John P. Tretbar
Kansas Common crude at CHS in McPherson starts the week at
$30 per barrel. That's down $1.25 from a week ago, up a dollar from the first
of the month, but down $17 from a year ago. After posting their first weekly
loss in three weeks, U.S. crude futures prices plunged on Monday. In afternoon
trading the benchmark Nymex contract was down $1.34 to $38.51 per barrel.
London Brent was down $1.37 to $40.40.
Drilling activity in Kansas was up slightly last week. Independent Oil &
Gas Service reports ten active drilling rigs in Western Kansas, up two for the
week. The count east of Wichita was unchanged at five active rigs. Drilling is
underway on two leases in Ellis County, where a third has reached total depth
and is being evaluated. An operator in Stafford County is preparing to spud two
new wells there.
Baker Hughes reports 287 active drilling rigs across the country, an increase
of six oil rigs. Texas added two rigs to the weekly count, while Oklahoma added
one.
Regulators approved 12 new permits to drill across Kansas last week, five of
them east of Wichita and seven in Western Kansas, including one in Barton
County and two in Stafford County. That's 358 permits for drilling at new
locations statewide so far this year., compared to 876 at this time last year.
Independent Oil & Gas Service reports a newly completed well in Ellis
County among 13 completions in Western Kansas last week. Add one east of
Wichita for a statewide total of 14 newly-completed wells for the week, 694 so
far this year.
The government said U.S. crude inventories dropped one million barrels last
week to just over 488 million. The report came less than a day after the
American Petroleum Institute reported a surprise increase in stockpiles of more
than half a million barrels.
U.S. production dipped below ten million barrels per day for the first time in
six weeks. The Energy Information Administration reports average production
last week of 9.86 million barrels per day, down 586,000 barrels per day from
the week before. Output is down nearly three million barrels per day from a
year ago at this time.
EIA said imports were down 167-thousand barrels per day last week to just over
five million barrels per day. The four-week average is nearly 14% less than
during the same four-week period last year.
Oil by rail traffic was up slightly on the week, but remained 19% below last
years tallies. The Association of American Railroads reports 10,293 tanker cars
hauling petroleum or petroleum products during the week ending October 17. Oil
by rail in Canada is down nearly thirty percent compared to a year ago.
Lower gasoline demand is dropping gasoline prices for the majority of the
country. Across the U.S., pump prices were a penny cheaper last week than
a week earlier, two cents lower than a month ago, and nearly half a dollar
below last year at this time. Triple-A says the national average Thursday was
$2.16 a gallon, while the average across the Sunflower State was $1.93. Kansas
was among 13 states across the U.S. with average prices below two dollars. It
was selling for $1.99 across Great Bend, and $1.90 in Hays. Filling your
15-gallon tank with cost you nine dollars more than it did six months ago, but
about five dollars less than last year at this time.
The two sides in Libya's civil war appear to have completed their
reconciliation. On Friday they signed a permanent cease-fire, although
skepticism is already rising. The deal includes an order for all foreign
mercenaries to leave the country, and sets the state for political talks next
month. Libya descended into chaos in 2011, after an uprising toppled and killed
longtime dictator Moammar Gadhafi.
Renewed production amid continuing low demand have prompted renewed concerns
about U.S. crude-oil storage capacity. The Energy Information Administration
reports the national totals are safe, but users have reached 77% of capacity at
the storage hub in Cushing, Oklahoma. EIA reports on net stockpiles as a
percentage of working storage capacity. That figure reached a high of 62
percent back in June, but has since dropped to 54%. Cushing is fast approaching
the all-time high. The Oklahoma total reached 77% in the week ending June 19.
The record of 83% of capacity was set May 1.
ConocoPhillips agreed to buy Concho Resources for about $9.7 billion in stock,
marking the largest shale industry deal since the collapse in energy demand
earlier this year. Concho Resources was worth $32 billion just two years ago,
but is selling for $9.7 billion in stock. The deal will create what Bloomberg
calls a heavyweight driller in America’s most prolific oil field, rivaled only
by the likes of Occidental Petroleum and Chevron.
Native American tribes opposed to the Dakota Access Pipeline have once again
asked a federal judge to stop the flow of oil while the legal battle over the
line’s future plays out. The tribes succeeded on their first attempt, only to
have an appeals court overturn the shutdown order earlier this year. The
Bismarck Tribune reports they are now asking the judge to clarify his order to
satisfy the appeals court and once again shut down the pipeline. The court is
awaiting a new environmental study to determine the risk the pipeline poses to
the tribes' water supply. The study is expected to take more than a year to
complete.
Given pandemic lockdown restrictions around the globe, worldwide crude oil
demand is shrinking. You can't even dock a crude-oil tanker in some ports,
where users are instead winding down inventories built up since March. Demand
for crude tankers has fallen more than 14% this year according to Lloyd's List
Maritime Intelligence, which covers shipping news. Only about 80% of the
international tanker fleet is currently in use according to Lloyd's List.