By JOHN P. TRETBAR
Kansas Common crude at CHS in McPherson gained $1.75 on Friday to end the week and the month of May at $25.75 a barrel. The average price for the month of May was $18.93, an increase of nearly $9 a barrel over the month before, but down more than $30 from the average price in May of last year.
The Energy Information Administration reported on U.S. crude-oil production through March of this year, with Kansas operators managing to pump more than 86-thousand barrels per day. That's down from a year ago, when the state managed nearly 92-thousand barrels per day. National production totaled about 12.7 million barrels per day.
Baker Hughes confirms a continuing contraction in new oil-and-gas exploration. The weekly Rotary Rig County notes just 301 active drilling rigs nationwide, down 17 rigs. The count in Texas was down eleven rigs.
Drilling activity is down in Kansas as well, with just four drilling rigs active across the state. The total number of inactive rigs is up one at 203. One operator is preparing to spud a new well on a lease in Ellis County.
There are just four new drilling permits this week across the state, three in western Kansas and one east of Wichita.
Independent Oil & Gas Service reports 23 new well-completions for the week, 399 so far this year, compared to 655 at this time last year. There are 11 new completions in eastern Kansas, and 12 west of Wichita, including one in Stafford County.
The government reported a 20,000 barrel decline in U.S. crude oil production last week, to 11.412 million barrels per day. Average production in the U.S. is down more than 800,000 barrels per day from the same week a year ago. The Energy Information Administration reports an increase in U.S. crude oil inventories of nearly eight million barrels. EIA says stockpiles are about 13% above the five-year average for this time of year. EIA reports crude imports last week of 7.2 million barrels per day, up by two million barrels per day from a week earlier. The four-week average is down more than 16% from a year ago.
Analysis from the U.S. Energy Information Administration shows how pricing among crude-oil benchmarks and local grades are closely interconnected. WTI and London Brent pricing impacts the price of crude oil just about everywhere on the planet. So when U.S. futures prices dropped below zero earlier this year, so did the published prices at Kansas refineries, among many others. On April 20, the near-month Nymex contract for light sweet crude dropped as low as -$40.32 a barrel before closing at more than $37 below zero. That same day, prices at the Coffeyville Resources refinery dropped to -$47.50. The Energy Information Administration says Nymex prices directly impact other price markers because of physical linkages such as pipelines, as in Coffeyville, or because of a specific pricing formula, as is the case at CHS in McPherson. But there are limitations, including quality disparities between grades, and geographic transportation obstacles.
The government reports on one silver lining amid the dire energy-related news of late: EIA says energy-related CO2 emissions will drop by 11 percent this year. If realized, that would represent the largest decline, in both percentage and absolute terms, in EIA emissions records dating back to 1949.
The head of the International Energy Agency warns that global oil consumption has not peaked, telling Bloomberg TV that a sustained economic recovery and low prices could take global demand back were it was before the pandemic. Some industry observers insist we may have reached the peak for global demand, after consuming nearly 100 million barrels a day of crude oil or its equivalent last year. They argue the pandemic could trigger permanent changes like working-from-home and less overseas travel, thus reducing consumption permanently.
A new report from an industry group shows Texas operators paid more than $13.4 billion in taxes and royalties in 2019, a 14% increase over a year earlier. The Houston Chronicle reports those figures were assessed when benchmark prices were about $50 a barrel.
For the last several weeks China has been snapping up crude oil amid historic low prices. Reuters now cites customs data showing Russia has overtaken the Saudis as China's top supplier.
The Association of American Railroads reports a continuing slump in total freight train traffic compared to last year. Oil-by-rail showed a slight increase over a week earlier, but remains about 26% behind last year's oil tanker traffic.
Despite sitting atop the largest oil reserves in the world, gasoline is a precious commodity in Venezuela because of U.S. and international sanctions. This week the first of five tankers arrived in Venezuela from Iran, another oil nation targeted by sanctions. The U.S. State Department told the New York Times that Venezuela's government is a criminal organization that used illegally obtained gold to buy fuel from Tehran. There's no word if the U.S. would try to block future shipments.