Dec 02, 2019 10:16 PM

News From the Oil Patch, Dec.2

Posted Dec 02, 2019 10:16 PM

Discovery Drilling


Kansas Common Crude at CHS in McPherson starts the final month of the year at $45.50 per barrel after dropping $2.75 a barrel on Friday. Kansas Common is fetching a dollar a barrel less than it did November 1, but $5.25 more than it did one year ago. The average price for November of 2019 was $47.32, compared to an average of $47.15 in November of last year.

U.S. operators continue breaking production records. Weekly output reached 12,888,000 barrels per day last week. That's the best weekly total ever, beating the previous high from two weeks ago by 97,000 barrels per day.

The Energy Information Administration reported domestic crude oil stockpiles increased by 1.6 million barrels for the week ending November 22 to 452 million barrels. That's about 3 percent above the five-year seasonal average.

The government says the U.S. imported an average 6.2 million barrels per day of crude oil last week. That's up 217,000 barrels per day from the week before. But, the four-week average is nearly 22% less than the same figure from a year ago.

Independent Oil & Gas Service reported a slight drop in the Kansas rig count, down one to eight active rigs in eastern Kansas, and down one west of Wichita at 24 active rigs. Drilling got underway on one lease in Barton County and one in Stafford County and was about to start on a new well in Ellis County.

Baker Hughes last week reported 802 active drilling rigs across the U.S., marking a decline of three oil rigs. The counts in New Mexico, Oklahoma and Texas were each down one. Canada reports 126 active drilling rigs, down eleven for the week.

Regulators last week approved 20 permits for drilling at new locations in Kansas, 15 of them east of Wichita, and five in the western half of the state. There's one new drilling permit in Stafford County. So far this year, there are 996 new drilling permits on file in Kansas. Independent Oil & Gas Service reported 16 newly-completed wells across Kansas last week, 1,284 so far this year. There were six new completions east of Wichita and 10 in Western Kansas, including one in Barton County.

The Seaway Crude crude pipeline from Cushing, Oklahoma to the Texas Gulf Coast could soon expand again. The company said the expansion could add up to 200-thousand barrels per day to the current 400-thousand barrels per day capacity. Up to half of that additional capacity would be available early next year, and under current planning, Seaway says the expansion could be fully in service by late in the year 2020. The company will have what is called an "open season" for new customers starting next month.

The state of North Dakota has had continuing problems disposing of natural gas produced at oil wells, but that could soon become a thing of the past. A North Dakota producer is launching a pilot project to inject natural gas back into the ground to force more oil out of the Bakken shale. This method of Enhanced Oil Recovery is already done in older oil fields using carbon dioxide or water. But the Grand Forks Herald reports Hess Corporation will inject a proprietary concoction of foam and natural gas into fractured shale formations, hoping to force gas into small pore spaces and force out more crude oil. The North Dakota Industrial Commission approved a pilot project near Ross, North Dakota which is expected to take place over the next two years.

The government of Iraq has agreed in principle to an oil-sharing deal with the northern Kurdish region. The agreement comes amid weeks of anti-government protests threatening the continued rule of the Prime Minister, who is seen as friendlier to the Kurds than previous leaders. The Kurds reportedly agreed to contribute 250,000 barrels of oil per day to the federal government by the start of next year in return for a greater share of the federal budget, which they will use to pay public sector salaries and other expenses. The Kurds’ independent oil policy has been a source of friction with the federal government for over a decade. 

What was once the world’s most famous oil and gas field, and the backbone of global crude pricing, has dried up. Soon the Brent benchmark will have no Brent oil. The Wall Street Journal reports Royal Dutch Shell is expected next year to plug the last remaining Brent oil wells near Scotland's Shetland Islands. The move will mark the end of an era as the industry shifts its focus to smaller finds near existing infrastructure.

OPEC and its allies plan to deepen oil production cuts and keep them in place at least through June in advance of the public stock offering of Saudi Aramco. CNBC says the new deal would add at least 400,000 barrels per day in cuts to the current agreement. The latest OPEC analysis shows a large oversupply and build up in inventories in the first half of next year, if no additional cuts are made.