Executive Summary: Rigs: The total US rig count increased by 2 rigs W-o-W, up to 581 from 579. Infrastructure: Crude oil is the primary economic driver in North Dakota's Williston Basin, with associated natural gas and NGLs playing a secondary role. Storage: East Daley expects a withdrawal of 2.45 MMbbl in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending April 26.
Rigs:
The total US rig count increased by 2 rigs W-o-W, up to 581 from 579. Liquids-driven basins held flat W-o-W as the Anadarko and Permian each gained 1 rig. The DJ and Eagle Ford basins both lost 1 rig. In the Permian, the Delaware lost 1 rig while the Midland gained 2 W-o-W.
Among operators, Civitas Resources dropped a rig in the DJ basin, while EOG Resources subtracted 1 rig in the Eagle Ford. Charter Oak Production Co in the Anadarko added 1 rig W-o-W. Permian operators Ovintiv and Diamondback Energy each added 1 rig W-o-W in the Midland, while Devon Energy in the Delaware subtracted 1 rig.
Infrastructure:
Crude oil is the primary economic driver in North Dakota's Williston Basin, with associated natural gas and NGLs playing a secondary role. However, operators could see Bakken oil production disrupted as growth in NGL-rich natural gas nears the capacity limits of existing pipelines.
Natural gas production continues to grow in the basin, according to East Daley’s Bakken Supply and Demand Forecast. We forecast gross gas production to average 3.6 Bcf/d in 2024, a gain of 210 MMcf/d vs 2023 gas production of 3.39 Bcf/d.
One factor causing increased gas production is a rising gas-to-oil ratio (GOR), which measures the amount of natural gas produced from wells compared to crude oil. Gas output tends to hold more steady than liquids as Bakken wells mature, resulting in a flatter decline curve for gas.
Supply growth, along with increased “rejection” of ethane, is filling pipeline capacity out of the Bakken. The rejection of ethane into the gas stream is a particular concern for pipelines due to its impact on gas quality, sometimes forcing them to impose limits on receipts of Bakken gas. Our regional Bakken Forecast. shows a key route to move natural gas out of the Bakken, Northern Border Pipeline, will run effectively full for the rest of 2024. Moreover, East Daley’s Bakken Forecast indicates gas demand is not increasing within the basin, leaving producers beholden to new pipeline expansions to move supply growth.
Despite the potential for constraints on the gas side, East Daley forecasts ~40 Mb/d of crude oil production growth from 2024–25 (avg to avg). Initial production rates from Bakken wells remain steady; however, forecasts for rigs and wells drilled have increased.
According to North Dakota state regulation, gas produced with crude oil may be flared for up to one year from the date of first production. While not a long-term solution, oil producers are currently flaring associated gas from wells while suing to block a Bureau of Land Management methane regulation they say will hinder oil and gas production.
Leaving ethane in the natural gas stream raises the heat content, allowing shippers to sell more Btus (British thermal units) while raising the volumes sent to pipelines. This higher-Btu gas is displacing leaner gas from Western Canada on pipelines like Northern Border and Alliance, creating reliability concerns for downstream markets.
While recovering more ethane could mitigate some of these issues, economic factors such as transportation costs to Gulf Coast fractionators present challenges. Additionally, expansion of projects like ONEOK’s (OKE) Elk Creek (+100 Mb/d) remains uncertain, adding some uncertainty to the situation.
Storage:
East Daley expects a withdrawal of 2.45 MMbbl in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending April 26. We expect total US stocks, including the SPR, will close at 816.854 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, fell ~0.37% W-o-W across all liquids-focused basins. Samples decreased 2.14% in the Gulf of Mexico and 1.19% in the Rockies DJ and Powder River basins. The declines were offset by a 5.44% increase in the Eagle Ford and a 1.60% gain in the Williston Basin. Both the Williston Basin and the Rockies have a very high correlation between gas volumes and crude oil volumes, whereas the Eagled Ford’s correlation is less than 30%. We expect US crude production to remain flat at 13.1 MMb/d.
According to US bill of lading data, US crude imports decreased by 247 Mb/d W-o-W to 6.25 MMb/d. More than 60% of the supply originated from Canadian pipelines into the US, with the remainder largely coming from ships carrying crude from Mexico, Brazil, and Venezuela.
As of April 26, there was ~865 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to increase by ~329 Mb/d W-o-W, coming in at 16.2 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast decreased W-o-W. There were 21 vessels loaded for the week ending April 26 and 31 the prior week. EDA expects US exports to be 4.9 MMb/d.
The SPR awarded contracts for 3.2 MMbbl to be delivered in April 2024. The SPR has 366.4 MMbbl in storage as of April 19, 2024.
Regulatory and Tariffs
Presented by ARBO
Tariffs:
Seaway Crude Pipeline Company The temporary volume incentive rates were extended through May 31, 2024. (FERC No 2.84.0 IS24- 249, filed April 15, 2024)
NuStar Logistics, L.P. The Incentive Rate from the filing under FERC No 73.23.0 was filed in error and is being decreased. No shippers were affected by the error. (FERC No. 5.37.0 IS24- 246, filed April 12, 2024
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/
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