North Dakota’s oil producers posted a historically ugly month in April, with production dropping 15% as COVID-19 hammered the U.S. economy and global demand for fuel.
And production declines are expected to continue, hitting lows not seen since oil’s 2016 swoon.
North Dakota oil production fell from 1.43 million barrels per day in March to 1.22 million in April, according to data released Friday by the North Dakota Department of Mineral Resources.
“That is the largest month-to-month decline we have seen in North Dakota in absolute terms and percentage terms,” Lynn Helms, the department’s director, said in a conference call with reporters. He said the same was true for natural gas production.
“We expect May to be worse,” Helms added.
Output is expected to dip below 1 million barrels per day in May, a particularly dramatic decline considering that the state hit an all-time oil output high of 1.52 million barrels per day in November. North Dakota is the nation’s second-largest oil-producing state after Texas.
Total U.S. oil production also hit a record high in November of 12.9 million barrels per day, but that number had fallen to 11.4 million in May, according to the U.S. Energy Information Administration.
The agency forecasts U.S. oil production to continue declining until reaching 10.6 million barrels per day next March.
The grim outlook can also be seen in the U.S. oil rig count, a harbinger for future production. It currently stands at 10 in North Dakota, down from an average of 17 in May and 52 in March.
“It is very likely we are going to go below 10,” Helms said.
Drilling new wells is a major source of employment, and so is fracking, the injection of torrents of water, sand and chemicals into those wells. There were 25 frac crews operating in North Dakota in March. Over the last month, there has been just one.
The oil and gas industry provides the best-paying hourly jobs in North Dakota, state employment data show. But the sector has been whacked by 9,200 layoffs through June 6, meaning a roughly 40% decline in oil and gas employment this year, state data indicates.
Oil prices have recovered somewhat over the past six weeks. West Texas Intermediate — the benchmark U.S. oil price — was trading at just over $12 a barrel on April, before gradually rising and topping the $30 mark in mid-May. WTI closed around $36 per barrel Friday.
However, that price is still below the break-even point for many oil operators. And U.S. oil inventories are rising at a time of year when they should be falling.