Sep 15, 2020 4:38 PM

News From the Oil Patch (9/15)

Posted Sep 15, 2020 4:38 PM

John P. Tretbar

The KIOGA Webinar featuring U.S. Secretary of State Mike Pompeo has been rescheduled. The new date is September 24 at two pm. For more information and to register you can contact Kelly at 316-263-7297 or by E-mail: [email protected]

Kansas Common crude at CHS in McPherson started the week at $27.50 per barrel, down $2.50/bbl from a week ago, and nearly six dollars less than the price at the first of the month.

Triple-A says as summer fades away, cheaper gas is here to stay. The national average pump price on Thursday was just under $2.21 per gallon, down two cents from last week. The statewide average in Kansas is once again below two dollars. We spotted $1.99 in Great Bend, and $1.94 in Hays.

Independent Oil and Gas Service reports four active drilling rigs in eastern Kansas Friday, which is unchanged from last week, and seven west of Wichita, which is down one. Baker Hughes reported 254 active drilling rigs nationwide. The counts in Texas and New Mexico were each down one, while Oklahoma was up one.

Regulators approved 13 permits for drilling at new locations across Kansas last week, eight of them in the eastern half of the state, and five west of Wichita, including two in Ellis County. So far this year, there are 298 new drilling permits in Kansas.

Independent Oil & Gas Service reports operators completed 15 new wells last week in Kansas, 11 of them east of Wichita and four in Western Kansas. Operators have completed 633 wells so far this year.

The government said Thursday U.S. crude-oil production rose nearly 300-thousand barrels per day last week, up three percent over the week before. But output remains below ten million barrels per day for the second week in a row.

The Energy Information Administration reported a big increase in domestic crude oil inventories. Stockpiles increased two million barrels, and remain about 14% over the five year average for this time of year. U.S. crude imports increased by half a million barrels per day last week, but the four-week average remains nearly 18% below the same four-week period a year ago.

U.S. oil-by-rail totals are down slightly from last week. The Association of American Railroads reports 10,056 tanker cars hauling petroleum and petroleum products for the week ending September 5. That's nearly 14% lower than the same week a year ago. The running total so far this year is down more than 12 percent from last year at this time.

Regulators in Colorado voiced support for increasing the buffers between oil and gas drilling and homes in the state. The newly-reconstituted Colorado Oil and Gas Conservation Commission held five days of hearings on the subject. According to the Denver Post, all but one member voiced support for setbacks of 2,000 feet. That's significantly larger than the setbacks proposed by commission staff, but smaller than the setbacks rejected by voters two years ago. The commission won’t vote on the regulation until it has completed hearings on all the proposed rules, expected in late October.

The Energy Information Administration says total U.S. energy-related carbon dioxide emissions will drop by ten percent this year. The agency's Short Term Energy Outlook for September says we're consuming 18% less coal and nearly 12% less petroleum. The government predicts an increase in monthly Brent crude prices, to an average $44 per barrel during the fourth quarter of this year, and possibly up to $49 per barrel next year.

An activist investment group plans to push for Noble Energy to abandon its plans to sell itself to Chevron, arguing the deal undervalues the oil and gas producer because of low oil prices. A New York-based hedge fund asserts the takeover was done at the wrong time for the wrong reasons. Elliott Management believes the company is better positioned than most firms to benefit from a recovery in oil prices. Elliott believes members of Noble’s management stand to make about $88 million in various forms of compensation from the deal, including $60 million for senior managers.

Husky Energy announced last week it will review and possibly cancel a major offshore drilling project in the Canadian Atlantic. The province of Newfoundland was relying on the "West White Rose" project for jobs and economic stimulus. Husky officials said the COVID-19 pandemic has caused a minimum one-year delay for the project to produce its first barrel of oil. CEO Rob Peabody said the company will undertake a full review of this project and any future operations in the Canadian Atlantic.

The Energy Information Administration's Drilling Productivity Report suggests that total shale production will drop to 7.6 million barrels per day next month, down 68-thousand barrels per day from September. Only the Permian Basin of New Mexico and West Texas is expected to show an increase in production next month.

In a closely-watched report, the International Energy Agency trimmed its outlook for worldwide oil demand to 91.7 million barrels per day. That marks a contraction of 8.4 million barrels per day year-over-year. The OPEC cartel predicts a slightly bigger decline in global demand. The cartel's Monthly Monthly Oil Market Report says global oil demand will drop to just over 90-million barrels per day. The report confirms production spikes in June in the U.S., Canada and Latin America, despite tropical storms in the Gulf of Mexico. The report suggests production declines are on the way through the end of the year.