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North Dakota Oil Output May Top High as Weather Allows Drilling

Photographer: Matthew Staver/Bloomberg

Traffic generated by an oil boom lines the main street in Watford City, North Dakota. Shale development is surging in North Dakota’s Bakken formation. Close

Traffic generated by an oil boom lines the main street in Watford City, North Dakota.... Read More

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Photographer: Matthew Staver/Bloomberg

Traffic generated by an oil boom lines the main street in Watford City, North Dakota. Shale development is surging in North Dakota’s Bakken formation.

Oil production in North Dakota may have exceeded an all-time high last month as mild weather and lower-than-normal snowfall allowed drilling to increase.

The number of wells started rose to 212 in January from 181 in December and 140 a year earlier, according to a preliminary estimate from Alison Ritter, a spokeswoman for the North Dakota (BAKKNODA) Department of Mineral Resources.

“A lot of people are going to be blindsided by fundamentals and an increase in oil production,” Hamza Khan, an analyst with Schork Group Inc. in Villanova, Pennsylvania, said by phone. “Production will increase and prices will fall.”

The state’s output reached a record of 535,036 barrels a day in December as improved technology has made it profitable for producers to tap crude trapped in tight underground shale formations. The Bakken Shale, which extends south from Canada into North Dakota, South Dakota and Montana, is the largest contiguous oil deposit in the continental U.S.

Temperatures in December and January were 12 to 14 degrees Fahrenheit higher than the previous year, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland. Temperatures this month through Feb. 26 ranged 4 to 10 degrees above normal. North Dakota has received 25 inches less snow than normal, he said.

“They’ve had very little snowpack this year,” Rogers said, noting that winter storms are forecast for the region this week. “There may be a last gasp here, but it has been much warmer than normal.”

Rig Count

As of Feb. 28, 205 rigs were drilling in North Dakota compared with an average of 167 in February 2011, according to the Industrial Commission of North Dakota, Oil & Gas Division website.

The state’s oil production has quadrupled since 2005, with average daily output rising to 418,426 barrels in 2011 compared with 97,435 in 2005, according to data from the Industrial Commission of North Dakota’s Oil & Gas Commission.

“The Bakken production has probably exceeded anyone’s forecast,” Andy Lipow, president of Lipow Oil Associates in Houston, said today.

Oil has increased 9.3 percent this year to $108.02 a barrel on the New York Mercantile Exchange as a European embargo of Iranian crude heightened tension with the Islamic republic and raised concern that Middle East exports may be disrupted.

Companies trying to take advantage of rising prices are curtailing natural gas production to drill for crude. U.S. oil output reached 5.842 million barrels a day in November, the highest level since April 2002.

Drillers are using the same techniques that unleashed a boom in natural gas production, pushing gas stockpiles to record highs while prices plummeted. Futures fell to $2.322 per million British thermal units on Jan. 25, the lowest since Feb. 25, 2002.

To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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