News from the Oil Patch, Nov. 1
John P. Tretbar
Kansas crude production in August reached nearly 2.4 million barrels, or 77,000 barrels per day. The Energy Information Administration (EIA) reports that's an improvement over July, but a drop of more than seven percent from the very brief spike in August of last year. EIA reports U.S. operators pumped more than 345 million barrels of crude oil in August, for an average of over 11.1 million barrels per day. That's down slightly from the month before, when output averaged just over 11.3 million.
Kansas crude prices start the month on a high note. At CHS in McPherson, Kansas Common is fetching $73.75 per barrel, up more than seven dollars from the beginning of the month, and $35 a barrel more than at the beginning of the year. In early Nymex trading Monday, light sweet crude for December delivery was up 92 cents at $84.49 per barrel. London Brent gained more than a dollar at $84.82 reducing the prices difference between the two benchmarks to less than half a dollar, the smallest spread this year.
Regulators in Kansas approved 58 new drilling permits last week, which is more than in any single week in three years. There are 41 new permits in eastern Kansas and 17 west of Wichita. So far this year, there are 927 new drilling locations across the state, up nearly 150% over last year at this time.
Independent Oil & Gas Service says Kansas drilling activity based on spudded wells is up more than 84% from a year ago. The number of active operators exploring for oil and gas is up nearly 36%. The rig count is up one rig, to 24, in Western Kansas. East of Wichita the count was down three at 16 active rigs. Operators were drilling Friday on one lease in Barton County and one in Stafford County.
Baker Hughes reports 544 active drilling rigs across the country this week, with Texas gaining one, and Louisiana dropping by one.
Operators in Kansas completed 23 new wells last week, including one in Barton County and one in Ellis County. Independent Oil & Gas Service reports 14 new completions in eastern Kansas and nine in the western half of the state, for a year-to-date total of 720 completed wells.
EIA reported an increase in U.S. crude-oil inventories of over four million barrels. Stockpiles as of October 22nd reached 430.8 million barrels, about six percent below the five year seasonal average.
U.S. crude production last week increased 11-thousand barrels per days compared to the week before, to just over 11.3 million barrels per day, according to a government report. That's nearly 300-thousand barrels per day higher than a year ago.
U.S. crude imports increased nearly 430-thousand barrels per day from the week before, at 6.3 million. Over the past four weeks, domestic imports averaged about 15 percent more than during the same four-week period last year.
Bloomberg is reporting what it calls a stunning reversal at the crude-storage hub at Cushing, Oklahoma. Analysts warn that Oklahoma stockpiles are at historic lows, and likely to drop further. This signals just how tight global supplies are, and threatens to drive prices even higher. Just last year the pandemic prompted a glut of oil so big that traders resorted to storing it in tankers at sea. Worldwide demand for Cushing crude has now surged to its highest level ever, because it is still the cheapest in the world.
Seven years after it was announced, the controversial Enbridge Line3 replacement pipeline resumed full operations earlier this month, delivering crude from Alberta, Canada to Superior, Wisconsin. EIA suggests increased pipeline shipments could displace some crude now moved by rail. The change could also ramp up prices for Western Canada Select crude, and narrow its current discount to the U.S. benchmark. Enbridge’s Line 3 originally became operational in 1968 but, due to corrosion, transported decreasing amounts of crude oil over time. The replacement project was proposed in 2014, but litigation over the replacement pipeline’s approval, particularly in Minnesota, delayed its opening. The pipeline capacity was restored to its original 760-thousand barrels per day from about half that.
A group of environmental organizations is demanding the Biden administration suspend and cancel oil and gas leases in federal waters off the California coast. After the recent pipeline spill, about three dozen organizations sent a petition to the Department of the Interior, arguing it has the authority to end these leases. The groups say offshore drilling threatens wildlife, fisheries and tourism and the decades-old platforms off the coast of California are especially susceptible to problems related to their age.
The newly-remade board of directors at Exxon Mobil is now debating whether to discontinue several major oil and gas projects. People familiar with the matter say the oil giant is reconsidering its investment strategy amid the quickly-changing energy landscape. The Wall Street Journal reports Exxon board members, many installed last year by an activist investor, are weighing the fate of future projects. The company is facing pressure from investors to restrain fossil-fuel investment to limit carbon emissions and return more cash to shareholders.