North Dakota posted a record month for oil and gas production in September, but the industry is likely to slow down in upcoming months due to a steep decline in oil prices.
North Dakota, the nation’s second-largest oil-producing state after Texas, pumped out 1.36 million barrels of crude per day in September, up 5 percent over August, a previous record month, according to data released Friday by the North Dakota Department of Mineral Resources.
Natural-gas production rose nearly 4 percent in September, also setting a record. The number of producing oil wells in North Dakota hit a new high, too, in September at 15,287.
“The oil and gas industry virtually broke every record in September,” Lynn Helms, director of the state’s mineral resources department, said in a conference call.
In May, North Dakota topped a monthly production record last set in December 2014, and oil output has been mostly trending upward since. U.S. oil output generally has been on a record pace this year as oil prices climbed to a four-year high in October.
But since then, oil prices have plummeted. The U.S. benchmark crude price — West Texas Intermediate — was trading at under $57 a barrel Friday, down from $76 a barrel in early October.
Falling prices are a key reason for a decline in the oil-rig count in North Dakota from 67 in October to 62 currently, Helms said. A falling rig count indicates operators are drilling fewer new oil wells.
“I think we will continue to see it decrease over the next three months,” Helms said.
Lower oil prices aren’t the only factor working against North Dakota’s oil industry right now. With the state’s ultratight labor market, oil and gas operators continue to have trouble finding enough workers, Helms said. And the state’s harsh winter usually serves as damper on oil production.
Altogether, “this is going to slow activity and it is going to slow growth for the next few months,” Helms said. Still, he said oil prices appear to “have seen the bottom.”
Global crude supplies have been building while demand has looked less rosy due to concerns over a global economic slowdown. The U.S. exemptions to its Iranian oil sanctions have played a particularly big role in the perception of a supply glut — and thus falling oil prices.
OPEC and Russia had ramped up production as the sanctions were expected to erase a lot of Iranian oil from the global market. But the U.S. then decided to exempt eight countries from the sanctions. Meanwhile, oil producers throughout the U.S. are pumping out record amounts of crude.