Oil recovered to just above $50 a barrel earlier today after touching a six-month low in the previous session, with high global production and fears over the Chinese economy casting a bearish gloom over the market.
Reuters reported that by 0849 UK Summer Time, Brent crude was up 57 cents at $50.09 and U.S. crude gained 61 cents to $45.78. The previous day, Brent fell to $49.36 at one point – its lowest in six months.
It later closed the day at $49.99-barrel.
The longer that Brent crude oil prices slops around the $50-barrel mark, the shorter the remaining operating and productive life of the North Sea basin.
Last year at $110-barrel, the remaining 25 billion barrels of oil in the North Sea meant a 25 year life-span for the field; at $50-barrel, oil companies could abandon the North Sea in little over 10 years time.
Crude has come under pressure from mounting signs of ample supply and a weakening of the demand outlook. Brent fell 18% in July, while the 21% dive in US crude was its biggest monthly decline since the 2008 financial crisis.
OPEC made a historic policy shift in November 2014, choosing to defend market share against rising output from rival producers rather than cut output to support prices. Since then, it has boosted production by more than 1.7 million barrels per day (bpd) – almost 6%.
A spokesman for the Aberdeen-based UK Oil and Gas association commented: “While significant uncertainty is inherent in estimates of ultimate recovery from the North Sea, the outcome will depend on a lot more than just the oil price – including technology improvements, cost and efficiency of operations, integrity and longevity of infrastructure and energy, fiscal and regulatory policy.
“We reference DECC’s estimate of 11.9 billion barrels of oil equivalent (boe) in ‘proven, probable and possible reserves’, ‘potential additional reserves’ ranging between 1.5-7.5 billion boe and ‘yet to find’ volumes ranging between 2-9 billion boe.
“Whatever the outcome on volumes recovered, there are fields in production now that are forecast to continue operating into the 2050s so in our view, any claim of North Sea abandonment in ten years’ time misrepresents the opportunity that still remains.”
ANALYSIS: Can UK oil and gas regulator save N. Sea ‘Jurassic Park’ industry from extinction in $60-barrel climate? http://goo.gl/Zmm1ZR