News from the Oil Patch: Dramatic slowdown continues - hays Post

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By JOHN P. TRETBAR

Weekly numbers from the Kansas oil patch reflect a dramatic slowdown across the industry, which reflects Kansas crude prices at historic lows. Independent Oil & Gas Service reported two active drilling rigs in eastern Kansas, up one for the week, and eight west of Wichita, which is also up one.

The number of inactive rigs in Kansas last week increased from 194 to 203. Operators in Pratt and Morton counties received the only two new drilling permits in the state, and operators completed just 16 new wells. Independent Oil & Gas identifies them as one dry hole, seven "re-completions" and eight abandoned locations. Year-to-date permits total 179, compared to 318 a year ago. Completions this year total 351, compared to 562 last year at this time.

Your 15-gallon fillup will cost you $2 less than last week, a little more than last month, $13 less than six months ago, and $17 less than a year ago. We see a gallon of regular as low as $1.49 at one station in Great Bend, and $1.46 at several stations in Hays.

Pump prices are going up in some areas as states reopen. AAA says big price increases in just a few states are fueling an increase in the national average ($1.84/gallon) The average across Kansas is $1.50 a gallon, up more than six cents from a week ago.

Kansas Common crude at CHS in McPherson starts the week at $15 a barrel, after gaining $1.25 on Friday. Kansas prices are $5 higher than a week ago, but $36 a barrel less than at the beginning of the year.

Baker Hughes noted another big drop in its weekly Rotary Rig Count. Nationwide, there are 374 active drilling rigs, down 33 oil rigs and down one seeking natural gas. The count in Texas dropped 28 rigs. North Dakota was down six, and Oklahoma dropped by two rigs. The count in New Mexico was up four rigs from the week before. Canada reported 26 active drilling rigs, down one from the week before.

Oil-by-rail shipments continue to decline amid a downturn in all freight train traffic. The latest weekly totals from the Association of American Railroads show the energy industry originated just 9,544 cars hauling petroleum and petroleum products during the week ending May 2, down 28% from the same week a year ago. Total rail traffic was down 22% for the week, and was 25% lower during the month of April.

The Energy Information Administration reported a nearly five-million barrel increase in U.S. crude-oil inventories at more than 532 million barrels. Stockpiles are about 12% above the five-year seasonal average. The government report undercut a report from the American Petroleum Institute a day earlier, which predicted a much larger build in U.S. stockpiles.

The government reported a drop in U.S. crude production for the sixth week in a row.  The EIA said weekly output dropped below 12 million barrels per day for the first time since July of last year. U.S. crude imports increased 410,000 barrels per day last week. The four week average for imports is still more than 20% below that same four-week average a year ago.

U.S. crude-oil storage capacity continues to dwindle, but not as quickly as it was earlier. The EIA reported net stockpiles accounted for 61% of our working storage capacity during the week ending April 24. That's an increase of one percent from the week before. Storage usage jumped from 50% to 61% in just five weeks.  

"Proration is now dead." So says the one Texas energy regulator willing to put the prospect of statewide production limits on the table, outgoing Texas Railroad Commissioner Ryan Sitton in an interview with Bloomberg TV.  Sitton's proposal to consider OPEC-style production caps in the Lone Star State divided the energy industry there. New numbers from Bloomberg show producers didn't really need a government order, with fracking down 82% and oil drilling is down 54% in the last seven weeks.

Colorado will delay hearings on a major revamp of its oil and gas regulations, even as concerns mount about how much of the state’s petroleum industry will be left to regulate. The Denver Post reports a 96% drop in drilling permits across Colorado, from 522 in April of last year, to just 21 last month.

Regulators in the number-two crude-oil producing state say demand shock has forced North Dakota to shut in 6,800 wells oil wells, amounting to 450,000 barrels per day of production. Hoping to jump-start the industry's recovery, regulators announced formation of the "Bakken Restart Task Force."  The group of government, business and industry leaders will focus on regulatory relief, economic stimulus, and the long-term recovery of the oil patch in North Dakota.

Oil field services giant Halliburton continues to shed employees, with nearly three thousand announced this week in Texas, Oklahoma, and Colorado. That comes in addition to 3,500 mandatory furloughs earlier. Local media in Houston report a thousand layoffs at the firm's corporate headquarters there.

OPEC’s crude production surged by the most in almost 30 years last month as its biggest member engaged in a price war with Russia. Saudi Arabia pumped a record of more than 11 million barrels a day in April according to a Bloomberg survey. Though they reached a truce by the middle of the month, the Saudis continued to keep production high, even with demand went into an unprecedented free-fall. The brief price war adding almost 100 million barrels of additional supply into an already oversupplied market.

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News from the Oil Patch: Dramatic slowdown continues - hays Post
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