May 04, 2021 10:21 AM

News From the Oil Patch: Feb. cold snap more costly than reported

Posted May 04, 2021 10:21 AM

By  JOHN P. TRETBAR

The Arctic cold blast that swept through the southern U.S. in February caused a much bigger loss in oil supply than previously estimated, with output falling to a three-year low. A report from the Energy Information Administration shows drillers cut production by almost 1.2 million barrels per day in February, a much bigger hit than previously reported. U.S. production for February was down 10 percent from January, and was 22% lower than a year earlier. The cold snap shut down the power grid and other infrastructure including a brief shutdown at the HollyFrontier refinery in El Dorado February 18, according to reports under the refinery's current Consent Decree. The EIA report shows a big drop in Kansas output in February as well. Production averaged 66,000 barrels per day, a 12% drop from January and 25% lower than February of 2020.

Benchmark crude futures settled Friday at $63.58 per barrel, up more than a dollar on the week and about three dollars higher than a month ago. In morning trading Monday, WTI for June delivery was fetching $64.25 per barrel.

Kansas Common crude ends the month of April at $53.75 per barrel, up a dollar fifty from a week earlier and two dollars higher than at the first of the month. The average price for April was a fraction shy of $52 per barrel, down about 89 cents from the average for March.

The weekly Rotary Rig Count from Baker Hughes reports 440 active rigs nationwide, a decline of one oil rig but an increase of two rigs seeking natural gas. The count in Texas was up one and New Mexico was down one.

Independent Oil & Gas Service reported 18 active oil-and-gas drilling rigs in Western Kansas this week, an increase of two rigs over last week. The count in the eastern half of the state was unchanged at six active rigs. Operators in Barton, Ellis and Stafford counties drilled four wells to total depth last week.

Kansas regulators approved 20 new drilling permits last week, nine east of Wichita and eleven in Western Kansas, including one in Barton County and one in Russell County. That's 265 new permits so far this year.

Independent Oil & Gas reports ten newly-completed wells in Kansas this week, five east of Wichita and five west, including one new well-completion in Ellis County. Operators have completed 224 wells so far this year.

Operators filed 100 Intent-to-Drill notices with the state of Kansas last month. That marks a slight decline from the month before, but is much higher than any other monthly total for the last year or so. There are four new intents in Barton County, six in Ellis County, two in Russell County and one in Stafford County.

US crude production dropped by more than 100,000 barrels to average just less than 11 million barrels per day last week. The Energy Information Administration says we're still more than a million barrels per day behind last year's record pace.

EIA says domestic crude-oil stockpiles were up slightly to just over 493 million barrels. That's equal to the five-year average. Gasoline stockpiles were also up slightly. But overall petroleum inventories dropped by a big margin, led by diesel and fuel-oil stockpiles which were down more than three percent.

The government reported US crude imports increased more than a million barrels per day to 6.6 million. The four-week average is nearly 11% higher than the same four-week period last year.

The government reports a big spike in gasoline demand, and the auto club AAA says that means we're filling our tanks more often. The latest measurement of demand nationwide reached its highest springtime total in two years, and just three percent below the same week in 2019. That's according to a report from the Energy Information Administration. On Thursday (4/29), the national average pump price for a gallon of regular gasoline was a fraction short of $2.89. That's half a cent higher on the week. The average in Kansas was nearly $2.73 a gallon, up a penny on the week and about seven cents higher than a month ago. We spotted two seventy-four across Great Bend and two sixty-nine in Hays. Filling up your 15-gallon tank cost a few cents less than last week, and about 30 cents more than a month ago.

Oil-by-rail traffic across the US is up over last week and last year at this time. The Association of American Railroads reports 11,131 tanker cars hauling petroleum or petroleum products last week, up 302 tankers from last week and a 17.1 percent increase over the same week last year, when the pandemic response reduced nearly all rail traffic.

The Arctic cold blast that swept through the southern U.S. in February caused a much bigger loss in oil supply than previously estimated, with output falling to a three-year low. A report from the Energy Information Administration shows drillers cut production by almost 1.2 million barrels per day in February, a much bigger hit than previously reported. U.S. production for February was down 10 percent from January, and was 22% lower than a year earlier. The cold snap shut down the power grid and other infrastructure including a brief shutdown at the HollyFrontier refinery in El Dorado February 18, according to reports under the refinery's current Consent Decree. The EIA report shows a big drop in Kansas output in February as well. Production averaged 66,000 barrels per day, a 12% drop from January and 25% lower than February of 2020.