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Oil "Breakeven" Falls With Oil Prices

Federal Reserve Bank

The "breakeven" price for oil has fallen in step with oil prices, according to new data from the Federal Reserve Bank of Kansas City. The "breakeven" price is when producing oil is no longer profitable for companies. 

The Bank periodically surveys oil and gas companies in seven Western and Midwestern states. When oil prices started to slide, those companies reported an average breakeven price of $79. Now, those same companies report it's down to an average of $62. 

Alison Felix, assistant vice president of the Bank, presented the results at the Wyoming Business Report's Energy Summit. She said companies attribute the lower breakeven price to reduced contractor costs, only operating the most productive rigs and more general technology improvements.

"I think this reduction in breakeven costs is somewhat encouraging, especially seeing the price the sector is facing," she said.

However, Felix added that the companies also expect lower oil prices going forward. The U.S. benchmark oil price is currently hovering around $60.

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