Bakken Oil Weakens as North Dakota Reports Record Production

Bakken crude weakened relative to West Texas Intermediate for the first time in more than a week as North Dakota reported record production from its portion of the shale formation.

Bakken oil priced in Clearbrook, Minnesota, weakened by 50 cents to a discount of $14 a barrel to WTI at 4:23 p.m., according to data compiled by Bloomberg. Production of the oil from North Dakota’s portion of the field increased by 21,000 barrels a day to 867,000 in September, according to the state’s Industrial Commission.

“It’s another month of records in every category,” said Lynn Helms, director of the state department of mineral Resources, on a call today. “At this pace we won’t probably quite make a million barrels a day by the end of the year, but early next year we anticipate we’ll get there.”

Portions of the Bakken field are also in Montana, South Dakota and southern Canada. If Bakken from both Montana and North Dakota were measured together, the combined output has probably reached 1 million barrels a day, said Justin Kringstad, director of North Dakota’s pipeline authority, on the call.

Output from the Bakken has surged from less than 100,000 barrels a day in September 2008, as drillers have improved the usage of horizontal drilling and hydraulic fracturing to ease crude out of tiny cracks in underground shale formations.

The Bakken and Eagle Ford shale formation in South Texas helped push U.S. crude production to the highest level since January 1989. Bakken prices fell from a $5-a-barrel discount to West Texas Intermediate to a discount of more than $10 between August and October.

Wells Drilled

Helms said the widening discount won’t keep companies from bringing more output online. More wells are drilled and awaiting completion than at any other time on record in North Dakota, he said.

About 587,000 barrels of crude a day was transported from the region by rail cars in September, the highest level since April, according to data from the state pipeline authority.

The market share of North Dakota oil moved by rail will increase in the next several months from the 63 percent carried by trains in September, because prices in the state are depressed compared to coastal oil markets, said Justin Kringstad, director of the pipeline authority.

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