21 Jul 2020

JBC in the Media - The Fuse

Problems For The Bakken Begin To Mount

“Notably, however, the recent discounts for Bakken oil relative to WTI have been surprisingly narrow, especially given the fact that Dakota Access’ days may be numbered. One reason for that is the fact that the pipeline hasn’t actually shut down yet. But another reason for the ‘lack of pressure that one might expect from such a large looming reduction in offtake capacity is massively reduced Bakken crude production,’ JBC Energy said in a note. ‘As such, despite the pipeline closure threatening to slash offtake capacity by 570,000 b/d, it is unlikely that Bakken Clearbrook will be massively pressured vs Cushing, even in the short term as shut-in shale wells are restarted’ JBC added, referring to the regional benchmark.”

“Even as oil prices have steadied, drilling remains very depressed. The Bakken is high-cost relative to the Permian, and the rig count is at multi-year lows. The rig count in the Williston basin (of which, the Bakken is a part) is down to just 10 active rigs, according to Baker Hughes. As recently as March, there were more than 50 rigs drilling in the basin. The severe slowdown in drilling means that oil production in the Bakken won’t bounce back anytime soon. JBC says that production will remain at around 1 million barrels per day for the remainder of the year, ‘which should help manage the fallout should the pipeline shut down.’”