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What Killed The Oil Price Rally?

What Killed The Oil Price Rally?

A bearish report from the…

US Geological Survey To Reevaluate Bakken Oil Reserves

Bakken rig

Federal geologists will lead a push to reevaluate the total amount of recoverable oil near North Dakota’s Bakken formation, according to the state’s Senator John Hoeven.

Hoeven requested the new analysis from the U.S. Geological Survey in an attempt to attract new investors to the shale play. The survey will now include 17 other formations in the state that could be commercially exploited using newly developed extraction technology.

USGS deputy director William Werkheiser said the federal agency would work with "appropriate state and local officials and technical experts to ensure we develop the best possible product in a timely manner."

Crude oil production in the Bakken shale in North Dakota has been experiencing some major challenges lately, but it is firmly on the growth path, said the state’s Department of Mineral Resources Director Lynn Helms in an interview for S&P Global Platts last month.

Helms identified as the biggest challenges a) growing production in the Permian and b) a hypothetical end to the OPEC production cut agreement. While the first challenge is very real, the latter challenge is more likely than not to remain hypothetical for the foreseeable future. E&Ps in the Bakken will continue to pump more than 1 million bpd but less than 1.1 million bpd until the end of the year and into 2018.

"We should see oil production in a growth mode, 10-15,000 b/d month on month is where we expect to be," Helms said, adding that the North Dakota shale industry would need West Texas Intermediate at $60 a barrel to start expanding production beyond the 1.1-million-bpd mark. At the time of this article’s writing, WTI traded at $58.01 a barrel.

Still, competition from the Permian with its lower production costs in the sweetest spots is hampering this production growth in North Dakota.

By Zainab Calcuttawala for Oilprice.com

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