Oil wells restart as inventory in U.S. declines

Recovered prices aid return of drillers

Midland oil company Diamondback Energy said Tuesday it had joined other drillers in restarting oil production at wells shut down during the oil crash this year.

Diamondback said Tuesday it began pumping oil in June from formerly closed wells, a month after it had taken 9,000 barrels of oil per day out of production in response to the loss of demand and low oil prices.

“With oil prices having recovered significantly since the decision to curtail production was made in April, Diamondback returned this production through the month of June with minimal associated cost,” CEO Travis Stice said in a statement.

Diamondback, which is active in the Permian Basin of West Texas, said it drilled 58 horizontal wells and completed 15 wells for production in the second quarter.

The driller, which saw the number of its operating rigs fall to seven from 20 on March 31, plans to operate five or six rigs and employ three or four completion crews for the rest of the year.

Diamondback is one of several energy companies restarting wells and production as coronavirus-related restrictions ease around the world. Concho Energy and Parsley Energy are reopening existing wells while ConocoPhillips and EOG resources said they plan to increase production in the third quarter.

The companies are returning wells to production as U.S. crude oil inventories have begun to decline, according to the Energy Information Administration.

Commercial crude oil inventories on July 10 stood at 531.7 million barrels, a decrease of 7.5 million barrels from the previous week, the EIA said.

Meanwhile, U.S. refineries processed 14.3 million barrels of crude oil per day, a decrease of 38,000 barrels per day, even as they increased gasoline and die

sel production.

Running at 78.1 percent of capacity, U.S. refineries produced an average of 9.1 million barrels of gasoline per day and 4.9 million barrels of diesel per day.

U.S. crude oil imports averaged 5.6 million barrels per day last week, a decrease of 1.8 million barrels from the previous week.

Despite the draws, U.S. crude oil inventories are still 17 percent higher than the five-year average for this time of year, agency figures show.

West Texas Intermediate, the U.S. benchmark for crude, settled Wednesday at $41.20 in New York.