By JOHN P. TRETBAR
Oil posted its biggest annual price advance since 2009 as vaccination roll-outs ramped up economies and spurred consumption, while crude production returned at a more moderate pace. Bloomberg reported West Texas Intermediate crude prices rose 55% for the biggest year-to-date gain in over a decade. Brent, the global benchmark, rose 50%, the largest gain since 2016. US crude also finished the year with the longest run of consecutive quarterly price increases since 1983.
Kansas Common crude at CHS in McPherson dropped nearly two dollars on Friday to end the year at $65.50 [["sixty-five fifty"]] per barrel. That's up $9.75 from the first of the month, and up nearly twenty dollars from a year ago. The average price for the month of December was just over $61.71 [["sixty-one seventy-one"]] per barrel, compared to just over $68 in November and a little over $37 in December of last year.
Kansas operators this year will nearly double the number of wells spudded last year. Independent Oil & Gas Service reported 1,080 wells were drilled during the first 51 weeks of the year, compared to only 563 at the same time last year. That's an increase of nearly 92%. The number of active operators searching for oil and gas in Kansas this year is now up to 240, an increase of nearly 38% over the same period last year.
The government last week reported a drop in domestic crude inventories of 3.6 million barrels. At 420 million barrels, US stockpiles are about seven percent below the five year average for this time of year. The Energy Information Administration says gasoline inventories dropped by 1.5 million barrels, and are about six percent below the five-year average. EIA said US Operators pumped nearly 11.9 million barrels of crude oil per day during the week through December 24. That’s a production increase of more than 330,000 barrels per day over the week before, and 877,000 barrels per day more than the same week last year.
Regulators in Kansas approved 36 new drilling permits last week. That's 1,182 so far this year. Out of 15 new permits in western Kansas, one was in Barton County and two were in Russell County. There are 21 new permits in eastern Kansas.
In the last weekly completions tally of the year, over twenty percent of the completed oil wells in Kansas were dry holes. The year-to-date total of 959 newly-completed wells included 199 dry holes. Independent Oil & Gas Service reports 27 new completions statewide last week, including one each in Barton and Ellis counties.
One barometer of future oil production is the number of wells that are drilled but not yet completed, or DUC wells. Such wells can be used to bring crude into production quickly. The Energy Information Administration tracks DUCs in the nation's seven major shale plays each month. In November the total dropped by 226 wells. All seven shale regions showed lower DUC numbers, with the Permian basin down 105 wells from October.
Oil-by-rail traffic was down for the week and for the year. The Association of American Railroads reported 10,398 tankers hauling petroleum or petroleum products for the week through December 18. That's down 316 carloads from the week before, and 11 percent lower than a year earlier. Canadian shippers moved 8,533 tanker carloads, which is up slightly for the week but down about six percent compared to a year earlier.
Authorities in Colorado have passed sweeping new regulations that could cost operators in the patch tens of millions of dollars each year. The Colorado Air Quality Control Commission this month passed the new regs in order to comply with the state's emissions goals. The stat's Air Pollution Control Division is imposing stringent requirements to capture and dispose of byproducts without allowing the gasses to escape into the atmosphere. They want the industry to reduce emissions compared to 2005 levels by 36% in four years and 60% by the year 2030. The move is expected to cost energy producers $59 million to $142 million a year.
Having called a dirge for the merger, the pipeline company must pay the piper. That colorful turn of phrase from a judge in Delaware finalized a very expensive ruling for oil pipeline giant Energy Transfer LP. The company must pay $410 million for scuttling a $33 billion merger with rival Williams Companies over a tax flaw in the deal. According to reporting from Bloomberg last week, Energy Transfer is required to pay what's called a break-up fee under the terms of the merger agreement. The 95-page ruling from Delaware Chancery Court Judge Sam Glasscock III ends a more than five-year dispute over the deal.
Mexico plans to end crude oil exports in 2023 as part of a strategy by the new government to reach self-sufficiency in domestic fuels. The state-owned oil company Pemex will reduce crude exports to 435,000 barrels per day next year, before phasing them out entirely the following year. The move is part of a drive to expand Mexico's domestic production of fuels, instead of sending its oil abroad and importing costly refined products like gasoline and diesel. Mexico currently buys most of its fuel from U.S. refiners.
Five years after it was created Norway's Aker BP is about to become a major North Sea player, and the second-largest producer on the Norwegian Continental Shelf. The company is buying Lundin Energy for ten billion dollars. The deal makes Aker BP Norway's second biggest producer, behind only state-owned Equinor. The combined companies will pump the equivalent of about 400,000 barrels of oil a day, more than some OPEC members. Another announcement marked good news for Aker-BP and great news for Maersk Drilling, which secures a five-year, $1 billion contract for two drilling rigs. Aker-BP will deploy the rigs in the North Sea off the shore of Norway. The new contract is worth all of last year's revenues reported by Maersk, which posted losses in four of the five prior years.