US shale regions that two years ago were in the middle of the cost curve for future oil supplies are now down towards the lower end.

Investments in the Eagle Ford shale of south Texas on average need a Brent crude price of $48 a barrel to break even, on Wood Mackenzie’s calculations, while projects in the Wolfcamp formation in the Permian Basin in west Texas need $39.

“There are more opportunities to invest in the US, and that’s where the investment will take place,” said Mr Flowers.

“If your investment options are in deep water, you’ve got quite a task on your hands. You might be asking: ‘Should we be getting into tight [shale] oil?’”

Brent was trading at $47.59 per barrel on Wednesday.

US companies that have shale oil reserves, including Chevron and ExxonMobil, have stressed the flexibility of those assets, which are developed with many wells costing a few million dollars each, rather than the multibillion dollar projects often required for offshore production.

On Wood Mackenzie’s calculations, Brazil’s deepwater oilfields are so large that some will be commercially viable, but higher cost regions could struggle to attract investment.

The number of large projects being given the go ahead by oil and gas companies averaged 40 a year between 2007 and 2013 but dropped to just eight last year, according to Angus Rodger, also of Wood Mackenzie. 

Eoin Treacy's view

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Anyone who has ever bought a boat knows how expensive it is to run any operation on the sea versus on land. The USA has a major advantage in the fact that shale and tight oil is domestic and land based rather than in the deep water off of Africa and Latin America. The ease with which these resources can be brought on line, and potentially even refracked, means it is only a matter of time before prices get to a level which justifies the cost of renewed activity.  

Commodity pricing is often dictated at the margin rather than the lowest cost producer. Legacy Middle Eastern fields with negligible cost per barrel will pump regardless of what the price is. Prices are dictated by how supply and demand swings on the ability of marginal producers to bring product to market and price matters. If US unconventional supply is economic at between $50 and $60 and can brought online within a short timeframe, then the impetus to develop higher cost longer lead-time prospects will obviously be less attractive.

Brent Crude Oil prices at least pausing and potentially rolling over suggesting at least some new supply has re-emerged and highlights just how finely balanced the market is at currently levels which at below $50 are well shy of where deepwater is commercially viable.

The continued development of electric vehicles and investment in battery technology represent even more important arbiters for energy prices going forward. The incentive to develop these sectors will only increase the higher oil prices move.