North Dakota Not Shocked by Lower Oil Prices

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Oil and gas production this year started off suppressed due to cold weather and the commodity outlook is dim due to U.S. economic policies, an energy director in North Dakota said.

North Dakota is home to the Bakken shale formation, the third-largest crude oil producer in the continental United States. The oil and gas division of the state Department of Mineral Resources reported total crude oil production averaged 1.17 million barrels per day (BBL/d) in January, the last full month for which the state published data.

That's 1.6% below December levels.

"We attribute that to a cold spell in January, and then I would expect February, due to its very cold temperatures, to have similar results," said Nathan Anderson, the director of the oil and gas division.

North Dakota is a nominal natural gas producer.

The state in January reported that about 70,000 BBL/d in production was curtailed by inclement weather. Highs for Bismarck, North Dakota, were in negative territory in mid-February. The windchill reached as low as minus 50 degrees Fahrenheit. The high for Monday was 50 degrees.

Elsewhere, North Dakota's Department of Mineral Resources in its latest monthly market report said it was pegging its revenue forecast at $70 per barrel for West Texas Intermediate (WTI), the U.S. benchmark for the price of oil.

WTI was trading at around $68 per barrel in early Monday trading. Anderson said he expects that prices could remain low for the foreseeable future.

"I think the Trump administration is doing things with tariffs and sanctions, and there's a lot of movement occurring right now, so I'm not surprised by the lower oil price," he said.

President Donald Trump has slapped tariffs on North American trading partners Canada and Mexico, as well as China. Tariffs, a tax on imports, imposed already on metals will be highly disruptive to North American manufacturing, while the energy sector could be faced with extra costs for imports. Canada and Mexico represent the top two crude oil exporters to the U.S. economy, respectively.

Trump suggested tariffs on energy could go into force by April 2.

Anderson, meanwhile, said he expected upstream activity in North Dakota to remain pretty much stable for the rest of the year. State data show 31 rigs in operation, with Continental Resources (Oklahoma City, Oklahoma) and Hess Corporation (NYSE:HES) (New York, New York) among the companies with the largest footprint.

The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, expects North Dakota oil production to average 1.24 million BBL/d this year, but dip to 1.19 million BBL/d by 2026. The state record was set in November 2019 with 1.5 million BBL/d.

EIA expects WTI to average $70.68 per barrel this year and fall to $64.97 for 2026. North Dakota Governor Kelly Armstrong (R), however, struck an upbeat tone about the future for the oil and gas industry. "The oil and natural gas industry continues to be a major force in North Dakota's economy, benefiting communities across our great state," he said last week. "Taxes and royalties paid by the industry support state and local investments in infrastructure, schools, communities, tax relief and the legacy fund, among other areas."

The oil and gas sector accounts for about 30% of the state's overall gross business volume.

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