By JOHN P. TRETBAR
Kansas Common crude at CHS in McPherson starts the week and ends the year at $52 per barrel, after gaining 75 cents late last week.
The government reported U.S. crude-oil production reached its second highest weekly total ever. The Energy Information Administration reported domestic output of 12.881 million barrels per day for the week ending December 20. That's just seven thousand barrels per day less than the all time record.
EIA reported a draw down of more that five and a half million barrels in U.S. crude-oil inventories last week to 441.4 million barrels. U.S. stockpiles are about two percent above the five-year average for this time of year.
Oil-by-rail traffic in the U.S. increased slightly last week. According to the Association of American Railroads, operators moved 14,119 tanker cars hauling petroleum and petroleum products during the week that ended December 21. The cumulative total for the year is up 12.5% [["twelve point five percent"]] over the total a year earlier. Oil by rail in Canada was up more than 14 percent for the week and up 16% over the cumulative total at this point last year.
A deadline is coming up soon that has some analysts fearing the worst. New shipping fuel standards kick in starting January first. The International Maritime Organization is poised to ban shipping vessels using fuel with a sulfur content higher than 0.5%. The current standard is 3.5%. Major oil companies and shipowners have spent billions of dollars preparing for the changes, but energy analysts worry that many in the industries still appear to be unprepared. One analyst tells CNBC the change provided the "opportunity of a lifetime" to raise prices, but says shippers are not capitalizing on it. More than 170 countries, including the U.S., have signed on to the fuel change, adopted by the organization in 2016. The U.N. created the IMO to set rules for shipping safety, security and pollution.
Exploration and production company Encana is ending the year with a flurry of drilling permit filings in two shale basins in Texas. According to the Houston Chronicle, Encana has filed for 43 drilling permits over the past month with the state agency that regulates the oil and gas industry. Encana is seeking to drill 32 horizontal wells in the Permian Basin and eight in the Eagle Ford Shale.
A new report from the Federal Reserve Bank in Dallas shows activity in the old and gas industry dipped again during the fourth quarter of 2019. The Fed noted that business activity in exploration and production showed modest growth, but oilfield services dipped significantly. Production activity increased for the 13th consecutive quarter, according to the survey of oil-patch executives. Nearly 60% of those responding said their capital spending would hold steady or increase next year. About half were making spending plans based on a price expectation of from $53 to $56 a barrel for West Texas Intermediate crude.
Banks are tightening requirements on revolving lines of credit, an essential lifeline for smaller shale producers. Semi-annual reviews are prompting some large banks to reduce the size of loans linked to shale reserves. According to The Wall Street Journal, operators are reducing their estimates on the value of their shale reserves. The banks are concerned that if some companies go bankrupt, their assets won’t cover the loans.
Reporting on the Web site "Oil Price dot com" suggests major "write downs" by major oil companies will continue to buffet an industry already battered by low prices. Last week Royal Dutch Shell announced it will write down, or reduce its value by between one-point-seven and two-point-three billion dollars in the fourth quarter. In its announcement Shell blamed a slowdown in the global economy, weak demand growth and relatively low prices for the move. This comes a little over a week after Chevron revealed a much larger reduction of ten-to-eleven billion dollars. Analysts say some companies overpaid for assets years ago, only to watch the market deteriorate. The report suggests the industry as a whole has failed to prove that it can turn a profit from shale drilling. Since October, Repsol, BP, Equinor and Halliburton have written down a combined $20 billion in assets.
Colorado’s falling oil and gas rig count appears to finally be showing up in the employment numbers. The Denver Post reports the Colorado economy shed 300 jobs in that sector between October and November. The total is down 400 jobs year-on-year, snapping a 31-month streak of employment gains.
The latest legislative report card for New Mexico’s oil and gas regulators pointed to a need for more staff and faster approvals for drilling applications as oil and gas continued to boom in the Permian Basin. The Carlsbad Current Argus reports a reduction in inspections last year, which the report blames on the high number of vacancies among compliance officers. Most drilling permits were approved within 10 business days, exceeding state goals, but fewer permits were approved than last year.
Kuwait and Saudi Arabia have put more than five years of differences behind them by signing a new deal for an oil-rich area known as the Neutral Zone, to which both have territorial claims. Forbes reports the countries last week signed a new agreement to divide the area between them. Production could resume soon from shared fields in the zone.