News from the Oil Patch, Dec. 23
John P. Tretbar
Kansas Common crude at CHS in McPherson starts the last full week of the year at $50.75 per barrel after dropping 75 cents a barrel on Friday.
Independent Oil & Gas Service reported a seasonal, 29% drop in its statewide rig count last week. There are five active rigs east of Wichita, which is unchanged, but the count in Western Kansas dropped by eight, to fifteen active drilling rigs.
Baker Hughes reported 813 active drilling rigs nationwide, an increase of 18 oil rigs, all of them in Texas. Canada reports 149 active rigs, down four from the week before.
Regulators approved 27 new drilling permits last week. Just two of them were in Western Kansas. That's 1,076 permits for drilling at new locations so far this year.
Independent Oil & Gas Service reported 22 new well completions last week, which makes 1,379 so far this year. There are six newly completed wells in eastern Kansas, and 16 west of Wichita including one in Ellis County and one in Russell County.
The government reported U.S. crude oil inventories were down 1.1 million barrels during the week ending December 13 compared to the week before. At 446.8 million barrels, stockpiles are about 4% above the five year average for this time of year.
The Energy Information Administration (EIA) predicts production growth will continue to increase slightly in U.S. shale formations in December and January. EIA now predicts shale production of 9.1 million barrels per day in December and 9.13 million barrels per day in January. EIA reports U.S. crude oil production of 12.781 million barrels per day last week. That's down slightly from the week before, when we produced 12.788 million barrels per day.
EIA reports U.S. imports are down by more than 300,000 barrels per day at 6.6 million barrels per day. The four week average of 6.4 million barrels per day is down more than 15% from the same period a year ago.
Oil-by-rail traffic in the U.S. increased slightly last week, amid a broad downturn in total freight-train traffic. Total traffic was down 8.5% during the week ended December 14, but oil-by-rail was up seven tenths of a percent from the same week a year ago. According to the Association of American Railroads, operators moved 13,643 petroleum tanker cars last week. The cumulative, year-to-date total is up more than 12% from a year ago. Canada oil-by-rail traffic is up 5.6% [["five point six percent"]] from the same week a year ago, and up sixteen percent year-to-date
Air-quality regulators in Colorado approved tougher statewide oil and gas regulations ending a disparity between areas in the western half of the state. The new regs strengthen requirements for reducing emissions from storage tanks, require annual emission reports, and mandate more frequent inspections for leaks at facilities near homes, schools and other public facilities. Some industry officials argued that the new rules will make operating some low-producing wells uneconomical.
A major pipeline operator is suing the Texas Railroad Commission, the state agency that regulates oil and gas drilling, alleging that it has blatantly disregarded longstanding state law that restricts the controversial and growing practice of the burning off, or "flaring," of natural gas. The lawsuit is the latest development in a first-of-its-kind dispute between Williams Companies and Exco Operating Company. In December 2017, Exco asked the Railroad Commission for permission to burn off excess gas from dozens of oil wells and later asked for a two-year extension of that authority. The request was unusual because the wells were already connected to a pipeline gathering system owned by Williams that's capable of transporting the gas to market. Exco emerged from bankruptcy in July, and said it couldn’t afford the pipeline rates.
North Dakota could soon have a second carbon dioxide pipeline. State regulators are considering permitting a pipeline in the southwest corner of the state, connecting to old oil fields along the Montana-North Dakota border. The line would carry a supply of carbon dioxide that Denbury Resources plans to inject underground to squeeze out more oil in a process known as enhanced oil recovery. Denbury aims to build its pipeline in 2020 and begin injecting carbon dioxide in early 2021.
Gasoline is getting cheaper, but not as cheap as it was last winter. The end of the year historically ushers in some of the cheapest gas prices of the year. This was true last year when the national gas price average was recorded at $2.26 on December 31. But the latest forecast from Triple-A shows prices dropping to between $2.40 and $2.45 per gallon, 15 to 20 cents more than last December. Right now the national average is just above $2.55 a gallon. A gallon of regular will cost you an average of $2.27 a gallon across Kansas, and $2.15 or less in Hays and Great Bend. The price for your 15-gallon fill-up edged up a few cents compared to last week but is still nearly five dollars cheaper than six months ago.
China continues record-breaking crude oil imports brought on by renewed hopes that easing trade tensions with the U.S. will bolster the economy. China imported an unprecedented 11.18 million barrels per day in November, the most by any country ever. The previous monthly record for imports was set by the U.S. in June of 2005. Bloomberg reports those numbers should continue to rise into next year, as two new Chinese refineries increase production runs and says a tax rebate will boost domestic production of marine fuel.
Russia and Ukraine have signed an agreement on the transit of Russian natural gas to Europe, bringing forward the long-awaited renewal of a deal due to expire at the end of the year. A stand-off between the two countries had threatened to disrupt supplies to Europe December 31st. Ukraine is a key transit route for Russian gas to Europe, an arrangement that earns the nation some $3 billion each year.