Feb 11, 2020 5:14 PM

News from the Oil Patch 2/10

Posted Feb 11, 2020 5:14 PM

News from the Oil Patch, Feb. 10

John P. Tretbar

Kansas Common crude at CHS in McPherson started the week at $40.50 per barrel after dropping 75 cents on Friday.  Kansas crude prices are down more than nine dollars from a month ago and are nearly three dollars lower than a year ago at this time. Crude oil prices posted their biggest January slide since 1991.  Analysts are blaming the global health emergency for a 15% drop in crude prices, the biggest January drop in nearly 30 years. Oil prices have dropped more than 20% from a peak in January after the spreading virus in China choked off demand in the world’s largest oil importer.  That continues to fuel concerns of excess supplies. Chinese oil demand has dropped by about three million barrels a day, or 20% of total consumption, according to Bloomberg. 

Hedge funds were heavy sellers of petroleum last week for the third time in four weeks, amid mounting anxiety about the impact of the outbreak on oil consumption in China. Reuters reports China’s state-owned refiners have signalled production cuts totaling more than 900,000 barrels per day this month. Much deeper cuts are expected next month. 

The Houston Chronicle reports three of the world’s largest oil traders are seeking to store crude on tankers at sea as the industry tries to deal with the expected glut.

The government's latest reports show the Sunflower State pumped just over 2.61 million barrels of crude oil, or about 87,000 barrels per day in November. That's down 109,000 barrels from the month before and down 157,000 barrels from November of 2018.

Independent Oil & Gas Service reported six active drilling rigs in eastern Kansas, which is unchanged from last week, and 15 west of Wichita, which is down two. There are 37 rigs listed as pending their next location assignment. Total inactive rigs are up eleven from last week. Drilling is underway at one lease in Barton County, and operators are about to spud one well in Ellis County and one in Stafford County.

Baker Hughes reported 790 active drilling rigs across the country, an increase of one oil rig and a decrease of one natural-gas rig.  The count in New Mexico was up three rigs, while Oklahoma was down three.

Kansas operators completed 48 wells last week, 14 east of Wichita and 34 in Western Kansas, including one in Barton County and four in Ellis county. Independent Oil & Gas Service says that brings the year-to-date total to 146 new well completions. Regulators approved nine new drilling permits across Kansas last week, 77 so far this year, including two in eastern Kansas and seven in the western half of the state.

High gasoline stockpiles, coupled with low winter demand, continue to put downward pressure on pump prices across the country. Triple-A says the national average is just over two forty-five a gallon.  The average across Kansas is $2.184 [["two eighteen, four"]], down more than four cents on the week, and more than nine cents cheaper than a month ago.  We saw one station below two dollars a gallon in Hays. The best price we found in Great Bend was $2.14.  You'll save more than a dollar on the average fill-up compared to last month, and about three dollars compared to six months ago.

Monthly numbers from the Association of American Railroads show a six percent drop in total freight car-loads originated in January, although oil-by-rail managed a slight increase compared to a year earlier.  For the week ending February 1, petroleum shipments increased two percent. The cumulative total so far this year is up just over one percent compared to the same period in 2019. Canada managed a whopping 51% increase for the week and a year-to-date increase of 18%.

The U.S. Energy Information Administration reported a slight drop in domestic crude-oil production, but it's still the third-highest weekly total ever.  For the week ending January 31, EIA says U.S. operators pumped an average of 12.885 million [["twelve point eight eight five million"]] barrels per day.  The government reported an increase in U.S. crude stockpiles of nearly three and a half million barrels. U.S. crude oil imports continue to decline, dropping 46,000 barrels per day last week to 6.6 million [["six point six million"]] barrels per day.  

An oil-patch trade group in Texas reports some contrary annual statistics for the energy sector in the Lone Star State last year. The Texas Alliance of Energy Producers says the industry contracted for the last ten months of the year despite steadily rising oil and gas production throughout the year.