Monday Madness: July 26 ’21

Posted: July 26, 2021

Join your host Tavis as he speaks about the DoI’s delay, Shell’s refusal to accept the court’s decision, and the impending Mexican energy crisis.

Audio Transcript

Alrighty everyone, welcome back! This is Tavis Kilian with RARE PETRO bringing you another episode of Monday Madness on July 26th, 2021. This is the last episode for July. It’s going to be August soon, and it sure feels like that summer moved waaaaay too fast. Don’t get me wrong, I feel like I spent my time well going out, getting a few short camping trips, and having a whole lot of fun through it all. I just wish there was a little more of it… A little more time with the people you love to enjoy summer. So, take the last of this warm, sunny weather to do something really fun. Call up close friends to make plans for one last fair-weathered hurrah because fall will be here before we know it. But I know you didn’t come here to listen to me get emotional about the weather, you came for the hottest oil and gas news and events that went down last week, so without further ado…

…It’s time to start talking about WTI! Now, if you remember last week’s episode took a hard dive to $67 on Monday morning. Most markets were in disarray, but I said, and I quote: “I’m not going to say that international markets are healthy and functioning normally, but I will say that RARE PETRO has spent more than a year now publishing content which justifies an increase in the price of oil, so I think this is just a temporary dip. It may not be easy getting back to $75, much less through it, but the biggest tool we have now is patience. Sit back, relax, and let time do its thing, and we should be above $67 barrels relatively soon.” Fortunately, I was correct, and don’t look like an absolute dingleberry this week as prices were back to $70 by Wednesday evening and $72 by the weekend. Today prices have been pretty stable at the high $71 range and currently, sit at $71.71. I don’t anticipate any significant events influencing price action in any major directions soon. Still, over the long term, RARE PETRO sees these prices going up. Pretty standard stuff this week, but I am excited to see if we can get back to $75 by end of day on Friday.

Next, of course, is the rig count. I don’t know how we keep doing it, but we add new rigs virtually every week. Last week was no different as the United States added 7 rigs to its total bringing it to 491, or up 240 year over year. This is the biggest increase we’ve seen in a little over a month, and wouldn’t ya know it… It’s the Permian’s fault. The dominant basin saw an additional 4 rigs go up with the next best performing basin being the Ardmore Woodford and the Granite Wash who both added one rig. The only basin to lose a rig this week was the Haynesville. From a state-by-state basis, it is no surprise Texas led with a total of 6 rigs. Surprisingly, Utah added 2 rigs to its total for a 20% increase from 10 to 12. Last week we saw some rigs targeting vertical gas plays, but this week it seems like the focus has shifted back to drilling horizontal oil wells. Pretty typical week outside of the surge of activity in Utah, but it is still really nice to see another 7 rigs go up overall.

Lastly of course are the inventories which you can have a whole lot more fun reading on our website. Each week we write a “Thirsty Thursday” inventory report full of jokes and interesting statistics, so be sure to check one of them out. I don’t think you will regret it. If you missed it, here’s a recap: The EIA predicted another draw at 4.5 million barrels but were way off the money as they reported a more than 2 million barrel surprise build. The API predicted a draw of 4.2 million barrels but was also blindsided by another build of 800,000 barrels. Still, much less of a build than the EIA reported. Sadly, that ended our wonderful multi-week streak. The drawdowns started modestly way back at the end of April and stretched all the way to now. Considering we saw around 40 million barrels disappear, a 2 million barrel build isn’t too devastating… especially when you look at how the price still climbed through the news. Additionally, we saw another decrease in the gasoline inventories, although you wouldn’t know by looking at the graph as it was just a teeny tiny 100,000 barrels. Distillates continued to do nothing interesting, but propane was still very near to falling out of its 5-year historical range. It again, skirted along the bottom teasing to break out of what we’d expect. Any week could shock the propane market, but for now, it continues to perform about how we would expect.

Altogether, last week wasn’t terrible. Sure, prices dipped, but they quickly bounced back up to $70. Sure there was a build in inventories, but it wasn’t super significant. Don’t forget that the rig count went up too! A decent week for sure.

Before we get into the news, I’ve got a quick update on the drilling moratorium. With more and more judges backing individual states looking to lease federal land the US Interior Secretary, Deb Haaland, stated that the department is asking for patience as they plan to finish the review of the US’s leasing policy by the end of the summer. That means we should be no more than 5 or 6 weeks out from hearing how the Biden administration will be changing leasing laws. Don’t get your hopes up people, it is almost assuredly going to become more difficult to access natural resources on public lands.

Next, an update on Royal Dutch Shell. If you missed it, a ruling on May 26 found that Shell’s current environmental efforts were inadequate and that they were violating human rights. Shell is now looking to overturn the ruling as they feel that a ruling against a single company is not effective. Additionally, Shell released an energy transition strategy 5 weeks before the ruling that was not considered before receiving a verdict. I gotta say, I understand why Shell is fighting back. These climate targets may only be achievable if Shell accelerates the selling of its fields while simultaneously reinvesting its money into an already crowded market of renewable energy. While that is bad news for Shell, some people see it as good news for national and private oil companies who will be sure to acquire everything Shell divests from. Overall, I’m torn on the decision. Yes, I think we need to be good stewards of the environment, but this solution only reduces the magnitude of Shell’s oil production. The demand remains unchanged from this decision. So, who will service that demand? Dutch courts have already set a precedent, so perhaps Russia will begin to produce a little more. If not them, any of our friends in the Middle East would be more than glad to supplement the demand. I’m not one to buy into slippery slope fallacies, but I am a little worried to see if the rest of the world buys into suing companies providing them with the energy and goods they all demand on grounds of human rights violations. I think that would get messy fast. Even in the US, there are plenty of municipalities and cities suing oil and gas companies on grounds of climate change and defrauding investors. Massachusetts is attempting to sue Exxon. Activist investors have already made their way onto the board even further weakening Exxon’s ability to defend itself. Who knows. It could be a great redistribution of wealth as the titans of oil and gas fall only for smaller companies to pick over the remains. Still, if this does restrict the production of American resources even further, you know that the price per barrel is gonna go up. Do what you can to stay in the industry!

Next, an article that was forwarded to me by RARE PETRO associate Scott McNear. The EIA published a short report covering the record-smashing country of Mexico. You see, natural gas prices are climbing, and fast. The price today is $4.09, one of the highest prices seen since about 2018. There is a huge demand for natural gas as more people pivot from coal and oil-fired power. This has led to shortages in pockets all around the world. I wouldn’t say it’s disastrous at this point, but it does become temporarily nonexistent in some places. Well, one of the largest customers of America’s natural gas turns out to be Mexico. Thanks to increased pipeline capacity on Mexico’s part, they can source more US gas to support their energy demands. They import so much that pipeline imports account for 76% of Mexico’s natural gas supply. That’s three-quarters of their gas supply coming from other parts of the Americas to Mexico. On June 17th, Mexico set a new record: 7.4 billion standard cubic feet of natural gas imported in a single day. They average 6.8 billion standard cubic feet for the whole month of June which is 44% higher than the previous 5-year average. This is exactly what Pemex is talking about when they mention energy independence. If 76% of your natural gas is imported, and prices continue to rise, it is going to get expensive quickly. It’s great that Mexico is looking to shift towards natural gas as an energy source, but they may just revert to coal or other dirtier forms of electricity generation if they have to. They are at the mercy of markets. This my friends is another factor that supports RARE PETRO’s hypothesis of increasing oil price, gas price, and energy price in general. I for one try not to take my energy resources for granted which is why I don’t use AC in the summer! Just kidding, it’s because I don’t have it which is a reality many of you could be facing in these summer months. Energy is getting more expensive, and supply is becoming an issue in many parts of the world that previously had no issues.
But that is all I’ve got for you today. Hopefully, you enjoyed digging into that data and some of the news stories. If you are hungry for more content, go to to find even more periodicals, podcasts, and pieces that we have published. If you can’t find what you are looking for, reach out to us by emailing We would love to hear suggestions for content or even just your opinion on the pieces that we publish. If you want to debate any of the points we make, we highly encourage you to send an email so we have a chance to feature it on the show (and you get the chance to win some RP swag). This has been Tavis Kilian with RARE PETRO and until we see you next time, take care, everybody!


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