By JOHN P. TRETBAR
After several days of intense negotiations, members of the "OPEC-Plus" oil exporters agreed Sunday to cut overall crude-oil production by 9.7 million barrels a day. The cuts would commence May 1 and gradually ramp down to cuts of six million barrels a day early next year. Sunday’s deal came after President Donald Trump intervened to compensate what Mexico could not contribute to the proposed cuts.
The Saudi Energy Minister said on Monday that the effective total worldwide cuts will reach 19.5 million barrels per day. Reuters reports that total includes the reduction agreement by the OPEC-Plus producers, as well as oil purchases into reserves and pledges by other nations.
A week-long marathon of calls and video conferences joined OPEC-Plus with the Group of 20 nations in what Bloomberg described as an unprecedented agreement. The focus of the market now shifts to whether they can dent the supply glut that keeps growing as the COVID pandemic hammers the global economy.
By Tuesday, a number of energy analysts were predicting the agreement will not fully kick in next month, and that compliance may not reach 50%.
Independent Oil & Gas Service reports a slight uptick in its weekly Rig Count in Kansas, noting three active rigs in the eastern half of the state, up two for the week. The count west of Wichita was unchanged at five active rigs. One oil well in Cheyenne County was the only well completed across the state of Kansas last week. We've had 312 new well-completions so far this year. There were just two permits issued last week for drilling at new locations in Kansas, one in Haskell County and one in Hodgeman County. There are 161 new drilling permits on file so far this year.
Baker Hughes reported another huge drop in the weekly active drilling rig counts last week. Nationwide there are 602 active rigs, down 58 oil rigs and four gas rigs. The count in Texas was down 36 rigs. New Mexico was down seven and Oklahoma was down three.
The Energy Information Administration last week reported another rise in domestic crude-oil inventories. U.S. stockpiles were up more than 15 million barrels to the highest level reported since June of last year.
The government said U.S. crude oil production dropped more than half a million barrels a day last week. Operators pumped just shy of 12.4 million barrels per day during the week ending April 3.
U.S. crude-oil imports continue to drop. EIA reported average imports of 5.9 million barrels per day, down 173,000 barrels per day from the week before.
The government reduced its production and price forecasts for West Texas Intermediate Crude. In its monthly Short-Term Energy Outlook report, the EIA predicts WTI prices will average $29.34 a barrel this year, down about 23% from its previous forecast. The report suggests U.S. production will average 11.76 million barrels per day in 2020, down nearly ten percent from the prediction in March.
Gasoline demand has dropped to 27-year lows, and gasoline stockpiles are now ten percent above the five-year average. That's good news at the pump. The national average price for a gallon of regular dropped to $1.851 on Tuesday. The average across Kansas is $1.603. Triple-A says only eleven states have a cheaper statewide average than Kansas. Your 15-gallon fill-up is nearly $15 cheaper than it was a year ago at this time.
A barrel of Western Canadian Select (crude oil) now costs less than a foot-long sub. That's the way Canada's oilfield service company executives put it in an open letter to the federal government in Ottawa. They're asking for a federal payroll relief plan, and for the government to purchase their accounts receivable, at a discount. They say that would give the companies instant cash flow, and the government could then collect at a profit when oil prices recover. In addition to the worldwide price rout, the oil patch in Canada has been hit harder than in most other countries because of inadequate pipeline capacity and other issues. Over 200,000 people have lost energy jobs in Canada since 2014.