Most of Bakken Oil Shut-ins Have Returned

July 31, 2020
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Our analysis of gas pipeline flows shows oil production may be 1.3 MMBbl/d, up from 0.8 MMBbl/d

Natural gas pipelines gather nominations data multiple times per day, and recent nominations show a large increase in gas receipts during July. The meters that represent production points now show flows recovered by more than half. If the ratio of oil-to-gas production in the Williston basin has held constant, then oil production is at least 1.3 MMBbl/d.

The chart above shows the most recent oil production data (dark blue), reported by North Dakota and organized by Bloomberg. It also shows daily gas receipts at supply points (green).

If oil production is increasing, there is more risk of oil-price differentials to widen. Both the Clearbrook (on the Enbridge mainline in Minnesota) and the Guernsey (at a pipeline junction in Wyoming) differentials could slip lower on higher supply. Specifically, we are concerned if Dakota Access Pipeline (DAPL) is shut down by government order (see our previous analysis here), then there would not be enough pipeline capacity to dispose of all the crude oil production.

The chart shows that without DAPL, the basin only has about 0.9 MMBbl/d of egress capacity. With DAPL, the outbound capabilities are around 1.5 MMBbl/d.

There are ways this analysis could overstate oil production. The main risk to the analysis is if previously flared gas is now being processed. Gas-processing capacity has often lagged gas production in the basin. If fewer gas molecules are being produced, it does not necessarily imply that fewer molecules are being processed. Therefore, a rise in gas receipts on pipelines may not imply a proportional rise in oil production.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

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