The collapse in crude oil prices that resulted from the Saudi-Russian price war in March — made only worse by the oil demand-depressing effects of COVID-19-related shelter-in-place orders — has begun to exact a toll on U.S. crude supplies. The Bakken, America’s #3 oil-producing basin, is a prime example of how quickly the price downturn has begun to negatively affect oil supplies as uneconomic wells there have been shut in and oil-focused drilling has ground to a near standstill. The spillover effects on the Bakken’s associated gas supplies have been just as dramatic with a sharp reduction seen since April as oil well shut-ins began to accelerate. The decline in these natural gas and NGL supplies to date provides a stark example of how quickly gas balances may be shifting in the region and may also be creating an opening for long-suffering Canadian gas exports. In today’s blog, we take a closer look at how Bakken oil supply declines are beginning to impact its gas supplies.
Crude oil supplies from the Bakken have been a prime example of how the Shale Revolution has changed America’s oil supply equation. Once considered a backwater for its low productivity and sleepy oil supplies, the Bakken Shale, covering parts of western North Dakota and eastern Montana, has risen in the past decade to become the third-largest oil producing basin in the U.S., after the Permian and the Gulf of Mexico. Monthly production data for North Dakota and Montana from the Energy Information Administration (EIA) pegs February 2020 crude oil production at just under 1.5 MMb/d (Figure 1). About 97% of that total comes from North Dakota, so any discussion of Bakken oil supplies essentially means focusing on North Dakota.
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