News from the Oil Patch: U.S. refining capacity rises despite 1 fewer refinery

By John P. Tretbar
Special to the Hays Post

Crude oil prices posted slight losses Monday after some big swings last week.  WTI on the Nymex was trading a few cents below $75 per barrel by midday Monday, after dropping below $73 and then topping out at nearly $77 last week. Brent crude was over $79 in midday trading in London. Kansas Common crude starts the week at $65.75 per barrel. That's up from $64 a week ago and up from $61 at the first of the month.

Kansas regulators report 127 intent-to-drill notices filed in June. That's 622 so far this year, compared to 851 halfway through last year. Barton County reported six new intents, 27 through June. Ellis County added two for a year-to-date total of 24. Just one new intent on file in Russell County, where there are four so far this year. Stafford County checks in with three new intents, 19 through the first six months of 2023.

Independent Oil & Gas Service reports Kansas operators completed 24 new wells last week, including three in Barton County and two in Ellis County. That's 932 new well completions so far this year, which is ahead of last year by almost 100 wells. Regulators approved 22 new drilling locations last week, with six west of Wichita including one in Stafford County.

The rotary rig count from Baker Hughes is down three oil rigs and five rigs, with Texas dropping eight rigs. New Mexico was up two. Oklahoma dropped by one. With 39 active drilling rigs statewide, the Kansas Rig Count from Independent Oil & Gas Service is down 4.5 percent from last week, down 11 percent from a month ago, and down nearly 28 percent from last year at this time. Drilling was underway Monday on a lease in Stafford County.

Weekly inventory reports from EIA do not include crude oil stored in the U.S. Strategic Petroleum Reserve, which have varied greatly over the last year. As gasoline prices spiked, President Joe Biden entered the marketplace to sell 180 million barrels from the SPR, the biggest drawdown in its history. That crude was sold for an average price of $95 a barrel. The administration is back in the marketplace to buy crude that will be more than $20 a barrel cheaper. The Department of Energy has already bought more than 3 million barrels for September delivery at just under $72 a barrel. Last week the government announced it is in the market for another 6 million barrels for delivery this fall. That's already ringing up what amounts to a savings of $180 million dollars to the U.S. treasury, simply by selling high and then buying low.

The latest inventory report NOT including the Strategic Petroleum Reserve shows a marked increase in stockpiles, up 5.9 million barrels to just over 458 million as of July 7. Inventories are about 1 percent above the five-year average for this time of year, according to the weekly report from the Energy Information Administration.

The government reported a slight drop in weekly crude production. The Energy Information Administration says U.S. producers pumped just over 12.3 million barrels per day, down 113,000 barrels per day from the week before, but leading the year-ago total by just under 300,000 barrels a day.

U.S. crude-oil imports dropped by over a million barrels per day last week. But, the four-week average is just a fraction less than the same period a year ago. The Energy Information Administration reports average imports in the week through July 7 of 5.9 million barrels per day. The four-week average is 6.4 million, which is down about three-tenths of a percent from the same four weeks a year ago.

U.S. refining capacity increased last year for the first time since the pandemic despite fewer operating refineries. A report from the Energy Information Administration shows refineries here were able to handle up to 18.1 million barrels a day last year, up 200,000 barrels from the year before. There are 129 operable refineries nationwide, which is down one from a year ago after the closure of a small facility in California. But EIA says overall capacity increased thanks largely to the re-opening of a partially-retired unit in New Jersey, along with some minor increases in Kansas and eight other states. EIA says the three refineries in Kansas now have a combined top-end capacity of 416,000 barrels per day.

Russian crude exports are starting to drop, more than four months after its promised production cuts. Bloomberg reports total seaborne crude flows dropped a little more than 1 million barrels per day in the week through July 9. The four-week average is down 205,000 barrels per day. The numbers are driven by big drops in shipments through Russia's western ports.