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, January 20, 2019

US oil production at a record high; rig count drops by most in 35 months...

oil prices rose for a third consecutive week, and while they ended the week more than 20% higher than their December 27th nadir, they still remain almost 30% below their October 3rd closing high...after rising 7.6% to $51.59 a barrel on hopes for a resolution of the US-China trade war last week, US oil prices for February delivery opened this week higher but quickly weakened and ended Monday​ ​$1.08 lower at $50.51 a barrel, pressured by weak Chinese trade data that increased concerns that a global economic slowdown would hurt crude demand...however, oil prices turned around rose with ​global stock markets on Tuesday, propelled by ​a ​Chinese fiscal stimulus intended to reverse their slowing economy, with U.S. crude prices ending $1.60, or 3.2%, higher at $52.11 a barrel...buoyed by a rising stock market, oil prices continued higher early Wednesday, but then fell back over $1 ​at midday ​after the EIA report showed record crude production and much higher refined product inventories, but recovered late in the session to end the day 20 cents higher at $52.31 a barrel...weighed by that surging U.S. crude output and weakening global demand, oil prices turned lower early Thursday, tumbling to as low at $50.98 a barrel, before recovering to close with a loss of just 24 cents at $52.07, on a rebound in U.S. stocks and a report that OPEC had sharply curtailed production in December...after a quiet Friday​ ​morning, oil jumped 3.3% to a 2-month high on news that China had proposed to eliminate its trade surplus by importing more US goods, with oil closing $1.73 higher at $53.80 a barrel...US crude for February thus ended the week 4.3% higher, while the international benchmark Brent crude for March, which had seen a steeper pullback early in the week, ended 3.7% higher at $62.70 a barrel..

meanwhile, natural gas prices spiked nearly 16% higher to $3.591 per mmBTU on Monday, largely on forecasts for a long, severe cold spell, but struggled to maintain that price level the rest of the week and ended Friday at $3.482 per mmBTU, still more than 12% higher than the prior week's close...the natural gas storage report for the week ending January 11th from the EIA indicated that the quantity of natural gas in storage in the US fell by 81 billion cubic feet to 2,533 billion cubic feet over the week, which left our gas supplies 77 billion cubic feet, or just 3.0% below the 2,610 billion cubic feet that were in storage on January 12th of last year, and 464 billion cubic feet, or 11.4% below the five-year average of 2,860 billion cubic feet of natural gas that have typically been in storage as of the 2nd weekend of January....this week's 81 billion cubic feet withdrawal from US natural gas supplies was just about on the consensus estimate for a 82 billion cubic feet withdrawal, but it was considerably less the average of 203 billion cubic feet of natural gas that have been withdrawn from US gas storage during the first full week of January over the last 5 years...since the report now tells us that "At 2,533 Bcf, total working gas is within the five-year historical range" we'll include this week's graph from the natural gas storage report showing natural gas in storage over the past two years, as compared to that 5 year range... 

January 19 2019 natural gas supplies as of January 11th

the above graph comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas ​in ​billion cubic feet in storage in the lower 48 states over the period from December 2016 up to the week ending January 11th 2019 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background represents the previous upper and lower range of natural gas in storage for any given time of year for the 5 years prior to the two years that are shown by today's graph…thus the grey area also shows us the normal variation of natural gas storage levels as they fluctuate from season to season, with natural gas in storage underground normally building to a maximum by the first weekend in November, falling through the winter, and usually bottoming out at the end of March or the first week of April, depending of course on the spring heating requirements in any given year...notice how our supplies of natural gas in blue started last year's heating season fairly close to the 5 year average of natural gas in storage shown in dark grey, then diverged over the year, beginning with the colder than normal January, with the gap separating the grey "normal" line and the blue current supply line slowly getting increasingly wider, until it finally fell below the 5 year low, represented by the grey shaded area, in July of this year...from that time until mid November, the gap between our natural gas supplies and the previous 5 year minimum became progressively wider, until a milder than normal December allowed for ​a period of slower than normal depletion...with the exceptional warmth over the 4 most recent weeks (see map below​ for the most recent week​), we have only needed to withdraw 240 billion cubic feet of natural gas from storage to meet our needs; that compares to the 860 billion cubic feet of natural gas that we needed during the same 4 week period a year ago...as a result, we still had 2,533 billion cubic feet remaining in storage as of January 11th, a bit more than the 2,529 billion cubic feet of gas that were in storage on January 10th 2014, and hence we're now "within the five-year historical range"

January 19 2019 temperature deviation for week ending January 10th (source)

The Latest US Supply and Disposition of Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending January 11th, indicated a moderate​ly large ​withdrawal of oil from our commercial crude supplies, largely because of a large increase in our oil exports and a modest drop in our oil imports...our imports of crude oil fell by an average of 319,000 barrels per day to an average of 7,527,000 barrels per day, after rising by an average of 454,000 barrels per day the prior week, while our exports of crude oil rose by an average of 901,000 barrels per day to an average of 2,966,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,561,000 barrels of per day during the week ending January 11th, 1,220,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reportedly 200,000 barrels per day higher at a record 11,900,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,461,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,223,000 barrels of crude per day during the week ending January 11th, 343,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period 383,000 barrels of oil per day were reportedly being pulled out of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports, from oilfield production and from storage was 379,000 barrels per day short of what refineries reported they used during the week....to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+379,000) 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 is labeled in their footnotes as "unaccounted for crude oil"....(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 7,605,000 barrels per day last week, but was still 3.6% less than the 7,892,000 barrel per day average that we were importing over the same four-week period last year....the 383,000 barrel per day increase in our total crude inventories was due to a 383,000 barrel per day ​withdrawal from our commercially available stocks of crude oil, while the oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported 200,000 barrels per day higher at 11,900,000 barrels per day because the rounded estimate for output from wells in the lower 48 states increased by 200,000 barrels per day to 11,400,000 barrels per day in light of last week's confirmed monthly figures, while a 2,000 barrel per day increase to 507,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending January 12th was at 9,750,000 barrels per day, so this week's rounded oil production figure was 22.1% above that of a year ago, and 41.2% 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...     

US oil refineries were operating at 94.6% of their capacity in using those 17,223,000 barrels of crude per day during the week ending January 11th, down from last week's 96.1% of capacity, but still the highest capacity utilization rate for the second week of January since 1999....likewise, the 17,223,000 barrels per day of oil that were refined this week were again at a seasonal high for the date for the 29th time out of the past 33 weeks, and 2.1% higher than the 16,875,000 barrels of crude per day that were being processed during the week ending January 12th, 2017, when US refineries were operating at 93.0% of capacity... 

even with the decrease in the amount of oil being refined, the gasoline output from our refineries was higher, rising by 192,000 barrels per day to 9,584,000 barrels per day during the week ending January 11th, after our refineries' gasoline output had decreased by 752,000 barrels per day to a 50 week low during the prior two weeks...hence, even with the modest increase in this week's gasoline output, our gasoline production was still 1.3% lower than the 9,710,000 barrels of gasoline that were being produced daily during the same week last year....meanwhile, refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 151,000 barrels per day to 5,412,000 barrels per day, after that output had decreased by 28,000 barrels per day the prior week....despite that decrease, this week's distillates production was 6.6% higher than the the 5,076,000 barrels of distillates per day that were being produced during the week ending January 12th, 2018.... 

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week jumped by 7,503,000 barrels to 255,565,000 barrels by January 11th, after jumping by a 3 year high of 8,066,000 barrels during the week ending January 4th....our gasoline supplies rose this week as the amount of gasoline supplied to US markets fell by 170,000 barrels per day to 8,565,000 barrels per day, while our imports of gasoline fell by 173,000 barrels per day to 377,000 barrels and our exports of gasoline rose by 103,000 barrels per day to 830,000 barrels per day....with this week's increase, our gasoline inventories are at a seasonal high for the second week of January, 4.5% higher than last January ​12th's level of 237,322,000 barrels, and roughly 5% above the five year average of our gasoline supplies for this time of the year...

even with the decrease in our distillates production, our supplies of distillate fuels increased for the 6th time in seventeen weeks, rising by 2,967,000 barrels to 143,009,000 barrels during the week ending January 11th, after our distillates supplies had increased by a record 20,140,000 barrels over the pr​evious two weeks...our distillates supplies increased this week even though the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 1,494,000 barrels per day to 4,449,000 barrels per day (after falling by 1,911,000 barrels per day over the course of the prior 3 weeks), in part because our imports of distillates rose by 117,000 barrels per day to 378,000 barrels per day, while our exports of distillates fell by 436,000 barrels per day to 917,000 barrels per day....as a result of this week's increase, our distillate supplies were 2.7% above the 143,088,000 barrels that we had stored on January 12th, 2017, even as they remained 3% below the five year average of distillates stocks for this time of the year...

finally, with soaring exports and falling imports, our commercial supplies of crude oil decreased for sixth time in 7 weeks, falling by 2,683,000 barrels over the week, from 439,738,000 barrels on January 4th to 437,055,000 barrels on January 11th...however, with a run of 10 large weekly increases before the recent smaller decreases, our crude oil inventories are still roughly 8% above the five-year average of crude oil supplies for this time of year, and roughly 30% above the 10 year average of crude oil stocks for the second week of January, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have ​mostly been rising since this Fall, after falling through most of the past year and a half until then, our oil supplies as of January 11th were thus 5.9% above the 412,654,000 barrels of oil we had stored on January 12th of 2017, while remaining nearly 10% below the 485,456,000 barrels of oil that we had in storage on January 13th of 2016, and 3.9% below the 455,169,000 barrels of oil we had in storage on January 8th of 2015..   

OPEC's Monthly Oil Market Report

this week we're also going to review OPEC's January Oil Market Report (covering December OPEC & global oil data), which was released on Thursday of this past week, and which is available as a free download, and hence it's the report we check for monthly global oil supply and demand data...the first table from this monthly report that we'll look at is from the page numbered 56 of that report (pdf page 66), 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 an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures...

December 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC's oil output dropped by 751,000 barrels per day to 31,578,000 barrels per day in December, from their November production total of 32,328,000 barrels per day....however, in November, Qatar was still a member of OPEC​,​ producing 615,000 barrels per day, and that November figure was originally reported as 32,965,000 barrels per day, so OPEC's November output excluding that of Qatar was at 32,350,000 barrels per day....therefore OPEC's November output excluding Qatar was revised 22,000 barrels per day lower with this report (for your reference, here is the table of the official November OPEC output figures as reported a month ago, before this month's revisions)...

as you can tell from the far right column on the table above, the 468,000 barrels per day drop in the oil output from Saudi Arabia was the major factor in the 751,000 barrel per day OPEC production decrease, with largely involuntary production decreases of 172,000 barrels per day in the oil output from Libya and 159,000 barrels per day in the oil output from Iran accounting for the rest...OPEC's December agreement called for oil producers to cut output by 1.2 million barrels per day beginning in January, so this December production cut was for all practical purposes carried out unilaterally by Saudi Arabia, with the decrease of 65,000 barrels per day in the oil output from the United Arab Emirates, their close ally, also likely intentional.....excluding new OPEC member Congo, the December output of 31,349,000 barrels per day from the remaining 13 OPEC members was 761,000 barrels per day below the 32,110,000 barrels per day revised quota they agreed to at their November 2017 meeting, (excluding the 620,000 bpd quota for Qatar), mostly due to the big drop in Venezuelan output, another OPEC country that has also been impacted by US sanctions...  

the next graphic we'll look at shows us both OPEC and global monthly oil production on the same graph, over the period from January 2017 to December 2018, and it's taken from the page numbered 57 (pdf page 67) of the January 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 millions of barrels per day of global output shown on the right scale...      

December 2018 OPEC report global oil supply

OPEC's preliminary estimate indicates that total global oil production fell by 350,000 barrels per day to 100.02 million barrels per day in December, after November's total global output figure was revised down by 270,000 barrels per day from the 100.64 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 400,000 barrels per day in December after that revision, with increased US and Canadian output the major contributors to the non-OPEC increase....global oil output during December was also 2.83 million barrels per day, or 2.9% higher than the revised 97.19 million barrels of oil per day that were being produced globally in December a year ago (see the January 2018 OPEC report online (pdf) for the originally reported year ago details)...with the December decrease in OPEC's output following the downward revision to their November output, their November oil production of 31,578,000 barrels per day represented just 31.6% of what was produced globally during the month, down from the 32.8% share they reported for November, when Qatar was still a member....OPEC's December 2017 production was reported at 32,416,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year and new member Congo from this year, are now producing 573,000 fewer barrels per day of oil than they were producing a year ago, during the twelfth month that their production quotas were in effect, with a 597,000 barrel per day decrease in output from Venezuela and a 1,060,000 barrel per day decrease in output from Iran from that time more than offsetting the production increases of 635,000 barrels per day from the Saudis, 340,000 barrels per day from the Emirates, and 309,000 barrels per day from Iraq...   

despite the 350,000 barrel per day decrease in global oil output in December, we still saw a small surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us... 

December 2018 OPEC report global oil demand

the table above comes from page 31 of the January OPEC Monthly Oil Market Report (pdf page 41), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2018 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for December, which is their revised estimate of global oil demand during the fourth quarter of 2018...       

OPEC's estimate is that during the 4th quarter of last year, all oil consuming regions of the globe were using 99.94 million barrels of oil per day, which was revised from their estimate of 99.98 million barrels of oil per day of a month ago....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, the world's oil producers were producing 100.02 million barrels per day during December, which means that there has been a surplus of around 40,000 barrels per day in global oil production as compared to the demand estimated for the month...     

a month ago we estimated a global surplus of around 660,000 barrels per day in global oil production during November, based on figures published at that time...however, as we ​​saw earlier, November's global output figure was revised down by 270,000 barrels per day from those figures, while global demand was simultaneously revised 40,000 barrels per day lower, so with these revised figures, we now find that global oil production in November was running roughly 430,000 barrels per day greater than demand...also a month ago, we estimated a surplus of 160,000 barrels per day for October; hence, with the downward revision to 4th quarter demand, that October​ oil production​ surplus would now be 200,000 barrels per day...

while 4th quarter demand was revised 40,000 barrels per day lower, 3rd quarter demand was revised 30,000 barrels per day higher at the same time, from 99.32 million barrels of oil per day to 99.35 million barrels of oil per day...that revision now means there were supply shortfalls of 10,000 barrels per day in September, 580,000 barrels per day in August, and 960,000 barrels per day per day in July....

since there are no revisions to supply or demand for the prior months, the surplus or shortfall figures for those months that we had recomputed last month remained unchanged; for the 2nd quarter months, we ​figured there were global oil shortfalls of 170,000 barrels per day in June, 610,000 barrels per day in May, and 400,000 barrels per day in April, while the first quarter of 2018 recorded global​ oil​ surplus​es of 20,000 barrels per day in March, 200,000 barrels per day in February, and 40,000 barrels per day in January...

by totaling up those 12 monthly estimates of surplus or shortfall, we find that for the twelve months of 2018, global oil demand exceeded production by roughly 56,250,000 barrels, actually a comparatively tiny net oil shortfall that is the equivalent of roughly 13.5 hours of global oil production at the December production rate.....however, should the entirely of the 1.2 million barrel per day OPEC production cut come to pass, we would be looking at a much larger shortfall during this coming year, and it does not yet appear that the market is taking the possibility of an oil shortfall of that magnitude into account..  

This Week's Rig Count

US drilling activity, as evidenced by the number of drilling rigs active at the end of the week, fell by the most in 35 months during the week ending January 18th, as drilling for both oil and natural gas decreased, probably due to the recently depressed oil prices for both​,​ and ​due to ​the 6.7 month backlog of uncompleted wells... Baker Hughes reported that the total count of rotary rigs running in the US fell by 25 rigs to 1050 rigs over the week ending January 18th, which was still 114  more rigs than the 936 rigs that were in use as of the January 19th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, which was the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil fell by 21 rigs to 852 rigs this week, which was the largest oil rig pullback since February 19, 2016...nonetheless, there were still 105 more oil rigs active​ this week​ than were running a year ago, while th​at number was well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 4 rigs to 198 natural gas rigs, which was still 9 more rigs than the 189 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

two platforms that had been drilling in the Gulf of Mexico offshore from Louisiana were shut down this week, which reduced the Gulf of Mexico rig count to 19 rigs for this report, which the same number of rigs that were deployed in the Gulf of Mexico a year ago at this time...since there is still no other offshore drilling off either coast or off Alaska at this time, nor was there during the same week of 2017-18, that Gulf of Mexico total is identical to the US total...

the count of active horizontal drilling rigs decreased by 19 rigs to 929 horizontal rigs this week, the largest horizontal rig pullback since February 26th, 2016...however, it still left 127 more horizontal rigs active than the 802 horizontal rigs that were in use in the US on January 19th of last year, but it was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the directional rig count decreased by 7 rigs to 55 directional rigs this week, which was also down from the ​77 directional rigs that were in use during the same week of last year, and the lowest directional rig count since December 16, 2016....on the other hand, the vertical rig count increased by 1 rig to 66 vertical rigs this week, which was also up from the 57 vertical rigs that were operating on January 19th of 2018...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table 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 January 18th, the second column shows the change in the number of working rigs between last week's count (January 11th) and this week's (January 18th) count, the third column shows last week's January 11th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent 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 1​9th of January, 2018...    

January 18 2019 rig count summary

offhand, i can't understand how Oklahoma could be down 10 rigs while the Cana Woodford was up 5 rigs and the Ardmore Woodford also added another one; the Mississippian shale is partly underlying Oklahoma, but it appears the 2 rigs that were shut down in that basin were pulled out of Kansas...while 3 rigs were pulled out of the panhandle region Granite Wash basin, one of those was pulled out in Texas, still leaving a big question mark on Oklahoma activity...meanwhile, the Permian basin saw a seven rig increase, as eight rigs were pulled out of Texas Oil District 8, which is the core Permian Delaware, while a Permian Delaware rig was added on the New Mexico side of the border...note that in addition to the major producing states shown above, Montana also had a Williston basin rig shut down, leaving two active in the state, still up from 1 rig a year ago... this week's natural gas rig situation also looks quite complicated; for starters, a natural gas rig was added in Ohio's Utica, while at the same time one of the two Utica ​gas ​rigs which had been operating in Pennsylvania was shut down, netting zero for the basin...another gas rig was added in the West Virginia portion of the Marcellus, and yet another was added the Haynesville, in northwestern Louisiana...meanwhile, despite the Ardmore Woodford rig increase, that masked an increase of two oil rigs and a reduction of one rig targeting natural gas...similarly, the one rig increase in the Eagle Ford of south Texas included an increase of two rigs​ targeting oil, and a reduction of natural gas rigs from 9 to 8...and in addition, 4 natural gas rigs were pulled out of "other" basins not tracked individually by Baker Hughes, to give us the total that we reported on earlier... 

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note:  there’s more here..

Sunday, January 13, 2019

holidays saw largest increase in distillates supplies on record; natural gas drilling now at a 40 month high

oil prices were again higher this week, largely on optimistic chatter coming out of the US-China trade talks in Beijing, but finally snapped their longest rally in 9 years when prices fell back for the first time since December 27th during Friday's session...after rising $2.63 or 5.8% to $47.96 a barrel last week, mostly on news of a big drop in OPEC output, US oil prices for February delivery opened higher and initially jumped to as high as $49.79 a barrel on Monday morning, on Saudi shipment cuts and expectations ahead of US-China trade talks, but later fell back to close just 56 cents higher at $48.52 a barrel, supported by steadier equities markets...optimism about the trade talks in Beijing again drove prices higher throughout the day on Tuesday, with oil prices finishing $1.26 or 2.6% higher at $49.78 a barrel...oil prices then spiked when the trade talks in Beijing were carried over into an unscheduled third day on Wednesday, with US crude finishing $2.58 or 5% higher at $52.36 a barrel, despite an EIA report showing much bigger-than-expected increases in stockpiles of gasoline and distillates...that EIA report and concerns about US-China trade talks initially sent oil prices tumbling 1% on Thursday morning, but prices recovered to close 23 cents higher at $52.59 a barrel, its ninth straight day of gains, supported by comments from Fed chairman Powell that lifted stock markets...however, hopes for the longest rally on record were dashed on Friday when worries over a global economic slowdown returned after talks in Beijing broke up without a deal being struck to end the escalating US-China trade war and oil prices fell $1, or 1.9%, to $51.84 per barrel, snapping a 9-session streak of price gains...

natural gas prices, meanwhile, ended the week higher on the strength of a Friday rally, but traded near $3 per mmBTU for most of the week as warm weather persisted....after the steepest monthly price drop in 15 years left natural gas prices at $3.044 per mmBTU at the end of last week, a change in the weekend forecast that delayed the arrival of January cold pushed prices 10 cents lower on Monday...natural gas prices then rallied more than 10 cents on a report of lower production on Tuesday, but fell back to close at $2.967 per mmBTU, a gain of just 2.3 cents....a forecast for slightly colder temperatures later in January added 1.7 cents on Wednesday, but even a larger than expected withdrawal of natural gas from storage couldn't sustain a rally on Thursday, as prices fell back 1.5 cents...however, the forecast cold finally arrived in force on Friday and sent natural gas prices 13 cents higher as they closed the week at 3.099 mmBTU, 5.5 cents higher than the prior week's close...

the natural gas storage report for the week ending January 4th from the EIA indicated that the quantity of natural gas in storage in the US fell by 91 billion cubic feet to 2,614 billion cubic feet over the week, which left our gas supplies 204 billion cubic feet, or 7.2% below the 2,818 billion cubic feet that were in storage on January 5th of last year, and 464 billion cubic feet, or 15.1% below the five-year average of 3,078 billion cubic feet of natural gas that have typically been in storage heading into the first weekend of January....this week's 91 billion cubic feet withdrawal from US natural gas supplies was more than the average estimate for a 75 billion cubic feet withdrawal that a Reuters poll had forecast, but it was much less the average of 182 billion cubic feet of natural gas that have been withdrawn from US gas storage during the New Year week in the last 5 years...an all time record 359 billion cubic feet of natural gas were withdrawn from storage during the week ending January 5th of last year, so that large withdrawal obviously impacted the 5 year average, as well as being the reason that our storage deficit from last year fell from 14.3% last week to 7.2% this week...

The Latest US Supply and Disposition of Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, also reporting on the week ending January 4th, indicated that despite a large increase in our oil imports and a modest drop in our oil exports, the data showed a modest withdrawal of oil from our commercial crude supplies because the unaccounted for crude factor was reversed from that of the prior week ...our imports of crude oil rose by an average of 454,000 barrels per day to an average of 7,846,000 barrels per day, after falling by an average of 264,000 barrels per day the prior week, while our exports of crude oil fell by an average of 172,000 barrels per day to an average of 2,065,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,781,000 barrels of per day during the week ending January 4th, 626,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reportedly unchanged at 11,700,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,481,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,566,000 barrels of crude per day during the week ending January 4th, 194,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period 240,000 barrels of oil per day were reportedly being pulled out of the oil storage in the US....hence, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports, from oilfield production and from storage was 155,000 barrels per day more than what refineries reported they used during the week....to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (-155,000) 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 is labeled in their footnotes as "unaccounted for crude oil"...since our unaccounted for crude was at +906,000 barrels per day last week, this week's oil supply and disposition figures would be considered more accurate than last week's...(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 7,579,000 barrels per day last week, but was still 3.6% less than the 7,863,000 barrel per day average that we were importing over the same four-week period last year....the 240,000 barrel per day increase in our total crude inventories was due to a 240,000 barrel per day addition to our commercially available stocks of crude oil, while the oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported unchanged at 11,700,000 barrels per day because the rounded figure for output from wells in the lower 48 states was unchanged at 11,200,000 barrels per day, while a 10,000 barrel per day increase to 505,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending January 5th was at 9,492,000 barrels per day, so this week's rounded oil production figure was 23.3% above that of a year ago, and 38.8% 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...     

US oil refineries were operating at 96.1% of their capacity in using those 17,566,000 barrels of crude per day during the week ending January 4th, down from last week's December record 97.2% of capacity, but still the highest capacity utilization rate for the first week of January since 1999....likewise, the 17,566,000 barrels per day of oil that were refined this week were again at a seasonal high for the date for the 28th time out of the past 32 weeks, and 1.4% higher than the 17,323,000 barrels of crude per day that were being processed during the week ending January 5th, 2017, when US refineries were operating at 95.3% of capacity... 

with the decrease in the amount of oil being refined, the gasoline output from our refineries was also lower, falling by 141,000 barrels per day to 9,392,000 barrels per day during the week ending January 4th, after our refineries' gasoline output had decreased by 611,000 barrels per day during the week ending December 28th...with that decrease in this week's gasoline output, our gasoline production was the lowest in 50 weeks, and 1.1% lower than the 9,525,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 28,000 barrels per day to 5,563,000 barrels per day, after that output had increased by 147,000 barrels per day the prior week....despite that decrease, this week's distillates production was 5.1% higher than the the 5,592,000 barrels of distillates per day that were being produced during the week ending January 5th, 2017.... 

even with the pullback in our gasoline production, our supply of gasoline in storage at the end of the week jumped by 8,066,000 barrels to 248,062,000 barrels by January 4th, the 7th increase in the past 12 weeks, and the largest increase in gasoline inventories since the week ending January 1st, 2016....our gasoline supplies rose this week because our imports of gasoline rose by 236,000 barrels per day to 550,000 barrels while our exports of gasoline fell by 145,000 barrels per day to 727,000 barrels per day, and while the amount of gasoline supplied to US markets rose by 113,000 barrels per day to 8,735,000 barrels per day, after falling by 725,000 barrels per day the prior week....with this week's increase, our gasoline inventories are again at a seasonal high for the first week of January, 4.5% higher than last January 5th's level of 237,322,000 barrels, and roughly 5% above the five year average of our gasoline supplies for this time of the year...

with our elevated level of distillates production, our supplies of distillate fuels increased for the 5th time in sixteen weeks, rising by 10,611,000 barrels to 129,431,000 barrels during the week ending January 4th, after our distillates supplies had increased by 9,529,000 barrels during the prior week...this week's increase was the largest one week increase since the week ending January 2nd, 2015, and the two week increase of 20,140,000 barrels was the largest two week increase on record...our distillates supplies increased this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 248,000 barrels per day to 2,955,000 barrels per day (after falling by 1,663,000 barrels per day over the course of the prior 2 weeks), and because our imports of distillates rose by 66,000 barrels per day to 261,000 barrels per day, while our exports of distillates rose by 131,000 barrels per day to 1,353,000 barrels per day....but despite this week's big increase, our distillate supplies were still 2.1% below the 143,088,000 barrels that we had stored on January 5th, 2017, and 5% below the five year average of distillates stocks for this time of the year...   

since our distillate supplies have just seen the largest two week jump on record, we'll include a graph showing what that looked like..

January 9th 2019 distillates supplies for January 4

the above graph came from a email from John Kemp of Reuters, which might also have been posted on his twitter page, and it shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year's range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the running median of our distillates inventory, or the midpoint of the 10 year daily range, traced by the blue dashes over each day of the year...this graph also shows the number of thousands of barrels of distillates we had stored at the end of each week in 2017 traced by a yellow graph, and our distillates supplies for each week of 2018 traced in red...to that red 2018 graph i have added an extension into the week ending January 4th, 2019, to bring his last graph for last year up to date....

notice that within the light blue shaded area that there is a seasonality to distillates supplies, as they're normally built up during the spring and summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heating oil is greatest...as you can see in yellpw, as recently as February 2017, our distillate supplies were repeatedly setting wintertime record highs, but then fell to below average by summer as our distillate exports increase...then, during this past year, when supplies of distillates should have been increasing during April and May - days 91 to 151 above - as they normally do, they were falling instead, largely because we had been exporting our distillates production at a record pace, and hence our supplies tracked near a 10 year low for most of June and June...so even though distillates supplies recovered somewhat during August, they began falling again in September and, like natural gas, were nearly 10% below their 10 year average heading into winter, when distillates are used as heat oil...so even though our refineries have started producing distillates at a near record pace in the weeks since, and we've thus seen the largest two week build on record, at least partially due to the recent mild temperatures, our supplies as of January 4th were still 2.1% below those of a year ago, and 5% below the 5 year average for this time of year...

finally, with this week's reversal in the unaccounted for crude factor, our commercial supplies of crude oil decreased for fifth time in 6 weeks, falling by 1,680,000 barrels during the week, from 441,418,000 barrels on December 28th to 439,738,000 barrels on January 4th...however, with a run of 10 large weekly increases before the recent smaller decreases, our crude oil inventories are still roughly 8% above the five-year average of crude oil supplies for this time of year, and roughly 30% above the 10 year average of crude oil stocks for the beginning of January, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have largely been rising since this Fall, after falling through most of the past year and a half until then, our oil supplies as of January 4th were thus 4.8% above the 419,515,000 barrels of oil we had stored on January 5th of 2017, while remaining 7.8% below the 479,012,000 barrels of oil that we had in storage on January 6th of 2016, and 2.1% below the 450,956,000 barrels of oil we had in storage on January 8th of 2015..  

This Week's Rig Count

US drilling activity, as evidenced by the number of drilling rigs active at the end of the week, was unchanged for the week ending January 11th, as drilling for oil decreased, likely in light of recently depressed oil prices and a 6.7 month backlog of uncompleted wells, while drilling for natural gas increased, likely reflecting the high natural gas prices of several weeks ago, when this week's drilling work was being contracted... Baker Hughes reported that the total count of rotary rigs running in the US remained at 1075 rigs over the week ending January 11th, which was still 136 more rigs than the 939 rigs that were in use as of the January 12th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, which was the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil fell by 4 rigs to 873 rigs this week, which was still 121 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 4 rigs to 202 natural gas rigs, which was also 15 more rigs than the 182 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...however, this week marked the first time that​ active natural gas rigs have topped 200 since September 4th, 2015....

a rig that had been drilling from a platform in the Gulf of Mexico offshore from Louisiana was shut down this week, which reduced the Gulf of Mexico rig count to 21 rigs for th​is​​report, which was still 2 rigs more than the 19 rigs deployed in the Gulf of Mexico a year ago at this time...since there is still no other offshore drilling off either coast or off Alaska at this time, nor was there during the same week of 2017-18, those Gulf of Mexico totals are identical to the US totals...in addition to the rig offshore from Louisiana being idled, a rig drilling from a platform on Louisiana inland waters was also shut down this week, leaving two such "inland waters" rigs operating there, still up from the one inland waters rig active a year ago...

the count of active horizontal drilling rigs increased by 3 rigs to 948 horizontal rigs this week, which was also 143 more horizontal rigs than the 805 horizontal rigs that were in use in the US on January 12th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the vertical rig count increased by 1 rig to 65 vertical rigs this week, which was also up from the 62 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count decreased by 4 rigs to 62 directional rigs this week, which was also down from the 72 directional rigs that were operating on January 12th of 2018...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table 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 January 11th, the second column shows the change in the number of working rigs between last week's count (January 4th) and this week's (January 11th) count, the third column shows last week's January 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent 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 12th of January, 2018...   

January 11 2019 rig count summary

while the Permian basin saw a one rig increase, the net change in the Texas Permian basin was a decrease, as two rigs were added to Texas Oil District 8, ​which is ​the core Permian Delaware, while 3 rigs were pulled out of Texas Oil District 7C, or the southern​ portion of the​ Permian Midland...meanwhile, the Permian Delaware that extends into New Mexico saw the addition of two rigs, netting an increase of one for the entire basin...meanwhile, the 4 rig increase in the Marcellus, 2 in Pennsylvania and 2 in West Virginia, accounts for this week's natural gas rig increase by itself; however, natural gas rigs were also added in Ohio​'s​ Utica and northern Louisiana's Haynesville, as two natural gas rigs that had been drilling in basins not tracked separately by Baker Hughes were concurrently pulled out...since the natural gas rig increases that are evident ​above account for an increase of 6 horizontal rigs, we know that 3 horizontal rig​s​ must have been shut down elsewhere...two of those obviously had been drilling in Oklahoma's Cana Woodford, but even those were partially offset by the Permian increase...so there must have been 2 horizontal rigs pulled out of basins not tracked separately by Baker Hughes...with no unaccounted for changes in other states, it would seem those would have had to be in Oklahoma, unless we had a masked rig switch elsewhere, such as a horizontal rig pulled out of a state while a vertical rig was added, which would appear as a goose-egg in the summary tables...

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note:  there's more here...

Sunday, January 6, 2019

natural gas prices see steepest monthly drop in 15 years; Christmas week natural gas withdrawal is smallest in 13 years

oil prices rebounded into the new year, rising every day this week, largely on news of a drop in OPEC output and hints of progress on resolving the U.S.-China trade imbroglio...after falling 0.6% to $45.33 a barrel in volatile trading that saw prices drop as low as $42.36 a barrel last week, prices of US oil for February delivery initially rallied nearly 2% on Monday on comments from both the US and Chinese presidents indicating progress in trade talks, but later fell back to close with a gain of just 8 cents at $45.41 a barrel, thus ending 2018 down nearly 25 percent, the first annual decline since 2015...after opening the new year higher, oil prices then slid to as low as $44.35 on Wednesday morning, before staging a rally that lifted prices from near session lows of $44.50 to $46.50 in the matter of a minute, likely on a report that OPEC’s oil output plunged by the most in almost two years, and then rose to as high as $47.78 a barrel, before falling back to settle with a gain for the day of $1.13 at $46.54 a barrel, weighed down by concerns of a slowing global economy...oil prices were higher again in choppy trade on Thursday, first rising to $47.49 and then falling back to $45.35, before ending with a gain of 55 cents at $47.09 a barrel, as concerns about slowing economic growth and a glut of crude were offset by Saudi output cuts and weakness in the US dollar...oil prices rose to as high as $49.22 ​a barrel ​on Friday, supported by a drop in the oil rig count, on news that vice-ministerial trade talks between the US and China had been scheduled for next week, but again fell back late to close with a gain of just 87 cents at $47.96 a barrel, with gains capped by an EIA report of large increases in refined product inventories...US oil prices thus​ ended​ 5.8% higher on the week, their biggest weekly increase since August, while the international benchmark of Brent crude for March ended the week $3.85 or 7.2% higher at $57.06, its largest gain in more than two years...

meanwhile, natural gas prices fell for the 5th week in a row as warm weather persisted and the the EIA reported the smallest Christmas week withdrawal in the modern record...prices of natural gas for February delivery fell 36.3 cents to $2.94 per mmBTU on Monday, trading below $3 per mmBTU for the first time since September...hence, natural gas finished the month of December down 36.3%, the sharpest monthly drop since March of 2003, and yes, a 36.3 cent drop on Monday did result in prices 36.3% lower than a month earlier...natural gas prices were then pretty much flat over the first two trading days of the new year, inching up 1.8 cents on Wednesday, but falling back 1.3 cents on Thursday, before rallying 9.9 cents or 3.3% on Friday to close the week at $3.044 per mmBTU, on the risk of colder weather come the 3rd week of January...

with that near​ly​ historic drop in natural gas prices, we'll include a graph of the recent price trajectory, to show you what that looked like..

January 5 2019 natural gas prices

the above graph is a Saturday afternoon screenshot of the interactive US natural gas price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents natural gas prices for a day of trading between mid August of 2018 and Friday of this week, wherein the green bars represent the days when the price of natural gas went up, and red bars represent the days when the price of natural gas went down...for green bars, the starting natural gas price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while for red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...also visible on this "candlestick" style graph are the faint grey "wicks" above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day...you can see that before October, natural gas prices had stayed below $3 per mmBTU, and it was only when the possibility of a wintertime natural gas shortage became widely known that prices began to move ​higher...then prices shot up to nearly $5 when November turned cold, and withdrawals of gas from storage were much above normal...now, with the milder temperatures and smaller withdrawals from storage of the past few weeks, the ​natural gas traders are thinking that the crisis has past, and hence natural gas prices ​have fallen back to their previous baseline...

the natural gas storage report for the week ending December 28th from the EIA showed that the quantity of natural gas in storage in the US fell by 20 billion cubic feet to 2,705 billion cubic feet over the week, which left our gas supplies 450 billion cubic feet, or 14.3% below the 3,155 billion cubic feet that were in storage on December 29th of last year, and 560 billion cubic feet, or 17.2% below the five-year average of 3,265 billion cubic feet of natural gas that are typically in storage ​going into the last weekend of December....this week's 20 billion cubic feet withdrawal from US natural gas supplies was much less than the 44 billion cubic feet to 47 billion cubic feet withdrawal that major surveys had forecast, and it was way below the average of 107 billion cubic feet of natural gas that have been withdrawn from US gas storage during the fourth week of December in the last 5 years...at it turns out, this week's withdrawal was​ also​ the smallest Christmas week withdrawal since 2005..

for a visualization of what this week's natural gas withdrawal looks like historically, we have a graphic showing this year's weekly change in natural gas inventories as compared to last year's and to the long term averages: 

January 5th 2019 change in natural gas inventories for Dec 28

the above graph was copied from a blog post at Bespoke Weather that was published on Friday of this week, ​shortly ​after the holiday postponed release of the natural gas storage report...on this graph, the dark blue ​graph ​shows this year's weekly additions to natural gas storage in billions of cubic feet above the zero line, and this year's weekly withdrawals from natural gas storage in billions of cubic feet below the zero line; similarly, weekly additions and withdrawals of natural gas in 2017 are shown in red, the 5 year average weekly change of natural gas in storage is shown in green, and the historical average weekly change of natural gas supplies in EIA data going back to 1992 is shown in orange...at the far left, you can see the record withdrawal of 359 billion of cubic feet during the first week in January of this year, and a withdrawal of 288 billion cubic feet during the third week of January 2018 that would have also been a record withdrawal if not for the first week; those 2 big withdrawals thus dropped our natural gas supplies to 17.5% below normal to start the year, a deficit which persisted throughout the summer, despite near normal additions to storage....in the week ending November 16th, you can see the big blue spike down that represented the largest drop in our supplies ever in mid-November, which came after our natural gas supplies had already started the winter at a 15 year low...then, two weeks ago, there was also a large withdrawal, but as you can see, by that time the 5 year average withdrawal was already near that level for mid-December...now we have had two much smaller than normal withdrawals of gas from storage, with this recent week showing the smallest Christmas​-week​ withdrawal since 2005​; contrast that with Christmas week of last year (shown in red), when 193 billion cubic feet ​of natural gas were​ needed from storage to meet demand​...while the past two weeks​ of low withdrawals​ have certainly taken the pressure off​ supplies​,​ ​we aren't completely out of the woods yet, since our gas stores are still more than 17% below recent averages, ​but barring a real frigid January, we should be able to make it through the winter with the supplies we now have on hand..

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending December 28th, indicated a big pickup in oil refining coupled with a modest decrease in our oil imports and a big drop in our oil exports, which together meant our commercial crude supplies remained statistically unchanged for the second week in a row...our imports of crude oil fell by an average of 264,000 barrels per day to an average of 7,392,000 barrels per day, after rising by an average of 233,000 barrels per day the prior week, while our exports of crude oil fell by an average of 732,000 barrels per day to an average of 2,237,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,155,000 barrels of per day during the week ending December 28th, 468,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reportedly unchanged at 11,700,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,855,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,760,000 barrels of crude per day during the week ending December 28th, 410,000 barrels per day more than the amount of oil they used during the prior week, while over the same period 1,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US....hence, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 906,000 barrels per day short of what refineries reported they used during the week plus what was added to storage....to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+90​6,000) 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 is labeled in their footnotes as "unaccounted for crude oil"...with our unaccounted for crude as high as 90​6,000 barrels per day, all of this week's oil supply and disposition figures that we have cited must therefore be considered questionable...(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 7,466,000 barrels per day, but was still 4.1% less than the 7,789,000 barrel per day average that we were importing over the same four-week period last year....the 1,000 barrel per day increase in our total crude inventories was due to a 1,000 barrel per day addition to our commercially available stocks of crude oil, since the oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported unchanged at 11,700,000 barrels per day because the rounded figure for output from wells in the lower 48 states was unchanged at 11,200,000 barrels per day, while a 2,000 barrel per day decrease to 495,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending December 29th was at 9,782,000 barrels per day, so this week's rounded oil production figure was 19.6% above that of a year ago, and 38.8% 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...     

US oil refineries were operating at 97.2% of their capacity in using those 17,760,000 barrels of crude per day during the week ending December 28th, ​up from last week's 95.1% of capacity, and the highest December capacity utilization rate on record....the 17,760,000 barrels per day of oil that were refined this week were thus again at a seasonal high for the time of year for the 27th time out of the past 31 weeks, and 0.9% higher than the previous December high of 17,608,000 barrels of crude per day that were being processed during the week ending December 29th, 2017, when US refineries were operating at 96.7% of capacity...  ... 

despite the increase in the amount of oil being refined, the gasoline output from our refineries was much lower, decreasing by 611,000 barrels per day to 9,533,000 barrels per day during the week ending December 28th, after our refineries' gasoline output had decreased by 190,000 barrels per day during the week ending December 21st...with that decrease in this week's gasoline output, our gasoline production during the week was 1.5% lower than the 9,682,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 147,000 barrels per day to 5,591,000 barrels per day, after that output had increased by 51,000 barrels per day the prior week....with that increase, this week's distillates production virtually equal to the the 5,592,000 barrels of distillates per day that were being produced during the week ending December 29th, 2017.... 

even with the pullback in our gasoline production, our supply of gasoline in storage at the end of the week increased by 6,890,000 barrels to 239,996,000 barrels by December 28th, the 6th increase in the past 11 weeks, and enough to finally lift our gasoline supplies back above those of early October....our gasoline supplies rose this week because the amount of gasoline supplied to US markets fell by 725,000 barrels per day to 8,623,000 barrels per day while our exports of gasoline rose by 21,000 barrels per day to 872,000 barrels per day and our imports of gasoline fell by 195,000 barrels per day to 314,000 barrels...with this week's increase, our gasoline inventories are again at a seasonal high for anytime in December, 2.9% higher than last December 29th's level of 233,187,000 barrels, and roughly 5% above the five year average of our gasoline supplies for this time of the year...

with the near record production of distillates, our supplies of distillate fuels increased for just the 4th time in fifteen weeks, rising by 9,529,000 barrels to 129,431,000 barrels during the week ending December 28th, after our distillates supplies had increased by a statistically insignificant 2,000 barrels during the prior week...our distillates supplies increased because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 1,039,000 barrels per day to 3,203,000 barrels per day (after falling by 644,000 barrels per day the prior week), and because our exports of distillates fell by 184,000 barrels per day to 1,222,000 barrels per day, while our imports of distillates fell by 9,000 barrels per day to 195,000 barrels per day....but despite this week's big increase, our distillate supplies finished the week 6.8% below the 138,834,000 barrels that we had stored on December 29th, 2017, and remained 7% below the five year average of distillates stocks for this time of the year...   

finally, with the week's big drop in oil exports largely offset by lower imports and increased refining, our commercial supplies of crude oil rose by a statistically insignificant 7,000 barrels to 441,418,000 barrels on December 28th, from 441,411,000 barrels on December 21st, the first increase in 5 weeks but the 27th 'up' week of 2018....with our increases for the year now greater than our decreases, our crude oil inventories were thus roughly 8% above the five-year average of crude oil supplies for this time of year, and over 28% above the 10 year average of crude oil stocks for the last week of December, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...however, since our crude oil inventories had been falling through most of the past year and a half until this Fall, our oil supplies as of December 28th​ ​were only 4.0% above the 424,463,000 barrels of oil we had stored on December 29th of 2017, and remained 7.8% below the 479,012,000 barrels of oil that we had in storage on December 30th of 2016, and 2.1% below the 450,956,000 barrels of oil we had in storage on January 1st of 2015..    

This Week's Rig Count

US drilling activity decreased for the fifth time in seven weeks during the week ending January 4th, as drilling for oil has stagnated in light of depressed oil prices and a 6.7 month backlog of uncompleted wells... Baker Hughes reported that the total count of rotary rigs running in the US decreased by 8 rigs to 1075 rigs over the week ending January 4th, which was still 151 more rigs than the 924 rigs that were in use as of the January 5th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil fell by 8 rigs to 877 rigs this week, which was still 135 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 198 natural gas rigs, which was still 16 more rigs than the 182 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008... 

two of the rigs that were shut down this week had been drilling from platforms in the Gulf of Mexico, which reduced the Gulf of Mexico rig count to 22 rigs for the week, which was still 5 rigs more than the 17 rigs deployed in the Gulf of Mexico a year ago at this time...since there is no other offshore drilling off either coast or off Alaska at this time, nor was there during the same week of 2017-18, those Gulf of Mexico totals are identical to the US totals..

the count of active horizontal drilling rigs remained unchanged at 945 horizontal rigs this week, which was still 147 more horizontal rigs than the 798 horizontal rigs that were in use in the US on January 5th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the vertical rig count decreased by 4 rig to 64 vertical rigs this week, which was still up from the 62 vertical rigs that were in use during the same week of last year...at the same time, the directional rig count also decreased by 4 rigs to 66 directional rigs this week, which was still up from the 64 directional rigs that were operating on January 5th of 2018...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table 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 January 4th, the second column shows the change in the number of working rigs between last week's count (December 28th) and this week's (January 4th) count, the third column shows last week's December 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent 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 5th of January, 2018...  

January 4 2019 rig count summary

in addition to the major producing states shown above, Mississippi also saw 4 rigs shut down this week, leaving 2 rigs active in the state, their lowest count since last January 12th...those 4 from Mississippi, and the 5 rigs pulled out of California, pretty much account for this week's decrease (the 2 Gulf of Mexico rigs that were shut down come out of Louisiana's count)...otherwise, i don't see anything that's hidden in this table, such as a "no change" masking a gas rig being swapped out for an oil rig, so what the table indicates this week is pretty much what happened...since the basin count above shows an increase of two rigs while the horizontal rig count was unchanged, two horizontal rigs had to have been pulled out of basins not tracked separately by Baker Hughes, ​such as those in California and Mississippi...then there were also 8 ​more ​rigs, 4 vertical and 4 directional, pulled out of those "other" basins not tracked separately by Baker Hughes, for a net decrease of 10 rigs in "other basins"....and all of those changes, including those shown above, were oil rigs; there were no changes to gas rig counts in any state...

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note:  there’s more here