Nov 24, 2020 4:12 PM

News From the Oil Patch: Kan. crude prices highest since August

Posted Nov 24, 2020 4:12 PM

BY JOHN P. TRETBAR

Kansas Common crude at CHS rose another 75 cents Monday, and is now fetching $33.25 per barrel, the best price in McPherson since late August. Current prices are a dollar and a half higher than a week ago, three dollars higher than at the beginning of the month, but $15 lower than a year ago at this time.

Crude futures prices reached their highest level since March, adding another four percent Tuesday. The Nymex benchmark contract reached $44.75 per barrel in late morning  trading, and London Brent was up to $47.55.

Baker Hughes says the national Rotary Rig Count was down five oil rigs Friday. The count in New Mexico was up two, while Texas, Oklahoma and Wyoming were each down one.

Kansas regulators report just six new drilling permits across the state for the week, four of them east of Wichita and two in Western Kansas. That's 412 permits so far this year, less than half the total at this time last year.

Independent Oil & Gas Service reports just four newly-completed wells in Kansas for the week, one in the eastern half of the state and three west of Wichita. That's 732 completions so far this year, compared to more than 1,200 a year ago.

U.S. crude oil inventories increased 800,000 barrels last week according to government report. At 489.5 million barrels, U.S. stockpiles are about six percent above the five-year seasonal average.

The Energy Information Administration reports U.S. crude-oil imports dropped nearly a quarter-million barrels per day last week, to 5.3 million. EIA says the four-week average is down more than 12% from a year ago.

EIA reported a half-million barrel spike in domestic daily production averages last week, up to 10.9 million barrels per day. 

Regulators in the second biggest oil-producing state report an uptick in production last month. North Dakota's Department of Mineral Resources says they pumped half a million barrels in September than in August, for an average of 1.2 million barrels per day. Operators show continuing improvement in reducing the flaring or venting of natural gas produced at oil wells. At 93%, the amount of natural gas recovered is well above the 91% goal set by the state beginning this month.

The government is once again predicting a significant decline in crude-oil production from the country's seven major shale-oil plays. The Energy Information Administration says total production in November will reach 7.6 million barrels per day. That's about 40,000 barrels per day less than previously predicted. According to this month's Drilling Productivity Report from the EIA, December production will drop by 140,000 barrels per day. Shale production accounts for about two-thirds of the total output in the U.S.

Oil-by-rail shipments lag last year's totals by 23 percent, but the Association of American Railroads reports another weekly increase, with 10,744 railroad tanker cars hauling petroleum or petroleum products, an increase of 354 tankers.

The third-quarter of 2020 represented a big test of oilfield services companies' cost control. Rystad Energy says cost cuts by the big three service companies have proven largely successful. Schlumberger, Halliburton and Baker Hughes have improved their adjusted operating margins during the third quarter, but still trail last year's numbers. 

The Colorado agency that's banning flaring as part of its overhaul of oil-and-gas regulation is apologizing after sending an inappropriate email ridiculing the very companies it regulates. Staffers were testing a new e-filing system but inadvertently sent an email to hundreds of oil and gas workers across Colorado. The email listed some derogatory names for oil companies, including "Snake Oil Inc," and "Here We Go Again" represented by the law firm of "Blah Blah Blah." Other names included “Bad Oil and Gas,” “Really Rich,” “Here We Go Again,” and “The Lorax.”

Land values in West Texas continue to plummet, due to shrinking oil demand brought on by the pandemic. The Associated Press quotes a land broker in Houston saying he's seen prices have fallen below $1,000 per acre for property that was once worth more than $10,000 an acre. Rystad Energy reports the average price of U.S. shale acreage has fallen by more than 70% in two years, from $17,000 per acre in 2018 to $5,000 per acre this year.

China continues its crude-oil buying spree. Bloomberg reports physical cargoes of crude oil from Russia, the U.S. and the Middle East were getting snapped up increased prices as buyers across Asia entered a bidding war to secure supplies. Traders also said Chinese importers are buying from Brazil and Angola as well, paying for cargoes that would arrive before mid-February’s Lunar New Year holidays.

Rivals in Libya’s civil war agreed to bolster a paramilitary unit to protect oil infrastructure, a step that could help sustain its recent surge in production. The chairman of the state energy company met with Libya’s two main warring factions last weekend. The oil company is meeting with French oil giant Total discussing that country's willingness to invest in Libyan crude production. Output in Libya has gone from next to nothing two months ago, to one-and-a-quarter million barrels per day last week. That's higher than it was before the Libyan civil war began nearly ten years ago.