Oil Prices Rise as Bakken Output Set to Increase

Oil prices climbed higher Thursday morning, with West Texas Intermediate (WTI) crude trading at $93.55 per barrel, a gain of $0.59, according to live market data. The global benchmark Brent crude rose to $97.08, up $0.90. The price for Bakken crude at the Clearbrook, Minnesota, hub was trading at a discount of $3.42 per barrel below WTI.

The price strength follows a session where crude rose on geopolitical risk and falling U.S. inventories, Rigzone reported Wednesday. Traders are reacting to the ongoing standoff between Iran and the U.S., a factor that has introduced significant volatility into the market since late February.

For Bakken operators, current prices are spurring action, but primarily on existing assets rather than new drilling campaigns. According to a report from Bing News, North Dakota's crude output is set to climb in the coming months as operators respond to higher prices. Nathan Anderson, director of the North Dakota Department of Mineral Resources, said operators that had curtailed production during earlier low prices have started bringing that output back online since the Iran conflict began.

The state's strategy is focusing on optimization. Anderson reported a 13% increase in the deployment of workover rigs, from 110 to 125, as companies work to maintain and enhance existing wells. However, drilling rig activity is seeing more caution. "I think operators are cautious to pick up rig activity because they don’t understand the duration of this," Anderson said, referring to the uncertainty surrounding the Iran war and price volatility.

This caution is reflected in the futures market. The Bing News report noted that on Tuesday, oil for delivery roughly six months from now was trading around $76.50 per barrel. Energy companies use these forward prices, rather than daily spot prices, to make drilling decisions due to the six- to nine-month lag between spudding a well and first production. The wide gap between current prices and the six-month futures suggests operators see risk ahead.

Currently, there are 10 hydraulic fracturing crews operating in North Dakota, with one operator set to add an additional rig and frac crew in July, Anderson said. North Dakota's oil production rose by 4,000 barrels per day to 1.13 million bpd in February, according to the latest state data, with a further increase expected for March.

The live price data shows natural gas holding steady at $2.86 per million British thermal units. For Bakken producers, the combined effect of strong oil prices and a stable differential provides a favorable environment to increase cash flow from current operations, even as long-term investment plans remain tempered by geopolitical uncertainty.