John P. Tretbar
U.S. Crude futures prices hovered around $62 a barrel by midday Monday, after dropping below sixty-one dollars earlier in the day. According to MarketWatch, many traders are betting the OPEC+ alliance will delay production increases this week based on the rise in COVID-19 cases in India. The alliance kept its demand forecast unchanged on Monday, but acknowledged that India posed a growing risk to global demand recovery. Settlement prices in New York last week ranged from sixty-one to sixty-two dollars per barrel. Prices in London were just short of $66.
Prices in Kansas are holding steady. Kansas Common starts the week at $52.50 per barrel at CHS in McPherson. The Kansas benchmark this month has ranged from $49.50 on April 9, to $53.75 per barrel a week later.
The auto club AAA reports national gasoline prices held fairly steady this month, holding within a penny or two of $2.86 per gallon. Analysts say the current 85% use-rate of American refineries is helping balance higher crude prices. Twenty-seven state averages held steady while another 16 saw pump prices change by only one or two cents, according to AAA. The national average was just over $2.88 Thursday. Kansas prices were about 16 cents cheaper. Filling up a 15-gallon tank will cost you over ten dollars more than six months ago and nearly twenty dollars more than a year ago.
Independent Oil & Gas Service reports a slight improvement in the weekly Rig Count in Kansas. There are 16 active drilling rigs in Western Kansas, up three from last week. The count east of Wichita is down one at six rigs. Baker Hughes' national Rotary Rig Count notes 438 active rigs, down one oil rig from last week. The count in Texas was down three rigs.
Regulators approved the first new drilling permits in Ellis County since early February, among 24 new drilling permits statewide last week. There are two new permits in Barton County, five in Ellis County and one each in Russell and Stafford counties. Regulators have okayed 245 new drilling permits across Kansas so far this year compared to just 171 by this time last year. Independent Oil & Gas Service reports 13 newly-completed wells across Kansas last week, 214 so far this year.
Crude inventories rose last week, after three weeks of declines. The Energy Information Administration reports stockpiles increased 600-thousand barrels to 493 million. Inventories are about one percent above the five year seasonal average. Refineries operated at 85% of capacity last week.
The U.S. Energy Information Administration said domestic production increased by 89-thousand barrels to once again top eleven million barrels per day for the week ending April 16. Year-ago production totals averaged over 12 million barrels per day.
The government reports U.S. crude-oil imports dropped by nearly half a million barrels per day last week to 5.4 million. The four-week rolling average is up about five percent from a year ago.
Oil-by-rail was down slightly from a week ago and a year ago. The Association of American Railroads reports 10,829 tanker cars hauling petroleum for the week ending April 17. That's down 597 tankers for the week and a 1.1% drop from a year ago. The year-to-date total is down 13% from the same total a year ago.
The government says air travel in the U.S. is picking up, and that could impact crude prices. Air passenger traffic is a barometer of jet fuel demand, which has been in the cellar for the better part of a year. The Energy Information Administration says the tallies in March for passenger traffic reached the highest monthly average since the onset of the pandemic. EIA says the numbers so far this month are even better, but remain at just over half of the totals reported in February of last year. The average fell from 2.2 million air passengers per day in February of 2020, to just 100-thousand passengers per day in April, when the impact on air travel was at its highest. Since then, the tally has slowly increased to 1.2 million per day in March.
The oil patch in Colorado was beset by low prices and new laws last year. State regulators now say crude production dropped nearly 11 percent in 2020 from the record-setting year the year before. Crude output reached 171.5 million barrels last year according to online totals from the Oil & Gas Conservation Commission. Under a new state law, local communities in Colorado have greater power to block drilling, and state regulators have a mandate to prioritize health and the environment.
Output from the number-two crude producing state declined slightly in February. Regulators say production in North Dakota dropped by about 64-thousand barrels to just over one million barrels per day. Their gas-capture rate dropped by two percent, but still exceeds the anti-flaring goals set by the state.
The Wall Street Journal reported on a major new undertaking by BP to end routine flaring of natural gas in the Permian Basin of Texas and New Mexico. The company plans to spend $1.3 billion to build a network of pipelines and other infrastructure to collect and capture the natural gas produced at its oil wells. If all goes as planned, the firm says it hopes to end routine flaring by 2025. The burning of gas in this way is prevalent in the Permian because most producers there drill for more profitable oil and often incinerate or vent into the air the gas that comes as a byproduct.
A new government report suggests some big production increases are on the way. The Energy Information Administration predicts output increases in the Permian Basin, which dwarf the declines expected in four other shale-oil plays, some of which will post declines. Total shale production in May is now expected to increase by 13,000 barrels to 7.6 million barrels per day. But Permian Basin production is expected to top 4.46 million barrels per day in May, an increase of 52,000 barrels per day over expected April output. EIA also reported a big drop in the number of drilled but uncompleted wells, reflected in each of the seven major shale plays. That added 177 new completed oil wells to the energy mix last month. Shale production now accounts for about two-thirds of all US crude output.
One of the Emirates on the Persian Gulf is challenging the U.S. Justice Department's seizure of crude oil which the government said violated Iran sanctions. A company owned by the Emir of Fujaira filed papers in US court to dismiss a forfeiture complaint. Lloyd's Maritime Intelligence reports the tanker resumed normal trading after the cargo was discharged and seized in Houston. Hundreds of thousands of barrels await a series of US legal challenges.
French Oil giant Total has signed a deal with officials in the African nation of Uganda which could make the country a significant crude producer and exporter. The company expects production to peak at 230-thousand barrels per day, which would rank it among the top African producers in OPEC. Officials also announced an agreement to build a 900 mile pipeline to connect newly-discovered oil fields in Western Uganda with the Indian Ocean and international markets.