US Oil Patch: Drop in demand takes toll on prices

The Hindu
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U.S. crude prices were down more than eight percent, dropping to $36.38 per barrel. London Brent was down six percent. Oil on the Nymex closed below $40 a barrel Friday for the first time in weeks. The summer driving season came to a close over the Labor Day holiday, and that signals a big drop-off in demand. Refineries typically schedule required maintenance at this time of year. Kansas crude prices followed the national trends, with CHS in McPherson dropping prices by a dollar and a half on Friday. Kansas Common starts the week at $30 a barrel, but that could drop even more in response to national and international trading Tuesday.

Independent Oil & Gas Service reports four active drilling rigs in eastern Kansas, down one for the week, and eight west of Wichita, an increase of three rigs. Baker Hughes reports 256 active drilling rigs across the U.S., an increase of one oil rig. The count in New Mexico was up one while Texas and North Dakota were each down ones.

Regulators approved 13 new drilling permits across Kansas last week, with two in the eastern half of the state and eleven in Western Kansas. That includes two new permits in Ellis County and one in Stafford County.  There are 285 new permits on file so far this year, compared to nearly 650 by the end of August last year.

Operators completed six new wells in Kansas last week. Independent Oil & Gas Service reports two new completions in eastern Kansas and four west of Wichita. Year-to-date that’s 618 newly-completed wells, compared to 964 at this time last year.

Regulators report one new intent-to-drill notice in Ellis County this month and one in Russell County. Statewide, the Kansas Corporation Commission reports a slight uptick to 38 new intents filed in August. That’s down from 94 in August of last year. So far this year, operators have filed 343 new intents statewide, compared to 735 by this time last year. 

U.S. crude inventories dropped more than nine million barrels. At over 498 million barrels, American stockpiles are about 14% above the five-year seasonal average.

For the sixth week in a row, average crude-oil production in the U.S. dropped below ten million barrels per day last week. That’s the first time that’s happened since January. The Energy Information Administration says output for the week ending August 28 dropped to about 9.7 million barrels per day, down from 10.8 million a week earlier. U.S. production is down nearly three million barrels per day from a year ago.

The government says domestic crude-oil imports dropped to 4.9 million barrels per day last week, down a million barrels per day from the week before. EIA says the four-week rolling average is down more than 20% from the same period last year.

A new federal report shows U.S. and Kansas crude production increased in June, but remain well below pre-pandemic levels. The Energy Information Administration reports Kansas output increased more than 200,000 barrels over the month before, to over 2.2 million barrels. That’s over 73,000 barrels per day.  Total U.S. production in June increased 300,000 barrels over the May total to 313 million barrels (10.43 million barrels per day).

The Kansas Geological Survey released county production totals through May. Barton County operators in the first five months of the year pumped over 545,000 barrels of crude oil, down from over 679,000 barrels a year earlier. Ellis County produced more than 833,000 barrels, compared to over one million barrels a year ago. Russell County pumped just over half a million barrels, down from 625,000. And, operators in Stafford County produced over 373,000 barrels of crude oil through May, down from nearly 429,000 through May of last year.

Saudi Arabia cut pricing for oil sales to Asia and the U.S. for October shipments. Bloomberg called that a sign that the world’s biggest exporter may see fuel demand wavering amid flare-ups in the coronavirus.

Venezuelan crude exports have dropped to an average 270,000 barrels per day in the last three months, according to Lloyd’s List Intelligence. That’s about half the levels seen in May, just before the U.S. sanctioned four Greek tankers. Greek-owned tankers are still shipping Venezuelan crude, but in much smaller amounts, and only to specific refineries as part of diesel-for-crude swaps. 

The state treasury in Oklahoma has seen better days. The Tulsa World reports the state’s August oil and gas production taxes fell by nearly half. Collections have dropped year-over-year in each of the past 12 months, as oil and gas revenue dropped by $430 million during that period. The State Treasurer said total tax collections for August in the Sooner State are down nearly five percent from a year ago. 

A railroad trade group reports U.S. freight deliveries dropped again in August, down 13 percent from July and nearly six percent lower than in August of last year. Rail shipments of petroleum and petroleum products dropped 14% last month, compared to a year earlier. By way of contrast, grain and other farm products both saw increases. The Association of American Railroads says the weekly total for oil-by-rail was down 17 percent year on year.

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