News from the Oil Patch, Nov. 22
John P. Tretbar
Crude prices dropped four percent to six-week lows Friday on the heels of new COVID-19 lockdowns in Europe paired with expected production increases. Prices have dropped for a fourth consecutive week, the longest losing streak since March of last year.
Kansas Common crude at CHS in McPherson starts the week at $66.25 per barrel after dropping $3 per barrel on Friday. Kansas prices are down eight dollars from the first of the month, but are more than $27 higher than at the first of the year, and more than $34 higher than a year ago.
The December benchmark crude contract on the Nymex expired Friday and settled at $76.10 per barrel, down nearly three dollars on the day and a four-dollar decline for the week. The January contract settled Friday at $75.94 per barrel. By lunchtime Monday, prices recovered somewhat from Friday's free-fall, with the near-month contract up 89 cents from the open at $76.83 per barrel.
Reuters reported OPEC+ could adjust its plans to raise oil production if large consuming countries release crude from their reserves or if the coronavirus pandemic dampens demand. Bloomberg reported the U.S. is considering a release of more than 35 million barrels over time, in tandem with releases in Japan, India and possibly other countries. An announcement was expected as soon as Tuesday.
The Rig Count in eastern Kansas is up one to 14 active drilling rigs . Independent Oil & Gas Service says the count west of Wichita was unchanged at 27 rigs either scheduled, moving to, or currently on drill sites. Operators are spudding wells in Barton, Ellis and Stafford counties, and they were preparing to spud a new one in Russell County. Baker Hughes reports a spike in horizontal drilling, with 563 active rigs nationwide, a net increase of seven oil rigs. The count in Texas was up seven and New Mexico was up two.
Based on spudded wells, drilling activity in Kansas is up more than 80% over last year at this time, with a 39 percent increase in the number of active operators in the state. Independent Oil & Gas Service reports operators in eastern Kansas completed 19 new wells last week, and Western Kansas checks in with 11. That brings the year-to-date total to 808 new completions compared to 732 at this time last year. Kansas Regulators okayed 44 new drilling locations across the state last week, 26 east of Wichita and 18 in Western Kansas, including one in Barton County, two in Ellis county, one in Russell county and one in Stafford County. That's 1,035 new drilling permits so far this year, compared to 412 by this time last year.
The auto club Triple-A reported a slight dip in the national average gasoline price. This month the national average has fallen on nine different days, after rising steadily on each of the previous 31 days. On Thursday motorists across the country were paying just over $3.41 per gallon. That's down three tenths of a cent on the week and nearly nine cents lower than a month ago. The average across the Sunflower state is just over $3.09. That's the going price across most of Great Bend and Hays, but if you shop around you can save a nickel a gallon. Filling up a 15-gallon tank will cost you nearly twenty dollars more than it did a year ago.
There's no help on the supply-side for U.S. gasoline prices. The government reported U.S. gasoline inventories dropped 700-thousand barrels per day last week and are about four percent below the five-year average for this time of year.
U.S. crude-oil inventories dropped by more than two million barrels to 433 million. The latest weekly tally is about seven percent below the five-year average for this time of year, according to the U.S. Energy Information Administration.
EIA reports U.S. crude production dipped last week by more than 100-thousand barrels per day to just over 11.4 million. That's still half a million barrels per day better than a year ago at this time.
Domestic crude imports last week rose 83-thousand barrels per day over the week before. The four-week average is about 15% higher than average imports during the same four weeks last year.
At 10,135 carloads, U.S. oil-by-rail shipments are up 126 tankers over a week ago, but down 5.5% compared to a year ago. The Association of American Railroads says Canadian traffic is up nearly six hundred carloads from a week ago and 5.7% higher than the same week a year ago.
Some U.S. lawmakers are seizing on the energy price surge to revive the long-standing "NOPEC" bill. The legislation would subject the OPEC oil cartel to the same antitrust laws used more than century ago to break up Standard Oil’s monopoly. The “No Oil Producing and Exporting Cartels Act” -- known as NOPEC -- would allow the U.S. government to sue members of the cartel, potentially seeking billions of dollars in reparations. The legislation has faced opposition from the State Department in the past. But the House Judiciary Committee did approve the latest version by a voice vote in April. A Senate version has attracted sponsors from across the political spectrum, from Iowa’s conservative Republican Chuck Grassley to Vermont’s liberal Democrat Patrick Leahy. No floor votes have been scheduled.
A new government report paints a rosy picture of the near-term and long-term future of solar power generation, which experts predict will cut into the market share in the patch. The Energy Information Administration says solar accounted for three percent of U.S. electricity generation last year. This includes both small scale and utility-scale generation. An EIA forecast predicts that share will grow to four percent this year and five percent next year. The report says that, assuming no change in current law, solar will reach 14% of total U.S. power generation by 2035, and 20% by the year 2050.
A tale of two countries could soon become a tale of two companies, as the world's fourth-largest energy producer pulls up roots and over a century of tradition. Royal Dutch Shell is leaving the Netherlands and dropping the "Royal Dutch" from its name. They're moving from The Hague to London, and will soon be known officially as, simply, "Shell." An activist investor wants to split Shell in two, to attract green investors. The company's defense includes a major overhaul of its legal and tax structure. According to Bloomberg News, the Dutch government immediately said it was “unpleasantly surprised” by the announcement. Officials in the UK hailed what it called Shell's faith in the British economy.
Oil output in the Permian Basin is projected to hit a record in December as the largest U.S. shale patch ramps up output from its Covid-19 induced slump. A government forecast predicts Permian production will increase to 4.95 million barrels per day next month, beating the record set in March 2020.
The United States' number-three crude producing state is increasing production while taking record strides to limit natural gas flaring. In a dramatic change from ten years ago, when burning natural gas across North Dakota was visible from space, the state's gas-capture rate fell to 93% in September, their best monthly tally ever. A trade group credited much of the improvement to the $20 billion they've invested in new natural gas gathering and processing infrastructure. The state's Department of Mineral Resources last week also announced statewide crude-oil production rose to over 1.1 million barrels per day, an increase of a little over six thousand barrels per day over the month before.