Bakken Crude Producers Cutting Their Production

An analyst who studies the crude oil industry reports that producers in the Bakken oil field are reducing their production and that trend is expected to continue through 2016.

Falling oil prices have triggered the production cuts. Much of the oil pumped in the Bakken region of North Dakota and Montana is transported by rail.

The report by RBN Energy LLC analyst Sandy Fielden did not provide any information about shipping of Bakken crude by rail.

“For the past, year many shale oil producers have defied the expectations of many and kept output at or near to record levels in the face of falling oil prices and much tougher economics,”  Fielden wrote. “Improvements in productivity, cost cutting and a concentration on ‘sweet spot’ wells that generate high initial production rates have all helped cash-strapped producers survive. But with oil prices so far in 2016 stuck in the $35/Bbl and lower range and with the worldwide crude storage glut still weighing on the market, producers are finally pulling back.”

In December there were 1,183 inactive wells in North Dakota and the number of new permits to drill wells has reached a seven-year low.

Fielden said the operators of the inactive wells have essentially abandoned them, usually because they are losing money.

The report described these wells as being older and having very low production rates

Fielden said the expectation that oil prices might remain low for a long time has shaken the market for crude oil from shale in the United States with many smaller operators having gone bankrupt.

He acknowledged that the extent of the production decline remains difficult to forecast because of the potential effect of drilled but uncompleted wells.

Tags: Bakken crude oil, crude oil, crude oil by rail, Crude oil trains