The largest oil producer in North Dakota has halted most of its production in the state, notifying some customers it would not supply crude at current pricing, according to people familiar with the matter.
Continental Resources, the company controlled by billionaire Harold Hamm, stopped all drilling and shut in most of its wells in the state's Bakken shale field, said three people familiar with production in the state. North Dakota is the second-largest oil-producing state in the United States after Texas.
Global oil prices have plunged this spring because of excess supplies and a lack of demand from coronavirus-related shutdowns. U.S. crude prices have dropped below zero in some places because of a lack of storage space to put the oil.
Bakken crude this week was selling regionally for $14 to $15 per barrel below the U.S. benchmark, said Ron Ness, president of the North Dakota Petroleum Council. The benchmark settled at $16.50 on Thursday.
A spokeswoman for Continental did not reply to requests for comment.
Bloomberg earlier reported the company declared force majeure on at least one contract to deliver oil because it could not have foreseen the price rout.
Continental is highly exposed to weak prices because it has declined to hedge future production, betting that economic growth would lift the value of its oil. Many large shale producers use derivatives as a type of insurance policy to lock in a price for their future output.
A rival who viewed Continental's notice of force majeure said that without state regulators requiring output cuts, a contract could not be canceled because sales were unprofitable for a period.
Hamm, an early supporter and informal adviser to President Donald Trump, urged Texas energy regulators to consider mandating 25% production cuts in the state to boost prices. Continental had reduced its production through May by 30% before the latest price crash and suspended its dividend.
After U.S. crude futures fell into negative territory this week, Hamm asked U.S. regulators and an exchange operator to investigate whether manipulation or system failure led to the price crash.
Continental shares on Thursday rose 6% to $13.23. They are down 61% year-to-date.