PanXchange® Sand: Benchmarks & Analysis 11.15.2021

Interactive Charts Located Under Commentary

Frac Sand Commentary

In the Permian basin, FOB Kermit 100m prices and 40/70m sand prices have decreased by $0.15 per ton and increased by $0.15 per ton respectively this week, while WTI has held above $80 per barrel. Suppliers in our network have suggested that supply has tightened this past week regarding 40/70m in-basin sand relative to its 100m counterpart.

In the Northern White mine gate market, FOB Wisconsin 100m and 40/70m sand prices have increased by $1.00 per ton since last week, as winter natural gas demand is providing an uplifting effect on prices. We continue to hear that there is continued, limited demand for Northern White 40/70m in the Permian, as a result of most operators electing to use in-basin proppant. As well, 30/50m Northern White minegate sand increased by $0.15 per ton this week, exhibiting continued, limited demand as well. The PanXchange team predicts that Northern White prices will rise over the winter months as a result of the substantial expected seasonal increase in natural gas demand from Northern-White dependent regions such as Appalachia.

The Primary Vision frac spread moved from 266 to 269 for the week ending November 5, 2021, as industry continues to balance stringent spending budgets as oil prices hold above average breakeven costs to drill and complete new wells. The Baker Hughes US rig count increased from 550 to 556, as operators continue to drill new wells to accommodate for historically low DUC inventory levels. WTI was marked at 80.66 at Monday’s open.

The federal government announced last week that it is reviewing policy options such as leveraging its strategic petroleum reserves (SPR) to reduce the price of fuel, as producers have been slow to ramp up production to match global oil demand. By releasing oil from the SPR, the administration would be addressing their concern about rising oil prices and the impact on both businesses and everyday consumers. This week, we dive into whether or not this could impact oilfield services producers down the line.

The legal paperwork behind both the SPR and the IEA emergency reserves system clearly states that its intent was to address physical product shortages (not a rise in prices, as this would be considered market manipulation). Selling crude from the SPR would have little impact on prices beyond the short term due to the limited amount that could be sold under the president’s jurisdiction (30 million barrels, equivalent to 82,000 barrels per day on an annual basis). Also, releasing inventory from the SPR fails to address the fundamental issue at hand; the amount of product flow from producers.

In terms of a short term spot price response for crude oil, due to the anticipation surrounding the potential sale of crude from the SPR, there would be less near term volatility as opposed to if it had been a surprise. Regardless, pricing would still be economic for producers to drill and complete new wells (albeit less so in the short term), and the PanXchange team expects the trend of maintenance capital to continue among producers, leading to sustainable (and relatively boring) market dynamics in the intermediate term for oilfield services companies and oilfield product vendors such as proppant companies.

To track any future mines that may come offline, interactive charts and graphics are shown below.