Executive Summary: Rigs: The US rig count ended 2023 at 591 rigs, down 2 W-o-W. Infrastructure: Oil production in the Denver Julesberg Basin has been steadily growing since the 2020 downturn. Storage: East Daley expects a draw of 2,170 MMbbl in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending January 5.
Rigs:
The US rig count ended 2023 at 591 rigs, down 2 W-o-W. Liquids basins lost 1 rig for the December 31 week with a total of 479 rigs. The Eagle Ford gained 3 rigs while the Bakken and Powder River each gained 1. The Permian lost 4 rig and the Uinta lost 2 rigs. In the Permian, operators dropped 5 rigs in the Delaware while the Midland Basin gained 1 rig.
In the Delaware, ConocoPhillips (COP) and three private operators (Arrington Oil & Gas Operating, Boyd & McWilliams Energy Group, and Spur Energy) each dropped 1 rig, while Ring Energy added 1 rig in the Midland. In the Unita Basin, XCL Resources and Koda Resources dropped 1 rig. EOG Resources (EOG) added 1 rig in the Powder River. In the Bakken, Continental Resources (CLR) added 1 rig.
Infrastructure:
Oil production in the Denver Julesberg Basin has been steadily growing since the 2020 downturn. East Daley Analytics’ Production Scenario Tools, available in Energy Data Studio, show the DJ nearing pre-COVID production levels in 1H24.
The eastern Rockies basin currently produces ~520 Mb/d, down 8% from a high of 565 Mb/d reached in November 2019. Pipelines serving the DJ also pick up crude oil from the Williston and Powder River basins, and these flows are at an all-time high of 114 Mb/d, according to East Daley’s Crude Hub Model. The local DJ production plus inbound flows brought total oil volumes moved out of the DJ to 630 Mb/d in September 2023.
At a high level, the DJ appears to have plenty of pipeline egress with an overall utilization of 79%. However, two of the four main pipelines delivering barrels to the Cushing hub are nearing capacity. Saddlehorn Pipeline, owned by Plains All American (PAA) and ONEOK (OKE; formerly Magellan), and Tallgrass Energy’s Pony Express are both at ~86% utilization.
Pony Express has excelled at attracting Bakken and Guernsey barrels through joint tariffs with Double H and TrueCos/Bridger pipelines. Additionally, Pony Express expanded the Northeast Colorado lateral to move barrels in Laramie County, WY and northeastern Weld County, CO. Saddlehorn provides optionality to attract Powder River production at the Guernsey market via Plains Pipeline. In late December 2023, Plains announced an alternative destination at Platteville, CO in the event transportation to Cushing is constrained.
Energy Transfer’s (ET) White Cliffs Pipeline and NGL Partners’ Grand Mesa both have opportunities for more volume at 32% and 47% utilization, respectively. Last week, NGL Partners published an aggressive interruptible tariff rate of $1.95/bbl from Platteville to Cushing.
EDA forecasts DJ Basin production to reach a near-term peak of 522 Mb/d in February ‘24 and then gradually decline through 2H24. Based on our outlook, pipelines serving the DJ should look to firm up long-term commitments before production turns over later this year.
Storage:
East Daley expects a draw of 2,170 MMbbl in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending January 5. We expect total US stocks, including the SPR, will close at 785.1 MMbbl.
The US natural gas pipeline sample, a proxy for changes in oil production, decreased by 1.0% in liquids-focused basins. The Permian saw a significant change, decreasing 2.4% W-o-W, and the Rockies gained 0.6% W-o-W. The Permian has a low pipeline sample coverage at ~42%. However, the Rockies coverage is high at ~85% of production. We expect US crude production to decrease by 0.1 MMb/d to 13.1 MMb/d.
According to US bill of lading data, US crude imports decreased by ~895 Mb/d W-o-W to 6.0 MMb/d. More than 60% of the supply originated from Canadian pipelines into the US, with the rest mostly from ships carrying crude from Mexico, Brazil and Nigeria.
As of January 5, refiners had taken ~297 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to decrease by 1.0% W-o-W to ~16.51 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast decreased W-o-W. There were 18 vessels loaded for the week ending January 6 and 28 vessels the prior week. EDA expects US exports to be 4.2 MMb/d.
The SPR awarded contracts for 2.73 MMbbl to be delivered to the Big Hill SPR site in January 2024.
Regulatory and Tariffs
Presented by ARBO
Tariffs:
Plains Pipeline L.P A new alternative intermediate destination point and the associated rate was established for service to Platteville, CO in the DJ Basin. The movement was established to afford shippers flexibility in case of restrained capacity. A corresponding incentive rate was established and the terms of the existing incentive rate was increased from 3,000 to 5,000 b/d. (IS24- 146, filed December 28, 2023)
Bridger Pipeline, LLC The Savageton truck station in the Powder River Basin has been canceled due to lack of shipper interest. There have not been any movements at Savageton Truck Station for 1 yaer. (IS24-140 filed December 27, 2023)
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/