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Oil and Gas Roundup — Jan. 3

January 03, 2017
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Oklahoma starts 2017 up 2 rigs, essentially flat year-over-year

The number of rigs exploring for oil and natural gas in Oklahoma increased by two to 86 for the week ending Dec. 30. A year ago, there were 87 rigs in operation in the state.

Nationwide, the rig count was up five to 658, down 40 from the same period last year.

Of the other major oil- and gas-producing states, Texas gained three rigs to 324; New Mexico and North Dakota were up one to 34 and 33, respectively; Louisiana (48), Pennsylvania (32), Colorado (28), Ohio (19) and Wyoming (19) were unchanged.

The Permian remains by far the most active basin, with 264 active rigs, up two over the previous week and up 47 year-over-year.

Economic and industry downturn in 2016 sweep through Oklahoma

With the deepest downturn since the 1980s and the loss of an industry and philanthropic leader, the biggest news items in the oil and natural gas industry in 2016 had ramifications felt throughout the state and country.

Oil prices hit a 12-year low near $26 a barrel in February, leading to the loss of tens of thousands of jobs and forcing at least nine Oklahoma companies into bankruptcy. The downturn also helped throw the Oklahoma economy into a more than yearlong recession and contributed to two years of state budget shortfalls.

The industry now is crawling to recovery, but it's doing so without natural gas magnate and philanthropist Aubrey McClendon, who died in a car crash in March.

While the oil price is still half the pre-downturn levels of two and a half years ago, it has doubled from February's lows while improved technology and procedures have allowed companies to be profitable at lower prices. Central Oklahoma's STACK and SCOOP fields are among the most active and fastest growing oil fields in the country.

Read more of The Oklahoman’s rundown of 2016’s top business stories.

Natural gas is 2016’s best-performing commodity

A polar blast that’s poised to sweep the U.S. has turned natural gas into the year’s best performer among major commodities.

Frigid weather will sweep the western two-thirds of the nation in the second week of January, stoking gas demand for heating, according to Commodity Weather Group LLC. The deep freeze comes as output from shale basins slows, sending production in the contiguous U.S. toward a second-straight annual drop. The prospect of supply constraints has pushed gas up 59 percent in 2016.

The gas rally marks a dramatic turnaround for a market that tumbled to the lowest prices since the 1990s earlier this year amid a glut of supply. Nine months later, the surplus has disappeared as an arctic chill boosts consumption and the U.S. ships its bounty of shale gas to Mexico and overseas buyers, putting the nation on course to become a net exporter of the fuel for the first time since the 1950s.

“The weather maps are looking so blue that they’re almost black,” said Santiago Diaz, an energy trading associate at FCStone Latin America LLC in Miami. “With temperatures dropping like this, there’s definitely a strong bullish case for natural gas, especially considering the slowdown in production from some of the shale formations.”

Read more at Bloomberg.

Weaknesses in Mexico's oil sector are creating 'chaos' during the holiday season

The holiday season has been a little less merry for car owners in Mexico as gasoline shortages in many parts of the country have forced grumbling customers to contend with hours-long lines.

In hard-hit parts like Leon, in Guanajuato state, filling up your tank often means driving around from one station to the next just to find one that has fuel.

"It's chaos," said Guadalupe Lopez, a customer service worker in Leon who visited eight stations on a recent day before she finally found a pump that wasn't dry. "One worker told me they had gone a day and a half without supply."

Rumors are swirling of gas station owners purportedly hoarding fuel ahead of a price deregulation that takes effect Sunday, and will let them sell it for as much as 20 percent more. Stories abound of Mexicans stocking up as much as they can before the hike kicks in.

Officials are largely downplaying the problems, citing factors such as pipeline theft, increased holiday demand and unforeseen shipping delays, and have sought to reassure consumers that they're working hard to get the fuel flowing. But even with conditions improved somewhat since Christmas, analysts say a neglected fuel infrastructure is finally catching up with the country, and there's no quick fix in sight.

Read more at Business Insider.

Column: Can the Canadian oil industry recover in 2017?

Even with oil barely over half of what it fetched in June of 2014 and the active drilling rig count doing better than (December 20, 2016 – 257, December 16, 2014 – 420; source JWN Rig Locator) compared to two years ago, it is obviously reckless to declare next year a success while it hasn’t even started yet.

However, it appears 2017 will provide significantly better times than the two previous years perhaps not by design but by exception. It won’t be as bad as 2016 because oil and gas prices are higher and it looks to be headed in an opposite direction from 2015 which was characterized by continuous contraction. Historically, most times this industry looks forward with even modest optimism it has been incorrect. The herd always seems to be going in the wrong direction. Super.

Since oil prices began their freefall in late November of 2014 there has been mountains written about what crude will or won’t do. Every modest gyration in the U.S. rig count or storage levels has caused prices to move one way or another. In the end what causes prices to rise is when more commodity traders think it should go up than down. This is why the CFTC data is comforting, at least for this week. After all this has happened before.

Read more at Oil Price.
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