News From the Oil Patch: Gas prices retreat from annual highs

By JOHN P. TRETBAR

Last week, gasoline prices reached the highest national average of the year at $3.19 per gallon. The auto club AAA says that was up two cents from a week earlier, up a nickel from a month earlier and up more than a dollar from a year ago. Today's prices are marginally cheaper. The statewide average in Kansas is just over $2.94. Most stations in Hays are offering regular gas for $2.89. It's going for $2.84 a gallon across Great Bend.

Kansas Common crude at CHS in McPherson is fetching $58.75 per barrel, after dropping half a dollar on Friday. Prices are up a quarter from a week ago, down more than five dollars from the first of the month, and $20 a barrel higher than at the first of the year.

Crude futures prices continued the slump started last week. The benchmark Nymex contract settled on Friday at $68.44 per barrel. By lunchtime Monday that was down another dollar and change to $67.35. London Brent was also down more than a dollar at $69.57 a barrel.

Drilling activity is on the rise in Kansas. Independent Oil & Gas Service's spud reports show an increase of 58%, or 192 more wells drilled so far this year than a year ago.  Seventy-six wildcat wells have been permitted this year, up more than 65% from a year ago. Wildcat drilling activity now accounts for nearly 15% of the total number of wells drilled. The weekly Rig Count in Kansas is down two for the week. Drilling was underway on one lease in Barton County, and an operator was preparing to spud a new well in Russell County.

Baker Hughes reported an increase of ten active oil rigs nationwide Friday. The count in New Mexico was up four rigs. Texas was up three and North Dakota was up two rigs.

Regulators approved 15 new drilling permits in eastern Kansas and 13 west of Wichita, including one in Barton County, two in Ellis County, and one in Stafford County. That's 605 new drilling locations so far this year.

Independent Oil & Gas Service reports 31 new completed wells across Kansas for the week, all but one of them in Western Kansas, including three in Barton County, one in Ellis County and one in Russell County. Operators have completed 492 Kansas wells so far this year.

US crude inventories dropped 400,000 barrels last week to nearly 439 million. The government says US stockpiles are about six percent below the five-year average for this time of year. Gasoline inventories are about 3% below the five year average, after dropping slightly last week. 

The US imported 6.4 million barrels of crude oil per day last week, down by 36,000 barrels per day from the week before. The four-week average of US imports is 16% higher than the same four weeks last year.

The Energy Information Administration reported an increase in US crude production of 124,000 barrels per day. At 11.3 million barrels per day, US output is nearly two million barrels per day higher than the same week a year ago.

Oil-by-rail traffic in the U.S. was down last week. The Association of American Railroads reports 10,188 tankers hauling petroleum, down 101 cars from the week before and nearly ten percent below the totals from a year ago.

It might surprise you to learn that the leading offshore oil producer is Brazil. According to new analysis from the firm GlobalData, Brazil is expected to contribute nearly one fourth of all offshore oil produced worldwide over the next four years. Planned and announced projects starting soon are expected to pump up Brazil's offshore output to about 1.3 million barrels per day.

The state of North Dakota reported a slight increase in crude-oil production in June. The Department of Mineral Resources announced output of 33.8 million barrels for the month. That's an average of 1.12 million barrels per day, up 143 barrels per day over the month before. The state's operators captured 92 percent of the natural gas produced at oil wells.

A government report predicts rising OPEC crude production and lower prices through next year. Brent prices averaged $75 per barrel in July, and should average around $72 for the next few months, according to the government's Short Term Energy Outlook. The report forecasts average Brent prices of $66 per barrel next year. The Energy Information Administration says US crude prices will average just under $66 this year, dropping to just over $62 per barrel next year. EIA says OPEC production will rise nearly a million barrels per day this year over last year.

Midwestern lawmakers are pressing their fight with the Fish and Wildlife Service over its potential listing of the lesser prairie chicken as an endangered species. Kansas Senators Jerry Moran and Roger Marshall joined lawmakers from Texas and Oklahoma urging the Service to extend the public-comment period on the proposal. Last week that comment period was extended one month to September 1st. But in the letter, the lawmakers are asking for an additional five months. They argue they need more time to consider potential impacts and scientific analysis. They say the listing would damage the construction, agriculture, energy and other industries that are already cooperating in conservation efforts to protect the bird habitat.

The biggest oil and gas companies in Europe are going to extraordinary lengths to convince investors that their profits are here to stay. Royal Dutch Shell last week surprised investors, by increasing its dividend nearly 40%, and announcing $2 billion in stock buybacks. French multi-national TotalEnergies last week promised to divert as much as 40% of its surplus cash to stock repurchases. According to a Bloomberg report this marks a big turnaround for the industry, which is trying to convince investors to hold on despite mounting concerns about climate change. Up until recently, both oil majors were focused on paying down debt and strengthening their balance sheets following the pandemic and the price slump.