Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, March 22, 2020

oil prices hit 18 year low in largest drop in 29 years; natural gas prices end at a 24 year low; DUC backlog at 7.1 months

oil prices hit an 18 year on the way to their largest weekly drop in 29 years; natural gas prices ended at a 24 year low; natural gas rigs were at a 41 month low; DUC wells are down 9.7% year over year, their backlog is at 7.1 months

oil prices ended down nearly 30% this week, despite rising nearly 24% on Thursday in the largest single day price jump in history, as the economic impact of the coronavirus pandemic and the Saudi-Russian oil price war continued to destabilize pricing...after falling 23% to $31.73 a barrel for the same reasons last week, the contract price of US light sweet crude for April delivery opened more than 6% higher at $33.75 a barrel Monday morning in an initial response to the Fed's emergency interest rate cut to 0% on Sunday, but those gains quickly evaporated as traders interpreted the Fed move as panicked and desperate while the Saudis continued to flood global markets with $25 oil, driving US prices down more than 10% to a session low of $28.03 per barrel before recovering to close at $28.70 a barrel, a loss of $3.03 on the day...oil prices continued falling Tuesday as Goldman Sachs slashed its oil forecast to $22 and others forecast oil prices in the teens, with US crude closing $1.75 lower at a 4 year low of $26.95 a barrel, as recession fears and the Saudi price war continued to weigh on markets...oil prices steadied early on Wednesday after the API had reported a drop in U.S. inventories of crude, gasoline and distillates, but then plunged as governments worldwide accelerated lockdowns to counter the coronavirus pandemic, prompting fears of a global economic collapse, with U.S. crude futures falling $6.58, or 24.4%, to settle at $20.37 a barrel, the 3rd largest price drop on record and the lowest oil price in more than 18 years....however, the entirety of that price drop was reversed in the first 4 and a half hours of trading on Thursday, as oil prices briefly spiked 36% to $27.71 a barrel after remarks by Trump that he might intervene in the Saudi-Russian price war on the way to an increase of $4.85, or 23.8%, the biggest one day price jump on record, with US crude settling at $25.22 a barrel, as traders absorbed news of a plethora of central bank and government interventions to combat the economic fallout from the coronavirus pandemic and as Russia indicated it would like to see higher prices...Thursday's rally continued into early Friday, with US crude reaching $27.89 a barrel in the early hours, but by 11:00 AM, it had sunk back to $25.02 a barrel on the way to a $19.46 a barrel nadir, before recovering to rise 15% from there to close at $22.43 a barrel, down $2.79 or 11.1% to $22.43 a barrel on the day, even as the world’s richest nations poured unprecedented aid into their economies to stop a coronavirus-driven global recession...prices thus finished the week more than 29.3% lower than the prior week, the largest one week percentage drop since 1991, as some traders saw oil demand shrinking as much as 10 to 20 million barrels a day (10-20%) as drivers stay home and flights are grounded across the world...

with that, here's a graph of 20 years of front month oil prices:

March 20 2020 oil prices

the above graph is a screenshot of the interactive price chart for the front month oil contract at Barchart.com, "the leading provider of real-time or delayed intraday stock and commodities charts and quotes", and it shows the range of prices for the nearest oil futures contract as a vertical bar for each month over the past 20 years....this graph was generated by taking the price quotes for what is called the "front month" oil futures contract, or the contract that is being quoted as "the price of oil" daily, with the each monthly contract price being replaced by the next month's price when trading in that contract expires on the 4th business day prior to the 25th calendar day of the month preceding the contract month... you might also note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month's closing price...as you can see, oil prices are now down to a level not seen since March 2002, and well below the lows of late 2015 to early 2016, when oil prices had crashed after OPEC after flooded the global oil market & caused a collapse in prices which put hundreds of US oil companies into bankruptcy...

natural gas prices also fell out of bed this week, sliding to a 24 year low on Wednesday, which was then matched at Friday's close...after rising 9.4% to $1.869 per mmBTU last week on hopes that the collapse in oil prices would prompt drillers to cut back on both oil and gas production, the contract price of natural gas for April delivery fell 5.4 cents, or 3% on Monday, on a rising awareness that the coronavirus pandemic would reduce natural gas demand, and despite forecasts for cooler weather and greater heating demand in the US over the next two weeks than was previously expected...the economic slowdown continued to pressure prices as they fell 8.6 cents on Tuesday, with forecasts for milder weather and less heating demand next week also pushing prices lower...April natural gas then plunged 12.5 cents or 7% to $1.604 per mmBTU on Wednesday, their lowest price since 1995, tracking lower alongside the day's 24% collapse in oil prices, as travel bans sparked by the coronavirus slashed the global outlook for energy demand...with the Thursday natural gas storage report close to expectations, natural gas followed other markets higher and rose 5 cents, only to fall back by the same amount on Friday to end the week back at $1.604 per mmBTU, the lowest weekly close since August 1995, and leaving the front-month contract down over 14% this week, its biggest weekly decline since November.

and here's what a graph of 20 years of natural gas prices looks like:

March 20 2020 natural gas prices

like the oil graph, this graph is a screenshot of the interactive price chart for the front month natural gas contract at Barchart.com, showing the range of prices for the nearest natural gas futures contract as a vertical bar for each month over the past 20 years....like the oil graph, this graph was generated by taking the price quotes for the "front month" natural gas futures contract, or the contract that is being quoted as "the price of oil" daily, with the each monthly contract price being replaced by the next month's price when trading in that contract expires, which for natural gas contracts occurs on the on the 3rd last business day of the month prior to the contract month....as you can see, current natural gas prices are now the lowest on this 20 year graph, a few cents below the lows hit in late February and early March 2016, and at a level not seen since August 1995...you can access the graph showing the complete natural gas price history using the link to the interactive graph above, which we chose not to include here because it displayed poorly.. 

the natural gas storage report from the EIA on the week ending March 13th indicated that the quantity of natural gas held in underground storage in the US fell by 9 billion cubic feet to 2,034  billion cubic feet by the end of the week, which left our gas supplies 878 billion cubic feet, or 76.0% higher than the 1,156 billion cubic feet that were in storage on March 13th of last year, and 281 billion cubic feet, or 16.0% above the five-year average of 1,816 billion cubic feet of natural gas that has been in storage as of the 13th of March in recent years....the 9 billion cubic feet that were withdrawn from US natural gas storage this week was near the consensus estimate for a 8 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, but was much less than the average 63 billion cubic feet of natural gas that have been pulled from natural gas storage during the second week of March over the past 5 years, and also way less than the 91 billion cubic feet withdrawal reported during the corresponding week of 2019.. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 13th indicated that a ​big ​increase in our oil exports reduced the week's ​domestic ​oil surplus, but we were still left with a ​modest amount of oil to add to our stored commercial supplies, the nineteenth addition ​of oil ​to storage in the past twenty-seven weeks....our imports of crude oil rose by an average of 127,000 barrels per day to an average of 6,539,000 barrels per day, after rising by an average of 174,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 968,000 barrels per day to 4,378,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,161,000 barrels of per day during the week ending March 13th, 841,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells rose by 100,000 barrels per day to 13,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,261,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 15,820,000 barrels of crude per day during the week ending March 13th, 119,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 279,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 838,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+838,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,351,000 barrels per day last week, now 4.5% less than the 6,649,000 barrel per day average that we were importing over the same four-week period last year....the 279,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day higher at a record 13,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at ​a record ​12,600,000 barrels per day, while a 5,000 barrel per day increase Alaska's oil production to 478,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 15th was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was 8.3% above that of a year ago, and 55.4% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 86.4% of their capacity in using 15,820,000 barrels of crude per day during the week ending March 13th, the same capacity utilization of the prior week, ​and still near the recent average refinery capacity utilization for the second week of March, historically the time of year that refineries change​ ​over to summer blends and undergo​ annual​ maintenance...nonetheless, the 15,820,000 barrels per day of oil that were refined this week were 2.3% less than the 16,198,000 barrels of crude that were being processed daily during the week ending March 15th, 2019, when US refineries were operating at 88.9% of capacity....

with the modest increase in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 18,000 barrels per day to 9,974,000 barrels per day during the week ending March 13th, after our refineries' gasoline output had increased by 199,000 barrels per day over the prior week... after this week's increase in gasoline output, our gasoline production was half a percent higher than the 9,925,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 19,000 barrels per day to 4,686,000 barrels per day, after our distillates output had increased by 57,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was 4.8% less than the 4,923,000 barrels of distillates per day that were being produced during the week ending March 15th, 2019....

despite the increase in our gasoline production, our supply of gasoline in storage at the end of the week ​decrease​d​ for the seventh week in a row, after twelve consecutive increases, falling by 6,180,000 barrels to 240,819,000 barrels during the week ending March 13th, after our gasoline supplies had decreased by 5,049,000 barrels over the prior week....our gasoline supplies decreased by even more this week because the amount of gasoline supplied to US markets increased by 247,000 barrels per day to 9,696,000 barrels per day, while our exports of gasoline fell by 142,000 barrels per day to 603,000 barrels per day, while our imports of gasoline fell by 22,000 barrels per day to 688,000 barrels per day....but even after this week's big inventory decrease, our gasoline supplies were only 0.3% lower than last March 15th's gasoline inventories of 241,503 ,000 barrels, and close to the five year average of our gasoline supplies for the same time of the year...

similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 24 weeks and for 33rd time in the past 49 weeks, falling by 2,940,000 barrels to 125,120,000 barrels during the week ending March 13th, after our distillates supplies had decreased by a near record 6,404,000 barrels over the prior week....our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 385,000 barrels per day to 4,013,000 barrels per day, and because our exports of distillates fell by 174,000 barrels per day to 1,356,000 barrels per day, while our imports of distillates fell by 45,000 barrels per day to 263,000 barrels per day....after this week's inventory decrease, our distillate supplies at the end of the week were 5.4% lower than the 132,242,000 barrels of distillates that we had stored on March 15th, 2019, and fell to about 11% below the five year average of distillates stocks for this time of the year...

finally, even after the jump in our oil exports, our commercial supplies of crude oil in storage rose for the twenty-first time in thirty-eight weeks and for the thirty-third time in the past 52 weeks, increasing by 1,954,000 barrels, from 451,783,000 barrels on March 6th to 453,737,000 barrels on March 13th ....but even after 8 straight increases, our crude oil inventories slipped to ​almost 3% below the five-year average of crude oil supplies for this time of year, even as they remained 27.2% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the second week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels​ and continued rising​....since our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of March 13th were 3.2% above the 439,483,000 barrels of oil we had in commercial storage on March 15th of 2019, and 5.9% above the 428,306,000 barrels of oil that we had in storage on March 16th of 2018, while at the same time remaining 14.9% below the 533,110,000 barrels of oil we had in commercial storage on March 17th of 2017...    

This Week's Rig Count

the US rig count decreased for the 22nd time in the past 27 weeks during the week ending March 20th, and is now down by 28.7% from the last rig count of 2018.....Baker Hughes reported that the total count of rotary rigs running in the US decreased by twenty rigs to 772 rigs this past week, which was also down by 244 rigs from the 1066 rigs that were in use as of the March 22nd report of 2019, and 1,157 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...

the number of rigs drilling for oil decreased by 19 rigs to 664 oil rigs this week, which was also 160 fewer oil rigs than were running a year ago, and ​considerably less than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 106 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was a 41 month low for natural gas drilling​, down by 86 gas rigs from the 192 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico remained at 19 rigs this week, with 18 Gulf rigs deployed in Louisiana waters and one rig still drilling offshore from Texas...that's now one less than the number of rigs that were deployed in the Gulf a year ago, when 17 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is thus equal to the national offshore rig total, as it has been all winter...

the count of active horizontal drilling rigs decreased by 17 rigs to 696 horizontal rigs this week, which was the fewest horizontal rigs active since December 13th 2019, and also 204 fewer horizontal rigs than the 900 horizontal rigs that were in use in the US on March 22nd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the vertical rig count was down by four rigs to 27 vertical rigs this week, and those were down by 26 from the 53 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count was up by one rig to 49 directional rigs this week, but those were also down by 14 from the 63 directional rigs that were in use on March 22nd of 2019...

the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 20th, the second column shows the change in the number of working rigs between last week's count (March 13th) and this week's (March 20th) count, the third column shows last week's March 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 22nd of March, 2019...    

March 20 2020 rig count summary

as you can see, the rigs withdrawn from the Permian basin accounted for the majority of this week's rig decline, as well as the lions share of the horizontal rig pullback...in the Texas Permian, six rigs were pulled out of Texas Oil District 8, or the core Permian Delaware​,​ and two more rigs were pulled out of Texas Oil District 7C, or the southern Permian Midland...since the Permian basin rig count was reduced by a total of 13, we can therefore figure that the 5 rigs that were pulled out in New Mexico had been drilling in the western Permian Delaware...elsewhere in Texas, an Eagle Ford rig was pulled out of Texas Oil District 1, while Texas Oil Districts 5 and 9 both lost rigs that weren't associated with a major shale basin....the Williston shale rig came out of North Dakota, and while Oklahoma saw a rig pulled out of the Cana Woodford, it also had one added in the Granite Wash basin, which means that Oklahoma also saw three rigs pulled out of basins not tracked separately by Baker Hughes...one of those could have been a natural gas rig, since the sole natural gas rig reduction this week also came out of one of those "other" basins that Baker Hughes doesn't itemize...

DUC well report for December

Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for March, which includes the EIA's February data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the twelfth month in a row, this report showed a decrease in uncompleted wells nationally in February, as drilling of new wells decreased and completions of drilled wells increased.....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 60 wells, falling from a revised 7,697 DUC wells in January to 7,637 DUC wells in February, which now is 9.7% fewer DUCs than the 8,454 wells that had been drilled but remained uncompleted as of the end of February of a year ago...this month's DUC decrease occurred as 1,014 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during February, down by 2 from the 1,016 wells that were drilled in January and the lowest number of wells drilled since June 2017, while 1,074 wells were completed and brought into production by fracking, an increase of 12 well completions from the 1,062 completions seen in January, but still down from the 1160 completions seen in February of last year....at the February completion rate, the 7,637 drilled but uncompleted wells left at the end of the month now represents a 7.1 month backlog of wells that have been drilled but are not yet fracked, down from the 7.3 month backlog of a month ago...

both oil producing and natural gas producing regions saw DUC well decreases in February, even as two of the seven major basins saw modest DUC increases...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 49, falling from 752 at the end of January to 703 DUC wells at the end of February, as 61 wells were drilled into the Anadarko basin during January while 110 Anadarko wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 13, from 1,373 DUC wells at the end of January to 1,360 DUCs at the end of February, as 159 wells were drilled in the Eagle Ford during February, while 172 already drilled Eagle Ford wells were completed....in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 12 to 446, as 133 Niobrara wells were drilled in February while 145 Niobrara wells were completed....on the other hand, DUC wells in the Bakken of North Dakota increased by 13, from 839 DUC wells at the end of January to 852 DUCs at the end of February, as 97 wells were drilled into the Bakken in January, while 84 of the drilled wells in that basin were being fracked...in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells rise by 11, from 3,490 DUC wells at the end of January to 3,482 DUCs at the end of February, as 454 new wells were drilled into the Permian, while 443 wells in the region were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 9 wells, from 574 DUCs at the end of January to 565 DUCs at the end of February, as 74 wells were drilled into the Marcellus and Utica shales during the month, while 83 of the already drilled wells in the region were fracked....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 1 well to 230, as 36 wells were drilled into the Haynesville during February, while 37 Haynesville wells were fracked during the same period....thus, for the month of February, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 50 wells to 6,842 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 10 wells to 795 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there's more here...

Monday, March 16, 2020

oil prices down by half in 2 months; oil surplus near 2.2 mpd in February; biggest ​distillates ​draw in 16 years

oil prices now down by half from January’s high on coronavirus and price war impacts; globl oil surplus near 2.2 mpd in February even with OPEC cuts still in effect; biggest ​distillates ​draw since January 2004, natural gas rigs at a new 40 month low

US oil prices fell 23% this past week after the Saudis initiated an oil price war against the Russians for their failure to agree on oil production cuts that the Saudis were pushing at the OPEC meeting the week before, a failure which itself had precipitated a 10% drop to a 42 month low on Friday of last week...before the markets even opened for this week, oil prices had plunged 30% in early trading on Sunday night, after the Saudis marked down prices on all the grades of oil they sell and indicated they'd be increasing production....hence, when the markets opened Monday morning, the contract price of US light sweet crude for April delivery opened $8.41 or 20.4% lower than last week's close of $41.28 at $32.87 a barrel and continued falling in early trading, tanking by more that 30% to $27.34 amid forecasts for $20 oil, before recovering to settle at $31.13 a barrel, hence posting a loss of $10.15 or 24.6% on the day, its biggest one day drop since 1991...oil prices then rebounded on Tuesday following reports that talks between OPEC and its allies remained possible, with oil prices closing up $3.23 or more than 10% at $34.36 a barrel, surging with the equity markets as the possibility of economic stimulus encouraged buying while U.S. producers slashed spending in a move that traders hoped would reduce output....after opening higher and rallying to as high as $36 early Wednesday, crude prices turned lower after Saudi Aramco said it had been directed by the energy ministry to raise its production capacity by a million barrels per day (10%) and after the EIA reported the biggest jump in US crude supplies since October, with US crude settling $1.38, or 4% lower at $32.98 per barrel....oil prices fell again on Thursday amid a broad decline in global markets after the US banned travel from Europe following the World Health Organization's decision to declare the coronavirus outbreak a pandemic, with US crude prices falling as much as 8% to a low of $30.02 before recovering to close at $31.50, a loss of $1.48 on the day...oil prices opened lower on Friday and were down more than a dollar while waiting for Trump's expected State of Emergency declaration, but jumped more than 5% after Trump announced his intention to buy "large quantities of oil" for the Strategic Petroleum Reserve and settled with a gain of 23 cents at $31.73 a barrel ...nonetheless, oil prices posted their biggest weekly percentage drop since the financial crisis of 2008 this week, rocked by both the coronavirus pandemic and efforts Saudi Arabia and its allies to flood the market with record levels of supply...

March 14 2020 oil prices

the above graph is a screenshot of the interactive price chart for the April oil contract at Barchart.com, a "leading provider of real-time or delayed intraday stock and commodities charts and quotes", and it shows the range of prices for the April oil futures contract as a vertical bar for each day over the past 6 months...note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month's closing price...across the bottom the red and green bars indicate the trading volume for each day, with down days indicated in red and days when the price rose indicated in green...what we want to note here is the precipitous fall in oil prices since the interim high for the April contract was hit on January 8th, when oil briefly traded at $64.99 a barrel before falling back...this week's closing price thus represents less than half of that high, with Monday nadir of $27.34 a barrel representing a 58% decline in just two month's time..

while oil prices were falling, natural gas prices were moving higher on expectations that the collapse in oil prices would prompt drillers to cut back on both oil and gas production... after rising 1.4% to $1.708 per mmBTU even as the weather remained bearish last week, the contract price of natural gas for April delivery jumped 7 cents, or over 4% on Monday on forecasts for colder weather and higher heating demand next week than was previously expected...natural gas futures then soared 15.8 cents or almost 9% on Tuesday, on hopes of an economic stimulus package and expectations the that oil price collapse would prompt U.S. drillers to cut back on oil and associated gas production in major shale oil basins...after flirting with $2 gas, prices fell back on Wednesday and ended 5.8 cents lower despite forecasts for a little more gas demand over the next two weeks than was previously expected...prices fell another 3.7 cents, or 2%, after the EIA reported a smaller than expected withdrawal of gas from storage on Thursday, even as the decline was limited by forecasts for cooler U.S. weather and higher heating demand over the next two weeks and expectations the oil price drop this week would cut crude and associated gas production in shale basins....the April natural gas contract then added 2.8 cents on Friday's state of emergency declaration to finish the week at $1.869 per mmBTU, thus showing a 9.4% gain for the week..

the natural gas storage report from the EIA on the week ending March 6th indicated that the quantity of natural gas held in underground storage in the US fell by 48 billion cubic feet to 2,043 billion cubic feet by the end of the week, which left our gas supplies 796 billion cubic feet, or 63.8% higher than the 1,247 billion cubic feet that were in storage on March 6th of last year, and 227 billion cubic feet, or 12.5% above the five-year average of 1,816 billion cubic feet of natural gas that has been in storage as of the 6th of March in recent years....the 48 billion cubic feet that were withdrawn from US natural gas storage this week was less than the consensus estimate for a 55 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, and was also much less than the average 99 billion cubic feet of natural gas that have been pulled from natural gas storage during the first week of March over the past 5 years, while it was way less than the 164 billion cubic feet withdrawal reported during the corresponding week of 2019..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 6th indicated that a modest increase in our oil imports and a big drop in our oil exports left us with a large surplus of oil to add to our stored commercial supplies, the eighteenth addition to storage in the past twenty-six weeks....our imports of crude oil rose by an average of 174,000 barrels per day to an average of 6,412,000 barrels per day, after rising by an average of 21,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 744,000 barrels per day to 3,410,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,002,000 barrels of per day during the week ending March 6th, 918,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells fell by 100,000 barrels per day to 13,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,002,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 15,702,000 barrels of crude per day during the week ending March 6th, 5,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 1,095,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 794,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+794,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,354,000 barrels per day last week, now 6.5% less than the 6,797,000 barrel per day average that we were importing over the same four-week period last year....the 1,095,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day lower at 13,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 12,500,000 barrels per day, while a 1,000 barrel per day decrease Alaska's oil production to 473,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 8th was rounded to 12,000,000 barrels per day, so this reporting week's rounded oil production figure was 8.3% above that of a year ago, and 54.2% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 86.4% of their capacity in using 15,702,000 barrels of crude per day during the week ending March 6th, down from 86.9% of capacity the prior week, but still near the recent average refinery capacity utilization for the first week of March, historically the time of year that refineries changeover to summer blends and undergo maintenance...however, the 15,702,000 barrels per day of oil that were refined this week were 2.0% less than the 16,020,000 barrels of crude that were being processed daily during the week ending March 8th, 2019, when US refineries were operating at 87.6% of capacity....

even with the amount of oil being refined little changed, gasoline output from our refineries was somewhat higher, increasing by 199,000 barrels per day to 9,956,000 barrels per day during the week ending March 6th, after our refineries' gasoline output had decreased by 40,000 barrels per day over the prior week... after this week's increase in gasoline output, our gasoline production was 2.3% higher than the 9,735,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 57,000 barrels per day to 4,705,000 barrels per day, after our distillates output had decreased by 198,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was 3.1% less than the 4,856,000 barrels of distillates per day that were being produced during the week ending March 8th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week fell for the six week in a row, after twelve consecutive increases, and was hence down for the 20th time in 38 weeks, falling by 5,049,000 barrels to 246,999,000 barrels during the week ending March 6th, after our gasoline supplies had decreased by 4,339,000 barrels over the prior week....our gasoline supplies decreased by even more this week because the amount of gasoline supplied to US markets increased by 263,000 barrels per day to 9,449,000 barrels per day, while our exports of gasoline fell by 67,000 barrels per day to 745,000 barrels per day, while our imports of gasoline rose by 199,000 barrels per day to 710,000 barrels per day....but even after this week's big inventory decrease, our gasoline supplies were still fractionally higher than last March 8th's gasoline inventories of 246,090,000 barrels, and about 1% above the five year average of our gasoline supplies for the same time of the year...

similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 24 weeks and for 33rd time in the past 49 weeks, falling by 6,404,000 barrels to 128,060,000 barrels during the week ending March 6th, the biggest draw since January 2004, after our distillates supplies had decreased by 4,008,000 barrels over the prior week....our distillates supplies fell by a near record amount this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 479,000 barrels per day to 4,398,000 barrels per day, and because our exports of distillates rose by 103,000 barrels per day to 1,530,000 barrels per day, while our imports of distillates rose by 183,000 barrels per day to 308,000 barrels per day....after this week's big inventory decrease, our distillate supplies at the end of the week were 6.1% lower than the 136,369,000 barrels of distillates that we had stored on March 8th, 2019, and fell to about 10% below the five year average of distillates stocks for this time of the year...

finally, with the big drop in our oil exports, our commercial supplies of crude oil in storage rose for the twentieth time in thirty-seven weeks and for the thirty-second time in the past 52 weeks, increasing by 7,664,000 barrels, from 444,119,000 barrels on February 28th to 451,783,000 barrels on March 6th, the largest increase since November 1st ....but even after 7 straight increases, our crude oil inventories were stlll roughly 2% below the five-year average of crude oil supplies for this time of year, even while they remained about 35% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the first week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels....even though our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of March 6th were just fractionally above the 449,072,000 barrels of oil we had in commercial storage on March 8th of 2019, and still 4.8% above the 430,928,000 barrels of oil that we had in storage on March 9th of 2018, while at the same time remaining 14.5% below the 528,156,000 barrels of oil we had in commercial storage on March 10th of 2017, a week which followed a period when we had been adding 10 million barrels per week to storage...   

OPEC's Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC's March Oil Market Report, which covers OPEC & global oil data for February, and hence it gives us a picture of the global oil supply & demand situation as production cuts totaling 2.1 million barrels a day from OPEC and its partners were still in effect, before the recent breakdown of OPECs agreemen...but as we'll see, this report shows there was already a surplus more than 2 million barrels per day of oil produced globally in February, almost entirely due to coronavirus related downward revisions to demand...we should note as a caveat that estimating demand while an epidemic is spreading is pretty much a crapshoot, and hence the numbers we'll be reporting this month should be considered having a much larger margin of error than we'd normally expect from this report..

the first table from this monthly report that we'll look at is from the page numbered 55 of that report (pdf page 63), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures...

February 2020 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC's oil output fell by 546,000 barrels per day to 27,772,000 barrels per day in February, from their revised January production total of 28,318,000 barrels per day...however that January output figure was originally reported as 28,859,000 barrels per day, which means that OPEC's January production was revised 541,000 barrels per day lower with this report, and hence February's production was, in effect, a 1,087,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month's revisions)...

from that OPEC table, we can also see that the 647,000 barrel per day decrease in production in wartorn Libya was the only reason for the February drop in OPEC's output, and were it not for that, there would have been a modest production increase, as several OPEC members increased output...nonetheless, it appears that oil output from most OPEC members, other than that of Iraq, still remains far enough below the output allocations that were originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers so as to allow for such modest increases....those output allocations for 2019, before ​the first quarter's additional cuts, can be seen in the first table of OPEC production quotas for last year which we've included on the left below: 

OPEC supply cut targets as of October 2019

OPEC additional supply cuts as of December 2019

in addition to the allocations shown on the table on the left, at their meeting with other oil producers on December 6th of this past year, OPEC announced additional production cuts of 500,000 barrels per day through to March 2020 on top of those 2019 allocations, a breakdown of which we have in a table from OPEC on the right above...that table was posted on OPEC's website after their December 6th meeting, and it shows the additional production cuts each of the OPEC members and their allies among other producers ​were expected to make over the 3 month period beginning January...as you see, the heaviest output cuts have been on the core OPEC members of Saudi Arabia. the United Arab Emirates, Kuwait and Iraq, while embargoed Iran and Venezuela remain exempt...obviously, that table would be more ​useful if their current production, or even their expected end production, were included, but i've been unable to find a table with those complete metrics, so we'll just have to make do switching back and forth between the two tables we have to see how each member is impacted....in addition to those cuts that came out of the December​ ​OPEC meeting, the Saudis ​had ​voluntarily pledged to cut an additional 400,000 barrels a day more than was mandated by the December 6th agreement, bringing the total current output cut for the group to 2.1 million barrels a day, or more than 2% of global output...however, with the breakdown of the OPEC talks the Friday before last, and the Saudi's subsequent declaration that they would increase production, those production cuts have now gone by the boards...nonetheless, the stated intentions to increase production ​going forward ​do not affect the February data that we're looking at today...

the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from March 2018 to February 2020, and it comes from page 54 (pdf page 66) of the March OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale... 

February 2020 OPEC report global oil supply

largely due to the 546,000 barrel per day drop in OPEC's production from what they produced a month ago, OPEC's preliminary estimate indicates that total global oil production was down by a rounded 0.29 million barrels per day to average 99.75 million barrels per day in January, a reported decrease which came after January's total global output figure was revised lower by 80,000 barrels per day from the 100.12 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 250,000 barrels per day in February after that revision, with higher oil production from the US, Norway, Guyana, Bahrain, Oman and the UK the major reasons for the non-OPEC output increase in February... despite the decrease in February's output, the 99.75 million barrels of oil per day produced globally in February were 0.86 million barrels per day, or 0.9% greater than the 98.89 million barrels of oil per day that were being produced globally in February a year ago, the 2nd month of OPECs first round of production cuts (see the March 2019 OPEC report (online pdf) for the originally reported February 2019 details)...with this month's downward revision to and decrease in OPEC's output, their February oil production of 27,772,000 barrels per day fell to 27.8% of what was produced globally during the month, down from the 28.3% share OPEC contributed in January, and the 29.3% global share they had in December, before Ecuador quit the cartel...OPEC's February 2019 production, which included 522,000 barrels per day from Ecuador, was reported at 30,549,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,255,000 fewer barrels per day of oil in February than what they produced a year ago, when they accounted for 30.8% of global output, with 760,000 barrel per day drop in the output from Libya, a 663,000 barrel per day drop in the output from Iran, a 404,000 barrel per day decrease in output from Saudi Arabia, and a 242,000 barrel per day decrease in the output from Venezuela from that time accounting for most of the year over year output decrease... 

even with the big drop in OPEC's output that we've seen in this report, there was a still substantial surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...     

February 2020 OPEC report global oil demand

the above table came from page 30 of the March OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2020 over the rest of the table...on the "Total world" line in the second column, we've circled in blue the figure that's relevant for February, which is their estimate of global oil demand during the first quarter of 2019...

OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe will be using 97.58 million barrels of oil per day, which is a 1.95 million barrel per day downward revision from the 99.51 million barrels of oil per day they were estimating for the 1st quarter a month ago (circled in green), largely reflecting coronavirus related demand destruction....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 99.75 million barrels per day during February, which means that there was a surplus of around 2,170,000 barrels per day in global oil production ​in ​February​ ​when compared to the demand estimated for the month... 

the revisions to January output and to 1st quarter demand (included in the green ellipse above) means that the previous surplus figure we had computed for January should be revised as well....however, the downward revision to 1st quarter demand was due to the impacts of the coronavirus, which were negligible during January, meaning that 1.95 million barrel per day revision for the quarter reflects demand impacts that fell over February and are expected over March...however, since we're computing monthly surplus or shortfalls off of quarterly demand data, the only way we can get close to an accurate estimate for the 3 months of the quarter would be to compute the figures as if the demand revision were evenly spread over those months...

hence, since we ​had ​estimated a surplus of 610,000 barrels per day in global oil production during January a month ago, based on the figures published at that time, we'll adjust that as part of an eventual first quarter total and revise that accordingly... as we saw earlier, January's global output figure was was revised 80,000 barrels per day lower than the figures published a month ago, while global demand for the 1st quarter was 1.95 million barrel per day lower, so with these revised figures, we'll now find that global oil production in January was running roughly 2,480,000 barrels per day in excess of demand...

meanwhile, for 2019, OPEC is revising its demand estimates 80,000 barrels per day lower, which we have circled in orange...while most of that downward revision falls in the 4th quarter, it's now a bit too far removed for us to be recomputing monthly figures for that period, so we'll just apply that 80,000 barrel per day demand revision to the year as a whole....based on revisions in the February OPEC Monthly Oil Market Report, we had figured and oil shortage of 284,090,000 barrels for the entirely of 2019...since demand for the year has now been revised 80,000 barrels per day lower, our new estimate would be that 2019's glogal oil production saw a shortage of 254,890,000 barrels, compared to OPEC's estimated demand....that's still a substantial a net oil shortfall that is the equivalent of more than two and a half days of global oil production at the December production rate... 

This Week's Rig Count

despite the recent drop​s​ in​ both​ oil & gas prices, the US rig count remained nearly stagnant for the 7th week in a row over the week ending March 13th, as decisions to redeploy equipment typically lag prices by several weeks...but while the rig count is down by just a quarter-percent since the beginning of this year, it still remains down by 27% from the end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by one rigs to 792 rigs this past week, which was still down by 234 rigs from the 1026 rigs that were in use as of the March 15th report of 2019, and 1,137 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...

the number of rigs drilling for oil increased by 1 rig to 683 oil rigs this week, which was still 150 fewer oil rigs than were running a year ago, and much lower than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 107 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was another 40 month low for natural gas drilling...natural gas rigs were also down by 86 gas rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to the rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico dropped by 4 rigs to 19 rigs this week, with 18 Gulf rigs remaining in Louisiana waters and one rig still drilling offshore from Texas...that's now three less than the number of rigs that were deployed in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is thus equal to the national offshore rig total, as it has been all winter...

the count of active horizontal drilling rigs increased by 5 rigs to 713 horizontal rigs this week, which was the most horizontal rigs active since November 1st 2019, but still 194 fewer horizontal rigs than the 907 horizontal rigs that were in use in the US on March 15th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by three rigs to 48 directional rigs this week, and those were also down by 17 from the 65 directional rigs that were operating during the same week of last year....​in addition, the vertical rig count was also down by three rigs to 31 vertical rigs this week, and those were down by 23 from the 54 vertical rigs that were in use on March 15th of 2019...

the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 13th, the second column shows the change in the number of working rigs between last week's count (March 6th) and this week's (March 13th) count, the third column shows last week's March 6th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 15th of March, 2019...    

March 13 2020 rig count summary

the ​5 rig drop in the Louisiana rig count reflects the shutting down of the 4 aforementioned offshore rigs that had been deployed in Louisiana waters, and a Haynesville shale rig in the northwest corner of the state; however, the Haynesville rig count remain​ed unchanged because a rig began drilling in that basin on the Texas side of the state line at the same time...the 4 rig increase in Texas includes that rig, Permian basin rigs that were added Texas Oil Districts 7C and 8A, the districts that encompass the Permian Midland basin, as well as rig additions in Texas Oil Districts 1 and 3, which were offset by the stacking of a rig in Texas Oil District 2...with Texas thus adding two Permian rigs this week, we can therefore figure that the rig that was added in New Mexico had to drilling in the western Permian Delaware..​.the Cana Woodford addition was an oil rig drilling in Oklahoma, offset by a conventional rig that was shut down elsewhere in the state..​.among rigs drilling for natural gas, two were added in West Virginia's Marcellus while 2 were shut down in Ohio's Utica and two more natural gas rigs were shut down in "other basins" that Baker Hughes does not track separately..

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Note: there's more here...

Sunday, March 8, 2020

oil prices crash to 42 mo low on OPEC discord; US oil output at a record high; natural gas rigs at a 40 month low

US oil prices saw their largest daily loss since 2014 on Friday, while international prices were down by the most in 11 years, after this week's OPEC+ meeting broke up without an agreement...after falling 16% to $44.76 a barrel last week on the economic impact of the coronavirus epidemic, the contract price of US light sweet crude for April delivery opened lower and continued falling early Monday, being at one point down more than 3% at $43.32, before the freefall was halted by expectations that the OPEC+ alliance would deepen output cuts, and then surged to gain $1.99, or 4.5%, to finish at $46.75 per barrel in their best day since September after reassurances from central bankers around the world that they would take stabilization measures...oil prices rallied again on Tuesday and were again up more than 4% after the Fed moved to slash interest rates by half a point, but finished well off the day’s high as the Fed's rate cut raised worries about the seriousness of the virus's economic fallout, with US crude ending the session up just 43 cents or less than 1% at $47.18 a barrel...oil's price rebound extended into a third day on Wednesday after OPEC+ experts recommended deeper production cuts, and held above $48 after the EIA reported a smaller than expected crude inventory build, but then settled 40 cents lower as oil producers meeting in Vienna appeared to struggle to reach an agreement on production cuts...oil prices were initially higher again on Thursday after sources told Reuters that OPEC had agreed to cut production by 1.5 million barrels per day, but then fell after the coronavirus epidemic worsened, prompting a selloff of risky assets such as stocks, with oil ending down 88 cents at $45.90 a barrel...oil moved briefly higher early Friday on hopes that the Saudis would get their 1.5 million barrel per day cut, but then began sliding after Reuters reported that Russia would not agree to the steeper oil output cuts proposed by OPEC, and finally plunged more than 10% to a 42 month low of $41.28 a barrel after the OPEC meeting ended with no mention of production cuts...US crude prices thus ended the week down 7.8% lower at its lowest close since August 2016, as more than 4.58 million front-month U.S. crude contracts changed hands in the busiest trading week on record...

with oil prices thus finishing the week at a 42 month low, we'll include a 10 year oil price graph so we can see how the current price compares to the historical record:

March 7 2020 oil prices

the above graph is a screenshot of the interactive price chart for the front month oil contract at Barchart.com, "the leading provider of real-time or delayed intraday stock and commodities charts and quotes", and it shows the range of prices for the nearest oil futures contract as a vertical bar for each month over the past 10 years....this graph was generated by taking the price quotes for what is called the "front month" oil futures contract, or the contract that is being quoted as "the price of oil" daily, with the each monthly contract price being replaced by the next month's price when trading in that contract expires on the 4th business day prior to the 25th calendar day of the month preceding the contract month.. you might also note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month's closing price...as you can see, oil prices are now down to a level seen only once in the past ten years, from late 2015 to early 2016, when oil prices crashed after OPEC after flooded the global oil market, causing a collapse in prices which put hundreds of US oil companies into bankruptcy...before that, oil prices had generally tracked between $80 and $110 a barrel for years..

meanwhile, natural gas prices managed to hold on to a small gain for the week, but remained near historical lows...after falling 12% to a four year low of $1.684 per mmBTU in last week's market bloodbath, the contract price of natural gas for March delivery rebounded 7.2 cents on Monday, even as the weather outlook remained bearish, and continued 4.4 cents higher on Tuesday and 3.7 cents higher on Wednesday on a slight decline in output, despite weather forecasts confirming it would remain warmer-than-normal over the next two weeks....but prices turned lower Thursday, falling 5.5 cents to $1.772 per mmBTU, on forecasts for lower heating demand over the next two weeks, despite an increase in LNG exports and a EIA report showing a near-normal weekly storage draw...prices gave up most of their remaining gains for the week on Friday, falling 6.4 cents to $1.708 per mmBTU, on the absence of any late season cold in the forecasts, but still ended with a gain of 1.4% on the week...

the natural gas storage report on the week ending February 28th from the EIA indicated that the quantity of natural gas held in underground storage in the US fell by 109 billion cubic feet to 2,091 billion cubic feet by the end of the week, which still left our gas supplies 680 billion cubic feet, or 48.2% higher than the 1,411 billion cubic feet that were in storage on February 28th of last year, and 176 billion cubic feet, or 9.2% above the five-year average of 1,915 billion cubic feet of natural gas that has been in storage as of the 28th of February in recent years....the 109 billion cubic feet that were withdrawn from US natural gas storage this week was a bit more than the consensus estimate for a 105 billion cubic feet withdrawal by analysts polled by Platts, and was also a bit more than the average 106 billion cubic feet of natural gas that have been pulled from natural gas storage during the last week of February over the past 5 years, but it was much less than the 152 billion cubic feet withdrawal reported during the corresponding week of 2019..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending February 28th indicated that a increase in our oil exports was mostly offset by a decrease in our refinery throughput, again leaving us with a bit of oil left to add to our stored commercial supplies for the seventeenth time in the past twenty-five weeks....our imports of crude oil rose by an average of 21,000 barrels per day to an average of 6,238,000 barrels per day, after falling by an average of 330,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 497,000 barrels per day to 4,154,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,084,000 barrels of per day during the week ending February 28th, 476,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells rose by 100,000 barrels per day to a record high of 13,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,184,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 15,696,000 barrels of crude per day during the week ending February 28th, 312,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that an average of 112,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 624,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+624,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,495,000 barrels per day last week, now 2.5% less than the 6,663,000 barrel per day average that we were importing over the same four-week period last year....the 112,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day higher at a record high of 13,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record high of 12,600,000 barrels per day, while a 1,000 barrel per day increase Alaska's oil production to 475,000 barrels per day still added the same rounded 500,000 barrels per day to the rounded national total....last year's US crude oil production for the week ending March 1st was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was 8.3% above that of a year ago, and 55.4% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 86.9% of their capacity in using 15,696,000 barrels of crude per day during the week ending February 28th, down from 87.9% of capacity the prior week, but still near the recent average refinery capacity utilization for the end of February, historically the time of year that refineries change blends and undergo maintenance...however, the 15,696,000 barrels per day of oil that were refined this week were 1.8% less than the 15,990,000 barrels of crude that were being processed daily during the week ending March 1st, 2019, when US refineries were operating at 87.5% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 40,000 barrels per day to 9,757,000 barrels per day during the week ending February 28th, after our refineries' gasoline output had increased by 272,000 barrels per day over the prior week... after this week's decrease in gasoline output, our gasoline production was 1.0% lower than the 9,852,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 198,000 barrels per day to 4,648,000 barrels per day, after our distillates output had decreased by 6,000 barrels per day over the prior week...after this week's drop in distillates output, our distillates' production for the week was 5.5% less than the 4,919,000 barrels of distillates per day that were being produced during the week ending March 1st, 2019....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell for the fifth week in a row, after twelve consecutive increases, but ​was still down for the 19th time in 37 weeks, falling by 4,339,000 barrels to 252,048,000 barrels during the week ending February 28th, after our gasoline supplies had decreased by 2,691,000 barrels over the prior week....our gasoline supplies decreased by more this week because the amount of gasoline supplied to US markets increased by 151,000 barrels per day to 9,186,000 barrels per day, while our exports of gasoline fell by 30,000 barrels per day to 802,000 barrels per day, while our imports of gasoline rose by 106,000 barrels per day to 511,000 barrels per day...but even after this week's big inventory decrease, our gasoline supplies were 0.5% higher than last March 1st's gasoline inventories of 250,714,000 barrels, and 2% above the five year average of our gasoline supplies for the same time of the year...

similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 17th time in 23 weeks and for 32nd time in the past 48 weeks, falling by 4,008,000 barrels to 134,464,000 barrels during the week ending February 28th, after our distillates supplies had decreased by 2,115,000 barrels over the prior week....our distillates supplies fell by more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 200,000 barrels per day to 3,919,000 barrels per day, because our exports of distillates rose by 221,000 barrels per day to 1,427,000 barrels per day while our imports of distillates fell by 52,000 barrels per day to 125,000 barrels per day....after this week's decrease, our distillate supplies at the end of the week were 1.1% lower than the 135,986,000 barrels of distillates that we had stored on March 1st, 2019, and fell to about 7% below the five year average of distillates stocks for this time of the year...

finally, even with those much higher oil exports, our commercial supplies of crude oil in storage rose for the twentieth time in thirty-seven weeks and for the thirty-first time in the past 52 weeks, increasing by 784,000 barrels, from 443,335,000 barrels on February 21st to 444,119,000 barrels on February 28th....but even after 6 straight increases, our crude oil inventories slipped to roughly 4% below the five-year average of crude oil supplies for this time of year, even while they remained about 34% higher than the prior 5 year (2010 - 2014) average of crude oil stocks at the end of February, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels....even though our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of February 28th were 1.9% below the 452,934,000 barrels of oil we had in commercial storage on March 1st of 2019, while still 4.3% above the 425,906,000 barrels of oil that we had in storage on March 2nd of 2018, while at the same time remaining 15.9% below the 520,184,000 barrels of oil we had in commercial storage on March 3rd of 2017, a week which followed a period when we had been adding 10 million barrels per week to storage...   

This Week's Rig Count

the US rig count increased for the 4th time in 27 weeks over the week ending March 6th but still remains down by 26.8% from the end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US increased by three rigs to 793 rigs this past week, which was still down by 234 rigs from the 1027 rigs that were in use as of the March 8th report of 2019, and 1,136 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business...

the number of rigs drilling for oil increased by 4 rigs to 682 oil rigs this week, which was still 152 fewer oil rigs than were running a year ago, and much lower than the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 109 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was a 40 month low for natural gas drilling...natural gas rigs were also down by 84 gas rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to the rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico increased by one rig to 23 rigs this week, with 22 of those Gulf rigs drilling in Louisiana waters and one rig drilling offshore from Texas...that was one more than the number of rigs that were deployed in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is equal to the national offshore rig total​,​​ as it was the same week a year ago​...however, a drilling rig also began drilling through a lake in McClain country Oklahoma this week, and with another such "inland waters" rig also running in Louisiana, there are now two "inland waters" rigs drilling in the US, up from one a year ago..

the count of active horizontal drilling rigs was unchanged at 706 horizontal rigs this week, which was still 196 fewer horizontal rigs than the 904 horizontal rigs that were in use in the US on March 8th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by five rigs to 51 directional rigs this week, but those were down by 16 from the 67 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was down by two rigs to 34 vertical rigs this week, and those were also down by 22 from the 56 vertical rigs that were in use on March 8th of 2019...

the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 6th, the second column shows the change in the number of working rigs between last week's count (February 28th) and this week's (March 6th) count, the third column shows last week's February 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 8th of March, 2019...    

March 6 2020 rig count summary

in the Texas Permian basin, 3 rigs were added in Texas Oil District 8, an area ​that corresponds to the core Permian Delaware, while there were no changes in Texas Oil Districts 7B, 7C or 8A, the districts that encompass the Permian Midland basin...hence, with a 4 rig increase in the Permian overall, we can figure that the rig that was added in New Mexico had to drilling in the western Permian Delaware...meanwhile, the rig that was added in the Granite Wash basin was also in Texas, as Texas Oil District 10 shows a one rig increase, but the rig that was added in the Haynesville was in northwestern Louisiana, as the rig count in Texas Oil District 6 was unchanged...Louisiana also saw rig increases offshore and in the southern part of the state, where there weren't any rigs deployed last week....meanwhile, Oklahoma's rig count was down two with the removal of three oil rigs from the Cana Woodford and the addition of the vertical rig on the lake in McClain county...the rig pulled out of North Dakota has been drilling in the Williston basin, while the rigs pulled out of Wyoming and California, as well at the rig added in Utah, do not correspond to basins that Baker Hughes itemizes...for natural gas rigs, Baker Hughes shows one rig being added in the Haynesville, while one was removed from West Virginia's Marcellus and another was pulled out of an "other basin" that they don't track separately...

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note: there's more here...