Break-Even Costs For Chinese Oil Production -- January 16, 2017

Regular readers and anyone paying attention are aware that with regard to oil and natural gas, China is in a world of pain. From a December 12, 2016 post:

Peak oil? This may be the most important story all week. From Bloomberg, China is cutting about 300,000 bopd this year, more than the combined cuts announced over the weekend by non-OPEC countries excluding Russia. China's decline in production will continue into 2017 (next year) at about 200,000 bopd. By the way, this was reported by The WSJ back on August 25, 2016:

China’s struggling oil sector has entered a challenging new phase: long-term decline of its domestic production.

Oil production in China likely peaked last year at around 4.3 million barrels a day, according to new data and interviews with industry executives. The development has significant implications globally, including the potential for higher crude prices over time as China steps up imports to meet rising demand at home.

“The turning point that we’ve been searching for, for years, is happening now,” said Kang Wu, vice chairman for Asia at energy consultancy FGE. As an oil producer, he said, “China is entering long-term stagnation and decline.”

I think this is why some analysts suggest there could actually be a "deficit" in global oil production in 2017.

Now, tonight from Bloomberg:

• China's crude oil production will drop as much as 7% this year
• output is declining at aging fields amid capital spending cuts
• that's despite automobile sales surging in China
• the "cut" in Chinese production is about the same size as the output cut agreed to by Iraq

From the article:

While China consumes more oil than almost any other country, it’s also one of the world’s biggest producers, with fields stretching from offshore its southern coast to the far north east. The collapse in prices that began in 2014 is taking its toll, and the nation’s output suffered a record decline last year. That plays into the hands of OPEC as it seeks to prop up the global oil market, forcing China to depend more heavily on imports.

Brent crude, benchmark for half of the world’s oil, averaged about $45 a barrel last year, more than 50 percent below levels in 2014, the year OPEC decided to tackle a global glut by keeping the taps open. The crash in prices triggered a rethink by the group, which banded together with 11 non-member countries late last year and agreed to a collective cut of almost 1.8 million barrels a day. Prices have since rallied above $58 a barrel.

China’s output slumped in 2016 as state-owned firms shut wells at mature fields that had become too costly to operate after the crash. Crude production fell 6.9 percent in the first 11 months of 2016 to about 4 million barrels a day, the first decline since 2009 and the biggest in data going back to 1990.

We never talk about breakeven costs for oil production in China, do we?

Do you remember all the acquisitions China was making during the Bakken boom? That was tracked here. As recently as: October 26, 2015: Chinese company pays $1.3 billion for shale in the Permian.