Kansas Common crude at CHS in McPherson starts the week at $31.50 per barrel after dropping 75 cents on Friday. Current prices are down a dollar from the first of the month, and are about twenty dollars a barrel less than at the first of the year.
AAA says Americans are enjoying the cheapest summer gasoline prices in more than a decade, averaging $2.14 per gallon over the last two months. The auto club says the national average Thursday ($2.18 per gallon) was nearly a penny cheaper than a week earlier, and half a dollar cheaper than a year ago. The statewide average of $1.96 once again placed Kansas among just 13 states below two dollars a gallon. Filling up a 15-gallon tank will cost you more than a dollar less than six months ago, and you'll save more than five dollars compared to a year ago.
The government says U.S. crude-oil production in May dropped by the biggest percentage since at least 1980. National output dropped nearly two million barrels per day from April to May, according to the Monthly Production Report from the Energy Information Administration. EIA says Texas, which produces about 41% of U.S. crude, saw a nearly 15% drop, down roughly 764,000 barrels per day. Production in Kansas was down 12% to 66,000 barrels per day.
Baker Hughes reported 247 active drilling rigs across the U.S. last week, marking a decline of four oil rigs. The count in New Mexico was down three. Independent Oil & Gas Service reported two active drilling rigs east of Wichita, up one, and eight in Western Kansas, which is up two on the week. Drilling is underway on one lease in Stafford County.
Kansas regulators approved just six new drilling permits last week, one in the eastern half of the state, and one west of Wichita. Kansas operators completed 12 wells last week, five of them east of Wichita and seven in Western Kansas, including one in Stafford County.
The government says oil and related product markets continue to be affected by efforts to mitigate the spread of the coronavirus. But a new report from the Energy Information Administration shows that gasoline demand increased month-over-month in May as many states began to relax stay-at-home orders. EIA says demand for jet fuel plummeted for the third straight week, because of reduced commercial air travel. Jet fuel demand dropped by more than one million barrels per day from April to May, a 67% decrease, to reach its lowest level since 1968.
Oil-by-rail shipments continue to lag behind last year's record pace, according to the Association of American Railroads. For the week ending August 1st, operators moved 10,070 tanker cars hauling petroleum, down more than seven percent on the week, and nearly 20% lower than a year ago. Monthly numbers from the AAR show total freight traffic in July was down more than 17% from a year earlier. They say coal and other energy-related rail commodities continue to struggle more than most.
The world’s five largest oil companies slashed production rates and collectively cut the value of their assets by nearly $50 billion in the second quarter, as the coronavirus pandemic caused a drastic fall in fuel prices and demand. BP was the hardest hit, taking a $17 billion hit. The five majors also cut capital expenditures by a combined $25 billion.
The Trump administration is seeking to ease a slew of Obama Administration rules for oil and gas drilling. One of the latest proposals could save energy companies more than $130 million over the next decade. But critics say that by relaxing requirements for measuring and reporting production on federal lands, the policy leaves open the possibility that taxpayers won't get their fair share of royalties. The proposal will be subject to public comment after being published in the federal register, which officials say has not been scheduled yet. The administration is also once again trying to get rid of rules for methane emissions in the oil patch. The Wall Street Journal reports the EPA wants to end requirements that producers have systems and procedures to detect methane leaks. Those new rules would apply to new wells and those drilled since 2016. They would also remove the largest pipelines, storage sites and other infrastructure from EPA emissions oversight. The administration has been trying to make such changes since 2017, but challenges from Congress and in the courts have, so far, stymied those efforts.
The Energy Information Administration says U.S. inventories dropped 7.4 million barrels last week, and are now about 16% above the five-year average for this time of year. EIA reported a down-tick in U.S. crude-oil production, which dropped by more than 100,000 barrels per day to just over 11.3 million [["eleven point three million"]].Imports were up 900,000 barrels per day. EIA says the four-week average imports are about 18% less than the same four-week period last year.
An appeals panel sided with the operators of the Dakota Access Pipeline, saying it's up to the Trump administration whether the pipe can continue to operate while a more robust environmental review is conducted. A judge in July ordered the pipeline shut down for the review, a move that rocked the industry. But the court of appeals is blocking that order until the Army Corps of Engineers can clarify in court whether the agency thinks the pipeline must shut down for the review.
There's another pipeline shutdown in the headlines in North Dakota. This time, a federal agency says an oil pipeline is in fact "trespassing" on tribal land. The Bismarck Tribune reports an easement expired seven years ago. That easement allowed the Tesoro High Plains Pipeline to cross part of the Fort Berthold Reservation on its way to Marathon Petroleum's Mandan Refinery. The Bureau of Indian Affairs ordered the shutdown and is demanding $187 million in damages. Marathon has vowed to appeal the BIA’s order, which requires that the company “immediately cease and desist” using the segment deemed to be trespassing. The line remains operational according to an online statement.