Oil Needs $63 A Barrel To Bring Marginal Production Online

In commodities, near-term prices are often set by inventory levels while long-term prices are determined by the marginal supply cost. In the case of oil, this is the price needed for the marginal, high-cost greenfield project to achieve breakeven. BloombergNEF estimates a price of $63 a barrel is needed to generate a reasonable return, based on TotalEnergies’ Lake Albert oil project in Uganda announced back in 2022. 

The oil price required for greenfield oil projects to break even spans a wide range. Bloomberg’s estimated break-even price for higher-cost greenfield projects ranges from $57-$63 per barrel.