Crude oil prices collapse to historic low in a matter of hours

Oil pumps fall silent across the Western Edge as crude oil prices drop to historic low. (Dickinson Press file photo)

Crude oil prices collapsed by more than 114% in a span of mere hours on Monday, as the coronavirus pandemic continues to crush demand while rising stockpiles of crude overwhelm storage facilities across the nation — resulting in the price plunge that took crude oil into negative digits for the first time in history.

As commodity futures continued their downward spiral for the fifth consecutive week, forecasters projected oil demands to exceed production.

Lynn Helms, North Dakota minerals director, detailed concerns last week with the unprecedented volumes of oil oversupply straining an already struggling logistical storage capability.

Some companies in the Oil Patch are considering building large tank farms to store large quantities of oil for sale later when prices rebound, Helms said.

In early March, North Dakota had more than 16,000 operating oil wells, a figure that was reduced by about 3,600 wells by the end of the month, according to Helms. That number has since decreased by nearly another 1,000, as operators take advantage of regulatory flexibility permitting the idling of wells without the requirement to permanently shut them down.


According to Helms, the result could see more than 6,000 oil patch workers without jobs before the situation reaches its balancing point. The statement by Helms comes after global oil prices continue to cause havoc on North Dakota’s economy, with recent reports out of the Bakken showing that more than 2,000 petroleum industry jobs have been shed since January alone.

U.S. Sen. Kevin Cramer, R-N.D., issued a statement on the plunging numbers, blaming the exacerbation on a price war between the Saudis and Russians, who both increased oil production, sending oil prices even lower in a bid to grab market share and to hurt U.S. producers.

“Today’s collapse poses a devastating threat to our oil and gas sector, with job losses in the thousands and national security being weakened if the industry cannot recover," the statement read. "The dramatic low underscores why we cannot allow Saudi Arabia to flood the market, especially given our storage capacity dwindling. Right now, the highest number of Saudi oil tankers in years is on its way to our shores."

Cramer added, "Given today’s news, I call on President Trump to prevent them from unloading in the United States.”

Ron Ness, the president of the North Dakota Petroleum Council, the industry group based in Bismarck said most of the price drop can be attributed to "paper turning" on the market as April 21 marks the end of the contract.

"I suspect that most of our barrels were already contracted and sold," Ness said. "We expect to see more rigs fall off over the next few weeks, we're talking a lot more wells shut-in."

Ness added, "The Saudi-Russia deal is the thing that kickstarted this oversupply, but what we are seeing now is a direct function of falling demand as a result of COVID-19. My estimates are that 85% of this is complete demand disruption for the commodities and 15% of it is the OPEC price war between Saudi Arabia and Russia."


The economic ramifications of dropping oil prices are topping the list of concerns for local elected officials as well, as many face the growing challenges of rebounding an economy in light of the negative impacts levied by the coronavirus pandemic. Mayor Scott Decker of Dickinson said that a potential oil bust is “without question” the primary concern of city officials in Dickinson, remarking that oil prices were being closely monitored and that serious discussions were being held at local, state and federal levels on the matter.


“One of the biggest challenges looking forward, and COVID is going to be huge, but the biggest problem looming over us is the falling oil prices,” Decker said. “In the past we couldn’t get enough workers, but what is it going to look like in the future with a decrease in oil activity. It’s such a yo-yo effect in that part of the economy out here. Despite our diverse economy, I think this is one of those where we are going to see a huge economic impact.”

According to recent reports, fracking crews have declined by more than 25% this quarter and are on pace to fall another 25% in the next month, leaving industry and government leaders to compare the forthcoming economic impact with that of the recession and financial crisis of 2008.

“We are going to have to seriously look at our model and consider what we are going to have to do,” Decker said. “Workforce, child care and keeping our economy diverse are always on our minds, and when it comes to city budgets there are going to be hard decisions that are going to have to be made.”

Estimates place the influx of oil jobs to the state since 2014 at more than 90,000 people, and Dickinson, Watford City and Williston have acted as regional hubs for many oil workers, businesses and investors who are vacating the state as plunging prices signal another bust.

As the oil price continues to evaporate, workforce, businesses and investors are leaving the Bakken and with it, leading many Western Edge cities and towns to face the reality of smaller budgets, fewer residents and the physical scars of a boom.

“When it comes to these quality-of-life projects that we had on the docket, we are going to have to push those down the road for a year, at least. ... The challenge is going to be to decide how we are going to operate as normal as possible in the downturn in sales tax and GPT (gross production tax) for oil,” Decker said.

James B. Miller, Jr. is the Editor of The Dickinson Press in Dickinson, North Dakota. He strives to bring community-driven, professional and hyper-local focused news coverage of southwest North Dakota.
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