Jan 20, 2020

News From the Oil Patch, Jan. 20

Posted Jan 20, 2020 10:30 PM
<a href="https://drlg4ksoil.com/">Discovery Drilling</a>
Discovery Drilling

By JOHN P. TRETBAR

Kansas Common crude at CHS in McPherson held steady at $48.75 a barrel. That's 50 cents a barrel higher than a week ago, and $2.25 a barrel less than at the start of this year. Current prices are seven dollars a barrel higher than a year ago.

The weekly rig count from Independent Oil & Gas Service was down one rig to eight rigs operating in eastern Kansas, and up two to 15 rigs west of Wichita. The total is 18% lower than a month ago and 30% lower than a year ago at this time.  Drilling was underway on one lease in Russell County. Baker Hughes reports 796 active drilling rigs across the U.S., an increase of 14 oil rigs and one seeking natural gas.  The count in Texas was up five rigs, while New Mexico and North Dakota were each up three.  Canada reported 244 active drilling rigs, up 41 from a week ago.

Kansas Regulators granted permits for drilling at eleven new locations across the state last week, four of them east of Wichita and seven in Western Kansas. That's 38 new permits so far this year.

Independent Oil & Gas reports 29 newly-completed wells across the state, 57 so far this year. There were eight new completions in eastern Kansas, and 21 in the western half of the state, including one in Russell County and two in Stafford County.

The U.S. Energy Information Administration reports average U.S. crude production last year reached 12.2 million barrels per day.  That's an increase of 1.3 million barrels per day.  Petroleum imports dropped from 2.3 million to just half a million barrels per day last year. The U.S. has remained a net petroleum exporter since September, and EIA predicts that will continue through 2020 and 2021.

U.S. natural gas production set a new record last year: 92 billion cubic feet per day. In its monthly Short Term Energy Outlook, the government predicts U.S. operators will beat that total this year and again next year.  Natural gas prices are predicted to drop this year but recover and actually gain ground next year.

U.S. operators set another production record last week.  The U.S. Energy Information Administration reports production of 12.98 million barrels per day for the week ending January 10. That beats the previous record by about 100-thousand barrels per day.  

As our production continues to increase, U.S. imports continue to drop, and we remain a net petroleum exporter. EIA reported imports of 6.6 million barrels per day last week, down 179-thousand barrels per day.  The four-week average is about 13% less than the same period a year ago.

Regulators in North Dakota report that state's crude-oil production dipped in November from October's record high.  The Department of Mineral Resources reported statewide production of 1.515 million barrels. That's down 2,500 barrels per day from the state's record set the previous month. The state's operators were able to capture just 83% of the natural gas produced at the state's oil wells, and were forced to vent or flare the remaining 17%.

Oil-by-rail in the U.S. continues to show increases over the same period a year ago, despite a broad downturn in freight-train traffic.  The Association of American Railroads reports 14,303 tanker cars moved petroleum and petroleum products during the week ending January 11. That's up 2.8% from the same week a year ago. Canada reports a 12.9% increase.

New shipping fuel regulations have dramatically boosted demand for heavy-sweet grades of crude oil, which are the best suited to produce newly-required low-sulfur fuel. Reuters cites one spot deal in which more than half a million barrels of Australian heavy sweet crude were sold at a $30 premium, or nearly $100 a barrel.