Even at very low oil prices — prices where they clearly are unable to make a profit — oil producers might opt to keep wells running, because turning off the tap could cause permanent issues.
"The crude markets move in slow motion," says Bernadette Johnson, the vice president of market intelligence for Enverus."So what we're seeing is almost a slow-motion train wreck."
"Shutting-in production is a very painful decision for an operator to make," Teodora Cowie, an analyst with Rystad Energy, writes."Often the economics support running a well at a loss for a certain period of time rather than shutting down the project completely."money. And oil companies have fixed costs they have to cover. Even if they're taking a loss overall, it may be better to keep a well running than to bring in no money.
Similarly, if you start pumping from a well, shut it down and try to get it running again,"it is almost guaranteed you will have to invest more money in the well to get it to produce at the same level," she says. And as the glut grows so intense that tanks, pipelines and ships run out of space, companies may be forced to shut in some wells that they wouldThere's another way that oil companies are reducing output: cutting back on new wells., U.S. firms need oil prices to be at least $49 per barrelSo when prices drop, companies often move quite quickly to reduce drilling — well before they shut in existing production.
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