BISMARCK, N.D. (North Dakota Monitor) — North Dakota oil shipped on the Dakota Access Pipeline is fetching nearly $7 more per barrel than a U.S. benchmark price amid volatility caused by the Iran war.

State regulators aren’t sure why prices for North Dakota oil at its destination in Illinois are higher than traditional benchmark prices. One possibility is the light, sweet crude can be more easily refined into products like jet fuel and diesel that are experiencing demand surges in Europe and elsewhere.

How much of that higher price benefits North Dakota will be more clear in the coming months, said Justin Kringstad, director of the North Dakota Pipeline Authority.

“Royalty owners, the producers, the state, all share that uplift,” Kringstad said.

North Dakota crude oil typically is discounted compared to benchmark pricing to account for the cost of transportation. Kringstad and Nathan Anderson, director of the North Dakota Department of Mineral Resources, expect to have more information next month about why the prices have been higher in recent weeks and how much of that value is filtering back to North Dakota.

“I would suspect that some portion of it, probably not all of it for sure, does make its way back,” Anderson said.

The new dynamic is a small part of a global oil market that has been thrown into chaos by the Iran war and the closure of the Strait of Hormuz, a maritime bottleneck for a fifth of the world’s oil production.

“Boy, this is largely dominated by the word volatility. That’s the way I would describe pricing over the last 50 days,” Anderson said. “But over the last seven days, I think we’ve had almost a $20 swing in price, depending upon what talks are occurring between the United States and Iran.”

That chaotic market dynamic and the uncertainty of how long the conflict, and subsequently high oil prices, will endure is a big reason why publicly-traded oil companies have not invested in new drilling, Anderson said.

But the number of maintenance rigs has risen from 110 to 125 since last month, suggesting that oil companies are trying to optimize production from existing wells while oil prices remain high, the director said.

There are 26 active drilling rigs in North Dakota, and companies have indicated plans to add one or two more, Anderson said.

Beyond that, Anderson does not expect publicly-traded companies to increase drilling activity until 2027 because their budgets for this year are already set. Privately-owned oil companies have more flexibility and could potentially invest in more drilling than they budgeted for this year if prices remain high enough to warrant it.

There is little data available on what impact the Iran war has had on North Dakota oil production so far because data is not available in real time. February figures, prior to the beginning of the war, were released Tuesday and showed the state produced an average of nearly 1.13 million barrels of oil per day. North Dakota also produced more than 3.32 billion cubic feet of natural gas per day.

The daily oil production is 1.76% below the revenue forecast used to guide North Dakota’s budget-making process. But Anderson expects those numbers to increase when March production is announced next month.

“One of the things that occurred when the Iran conflict happened was that those operators that had curtailed or shut in production during the low price environment started to bring that production online,” Anderson said.

North Dakota Monitor reporter Jacob Orledge can be reached at jorledge@northdakotamonitor.com.