Surge in oil prices provides incentive in Bakken
WILLISTON -- The elevated price of oil due to the crisis in Syria is creating extra urgency to develop the Bakken, says a certified trading adviser.
Eugene Graner, president of Heartland Investor Capital Management in Bismarck, said the price of oil, which hovered around $108 Thursday after peaking at $112 last week, assures aggressive drilling in North Dakota.
"The Syrian conflict keeps the prices at an elevated level that helps keep the excitement level in the Bakken moving at a rate that would be higher than normal," Graner said.
The price is not elevated because Syria is a significant oil producer, Graner said. Syria produces about 100,000 barrels of oil per day, down from the 400,000 barrels per day it produced before the civil war, Graner said.
By comparison, North Dakota now produces more than 820,000 barrels per day.
But concerns about what may happen in Syria that could affect neighboring countries of Jordan, Iraq and Egypt are driving fears about oil supply in the region, Graner said.
"If Syria goes wrong, it's a domino," Graner said.
North Dakota had 186 active drilling rigs Thursday, which is consistent with recent months.
Ron Ness, president of the North Dakota Petroleum Council, said the high price gives operators confidence, but he doesn't think they're changing their development plans.
"I don't think they react quite that sharply right now," Ness said.
Graner said operators in North Dakota tend to work faster when the price of oil is high.
"This is very profitable production," Graner said.
Typically, oil prices start to drop at the end of September, Graner said.
If the tensions back off, the price of oil will likely return to the low $90s, Graner said. The longer the price stays elevated, the more it will drop after tensions are eased, he said.
"When this tension leaves, the demand won't be there to support this supply," Graner said.