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Oil price drop could lead to shutdown at North Dakota rigs

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Falling oil prices could halt drilling at several rigs in North Dakota, the state's top oil regulator has warned.

The price of sweet crude hit $66.25 per barrel on Wednesday, InForum reports, which is a 20 percent drop from July.

This has meant good news for drivers, with average regular unleaded gas prices in Minnesota dropping below $3 a gallon this week, but the outlook is less positive for oil producers.

The number of operational rigs in North Dakota on Wednesday stood at 190, down 13 percent from the all-time high of 218 at the end of May, according to the state's Department of Mineral Resource's most recent figures, but the department's director, Lynn Helms, said drilling could stop at another 10 rigs because of the prices.

“We have three counties that right now are below breakeven," he told the Minot Daily News. “It would not be economically viable to drill wells in those counties."

“It puts eight to 10 rigs at risk. It's impossible to predict when those rigs could go out of service. We're at 190 today, so it's less than a 10 percent impact,” he told the paper.

Helms identified Burke, McLean, Bowman and Slope counties as areas where drilling wells is currently uneconomical, as their breakeven marks – the point at which they stop being profitable – are at $81, $73 and $75 respectively.

But while the price of oil has more than halved in the last six years, it is still well above the $28 a barrel breakeven point for rigs in McKenzie County.

The Bakken oil formation recently generated its billionth barrel, according to the state's figures, and August was also a record month as 35 million barrels were produced.

Minnesota is one of seven states currently with gas prices below $3 a gallon, USA Today reports, and a continued drop in prices could see prices pushed down a further 20 cents by early November.

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