North Dakota again posted records for oil and gas output in July, and Monday's surge in oil prices could fuel further production gains in the coming weeks.
Global oil prices shot up 15% after the weekend bombings of key Saudi Arabian oil installations, temporarily knocking out half the country's production capacity and roughly 5% of the world's oil supply.
The extent of the attack's repercussions on the oil industry aren't clear, though it certainly could boost U.S. oil exports.
"If the destruction turns out to be a lengthy affair, I think we will see a higher price of crude oil, and with higher prices there is an incentive to increase production in the U.S.," said Sandy Fielden, an oil analyst at Morningstar. In that scenario, U.S. exports should increase and the country would gain global market share, he said.
Whatever happens next in the Mideast — more violence or just heightened tensions — a higher "geopolitical risk factor" will be built into oil markets, Fielden said.
U.S. oil production has already been strong this year, and North Dakota has been no exception.
North Dakota, the second-largest oil-producing state after Texas, pumped out 1.44 million barrels of crude per day, up 1.2% over June, according to data released Monday by the North Dakota Department of Mineral Resources. Natural gas production rose 2.2% from June to July, hitting 2.95 million MCF per day. An MCF is 1,000 cubic feet of gas.
The number of producing oil wells stood at 15,943 in July, also a record. And the state's rig count — an indicator of drilling for new wells — is relatively healthy. There are now 62 drilling rigs working in North Dakota, four fewer than in March, but five more than in July.
Oil markets ignited Monday after the attack on Saudi Arabia. Brent crude, the global-oil price, jumped 15%, while West Texas Intermediate — the benchmark U.S. crude price — soared 12% from about $55 a barrel to around $62 a barrel.
WTI has traded between $52 and $60 for the last three months, with its 52-week peak at around $73 in October.
Oil and gas production in North Dakota could be higher this year if the state had more infrastructure to collect and process natural gas.
The burning of excess natural gas — called flaring — has been stubbornly above the state's targets this year, though it declined a bit in July, according to the Mineral Resources Department.
In July, North Dakota operators captured 77% of natural gas, flaring the remaining 23%. During the previous month, flaring hit 24%, one of the highest marks in recent years.
North Dakota has been well below its gas capture goal of 88% (12% flaring) for many months. The state's ability to process gas has not kept up with rising production.
Mike Hughlett • 612-673-7003