News from the Oil Patch, Dec. 21
John P. Tretbar
Crude oil prices settled above $49 on Friday,
but reversed course on Monday on news that a new strain of the coronavirus
could once again stop a lot of international travel. In late morning trading
Monday, the benchmark Nymex contract was down nearly four percent to $47.31 per
barrel.
Kansas Common crude at CHS in McPherson was fetching $39.25 per barrel.
Independent Oil & Gas Service reports the rig count is up slightly in
eastern Kansas, where there were eleven active rigs, and down slightly in Western
Kansas, where there were eight rigs on the active list. Baker Hughes reported
346 active drilling rigs across the U.S. last week. The count in New Mexico was
up six rigs, while Texas was up three.
Regulators in Kansas approved 20 new drilling permits in Kansas last week.
Eighteen of them were in eastern Kansas. There have been 468 new permits filed
so far this year.
Operators completed eleven wells in Kansas last week including two in Barton
County. Independent Oil & Gas Service says the total so far this year is
776 completed wells.
Contrary inventory reports highlighted an unusual week in the oil patch. The
Energy Information Administration reported a drawdown in U.S. crude
inventories, even as the American Petroleum Institute reported increasing stockpiles.
API on Tuesday reported an increase in U.S. crude-oil inventories of nearly two
million barrels. Analysts had expected a drawdown of nearly two million
barrels. But EIA on Wednesday said U.S. stockpiles dropped by more than three
million barrels to just over five hundred million. EIA says inventories are
about ten percent above the five year average for this time of year.
U.S. crude production is slowing down, but remained above 11 million barrels
per day for a third straight week. For the week ending December 11, output was
down more than 100-thousand barrels from the week before at 11.1 million
barrels per day. The government reported U.S. crude imports of 5.4 million
barrels per day, down more than a million barrels from the week before. Average
imports for the last four weeks were 12 percent lower than the same four weeks
last year.
Tribal leaders in Oklahoma are sending out a slew of new tax bills to
oil-and-gas operators in the state, and the Attorney General is not happy about
it. Members of the so-called "Five Tribes" are asserting civil
jurisdiction in the wake of the Supreme Court ruling which held that the Creek
Reservation was never disestablished. The territory in dispute covers about one
third of Oklahoma. One local lawmaker says the tribes are asking for what
amounts to another eight percent gross production tax. AG Mike Hunter says the
tribes have no jurisdiction to levy taxes and fees, and is urging tribal
leaders to stop.
A state judge in Texas says the state's oil regulator cannot waive
environmental rules and fees. In a rare rebuke, the Railroad Commission of
Texas was barred from enforcing a series of emergency rule-waivers announced in
May to help Texas drillers cope with low prices. A District Court Judge faulted
the agency for failing to give adequate public notice.
A sporting-goods company is taking heat in the Lone Star State for refusing to
produce jackets for an oil-and-gas company. Innovex Downhole Solutions says it
was recently denied an order of jackets by The North Face because they are in
the oil and gas business, even though they've done business in the past. The
story is escalating statewide on the air and online. Some are comparing the
state's largest industry to porn or tobacco. Others are pointing out the irony
of a recreation company badmouthing the industry that creates and delivers
their products.
Production in America's number-two crude-producing state has declined slightly.
The North Dakota Department of Mineral Resources reports output of over 1.2
million barrels per day in October, the latest numbers available. The tally is
down 236 barrels per day from the September total. The state continues to
exceed its gas-capture goals, topping 93% for the second month in a row. That
means operators are burning or venting only seven percent of the natural gas
produced at oil wells.
The government says total fuel consumption for the week of Thanksgiving was
down 11 percent from the holiday period a year earlier. Jet fuel use was down
by about half. The Energy Information Administration says we used two million
barrels per day of jet fuel for the holiday week in 2019, but that dropped by
more than 900,000 barrels per day this year. Analysts say the number of flights
departing U.S. airports dropped 37% compared to Thanksgiving week 2019.
Weekly oil-by-rail shipments are down. The Association of American Railroads
reports 11,485 tanker cars hauling petroleum and petroleum products during the
week that ended December 12th. That's down 225 cars from a week earlier, and a
decline of more than 16 percent year-over-year. Year-to-date totals indicate a
decline of about 14% in total U.S. oil-by-rail shipments.