News from the Oil Patch, Jan. 27
By John P. Tretbar
Almost exactly two years ago, authorities were tracking a suspected shadow-fleet tanker called "Saint Nicholas." It was well after Christmas, after all, and it was being tracked into the Persian Gulf. This week, authorities announce another dampener of the Yuletide spirit of those who would violate sanctions. The French have seized an oil tanker sailing out of northwestern Russia. Maritime authorities off the coast of Spain in the Mediterranean Sea say they tracked, intercepted and seized a crude-oil tanker named "The Grinch." The vessel is suspected of sailing under a false flag.
Kansas crude reaches its second highest price this year. Kansas Common crude at CHS in McPherson starts the week at $51.25 per barrel after jumping a $1.75 on Friday. That's a weekly gain of a $1.50 per barrel. The best price so far this year is $51.50, posted January 13.Near-month, NYMEX crude rose nearly two dollars Friday to settle over $61 for the first time in more than a week and the third-best price this year. Prices dropped below $61 by lunchtime on Monday. London Brent is fetching just under $66 per barrel.
The biggest producer in North Dakota says he's about to shut down drilling operations there. Harold Hamm of Continental Resources tells Bloomberg this will be the first time in thirty years he hasn't had drilling operations in North Dakota. Hamm is a pioneer in the Bakken formation, an oil-rich shale patch in western North Dakota, where he used horizontal drilling and fracking to access tens of millions of barrels. North Dakota is the third-largest oil-producer among US states. "There is no need to drill it when margins are basically gone," Hamm said. So the mastermind behind the crude-production revolution in North Dakota is shutting down production there.
The latest numbers from the #3 crude-producing state showed an increase in production with fewer active wells. The North Dakota Department of Mineral Resources reports November crude production rose to the state's 23rd highest monthly average ever, at 1,189,104 barrels per day. The number of active wells drops by nearly 200 wells from the all-time record set the month before.
Winter storm sweeping the country has taken about ten percent of US natural gas production offline. Bloomberg reports the outages on Monday began impacting industrial operations along the Texas Gulf Coast, including refiners, chemical plants and manufacturers. Frigid weather has frozen pipelines, choking off supply. Production has plunged by about ten BILLION cubic feet. Demand has surged about 18 BILLION cubic feet.
The administration continues its efforts to take over Venezuela's oil patch, and to rein in the so-called "shadow fleet" of tankers violating sanctions worldwide. The U.S. Southern Command said in a social media post they apprehended a seventh oil tanker operating in defiance of President Trump’s established quarantine. This vessel was sanctioned by the U.S. Treasury Department under an executive order related to Russia’s invasion of Ukraine.
The US sold confiscated Venezuelan crude for $500 Million, and gave $300 million back to Venezuela. Reuters reported last week that Venezuelan crude was being offered to traders at a discount compared to similar oil from other countries. The interim president of Venezuela says she has received the proceeds from the first sale, worth a reported $500 million. Delcy Rodriguez said she will use the $300 million she received to stabilize the the Venezuelan currency on the foreign exchange market, to, in her words, protect the income and purchasing power of Venezuelan workers.
Operators in Kansas completed 14 wells this week. That's 56 so far this year, compared to 122 a year ago. Independent Oil and Gas Service reports only 25 wells have been drilled to full depth this year, compared to 46 a year ago, down more than 45 percent. Regulators okayed two drilling permits in Kansas this week, one in Pratt County, and another in Rooks County. That's 18 new drilling locations so far this year, down from 46 a year ago.
The Kansas Rig Count from Independent Oil and Gas Service is up one rig to eight in eastern Kansas, but down one to six active rigs west of Wichita. Drilling activity is down more than six percent from a month ago, and is more than 17 percent lower than a year ago.
Baker Hughes reports 544 active drilling rigs this week, up one rig from a week ago and down 32 from a year ago. Louisiana was down two rigs, while Texas gained one. Colorado was up two while Utah was down one.
EIA reports an additional 800,000 barrels added to the Strategic Petroleum Reserves, which are now over 414 million barrels, an increase of five percent in the last year. Commercial inventories rose by 3.6 million barrels to 426 million. Stockpiles are about two percent below the five-year seasonal average.
Crude production dropped slightly this week. Output surpassed 3. 7 million barrels per day for the second week in a row, after topping 13.8 million in each of the nine weeks before that.US Operators imported nearly 6.5 million barrels of crude per day this week. That's down more than 600,000 barrels a day from last week, and 300,000 from last year, but are up 1.1 million barrels per day from two years ago. The four-week average is down five percent last year at this time.
Crude exports declined by more than 600,000 barrels a day to drop below four million for the first time this year. The four-week average is up a hundred thousand barrels from a year ago.
Russia's oil-and-gas revenues are expected to drop by nearly half this month compared to a year ago. Revenue from the patch accounts for about one-fourth of Russia's federal budget, and is a big part of the Kremlin's military budget in Ukraine. Reuters reports revenue will like fall to about $5.4 BILLION in January, the lowest since August of 2020, when the COVID pandemic crimped demand around the world.