Oil Prices Edge Higher as Bakken Operators Show Caution

Oil prices posted modest gains on Friday, with West Texas Intermediate (WTI) crude trading at $96.84 per barrel, a 0.51% increase. The global benchmark Brent crude rose 1.1% to $103.71, according to live price data. The price for Bakken crude at the wellhead was discounted by $3.42 per barrel versus WTI. Natural gas prices fell to $3.03.

The price strength continues a rally largely driven by geopolitical tensions, but operators in North Dakota's Bakken formation are taking a measured approach to increasing activity. According to Reuters, U.S. oil operators in the state are cautious about ramping up drilling despite the sharp rise in oil prices caused by the Iran war, waiting to see if higher prices will last long enough to justify new investment.

Mark Bohrer, assistant director for the Oil and Gas Division of the North Dakota Industrial Commission, said most producers have stuck to budgets set at the end of last season, limiting any immediate drilling surge. "The output could increase in the short term, as more wells will be completed and drilling activity will pick up," Bohrer told Reuters.

The regulator reported that North Dakota had 26 active drilling rigs in May, unchanged from April. Thirteen hydraulic fracturing crews were also working in the state. While activity is steady, some additions are planned. Bohrer stated that Continental Resources, the state's second-largest producer, plans to add a drilling rig after laying one down earlier this year. He said other companies may add a few rigs if prices remain high.

The broader market is being supported by tightening inventories. According to Rigzone, U.S. crude oil stocks, excluding the Strategic Petroleum Reserve, fell by almost 8 million barrels week-on-week to 445.0 million barrels as of May 15, based on the latest Energy Information Administration data. This drawdown provides fundamental support for prices.

North Dakota's oil production was 1.142 million barrels per day in March, an increase of 9,000 bpd from February, according to the regulator. Production from the Bakken and Three Forks formations specifically rose by 11,000 bpd. Operators brought 49 new wells online during the month.

Bohrer expects the state's production to remain stable in the coming months, with a potential for slight short-term increases as the pace of well completions rises with more fracturing crews at work. The report noted that other large producers like ConocoPhillips, EOG Resources, and Diamondback Energy are primarily diverting resources to drill or expand wells in the Permian Basin to capitalize on the price environment.

The benchmark WTI contract has increased 44.1% in value since the start of the Iran war in late February, settling at $96.60 on Friday in the Reuters report. For Bakken operators, the sustained high prices present an opportunity, but the prevailing strategy remains one of capital discipline and measured response.