John P. Tretbar
Oil traders and producers alike will be watching
this week as producers from the "OPEC Plus" alliance meet to decide
whether to relax the group's production cuts. Prices have rallied to
pre-pandemic levels, but supplies are dwindling at their steepest rate in
twenty years. Bloomberg reports the crude glut that piled up during the
pandemic is vanishing fast, and the "OPEC Plus" group could decide to
increase output.
Kansas crude prices dropped two dollars on Friday, but will still post February
gains of eight dollars per barrel. Kansas Common crude at CHS in McPherson
starts the week and the month of March at $51.75 per barrel.
Intent-to-drill notices for the month of February were down by more than half
from totals for the month before and a year earlier. The Kansas Corporation
Commission reports 31 intents filed statewide last month. That's 110 intents
statewide so far this year. Ellis, Russell, and Stafford counties each reported
on new intent-to-drill notice last month.
Independent Oil & Gas Service reports a slight increase in the rig count in
Western Kansas this week with 12, and increase of two rigs. East of Wichita,
the count was three active rigs, down three from the week before. Operators
reached total depth at one lease in Ellis County and one lease in Stafford
County. The weekly Rotary Rig Count from Baker Hughes shows an increase of four
oil rigs to the active count of 402. Texas was up three while the count
in New Mexico was up one.
Kansas regulators okayed six new drilling permits last week, all of them in the
western half of the state. That brings the running total this year to 100
permits for drilling at new locations in Kansas.
Independent Oil & Gas Service says Kansas operators completed eleven wells
last week, six of them east of Wichita, and five in Western Kansas. Those
include a service well in Russell County and an oil well in Stafford County.
After a magnitude 4.2 earthquake rumbled under the town of Manchester in
northern Oklahoma on Friday (Feb. 19), regulators there locked down some
oilfield activity over the following weekend. Three disposal wells within three
miles of the epicenter were shut down under the directive, and another 13 wells
were ordered to cut back disposal volumes by half. The Oklahoma Corporation
Commission staff says that amounts to about 7,000 barrels of wastewater per
day. Data supplied by the OCC shows 61 earthquakes of magnitude two or greater
in January, the highest monthly total since May of last year. In part,
officials credit these commission directives limiting wastewater disposal with
the sharp decrease in the seismicity rate in the Sooner State. Oklahoma reached
a monthly peak of nearly 948 earthquakes in March of 2015. Local officials did
not receive any reports of damage or injury from the Manchester quake.
U.S. crude inventories jumped 1.3 million barrels last week. Stockpiles are
marginally below the five-year average for this time of year. Crude production
dropped by more than a million barrels per day last week. The Energy
Information Administration says current output is just shy of 9.7 Million
barrels per day. Compare that to a year ago, when output was a few barrels
short of 13 million per day. EIA says weekly imports dropped by 1.3 million
barrels per day. The four-week average for imports is down more than 13% from a
year ago.
Oil-by-rail shipments plummeted during the recent cold snap. The Association of
American Railroads reports just 8.148 tanker cars hauling petroleum for the
week ending February 20. That's down nearly two thousand cars from the week
before, and a nearly 40% drop from a year earlier.
With the forced shutdown of Gulf Coast and some Midwest refineries due to
winter weather, gasoline stockpiles have tightened and gas prices have
skyrocketed. Triple-A reported the most expensive national average since
October of 2019. Two-thirds of statewide averages were up by double-digits last
week, with spikes of anywhere from ten to 22 cents a gallon. The average across
Kansas on Thursday was over two forty-seven a gallon, an increase of 12 cents over
last week. Pump prices are up to $2.55 a gallon across Hays and $2.57 in Great
Bend. Your 15-gallon fill-up is up more than two dollars from a week ago, up
four dollars from last month, and nearly five dollars higher than last year at
this time.
Africa's biggest crude producer is playing hardball with one of the world's
largest oil companies. A court in Nigeria has now frozen access to the bank
accounts of Royal Dutch Shell. The action comes amid a legal dispute with a
local producer over a pipeline deal six years ago. The dispute is just one
among a growing list of legal entanglements related to Shell’s business in
Nigeria. A buyer is demanding billions in damages, claiming Shell
misrepresented the condition of the pipeline and under-counted crude volumes.
Shell calls the lawsuit baseless and is working to overturn the court order.
The government of Canada formalized some new winter safety rules for rail
transport of dangerous goods including petroleum products. The new regulations
include some common-sense items like risk assessments, stronger track
inspection and maintenance programs, and new technology requirements. One will
have an immediate impact on the bottom line of some operators. Trains hauling
large quantities of crude oil or liquid petroleum gases will now face a speed
limit across Canada. These trains can travel up to 35 mph in metro areas and 40
mph at all other places.