Aug 03, 2021

News From the Oil Patch: U.S. crude output rises in May

Posted Aug 03, 2021 10:35 AM


OPEC output reached its highest level last month since April 2020, and China's factory activity is slowing down. The combination sent prices plummeting Monday. The benchmark contract on the Nymex settled Friday at $73.75 per barrel, but by midday on Monday that dropped more than three percent to $71.54 per barrel, erasing two-dollar gains from last week.  London Brent was also down more than two dollars, at $73.29.

Kansas crude prices rose half a dollar on Friday. Kansas Common starts the month of August at $64.25 per barrel at CHS in McPherson. Prices averaged just over $63 for the month of July. That's up from a monthly average of $31 per barrel a year ago.

The government on Friday released updated crude-oil production totals through May. The Energy Information Administration says U.S. output for the month was 348 million barrels, or 11.2 million barrels per day. That's an increase of nearly half a million barrels per day over the month before, and is up more than 1.5 million barrels per day from May of last year. EIA says total U.S. production this year through May averaged just under 10.9 million barrels per day. Kansas output for the month was 2.3 million barrels or about 75,000 barrels per day. For the third month in a row, producers in New Mexico outpaced their counterparts in North Dakota, making New Mexico the second-biggest producer in the U.S. behind Texas. 

The weekly Rig Count in Kansas from Independent Oil & Gas Service shows nine drilling rigs in eastern Kansas and 23 west of Wichita, both tallies up one for the week. Drilling was underway on wells in Ellis and Russell counties, and on two leases in Stafford County. The Rotary Rig Count from Baker Hughes was down two oil rigs and one gas rig, for a total of 488 active rigs. The count in Louisiana was down four rigs, Utah was down two while Texas was up two.

There were just three new Kansas drilling permits filed last week, in Meade, Ness and Rooks counties. That brings to the total so far this year to 559 permits. That's more than double the total by the end of July last year, and just a little better than the total through July two years ago. 

Kansas operators completed just six wells last week. According to Independent Oil & Gas Service all six were in Western Kansas, including one well in Ellis County. The total this year is 427 completions, compared to 575 a year ago and 823 by the end of July two years ago.

The government on Wednesday reported a decline in US crude-oil inventories. The Energy Information Administration's Weekly Petroleum Status Report notes stockpiles of 435.6 million barrels through July 23, down more than four million barrels from the week before.

Total motor gasoline inventories were down more than two million barrels and are roughly equal to the five year average for this time of year.

US Crude production slowed down slightly last week. The government reports total output of over 11.2 million barrels per day during the week through July 23. That's down 136,000 barrels per day from the week before, but about 94,000 barrels per day higher than last year at this time.

Domestic crude imports dropped by more than half a million barrels to six-and-a-half million per day.

Educators and child-advocacy groups in New Mexico have seen first-hand just how unreliable a budget based on the price of oil can be. They're now demanding the state find a more reliable source of revenue for public education. The oil patch in New Mexico provides billions to local school districts across the state, but the Carlsbad Current-Argus reports job losses and price-drops turned a $2 BILLION state surplus into a $400 million deficit last year. 

The oil patch in Texas continues to generate tens of thousands of new job-postings, more than 12,000 unique help-wanted ads so far this year. According to analysis by the Web site Rig Zone, 42% of those jobs were in either Houston, Midland, or Odessa, Texas. The Texas Independent Producers and Royalty Owners reported most of those jobs were in oil refining, followed by extraction, and machinery manufacturing.

Amid what the Denver Business Journal calls Colorado's "oil-merger frenzy" comes another big sale. Whiting Petroleum is consolidating and increasing its interests in the Bakken/Three Forks shale play in North Dakota, while selling off a significant portfolio in the Denver-Julesburg Basin of Colorado. The company is already one of the biggest players in the Bakken. They're buying the new North Dakota acreage in a cash deal worth $271 million. The properties adjoin and complement Whiting’s existing operations there. Whiting is selling assets in Weld County, Colorado for $187 million in cash according to a news release.

Challenges and cancellations for crude pipelines have led Canada to another shift toward rail shipments, at least the second such political shift in a decade. Canadian oil-by-rail continued a huge spike last week, increasing 12 percent from a week earlier, and up more than 42 percent from a year ago. Oil-by-rail in the U.S. was up slightly over the week before, but down from a year ago. The Association of American Railroads reports 10,530 tankers hauling petroleum and petroleum products across the US during the week through July 24. That's up twelve tankers for the week but down 309 carloads or 2.9% from a year ago.  AAR reports 8,727 oil tankers rolling across Canada, up 956 carloads for the week.