Price of North Dakota Oil Drops Below Zero


Translated by Ollie Richardson for Fort Russ

18th January, 2016


The buyer of one of the varieties of American low-quality oil demanded from the seller to pay extra to get the raw materials. A year ago this transaction would have cost $13.5.

Company Flint Hills Resources agreed to buy oil grade North Dakota Sour, if they will pay -$0,5/bbl., reports Bloomberg with reference to the corporate price list. In January 2014, this brand cost $47.6, but by January 2015 fell to $13.5/bbl.

North Dakota Sour is extremely low grade with high sulphur content. As was stated by the Executive Vice President of the Dallas company ‘Turner Mason’, John Auers, in 2011, the company ceased to provide Enbridge with a pipeline for sour crude and needed to take out cargo and rail transport, which significantly increased costs.

Sour in North Dakota accounts for less than 15 thousand barrels. a day of total oil production in North Dakota. For comparison, in the Western part of the state lies a shale formation of ‘Bakken’, which gives 1.1 million barrels daily of low-sulphur oil.

- Advertisement -

The representative of Flint Hills, Jake Reint, did not responded to a phone call and request by Bloomberg by e-mail to comment on the pricing policy of the company.

Oil with high sulfur content generally costs less because its processing requires special equipment, the agency explained. Bloomberg also reminded us that last year the canadian centre for oil and gas, Edmonton propane, within three months were selling at a negative price, i.e., sellers were paying the buyers.

According to Awarta and the President of Lipow Oil Associates in Houston, if manufacturers have to pay for something that they have bought, there is only one way out — to stop taking.

Evaluation research firm Wolfe Research showed that a third of American oil companies will file for bankruptcy when oil prices drop below $50/bbl. According to the data of the company Plains All American, there are two varieties of low-quality oil that are much cheaper : South Texas Sour fell to $13,25/Barr., Oklahoma Sour to $13,50.

Over the past year and a half, the price of the underlying American grade WTI oil had fallen by 70%. On Monday on the new York stock exchange the cost of the February gold futures were down to $28,36/Barr., which is the lowest level since October 2003.

Prices for canadian bitumen fell last week to $8,35/Barr., whereas less than two years ago it was worth $80. Saudi Arabia sells its oil to Asian markets at $26 with a discount.

The drop in the cost of oil is influenced by the glut in the market, at which supply is growing more rapidly than demand. The situation may be complicated with the appearance of additional oil after the lifting of sanctions with Iran.

On Monday futures for the supply of North sea Brent crude in March fluctuated on the London exchange ICE in the range of $27,72 – $28,90.

Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.