Oil markets were looking up last week but then – oops!

Things were looking up in markets last week, but then prices slid back on Friday.

This just illustrates how wobbly the recovery in crude oil prices, and oil demand, will be for a while.

On a positive note, last Wednesday ConocoPhillips said it will restore its North Slope oil production to previous levels in July, but also cautioned it may cut output again.

The decision will effectively add 100,000 barrels per day to Alaska production bringing total slope production back to previous averages of about 480,000 barrels per day.

“We intend to restore the production we curtailed in June,” company spokesperson Natalie Lowman said in an email.

But she added a caution: “Further decisions on curtailment will be made on a month-to-month basis,” meaning that if markets, and oil prices, deteriorate again ConocoPhillips may impose a voluntary production curtailment.

Meanwhile, Alaska North Slope crude oil prices dropped $2.26 per barrel Thursday to $40.20 per barrel. Prices had exceeded the $40 level in the previous few days, climbing out of a deep trough due to Corona-19 virus shutdowns of economic activity.

ConocoPhillips imposed its cuts in late May to take supply out of the market and shore up prices. The reductions were made in North Slope producing fields the company controls and where it is the total or majority owner, mainly the Kuparuk River and Alpine oil fields. Other fields on the slope, such as the large Pudhoe Bay field, were not affected.

The curtailment, undertaken voluntarily by ConocoPhillips, brought Kuparuk River field production from and average 127,000 barrels per day in early May to 61,875 barrels per day for the first nine days of June.

Alpine field production averaged 20,576 barrels per day for the first nine days of June, down from rates of 63,000 barrels per day a month earlier, in May.

ConocoPhillips’ action did not affect production at other fields on the slope where BP, ExxonMobil and Hilcorp Energy are co-owners. Under field rules those companies would have to consent to production restraints.

Earlier, Alyeska Pipeline Service Co. had imposed restraints on Trans Alaska Pipeline throughput to reduce a buildup of crude oil inventory in tanks at the Valdez Marine Terminal. Alyeska allowed full TAPS throughput to resume later in May as inventories were brought down.

As of June 9 there were 4.1 million barrels of oil in storage in Valdez. Tanks at the terminal have a working capacity of about 6.6 million barrels.

Meanwhile, uneven oil markets aren’t the only uncertainty hanging over Alaska’s oil and gas industry.

In a webcast to the Independent Petroleum Association of America June 9, ConocoPhillips CEO Ryan Lance warned that a pending ballot proposition on Alaska’s general election ballot in November could damage a recovery in the industry activity.

In passed by voters, the proposed tax changes, in effect a doubling of state taxes, may cause companies to re-think investments, Lance said.

ConocoPhillips has made several new discoveries in Alaska along with other companies. Those were made possible by favorable changes in state taxes made in 2014, he said. Ballot Measure 1, also called Alaska’s “Fair Share” act, would more than roll back those changes.

Some medium-sized new discoveries in the National Petroleum Reserve-Alaska have been put into production or are now in construction. Two large projects, “Willow” by ConocoPhillips and “Pikka” by New Guinea-based Oil Search, are in advanced planning.

The citizen’s initiative, which will be on the ballot in the November elections, would apply to large North Slope fields, but those provide the cash companies like ConocoPhillips are using to do new exploration. “If the tax rate goes up, cash flows go down and One other troubling parts of the ballot proposition, however, is that companies’ confidential tax returns filed with the state Department of Revenue would be made public.

In a radio debate on Alaska Public Media’s Talk of Alaska, moderated by Lori Townsend, ConocoPhillips Alaska vice president Scott Jepsen said the public disclosure of tax returns could open up other confidential information filed with the state revenue department.

That could include payments to contractors, which could put support firms at a disadvantage with competitors.

Robin Brena, an Anchorage attorney who is chief advocate for the tax initiative, was opposite Jepsen on Talk of Alaska, and discounted problems this would cause.

“I’m not sure very many people are going to know what to do with it,” (the tax returns) Jepsen said. “But what it will do is put confidential information out there. It will put contracts we have with drilling companies out there and another drilling company will have the advantage what ‘company x’ bid on our work.”

** Editor's note: A quote about the public not understanding corporate tax returns made public by the Fair Share Act was attributed to Robin Brena. It should have been attributed to Scott Jepsen.