they’ve been through this before,” said Tipping. “But there’s concern. There’s some fear.”
She expects well closures at higher-cost fields across much of North America, including older parts of North Dakota’s Bakken, and areas where the geology is difficult, such as the Anadarko Basin in Kansas and Oklahoma.
There are about 400,000 stripper wells in the United States, most with operating costs of between $20 and $50 per barrel, according to analysts at Wood Mackenzie, a leading energy and commodities consultancy. The cheapest ones are in locations where there is little underground saltwater.
Strippers often produce just a few barrels a day, but together they account for up to 1 million barrels per day, a ninth of US output.
Not all stripper wells are losing money now and those that do may not be shut in. This is in part because producers can lose their leases forever if they shut wells for more than a few months, so owners are often willing to pump at a loss and store oil until prices rise.
“At $40, we think you have got about 100,000 to 200,000 barrels per day at risk” from US stripper wells, said RT Dukes of Wood Mackenzie.
That could represent a dent of up to 2 percent dent in output compared with US Energy Information Agency forecasts that this year’s US production will average 9.3 million bpd.
After production hit 9.1 million bpd in late 2014, the agency now expects production to climb to 9.42 million bpd around the middle of this year, then ebb to 9.26 million bpd at year’s end.
Its latest Jan. 13 outlook forecasts the 2015 average price of the Brent crude global benchmark at $58 a barrel and the US benchmark at $3-4 below that.
Some warn the slowdown could be more pronounced given the sharp drop in the number of rigs drilling new wells. The prevailing industry view, however, is that new, more productive, shale oil wells in Texas, North Dakota and Colorado will keep output rising.
Those wells, which typically do not need constant pumping to make oil flow, have helped US crude output to nearly double since 2007.
They have also prompted OPEC and Saudi Arabia to let prices fall in what is widely seen as an attempt to force US rivals to cut output.
But publicly-traded shale oil companies talk of cash operating costs between $10 and $30 a barrel, suggesting oil prices would have to fall by another third to force them consider well closures.
The upshot? It might take a prolonged slowdown in drilling of new wells to significantly curb US supply.
Break even levels for drilling new wells in most US shale oil fields range between $50 and $80 per barrel - well above operating costs for existing shale wells.
In response to the price slump, most oil companies have already cut drilling budgets by 25 percent or more, but they are still sinking new wells. Furthermore, unlike small stripper well operators, several producers have hedged much of their 2015 output at prices close to $90 a barrel, keeping lots of their new output profitable.
Vast efficiency gains also mean that more oil can be squeezed from fewer new wells. For example, EOG Resources Inc said in November that output of new fracked wells in the Eagle Ford shale of Texas was up 39 percent compared with wells sunk at the start of 2014.
“To me, it’s going to be extremely difficult for any US production to be cut significantly,” TMR’s Lasseigne said about the possible impact of well closures.