North Dakota oil production jumped 5 percent in February over January, topping the 1 million barrel per day mark.
The state’s oil fields pumped out 1.03 million barrels per day in February, only the third month since July that the 1 million barrel-per-day mark has been reached, according to data released Thursday by the North Dakota Department of Mineral Resources. Low oil prices have been putting a damper on production.
North Dakota, the nation’s second largest oil producing state, has also seen its rig count rise in the past couple of months. The number of rigs drilling for oil has risen from 38 and 39 in January and February respectively to 51 today. Rig counts generally have been rising in the United States during that time, a positive sign.
Still, oil price weakness is anticipated to last through 2017’s second quarter, according to a monthly report from Lynn Helms, director of the state’s mineral resources department.
West Texas Intermediate (WTI), which sets the benchmark price for U.S. crude oil, was trading around $53 per barrel Thursday. The WTI per-barrel price has been mostly in the low-to-mid $50s since the beginning of December, though it broke into the high $40s for about 20 days in March.
One factor pushing production ahead is that the Dakota Access pipeline (DAPL) is now online despite opposition led by environmental groups and American Indians.
The pipeline is expected to save the energy industry at least $540 million in annual shipping costs to refineries and other customers on the Gulf Coast.
Market players hope it will hasten a revival of output from the Bakken region, which fell sharply along with global oil prices during the past two years.
“We’re back to growth in the Bakken,” Hess Corp. CEO John Hess said in a recent interview. The New York-based company has contracts to send roughly half its daily North Dakota output through the pipeline. For 2017, Hess has said its Bakken production could grow more than 10 percent.
Hess plans to triple the number of drilling rigs it operates in North Dakota this year. The company will move the 30 percent of its existing Bakken production from rail to pipeline once DAPL opens.
Oasis Petroleum Inc., another large Bakken producer, said its 2017 output could rise more than 30 percent. DAPL “is definitely going to give us more options to get our product to market,” Oasis CEO Tommy Nusz said.
Whiting Petroleum Corp., the state’s largest oil producer, does not contract for space on DAPL, nor does Continental Resources Inc., the second largest. But Continental expects DAPL to ease a transport bottleneck out of the state and open room on other pipelines, allowing it to stop using rail.
Both Whiting and Continental have projected production to rise more than 20 percent this year. The companies did not respond to requests for comment.
President Donald Trump approved the $3.7 billion pipeline in February, reversing the prior administration, which had blocked it last December with a decision by the U.S. Army Corps of Engineers.
Energy Transfer Partners, which operates the 1,100-mile-long DAPL, has begun filling the line with crude and could reach full operating capacity by late April, based on industry estimates. The pipeline will carry about 500,000 barrels of oil per day, more than half of North Dakota’s daily output.
That should help level the playing field between Bakken producers and rivals in other U.S. oil producing areas, many of which are closer to refineries and other customers.
“Economics for drilling in the Bakken will look better because of DAPL,” said Rusty Braziel of RBN Energy in Houston.
DAPL’s opponents say they will continue to oppose the line and oil production across North Dakota, which pumps more crude each day than any state but Texas.
Includes reporting by staff writer Mike Hughlett and Reuters reporter Ernest Scheyder.