North Dakota Oil Prices Hit Rare Premium, Boosting Tax Revenue by $29 Million
North Dakota oil traded above the WTI benchmark in May for the first time in decades, generating an estimated $29 million in additional state tax revenue.
(P&GJ) — North Dakota crude traded above the West Texas Intermediate (WTI) benchmark in May for the first time in decades, an unusual market shift that generated an estimated $29 million in additional oil tax revenue for the state, according to the North Dakota Monitor.
Justin Kringstad, director of the North Dakota Pipeline Authority, said North Dakota crude averaged a $2.56-per-barrel premium over WTI during May. He noted the last comparable premium occurred in 1986, with only minor premiums recorded during two months in 2003 and 2004.
North Dakota oil typically sells at a discount to WTI because producers must absorb the cost of transporting crude to downstream markets. However, supply disruptions linked to the conflict involving Iran and shipping constraints through the Strait of Hormuz temporarily reversed that trend, driving prices at regional delivery hubs above the U.S. benchmark.
Kringstad described the premium as an unusual event for the Williston Basin but said he does not expect the pricing advantage to persist. Even so, he estimated the stronger pricing generated about $29 million more in state oil tax revenue than would have been collected had North Dakota crude continued trading at its typical discount.
Nathan Anderson, director of the North Dakota Department of Mineral Resources, said the state's average oil price reached $100.64 per barrel in May, exceeding the price assumption used in the state's revenue forecast by more than 70%. Oil production, however, remained slightly below forecast at 1.125 million bpd, according to the North Dakota Monitor.
Despite stronger prices, drilling activity has remained relatively subdued. North Dakota's active rig count declined to 24, though Anderson said one rig is expected to relocate from Montana in the coming weeks. He added that operators continue to favor Texas because rigs are less expensive to deploy there and transportation costs for North Dakota crude reduce overall project economics.
State officials said increases in drilling permits and well completions in recent months should help sustain production levels going forward, as reported by the North Dakota Monitor.