Market price of oil collapsed last spring. In looking at the data by month, you can see a one month lag in the drop of production. As a result, the value of oil produced in North Dakota dropped substantially last spring and summer.
As the price of North Dakota light sweet dropped in March to $20.33 from $37.21 the prior month, production slid about 210k bopd in April to 1.225 bopd.
The shock decline in April 2020 to $9.16 from $20.33 led to a drop of production in May of 363K bopd, with average output down to 862k bopd.
A further drop in May 2020 to $7.92 from the prior $9.16 led to another month of low production in June at 895k bopd, an increase of a mere 33k bopd.
Average prices recovered the next month and then over the next seven months were in a range between $29 and $33. Production increased to the range of 1.0m bopd to 1.2 bopd since prices recovered.
Prices have accelerated in the last four months.
The driver for this wild roller coaster ride can be seen in the average of monthly prices:
In turn, with the roughly one month delay in changing levels of production, the value of monthly oil production has been:
When you look at the number of rigs in operation and the number of completed wells in the following graph, you cannot really see an impact on drilling and completion rates as a result of the wild swings in prices:
Graph above shows dramatic drop in production back in May and June 2020, caused by the drastic drop in prices. Record output in November 2019 of 1,519,032 bopd slowly declined then took a sharp drop to below 900,000 bopd in May and June.
Recovery thereafter increase production to just over 1.2M bopd in September, October, and November 2020. Production since then has dropped, with a significant decline in February 2021.
From high of 1,519,032 bopd in November 2019, two low of 862,349 bopd in May 2020, to high of 1,226,549 bopd in November 2020, to drop due to the weather of 1,083,020 bopd in February 2021.
Quite a roller coaster, huh?
For more detail and to drill down deeper, including Bakken/Three Forks only and statewide data, check out:
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.
Previous post mentioned the volume of production in North Dakota is starting to recover. It is still down dramatically from the last few years. Production past the 1.04M bopd level back in April 2017 and has been above that level until the pandemic hit and Saudi Arabia started flooding the market.
Two graphs showing the production levels can be seen on the previous post.
The price of oil has recovered from the lows during the shock back in April and May. Check out the price of West Texas Intermediate, North Dakota sweet crude, and estimated prices realized in the state:
As seen in the following graph, crude oil production increased in July 2020. It is up 179,958 barrels of oil per day (bopd) over the low of 860,430 bopd in May. This is a drop of 478,644 bopd from the high point in November 2019.
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.
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.
Production in North Dakota dropped in January, which is typical. Look at the production chart and you can pick out each of the winters because production usually falls off.
However, the price has fallen through the floor, courtesy of Saudi Arabia and Russia kicking off a price war and declaring they will flood the market with increased production.
Crude oil prices dropped in February and have continued in free fall during March. Prices on 3/17/20 per the Director’s Cut report are all the way down to $18.50 for North Dakota light sweet and $23.60 for the North Dakota market estimate.
Production in January 2020 dropped to 1,429,515 bopd (preliminary), off 47,262 bopd from January (revised) and down 89,515 bopd from December’s record high.
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.