Oil Prices Drop Sharply Amid Geopolitical Shifts, Bakken Differential at -$3.42

Crude oil prices fell sharply in midday trading Friday, with Brent crude retreating from the $100 threshold as immediate supply fears eased. West Texas Intermediate (WTI) crude was trading at $89.31 per barrel, down $2.88 or 3.12 percent, according to live price data. Brent crude was at $96.78, down $3.91 or 3.88 percent. The price for Bakken crude at the wellhead was at a discount of $3.42 per barrel versus WTI.

The decline follows reports of U.S.-Iran diplomacy and confirmation that oil flows through the Red Sea are continuing, reducing the immediate risk of a major supply disruption, Rigzone reported. This news provided a counterweight to ongoing tensions stemming from the closure of the Strait of Hormuz earlier this year.

The prolonged closure of the critical Middle Eastern shipping channel is having severe downstream effects, particularly on global fertilizer and food supplies. According to a report from OilPrice.com, the Strait's closure has effectively blockaded 3.9 million tonnes of urea exports, representing about 30 percent of the region's annual fertilizer exports. Synthetic fertilizer is a petroleum product, and its supply chain is highly sensitive to oil shocks.

The International Food Policy Research Institute (IFPRI) has warned of an "input crisis" that could develop into a full-blown food crisis. "Most production facilities in the region continue to operate at reduced rates to prevent excessive stockpiling," IFPRI reports. The situation is compounded by renewed conflict in the Black Sea disrupting grain exports and ongoing war in Ukraine.

Fundamental U.S. data also contributed to the price pressure. The U.S. Energy Information Administration's latest weekly report showed a build in commercial crude inventories, excluding the Strategic Petroleum Reserve. Stocks stood at 411.7 million barrels as of July 17, Rigzone reported.

For Bakken operators, the midday price drop translates directly to lower wellhead revenue. With WTI at $89.31 and the Bakken differential at -$3.42, the local price is approximately $85.89 per barrel. While prices remain at historically robust levels, the volatility underscores the sector's exposure to distant geopolitical events. The growing fertilizer crisis highlighted by OilPrice.com also illustrates the broad economic ripple effects of energy supply disruptions, which can eventually feed back into operational costs and the broader economic environment in North Dakota.

The United Nations warns that rising energy and fertilizer prices, driven by global conflicts, could result in an additional 9 to 18 million people facing hunger. The average global cost of a healthy diet has increased by nearly 25 percent since 2021, the report found.