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.
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.
The double black swan of COVID-19 pandemic from the demand side and Saudi Arabia flooding the market from the supply side is creating a sales problem and storage problem for the oil industry.
Regulators in Texas are thinking about about ordering a pro-rate reduction in production. In other words, they are considering giving each producer an order on how much to cut.
North Dakota has no such plans.
North Dakota is planning to rely on capitalism to rapidly adjust production.
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.”
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.
Production data since 2008: Continue reading “Oil production in North Dakota shows usual drop in January 2020. Price takes a nose dive.”
Saudi Arabia and Russia had a falling-out over the weekend about controlling production levels and prices. As a result Saudi Arabia is going to cut prices and increase production.
They have announced they will cut prices by somewhere between $6 and $8 a barrel in April, depending on destination.
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: