News from the Oil Patch, Jan. 13
John P. Tretbar
Kansas Common crude at CHS in McPherson starts the week at $49.25 per barrel, after dropping fifty cents on Friday.
The government reported an increase in crude inventories that pressed on U.S. prices. Inventories increased last week to 431.1 million barrels, a jump of 1.2 million barrels. The Energy Information Administration says that's equal to the five-year average for this time of year.
The government reported a slight dip in U.S. crude production last week, but it's still the third highest weekly tally ever. EIA says U.S. operators pumped 12.883 million barrels per day for the week ending January 3. That brings the four-week average to 12.858 million barrels per day. That's nearly 11 percent higher than the same four-week average a year ago.
The Kansas rig count from Independent Oil & Gas Service shows a four percent drop from a week ago, a 24% drop from a month ago, and a 41% drop from a year ago. There are currently 22 active rigs in Kansas, 13 of those in Western Kansas, which is down three.
Baker Hughes reported 781 active rigs nationwide, a decline of 11 oil rigs and four seeking natural gas. The count in Texas was down seven rigs. Canada reported a big seasonal increase, up 118 to 203 active rigs.
Independent Oil & Gas Service reports just two new well completions across Kansas last week. Both of them were dry holes: one in Osage County, and one in Rawlins County. Kansas regulators approved the first 27 new drilling permits of the year including one new permit in Barton County.
A report from the Kansas City Federal Reserve Bank shows oil and gas activity in the U.S. 10th District dropped in the fourth quarter, and expectations for future activity continued to decline. The Fed's quarterly energy survey showed a significant decrease in drilling and business activity, but a slight improvement in revenues, wages and benefits. The 10th District includes Kansas, Oklahoma, Colorado, Nebraska, Wyoming, western Missouri and northern New Mexico. Firms in the district said they'd need to see average crude prices of $65 a barrel for substantial increases in drilling to occur.
U.S. Oil-by-rail starts the year more than eight percent higher than last year. The Association of American Railroads reports more than 13-thousand tanker cars moving petroleum and petroleum products for the week ended January 4. Total U.S. freight train traffic was down five percent. Oil-by-rail in Canada was up nearly nine percent over a year earlier.
The Dallas Morning News has joined a rising chorus in the Lone Star State, urging producers there to throttle back the state's oil and gas production. Texas is now the center of history’s biggest oil and gas boom, but the newspaper reports in an editorial that regulators may need to slow production slightly. One reason is the growing practice of burning off or "flaring" natural gas produced at oil wells, a practice that is growing in the absence of pipeline takeaway capacity. Texas alone now flares more gas than many states consume. The flaring can be seen from space, with nighttime satellite pictures making the Permian Basin look like Texas’s biggest metropolis.
Apache Corp. will close its San Antonio office and lay off 272 employees. That's according to a document filed with the Texas Workforce Commission cited in the San Antonio Express News. The notice says the company will begin shutting down the regional office March 6. Apache was one of three Texas oil-and-gas firms announcing a total of nearly 600 layoffs last week, on the heels of Occidental Petroleum's big staff reduction announced earlier.
Saudi Aramco has exercised its so-called "over-allotment option" to raise the size of its already record-breaking initial public offering. The Saudi Arabian state-owned oil monopoly said late last week it had issued an additional 450 million shares, raising the size of its IPO $3.8 billion to a total of $29.4 billion.
Russia’s crude oil and condensate output hit a post-Soviet high last year even as it curbed production under an agreement with OPEC. According to the Houston Chronicle and Bloomberg, 2019 marked the 11th consecutive year of output growth in Russia. Despite being one of the architects of the original "OPEC Plus" agreement in 2016, Moscow has a poor record of actually meeting its pledged output goals. The country consistently failed to meet its quota last year, overshooting its target in nine of the 12 months.