North Dakota’s oil production rose a bit in May as global crude prices climbed from a nadir this winter, according to data released Friday.
The state’s average daily production rose a half-percentage point to 1.05 million barrels, compared with a 6 percent drop in April, the largest month-to-month decline in North Dakota history.
But May’s small improvement is overshadowed by the oil bust that set in last year and shows few signs of significantly improving anytime soon.
And that’s bad news for North Dakota, where Gov. Jack Dalrymple earlier this week called a legislative special session to cope with budget shortfalls. Declining oil revenue has been a prime culprit. North Dakota is the nation’s second-largest oil-producing state after Texas.
Oil price weakness is now anticipated to last into at least the third quarter of this year and perhaps into 2017’s second quarter, Lynn Helms, head of North Dakota’s Department of Mineral Resources, wrote in his monthly report Friday.
Low oil prices associated with the lifting of sanctions on Iran and a weaker economy in China are expected to keep North Dakota’s oil rig count depressed, Helms wrote. “Operators remain committed to running the minimum of rigs while oil prices remain below $60/barrel WTI.”
West Texas Intermediate (WTI), the benchmark U.S. crude oil price, is currently about $46 per barrel.
The number of drilling rigs in North Dakota today stands at 29, up by two from May, when the count hit its lowest mark since July 2005. The record high was 218 in May 2012.
The number of producing oil wells was 13,167 in May, down from the all-time high of 13,190 set last October.
The WTI oil price fell to around $27 a barrel in February, a 13-year low. It rallied this spring, hitting $51 in early June, giving producers a little optimism. But the price has since fallen back.
“Since early June, this oil price recovery has lost momentum,” wrote Credit Suisse analyst Jan Stuart in a research note this week. “What’s more, demand-side headwinds are gathering in a way that they had not for any length of time since the middle of 2013.”
Credit Suisse has tempered its forecast for oil demand for the rest of 2016 and 2017 because of weakening global industrial production.