Hormuz Reopening Optimism Fades, Prolonging Bakken Price Volatility

Optimism for a near-term reopening of the Strait of Hormuz is "sliding fast," according to a leading analyst, signaling continued volatility and potential for higher prices that directly impact the value of North Dakota crude. Skandinaviska Enskilda Banken AB (SEB) Chief Commodities Analyst Bjarne Schieldrop warned Thursday that the market may be on the verge of a shift from expecting an imminent deal to accepting a prolonged closure, which would force a "knee-jerk" oil price adjustment higher.

The pricing of Brent crude for the rest of 2026 is highly sensitive to the strait's status, with Schieldrop estimating that for every week beyond May 1 it remains closed, the implied average price should rise by roughly $5 per barrel. A mid-May reopening would point to a rest-of-year price closer to $100 per barrel, SEB's current forecast. This global chaos is already being felt in North Dakota, where oil shipped on the Dakota Access Pipeline (DAPL) is fetching nearly $7 more per barrel than a U.S. benchmark price, according to state officials.

Nathan Anderson, director of the North Dakota Department of Mineral Resources, described the last 50 days of pricing with one word: "volatility." He noted a nearly $20 price swing in just the past week, depending on talks between the U.S. and Iran. This uncertainty is a key reason publicly-traded companies have not invested in new drilling, as their 2026 budgets are already set. However, the number of maintenance rigs has risen from 110 to 125 since last month, suggesting operators are optimizing existing wells while prices are high.

Justin Kringstad, director of the North Dakota Pipeline Authority, said the premium for North Dakota's light, sweet crude may be due to its easy refinement into high-demand products like jet fuel and diesel in markets such as Europe. "Royalty owners, the producers, the state, all share that uplift," Kringstad said. State regulators expect to have more clarity next month on how much of that added value is filtering back to North Dakota.

The midstream sector is also reacting to the volatile, high-price environment. Kinder Morgan Inc. reported a 39 percent year-on-year increase in adjusted net profit to $1.06 billion for Q1 2026, declaring a dividend of $0.2975 per share. The company's performance was boosted by higher natural gas transport volumes, the impact of higher commodity prices on its products pipelines business, and higher terminal rates. However, its crude and condensate pipeline volumes were down 12 percent year-over-year, due partly to the conversion of its Double H pipeline to natural gas liquids service.

For Bakken operators, the immediate outlook hinges on the Strait of Hormuz. With only 26 active drilling rigs in the state and plans to add just one or two more, significant activity increases from public companies are not expected until 2027. Privately-owned companies retain more flexibility to add drilling if prices justify it. The market's next move depends heavily on negotiations with Iran, with Schieldrop noting the current leadership appears dominated by "real hardliners" willing to sustain pain, making a near-term deal less promising.