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

Monday, May 20, 2019

horizontal drilling at a 14 month low; April's global oil supplies short of demand despite flat OPEC output

oil prices rose for the first time in four weeks this week, as the threat that hostilities in the Middle East would disrupt global oil supplies overshadowed the rapidly deteriorating trade dispute between the US and China...after falling 28 cents to $61.66 a barrel on a resumption of that trade war last week, prices of US crude for June delivery initially rose to as high as $63.33 a barrel early Monday on news that four ships, including two Saudi oil tankers, had been sabotaged off the UAE coast, just outside the Strait of Hormuz, but then gave up those gains and fell with Wall Street as a negative turn in the U.S.-Chinese trade talks spooked markets, with oil prices ending the day 1% lower at $61.04 a barrel...oil prices then opened lower on Tuesday but again jumped higher after Saudi Arabia reported a drone attack against its pipeline infrastructure that disabled two pumping stations and sent WTI crude to a gain of 74 cents, or 1.2 percent, at $61.78 a barrel...oil prices opened lower Wednesday on the Tuesday evening API report of a massive build of US crude inventories, but shrugged off that increase in crude stockpiles even when confirmed by the EIA later in the day to settle 24 cents higher at $62.02 per barrel....oil prices then jumped as much as 2% higher on Thursday after the Saudis launched air strikes in retaliation for the attacks on their pipeline infrastructure before settling 85 cents higher at $62.87 per barrel, the highest close in two weeks...oil prices then fell 11 cents to $62.76 a barrel on Friday on fears of falling demand due to a worsening standoff in Chinese-U.S. trade talks, but still ended the week with an increase of 1.8% on the deteriorating developments in the Middle East...

natural gas prices also ended the week higher, boosted by forecasts of much warmer than normal temperatures over the major power demand centers from the middle of the U.S. to the East Coast, as yet another above-normal inventory build was brushed off as natural gas for June delivery ended the week 1.2 cents higher at $2.631 per mmBTU...the natural gas storage report for the week ending May 10th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 106 billion cubic feet to 1,653 billion cubic feet by the end of the week, which meant our gas supplies were 130 billion cubic feet, or 8.5% more than the 1,523 billion cubic feet that were in storage on May 11th of last year, while still 286 billion cubic feet, or 14.7% below the five-year average of 1,939 billion cubic feet of natural gas that have typically been in storage as of the second weekend in May in recent years....this week's 106 billion cubic feet injection into US natural gas storage was in line with estimates from surveys of analysts of a 104 billion cubic foot increase in supplies, while it was somewhat higher than the 88 billion cubic feet of natural gas that have historically been added to gas storage during the same week of May....this week's increase was the seventh 5 year seasonal high injection in a row, and the 498 billion cubic feet of natural gas that have been added to storage over the past 5 weeks was the most natural gas added to storage over 5 continuous weeks since a record 562 billion cubic feet week added over the 5 weeks to June 20, 2014

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending May 10th, showed a sizable addition to our commercial supplies of crude for the sixth time in eight weeks, as a massive amount of crude oil that could not be unaccounted for shifted from the demand side to the supply side of the petroleum balance sheet...our imports of crude oil rose by an average of 919,000 barrels per day to an average of 7,612,000 barrels per day, after falling by an average of 721,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 1,025,000 barrels per day to 3,347,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,265,000 barrels of per day during the week ending May 10th, 106,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be down by 100,000 barrels per day to 12,100,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,365,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 16,676,000 barrels of crude per day during the week ending May 10th, 271,000 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 of 524,000 barrels of oil per day were added to the oil that's in storage in the US....​hence, ​we can see that ​this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 835,000 barrels per day short of what was added to storage plus what the oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+835,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"....with a switch in the unaccounted oil figure from -856,000 last week to +835,000 this week, we have to figure that both weeks' crude oil metrics are​ off by statistically significant amounts, and that week over week comparisons are essentially meaningless... (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 7,217,000 barrels per day last week, still 9.6% less than the 7,986,000 barrel per day average that we were importing over the same four-week period last year...the 524,000 barrel per day increase in our total crude inventories ​was due to a​ 776,000 barrels per day addition to our commercially available stocks of crude oil, which was partially offset by a 252,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve, part of a release from our reserves intended to blunt the shortage of crude in the Gulf resulting from the Venezuelan oil export sanctions...this week's crude oil production was reported to be 100,000 barrels per day lower at 12,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,600,000 barrels per day, while a 5,000 barrel per day increase to 481,000 barrels per day in Alaska's oil production was not enough to impact the final rounded national total...last year's US crude oil production for the week ending May 11th was at 10,723,000 barrels per day, so this reporting week's rounded oil production figure was 12.8% above that of a year ago, and 43.6% 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 90.5% of their capacity in using 16,676,000 barrels of crude per day during the week ending May 10th, up from 88.9% of capacity the prior week, but still a bit below the historical refinery utilization rate for this time of year....however, the 16,676,000 barrels per day of oil that were refined this week were a bit more than the 16,635,000 barrels of crude per day that were being processed during the week ending May 11th, 2018, when US refineries were operating at 91.1% of capacity... 

even with the increase in the amount of oil being refined, gasoline output from our refineries was still somewhat lower, decreasing by 217,000 barrels per day to 9,912,000 barrels per day during the week ending May 10th, after our refineries' gasoline output had increased by 202,000 barrels per day the prior week....with that decrease in gasoline output, this week's gasoline production was 5.3% below than the 10,462,000 barrels of gasoline that were being produced daily during the same week last year....​however, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 175,000 barrels per day to 5,264,000 barrels per day, after that distillates output had decreased by 39,000 barrels per day the prior week...with this week's increase, the week's distillates production was 4.6% more than the 5,031,000 barrels of distillates per day that were being produced during the week ending May 11th, 2018.... 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell for the twelfth time in 13 weeks, decreasing by 1,123,000 barrels to 225,024,000 barrels over the week to May 10th, after gasoline supplies had fallen by 596,000 barrels over the prior week....our gasoline supplies fell even though the amount of gasoline supplied to US markets decreased by 723,000 barrels per day to 9,148,000 barrels per day, after increasing by 643,000 barrels per day the prior week, because our exports of gasoline rose by 294,000 barrels per day to 785,000 barrels per day while our imports of gasoline fell by 362,000 barrels per day to 752,000 barrels per day...so even after having reached an all time record high sixteen weeks ago, our gasoline supplies are now 3.0% lower than last May 11th's inventory level of 232,014,000 barrels, and remain roughly 2% below the five year average of our gasoline supplies at this time of the year...  

with the increase in our distillates production, our supplies of distillate fuels rose for the first time in 9 weeks, but only by 84,000 barrels to 125,647,000 barrels during the week ending May 10th, after our distillates supplies had decreased by 159,000 barrels over the prior week....our distillates supplies inched up even as the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 198,000 barrels per day to 4,094,000 barrels per day, as our exports of distillates fell by 128,000 barrels per day to 1,199,000 barrels per day while our imports of distillates fell by 70,000 barrels per day to 41,000 barrels per day ...​but even ​with this week's inventory decrease, our distillate supplies were ​still ​9.3% higher than the 114,946,000 barrels of distillate that we had stored on May 11th, 2018, even as they remain roughly 2% below the five year average of distillates stocks for this time of the year...

finally, despite ​near--​record oil exports and rising refinery throughput, our commercial supplies of crude oil in storage increased for the twelfth time in 17 weeks, rising by 5,431,000 barrels, from 466,604,000 barrels on 3rd to 472,035,000 barrels on May 10th....that increase​ ​lifted our crude oil inventories to 2% ​above the recent five-year average of crude oil supplies for this time of year, and to more than a third higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the first weekend in May, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of May 10th were 9.1% above the 432,354,000 barrels of oil we had stored on May 11th of 2018, but at the same time still 9.4% below the 520,772,000 barrels of oil that we had in storage on May 12th of 2017, and 7.4% below the 509,797,000 barrels of oil we had stored on May 13th of 2016...      

OPEC's Monthly Oil Market Report

next we're going to review OPEC's May Oil Market Report (covering April OPEC & global oil data), which was released on Tuesday of this past week and is available as a free download, and hence it's the report we check for monthly global oil supply and demand data...the first table from this monthly report that we'll look at is from the page numbered 57 of that report (pdf page 67), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures...

April 2019 OPEC crude output via secondary sources

as we can see from this table of official oil production data, OPEC's oil output fell by 3,000 barrels per day to 30,031,000 barrels per day in April , from their revised March production total of 30,034,000 barrels per day...however that March figure was originally reported as 30,022,000 barrels per day, so that means their production for April was, in effect, a 9,000 barrel per day increase from the previously reported figures (for your reference, here is the table of the official March OPEC output figures as reported a month ago, before this month's revisions)...

the largely involuntary Iranian output cuts of 164,000 barrels per day due to US sanctions on their exports were more than offset by increases in output from Iraq, Libya and Nigeria, which also served to offset production cuts from Saudi Arabia and Angola...the 28,000 barrels per day increase in output from Venezuela is a bit of a surprise; considering recent media reports that their production had continued to fall under pressure of the US led coup attempts...meanwhile, the 113,000 barrels per day increase in the output from Iraq now puts them back over the output allocations assigned to each member after their December 7th 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, as does the 92,000 barrels per day increase in the output from Nigeria, as can be seen in the table of OPEC production allocations we've included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, and shows average daily production quota in millions of barrels of oil per day for each of the OPEC members for the first 6 months of this year, as was agreed to at their December 2018 meeting...note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by disruptive civil strife, are exempt from any production quotas, and that only Libya had produced any more than they did in the 4th quarter of 2018, as ​can be seen in the fifth column of the OPEC production table above...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from May 2017 to April 2019, and it comes from page 58 (pdf page 68) of the April 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... 

April 2019 OPEC report global oil supply

despite the small increase in OPEC's production from what they reported a month ago, their preliminary estimate indicates that total global oil production fell by 0.07 million barrels per day to 98.82 million barrels per day in April, but that came after March's total global output figure was revised down by 310,000 barrels per day from the 99.26 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 70,000 barrels per day in April after that revision, with lower oil output from Kazakhstan, Canada, China and Russia the major reasons for the non-OPEC production decrease.... the 98.82 million barrels per day produced globally in April was ​still 1.05 million barrels per day, or 1.1% higher than the revised 97.77 million barrels of oil per day that were being produced globally in April a year ago (see the May 2018 OPEC report (online pdf) for the originally reported March 2018 details)...with little change in OPEC's output, their April oil production of 30,031,000 barrels per day represented 30.4% of what was produced globally during the month, up from the 30.2% share they reported for March, before revisions increase​d​ their March global share to 30.4%....OPEC's April 2018 production was reported at 31,930,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year's total and new member Congo from this year's, are now producing 1,664,000 fewer barrels per day of oil than they were producing a year ago, when they accounted for 32.6% of global output, with a 668,000 barrel per day decrease in the output from Venezuela and a 1,269,000 barrel per day drop in output from Iran from that time more than offsetting the year over year production increases of 188,000 barrels per day from the Emirates, 194,000 barrels per day from Libya, and 201,000 barrels per day from Iraq... 

the 70,000 barrels per day decrease in global oil output ​that was ​seen during April, combined with the 310,000 barrels per day downward revision to March's global output, meant there was a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us... 

April 2019 OPEC report global oil demand

the table above comes from page 34 of the May OPEC Monthly Oil Market Report (pdf page 44), 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 third column, we've circled in blue the figure that's relevant for April, which is their revised estimate of global oil demand during the second quarter of 2019...

OPEC is estimating that during the 2nd quarter of this year, all oil consuming regions of the globe will using 99.20 million barrels of oil per day, which was revised 0.02 million barrels of oil per day higher than their estimate for the 2nd 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 98.82 million barrels per day during April, which means that there was a shortfall of around 380,000 barrels per day in global oil production when compared to the demand estimated for the month...

in addition, the downward revision of 310,000 barrels per day to March's global output that's implied in this report, combined with the 30,000 barrels per day upward revision to 1st quarter demand ​that ​we've circled in green means that the 240,000 barrels per day global oil output surplus we had figured for March would now be revised to a deficit of 100,000 barrels per day....however, that follows a revised 350,000 barrel per day global oil output surplus in February and a revised 260,000 barrel per day global oil output surplus in January, so despite OPEC cuts of more than 1.6 million barrels per day in the first quarter of this year, a small global oil surplus for the year to date still persists... 

we should also note that the previous estimate for 2018's oil demand was revised 30,000 barrels per day higher with this report, which we've also highlighted ​with​in that green ellipse...the 2018 demand table on page 33 of the May OPEC Monthly Oil Market Report (pdf page 43) indicates that demand revision was spread evenly across the year, so that means that for all of 2018, global oil demand exceeded production by roughly 18,040,000 barrels, still a comparatively small net oil shortfall that would be the equivalent of less than four hours and twenty minutes of global production at the December production rate...  

This Week's Rig Count

the US rig count was down by just one this past week, but that still meant it was at another 14 month low and continued the ongoing slide that has seen drilling rig activity decrease ​in ​twelve out of the last 13 weeks....Baker Hughes reported that the total count of rotary rigs running in the US fell by 1 rig to 987 rigs over the week ending May 17th, which was also down by 59 rigs from the 1046 rigs that were in use as of the May 18th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...

the count of rigs drilling for oil fell by 3 rigs to 802 rigs this week, which was also 42 fewer oil rigs than were running a year ago, and less than half of 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 increased by 2 rigs to 185 natural gas rigs, which was still down by 15 rigs from the 200 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

drilling activity offshore in the Gulf of Mexico increased by 2 rigs to 22 rigs this week, as 3 rigs were added offshore from Louisiana, where there are now 20, and one rig was shut down in Texas offshore waters, where just two rigs remain offshore...those totals are up from a year ago, when 18 rigs were deployed offshore, 17 in Louisiana waters, and one offshore from Texas...

the count of active horizontal drilling rigs was down by 6 to 866 horizontal rigs this week, which was also 53 fewer horizontal rigs than the 918 horizontal rigs that were in use in the US on May 18th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...that is the smallest number of horizontal rigs deployed since March 9th 2018, and means that horizontal rigs are also now at a 14 month low....meanwhile, the vertical rig count was up by 3 rigs to 48 vertical rigs this week, which was still down from the 61 vertical rigs that were in use during the same week of last year...in addition, the directional rig count was up by 2 rigs to 73 directional rigs this week, but those were up by 7 rigs from the 66 directional rigs that were operating on May 18th of 2018... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 17th, the second column shows the change in the number of working rigs between last week's count (May 10th) and this week's (May 17th) count, the third column shows last week's May 10th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 18th of May, 2018...       

May 17 2019 rig count summary

as ​you can see, there was a 4 rig increase in Ohio's drilling activity this week, despite the pullbacks elsewhere, while the Utica shale only shows an increase of 3 rigs...since the North America Rotary Rig Count Pivot Table (xls) shows that only Utica natural gas rigs are active in Ohio, we can figure that the sole Utica shale rig that had been deployed in Pennsylvania was shut down this week, along with 2 Marcellus rigs that had been operating in the Keystone state, to bring the Utica rig count into balance...the Marcellus shale, meanwhile, shows a three rig decrease, because a Marcellus rig that had been operating in West Virginia was also shut down at the same time...in addition to those, 2 natural gas rigs were also shut down in the northwestern Louisiana portion of the Haynesville shale, but the national natural gas rig count still showed an increase of 2 rigs because ​a net of ​4 natural gas rigs were concurrently started up in basins not tracked separately by Baker Hughes, with Wyoming and Louisiana the most likely locations for those..

oil rigs, meanwhile, were shut down in Texas and also in Oklahoma, even though the Cana Woodford in central Oklahoma had an oil rig start up...in the Permian basin of western Texas, three rigs were shut down in Texas Oil District 8, which​ would be the core Permian Delaware, and three more were shut down in Texas Oil District 8A, or the northern Permian Midland basin, while two rigs were added in Texas Oil District 7C, or the southern Permian Midland basin...since the Permian ​basin ​shows a net 3 rig decrease, those Texas changes means that the rig that was added in New Mexico was deployed in the far western portion of the Permian Delaware...for the remaining changes in activity in Alaska, Oklahoma, and Wyoming, check out the North America Rotary Rig Count Pivot Table (xls), which lists the details on each rig deployment individually, ...

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note: there's more here...

Monday, May 13, 2019

unprecedented natural gas restocking continues; US gasoline imports at a 6 year high; rig count at a 14 month low…

oil prices ended lower for the third week in a row, as a resumption of the trade war between the US and China cast a pall over the markets and overshadowed the impact of tightening global supplies stemming from US sanctions on Iranian and Venezuelan oil exports...after falling 2.2% to $61.94 a barrel on a big build in US oil supplies last week, contract prices of US crude for June delivery initially crashed to a one month low of $60.04 a barrel on Monday morning, after Trump reignited the trade war by tweeting that tariffs on $200 billion of Chinese goods would jump from 10 to 25 percent on Friday, but rebounded later in the day and settled 31 cents higher at $62.25 per barrel after the US deployed an aircraft carrier strike group and a bomber task force to the Middle East to confront Iran...however, oil prices tumbled again on Tuesday, as the US-China trade war intensified and stoked concerns over global growth, with crude prices falling 85 cents or 1.4% to a 5-week low of $61.40....nonetheless, oil prices popped right back up on Wednesday after the EIA reported a surprise draw from US supplies and went on to finish 1.2% higher at $62.12, even as escalating U.S.-Chinese trade tensions limited oil's gains...however, oil prices fell on the trade dispute again on Thursday, despite falling inventories, tumbling to as low as $60.92 a barrel before steadying near the close to end down 41 cents at $61.70 a barrel...oil prices were then little changed on Friday, closing down 4 cents at $61.66 a barrel, even as Trump 's tariff hike on Chinese goods took effect and kept tensions high between the world's two largest economies...hence, for the week oil prices ended down just 28 cents, or less than half a percent, as tight supply factors offset the impact of the renewed US-China trade dispute..

natural gas prices, meanwhile, trended somewhat higher, with the contract for June delivery of natural gas rising 5.2 cents over the week to finish at $2.619 per mmBTU, as both the 6 to 10 day outlook and the 8 to 14 day outlook from the Climate Prediction Center continued to indicate building warmth in the Southeast and colder than normal in the Intermountain West and northern tier, which would suggest greater air conditioning demand in the former and more heating demand in the later...however, despite just such a temperature setup over the prior week, which you can see on the map of temperature anomalies for week ending May 2nd below, the injection of surplus natural gas into storage was still well above normal for this time of year...

May 11 2019 temperature anomalies over the week ending May 2nd(source)

the natural gas storage report for the week ending May 3rd from the EIA indicated that the quantity of natural gas held in storage in the US increased 85 billion cubic feet to 1,547 billion cubic feet by the end of the week, which meant our gas supplies were 128 billion cubic feet, or 9.0% more than the 1,419 billion cubic feet that were in storage on May 4th of last year, while ​still 303 billion cubic feet, or 16.4% below the five-year average of 1,850 billion cubic feet of natural gas that have typically been in storage as of the first weekend in May in recent years....this week's 85 billion cubic feet injection into US natural gas storage was close to the median estimate of a 87 billion cubic foot increase indicated by a Bloomberg survey of analysts, while it was somewhat more than the 72 billion cubic feet of natural gas that are normally added to gas storage during the same week of spring....this was the eighth week in a row that we've either seen injections above normal or withdrawals below normal, and concludes a 4 week period where the injections into storage have averaged just under one hundred billion cubic feet per week, unprecedented for this time, or really​ for​ any time of year...moreover, the early June weather outlook appears to show it will be a colder than normal period nationally, delaying the onset of air conditioning electric consumption, suggesting that the 100 billion cubic foot injection pace might continue well into the next month...

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending May 3rd, showed that due to a drop in our oil imports and a ​major ​shift ​from unaccounted for crude supply to unaccounted for demand, we had to withdraw oil from our commercial supplies of crude for the second time in seven weeks...our imports of crude oil fell by an average of 721,000 barrels per day to an average of 6,693,000 barrels per day, after rising by an average of 1,325,000 barrels per day over the prior two weeks, while our exports of crude oil fell by an average of 289,000 barrels per day to 2,322,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,371,000 barrels of per day during the week ending May 3rd, 432,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be down by 100,000 barrels per day to 12,200,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,571,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 16,405,000 barrels of crude per day during the week ending May 3rd, 41,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that 690,000 barrels of oil per day were being withdrawn from oil storage in the US....therefore, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 856,000 barrels per day more than what the oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (-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 is labeled in their footnotes as "unaccounted for crude oil"....with a switch in the unaccounted oil figure from +685,000 last week to -856,000 this week, we have to figure that both weeks' crude oil metrics are in error by statistically significant amounts, and that week over week comparisons are ​essentially ​meaningless... (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 still rose to an average of 6,812,000 barrels per day last week, 15.6% less than the 8,068,000 barrel per day average that we were importing over the same four-week period last year...the 690,000 barrel per day decrease in our total crude inventories included 566,000 barrels per day that were withdrawn from our commercially available stocks of crude oil, and a 124,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve​, part of a release from the reserves intended to blunt the ​Gulf crude ​short​age resulting from the Venezuelan oil export​ sanctions​​​...this week's crude oil production was reported to be 100,000 barrels per day lower at 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,700,000 barrels per day, while a 1,000 barrel per day decrease to 476,000 barrels per day in Alaska's oil production was not enough to impact the ​final ​rounded national total...last year's US crude oil production for the week ending May 4th was at 10,703,000 barrels per day, so this reporting week's rounded oil production figure was 14.0% above that of a year ago, and 44.8% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 88.9% of their capacity in using 16,405,000 barrels of crude per day during the week ending May 3rd, down from 89.2% of capacity the prior week, and below the historical refinery utilization rate for ​this time of year....similarly, the 16,405,000 barrels per day of oil that were refined this week were still a bit less than the 16,486,000 barrels of crude per day that were being processed during the week ending May 4th, 2018, when US refineries were operating at 90.4% of capacity... 

even with the decrease in the amount of oil being refined, gasoline output from our refineries was still somewhat higher, increasing by 202,000 barrels per day to 10,129,000 barrels per day during the week ending May 3rd, after our refineries' gasoline output had increased by 146,000 barrels per day the prior week....with that increase in gasoline output, this week's gasoline production was finally 1.5% more than the 9,974,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 39,000 barrels per day to 5,089,000 barrels per day, after that distillates output had increased by 64,000 barrels per day the prior week...but even after this week's decrease, the week's distillates production was 1.9% more than the 4,993,000 barrels of distillates per day that were being produced during the week ending May 4th, 2018.... 

even with the increase in our gasoline production, the supply of gasoline in storage at the end of the week fell for the eleventh time in 12 weeks, decreasing by 596,000 barrels to 226,147,000 barrels over the week to May 3rd, after gasoline supplies had fallen by 917,000 barrels over the prior week....our gasoline supplies fell because the amount of gasoline supplied to US markets increased by 643,000 barrels per day to 9,871,000 barrels per day, after decreasing by 181,000 barrels per day the prior week, while our imports of gasoline rose by 344,000 barrels per day to a 70 month high of 1,114,000 barrels per day, and while our exports of gasoline fell by 197,000 barrels per day to 491,000 barrels per day....after having reached an all time record high fifteen weeks ago, our gasoline supplies are now 4.1% lower than last May 4th's inventory level of 235,804,000 barrels, and remain roughly 2% below the five year average of our gasoline supplies at this time of the year...

with the decrease in our distillates production, our supplies of distillate fuels fell for the 25th time in thirty-two weeks, decreasing by 159,000 barrels to 125,563,000 barrels during the week ending May 3rd, after our distillates supplies had decreased by 1,307,000 barrels over the prior week...the draw on our distillates supplies was much smaller this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 319,000 barrels per day to 3,896,000 barrels per day, and because our imports of distillates rose by 48,000 barrels per day to 111,000 barrels per day, ​while our exports of distillates rose by 164,000 barrels per day to 1,327,000 barrels per day...but even after this week's inventory decrease, our distillate supplies were still 9.1% higher than the 115,038,000 barrels of distillate that we had stored on May 4th, 2018, even as they remain roughly 5% below the five year average of distillates stocks for this time of the year...

finally, with lower oil production and falling oil imports, our commercial supplies of crude oil in storage decreased for the fifth time in 16 weeks, falling by 3,963,000 barrels over the week, from 470,567,000 barrels on April 26th to 466,604,000 barrels on May 3rd....that still left our crude oil inventories near the recent five-year average of crude oil supplies for this time of year, while they also remained about a third higher than the prior 5 year (2009 - 2013) average of crude oil stocks ​as of the first weekend in May​, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of May 3rd were 7.6% above the 433,758,000 barrels of oil we had stored on May 4th of 2018, but at the same time still 10.7% below the 522,525,000 barrels of oil that we had in storage on May 5th of 2017, and 8.2% below the 508,487,000 barrels of oil we had stored on May 6th of 2016...    

This Week's Rig Count

the US rig count was down again this past week and hence ​fell to a​ 1​4 month low in continuing the recent slide that has seen drilling rig activity decrease eleven out of the last 12 weeks.....Baker Hughes reported that the total count of rotary rigs running in the US fell by 2 rigs to 988 rigs over the week ending May 10th, which was also down by 57 rigs from the 1045 rigs that were in use as of the May 11th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...

the count of rigs drilling for oil fell by 2 rigs to 805 rigs this week, which was also 39 fewer oil rigs than were running a year ago, and barely half of 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 183 natural gas rigs, which was still down by 16 rigs from the 199 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

drilling activity offshore in the Gulf of Mexico was unchanged at 20 rigs this week, which was the same number of rigs that were active in the Gulf a year ago...the number of active horizontal drilling rigs was down by 1 to 872 horizontal rigs this week, which was also 46 fewer horizontal rigs than the 918 horizontal rigs that were in use in the US on May 11th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....in addition, the vertical rig count was also down by 1 rig to 45 vertical rigs this week, which was also down from the 55 vertical rigs that were in use during the same week of last year....meanwhile, the directional rig count was unchanged at 71 directional rigs this week, which was still down by 1 from the 72 directional rigs that were operating on May 11th of 2018... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 10th, the second column shows the change in the number of working rigs between last week's count (May 3rd) and this week's (May 10th) count, the third column shows last week's May 3rd active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 11th of May, 2018...      

May 10 2019 rig count summary

this week's major oil rig decrease was​ in​ New Mexico, and it appear that 3 of the 4 rigs that were shut down in the state had been operating in the Permian, because two Permian rigs were added in Texas, one each in Texas Oil District 7C, or the southern Permian Midland basin, and in Texas Oil District 8A, or the northern Permian Midland basin...the three rigs that were added in California were also likely targeting oil, since the natural gas rig count elsewhere balances, although we can't be sure without digging through the North America Rotary Rig Count Pivot Table (xls), which lists the details on each rig deployment individually...for rigs​ ​targeting natural gas, two were added in Pennsylvania's Marcellus, while Pennsylvania saw a natural gas rig pulled out of the Utica shale at the same time....the national natural gas rig count remained unchanged, however, because the Denver-Julesburg Niobrara chalk had a natural gas rig that had been operating in Wyoming pulled out at the same time​, and all rigs remaining in the Niobrara are now drilling for oil...we should also note that in addition to the rig changes for major producing states shown above, Alabama drillers added a rig and are now operating two, also an increase from the single rig they had deployed a year ago, while Mississippi saw two rigs shut down and has two still drilling, which is down from the 3 rigs that were running in Mississippi a year ago...

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Note: there's more here

Sunday, May 5, 2019

new record for US oil production; record April natural gas build, 5 week storage injection is triple normal

oil prices fell for the second week in nine this past week, largely on a selloff precipitated by the report of the biggest increase in US crude supplies yet this year, and likely exacerbated by short selling by commodity traders probably trying to take advantage of severely overextended bullish hedge fund positions...after falling 1.1% to $63.30 a barrel last week on Trump's BS to reporters, the benchmark US crude for June delivery opened lower early Monday in a continuation of Friday's Trump comment selloff and fell to as low a $62.46 a barrel, before shaking off Trump's balderdash after OPEC and Saudi sources denied that any officials spoken to Trump, and subsequently rebounded to close 20 cents higher at $63.50 a barrel...prices then opened higher on Tuesday and rose to as high as $64.75 a barrel on a coup attempt in Venezuela before paring those gains to settle just 41 cents higher at $63.50 a barrel after reports Venezuelan oil operations were not disrupted and military leaders remained loyal to Maduro...oil prices fell on Wednesday, however, as the EIA reported U.S. crude supplies rose nearly 10 million-barrels to their highest since September 2017, with US crude finishing down 55 cents at $63.36 per barrel...with supply concerns thus alleviated, that selloff continued into Thursday, with oil prices breaking through a key support level and falling as much as 4% before steadying and ending $1.81 lower at $61.81 a barrel, despite a number of geopolitical concerns....oil prices then edged back up on strong economic data on Friday, closing 13 cents higher at $61.94 a barrel, but still finished the week 2.2% lower, thus logging its second straight weekly decline...

natural gas prices, meanwhile, ended a bit lower, as a near record addition of gas to storage​ reported​ on Thursday​ ​reversed price gains logged earlier in the week...with little associated commentary, natural gas contracts for June delivery rose 1.3 cents on Monday and then fell back 1.8 cents on Tuesday before rising 4.5 cents to $2.620 per mmBTU on Wednesday on strong cash prices and cooling demand in the US South...however, a bearish EIA report knocked prices back 3.1 cents on Thursday, with momentum from that carrying into a 2.2 cent loss on Friday to end the week down half a percent at $2.567 per mmBTU, despite forecasts for unseasonably cool weather in the north-central states and above average temperatures in the southeast..

the natural gas storage report for the week ending April 26th from the EIA indicated that the quantity of natural gas held in storage in the US increased by a new April record 123 billion cubic feet to 1,462 billion cubic feet by the end of the week, which meant our gas supplies were 128 billion cubic feet, or 9.6% more than the 1,334 billion cubic feet that were in storage on April 27th of last year, while remaining 316 billion cubic feet, or 17.8% below the five-year average of 1,778 billion cubic feet of natural gas that have typically been in storage as of the fourth weekend in April in recent years....this week's 123 billion cubic feet injection into US natural gas storage exceeded analysts' expectations of a 114 billion cubic foot increase, and it was quite a bit more than the 70 billion cubic feet of natural gas that are normally added to gas storage during the fourth week of April...and as it turns out, that 123 billion cubic feet increase was also the highest ever for April, and the second highest injection in the recent history of this storage report, which we can see in the graphic below..

May 3 2019 change of gas in storage as of April 26

the above graphic is a screenshot of an interactive graphic included on the EIA's weekly natural gas storage dashboard, and as the heading indicates, it shows the weekly change, in billions of cubic feet, of natural gas in storage in the lower 48 states...the blue dots represent the weekly changes of natural gas in storage for this year up to the current report, and the dark diamonds represent the 5 year average change of natural gas in storage for each of the weeks of the year, while the shaded grey background to those markers represent the range of changes for each week of the year over that 5 year span...thus, for this week, which i have highlighted on this interactive by moving my cursor over that blue dot, you can see the 123 billion cubic feet addition for this year, the 70 billion cubic feet average for the same week over the prior 5 years, and the prior range between 51 billion cubic feet and 81 billion cubic feet of natural gas that was added to storage over the prior 5 years...

as it turns out, that 123 billion cubic foot addition of this reporting week was the second largest injection shown on the graph, topped only by the 126 billion cubic feet injection over the week ending May 31, 2015, not easily differentiated on this scale...but if you look at the blue dots over the 7 most recent weeks, you can see that they all topped the 5 year average, with 4 of the last five weeks actually establishing a short term high injection for the weeks in question...over the five most recent weeks, 355 billion cubic feet of natural gas have been added to storage in the lower 48 states; that is almost triple the 5 year historical average addition of 120 billion cubic feet over the same 5 weeks, and in sharp contrast to a year ago, when 34 billion cubic feet of natural gas had to be withdrawn from storage over the same 5 week period...

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending April 26th, showed that another increase in our oil imports on top of last week's big import jump meant that we had more surplus oil left to add to our commercial supplies of crude for the fifth time in six weeks...our imports of crude oil rose by an average of 265,000 barrels per day to an average of 7,414,000 barrels per day, after rising by an average of 1,157,000 barrels per day the prior week, while our exports of crude oil fell by an average of 70,000 barrels per day to 2,611,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,803,000 barrels of per day during the week ending April 26th, 335,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be up by 100,000 barrels per day to a record 12,300,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 17,103,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 16,446,000 barrels of crude per day during the week ending April 26th, 137,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that 1,342,000 barrels of oil per day were being added to the oil that's in storage in the US....therefore, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 685,000 barrels per day short of what was added to storage plus what the oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+685,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"....with that much oil unaccounted for again this week, we have to figure that one or more of this week's oil metrics is in error by a statistically significant amount.. (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 6,789,000 barrels per day last week, still 19.2% less than the 8,400,000 barrel per day average that we were importing over the same four-week period last year...the 1,342,000 barrel per day increase in our total crude inventories included 1,419,000 barrels per day that were added to our commercially available stocks of crude oil, which was partially offset by a 77,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve...this week's crude oil production was reported to be 100,000 barrels per day higher at a record 12,300,000 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 11,800,000 barrels per day, while Alaska's oil production was unchanged at 477,000 barrels per day and hence did not impact the rounded national total...last year's US crude oil production for the week ending April 27th was at 10,619,000 barrels per day, so this reporting week's rounded oil production figure was 15.8% above that of a year ago, and 45.9% 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 89.2% of their capacity in using 16,446,000 barrels of crude per day during the week ending April 26th, down from 90.1% of capacity the prior week, and below the historical refinery utilization rate for the last week of April....similarly, the 16,446,000 barrels per day of oil that were refined this week were still a bit less than the 16,561,000 barrels of crude per day that were being processed during the week ending April 27th, 2018, when US refineries were operating at 91.1% of capacity... 

even with the decrease in the amount of oil being refined, gasoline output from our refineries was still somewhat higher, increasing by 146,000 barrels per day to 9,927,000 barrels per day during the week ending April 26th, after our refineries' gasoline output had decreased by 136,000 barrels per day the prior week....but even with that increase in gasoline output, this week's gasoline production was still 1.2% less than the 10,045,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 64,000 barrels per day to 5,128,000 barrels per day, after that distillates output had increased by 241,000 barrels per day the prior week...after this week's increase, the week's distillates production was 2.7% more than the 4,995,000 barrels of distillates per day that were being produced during the week ending April 27th, 2018.... 

with the increase in our gasoline production, the supply of gasoline in storage at the end of the week rose for the first time in 11 weeks, increasing by 917,000 barrels to 226,743,000 barrels over the week to April 26th, after gasoline supplies had fallen by 2,129,000 barrels over the prior week....that inventory increase came as the amount of gasoline supplied to US markets decreased by 181,000 barrels per day to 9,228,000 barrels per day, after decreasing by 397,000 barrels per day over the prior two weeks, while our imports of gasoline fell by 135,000 barrels per day to 770,000 barrels per day, and while our exports of gasoline rose by 142,000 barrels per day to 688,000 barrels per day....but after having reached an all time record high fourteen weeks ago, our gasoline supplies are still 4.7% lower than last April 27th's inventory level of 237,978,000 barrels, and remain roughly 2% below the five year average of our gasoline supplies at this time of the year...

even with the increase in our distillates production, our supplies of distillate fuels fell for the 24th time in thirty-one weeks, decreasing by 1,307,000 barrels to 125,722,000 barrels during the week ending April 26th, after our distillates supplies had decreased by 662,000 barrels over the prior week...the draw on our distillates supplies was a greater this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 419,000 barrels per day to 4,215,000 barrels per day, while our imports of distillates fell by 182,000 barrels per day to 63,000 barrels per day, and while our exports of distillates fell by 445,000 barrels per day to 1,163,000 barrels per day...but even after this week's inventory decrease, our distillate supplies were still 5.8% higher than the 118,829,000 barrels of distillate that we had stored on April 27th, 2018, even as they remain roughly 6% below the five year average of distillates stocks for this time of the year...

finally, with record oil production and higher oil imports, our commercial supplies of crude oil in storage increased for the eleventh time in 15 weeks, rising by 9,934,000 barrels over the week, from 460,633,000 barrels on April 19th to 470,567,000 barrels on April 26th...that increase left our crude oil inventories near the recent five-year average of crude oil supplies for this time of year, while they also were also about a third higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the fourth week of April, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have ​generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of April 26th were 7.9% above the 435,955,000 barrels of oil we had stored on April 27th of 2018, but at the same time still 10.8% below the 527,772,000 barrels of oil that we had in storage on April 28th of 2017, and 8.9% below the 512,095,000 barrels of oil we had stored on April 29th of 2016...   

This Week's Rig Count

US drilling rig activity was down by just one this past week, thus technically falling to another 13 month low and continuing the recent slide that has seen active rigs decrease ten out of the last 11 weeks.....Baker Hughes reported that the total count of rotary rigs running in the US fell by 1 rigs to 990 rigs over the week ending May 3rd, which was also down by 42 rigs from the 1032 rigs that were in use as of the May 4th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...

the count of rigs drilling for oil rose by 2 rigs to 807 rigs this week, which was still 27 fewer oil rigs than were running a year ago, and was barely half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 3 rigs to 183 natural gas rigs, which was also down by 13 rigs from the 196 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

drilling activity offshore in the Gulf of Mexico was down by 1 rig to 20 rigs this week, which was still 1 more rig than the 19 rigs active in the Gulf a year ago...the number of active horizontal drilling rigs was unchanged at 873 horizontal rigs this week, which was still 40 fewer horizontal rigs than the 913 horizontal rigs that were in use in the US on May 4th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....in addition, the vertical rig count was also unchanged at 47 vertical rigs this week, which was also down from the 55 vertical rigs that were in use during the same week of last year....however, the directional rig count decreased by 1 rig to 70 directional rigs this week, but those were still up by 7 rigs from the 64 directional rigs that were operating on May 4th of 2018... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 3rd, the second column shows the change in the number of working rigs between last week's count (April 26th) and this week's (May 3rd) count, the third column shows last week's April 26th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 4th of May, 2018...      

May 3 2019 rig count summary

as you can see, rig removals from Texas were responsible for this week's decrease, as rigs were being added in several other states...of the 7 rigs pulled out in Texas, two rigs were again removed from Texas Oil District 8, or the core Permian Delaware, and two rigs were also pulled out of Texas Oil District 7C, or the southern Permian Midland basin, while two rigs were added in Texas Oil District 8A, or the northern Permian Midland basin...a rig was also pulled out of Texas Oil District 7B, which would include the Permian​'s ​eastern shelf in its westernmost extent, suggesting a net reduction of three Permian ​oil ​rigs in Texas while two Permian ​oil ​rigs were being added in New Mexico...

it also appears that several natural gas rigs were also pulled out of Texas, even though some don't show on the basin count, because while two natural gas rigs were pulled out of Texas Oil District 6, which would include the western portion of the Haynesville shale, and while one natural gas rig was removed from Pennsylvania's Marcellus, two natural gas rigs were added in Oklahoma's Arkoma Woodford and one was added in Ohio's Utica...thus for the national natural gas rig count to show a net decrease of 3 rigs, 3 natural gas rigs had to have been pulled out of basins not tracked separately by Baker Hughes...since Texas is the only state with gas rigs that shows a negative count for the week, we thus have to believe that some or all of those idled natural gas rigs had to have been operating in Texas...

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note:  there’s more here

Sunday, April 28, 2019

oil prices fall on Trump's BS; natural gas injection matches last week's record; rig count drops to 13 month low

oil prices ended the week lower for the first time in eight weeks, largely on a big Friday selloff that began after Trump told reporters he had “called up” OPEC and told them to bring down fuel costs, even as no-one at OPEC knew anything at all about the alleged "call" from Trump....after oil prices eked out an 11 cent increase to $64.00 a barrel last week, this week began with the last day of trading for US crude for May delivery, which spiked $1.70 or 3% higher to expire at $65.70 a barrel, after the US announced an end to waivers on Iran sanctions, demanding that buyers of Iranian oil stop purchases by May 1st...at the same time, contracts for US WTI crude for June delivery, which had ended last week priced at $64.07 a barrel, rose $1.48 to $65.55 a barrel on Monday and became the front month, or widely quoted 'price of oil'....in an ongoing Iran sanctions rally, that June oil price rose another 75 cents to a 6 month high of $66.30 per barrel on Tuesday, after Iran said they'd close the Strait of Hormuz, the conduit for a fifth of the world's oil, if they were prevented from using it and oil traders expressed skepticism that Saudi Arabia would replace the lost Iranian barrels...however, oil prices opened lower on Wednesday, after a Tuesday night industry report indicated a much larger than expected build of US crude supplies, and went on to settle 41 cents lower at $65.89 a barrel after the EIA confirmed that US oil supplies had in fact risen by much more than traders had expected...after trading higher Thursday morning on the suspension of Russian crude exports to Europe due to pipeline contamination, oil prices turned sharply lower heading into Thursday’s settlement, after a number of reports convinced traders that OPEC could easily replace sanctioned Iranian crude, with oil prices ending down 68 cents at $65.21 a barrel...oil prices then fell steadily on Friday after Trump said he called OPEC and told them to bring oil prices down, with June US crude falling to as low as $62.28 a barrel before recovering a bit before the close to end the session down $1.91 at $63.30 a barrel, thus ending the week down 1.1% and derailing the longest run of weekly gains since the first half of 2015...

meanwhile, natural gas prices, which had been down 5 out of the past six weeks while falling to a 34 month low last week, managed to stage a modest rally after new 34 month lows were set again on Tuesday, and finished 3% higher on the week...quoting natural gas for May delivery all week, prices rose 3.4 cents to $2.524 mBTU on Monday, the first gain in seven sessions, on strong cash prices and the first signs of demand for cooling in the South...that brief move higher didn't hold, however, as natural gas prices fell 6.9 cents to a new 34 month closing low of $2.455 per mmBTU on Tuesday...prices managed a seven-tenths of a cent rebound on Wednesday, and then turned decidedly higher despite another record injection being logged on Thursday, as forecasts indicated colder than normal temperatures for the northern tier of states, and forecasts warm enough for those in the South to crank up the air conditioning...with that forecast indicating natural gas demand increasing both north and south, natural gas prices posted identical 5.2 cents gains on both Thursday and Friday to end the week at $2.566 per mmBTU, 7.6 cents higher than the prior week's close...

the natural gas storage report for the week ending April 19th from the EIA indicated that the quantity of natural gas held in storage in the US had again increased by an April record 92 billion cubic feet, now up to 1,339 billion cubic feet by the end of the week, which meant our gas supplies were 55 billion cubic feet, or 4.3% more than the 1,284 billion cubic feet that were in storage on April 20th of last year, while remaining 369 billion cubic feet, or 21.6% below the five-year average of 1,708 billion cubic feet of natural gas that have typically remained in storage as of the third weekend in April in recent years....this week's 92 billion cubic feet injection into US natural gas storage was in line with market expectations, while it was quite a bit more than the 47 billion cubic feet of natural gas that are normally added to gas storage during the third week of April...over the past 4 weeks, 232 billion cubic feet of natural gas have been added to storage in the lower 48 states; that is in sharp contrast to the same four weeks of 2018, when a cool end to winter meant that 96 cubic feet of natural gas had to be withdrawn from storage over the same 4 week period...

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending April 19th, showed that due to a large increase in our oil imports, we had surplus oil left to add to our commercial supplies of crude for the fourth time in five weeks...our imports of crude oil rose by an average of 1,157,000 barrels per day to an average of 7,149,000 barrels per day, after falling by an average of 607,000 barrels per day the prior week, while our exports of crude oil rose by an average of 280,000 barrels per day to 2,681,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,468,000 barrels of per day during the week ending April 19th, 877,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be up by 100,000 barrels per day to 12,200,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,668,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 16,583,000 barrels of crude per day during the week ending April 19th, 550,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that 783,000 barrels of oil per day were being added to the oil that's in storage in the US.....therefore, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 698,000 barrels per day short of what was added to storage plus what the oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+698,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"....with that much oil unaccounted for, we have to figure that one or more of this week's oil metrics is in error by a statistically significant amount.. (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 6,626,000 barrels per day last week, still 19.6% less than the 8,237,000 barrel per day average that we were importing over the same four-week period last year...the 783,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the oil stored in our Strategic Petroleum Reserve remained unchanged......this week's crude oil production was reported to be 100,000 barrels per day higher at a record 12,200,000 barrels per day because the rounded estimate for output from wells in the lower 48 states was 100,000 barrels per day higher at 11,700,000 barrels per day, while a 1,000 barrel per day decrease to 477,000 barrels per day in Alaska's oil production was not enough to make a difference in the rounded national total...last year's US crude oil production for the week ending April 20th was at 10,586,000 barrels per day, so this reporting week's rounded oil production figure was 15.2% above that of a year ago, and 44.8% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 90.1% of their capacity in using 16,583,000 barrels of crude per day during the week ending April 19th, up from 87.7% of capacity the prior week, but still a bit below the normal refinery utilization rate for the middle of April....similarly, the 16,583,000 barrels per day of oil that were refined this week were still a bit less than the 16,621,000 barrels of crude per day that were being processed during the week ending April 20th, 2018, when US refineries were operating at 90.8% of capacity... 

even with the large increase in the amount of oil being refined, gasoline output from our refineries was still somewhat lower, decreasing by 136,000 barrels per day to 9,781,000 barrels per day during the week ending April 19th, after our refineries' gasoline output had decreased by 252,000 barrels per day the prior week....with that decrease in gasoline output, this week's gasoline production was 1.1% less than the 9,886,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 241,000 barrels per day to 5,064,000 barrels per day, after that distillates output had decreased by 215,000 barrels per day the prior week...and after this week's increase, the week's distillates production was 1.7% more than the 4,977,000 barrels of distillates per day that were being produced during the week ending April 20th, 2018.... 

with the decrease in our gasoline production, the supply of gasoline left in storage at the end of the week fell for the 10th week in a row, decreasing by 2,129,000 barrels to 225,826,000 barrels over the week to April 19th, after gasoline supplies had fallen by 1,174,000 barrels over the prior week....that was as the amount of gasoline supplied to US markets decreased by 11,000 barrels per day to 9,409,000 barrels per day, after decreasing by 386,000 barrels per day the prior week, and as our imports of gasoline fell by 85,000 barrels per day 905,000 barrels per day, while our exports of gasoline fell by 53,000 barrels per day to 546,000 barrels per day...after having reached an all time record high thirteen weeks ago, our gasoline inventories are now 4.6% lower than last April 20th's level of 236,807,000 barrels, and have now fallen to roughly 2% below the five year average of our gasoline supplies at this time of the year...

even with the increase in our distillates production, our supplies of distillate fuels fell for the 23rd time in thirty weeks, decreasing by 662,000 barrels to 127,029,000 barrels during the week ending April 19th, after our distillates supplies had decreased by 362,000 barrels over the prior week...the draw on our distillates supplies was a bit greater this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 443,000 barrels per day to 3,796,000 barrels per day, while our exports of distillates fell by 62,000 barrels per day to 1,608,000 barrels per day, and while our imports of distillates rose by 107,000 barrels per day to 245,000 barrels per day...but even after this week's inventory decrease, our distillate supplies were still 3.5% higher than the 122,729,000 barrels of distillate that we had stored on April 20th, 2018, even as they fell to roughly 6% below the five year average of distillates stocks for this time of the year...

finally, with that big jump in our oil imports, our commercial supplies of crude oil in storage increased for the tenth time in 14 weeks, rising by 5,479,000 barrels over the week, from 455,154,000 barrels on April 12th to 460,633,000 barrels on April 19th...that increase was enough to bring our crude oil inventories back to the recent five-year average of crude oil supplies for this time of year, while they also were also a third higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the third week of April, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have mostly been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of April 19th were 7.2% above the 429,737,000 barrels of oil we had stored on April 20th of 2018, but at the same time still 12.9% below the 528,702,000 barrels of oil that we had in storage on April 21st  of 2017, and 9.6% below the 509,311,000 barrels of oil we had in storage on April 22nd of 2016...        

since our recent crude inventory increases have concurrently been accompanied by rapidly falling oil product inventories, i'd like to include a set of bar graphs to show you what that looks like graphically...this set of inventory bar graphs was copied from the Zero Hedge report of this past week that reviewed the weekly EIA report:

April 25 2019 oil inventory bar graphs for April 19

above we have 4 similar bar graphs stacked one on top of another; from the top, the first shows the weekly change in US crude oil inventories, then the weekly change in oil inventories at the Cushing Oklahoma storage depot, then the weekly change in gasoline inventories, and lastly the weekly change in inventories of distillates...each graph has the same format: inventory increases for a given week are shown as a green bar above the zero line, whereas inventory decreases are shown as a red bar pointing down from the zero line, wherein the size of the bar in both cases is indicative of the size of the inventory increase or decrease...thus we can see in the top graph that US crude inventories have increased substantially in 4 out of the last 5 weeks, as Zero Hedge has boxed in green, and in a broader look they've increased in 10 out of the past 14 weeks...but then look at the last two graphs, which show inventories of gasoline and distillates decreasing; in the case of distillates, they're now down 6 weeks in a row and 12 weeks out of the last 14, sliding from 143 million barrels to 127 million barrels over that span, and in the case of gasoline, they're now down 10 weeks in a row, dropping all the way down to 225,826,000 barrels, from 258,301,000 barrels on February 8th, ie, heading in the wrong direction only a month before Memorial Day....many are writing off these decreases to normal spring refinery maintenance, but as we've been pointing out, refinery utilization over this period has been quite a bit below that of the same season in recent years...and as we've also been pointing out, the beginning of this sharp refinery slowdown coincides to the date with the imposition of Trump administration sanctions on importation of heavy sour Venezuelan crude, which many US Gulf Coast were optimized to use....and it has taken until this week for us to see US oil imports return to the pre-sanction level, likely heralding the first arrivals of comparable grades of heavy sour crude from the Middle East...

This Week's Rig Count

US drilling rig activity decreased for the ninth time in ten weeks, and has now slowed to a 13 month low, 3% below year ago levels, with both oil and gas drilling down by similar percentages....Baker Hughes reported that the total count of rotary rigs running in the US fell by 21 rigs to 996 rigs over the eight days ending April 26th, which was also down by 30 rigs from the 1021 rigs that were in use as of the April 27th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...note that this week's rig count is for 8 days, after last week's count was released on the Thursday before Good Friday...

the count of rigs drilling for oil fell by 20 rigs to 805 rigs this week, which was also 20 fewer oil rigs than were running a year ago, and was only half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 rig to 186 natural gas rigs, which was also down by 9 rigs from the 195 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

drilling activity offshore in the Gulf of Mexico was down by 2 rigs to 21 rigs this week, which was still 1 more rig than the 18 rigs active in the Gulf a year ago...however, the week also saw the startup of a platformed rig drilling on an inland body of water in southern Louisiana, where there are now 4 such 'inland waters' rigs running, down from the 5 'inland waters' rigs deployed a year ago...

the number of active horizontal drilling rigs decreased by 13 rigs to 873 horizontal rigs this week, which was 28 fewer horizontal rigs than the 901 horizontal rigs that were in use in the US on April 27th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....at the same time, the directional rig count decreased by 4 rigs to 71 directional rigs this week, but that was still up by 3 rigs from the 68 directional rigs that were in use during the same week of last year....in addition, the vertical rig count decreased by 4 rigs to 47 vertical rigs this week, which was down from the 52 vertical rigs that were operating on April 27th of 2018... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of April 26th, the second column shows the change in the number of working rigs between last week's count (April 18th) and this week's (April 26th) count, the third column shows last week's April 18th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 27th of April, 2018...     

April 26 2019 rig count summary

as you can see, this week's drilling pullback was fairly widespread, with all of the major oil basins seeing rig reductions...while this was happening even as oil prices were at a 6 month high, we have to realize that there's quite a lag - maybe an average of 3 or 4 months - between the time when a exploitation company makes the decision to drill and the time they contract a drilling rig and get it deployed in the field...so it's likely that the decisions to curtail drilling that we've seen over recent weeks were probably made at a time when oil prices were $10 to $15 a barrel below where they were at this week...

of the 9 rigs pulled out in Texas, five came out of Texas Oil District 1 in the southeast, which would include the 4 shut down from the Eagle Ford; another 2 rigs were removed from the panhandle region Texas Oil District 10, which would be the Granite Wash, and which could have thus included a rig added back in that basin on the Oklahoma side of the border...in the Permian, two rigs were removed from Texas Oil District 8, or the core Permian Delaware, and two rigs were pulled out of Texas Oil District 7C, or the southern Permian Midland basin, while two rigs were added in Texas Oil District 8A, or the northern Permian Midland basin...with a Permian reduction of 3 rigs nationally, those Texas changes suggest that the rig that was shut down in New Mexico had also been operating in the Permian Delaware...

among rigs targeting natural gas, one was removed from Ohio's Utica shale, while one was also pulled out of the Eagle Ford in south Texas, where 8 natural gas rigs remain deployed along side of 65 rigs drilling for oil...at the same time, a natural gas rig was started up in the Rockies' Niobrara chalk for the first time in over a year, where an oil rig was concurrently shut down, but 28 oil directed rigs still continue to drill....we should also note that the lone rig which had been drilling in Indiana was also shut down this week, leaving Indiana without drilling activity for the first time since last April 20th..

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