As shown in the following graph, crude oil production increased again in August 2020. It is up 122,351 barrels of oil per day (bopd) over revised July amount, which follows a 148,343 bopd increase over June.
Comments in the Bismarck Tribune and Williston Herald provide context on the drastic drop in oil production during May.
The Tribune was more dramatic in describing the drop.
Oil production in North Dakota “cratered” during the month, as described by the Bismarck Tribune on 7/17: North Dakota shatters previous record oil drop as pandemic hits industry hard.
Notice the “shatters” description in the headline.
Impact of pandemic was to “tank” the production.
Director Helms referred to the drop as a “five alarm fire” for the industry.
Crude oil production in the state dropped to 858K bopd in May, which is a 362K bopd drop for the month and a 661K bopd drop since the record high of 1,519K bopd in November 2019.
Price of oil also collapsed, which means the value of production shrank.
Graphs of monthly production and prices can be seen in previous post.
Check out my calculation of the value of monthly production the combination of dropping output and dropping prices:
Just as a guess, I think production could be opened up almost as fast as it was cut back. More on that thought at the end of this post.
With a 45 day lag in reporting to allow data submission and collation, the production data for crude oil during May is now available for North Dakota.
The combined shocks of reduced demand for the pandemic and flooding the market by Saudi Arabia collapsed prices which then collapsed production. A glut of oil jammed the storage capacity for a while which further drove down the prices available to producers in North Dakota.
The impact on volume and value of production is staggering.
The graphs of production in this post demonstrate how rapidly a massive industry, like oil production across an entire state, can respond to price signals in a capitalist economy. That part is amazing to see.
May production data
Crude oil production in the state dropped to 858,395 bopd (preliminary) in May. This is down 362,624 bopd from the revised April level of 1,221,019 bopd. The April production was down 209,353 bopd from March.
Production data in North Dakota is routinely released on about the 15th of each month reflecting data for the second previous month. So the info just released on May 15, 2020 reports the March 2020 activity.
The radical drop in price due to the demand shock and supply shock will show up in production data for April, expected to be released about 6/15/20.
5/15/20 – Williston Herald – Helms: North Dakota crude has probably fallen below 1 million barrels, but March figures don’t yet reflect it – The head regulator, Lynn Helms, thinks that production in the state is currently below 1 million barrels a day. The May data won’t be released until July.
In February 2020, crude oil production in North Dakota averaged 1,451,029 bopd (preliminary), up 20,518 bopd from 1,430,511 bopd (revised) in January. This is the 4th highest level of output, behind the high water mark of 1,519,032 bopd in November.
Production is going to drop rapidly. Drop will be at least 20% of current production. I’ll make a not-so-wild guess decline will be a quarter or more (>25%).
Prices have collapsed due to a double black swan. The COVID-19 pandemic has caused a demand side shock.
There is also a supply side shock to the market.
Following charts show the production levels in the state before the double black swan events of pandemic and price war hit the market.
Next post will discuss the production levels and those two black swans.
Production in state and Bakken only:
For longer term perspective: Continue reading “Crude oil production levels in North Dakota in February 2020.”
Release of the December production data in North Dakota lets us look at production for the full year. Following graphs show the average daily production and total for the year. Multiplying the monthly data by the sweet crude price in North Dakota reported in the Director’s Cut lets us see the value of production by month and total value for the year.
North Dakota oil production in December 2019 is fourth highest level on record, after setting new production level in 5 of last 6 months.
Average daily production in the state was 1,475,685 barrels of oil per day (bopd) (preliminary) after hitting the highest level ever of 1,519,037 bopd (revised) in November. The November production broke the state’s record for the fifth time in six months, and the twelfth time in the last twenty months.
The routine record-level production is being achieved with stable and low level of drilling rigs and without the wild-west craziness in the local economy that existed before 2014.
Graph of the average daily production in the state and in the Bakken pool:
Crude oil production hit yet another record level in October at 1,517,796 barrels of oil per day (BOPD) (preliminary). September was not a record at 1,443,980 BOPD (revised). September was only the third highest production.
During 2019, record level of production was hit in October, August, July, June, and January. Record was broken in 2018 during December, October, September, August, July, and May.
What does the average daily production trend look like? Check it out:
Crude oil production in North Dakota has broken a record for three months in a row. This is not a record breaking number of record breaking months though. In the post-bust time since 2014, the record number of record levels was July 2018 through October 2018, or four months in a row. Back then production was 1.27m bopd in 7/18, 1.29m, 1.36m, and 1.394m, before sliding a bit to 1.378m in 11/18.
Production was 1,477,394 bopd (preliminary) in August 2019, up 2.18% from 1,445,934 bopd in July.
Check out the production trend:
In July, the state energy wizards set four record levels of production:
- Crude oil
- Barrels of oil equivalent (converting gas into equivalent amount of oil and combining with crude production)
- Number of producing wells
Breaking production records in North Dakota, New Mexico, and Texas is something to celebrate if you like being able to get gasoline for your car whenever you feel like doing so, or if you like having gas available at reasonable prices in spite of when, oh, say, someone drops a bunch of bombs on Saudi production facilities.
Oil production in the state increased 2.15% in June, growing an average of 30,004 bopd, from 1,394,648 bopd average in May (revised) to 1,424,652 in June (preliminary). That is after a lull from October 2018 through May 2019, when the average production increased a mere 648 bopd.
Before showing the production graph, a few comments about prices and rigs in operation.
Prices have declined substantially in the last couple of months:
- Sweet crude in North Dakota
- $48.00 March
- $52.50 April
- $50.50 May
- $43.10 June
The drop, especially in June, shows up in the value of crude production:
The productivity of wells has increased over the years. The result is the count of completed wells is largely independent of the number of drilling rigs in operation.
Consider an overlay of the completed well count and the rig count:
Oil production in North Dakota increased slightly to average of 1,393,284 BOPD in May 2019 (preliminary), up 799 BOPD from April (revised).
Rig count has been flat, ranging from low of 61 to high of 67 during the last 12 months.
An odd factor this month is small increase in production (up 799 bopd/day, 0.06%) with increase in producing wells of 194 (+1.26%).
Lynn Helms is cited in article at Bismarck Tribune (7/16/19 –Oil Production steady in May, but transportation woes persist) suggesting this is due to old legacy wells that produce around 25 barrels a day being closed in for the winter and then brought on-line from late spring until fall.
Economic driver explaining this is the costs of plowing roads and hauling oil makes such wells uneconomical in the winter. Thus they are taken off line in the winter.
The number of inactive wells dropped by 69 in May.
The two month changes are:
- 141 – drop in inactive wells
- 185 – well completions
- 337 – increase in producing well count
That leaves an increase of 11 producing wells that isn’t explained by drop in inactive wells and completions.
Here is what the average production looks like:
Latest guess, from someone who has a clue about such issues, on where production is going in North Dakota is somewhere around 1.5M or 1.6M barrels a day late this year or early next year.
Huge finds off coast of Guyana and in New Mexico/Texas.
Question needs to be asked again: What Peak Oil?
The Million Dollar Way – 7/7/19 – ND Oil Production to Surge – Lynn Helms. Citing another source, the article says Lynn Helms, director of DMR, thinks production in North Dakota will surge later this year after gas infrastructure construction is done.