Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on June 16, 2015
North Dakota’s Oil Production Has Peaked
North Dakota’s crude oil output has peaked, according to the latest production data published by the state government, as the slump in prices takes its toll.
The state produced 1.17 million barrels per day (bpd) in April, down from a peak of 1.23 million in December, the Department of Mineral Resources (DMR) reported on Friday.
The former rapid growth in production has stalled and current output is no higher than it was in September 2014 (http://link.reuters.com/zeb94w).
In the seven months between February and September 2014, output increased by 233,000 bpd, while in the seven months from September 2014 to April 2015, output actually edged down 18,000 bpd.
Prices are by far the most important cause of the downturn, according to state regulators, followed by tax changes, tougher flaring rules and new regulations on oil conditioning to remove the most volatile components from the crude and make it safer to transport (“Director’s Cut” June 2015).
Real Time Numbers
Falling production comes as no surprise: the number of rigs drilling for oil in the state has declined by more than 60 percent since September.
Unlike production numbers published by the U.S. Energy Information Administration and the Railroad Commission of Texas, North Dakota’s figures are based on well records rather than estimates and are subject to only small revisions in subsequent months.
North Dakota’s monthly production numbers provide the most useful snapshot into nationwide production trends.
They confirm that U.S. shale output is levelling off and even falling as the industry scales back drilling and completions in response to lower prices which are still 45 percent lower than this time last year.
The flattening of U.S. production represents an enormous change from 2014 and 2013, when output grew by 1.2 million bpd and 800,000 bpd respectively.
During 2013 and 2014, the United States provided almost all the marginal growth in global oil production, now the marginal barrels are coming from Saudi Arabia, Iraq and other Middle East producers.
No Rig Return Yet
U.S. shale producers have responded to the downturn by squeezing their suppliers: costs have fallen by 20 to 30 percent since the start of the year, according to the Federal Reserve Bank of Dallas.
Some shale executives and market analysts are optimistic about the industry’s ability to maintain and increase production at lower prices.
Continental Resources’ Chief Executive Harold Hamm has said that $70 per barrel is a price “that turns it on for us”.
So far, however, U.S. oil futures have been capped at around $60 and prices at the wellhead are generally a few dollars lower.
There are no signs of significant rig reactivations despite the $18 (40 percent) increase in prices since the middle of March.
The number of rigs drilling for oil across the United States continues to fall, according to oilfield services company Baker Hughes, though the decline has slowed from the plunge between December and April (http://link.reuters.com/gub94w).
In North Dakota, the number of active rigs fell to a new recent low of just 76 on Tuesday, according to the DMR, and has shown no sign of increasing.
The shale wells of North Dakota and Texas have become the marginal suppliers to the global oil market so it is unsurprising prices have been capped (at least temporarily) just below the level at which the industry might start adding production again.
There is an element of bravado in some of the predictions about a new surge in shale production. The same industry leaders insisted last September and October they would not cut drilling despite the drop in prices and would stare down OPEC.
In the short term, production from both North Dakota and Texas will probably continue falling for the next few months as natural decline rates on the wells and the slowdown in drilling and completions during the spring continues to filter through.
64 Comments on "North Dakota’s Oil Production Has Peaked"
Quintard on Wed, 17th Jun 2015 9:30 am
Davy,
I speak a language of truth
joe on Wed, 17th Jun 2015 9:50 am
This was so easy to predict it’s not funny. As we face into stagflation for the next ten years we are going to see allot of bumps in the road. All the while, easy oil gets used up. What your left with is credit issued junk bonds paying high marginal returns for tough oil. As a both are forms of capital then it implies that anything produced from them must also have high marginal returns. That then implies that living standards will fall as say higher costs of credit can’t drive top end growth in consumption as per the exponential growth model. After nearly 7 years of almost zero interest rates we see only very slow growth consistent with population increases and oil being used in greater amounts in lots of countries outside the US, clearly the aim is to spur consumerism in those nations.
shallow sand on Wed, 17th Jun 2015 10:18 am
Davy No clue on duration, but price spikes and price collapses are not good. $140 is not good and $40 is not good. I do not know what price is a “fair price” but volatility is not a good thing for anyone, except possibly people who are good at trading on it.
The more capital intensive the industry, the less able to cope with volatile markets, IMO. Oil prices in the US were stable for many years, up to about 1973. Since then, there have been some very volatile periods.
Davy, I have no idea about whether your thesis will come to pass. I am not cocky enough to say yes or no to that. I do agree there are mountains of debt and wonder about how things will all pan out given that fact.
Nony on Wed, 17th Jun 2015 11:35 am
Shallowsand is right; Rock is wrong.
This has been hashed to death. Even the Texas figures with the initial adjustment estimate are too low and are inevitably raised up over the course of ~2 years.
Rock, an August peak makes no sense. Remember the “lag” and all that? DEC, I can buy. AUG, no way.
P.s. You got your ass kicked on this whole issue earlier and weren’t even aware of the reporting lag or the Texas adjustments. Mouthed off big time and then had to admit you were wrong. Just like with the Marcellus and your confusing monthly and yearly advances.
Nony on Wed, 17th Jun 2015 11:38 am
40 is great, SS. you are a producer who just wants cover to charge more. And “volatility” is the biggest joke. I remember Dick Cheney whining about this and wanting price controls (to prop price up!) I’ll take my chances with the free market.
You can go compete. And if you can’t produce the oil cheap enough, not my worry. I’m the consumer and I want it as cheap as possible!
Northwest Resident on Wed, 17th Jun 2015 11:42 am
“I’m the consumer and I want it as cheap as possible!”
Multiply that attitude times 7 billion and there you have it! The reason we are so totally, irrevocably screwed. That attitude is corrupt, selfish, borderline insane, sitting on Satan’s shoulder calling the shots. Nony, you’re a clever and cute and evil little bastard. ME ME ME ME ME!!!
When your breed of human disappears from planet earth, all remaining life will breath a sigh of relief and the earth will finally begin to heal. Let’s just hope there are a few enlightened individuals left to carry on and to teach their children how absolutely wrong and self-destructive your POV is.
shallow sand on Wed, 17th Jun 2015 12:07 pm
Nony I understand you want all products as cheap as possible, except the one’s that you are employed in or are invested in.
I am just stating that my opinion, that $65 WTI long term will cause US oil production to eventually fall and many US shale oil independent producers to fail. I may be wrong. We may find out.
I base my opinion on reading several SEC reports of these companies during my free time. I enjoy doing that, for some strange reason.
If bank credit lines were frozen, almost all would not be able to pay bills next month. They are running it that close IMO.
They may be able to cut costs some, but my view is that cost cutting will not be enough at $65 WTI and $3 natural gas.
As for us, we do not set the price for oil, grain etc. I do not think any producer in the US can do that, even XON.
Tell me what your opinion is of where US oil production would be if we hold the price of WTI constant at $65 and natural gas constant at $3 through the end of 2016? I think we would see oil drop over 1 million bopd by the end of 2016. I may be wrong. We may find out, as I stated above.
Apneaman on Wed, 17th Jun 2015 12:12 pm
I want it cheap and I don’t want to hear about the externalities.
New study of Barnett Shale area well water finds elevated levels of water contaminants
http://phys.org/news/2015-06-barnett-shale-area-elevated-contaminants.html
Davy on Wed, 17th Jun 2015 12:23 pm
NOo, why don’t you sit back and listen and watch someone like SS. He is fair, balanced, and talking from experience. He does not cheerlead an agenda like you do. He is likable and believable. You come across as a slimy snake oil salesman. That my friend is the power of the of personality and something that would take you so much further in life.
beammeup on Wed, 17th Jun 2015 1:03 pm
“Although production is slipping, and prices are down significantly world inventories are still increasing. 40% declines in the price of oil has not convinced the consumer to increase demand enough to absorb all of the present production. So how could prices increase? How far will prices have to fall to balance supply, and demand. A 60% decline in price, 70 or 80. We are in at a critical junction in the history of oil. Stay tuned!”
Short – I’m not sure that reported inventory levels are the best barometer of demand elasticity. A more direct way to measure that is via metrics such as reported airline fuel consumption, total vehicle miles driven, relative sales of gas guzzlers, overall expansion of the auto fleet, etc. From what I’ve read, those metrics are indeed trending upward. This is NOT an argument that all is well in the world economy. There are huge fundamental problems there for sure, but Jevon’s paradox still seems to hold: when a given commodity gets cheaper humanity generally finds ways to use more of it
Nony on Wed, 17th Jun 2015 1:09 pm
SS, I think domestic industry will not be able to sustain 9MM+ bpd at 60 WTI.
But the US is primarily an oil consuming nation (even now), not a producer. I want the consumers to benefit and not the oil producers. If I have to choose between 100+ and a boom or 60 and a hurting shale industry, I pick the lower price every time. I appreciate the existence of the shale drillers to reduce price overall. But that’s it. If I could have 30/bbl and just import it all, that would be fine too.
Bottom line is you’re a producer. You want your competitors supply restricted in the hopes that prices for what you have goes up. I want all of you all fighting like drunken hoo…people to sell me your oil at the cheapest price. I’d love to add Keystone, ANWR, VACAPES into the mix too. Competition drives lower prices!
Nony on Wed, 17th Jun 2015 1:14 pm
SS, demand for refined products is up.
http://www.reuters.com/article/2015/06/17/usa-gasoline-kemp-idUSL5N0Z334820150617?feedType=RSS&feedName=everything&virtualBrandChannel=11563
beammeup on Wed, 17th Jun 2015 7:47 pm
Nony – Thanks for the link, an interesting read.
GregT on Wed, 17th Jun 2015 8:35 pm
Nony,
“If I have to choose between 100+ and a boom or 60 and a hurting shale industry, I pick the lower price every time. I appreciate the existence of the shale drillers to reduce price overall.”
You have it backwards. Shale drillers did not reduce price, high prices allowed shale drilling.”
Lower high prices reduce production, which in turn will cause prices to rise. Unfortunately for us the economy is still faltering even at $60, or in other words. Peak Oil!