Iran Crisis Spikes Oil Prices as Bakken's Next Era Hangs on Tech, Economics

Oil prices surged more than 7% Monday as a geopolitical crisis in the Middle East sent shockwaves through global markets, according to OilPrice.com. U.S. West Texas Intermediate crude leapt 7.69% to approach $93 per barrel following reports that Iran is cutting off diplomatic talks with the U.S. and threatening to completely block the strategic Strait of Hormuz.

The sudden escalation reversed earlier market optimism. Iran's state-affiliated Tasnim news agency reported that Iranian negotiators will immediately stop exchanging messages with Washington and that the "resistance front and Iran have resolved to completely block the Strait of Hormuz," according to OilPrice.com. The Strait of Hormuz carries roughly one-fifth of global oil trade. The report stated the action is a retaliation for Israel's operations against Hezbollah in Lebanon.

This volatility underscores the external pressures facing Bakken operators as they work to define the region's next phase of production. North Dakota officials are pushing to accelerate the development of next-generation oil production technology, but executives say success is uncertain and depends on many factors, according to Bing News.

Governor Kelly Armstrong, speaking at a May oil conference, said, "We have a tremendous opportunity in the next two years, because we have an administration that understands this stuff. We have to get them to mobilize a little faster." He added, "Time is the enemy."

The technologies, collectively called enhanced oil recovery (EOR), aim to double extractable oil from the Bakken and extend field life by decades. Techniques include injecting chemical surfactants or gases like natural gas or carbon dioxide to repressurize reservoirs. However, the industry has not determined the most efficient and cost-effective method.

"There’s not a silver bullet. We haven’t found one yet," said Charlie Gorecki, CEO of the University of North Dakota's Energy and Environmental Research Center, according to Bing News.

Profitability remains a key question. "Economics are always going to rule the day," said Pam Heatherington, general manager of ExxonMobil’s Americas division and CEO of Denbury. Previous analysis showed operators were cautious about ramping up even with oil near $100 a barrel.

Chord Energy CEO Danny Brown stated, "Future success is far from a given, it’s going to have to be earned. But the reward is tremendous for this and for future generations."

The geopolitical standoff with Iran adds a layer of price uncertainty to these economic calculations. OilPrice.com reported that President Trump has toughened the terms of a potential framework deal with Iran, sending proposed changes back for consideration, according to the New York Times. Iran has stated it will only accept terms it agrees with and is prepared for no deal.