Apr 03, 2024

News from the Oil Patch: Government SPR deals save $581 million

Posted Apr 03, 2024 4:00 PM

News from the Oil Patch, Apr. 1
John P. Tretbar

Crude prices rise to five-month highs. In lunchtime trading Monday the near-month contract for light sweet NYMEX crude was about a dollar higher, trading over $84 per barrel for the first time since late October. London Brent was also higher, rising over $87 by midday. Kansas Common crude at CHS in McPherson ended the month of March at $73.50 per barrel. The monthly average was $70.82 per barrel, which is up more than four dollars from February and more than seven dollars a barrel higher than March of last year.

Operators in Kansas completed 19 wells last week, with 12 in Western Kansas including one in Barton County. Independent Oil & Gas Service reports 278 new well-completions so far this year, compared to 471 reported a year ago.

Kansas regulators approved 17 new drilling locations statewide last week, with five in Western Kansas. That's 210 new drilling permits this year, compared to 296 by the end of March last year.

The Kansas Rig Count from Independent Oil and Gas Service is up two rigs in eastern Kansas at 13 rigs, and up one rig west of Wichita at 19 active rigs. The tally is up 69% from a month ago but down 20% from a year ago.

The Rotary Rig Count from Baker Hughes Friday drops three oil rigs to 621.  The count in New Mexico is up five rigs. Texas is down four, while Louisiana is down three rigs.

Mergers and acquisitions dominated the business landscape in the patch last year, especially in Texas and New Mexico. Buyouts spiked last year, as some of the oil and gas industry's biggest players sought to take over their rivals. The Energy Information Administration says it marks a return to a consolidation trend interrupted three years ago amid extreme volatility in the market.  E.I.A. reported a total for last year of more than $234 BILLION, the biggest tally in 12 years. That total is driven by some big-bucks deals in the Permian Basin of Texas and New Mexico. ExxonMobil is buying Pioneer Natural Resources, for $64.5 BILLION; Chevron hopes to take over Hess Corporation, for $60 Billion. Chevron is currently the largest U.S. producer, accounting for five percent of the U.S. total. If the Hess deal goes through, that rises to six percent. Exxon Mobil's output would jump to seven percent of the U.S. total if the Pioneer deal goes through. That would make them the biggest operator in the U.S.

The government announced another crude-oil purchase to replenish the Strategic Petroleum Reserve. So far they've realized hundreds of millions of dollars in savings.  Shortly after the Russian invasion of Ukraine, The Department of Energy sold 180 million barrels of crude from the SPR, for more than $95 a barrel. The latest announcement last week brings the total U.S. purchases to more than 32 million barrels. DOE says the average price was below $77, for savings over 18-dollars a barrel, or more than 581 million dollars total.

The U.S. is a net importer of crude oil, but a net exporter when you add refined petroleum products to the equation.*The Energy Information Administration says domestic crude-oil imports averaged 6.7 million barrels a day (bpd) last week, an increase of 424,000 barrels from the week before.  Over the last four weeks, domestic crude-oil imports averaged over 6.4 million barrels a day, rising 427,000 barrels a day or seven percent over the same four weeks last year.*The U.S. imported 1.6 million barrels per day of petroleum products last week, up more than 200,000 barrels from the week before. Four-week average product imports are down more than 200,000 barrels from a year ago.*The U.S. exported over four million barrels a day of crude oil last week, and another 6.6 million barrels per day of petroleum products. Total exports are over 10.8 million bpd. That's down more than a million barrels from last week, but up 200,000 bpd from last year.*Four-week average exports are down 73,000 bpd from a year ago.  Total petroleum exports exceed total petroleum imports by 2.4 million barrels a day. The difference is down from last week and last year, according weekly government data.

The Energy Information Administration reports a slight dip in U.S. crude-oil production last week. Domestic output averaged 13,132,000 barrels per day in the week through March 22nd.  That's down about ten thousand barrels a day from the week before. Output has topped 13 million barrels a day in each week but one since early October. The current four-week production average exceeds 13.1 million barrels a day, beating the same four weeks last year by more than a million barrels a day.

The government reports domestic crude inventories rose by 3.2 million barrels last week. At over 448 million barrels, EIA said U.S. stockpiles are about two percent below the five-year average for this time of year. Gasoline stockpiles were up more than a million barrels. Inventories of diesel fuel were more than a million barrels lower. Average national gasoline prices are up seven cents a gallon over last week and up a dime over a year ago.  National diesel pries are up a fraction of a cent from last week, but down a dime from last year at this time. Across the Midwest, regular gasoline and diesel prices ticked up a few cents last week.