Global Tensions, Europe's Gas Diversification Shape Bakken Market Context

Global energy supply tensions and Europe's continued diversification away from Russian gas are shaping the market environment for Bakken crude as the winter season approaches. Key developments include a stalemate over the Strait of Hormuz, attacks on Russian refineries, and Germany's declaration of supply security despite low gas storage levels, according to wire reports.

Iran remained firm on its seven-day proposal for reopening the crucial Strait of Hormuz on Monday, September 28, saying it won't soften its conditions, Rigzone reported. The chokepoint for seaborne oil exports from the Persian Gulf is a perennial source of geopolitical risk premium for global crude benchmarks, which directly influence the price of Bakken crude.

Meanwhile, Ukraine said it hit two more Russian oil refineries on September 25, as the warring countries continue strikes against each other's energy assets, according to a separate Rigzone summary. Such attacks have the potential to tighten global refined product markets, influencing crack spreads and overall demand for light sweet crude like that produced in the Bakken formation.

In Europe, Germany's largest gas storage sites were only about 57% full as of September 27, according to data cited by OilPrice.com. However, major German gas importer VNG says winter supply is covered due to a more robust and diversified import system compared to 2022. "We have more access to liquefied natural gas (LNG) and we have broadened our overall position in terms of sources of supply," VNG’s CEO Ulf Heitmueller told Reuters in an interview published Monday.

VNG now imports natural gas from Norway and has recently signed deals to import gas from Azerbaijan and Algeria, diversifying its portfolio after Russian pipeline gas stopped flowing, OilPrice.com reported. The company started procuring gas from Algeria in 2024 and signed a new agreement with Algeria’s Sonatrach this summer for additional volumes starting in 2027.

"A broad and resilient supply portfolio is essential," Heitmüller said in July, according to the source. "The agreement with SONATRACH is an important component for securing the long-term supply of our customers."

For Bakken operators and North Dakota royalty owners, these developments underscore a complex global landscape. Europe's successful diversification into LNG and other pipeline sources reduces its direct demand for alternative fuels that could compete with oil, potentially supporting crude demand. However, the continent's lower storage levels could increase competition for global LNG cargoes, influencing natural gas prices. Simultaneously, the combined risks from the Strait of Hormuz and ongoing refinery attacks continue to inject volatility into the crude oil markets that set the value of Bakken production.