North Dakota’s oil production dropped below 1 million barrels per day in August, the first time it has done so since March 2014. But officials said they were expecting the decline, which followed several consecutive months of flat or slowing production because of continued weak prices.
“I think it’s more a psychological thing than a physical thing in terms of state revenue, or actual physical impact on the global markets, or even U.S. storage,” said Lynn Helms, head of North Dakota’s Department of Mineral Resources, in a monthly web conference for reporters on Thursday.
The nation’s second-largest oil-producing state pumped out 981,039 barrels per day during August, about 5 percent or 50,000 barrels less than July. North Dakota’s highest production was nearly 1.3 million barrels per day in December 2014.
Oil prices began plummeting that year, and the world has had a supply glut ever since.
Helms said with oil prices in the doldrums, he expects North Dakota production to continue to decline to about 900,000 barrels per day by next June or July, before it hits bottom.
“There’s still more slowing to come over the next few months based on what we’re seeing in the number of [oil well] completions and the lack of drilling activity in oil fields,” he said.
North Dakota’s natural gas production was also about 2.5 percent less in August than in July, Helms said.
“Our oil and gas operators are responding to global price signals that world markets are sending,” he said.
One of the largest questions facing the industry is whether the Organization of Petroleum Exporting Countries (OPEC) will begin to reduce its production before the end of the year. OPEC ministers announced plans in late September to cut oil production between one-half billion and 1 billion barrels per day in an effort to boost the persistently weak crude prices. The news caused oil markets to jump 5 percent immediately to slightly over $50 per barrel.
But Helms said it won’t be clear until OPEC meets again in late November whether any reductions will actually take place, or whether the countries were just testing the global market.
“The U.S. industry is not going to jump and start hydraulic fracking wells right away just because we got above $50 for a few days,” he said. “They’ll take a wait-and-see approach.”
The North Dakota monthly report also showed that the oil industry is not expanding the number of drilling rigs to scout new wells. The state’s current count is 33 rigs, up 2 from July’s mark but far below the all-time high of 218 in May 2012.
The price of West Texas Intermediate Crude, the U.S. benchmark, closed at $50.44 per barrel on Thursday. State officials have said that sustained prices must be in the $50 to $60 range to spark more activity in North Dakota’s Bakken range.