As oil crashes through $35 a barrel in New York, some producers are already living with the reality of much lower prices.

A mix of Mexican crudes is already valued at less than $28, an 11-year low, according to data compiled by Bloomberg. Iraq is offering its heaviest variety of oil to buyers in Asia for about $25. In western Canada, some producers are selling for less than $22 a barrel.

“More than one-third of the global oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, said by e-mail. “Canadian oil producers could have difficulty in covering their operational costs.”

A blend of Mexican crude has plunged 73 percent in 18 months to $27.74 on Dec. 11, its lowest level since 2004, according to data compiled by Bloomberg. Venezuela is experiencing similar lows. Western Canada Select, which is heavy and sulfurous, has slumped 75 percent to $21.37, the least in almost eight years. Other varieties including Ecuador’s Oriente, Saudi Arabia’s Arab Heavy and Iraq’s Basrah Heavy were selling below $30, the data show.

Bitumen -- which technically isn’t crude but a heavy black viscous oil that constitutes the so-called tar sands along with clay, sand and water -- is trading at around $13 a barrel, suffering a drop of more than 80 percent since June 2014.

Crudes of this type trade at a discount to lighter varieties because to process them “refiners have to invest in upgrading facilities such as coking plants, which are very expensive,” KBC’s Ul-Haq said.

David Fuller's view

Oil is still the world’s most important commodity, even though it is branded as a pariah resource in the eyes of most environmentalists and political greens.  Despite all the politics, pressure to develop renewables and the gradual re-emergence of new nuclear, global demand for crude oil continues to rise.

According to the International Energy Agency (IEA), the worldwide average demand for crude oil will be 96 million barrels a day, or just over 35 billion barrels a year.  Moreover, during the current production free-for-all, it recently breached 97 million barrels per day earlier this month.

Meanwhile, global markets are clearly in the grip of the crude oil slump (Brent & WTI) slump, although they are also buffeted by rising junk bond yields (see Eoin’s analysis of this section below). Developed country stock markets have corrected their end-November overbought conditions but the recent technical damage confirms that we are still in a challenging environment.