Oil Prices Surge Over 3%, Bakken Output Set to Rise

Oil prices posted significant gains on Wednesday, with West Texas Intermediate (WTI) crude climbing 3.43% to settle at $92.75 per barrel. Brent crude, the international benchmark, rose 3.29% to $101.72. The price for Bakken crude at the Clearbrook, Minnesota, hub traded at a differential of $3.42 below WTI. Natural gas saw a modest increase of two cents to $2.71 per MMBtu.

The price surge comes as the market anticipates the latest U.S. inventory data. According to a report from Macquarie strategists sent to Rigzone on Tuesday, U.S. commercial crude inventories are forecast to have built by 2.2 million barrels for the week ending April 17. This follows a draw of 0.9 million barrels the prior week. The strategists noted the prior week's balance was "significantly tighter" than expected, potentially due to export timing.

The Macquarie team also projected draws in key refined products, forecasting a 3.5 million-barrel decline in gasoline stocks and a 3.0 million-barrel draw in distillates for the same week. They model a continued strong level of clean product exports and implied demand for gasoline, distillate, and jet fuel at approximately 14.5 million barrels per day.

For Bakken operators, the high-price environment is translating into increased activity focused on existing assets. Nathan Anderson, director of the North Dakota Department of Mineral Resources, said Tuesday that the state's crude output is set to climb in the coming months as operators respond to prices. According to Anderson, there has been a 13% increase in the deployment of workover rigs, from 110 to 125, as companies optimize existing production rather than commit to new drilling.

This caution on new drilling is tied to sharp price volatility and uncertainty surrounding the conflict in Iran. Operators are looking at futures prices, which can be significantly lower than spot prices, when making long-term capital decisions. Anderson noted that one operator is set to add a drilling rig and hydraulic fracturing crew in July. Currently, there are 10 frac crews operating in the state.

"When the Iran conflict happened, those operators that had curtailed or shut in production during the low price environment started to bring that production online," Anderson said, adding that March production is expected to rise. 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.

The Macquarie strategists warned that the timing of import and export cargoes remains a source of potential volatility in weekly crude balances. They also forecast a Strategic Petroleum Reserve (SPR) draw of 4.2 million barrels for the week ending April 17.