Feb 23, 2021 11:29 AM

News From the Oil Patch: Oil, gasoline prices reach 13-month highs

Posted Feb 23, 2021 11:29 AM


Operators continue to enjoy the highest prices in more than a year. U.S. crude futures prices jumped more than 3 percent Monday, topping $61 a barrel for the first time since early January of last year. By noon, the near-month contract for light sweet crude was up nearly $2 at $61.13 per barrel. London Brent was also up 3 percent at $64.65 per barrel.

The government says gasoline inventories are increasing, signaling decreasing demand. But prices continue to rise at pumps across the country, largely due to spiking crude-oil prices. The Energy Information Administration says total motor gasoline inventories increased by 700,000 barrels last week and are about 1% above the five year average for this time of year. But gasoline prices have already topped last year's more than three dozen states.

The motor club AAA said the gasoline price spike kept up with spiking crude-oil prices, and predicted both would soon top the highest prices of last year. The national average price at the pump last week was just over $2.57. Nearly 40 state average pump prices had already topped last year's highs, with half of those seeing double-digit increases. Kansas was the tenth cheapest state in the U.S. last week, with an average of just over $2.35 per gallon. That's up nearly eight cents over a week ago, and eighteen cents a gallon higher than a month ago. Filling up your 15-gallon tank cost just over $36, up more than a dollar from last week and nearly two dollars more than last month. 

Cold weather wreaked havoc in the oil patch last week. Output was down by more than two million barrels per day as the coldest weather in 30 years hits states that aren't used to it. Quoting unnamed traders and company executives, Bloomberg reported supply losses in the Permian Basin in Texas and New Mexico, along with the Eagle Ford play in southern Texas and the Anadarko basin in Oklahoma. 

The cold snap was good news for small natural gas producers. The freeze is giving a rare boost to a market that’s never recovered from a crash more than a ten years ago. As Texas output is disrupted by frozen pipes, prices have surged more than 4,000% in Oklahoma.  

The Rig Count in Kansas last week was unchanged statewide, down one east of Wichita and up one in Western Kansas. Independent Oil & Gas Service notes that operators have now reached total depth at new well in Ellis County and another in Stafford County.

Baker Hughes reports the national rig count was unchanged. The count of oil rigs was up one, while the gas rig count was down one. Texas and North Dakota were each up one rig, while Louisiana and Alaska both dropped by one. 

There were just four new permits filed last week in Kansas. All of them were in counties east of Wichita. That's 94 permits for drilling at new locations in Kansas so far this year.

Independent Oil & Gas Service reports 16 newly-completed wells across Kansas last week, eight of them east of Wichita and eight in Western Kansas, including two in Ellis County.

The government says U.S. crude-oil stockpiles dropped by 7.3 million barrels during the week ending February 12. The Energy Information Administration reports inventories are right at the five-year average for this time of year.

EIA reports U.S. crude imports rose 41,000 barrels per day last week. We currently import an average of 5.9 million barrels per day. Over the last four weeks, imports have averaged 13% less than the same four-week period last year.

U.S. crude-oil production dropped below 11 million barrels per day last week, and remains more than two million barrels per day behind year-ago totals.

In a monthly report, the government predicts total shale production in the U.S. will continue to decline. Output from the seven major shale plays tracked by EIA will drop 77,000 barrels per day in March, to just over 7.5 million barrels per day. That would mark the sixth consecutive monthly decline. Shale production accounts for roughly three-fourths of U.S. crude-oil production.

Regulators in North Dakota say production continues to drop in the #2 U.S. crude-producing state. The Department of Mineral Resources reported output of 1.19 million barrels per day in December, down nearly 35,000 barrels per day from the month before. Declining production in North Dakota has helped the state meet its environmental goals. In its latest report, DMR reported a 93 percent gas-capture rate. That means of all the natural gas produced at oil wells in North Dakota, only seven percent was vented or burned at the well head. During it's initial oil boom, the state's operators flared four times that amount.

Last year marked the first in which the U.S. was a net petroleum exporter, exporting more petroleum than we imported on an annual basis. The U.S. Energy Information Administration says declining imports drove the shift, but now predicts we will return to net importer status for the next two years. In it's Short Term Energy Outlook, the government predicts U.S. petroleum consumption will continue to recover from the effects of the pandemic, growing by seven percent this year and another five percent next year.