John P. Tretbar
Crude prices retreated on Tuesday after posting some big gains. Prices briefly touched highs not seen in six years, after OPEC and it's allies failed to reach an agreement on production policy. Before noon on Tuesday, WTI futures prices rose nearly two dollars, and then fell by a like amount. At one point the August contract reached $76.98 per barrel, a price not seen since November 2014. In late morning trading Tuesday, WTI was below $74, dropping $1.20 from the opening bell at $73.96 per barrel. So far this year, WTI prices have gained 57 percent.
OPEC and its allies on Friday failed to come to agreement on new production policy and postponed talks indefinitely. OPEC+ took historic measures in April 2020, removing nearly 10 million barrels per day from the marketplace in an effort to support prices. Since then, the group has been slowly returning barrels to the market, while meeting on a near-monthly basis to discuss output policy. But Friday's meeting came to an end after the United Arab Emirates blocked two key votes, and members have not planned a new meeting.
At CHS in McPherson, Kansas Common starts the week, and the month of July, at $65.50 per barrel, after a big jump ahead of the holiday weekend. The state benchmark ended the month of June at $63.75 which is nearly six dollars higher than at the start of the month. The average price for the month of June was $61.66 per barrel.
Independent Oil & Gas Service reports a slight uptick in the Rig Count in Kansas, with eight active rigs in the eastern half of the state and 22 west of Wichita. Both tallies were up one for the week. Baker Hughes reported 475 active drilling rigs across the country on Friday, an increase of four oil rigs and one gas rig. Colorado notched an increase of three rigs. The counts in North Dakota and Texas were each up one.
Regulators gave their okay to 16 new drilling permits in Kansas last week, four in eastern Kansas and 12 west of Wichita. That's 483 new drilling permits so far this year, compared to just 214 through the first six months of last year.
Independent Oil & Gas Service reports 31 completions across Kansas for the week, but just two of them were west of Wichita. That's 389 newly-completed wells so far this year. Last year's six-month total was 537, reported before most of the state's shutdown kicked in. Just seven years ago, the six-month total was over three thousand newly completed wells.
The government reported the sixth consecutive weekly drop in US crude-oil inventories. For the week ending June 25, US stockpiles dropped 6.7 million barrels from the week before, to a total of just over 452 million barrels. The Energy Information Administration says US inventories are about six percent below the five-year average for this time of year.
Gasoline stockpiles increased by one and a half million barrels last week. Inventories are now equal to the five-year average for this time of year.
US crude-oil production topped 11 million barrels per day last week for the third week in a row. US output jumped 103-thousand barrels per day compared to the week before. Production is currently about 185-thousand barrels per day higher than the output reported a year ago.
US crude imports averaged 6.4 million barrels per day last week, down half a million barrels a day. The government says Imports over the last four week averaged 2.8 percent more than the same four week period last year.
The current rally in oil prices is setting records for the speed of the increases. Brent crude reached $75 per barrel last week, more than double the price in November. In Canada they're calling it "almost too good to be true." According to The Financial Post, an oil rally this rapid has only happened three times in the last twenty years. If Canadian oil and gas companies continue to maintain their cost discipline, analysts believe they could get substantial returns, a big turnaround for the industry. According to the report, Canadian oil and gas companies are close to hitting their debt-reduction goals and could soon start allocating billions in free cash.
Oil-by-rail totals have risen steadily each week since late April. The Association of American Railroads reported another increase for the week ending June 26, with 10,201 tankers hauling petroleum or petroleum products. That's up 416 rail cars from the week before and half a percentage point higher than a year ago. Oil-by-rail in Canada is down slightly for the week, but up more than 50% over a year ago.
As you might expect, US energy consumption dropped dramatically last year because of the pandemic response and other factors. The government now says we saw our largest annual decline in energy use ever, a decline of 7.5%. Fossil fuels, including both petroleum for transportation and coal for electrical power, accounted for most of the decline. Fossil fuels consumption dropped last year to its lowest level since 1991. The Energy Information Administration reports non-fossil fuel sources, including nuclear power and renewable sources, rose to their highest share of the energy mix since the early 1900s.