Crude at $55 a barrel is the magic number for the oil and gas industry to turn around, Wood Mackenzie said in a new report released Monday, as the consultancy sounded an optimistic note on recent joint production cut announcements by OPEC and major non-OPEC countries.
If the cuts materialize to push oil prices up sustainably to $55 a barrel or more, the oil and gas industry will turn cash flow positive in 2017, marking the first upturn for sector since a prolonged downturn that started in the summer of 2014.
"If we stay (at $55 a barrel), the world's biggest oil companies start to make money again. If we go back down to $50 (or lower) in 2017...then those companies are in the negative territory and they go back into survival mode where they have been in the last two years," said Angus Rodger, the consultancy's research director for upstream oil and gas.
He expects OPEC and major non-OPEC countries that have pledged production cuts recently to mostly comply with their promise to cut a collective 1.8 million barrels a day from the market, he told CNBC's "Squawk Box".
At a compliance level around 75 percent, oil will average $57 a barrel through 2017, Rodger added.