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 19, 2020

natural gas prices at new lows; record oil production; 2019 oil shortage was 297,900,000 barrels, or ~3 days of output

oil prices finished lower for a second week as geopolitical fears unwound and oil traders shifted their focus to an imaginary oil glut and sluggish demand....after falling 6.4% to $59.04 a barrel last week because the exchange of missile attacks between the US and Iran failed to interrupt oil supplies, the benchmark price of US light sweet crude for February delivery fell for a fifth consecutive day on Monday as tensions in the Mideast continued to ease over the weekend and oil traders turned their focus to high US fuel supplies, with oil prices finishing down 96 cents at $58.08 a barrel...however, oil prices snapped their losing streak on Tuesday, rising 15 cents to $58.23 a barrel, buoyed by upbeat anticipation of the expected Wednesday signing of a so-called 'phase one' U.S.-China trade deal...but oil prices were down again early Wednesday after the late Tuesday API report had showed a surprise increase of US crude supplies, and continued lower to close down 42 cents at $57.81 a barrel after the EIA reported huge increases in domestic supplies of gasoline and distillates....oil prices then opened higher on Thursday on Chinese commitments to much higher purchases of U.S. energy products, but slumped back to $57.56 at midday before rallying to finish 71 cents higher at $58.52 a barrel on news of the Senate approval of the U.S.-Mexico-Canada trade agreement...oil prices then tacked on another 2 cent gain on Friday to finish at $58.54 a barrel, a loss of less than 1% for the week as the positive news on trade was outweighed by signs of oversupply and weak global demand..

meanwhile, natural gas prices finished much lower on continued moderate weather and on reports from the EIA forecasting lower natural gas prices for 2020 and slower growth in natural gas-fired electricity generation...after finishing last week 3.4% higher at $2.202 per mmBTU as traders eyed a return to winter temperatures, the price of natural gas for February delivery opened higher but then moved down on Monday and ended 2 cents lower at $2.182 mmBTU as the shift to colder temperatures failed to impress natural gas traders...prices recovered a half a cent on Tuesday but were down 6.7 cents on Wednesday on forecasts for less cold in the two week forecasts...prices rallied on a bullish storage report on Thursday, but again faded to close 4.3 cents lower at a five month low of $2.077 mmBTU, as the bullish storage report was no match for bearish weather forecasts... February natural gas lost then 7.4 cents, or 3.6%, on Friday to settle at $2.003 per mmBTU, and was thus down about 9% for the week, the lowest close for natural gas prices since May 2016 and the lowest price ever for February 2020 natural gas...

the natural gas storage report for the week ending January 10th from the EIA indicated that the quantity of natural gas held in storage in the US fell by 109 billion cubic feet to 3,039 billion cubic feet by the end of the week, which left our gas supplies 494 billion cubic feet, or 19.4% higher than the 2,545 billion cubic feet that were in storage on January 10th of last year, and 149 billion cubic feet, or 5.2% above the five-year average of 2,890 billion cubic feet of natural gas that has been in storage as of the 10th of January in recent years....the 109 billion cubic feet that were withdrawn from US natural gas storage this week was somewhat more than the average forecast for a 92 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, but still far less than the average 194 billion cubic feet of natural gas that have been pulled from natural gas storage during the first full week of January over the past 5 years....

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 10th showed that because of a modest drop in our oil imports and a sizable increase in our oil exports, we needed to pull oil out of our stored commercial supplies for the seventh time in the past eighteen weeks....our imports of crude oil fell by an average of 179,000 barrels per day to an average of 6,730,000 barrels per day, after rising by an average of 379,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 417,000 barrels per day to 3,481,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,071,000 barrels of per day during the week ending January 10th, 596,000 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 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 16,071,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,973,000 barrels of crude per day during the week ending January 10th, 76,000 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 364,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....hence, we can see that this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 538,000 barrels per day less than 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 (+538,000) 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) indicated that the 4 week average of our oil imports slipped to an average of 6,611,000 barrels per day last week, now 13.1% less than the 7,605,000 barrel per day average that we were importing over the same four-week period last year....the 364,000 barrel per day net withdrawal from our total crude inventories was all from our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve was unchanged....this week's crude oil production was reported to be 100,000 barrels per day higher at a record 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 higher at a record 12,500,000 barrels per day, and while even though oil production from Alaska was 3,000 barrels per day lower at 480,000 barrels per day, it 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 January 11th was rounded to 11,900,000 barrels per day, so this reporting week's rounded oil production figure was 9.2% 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 92.2% of their capacity in using 16,973,000 barrels of crude per day during the week ending January 10th, down from 93.0% of capacity the prior week, and a bit below the recent average capacity utilization for the first full week of January...as a result, the 16,973,000 barrels per day of oil that were refined this week were 1.5% below the 17,223,000 barrels of crude that were being processed daily during the week ending January 11th, 2019, when US refineries were operating at 94.6% of capacity....

even with just a modest increase in the amount of oil being refined, gasoline output from our refineries was quite a bit higher, increasing by 394,000 barrels per day to 9,281,000 barrels per day during the week ending January 3rd, after our refineries' gasoline output had decreased by 1,286,000 barrels per day over the prior week...but even after this week's increase in gasoline output, our gasoline production was still 3.2% lower than the 9,584,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 105,000 barrels per day to 5,205,000 barrels per day, after our distillates output had increased by 1,000 barrels per day over the prior week...after this week's decrease in distillates output, our distillates' production for the week was 3.8% below the 5,412,000 barrels of distillates per day that were being produced during the week ending January 11th, 2018....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the tenth week in a row and for the 16th time in 30 weeks, rising by 6,678,000 barrels to 258,287,000 barrels during the week to January 10th, after our gasoline supplies had increased by a 4 year high of 9,137,000 barrels over the prior week....our gasoline supplies increased by less this week because the amount of gasoline supplied to US markets increased by 428,000 barrels per day to 8,558,000 barrels per day, while our exports of gasoline fell by 198,000 barrels per day to 608,000 barrels per day, and while our imports of gasoline rose by 42,000 barrels per day to 443,000 barrels per day....after this week's increase, our gasoline supplies were 1.1% higher than last January 11th's gasoline inventory level of 255,565,000 barrels, and remained 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 16 weeks and for 16th time in the past 41 weeks, rising by 8,171,000 barrels to 147,221,000 barrels during the week ending January 10th, after our distillates supplies had increased by 5,330,000 barrels over the prior week....our distillates supplies increased by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 188,000 barrels per day to 3,185,000 barrels per day, and because our exports of distillates fell by 373,000 barrels per day to 1,055,000 barrels per day, while our imports of distillates fell by 50,000 barrels per day to 202,000 barrels per day....but even after three weeks of near record inventory increases, our distillate supplies were still 0.7% less than the 140,042,000 barrels of distillates that we had stored on January 11th, 2018, and roughly 3% below the five year average of distillates stocks for this time of the year...

finally, with this week's increase in oil exports and the decrease in oil imports, our commercial supplies of crude oil in storage fell for the sixteenth time in thirty weeks and for the twenty-first time in 50 weeks, decreasing by 2,549,000 barrels, from 431,060,000 barrels on January 3rd to 428,511,000 barrels on January 10th....after that decrease, our crude oil inventories remained near the five-year average of crude oil supplies for this time of year, but were still almost 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the first full week of January, 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 the past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of January 10th were 2.0% below the 437,055,000 barrels of oil we had stored on January 11th of 2018, while rising to 3.8% above the 419,515,000 barrels of oil that we had in storage on January 5th of 2017, but at the same time fell to 11.2% below the 485,456,000 barrels of oil we had in commercial storage on January 13th of 2016...        

OPEC's Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC's January Oil Market Report, which covers OPEC & global oil data for December, and hence it gives us a snapshot of the global oil supply & demand situation before ​OPEC's ​increased ​production cuts of up to 2.1 million barrels per day, or more than 2% of global supply, are to go into effect...but as we'll see, this report shows there was already a shortfall of nearly ​0.8% of the amount of oil produced globally in December, even as it was less than the larger shortfalls seen earlier this year...

the first table from this monthly report that we'll look at is from the page numbered 58 of that report (pdf page 68), 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...

December 2019 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC's oil output fell by 161,000 barrels per day to 29,444,000 barrels per day in December, from their revised November production total of 29,606,000 barrels per day...however that November output figure was originally reported as 29,551,000 barrels per day, which means that OPEC's November production was revised 55,000 barrels per day higher, and hence December's production was, in effect, a 106,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official November OPEC output figures as reported a month ago, before this month's revisions)...

from that table, we can also see that a 111,000 barrel per day decrease in production by the Saudis, a 76,000 barrel per day decrease in production by Iraq, a 46,000 barrel per day decrease in production by the Emirates, and a 44,000 barrel per day decrease in production by Libya were the major reasons for the December drop in OPEC's output, more than offsetting the increase of 125,000 barrels per day in the output from Angola, while the oil output changes by most other OPEC members had little impact on the total....with th​is month's increase in Angola's output, and despite the decrease in Iraq's output, they are now the only two OPEC countries whose production was above the output allocation as 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, and which were extended at their July 1st meeting earlier last year...these output allocations for December can be seen in the table of OPEC production quotas for 2019 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 those cuts, 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 are expected to make over the 3 month period beginning January...as you see, the heaviest cuts fall on the core OPEC members of Saudi Arabia. the United Arab Emirates, Kuwait and Iraq, while embargoed Iran and Venezuela remain exempt...obviously, th​at table would be more meaningful if their current production, or even their expected end production, were included, but i've been unable to find a table with those complete details, 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 OPEC meeting, the Saudis voluntarily pledged to cut an additional 400,000 barrels a day more than was mandated by the December 6th agreement, bringing the total cut for the group to 2.1 million barrels a day, or more than 2% of global output....

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 January 2018 to December 2019, and it comes from page 59 (pdf page 69) 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 metrics for global output shown on the right scale...  

December 2019 OPEC report global oil supply

including the 161,000 barrel per day decrease in OPEC's production from what they produced a month ago, OPEC's preliminary estimate indicates that total global oil production decreased by a rounded 0.06 million barrels per day to average 100.28 million barrels per day in December, but that reported decrease came after November's total global output figure was revised higher by 560,000 barrels per day from the 97.78 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 110,000 barrels per day in December after that revision, with higher oil production from the UK, Norway, Canada, Mexico and the US the major reasons for the non-OPEC output increase in December...after the decrease in December's output from that upward revision to November, the 100.28 million barrels of oil per day produced globally in December were 0.07 million barrels per day, or just fractionally lower than the 100.35 million barrels of oil per day that were being produced globally in December a year ago, before their first round of cuts officially kicked in (see the January 2019 OPEC report (online pdf) for the originally reported December 2018 details)...with this month's decrease in OPEC's output, their December oil production of 29,444,000 barrels per day fell to 29.4% of what was produced globally during the month, down from the 29.5% share OPEC contributed in December, and the 29.9% share they had in November....OPEC's December 2018 production was reported at 31,578,000 barrels per day, which means that the 14 OPEC members who were part of OPEC last year produced 2,134,000 fewer barrels per day of oil​ in December​ than what they produced a year ago, when they accounted for 31.6% of global output, with a 791,000 barrel per day decrease in output from Saudi Arabia, a 677,000 barrel per day drop in the output from Iran, and a 434,000 barrel per day decrease in the output from Venezuela from that time accounting for most of the year over year decrease... 

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

December 2019 OPEC report global oil demand

the above table came from page 31 of the December OPEC Monthly Oil Market Report (pdf page 41), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2019 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 estimate of global oil demand during the fourth quarter of 2019...

OPEC has estimated that during the 4th quarter of this year, all oil consuming regions of the globe have used 101.07 million barrels of oil per day, which is an upward revision from the 100.95 million barrels of oil per day they reported for the 4th quarter a month ago....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 only producing 100.28 million barrels per day during December, which means that there was a shortage of around 790,000 barrels per day in global oil production when compared to the demand estimated for the month... 

the revisions to November output and to 2019 demand (circled in green above) means that the previous surplus of shortfall figures we had computed for prior months should be revised as well...a month ago we estimated a global shortage of around 1,170,000 barrels per day in global oil production during November, based on the figures published at that time...however, as we saw earlier, November's global output figure was was revised higher by 560,000 barrels per day from those figures, while global demand was simultaneously revised 120,000 barrels per day higher, so with these revised figures, we now find that global oil production in November was running roughly 730,000 barrels per day short of demand...also a month ago, we estimated a shortage of 1,580,000 barrels per day for October; hence, with the upward revision to 4th quarter demand, that October oil production shortage would now be 1,700,000 barrels per day...

note in our green ellipse that demand for oil in the 3rd quarter was revised 90,000 barrels per day lower...we had previously computed a global shortage of 3,030,000 barrels per day in September (after the ​missile ​attack on Saudi production​)​, a deficit of 1,670,000 barrels per day in August, and a deficit of 2,290,000 barrels per day in July's oil production...with the downward revision to 3​rd​ quarter demand, those shortfalls will now be 2,940,000 barrels per day in September, 1,580,000 barrels per day in August, and 2,200,000 barrels per day in July...

meanwhile, demand for oil in the 2nd quarter was revised 200,000 barrels per day lower.....that would mean that we'd have to revise our most recently computed global oil deficit for June from 310,000 barrels per day to 110,000 barrels per day, that we'd have to revise our May oil shortage from 680,000 barrels per day to 480,000 barrels per day, and that we'd have to revise our global oil deficit for April from 710,000 barrels per day to 510,000 barrels per day...hence, for the 2nd quarter as a whole, even after that big downward revision to demand, the world's oil producers were still producing 257,000 barrels per day less than what was needed...

also encircled in green is an upward revision of 40,000 barrels per day to first quarter demand, a period when oil supplies exceeded demand....that revision means that the global oil surplus of 190,000 barrels per day we had last figured for March would have to be revised to a global oil surplus of 150,000 barrels per day, that the 640,000 barrel per day global oil output surplus we had for February would now be a 600,000 barrel per day global oil output surplus, and the 550,000 barrel per day global oil output surplus we had for January would be revised to a 510,000 barrel per day oil output surplus...

so as you can see, we have gone from a global oil surplus averaging over 400,000 barrels per day in the first quarter of 2018 to an oil shortage of ​​2, 240,​000 barrels per day by the third quarter, and thence to an oil shortage of around 790,000 barrels per day by December....by totaling up those 12 monthly estimates of surplus or shortfall, we find that for the twelve months of 2019, global oil demand exceeded production by roughly 297,900,000 barrels, a net oil shortfall that is the equivalent of ​almost​ three days of global oil production at the December production rate....however, most of the media, including industry websites, are still reporting on oil supplies as if we still have a global glut of oil, because that has become the established narrative and because no one makes the effort to look at the actual data...

This Week's Rig Count

the US rig count increased for the 3rd time in the past 22 weeks during the week ending January 17th, but is still more than 26.5% lower than the last ​rig ​count of 2018...Baker Hughes reported that the total count of rotary rigs running in the US increased by 15 rigs to 796 rigs this past week, which was still down by 254 rigs from the 1050 rigs that were in use as of the January 18th report of 2019, and 1,133 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 14 rigs to 673 oil rigs this week, which was 179 fewer oil rigs than were running a year ago, and much 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 rose by one to 120 natural gas rigs, which was still down by 78 gas rigs from the 198 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, compared to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico decreased by one rig to 20 rigs this week, as another rig that had been drilling offshore from Louisiana was shut down this week, the 4th Louisiana offshore decrease in a row...however, the 19 rigs that continued drilling in Louisiana waters plus the one that was drilling offshore from Texas was one more than the Gulf of Mexico rig count of 19 rigs during the same week of a year ago, when 18 rigs were drilling offshore from Louisiana and one rig was drilling in Texas waters...since there are no rigs deployed off US shores elsewhere at this time, nor were there a year ago, the Gulf of Mexico count for this year and last is the same as the national total in both cases..

the count of active horizontal drilling rigs was up by 11 rigs to 709 horizontal rigs this week, the highest horizontal rig count since November 8th, but still 220 fewer horizontal rigs than the 929 horizontal rigs that were in use in the US on January 18th 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 vertical rig count was up by 5 rigs to 43 vertical rigs this week, but those were still down by 23 from the 66 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count was down by 1 to 44 directional rigs this week, and those were down by 11 from the 55 directional rigs that were in use on January 11th 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 January 17th, the second column shows the change in the number of working rigs between last week's count (January 10th) and this week's (January 17th) count, the third column shows last week's January 10th 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 18th of January, 2019...   

January 17 2020 rig count summary

three rigs were added in Texas Oil District 8, or the core Permian Delaware this week, while the rig count in the other Texas oil districts encompassing the Permian basin in Texas were unchanged...since the Permian basin rig count was up by a total of six, that means that the three rigs that were added in New Mexico were also Permian rigs, drilling in the far western reaches of the Permian Delaware...the other Texas rig ​changes, meanwhile, were ​the two rigs added ​in Texas Oil District 2 of the Eagle Ford, while the rig that was pulled out of the Granite Wash was apparently operating in Oklahoma, since activity in the panhandle Texas Oil District 8 was unchanged...Oklahoma, meanwhile, saw a rig addition in the Ardmore Woodford and at least one elsewhere not shown above...the Williston basin only shows a two rig increase while the North Dakota activity increased by 3 rigs because a Williston rig in Montana was shut down at the same time; one Williston rig remains in Montana as of this week, down from two a year ago....meanwhile, the single natural gas rig addition this week doesn't even show up in this weeks tables, as it was in a basin not tracked separately by Baker Hughes... 

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note: there's more here...

Sunday, January 12, 2020

smallest January natgas draw in 21 years; gasoline supplies rise most in 4 years as gasoline demand falls to a 3 year low

oil prices fell for the first ​​week in six​​ and by the most in one week since July​ this past week​, following the lack of any significant disruption to oil supplies in the wake of ​the latest U.S.-Iran ​missile exchange...after rising 2.2% to $63.05 a barrel last week following the US assassination of Iran's top General, the benchmark price of US light sweet crude for February delivery opened higher on Monday and rose to as high as $64.72 as Trump and Tehran continued to trade bellicose rhetoric, but backed off that high to settle with an increase of just 22 cents at $63.27 a barrel on growing doubts that Iran would strike back in a way that would disrupt oil supplies...with oil supplies remaining uninterrupted​​, oil prices opened lower on Tuesday and continued falling to register their first loss in 4 days, ending down 57 cents as $62.70 a barrel, as oil traders reconsidered the likelihood of the feared supply disruptions and cashed in their profits...but ​then ​oil prices spiked nearly $3 higher to start trading on Wednesday, first because the API had reported a larger than expected drawdown of US crude supplies, and then because Iranian missiles had struck US military bases in Iraq...however prices turned around that afternoon and doubled that ​big ​early ​spike in a downward tumble, falling nearly 10% from the day's high to end down $3.09 at $59.61 a barrel, after the EIA reported an increase in US crude supplies again​st​ the expected draw and Trump said Iran “appears to be standing down” following those overnight missile strikes...oil prices then fell for a third day on Thursday, drifting below the levels prevailing before the ​initial ​U.S. attack and ending down 5 cents at $59.56 a barrel as calm in the Mideast prevailed...with both countries appearing to take a step back from the brink on Friday, oil prices fell another 52 cents to close at $59.04 a barrel, leaving the front-month oil contract 6.4% lower on the week, it's biggest weekly loss since July...

natural gas prices, on the other hand, finished modestly higher, after bouncing off a life-of-contract low last week...after falling 4.5% to $2.130 per mmBTU on 'exceptionally bearish' weather forecasts last week, the price of natural gas for February delivery opened lower and fell to below $2.10 on Monday before recovering to close half a cent higher at $2.135 per mmBTU.. natural gas prices rose 2.7 cents to $2.162 per mmBTU​ ​on Tuesday as some models began to show an extended stretch of below-normal temperatures, but then gave 2.1 cents of that gain back on wednesday, as oversupply continued to weigh on prices ...but despite widespread warmth on Thursday, prices rose 2.5 cents as natural gas traders "eyed an end to the blowtorch regime"...prices then rallied a bit on Friday on the prospect of a return to something resembling winter temperatures later this month and closed 3.6 cents higher at $2.202 per mmBTU, thus finishing th​is week ​3.4% higher than last​...

the natural gas storage report for the week ending January 3rd from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 44 billion cubic feet to 3,148 billion cubic feet by the end of the week, which left our gas supplies 521 billion cubic feet, or 19.8% higher than the 2,627 billion cubic feet that were in storage on January 3rd of last year, and 74 billion cubic feet, or 2.4% above the five-year average of 3,074 billion cubic feet of natural gas that has been in storage as of the 3rd of January in recent years....the 44 billion cubic feet that were withdrawn from US natural gas storage this week was the smallest January ​gas ​draw since 1998, a bit below the average forecast for a 50 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, less than ​half of ​the 94 billion cubic feet withdrawal reported during the corresponding week in 2019, and less than​ a quarter of/​ the average 184 billion cubic feet of natural gas that have been pulled from natural gas storage during New Year​'​s week over the past 5 years....

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 3rd showed that because of a big drop in our oil exports, a sizable increase in our oil imports, and a decrease in demand for oil from our refineries, we were able to add to our stored commercial supplies of crude for the eleventh time in the past seventeen weeks...our imports of crude oil rose by an average of 379,000 barrels per day to an average of 6,730,000 barrels per day, after falling by an average of 457,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,398,000 barrels per day to 3,064,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,666,000 barrels of per day during the week ending January 3rd, 1,777,000 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 was unchanged at 12,900,000 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 16,566,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,897,000 barrels of crude per day during the week ending January 3rd, 387,000 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 166,000 barrels of oil per day were being added to the supplies of oil stored in the US....hence, 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 497,000 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 (+497,000) 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) indicated that the 4 week average of our oil imports slipped to an average of 6,617,000 barrels per day last week, now 12.7% less than the 7,579,000 barrel per day average that we were importing over the same four-week period last year....the 166,000 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 was unchanged....this week's crude oil production was reported to be unchanged at 12,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,400,000 barrels per day, while oil production from Alaska was 4,000 barrels per day lower at 483,000 barrels per day but 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 January 4th was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 10.3% above that of a year ago, and 53.1% 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 93.0% of their capacity in using 16,897,000 barrels of crude per day during the week ending January 3rd, down from 94.5% of capacity the prior week, and a bit below the recent average capacity utilization for the first week of January...as a result, the 16,897,000 barrels per day of oil that were refined this week were 3.8% below the 17,566,000 barrels of crude per day that were being processed during the week ending January 4th, 2018, when US refineries were operating at 96.1% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 1,286,000 barrels per day to 8,887,000 barrels per day during the week ending January 3rd, after our refineries' gasoline output had decreased by 96,000 barrels per day over the prior week...after this week's big d​rop in gasoline output, our gasoline production was 5.4% lower than the 9,392,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) slipped by 1,000 barrels per day to 5,310,000 barrels per day, after our distillates output had decreased by 83,000 barrels per day over the prior week...and after this week's small decrease in distillates output, our distillates' production for the week was 4.5% below the 5,563,000 barrels of distillates per day that were being produced during the week ending January 4th, 2018....

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the ninth week in a row and for the 15th time in 29 weeks, rising by 9,137,000 barrels to 251,609,000 barrels during the week to January 3rd, the largest increase in 4 years, after our gasoline supplies had increased by 3,212,000 barrels over the prior week....our gasoline supplies increased by much more this week because the amount of gasoline supplied to US markets decreased by 828,000 barrels per day to a three year low of 8,133,000 barrels per day, and because our exports of gasoline fell by 219,000 barrels per day to 806,000 barrels per day​,​ while our imports of gasoline fell by 72,000 barrels per day to 401,000 barrels per day....after this week's increase, our gasoline supplies were 1.4% higher than last January 4th's gasoline inventory level of 248,062,000 barrels, while they remained roughly 5% above the five year average of our gasoline supplies for this time of the year...

likewise, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 5th time in 15 weeks and for 15th time in the past 40 weeks, rising by 5,330,000 barrels to 139,050,000 barrels during the week ending January 3rd, after our distillates supplies had increased by 8,776,000 barrels over the prior week....our distillates supplies increased by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 318,000 barrels per day to 3,373,000 barrels per day, and because our exports of distillates rose by 243,000 barrels per day to 1,428,000 barrels per day, while our imports of distillates rose by 69,000 barrels per day to 252,000 barrels per day....but even after this week's inventory increase, our distillate supplies were 0.7% less than the 140,042,000 barrels of distillates that we had stored on January 4th, 2018, and roughly 8% below the five year average of distillates stocks for this time of the year...

finally, with this week's big drop in oil exports, combined with higher oil imports and the decrease in the amount of oil used by refineries, our commercial supplies of crude oil in storage rose for the fourteenth time in twenty-nine weeks and for the twenty-ninth time in 49 weeks, increasing by 1,146,000 barrels, from 429,896,000 barrels on December 27th to 431,060,000 barrels on January 3rd....with that modest increase, our crude oil inventories remained near the five-year average of crude oil supplies for this time of year, but were still more than 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the first weekend of January, 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 this 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 January 4th were 2.0% below the 439,738,000 barrels of oil we had stored on January 4th of 2018, while remaining 2.8% above the 419,515,000 barrels of oil that we had in storage on January 5th of 2017, but at the same time were 10.8% below the 483,109,000 barrels of oil we had in commercial storage on January 6th of 2016...       

This Week's Rig Count

the US rig count decreased for the 18th time in the past 21 weeks during the week ending January 10th, and is now 27.9% lower than the last count of 2018...Baker Hughes reported that the total count of rotary rigs running in the US decreased by 15 rigs to a 34 month low of 781 rigs this past week, which was also down by 294 rigs from the 1075 rigs that were in use as of the January 11th report of 201​9, and 1,148 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 11 rigs to 659 oil rigs this week, which was a 33 month low for oil rigs, 214 fewer oil rigs than were running a year ago, and much 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 fell by 4 to 119 natural gas rigs, the fewest natural gas rigs deployed since December 2nd 2016, and hence a 37 month low for natural gas drilling, down by 83 gas rigs from the 202 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, compared to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico decreased by one rig to 21 rigs this week, as another rig that had been drilling offshore from Louisiana was shut down this week...as a result, the 20 rigs that continued drilling in Louisiana waters plus the one that was drilling offshore from Texas matched the Gulf of Mexico rig count of 21 rigs a year ago, when 20 rigs were drilling offshore from Louisiana and one rig was drilling in Texas waters...since there are no rigs deployed off US shores elsewhere, nor were there a year ago, the Gulf of Mexico count for this year and last is equal to the national total in both cases..

the count of active horizontal drilling rigs was down by 3 rigs to 698 horizontal rigs this week, which was 250 fewer horizontal rigs than the 948 horizontal rigs that were in use in the US on January 11th 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 vertical rig count was down by 6 rigs to 38 vertical rigs this week, and those were also down by 27 from the 65 vertical rigs that were operating during the same week of last year....in addition, the directional rig count was also down by 6 to 45 directional rigs this week, and those were down by 17 from the 62 directional rigs that were in use on January 11th 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 January 10th, the second column shows the change in the number of working rigs between last week's count (January 3rd) and this week's (January 10th) count, the third column shows last week's January 3rd 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 11th of January, 2019...   

January 10 2020 rig count summary

in the Texas Permian basin, there was a three rig reduction in Texas Oil District 8, or the core Permian Delaware, and ​a ​one rig reduction in Texas Oil District 8A, or the northern Permian Midland, while one rig was added in Texas Oil District 7C, the southern Permian Midland...in addition, two rigs were pulled out of Texas Oil District 7B, often shown as east of the Permian but ​a region ​which nonetheless has accounted for Permian rig additions in recent weeks...with the New Mexico rig count also down by two, we have to figure either one of those, or one of the retired rigs from Texas District 7B, had not been targeting the Permian...​meanwhile, ​most the other changes were pretty straightforward; oil rigs were pulled out of North Dakota's Williston shale and Colorado's Niobrara chalk, while rigs ​targeting oil ​were added in Oklahoma's Ardmore Woodford and Cana Woodford...for rigs targeting natural gas, one was added in Pennsylvania's Marcellus shale, one was shut down in Ohio's Utica shale, and four were shut down in the Haynesville shale...for those, the northern Louisiana region that includes the Haynesville shale was down 2 rigs to 31, while the adjacent Texas Oil District 6 was down 3 rigs to 16, so with the Haynesville down four, one of those rigs  ​was apparently​ ​not targeting that formation...

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note: there's more here

Sunday, January 5, 2020

US oil supplies fall most in 6 mos on record exports; February natural gas hits a contract low; gas rigs at 37 month low

oil prices ended higher for a 5th week in a row and for the eighth week out of the past nine, as US oil supplies fell much more than was expected while the US assassination of Iran's top general and the commander of the Iraqi Popular Mobilization Forces sparked fears of a major conflict in the Persian Gulf and subsequent supply disruptions ...after rising 2.1% to $61.72 a barrel last week on reports of falling US crude supplies, the benchmark price of US light sweet crude for February delivery opened higher on Monday and rose to a three-month high at $62.34, buoyed by optimism over U.S.-China trade deal, but backed off those highs later in quiet trading in the day to finish 4 cents lower $61.68 a barrel, thus snapping a four-day winning streak...oil prices again drifted lower throughout the session on the final day of 2019 and lost another 62 cents, finishing at $61.06 per barrel, but still managed a gain of 34% on the year, its largest annual advance since 2016...oil prices started the new year higher on Thursday, as warming US-China trade relations eased demand concerns and rising tensions in the Middle East fueled worries about supply, but then faded to move between gains and losses later in the session under pressure from a stronger dollar and ended the day up just 12 cents at $61.18 a barrel...but oil prices surged much higher on Friday after reports that a US drone strike had killed Iran's top military commander in a strike at the Baghdad airport, with the international benchmark Brent jumping $3 and US crude finishing $1.87 higher at $63.05 a barrel, as the EIA also reported the largest drop in US crude supplies in 6 months...oil prices thus ended 2.2% higher on the week, and finished at their highest in more than 7 months...

meanwhile, natural gas prices again finished lower, driven by milder weather and an abundance of supply...after trading of the contract for January natural gas expired at an all time low of $2.158 per mmBTU on record high temperatures across much of the US last week, the price of natural gas for February delivery fell 4.5 cents to it's own record closing low of $2.186 per mmBTU on Monday, as signs of sustained cold weather remained absent from the long-range forecasts...while natural gas prices managed to eke out a three-tenths of a cent gain to $2.189 per mmBTU on Tuesday, they still finished the year 26% lower, their largest annual percentage decline since 2014...the natural gas price slide resumed with the new year on Thursday, as both short and longer term forecasts indicated a lot of warmth for the heavily populated eastern half of the country, with the price of February gas falling 6.7 cents to another record low at $2.122 per mmBTU, as 'exceptionally bearish' weather kept pressure on prices...while prices moved more than 4 cents higher awaiting the storage report early on Friday, they slipped back to close with a gain of just eight-tenths of a cent at $2.130 per mmBTU, down 4.5% on the week, as the draw from natural gas inventories was below expectations..

the natural gas storage report for the week ending December 27th from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 58 billion cubic feet to 3,192 billion cubic feet by the end of the week, which still left our gas supplies 484 billion cubic feet, or 17.9% higher than the 2,708 billion cubic feet that were in storage on December 27th of last year, but 38 billion cubic feet, or 1.2% below the five-year average of 3,230 billion cubic feet of natural gas that has been in storage as of the 27th of December in recent years....the 58 billion cubic feet that were withdrawn from US natural gas storage this week was somewhat below the average forecast for a 67 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, and was quite a bit less than the average 94 billion cubic feet of natural gas that have been pulled from natural gas storage during the fourth week of December over the past 5 years. but still way more than the 24 billion cubic feet withdrawal reported during the corresponding warm week in 2018...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 27th indicated that because of a sizable decrease in our oil imports, a record amount of oil exports, and an increase in demand for oil from refineries, we needed to pull oil out of our stored commercial supplies for the sixth time in the past sixteen weeks...our imports of crude oil fell by an average of 457,000 barrels per day to an average of 6,352,000 barrels per day, after rising by an average of 230,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 1,065,000 barrels per day to a record of 4,462,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,890,000 barrels of per day during the week ending December 27th, 1,522,000 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 was unchanged at 12,900,000 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 14,790,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 17,283,000 barrels of crude per day during the week ending December 27th, 303,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that an average of 1,638,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 856,000 barrels per day less than 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 inserted a (+856,000) 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 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, as they're seen & 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) indicated that the 4 week average of our oil imports rose to an average of 6,657,000 barrels per day last week, still 10.8% less than the 7,446,000 barrel per day average that we were importing over the same four-week period last year....the 1,638,000 barrel per day net withdrawal from our total crude inventories was all from our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve was unchanged....this week's crude oil production was reported to be was unchanged at 12,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,400,000 barrels per day, while oil production from Alaska was 6,000 barrels per day higher at 487,000 barrels per day but 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 December 28th was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 10.3% above that of a year ago, and 53.1% 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 94.5% of their capacity in using 17,283,000 barrels of crude per day during the week ending December 27th, up from 93.3% of capacity the prior week, and near the recent average capacity utilization for the fourth week of December...however, the 17,283,000 barrels per day of oil that were refined this week were still 2.7% below the 17,760,000 barrels of crude per day that were being processed during the week ending December 28th, 2018, when US refineries were operating at 97.2% of capacity....

even with the increase in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 96,000 barrels per day to 10,173,000 barrels per day during the week ending December 27th, after our refineries' gasoline output had increased by 429,000 barrels per day over the prior week...but even after this week's decrease in gasoline output, our gasoline production was still 6.7% higher than the 9,533,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 83,000 barrels per day to 5,311,000 barrels per day, after our distillates output had increased by 322,000 barrels per day over the prior week...and after this week's decrease in distillates output, our distillates' production for the week was 5.0% below the 5,591,000 barrels of distillates per day that were being produced during the week ending December 28th, 2018....

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the eighth week in a row and for the 14th time in 28 weeks, rising by 3,212,000 barrels to 242,472,000 barrels during the week to December 27th, after our gasoline supplies had increased by 1,963,000 barrels over the prior week....our gasoline supplies increased by more this week because the amount of gasoline supplied to US markets decreased by 342,000 barrels per day to 8,961,000 barrels per day, while our exports of gasoline rose by 155,000 barrels per day to 1,025,000 barrels per day and while our imports of gasoline fell by 121,000 barrels per day to 473,000 barrels per day....after this week's increase, our gasoline supplies were 1.0% higher than last December 28th's inventory level of 239,996,000 barrels, while they remained roughly 5% above the five year average of our gasoline supplies for this time of the year...

likewise, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 4th time in 14 weeks and for 14th time in the past 39 weeks, rising by 8,776,000 barrels to 124,944,000 barrels during the week ending December 27th, the largest increase since January 4th of 2019, after our distillates supplies had decreased by 152,000 barrels over the prior week....our distillates supplies increased this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 1,159,000 barrels per day to 3,055,000 barrels per day, the largest drop since 2016, and because our exports of distillates fell by 265,000 barrels per day to 1,185,000 barrels per day, while our imports of distillates fell by 65,000 barrels per day to 183,000 barrels per day....after this week's inventory increase, our distillate supplies were 3.3% higher than the 129,431,000 barrels of distillates that we had stored on December 28th, 2018, even as they were still 6% below the five year average of distillates stocks for this time of the year...

finally, with this week's record oil exports, combined with lower oil imports and another sizable increase in the amount of oil used by refineries, our commercial supplies of crude oil in storage fell for the fifteenth time in twenty-eight weeks and for the twentieth time in 48 weeks, decreasing by 11,463,000 barrels, from 441,359,000 barrels on December 20th to 429,896,000 barrels on December 27th, the largest draw from stores since June 21st....after that big decrease, our crude oil inventories were back to near the five-year average of crude oil supplies for this time of year, but were still more than 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the last weekend of December, 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 this 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 December 27th were 2.6% below the 441,418,000 barrels of oil we had stored on December 28th of 2018, while remaining 1.3% above the 424,463,000 barrels of oil that we had in storage on December 29th of 2017, but at the same time were 10.3% below the 479,012,000 barrels of oil we had in commercial storage on December 30th of 2016...        

since our record oil exports were the primary reason for the largest decrease in US crude supplies in over 6 months, we'll include a graph of their recent history below...

January 4th, 2020 US oil exports as of December 27

the above graph of US crude oil exports came from the EIA spreadsheet listing weekly weekly US oil exports since 1991 and it shows weekly US crude oil exports in millions of barrels per day from early 2016 to the current week...prior to January 2017, our oil exports were minimal, because by law they had been outlawed for 40 years, with the exception of oil exports to Mexico and Canada, which were allowed under provisions of the North American Free Trade Agreement (NAFTA)...since that time, however, our exports have steadily risen, often limited only by the number and size of ships that could be loaded in one week and the number of ports which could provide such loading (which also accounts for the volatility you see in the chart above)...note that while we've been exporting an average of around 2,981,000 barrels per day this year, up 51.5% from 2018, we have at the same time been importing an average of 6,812,000 barrels per day...the reason for oil coming & going like that is that most US refineries can't use most of the oil coming from US shale wells, which is light and sweet, because they are configured to use the sour and heavier oil that we had been importing before the shale boom...so we're exporting what is actually a premium quality oil from our own wells, while at the same time importing the poorer quality, heavier sulfuric oil from overseas that many less complex foreign refineries can't use...

This Week's Rig Count

the US rig count decreased for the 17th time in the past 20 weeks ​during the week ending January 3rd, and is now 26.5% below the count at the end of 2018...Baker Hughes reported that the total count of rotary rigs running in the US decreased by 9 rigs to a 33 month low of 796 rigs this past week, which was also down by 279 rigs from the 1075 rigs that were in use as of the January 4th report of 2014, and 1,133 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 shale out of business​...

the number of rigs drilling for oil decreased by 7 rigs to 649 oil rigs this week, which was also a 33 month low for oil rigs, 207 fewer oil rigs than were running a year ago, and much 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 fell by 2 to 123 natural gas rigs, the fewest natural gas rigs deployed since December 2nd 2016, and hence a 37 month low for natural gas drilling, down by 75 gas rigs from the 198 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, compared to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico decreased by one rig to 22 rigs this week, as another rig that had been drilling offshore from Louisiana was shut down this week...as a result, the 21 rigs that continued drilling in Louisiana waters plus the one that was drilling offshore from Texas matched the Gulf of Mexico rig count of 22 rigs a year ago, when 21 rigs were drilling offshore from Louisiana waters and one rig was drilling in Texas waters...since there are no rigs deployed off US shores elsewhere, nor were there a year ago, the Gulf of Mexico count for this year and last is equal to the national total in both cases..

the count of active horizontal drilling rigs was down by 2 rigs to 701 horizontal rigs this week, which was 244 fewer horizontal rigs than the 945 horizontal rigs that were in use in the US on January 4th 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 vertical rig count was down by 5 rigs to 44 vertical rigs this week, and those were also down by 20 from the 64 vertical rigs that were operating during the same week of last year....in addition, the directional rig count was was down by 2 to 51 directional rigs this week, and those were down by 15 from the 55 directional rigs that were in use on January 4th of 2018...

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 January 3rd, the second column shows the change in the number of working rigs between last week's count (December 27th) and this week's (January 3rd) count, the third column shows last week's December 27th 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 4th of January, 2018...   

January 3 2020 rig count summary

the first thing you might notice about this week's tables is that the decreases shown in the state counts fall well short of the nine rig decrease reported nationally this week...that's because all the rigs that had been running in deep south states not included in the table above were also shut down this week...that includes Mississippi, where three rigs were shut down this week to leave them with none, which is the first time on record there was no drilling in Mississippi whatsoever, and down from 2 rigs a year ago...elsewhere, the rig that was shut down in Alabama had just started up 3 weeks earlier, while a year ago the state also had two rigs deployed...and in Florida, the rig that was shut down leaves the state with no activity for the first time since mid-August, but it matches the state's null count through January of 2019...since those three states are not known for major shale plays, it seems likely that the 5 rigs pulled out of them account for this week's big drop in vertical rig deployment..

elsewhere, the only evident change in the Texas Permian was a one rig reduction in Texas Oil District 8A, or the northern Permian Midland, which means the New Mexico rig that was shut down had been operating in the eastern Permian Delaware, to thus​ ​account for the two rig drop in the Permian...in Oklahoma, rigs were shut down in the Cana Woodford and the Arkoma Woodford, while an oil rig began drilling in the Ardmore Woodford for the first time in nine weeks...for natural gas, rig reductions were seen in Oklahoma's Arkoma Woodford and Pennsylvania's Marcellus, thus accounting for the national drop of two rigs targeting natural gas..

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note: there's more here...

Monday, December 30, 2019

January 2020 natural gas contract expires at an all time low

oil prices rose for the 4th week in a row and for the 7th week out of eight, underpinned by reports that showed larger than expected declines in U.S. supplies of crude and its products....after rising less than 1% to $60.44 a barrel last week as a US-China trade deal rally ended in profit-taking, the benchmark price of US light sweet crude for February delivery started out lower on Monday after Kuwait and Saudi Arabia agreed to renew crude output in the shared neutral zone along their border, but recovered to end 8 cents higher at $60.52 a barrel even as the Russian Energy Minister said the OPEC-led producer group might consider easing output cuts next year...oil traded higher in thin pre-Christmas trading on Tuesday, ahead of reports forecast to show crude stockpiles shrank, after Russia said cooperation with OPEC on supply cuts would continue and settled 59 cents, or 1%, higher at $61.11 per barrel amid renewed optimism that the US and China would soon finalize their trade agreement...oil prices opened higher after the holiday on Thursday after a late Tuesday report from the American Petroleum Institute showed crude inventories fell by much more than was expected and ended 57 higher cents at $61.68 a barrel, the highest price since mid-September drone attacks on Saudi-Arabia, as US stock market indices also closed at record highs...oil prices retreated from those three-month highs early on Friday, despite upbeat economic data from China and the US and optimism over a trade deal between the two, as traders awaited the EIA's oil inventory data, but then rebounded when the EIA reported a larger than expected draw from crude supplies and managed to end the day 4 cents higher at $61.72 a barrel...oil prices thus ended with a 2.1% gain on the week and higher for the 4th week in a row, now having increased nearly 14% since the end of October....

meanwhile, natural gas prices hit all time lows for the current front month contract three times this week, despite a much larger than normal withdrawal from storage, as near record warmth across most of the nation reduced heating demand heading into January...after closing last week 1.4% higher at $2.328 per mmBTU because weather models were indicating cooler weather two weeks out, the price of natural gas for January delivery opened 3% lower on Monday and continued falling to an all time low of $2.214 per mmBTU, down 11.4 cents on the day, on expectations of lower heating demand as weather forecasts had turned warmer...the selloff continued on Tuesday as natural gas prices fell another 2% to another all time low of $2.172 per mmBTU, as ongoing warmth kept the pressure on prices...however, a drop in production and a slightly cooler forecast sparked a wave of short-covering on Thursday, as gas prices jumped 12.2 cents to $2.294 per mmBTU...however, warm weather pushed prices lower again with the delayed release of the storage report on Friday, falling 13.6 cents to $2.158 per mmBTU on the day, as trading in the January contract expired at another all time low...

with natural gas prices for delivery in January thus expiring at an all time low, we'll include a price graph of that contract to see what it's recent history looks like....the graph we have below shows the weekly price of the January 2020 natural gas contract over the past 3 years...

December 28 2019 natural gas for January

the above graph is a screenshot of the interactive weekly price chart for the January 2020 natural gas 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, in dollars per mmBTU, for that January natural gas contract as a vertical bar for each week over the past 3 years...you might note that each bar has two small horizontal appendages: the one on the left is the opening price for the week the bar indicates, while the appendage on the right is the week's closing price...what we can see here is that up until May of this year, the contract price for January gas seldom sold at less than $3 per mmBTU, and up until a month ago it was seldom priced lower than $2.50 per mmBTU... now, with January arrival's imminent, the price of that gas contract has fallen to $2.158 per mmBTU, 17 cents lower than it had been priced at the end of the previous week...we should make clear that this graph shows the price of the January contract, which is historically the most expensive, and that mid-summer gas contract prices we have quoted earlier this year were occasionally lower priced...furthermore, even as January gas was falling more than 7% this week, the longer dated futures prices showed less downward movement...even the price of natural gas for February delivery, which will be quoted as "the price of natural gas" next week, only fell a net of 7.9 cents over the 4 trading days this week, and ended the week at $2.231 per mmBTU, 7.3 cents higher than January's gas price...although it did hit a contract low on Wednesday, traders priced it higher than January on the chance that winter will turn colder by then...

the natural gas storage report for the week ending December 20th from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 161 billion cubic feet to 3,250 billion cubic feet by the end of the week, which still left our gas supplies 518 billion cubic feet, or 19.0% higher than the 2,732 billion cubic feet that were in storage on December 20th of last year, but 69 billion cubic feet, or 2.1% below the five-year average of 3,319 billion cubic feet of natural gas that has been in storage as of the 20th of December in recent years....the 161 billion cubic feet that were withdrawn from US natural gas storage this week was somewhat more than the average forecast for a 153 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, and quite a bit more than the average 101 billion cubic feet of natural gas that have been pulled from natural gas storage during the third week of December over the past 5 years. as well as way more than the 61 billion cubic feet withdrawal reported during the corresponding week in 2018...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 20th indicated that because the increase in our net oil imports nearly matched the increased demand from refineries, we needed to pull oil out of our stored commercial supplies for the fifth time in the past fifteen weeks...our imports of crude oil rose by an average of 230,000 barrels per day to an average of 6,809,000 barrels per day, after falling by an average of 308,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 236,000 barrels per day to an average of 3,397,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,412,000 barrels of per day during the week ending December 20th, 466,000 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 increased by 100,000 barrels per day to 12,900,000 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 16,312,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,980,000 barrels of crude per day during the week ending December 20th, 419,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 782,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 113,000 barrels per day more than 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 inserted a (-113,000) 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...(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) indicated that the 4 week average of our oil imports rose to an average of 6,566,000 barrels per day last week, still 11.5% less than the 7,423,000 barrel per day average that we were importing over the same four-week period last year....the 782,000 barrel per day net withdrawal from our total crude inventories was due to a withdrawal of 782,000 barrels per day from our commercially available stocks of crude oil, while the quantity oil stored in our Strategic Petroleum Reserve was unchanged......this week's crude oil production was reported to be 100,000 barrels per day higher at 12,900,000 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 12,400,000 barrels per day, while Alaska's oil production was unchanged at 481,000 barrels per day and hence added ​a rounded ​500,000 barrels per day to the rounded national total...last year's US crude oil production for the week ending December 21st was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 10.3% above that of a year ago, and 53.1% 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 93.3% of their capacity in using 16,980,000 barrels of crude per day during the week ending December 20th, up from 90.6% of capacity the prior week, and close to the recent average capacity utilization for the third week of December...however, the 16,980,000 barrels per day of oil that were refined this week were still 2.3% below the 17,350,000 barrels of crude per day that were being processed during the week ending December 21st, 2018, when US refineries were operating at 95.1% of capacity....

with the big increase in the amount of oil being refined, gasoline output from our refineries was also much higher, increasing by 429,000 barrels per day to 10,269,000 barrels per day during the week ending December 20th, after our refineries' gasoline output had increased by 87,000 barrels per day ​over ​the prior week....and with this week's big increase in gasoline output, our gasoline production was 1.2% higher than the 10,144,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 322,000 barrels per day to 5,394,000 barrels per day, after our distillates output had decreased by 156,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was still 0.9% below the 5,444,000 barrels of distillates per day that were being produced during the week ending December 21st, 2018....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the seventh week in a row and for the 13th time in 27 weeks, rising by 1,963,000 barrels to 239,260,000 barrels during the week to December 20th, after our gasoline supplies had increased by 2,529,000 barrels over the prior week....our gasoline supplies increased by less this week because our exports of gasoline rose by 280,000 barrels per day to 870,000 barrels per day while our imports of gasoline rose by 75,000 barrels per day to 594,000 barrels per day and while the amount of gasoline supplied to US markets decreased by 108,000 barrels per day to 9,303,000 barrels per day....after this week's increase, our gasoline supplies were 2.6% higher than last December 21st's inventory level of 233,106,000 barrels, while they remained roughly 5% above the five year average of our gasoline supplies for this time of the year...

even with the increase in our distillates production, our supplies of distillate fuels decreased for the 10th time in 13 weeks and for 25th time in the past 38 weeks, but only by 152,000 barrels to 124,944,000 barrels during the week ending December 20th, after our distillates supplies had increased by 1,509,000 barrels over the prior week....our distillates supplies decreased this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 96,000 barrels per day to 4,214,000 barrels per day, and because our exports of distillates rose by 535,000 barrels per day to 1,450,000 barrels per day, while our imports of distillates rose by 70,000 barrels per day to 248,000 barrels per day....after this week's inventory decrease, our distillate supplies were 4.2% higher than the 119,902,000 barrels of distillates that we had stored on December 21st, 2018, while ​they ​slipp​ed to 8% below the five year average of distillates stocks for this time of the year...

finally, with this week's big increase in refining, our commercial supplies of crude oil in storage fell for the fifteenth time in twenty-eight weeks and for the twentieth time in 48 weeks, decreasing by 5,474,000 barrels, from 446,833,000 barrels on December 13th to 441,359,000 barrels on December 20th...but even after that decrease, our crude oil inventories were still 2% above the five-year average of crude oil supplies for this time of year, and were roughly 32% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after two weeks of December, 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 this past year, except for during this summer, after generally falling until then through most of the prior year and a half, our oil supplies as of December 20th were fractionally below the 441,411,000 barrels of oil we had stored on December 21st of 2018, while remaining 1.1% above the 436,491,000 barrels of oil that we had in storage on December 22nd of 2017, but at the same time were 9.1% below the 485,449,000 barrels of oil we had in commercial storage on December 23rd of 2016...       

This Week's Rig Count

the US rig count decreased for the 16th time in the past 19 weeks over the week ending December 27th, and is now 25.7% below the count as of December 28th of last year....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 8 rigs to 805 rigs this past week, which was also down by 278 rigs from the 1083 rigs that were in use as of the December 28th report of 2018, and 1,124 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 their attempt to flood the global oil market...

the number of rigs drilling for oil decreased by 8 rigs to 656 oil rigs this week, which was also 208 fewer oil rigs than were running a year ago, and much 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 was unchanged at 125 natural gas rigs, matching last week's 3 year low for natural gas drilling, down by 73 gas rigs from the 198 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico decreased by one rig to 23 rigs this week, as one of the rigs that had been drilling offshore from Louisiana was shut down this week...as a result, the 22 rigs that continued drilling in Louisiana waters plus the one that was drilling offshore from Texas was down by one from the Gulf of Mexico rig count of 24 rigs a year ago, when 23 rigs were drilling offshore from Louisiana waters and one rig was drilling in Texas waters...since there are no rigs deployed off US shores elsewhere, nor were there a year ago, the Gulf of Mexico count for this year and last is equal to the national total in both cases..

the count of active horizontal drilling rigs was down by 3 rigs to 703 horizontal rigs this week, which was 242 fewer horizontal rigs than the 945 horizontal rigs that were in use in the US on December 21st 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 7 rigs to 49 vertical rigs this week, and those were also down by 19 from the 68 vertical rigs that were operating during the ​last full week of last year....on the other hand, the directional rig count was was up by 2 to 53 directional rigs this week, but those were still down by 17 from the 70 directional rigs that were in use on December 28th of 2018...

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 December 27th, the second column shows the change in the number of working rigs between last week's count (December 20th) and this week's (December 27th) count, the third column shows last week's December 20th 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 28th of December, 2018...   

December 27 2019 rig count summary

much of this week's drilling decrease virtually reverses the increases we saw last week, which certainly must be coincidental, since no one would be starting rigs one week just to shut them down the next...for rigs drilling in the Texas Permian, which saw a 13 rig increase last week, a net of seven rigs were shut down in Texas Oil District 8, or the core Permian Delaware, two more rigs were pulled out of Texas Oil District 8A, or from the northern Permian Midland, and another rig was pulled out of Texas Oil District 7C, or the southern part of the Permian Midland...in addition, another 2 rigs were pulled out of Texas Oil District 7B, which is usually thought of as east of the main Permian, but which had at least three Permian basin rig additions last week....since the net decrease in the Permian was just nine rigs, and since the two rigs added in New Mexico were likely Permian rigs, we can figure that at least one of the rigs in those 4 Texas ​'Permian' ​districts was not targeting the Permian, but without digging thru the North America Rotary Rig Count Pivot Table (xls) for the individual well records, we can't say for sure which, at least on the basis of the summaries we're provided with...we're also left somewhat in the dark about what changes happened in Oklahoma, which saw a net one rig increase despite the two rig decrease in the Cana Woodford, hence meaning that three rigs began operating in the state outside of the 5 Oklahoma basins tracked​ & summarized​ here by Baker Hughes...the week's natural gas rigs changes, however, are pretty straight forward; one natural gas rig was shut down in the Haynesville, in Texas Oil District 6, just across the border from the core Haynesville shale in northern Louisiana, while a natural gas rig began operating in Pennsylvania's Marcellus at the same time...we should also note that another rig was shut down in Mississippi this week, leaving the state with 3 rigs operating, down from the 6 rigs that were operating in Mississippi a year ago, although as we've noted, the rig count in Mississippi has been quite volatile, ranging from 1 rig to 6 rigs and back again over the past year... 

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