In this (slightly delayed) episode Tavis brings you good news about WTI prices, FRAC bills, and new nuclear development.
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Audio Transcript
Alrighty everyone, welcome back! This is Tavis Kilian with RARE PETRO bringing you a fresh episode of Monday Madness of August 1st, 2023. Yes, that means this episode is being released on a Tuesday but that is only because my girlfriend and I were taking some time to visit my grandfather in Florida. It was a nice and relaxing trip where we spent a lot of time being schooled in classic cinema. I had before watched Donnie Brasco or Clint Eastwood’s Honky Tonk Man, but now I can call myself a bit of an expert. Outside of that I tempted fate by braving the sunlight for a few hours with no sunscreen and let me tell ya – the sun won. Otherwise I am happy to be back home in a much drier climate where my towel isn’t wet once I go back to use it again. But you didn’t come here to listen to my domestic travel stories… You came here to get a quick fix regarding revealing statistics and news in the energy space, and I intend to give it to ya.
WTI prices are down just a little bit today which may sound like bad news if you haven’t been keeping an eye on it for the past week. Last Monday we were hovering in the mid $79 range and I gotta admit I was pretty happy with that. By the time we hit Thursday we tickled an $80 price. We ended up closing out Friday at $80.58 and that was the high point after a month of climbs. Once trading resumed on Monday morning, we ended up to peak at $81.89 which is the highest price we have seen since mid April, and I have half a mind to think that will continue. Like I mentioned previously, the price has fallen a bit, but currently rests at $81.51. Not a bad place to be considering what prices have looked like in the past 3 months. Brent’s spread has shrunk back down to about $4 which has been pretty typical as of late. Otherwise same price action as WTI. Natural gas has had the same 20 cent swings we’ve witnessed but may be pushing just a bit higher and higher in price. Nothing super significant yet as it is still bouncing between $2.70 and $2.50, but once we get to the winter I think we will have some added pressure from cold prices. It currently sits at about $2.50 and all things considered, I’m happy with commodity prices. I really do think good things are coming.
Our next statistic is the rig count. While commodity prices may be doing well, the rig count continues to drop. The most recent rig count reveals a 5 rig drop bringing the US total to 664 which is 103 fewer rigs than we had this time last year. Basin by basin the Eagle Ford drops 2, while the Barnett, Marcellus, and Utica each drop 1. Surprisingly the Permian added one more this week. State by state New Mexico lost 2. Ohio, Colorado, Oklahoma, and Pennsylvania each lost one. Otherwise Louisiana adds 2 more to its total. The Gulf of Mexico added one rig. The majority of rigs being dropped were horizontal and targeting gas reserves. We actually added 2 directional rigs and one vertical rig to the net totals which I don’t believe we have seen in a minute. I suppose horizontal wells are just too capital intensive at this point. I don’t see the rig count trend reversing until we sit near $90 for quite some time, so let’s prepare for more to be laid down.
Lastly is the domestic inventory report in the form of Thirsty Thursday. The EIA most recently predicted a drawdown of more than 2 and a quarter million barrels. They were right about the drawdown, but it was only 600,000 barrels. Still, a drawdown is a drawdown. The API forecasted a slightly smaller drawdown at 2 million barrels, but totally missed the mark with a 1.3 million barrel build. There is no clear recent pattern from the EIA’s weekly data so I’m not exactly sure if any trends will emerge. At the moment things seem kinda flat, but they are right in the middle of the historical 5 year range which is reassuring on a supply level. Now we get to talk about gasoline. While the week over week change isn’t that dramatic, we are witnessing record setting lows for this time period by several millions of barrels. If we continue on this trend, we should just barely skirt into the appropriate range by the end of August just to slip out by December. I imagine prices are likely going to respond a bit more aggressively. At the moment week over week prices have gone up 15 cents so things could start to take off pretty quick here. Diesel prices are only up 10 cents despite distillates steadily increasing. California is back with the most expensive gasoline in the nation as it tops Washington state by 5 cents at an average of $5 and one cent. The cheapest gas is still in Mississippi at $3.285 per gallon which is a shame because we were getting awfully close to a flat $3. Propane continues to raise no commotion as it comes back to the historical normal territory. Overall, inventories are doing relatively well and oil may be in the midst of preparing for a drop. Time will tell.
I believe that is all we’ve got as far as statistics go, so now it is time to get into the news stories. Our first story takes place over on capitol hill as a lawmaker from Colorado’s First District has introduced the FRAC Act, a clever acronym. No I’m not talking about the Firearms Regulatory Accountability Coalition, nor the Food Research and Action Center. I’m talking about the Fracturing Responsibility and Awareness of Chemicals Act of 2023. This is not the first time a bill has been introduced in this capacity, and more often than not it is just trying to close what is known as the “Halliburton loophole.” Back during the Bush Jr. administration, Halliburton had argued that chemical blends should be proprietary in order to protect intellectual property. Despite having previous Halliburton CEO Dick Chaney as Vice President, the loophole was approved back in 2005 and legislation has been looking to patch it ever since. In fact, there is a bill back from 2017 that is still pending in the senate. This new push is a result of a recent report that determined, “Water quality improvements after the disclosure mandates are greater in areas where public pressure is higher.” This is an especially sensitive topic for Colorado given the limited water resources. The FRAC Act would effectively close the loophole and allow the EPA greater control over the process. While I personally believe this is a great resource for protecting groundwater, it seems a bit problematic that it could be regulated at a federal level. Some states already have this loophole closed through their regulatory supervisors. I suppose we will just have to wait and see what will happen, but it could meet the same fate as many of the bills before it by getting trapped in limbo.
Our next story actually takes a look at nuclear energy. It has been 7 years since the US constructed a nuclear reactor. Now, Waynesboro Georgia-based unit 3 reactor at Plant Vogtle began delivering its first wattage to the power grid. It should be able to produce 1,100 megawatts of energy in order to power about half a million buildings. Of course there is already opposition from the anti-nuclear energy lobby as they are worried about meltdown risks and the issue of nuclear waste. Of course the other side claims that this is the best way to further explore the technology and establish energy security through renewable energies. Unfortunately, it likely won’t be an issue of total meltdown that stops nuclear development, but rather the supply of fuel rods. Russia is one of the largest suppliers of uranium and is home to an estimated 8% of global supply. As a matter of fact, the US imported some 14% of its uranium from Russia and utilized the country for 28% of all enrichment services. This of course serves as another point of contention as folks would rather source energy from countries not actively involved in international conflict. I don’t see a dramatic change on the nuclear stance any time in the future, but I suppose anything is possible. Don’t forget that we have plenty of energy resources right here on American soil.
But folks that is all I’ve got for today. Again, apologies for a day delay, but I figure it’s probably better late than never. We have basin breakdown coming out later this week, and a long overdue episode of the wacky world of energy coming next week. As always, there is plenty of content on www.rarepetro.com that could keep you busy for literal days. I can’t tell you how many hours of content we have pushed out in the past 3 and a half years, but it still all remains relevant. Give our YouTube channel a peek as well. This has been Tavis Kilian with RARE PETRO. Until we see you next time, take care everybody!