Oil producers are using more efficient technology that allows them to make a profit drilling for oil when the price is as low as $60 a barrel. 
Oil producers are using more efficient technology that allows them to make a profit drilling for oil when the price is as low as $60 a barrel.  - 
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There are signs the long slump in oil prices may be ending. The International Energy Agency says supply and demand globally are “near balance.” And already, some American drillers are betting on higher prices and putting drill-bits into the ground, measured by the private-sector oil rig count. That includes those employing high-tech “fracking,” which is growing more affordable by the day.

Four years ago, it cost around $60 to drill and frack a barrel of shale oil in southeastern Texas. Now, U.S. shale can be produced there for around $40, estimates the consultancy Rystad Energy in Norway.

“It was the underdog a couple years ago,” Rystad senior analyst for North America, Bielenis Villanueva, said. “But now shale is really one of the main sources of supply for the global picture."

She said American drillers have become extraordinarily efficient since prices plunged two years ago, slashing payments to contractors, rig operators, water haulers, workers, everyone.

“Definitely they have been able to renegotiate the contracts, the rates,” Villanueva said.

And the U.S. frackers became more productive. Each rig drilled more wells in the ground, and the holes deeper, further. Each “frac” job of sand, water and chemicals shot into the ground produced more hydrocarbons than before.

The Americans innovated, just in time for what many analysts predict to be an end to the global oil glut.

“Now, that oversupply is reversing,” Raymond James analyst Pavel Malchanov said, “and is actually giving way to an under supply. In other words, global inventories for petroleum are actually starting to shrink.”

Here is the bullish scenario: low prices are boosting demand and driving, so we may need more oil. Old wells are declining, so we may need more oil. And any producers stopped investing during the price bust, so – yes – we may need more oil.

But even if U.S. fracked, or tight oil, comes back in a big way, that may not be enough to supply the whole world.

“Even as we add up how much supply there is in the U.S. and OPEC and other areas, you can’t get there with just OPEC, you can’t get there with just tight oil,” said R.T. Dukes, research director at the energy firm Wood MacKenzie. “And we actually don’t think you can get there with just the two together.”

Which would mean even higher cost oil may come to market – crude that’s pricier to produce than U.S. shale oil.

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Follow Scott Tong at @tongscott