North Dakota oil sector bracing for slump

BISMARCK, N.D., Dec. 10 (UPI) -- North Dakota oil producers increased production in October in a spasm of activity as signs emerge of a prolonged slump, a state report finds.

The North Dakota Industrial Commission reported 1.17 million barrels oil produced per day on average for October, up about a half percent from the previous month. The all-time high was 1.22 million bpd in December 2014.

Lower crude oil prices are starving energy companies of the capital needed to maintain vibrant exploration and production operations. West Texas Intermediate, the U.S. benchmark price for crude oil, is off 37 percent from this date in 2014.

Rig counts, a metric used to gauge the health of the upstream sector, are falling along with crude oil prices. As of Thursday, there were 65 rigs in active service in North Dakota, down 8.5 percent from September.

"Operators are now committed to running fewer rigs, but drill times and efficiencies continue to improve while oil prices continue to fall," NDIC Director Lynn Helms said in a statement.

Crude oil prices started drifting lower in mid-2014 as higher U.S. oil production pushed markets toward the supply side. A series of decisions from the Organization of Petroleum Exporting Countries to keep production steady put further downward pressure on crude oil prices. The price for WTI is 7 percent lower since OPEC's last meeting Friday.

Helms said the number of permits for drilling activity in North Dakota started to fall off sharply in November as operators prepared for protracted weakness in the oil economy.

"The drop in oil price associated with anticipation of lifting sanctions on Iran and a weaker economy in China is leading to further cuts in the drilling rig count," he added.

More than 90 percent of the drilling activity targets the Bakken and Three Forks shale formations in the state.