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AS I SEE IT

Posted 10/25/17 (Wed)

By Neal A. Shipman
Farmer Editor

For producers of North Dakota Bakken crude oil, a recent shipment of North Dakota “black gold” to China could be the price game changer that they have been hoping would happen.
For those not familiar with oil prices, North Dakota Bakken oil sells at a considerably lower price than West Texas Intermediate or Brent crude. Brent crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide, while West Texas Intermediate is the benchmark for all crude oil that originates in the United States and makes its way by pipeline to the hub in Cushing, Okla. Like Brent, most of the oil extracted in the United States, especially in Texas and North Dakota, - is light and sweet, making it ideal for refinement.
The question that many North Dakota producers are asking is why is North Dakota crude, some of the world’s finest, still selling up to $6 a barrel less than Brent crude?
Part of the answer to that question is up until 2015, the vast majority of the United States’ oil production could not be sold overseas. And when our oil could only be sold within this country, oil producers could not take advantage of opportunities to sell their very high quality to foreign countries.
But that changed in 2015 when the United States finally allowed U.S. oil to be shipped overseas to countries like China and other Asian countries, who have a growing appetite for oil.
In 2016, for the first time in history, Bakken crude oil was shipped overseas when Hess Corporation sold 175,000 barrels of North Dakota crude for export to Europe.
And just recently, Continental Resources Inc. announced it made its first-ever sale of Bakken oil for delivery overseas. The company will deliver 33,500 barrels per day of crude oil in November to Atlantic Trading and Marketing, which will export the oil to China.
The reason that Bakken crude is now becoming a marketable product worldwide is in large part due to the completion of the Dakota Access Pipeline, which can now economically move North Dakota oil to the marketplace.
And that shift in economics is good news for North Dakota and the oil producers operating in the state.
According to Tessa Sandstrom with the North Dakota Petroleum Council, such sales are going to help stabilize energy markets by taking some of the volatility out of the industry and result in Bakken crude getting high prices. And is good news for everyone from the royalty owners to the state and the oil companies operating in North Dakota.
While the latest sale of Bakken crude to China does not involve that much oil, it is another important step in bringing our oil prices closer in line with the other industry benchmarks.
But more importantly, it shows that the world is now seeing the Bakken as one of the sources that can provide a dependable supply of the best oil on the market.