As growing inventories push down prices, oil producers must focus on efficiency

Growing inventories are pushing down the price of crude, forcing oil producers to focus on efficiency.

Several new reports indicate that crude prices may remain low for some time. On June 12, both the U.S. Energy Information Administration (EIA) and the Paris-based International Energy Agency (IEA) released new studies. The former looked at the current level of U.S. commercial crude inventories while the latter analyzed expected growth in global oil demand.

According to the EIA, U.S. crude inventories rose to almost 400 million barrels during the week ending on June 7. The amount of finished gasoline and blending components in storage also jumped considerably. All of these figures are well above the average levels for this time of year and with crude production remaining relatively high around the world, there is substantial downward pressure on the price of oil.

Sluggish growth in demand will exacerbate this effect, according to the IEA. The international organization lowered its global oil demand growth forecast by 10,000 barrels per day and an analysis performed by Raymond James & Associates found that the agency's estimates are still too high, which means oil prices could fall even lower over the course of the year.

As a result of these trends, well operators will need to focus on efficiency to maintain healthy profit margins. Implementing advanced production equipment such as hydraulic jet pumps may be the best option for some companies.

Jet pumps allow producers to recover oil more efficiently by utilizing a streamlined design with no downhole moving parts. This versatile solution can even be successfully deployed at sites where issues with the well casing would make other artificial lift solutions less effective.