News From the Oil Patch: Oil prices up 5% on week, 120% year over year

By JOHN P. TRETBAR

The rally in crude prices continues. Light sweet crude on the Nymex settled on Friday at $79.35 per barrel, a five percent weekly gain. In midday trading Monday the benchmark contract in New York was up more than 2 percent, gaining nearly two dollars at $81.09 per barrel. London Brent was up $1.50 at $83.89. The Wall Street Journal reports benchmark prices have increased 120 percent in the last 12 months.

Kansas crude prices rose $1 on Friday to their highest levels since October 2014. Kansas Common crude at CHS in McPherson fetches $69.50 per barrel. That's up more than $3 from the beginning of the month, and more than $30 a barrel higher than at the beginning of the year.

Goldman Sachs Group suggests shortages of natural gas are playing a big role in crude price spikes. Power generation could add an extra 650,000 barrels a day to oil demand this winter due to high natural gas prices.

Oil prices above $80 a barrel are prompting a revival of shale drilling in America’s biggest oil field. Production in the Permian Basin of Texas and New Mexico is expected to return to pre-pandemic highs soon. It's being driven this time by private operators, rather than the publicly traded companies that fueled previous booms. Analysts at Rystad Energy forecast production from the Permian will reach its pre-pandemic record high of 4.9 million barrels per day as soon as this month. They predict output will continue climbing steadily next year. Meanwhile the public companies have ratcheted back growth. Many are paying off debts, buying back stock and paying dividends rather than reinvesting in new wells.

Independent Oil & Gas Service reports 15 active drilling rigs in eastern Kansas, up one from last week, and 22 west of Wichita, which is down three. There are a total of 37 active rigs statewide, compared to just nine a year ago. IOGSI says the number of active operators searching for oil and gas in Kansas this year now totals 200, compared with 143 last year at this time.

Baker Hughes reports 533 active drilling rigs nationwide, an increase of five oil rigs. The count in Texas was up four rigs.

Kansas regulators okayed 35 new drilling permits last week, 819 so far this year. There are 16 new drilling locations in eastern Kansas and 19 west of Wichita, including one each in Ellis and Russell counties.

Independent Oil & Gas Service reports 23 newly-completed wells across Kansas, 12 of them east of Wichita and 11 in the western half of the state. That's 671 new completions year-to-date. One of every five completed wells in Kansas this year, including nearly three out of every four wildcat wells, have been dry holes.

The Energy Information Administration reports stockpiles increased last week by 2.3 million barrels. At nearly 421 million barrels, the government says crude-oil inventories remain about seven percent below the five year seasonal average. Gasoline inventories increased by more than 3 million barrels last week and are about 1 percent below the five-year seasonal average.

EIA says U.S. crude imports were up nearly half-a-million barrels per day to 7 million barrels per day. The four-week average is 22 percent higher than the same four-week period last year.  

The government reported U.S. production over 11.3 million barrels per day during the week through October 1, as more offshore production returned to the supply chain. That's an increase of more than 200,000 barrels per day over the week before, and nearly 400,000 barrels per day over the same week a year ago.

The Biden Administration announced an offshore oil-and-gas lease sale for the Gulf of Mexico, the first government offering since a judge blocked a moratorium on new leasing. The sale will be streamed live from New Orleans on Nov. 17. Only mail-in bids will be accepted.

A government report says U.S. refiners are exporting a lot of gasoline. EIA reported exports in May, June and July set records for each month, contributing to a record-breaking summer. EIA says gasoline inventories actually increased by more than 3 million barrels last week. But pump prices continue to spike, blamed largely on high crude prices. The auto club Triple-A reports the national average Thursday (10/7) was $3.24 a gallon, the highest since October 2014. The average across Kansas Thursday was just over $2.96 a gallon. It's more than a dime cheaper than that in Great Bend. But it's about a nickel more expensive in Hays.

The Association of American Railroads reports weekly oil-by-rail shipments were down. Shippers moved 9,827 tanker cars during the week through Oct. 2, down 617 carloads from the week before, and a 5.8 percent drop from last year. Canadian oil-by-rail shipments were up nearly 15 precent from the same week last year. Total railroad traffic in the U.S. was down nearly 2 percent last month, but third-quarter totals are up 9 percent compared to a year ago. AAR says 15 of the 20 commodity categories they track saw carload increases in September. But Petroleum and Petroleum Products carload counts were down 3.1 percent compared to a year ago.

The Kansas Oil & Gas Museum Foundation will open its doors for public tours, and open its honor roll to 10 new honorees. The museum's 2021 Hall of Fame Induction is Saturday, Oct. 23 at the Great Bend Events Center. Your $50 ticket will include a social hour, dinner, and a speech from Kansas Congressman Dr. Roger Marshall.