By JOHN P. TRETBAR
President Donald Trump ramped up threats to use tariffs to protect the U.S. energy industry from a historic glut of oil, as efforts to forge a global deal to cut output appeared to lose momentum. Trump said Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry. At the same time, he predicted that Saudi Arabia and Russia would come to an agreement to cut output and stem the price rout. Russia and Saudi Arabia may very well be "very close" to a deal to cut oil production. But a meeting planned for Monday was delayed, and crude prices cratered.
U.S. crude futures prices were down about 6 percent in mid-morning trading Monday after posting big gains last week. The near-month Nymex contract was down $1.78 to $26.56 a barrel. London Brent was down more than 3 percent at $32.95.
Kansas oil prices posted significant gains last week. Prices at CHS in McPherson jumped $3 on Friday to start the week at $18.50 a barrel. That's down $16.50 from the beginning of last month, and more than $34 below the price a year ago at this time.
Regulators report 37 new intent-to-drill notices in Kansas last month, including one in Barton County and two in Stafford County. That makes a total of 171 for the first quarter on 2020, compared to 228 at this time last year.
Rig counts across Kansas continue to decline, reflecting the industry's retreat across the country and around the world. Independent Oil & Gas Service reports one active rig in eastern Kansas, unchanged, and five west of Wichita, down four from the week before.
Baker Hughes reports 664 active drilling rigs nationwide, a drop of 62 oil rigs and two seeking natural gas. The count in Texas is down 30, Oklahoma is down ten, New Mexico dropped by nine rigs and North Dakota is down six. Canada reports 41 active rigs, down 13 for the week.
Independent Oil & Gas Service reports nine newly-completed wells across Kansas last week, all of them west of Wichita. That's 311 completions so far this year. There are NO new drilling permits filed in Kansas this week.
The national average for a gallon of regular gasoline dropped below two dollars for the first time in four years last week. By Monday, the average price across the U.S. was $1.929. Triple-A expects that to drop to $1.75 or less later this month. The average across Kansas Monday was $1.689. We spotted $1.64 at several stations in Great Bend, and $1.42 at some stations in Hays.
The latest numbers from the Energy Information Administration show a continuing slide in Kansas crude-oil production in January. Operators pumped 2.74 million [["two point seven four million"]] barrels per day. That's down 18,000 barrels per day from December and about 95,000 barrels per day less than a year ago.
The government reports U.S operators pumped 12.975 million barrels of crude oil per day last week. That's up 16,000 barrels per day from the week before. The Energy Information Administration reports an increase in U.S. crude oil inventories of more than 13 million barrels. At 469.2 million barrels, U.S. stockpiles are near the five-year average for this time of year. EIA said imports totaled six million barrels per day last week. That's down 70,000 barrels per day from the week before.
With the spread between crude-oil delivery in May and November reaching record heights, traders are increasingly turning to floating storage to hedge against low prices. But it's still a huge gamble, which based on today's numbers will not pay off. Reuters reports it now costs up to $180,000 a day to charter a supertanker, double the going rate last Wednesday. The November contract for U.S. crude pays $12.85 a barrel more for than the near-month contract. You can store up to two million barrels on the so-called Very Large Crude Carriers. Thus at today's rates it costs more than $32 million to charter the supertanker, but at current November prices the trader only recaps a return of $25.7 million.
Nonetheless, the scramble for tanker storage continues. Lloyd's List Maritime Intelligence reports the Saudis have joined that particular market, even though their price and production war with the Russians is responsible in part for low crude prices. Lloyd's reports that in just the last two weeks, 21 Very Large Crude Carriers have been chartered for six to 12 months, and nine of those are specifically designated as floating storage.
Oil-by-rail in the United States was up in March, despite a 6 percent decline in total railroad traffic and a double-digit decline in the weekly oil-by-rail totals. The Association of American Railroads says monthly petroleum shipments by rail increased 3.5 percent over March of 2019.