John P. Tretbar
Government and watchdog reports are fueling the best oil-price rally in a month. The International Energy Agency and OPEC each raised their crude-oil demand outlook, while the US reported it's third straight weekly drop in inventories. The Nymex benchmark futures contract settled at $62.44 per barrel Tuesday, after three trading sessions above $63. Prices remain at or near one-month highs.
Crude prices at CHS in McPherson are down slightly from Monday, but the Kansas benchmark remains above $52 a barrel. At $52.75, Kansas Common is up more than two dollars from last week and up a dollar from the first of the month.
U.S. crude inventories dropped nearly six million barrels last week to just over 492 million. The U.S. Energy Information Administration says that's about one percent above the five year average for this time of year. EIA reports nearly six million barrels per day of crude-oil imports last week, down 411-thousand barrels per day from the week before. Four-week average imports are up slightly from the same period last year.
The government reported U.S. crude production averaged just short of eleven million barrels per day last week. Output for the week through April 9 was 99,000 barrels per day higher than the week before, but well behind the more than 12.2 million barrels per day we produced a year ago.
In it's Monthly Oil Market Report, OPEC offered some cautious optimism for the oil markets worldwide. The cartel predicts global oil demand this year will grow by about six million barrels per day over last year. Spot prices were up for the fifth consecutive month in March, because of what the report called "supportive fundamentals." The cartel reduced it's estimate of the economic contraction caused by the pandemic last year, based on a better-than-expected actual performance in several economies during the second half of the year. US Imports were flat for the fourth month in a row, while US exports were down for the third month in a row, according to the OPEC report.
EIA says US refineries are operating at 84% of capacity, the highest utilization rate so far this year. The auto club AAA says that helped increase domestic gasoline supplies, and thus helps push down the national average pump price.
Independent Oil & Gas Service reports a slight uptick in the Rig Count in Kansas. There are 13 active rigs in Western Kansas, which is up one from last week. The count east of Wichita was unchanged at seven active rigs. Operators are evaluating one well drilled to total depth in Barton County, two in Ellis County and one in Stafford County. Baker Hughes reports 439 active drilling rigs across the US, an increase of seven oil rigs and one gas rig. The count in Texas was up five rigs.
Regulators in the Sunflower State approved nine new drilling permits last week, eight in Western Kansas and one east of Wichita, for a running total of 221 new permits so far this year. Operators completed 14 new wells in Kansas last week. Independent Oil & Gas Service reports five new completions east of Wichita, and nine in the western half of the state, including one each in Barton, Russell and Stafford counties. That's 201 newly-completed wells statewide so far this year.
Weekly oil-by-rail tallies were up compared to last year, for the first year-over-year increase since March of 2020. The Association of American Railroads reports a total of 11,426 tanker cars hauling petroleum or petroleum products during the week that ended April 10. That's up more than a thousand tankers from the week before, and an eight percent increase over a year ago. Canada also posted a slight year-over-year increase in the weekly total. The running totals for oil-by-rail deliveries so far this year still lag behind last year by 13% in the US and 18% in Canada.
Iran’s sanctioned oil production has risen to its highest level in almost two years thanks to its growing Chinese market. Iran's output of 2.3 million barrels a day in March was its highest since May 2019, when the US imposed a full embargo. Meanwhile, an emirate in the Persian Gulf is challenging the U.S. seizure of crude oil under that embargo. Lloyd's Maritime Intelligence reports hundreds of thousands of barrels were discharged and seized in Houston. The latest in a series of legal challenges for the oil was filed by a company owned by the Emir of Fujaira, located about 100 miles across the Persian Gulf from Iran.
A U.S. judge said he was surprised by government lawyers who said the Biden Administration would not order the shutdown of the Dakota Access Pipeline, but he says he'll decide for himself. Even though President Biden declined to enforce a temporary shutdown, the administration reserves the right to shut down the facility at any time during a new environmental review, which could take a year to complete. As it stands, the facility will remain open during that period.
Former Secretary of State and CIA Director Mike Pompeo will speak at a petroleum conference in North Dakota next month. The former 4th District Kansas Congressman is among 70 speakers slated for the three-day Williston Basin Petroleum Conference. The event will also feature executives from Conoco Phillips and Energy Transfer, the operators of the Dakota Access Pipeline. Pompeo, a former oilfield services firm president, will speak on the final day of the conference May 13.