John P. Tretbar
Ed Cross, the President of the Kansas Independent Oil & Gas Association (KIOGA) has been on an outreach mission with the media, congressional policymakers, state lawmakers and the Governor about the current situation in the crude oil market. Cross called this a "critical time" for the industry here, and said "fear exists on both sides of the ledger," with tighter margins, less opportunity for investment, and rising unemployment. Cross said that for Kansas producers, optimizing internal operating efficiencies is paramount as a hedge against volatile price swings."Kansas producers have worked through tough times before, and will survive to prosper again another day," Cross said.
AAA on Monday predicted "a high likelihood" that the national average price for regular gasoline will dip below two dollars before the end of the month. The auto club says Kansas remained in the top ten cheapest gasoline markets in the country. Pump prices continue to fall, with two-thirds of the states in the U.S. seeing double-digit price drops last week. The national average price for a gallon of regular on Monday was down to $2.25, but the average across Kansas was a fraction above two dollars. We spotted regular gas as cheap as $1.68 at several stations in Hays and $2.09 in Great Bend.
CHS in McPherson posted its biggest price drop in recent memory on Monday (3/9). Kansas Common crude dropped ten dollars to just $21.50 a barrel, the lowest price since 2001. Prices at Kansas refineries have been up and down since then, with CHS posting a slight increase on Friday to $22 a barrel. Prices in Kansas are down $13 a barrel since the first of the month and are $28 a barrel lower than a year ago.
The rig counts in Kansas were up this week, with six active rigs in the eastern half of the state, up three, and 16 in Western Kansas, up five. Independent Oil & Gas Service reports one active drilling rig in Russell County. The totals are up 57% across the state week over week, up five percent over a month ago, but down eight percent from a year ago at this time.
Baker Hughes reports 792 active rigs across the U.S., which is up one oil rig but down two seeking natural gas. Louisiana's count was down five for the week, while Texas was up four. Canada checks in with 175 active rigs, down 28 for the week.
Independent Oil & Gas Service reports a flurry of completion activity in our area, with five newly-completed wells in Barton County, three in Ellis County and one in Stafford County. Statewide there were 28 new completions for the week, 22 of them west of Wichita. That makes 253 completed wells so far this year.
There are 13 new drilling permits across Kansas, four of them east of Wichita and nine in the western half of the state. That's 152 permits so far this year.
The government's weekly inventory report showed U.S. crude oil stockpiles increased to 451.8 million barrels (up 7.7 million barrels) during the week ending March 6. The Energy Information Administration reports inventories are about two percent below the five-year average for this time of year.
EIA says crude-oil production dipped slightly last week from the all-time record the week before. Operators pumped 12.973 million barrels per day, down from nearly 13.2 million the week before.
The government delayed a closely-watched monthly report to incorporate recent developments in the global oil market, including a shift in focus by OPEC from market balance to market share. EIA forecasts U.S. crude oil production will average 13 million barrels per day this year, up 800-thousand barrels per day from last year, but then output is expected to fall to 12.7 million barrels per day next year. That would mark the first annual production decline since 2016. EIA says Brent crude, the international benchmark, will average $43 a barrel this year, down more than $21 from the average in 2019.
President Donald Trump last week told U.S. energy officials to purchase “large amounts” of oil to fill up the nation’s emergency reserve after the biggest price crash in a generation. Replenishing the Strategic Petroleum Reserve would enable the government to take as much as 77 million barrels off the world market. But Bloomberg reports the purchases are not likely to offset the supply boost promised by Russia and Saudi Arabia. The reserve is stored in salt caverns along the U.S. Gulf Coast. It was set up after the Arab oil embargo in the 1970s. The SPR currently holds 635 million barrels with a capacity of more than 713 million.