News from the Oil Patch, Aug. 24
John P. Tretbar
Kansas Common crude at CHS in McPherson starts
the week at $32.50 per barrel, after dropping 25 cents per barrel on Friday.
Current prices are 25 cents higher than a week ago, two dollars higher than at
the first of the month, but nearly $19 lower than at the first of the year.
Pump prices are dropping from their cheapest summer levels in decades. AAA says
that over the last four weeks, U.S. gasoline prices have steadily decreased,
reaching a summer peak around $2.20 a gallon a month ago. The national average
on Thursday was $2.18 a gallon, about 40 cents less than a year ago. Statewide,
Kansas, at $1.97 per gallon, remains among just eleven states where average
prices are below two dollars. We found $1.92 a gallon at some stations in Hays
and $1.94 in Great Bend. You'll save nearly five dollars on your 15-gallon
fill-up compared to a year ago.
Baker Hughes reports an increase in drilling activity across the U.S. There are
254 active drilling rigs in the company's latest Rotary Rig Count, an increase
of eleven oil rigs. The count in Texas was up eight rigs, New Mexico was up
two. Independent Oil & Gas Service reports an increase of three drilling
rigs in eastern Kansas, but the count west of Wichita dropped by one.
Kansas regulators approved eight permits for drilling at new locations last
week, bringing the year-to-date total to just 265 new permits. There were two
new permits east of Wichita and six in Western Kansas including one in Russell
County. Independent Oil & Gas Service reports eight newly-completed wells
for the week, seven of them west of Wichita. Operators completed two wells in
Barton County, one in Ellis County and one in Stafford County. The report shows
605 completions so far this year.
U.S. production increased slightly last week over the week before. At just
under 10.74 million barrels per day, EIA says domestic output remains about
one-and-a-half-million barrels per day behind last year's pace.
The Energy Information Administration says U.S. commercial crude oil
inventories declined by 1.6 million barrels last week, but remain about 15%
above the five-year seasonal average.
The government said crude-oil imports increased slightly last week, up to 5.7
million barrels per day. The four-week average is about 22% less than the same
four-week period last week.
Oil by rail traffic dropped last week by about 12-hundred tanker cars from the
week before. The Association of American Railroads reports operators loaded
10,812 tanker cars with petroleum or petroleum products during the week ending
August 15. That's down ten percent from the same week a year ago. Most freight
categories are down from a year ago, except grain shipments, which are up more
than 14% from a year ago.
Some observers point to increases in drilling activity in the Permian Basin as
a good sign. With prices holding steady above $42 per barrel, Baker Hughes
reported ten additional rigs on its active list last week, the biggest jump
since prices collapsed. The world's biggest fracking provider Halliburton is
expecting the worst-ever slump in oil exploration to end soon. CEO Jeff Miller
told Bloomberg-TV the company expects to see a recovery during the "back
half" of this year, after reaching a bottom during the third quarter.
Analysts at Rystad Energy say curtailed U.S. output that was shut-in by the
pandemic could begin to return to production soon. But other sources indicate a
full recovery might still be a ways off. The government offered mixed news,
predicting a continuing decline in total U.S. shale production, but growth in
the two largest shale plays. EIA's Drilling Productivity Report for August
predicts total shale production will drop 19-thousand barrels per day from
August to September. But Permian production will increase by a little over a
tenth of a percent and North Dakota output is expected to rise about half a
percent.
North Dakota regulators this week offered mixed expectations. Lynn Helms of the
Department of Mineral Resources told reporters he expects rising prices will
prompt operators to bring more shut-in wells back into production. And that, he
says, could add up to 200-thousand barrels per day in July and another
300-thousand in August. But Helms said drilling activity has receded
dramatically, and might not bounce back before late next year.
The top oil and gas regulator in Canada predicts that the country's oil
production will gradually recover over the rest of this year, after operators
halted production upwards of one million barrels per day because of low prices.
Still, The Canada Energy Regulator says total production this year will average
4.38 million barrels per day, down nearly seven percent from last year.
New natural gas pipelines coming online this year could be a game changer for
several markets in the U.S. The Energy Information Administration lists nearly
a dozen new or expanded gas pipelines going into service between January and
July of this year. The new pipes can bring up to five billion cubic feet per
day of natural gas to growth markets in the South-Central, Mountain and
Northeast regions.
Monthly energy-related carbon dioxide emissions in the U.S. fell to 307 million
metric tons in April, the lowest in government records since 1973. The Energy
Information Administration credits travel restrictions and other measures to
mitigate the spread of coronavirus in April, which dramatically reduced
consumption.
Saudi Arabia’s state oil company has reportedly ended its joint effort to build
a huge new refinery in China. The $10 billion joint venture was signed back in
February of 2019, when the kingdom's Crown Prince visited Beijing. It was seen
at the time as a landmark deal with a key ally. The Saudi's hoped to increase
their market share in Asia. They had planned to supply upwards of 70 percent of
the crude for a refinery needing 300-thousand barrels per day. But Bloomberg
reports the Saudis decided to back out based on the uncertain market outlook.
The Chinese will move forward with the project. Saudi Aramco is slashing
spending on a lot of capital projects, as the kingdom continues to reel from
low crude prices.
A trade group for the staffing industry says nearly one third of all oil and
gas jobs in Canada could be fully automated within the next twenty years. A
report from E-Y Canada says new technologies driving that change include
robotic process automation, artificial intelligence, language processing and
machine learning. Company head Lance Mortlock says many companies have
already begun the transition and the Covid-19 pandemic has brought new urgency.
Mortlock says about half of the job skills in exploration and production will
soon be automated. He says oil workers must develop skills in emotional
intelligence, critical thinking and data analysis to be competitive.
The owner of the world's largest fleet of offshore drilling rigs has filed for
bankruptcy protection. Valaris becomes the latest casualty in the global slump
in oil prices. The firm hopes to restructure more than seven billion dollars in
debt.