Jan 24, 2023

News from the Oil Patch: Kansas prices reach two-month high

Posted Jan 24, 2023 8:00 PM

News from the Oil Patch, Jan. 23
John P. Tretbar

Kansas crude prices are the highest in nearly two months. Kansas Common crude at CHS starts the week at $71.50 per barrel, the highest price in McPherson since December 1, 2022.

Susan Duffy was chosen to chair the Kansas Corporation Commission. This is her second term leading the state's energy and infrastructure regulator, after leading the three-member panel beginning in January, 2020. Duffy was appointed to the Commission in March of 2019 by Kansas Governor Laura Kelly.

So far this year, operators in Kansas have spudded 54 wells, down slightly from a year ago. Independent Oil & Gas Service says drilling was underway Friday on leases in Barton and Russell counties. Operators were preparing to spud new wells in Barton, Ellis and Stafford counties. New drilling permits in Kansas have nearly doubled in the last week. Kansas regulators okayed 41 new drilling locations, with 17 west of Wichita, including one in Ellis County, one in Russell County, and three in Stafford County. Operators completed 27 wells in Kansas last week; 126 so far this year.

The government reported a spike in crude inventories, up 8.4 million barrels to 448 million as of January 13. That's about three percent above the five-year seasonal average. The Energy Information Administration says US Operators pumped 12.1 million barrels of crude per day last week, down 95,000 barrels from the week before, but up nearly half a million barrels per day from a year ago.

US crude imports average 6.9 million barrels per day, an increase of more than half a million barrels per day from the week before. Four-week average imports are down 1.1% from a year ago.

Weekly government tallies show gasoline deliveries down nearly five percent from a year ago, while diesel deliveries were down nearly ten percent. Diesel inventories dropped nearly two million barrels and are about 20% below the five-year average. National gasoline prices are up a dime from a week ago to an average of three-thirty-seven per gallon. Diesel prices dropped slightly from last week, but remain a dollar a gallon higher than a year ago.

The feds are stepping back from efforts to rein in air pollution in the nation's top-producing oil patch. Last summer the EPA announced an active effort to designate the Permian Basin of Texas and New Mexico to be in violation of ozone standards. That move would have required substantial reforms in oil and gas operations. But the agency's new annual agenda the active effort became a pending one, effectively moving it to the back burner.

Crude output in North Dakota dropped a little over two percent in November. The number-three producing state pumped just under 1.1 million barrels per day, down from 1.12 million the month before. The state's Department of Mineral Resources noted a slight improvement in the gas-capture rate. Operators reduced flaring and venting to just five percent of the natural gas produced at North Dakota oil wells.

After a long string of declines, the US inventory of oil wells drilled but uncompleted has gone up for the second month in a row. DUCs are used as a barometer for the nation's shale producers' ability to quickly raise production by completing wells. The Energy Information Administration says the DUC tally for December was up 40 wells from November and up 60 wells from October. Most of the increases were in Wyoming and Louisiana in the Niobrara and Haynesville shale plays.

The top energy firms in the West are expected to rake in a combined record annual profit when fourth quarter earnings are announced beginning later this month. Citing industry analysts, Reuters projects total earnings of $199 billion for BP, Chevron, Exxon Mobil, Shell and Total. The report suggests earnings for this year will drop to $158 billion, still well above the previous record. The companies have also cut their debt to a combined $100 billion, a 15-year low, and delivered unprecedented dividends and share buybacks.

An energy CEO is urging his colleagues to cut natural gas production to tame a cascade in prices. An unusually warm winter here and abroad is slashing global gas demand. After dropping seven percent last week, prices were down by half from last month, and 23% lower year over year. In an interview with Bloomberg, the CEO of Chesapeake Energy urged his peers to scale back production in order to avoid a repeat of the years-long shale bust that started in late 2014.