North Dakota Director of Mineral Resources, Lynn Helms, says lower oilfield activity is a distinct possibility unless crude oil prices rebound from current low prices. WTI crude oil has lost nearly half its value in recent weeks as Russia and Saudi Arabia feud on production agreements, as well as decreased economic activity due to concerns with Coronavirus. Helms issued the below statements today following an oil price drop of more than 20% between Friday March 6th and Monday, March 9th. Over the weekend the price of West Texas Intermediate crude oil was down as much as a 34%, one of the largest price drops in decades.
Among Helms' statements:
- It is never a good time for such a significant price drop, but the timing of this drop does allow the state to plan ahead for the next legislative session and will allow lawmakers to adjust priorities in preparation for the next biennium.
- The price in the North Dakota budget forecast is $48.50 at the wellhead which we are significantly below at this point. While the impact on revenues from gross production tax and extraction tax will be immediate, it typically takes 3-6 months to work those impacts into any type of revised revenue forecasting. Likewise it typically takes 3-6 months for this type of price drop to impact to oil and gas activity.
- Unless prices rebound within the next 30-60 days, we can expect to see an impact to production and field activity. In both 2008 and 2015 similar price drops took two years for prices to fully recover. Oil production will likely remain flat to slightly down during that time.
Oil prices dropped 24% today in the largest single-day price drop since 1991.