Sep 28, 2022

News from the Oil Patch: Oil prices dropping, gas prices rising

Posted Sep 28, 2022 7:00 PM

News from the Oil Patch, Sep. 27
John P. Tretbar 

Investigations are underway after the death of a Kansas man in an oilfield explosion in North Dakota.  According to his obituary, Oscar Gilberto Gandara, 37, of Liberal, Kansas, died September 15 from injuries he suffered in an explosion and fire at a drilling site. The Web site obtained an accident report from the local Sheriff in which a witness described a "lack of all safety procedures." The witness said fumes were visible all over the site. Gandara was one of three men injured in the blast west of Minot, North Dakota on September 2. The operator Chord Energy says it is cooperating with a government investigation, and is conducting one of its own.

Crude prices at CHS in McPherson dropped nearly five dollars Friday (9/23). Kansas Common started the week at $69 a barrel, eight dollars lower than at the first of the month.

The benchmark Nymex crude contract settled Friday below $80 a barrel for the first time since January. Prices on Tuesday were over $78 a barrel in New York and over $85 in London.

Until last week, gasoline pump prices had gone down every day since June, when rising prices peaked just over $5 a gallon nationwide. But prices have now gone up five days in a row. The auto club AAA now says the average pump price across the U.S. Tuesday was $3.74 per gallon, a nickel higher than a week ago.

The weekly Rotary Rig Count from Baker Hughes reached 764 active rigs, an increase of three oil rigs. The number or rigs drilling for natural gas was down two. The count in New Mexico was up three rigs, Texas was down two and Oklahoma was up one.

The Rig Count in Kansas was unchanged from last week, with 27 active rigs in the eastern half of the state, and 32 in Western Kansas. Drilling was underway Friday on a lease in Ellis County, and operators were about to spud three more in Barton, Ellis and Stafford counties.  Independent Oil & Gas Service was tracking 489 wells in various stages of drilling or completion, up more than 50% from the tally a year ago.

Operators completed 35 new wells across the state last week. Ten were in eastern Kansas and 25 west of Wichita including two in Ellis County and one in Russell County. That's 1,186 new well-completions so far this year, compared to 630 by this time last year.  

Regulators in the Sunflower State approved 22 new drilling permits last week, with eight in eastern Kansas and 14 west of Wichita, including three new drilling locations in Ellis County. The tally so far this year is 1,194 new drilling permits, compared to 763 a year ago.

U.S. crude inventories increased by 1.1 million barrels to 430.8 million barrels as of September 16th. That's about two percent below the five-year average for this time of year.  The Energy Information Administration says gasoline stockpiles rose by 1.6 million barrels and are about five percent below the five-year seasonal average.

EIA said crude imports last week averaged 6.9 million barrels per day, up 1.2 million barrels per day from the week before. The four week average is up 4.5% from last year.

U.S. operators produced 12.13 million barrels per day during the week through September 16th, marking a slight dip from the week before but more than 1.5 million barrels per day higher than a year ago.

Oil-by-rail traffic in the U.S. last week was up 901 tanker carloads from the week before, but lags behind the tally a year ago by just over two percent. The Association of American Railroads reports 10,252 tankers hauling petroleum and petroleum products in the week through September 17th. Canadian traffic is down nearly two percent week over week, after dropping by more than six hundred tanker carloads.

The Department of Energy will offer more crude for sale from strategic reserves ahead of plans by the European Union to ban most Russian oil in December.  The U.S. will offer 10 million barrels for supply in November. DOE’s 180-million barrel release was originally scheduled over a six-month period starting in May. To date, 155 million barrels of crude oil have changed hands. Of the 10 million barrels slated for November delivery, one million are being marked for possible export.

Operators are increasingly turning their attention to natural gas, thanks to higher prices, better export opportunities, and government edicts. U.S. energy companies are ramping up their search for natural gas at the fastest pace since 1992. Reporting by the Houston Chronicle and Bloomberg shows high prices and renewed attention to flaring are driving the switch. A commodity that not too long ago was flared off at the well head is now fetching six times its equivalent in oil in Europe. So far this year, U.S. natural gas prices have more than doubled and gas drilling here has soared more than 50%. Some huge producers, including Callon Petroleum, Continental Resources and Pioneer Natural Resources have switched more than 10% of their overall output to gas from oil.

Shippers are paying a lot more to ship crude oil a lot farther, thanks to the Russian invasion of Ukraine. The largest of the crude supertankers will now cost you more than $50-thousand a day, the highest rate since June of 2020.  Bloomberg reports Europe’s oil refiners are pulling more crude from farther away, and that is boosting demand for the world’s biggest oil tankers.

China is ramping up crude-oil imports from both Russia and Saudi Arabia, even as it's total imports drop. Reuters reports Russian shipments to China increased 28% last month, to 1.96 million barrels per day. Saudi deliveries rose five percent to nearly two million. Earlier this year, Russia replaced Saudi Arabia as China’s largest supplier of crude but the Saudi's retook that honor in August. China's total crude imports fell more than nine percent from a year earlier to about 9.5 million barrels per day.