North Dakota crude output is set to climb in the coming months as surging oil prices spur operators to ramp up activity, a state regulator said Tuesday. Operators in the third largest oil-producing state are responding to higher oil prices, boosting output from existing wells while holding back on new drilling amid sharp price volatility tied to the Iran war. U.S. oil prices on Tuesday were trading around $93.63 a barrel, up about $4.02, while oil for delivery roughly six months from now was trading around $76.50 a barrel, 17% higher than before the war began in late February.
Energy companies look at futures prices rather than daily price moves to decide whether or not to increase drilling because it can take six to nine months for first oil after drilling and fracturing a new well. There are currently 10 hydraulic fracturing crews operating in the state, with one operator in North Dakota set to pick up an additional rig and frac crew in July, said Nathan Anderson, director of the North Dakota Department of Mineral Resources. There has been a 13% increase in deployment of workover rigs in North Dakota, from 110 to 125 as operators look to optimize existing production, according to Anderson. Workover rigs are typically used to maintain existing wells rather than drilling new ones.
“When the Iran conflict happened, those operators that had curtailed or shut in production during the low price environment started to bring that production online,” Anderson said, adding that March production is expected to rise. “Drilling rigs is a different story…I think operators are cautious to pick up rig activity because they don’t understand the duration of this,” Anderson said in reference to uncertainty surrounding the Iran war and volatility in oil prices. Since the start of the current war in Iran, U.S. crude futures have traded at a high of $119.48 a barrel on March 9 and a low of $69.20 on March 2. Oil production in North Dakota, the third-largest U.S. oil-producing state, rose by 4,000 barrels per day to 1.13 million bpd in February, according to the department’s latest data.
(Reporting by Georgina McCartney in Houston; Editing by Daniel Wallis)