John P. Tretbar
Crude futures prices dropped six percent Monday after the OPEC-Plus crude-oil exporters reached agreement with one holdout nation, and agreed to raise production. Prices dropped nearly five dollars in New York to $67.12 per barrel by lunchtime Monday.
OPEC-Plus ministers agreed on Sunday to increase oil supply starting next month to cool the highest prices in more than two years. That came after an agreement that allowed the United Arab Emirates to raise its production quota. From August to the end of the year, the entire group will reintroduce to the marketplace another two million barrels per day, or about 400-thousand barrels per day each month. The cartel hopes to fully phase out its self-imposed production cuts by around September 2022.
Kansas crude prices dropped by more than two dollars last week. Kansas Common crude at CHS in McPherson starts this week at $62 per barrel. That's down nearly four dollars from the first of the month, but more than $23 higher than at the first of the year.
High crude prices coupled with high gasoline demand pushed average gasoline prices up to $3.17 per gallon nationwide Monday, an increase of 13 cents per gallon since Memorial Day Weekend. Gasoline demand jumped nearly one million barrels per day to the highest level ever reported by the EIA. Most gas stations in Hays and Great Bend were offering a gallon of regular for $2.94 a gallon, but last week we spotted one station over three dollars, the first we've seen in about seven years.
The Rig Count in Kansas was down slightly last week. Independent Oil & Gas Service reports seven active rigs in eastern Kansas, which is down one from last week. The count west of Wichita was unchanged at 22 active drilling rigs. Operators are preparing to spud new wells in Barton and Stafford counties.
Baker Hughes reports 484 active rigs across the US. The total marked an increase of two oil rigs and three seeking natural gas. Oklahoma was up two, and Texas was down two.
The benchmark Nymex futures contract settled Thursday at $71.65 [["seventy-one sixty-five"]] per barrel after nearly topping $73 earlier in the day. By Friday afternoon prices were once again over $72. Light sweet crude for August was up 37 cents to $72.02 [["seventy-two oh two"]] per barrel. London Brent gained 28 cents to $73.75 [["seventy-three seventy-five"]] per barrel.
Kansas regulators okayed 20 new drilling permits last week, 535 so far this year. There are five new permits east of Wichita and 15 in Western Kansas, including one each in Barton, Russell and Stafford counties.
Operators across the state completed 22 new wells last week, for a year-to-date total of 415 new well completions. Independent Oil & Gas Service says there were seven in eastern Kansas and 15 west of Wichita, including one newly-completed well in Barton County and one in Russell County.
The government reported declining US crude-oil inventories for an eighth consecutive week. The Energy Information Administration says domestic stockpiles dropped by nearly eight million barrels last week and are currently about eight percent below the five-year average for this time of year. EIA said US crude-oil imports rose by 347-thousand barrels per day last week, but the four-week average remains slightly lower than the same time period last year. US crude production increased by 96-thousand barrels per day last week to just over 11.4 million barrels per day.
Oil-by-rail shipments dropped last week. The Association of American Railroads reported 9,775 tankers hauling petroleum and petroleum products, down 252 tankers from the week before and three percent lower than the same week a year ago.
Despite huge reductions during the pandemic, the U.S. continued to lead the world in total petroleum and natural-gas production last year. The Energy Information Administration reports more fossil fuel was produced here than in any other country, continuing a trend that began in 2014. The world's largest producers all saw massive drops in production last year. US output was down by about three percent from the year before.
Drilling permits on federal lands are on pace this year to reach their highest levels in nearly 15 years. That comes despite efforts by the Biden Administration to slow down drilling on public lands. According to analysis from the Association Press, the government approved about 2,500 permits to drill on public and tribal lands during the first six months of the year. That includes more than 2,100 approvals since President Biden took office January 20. Some analysts are crediting the spike to industry and Republican resistance to the administration's efforts.