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, November 11, 2019

figure on 1st withdrawal of natural gas from storage over the week just ended; horizontal drilling was at a 31 month low

oil prices were modestly higher this past week, as repeated rumors that a US-China trade deal was imminent continued to goose financial & energy markets...after falling 0.8% to $56.20 a barrel as pressure from increasing oil supplies outweighed trade hopes and improving economic data last week, prices of US light sweet crude for December delivery slid to as low as $55.83 early Monday before talk of a meeting between Chinese President Xi and Trump and Saudi Arabia’s offering of public stock in state oil giant Aramco fueled optimism and pushed prices to a 6 week high at $57.43 a barrel, before settling back to $56.54, a gain of 43 cents on the day...hopes for a U.S.-China trade agreement and optimism that Trump would roll back some of the tariffs he had imposed on Chinese imports pushed prices higher on Tuesday, as the benchmark US crude price rose 69 cents, or 1.2%, to close at a 6 week high of $57.23 a barrel...however, prices started sliding in after hours trading Tuesday after the API reported a larger than expected build of crude supplies and continued lower throughout the Wednesday session, pulled down by the EIA report of a much larger-than-expected crude inventory build and by weak euro zone economic data, and ultimately ended 88 cents lower at $56.35 a barrel...but prices bounced back on Thursday, rising 80 cents throughout the day to finish at $57.15 a barrel, buoyed once again by optimism for a potential resolution of the U.S.-China trade dispute...renewed uncertainty over trade then pushed prices much lower early Friday, with oil trading as low as $55.76 after Trump said that he had not agreed to roll back tariffs on China, but pared those losses in the afternoon to end the day 9 cents higher at $57.24 a barrel...oil prices thus shrugged off this week's big inventory build and trade uncertainty to finish at a 6 week high, nearly 1.9% higher than the prior week's close...

natural gas prices were also higher this week amid warnings of a historically severe outbreak of cold temperatures across the eastern two thirds of the US... after rising more than 10% to $2.714 per mmBTU on the arrival of cold weather last week, the price of natural gas for December delivery rose 10.7 cents on Monday and another 4.1 cents on Tuesday, as weather guidance after the weekend indicated it would be much colder the following week...but prices then fell 3.4 cents on Wednesday despite forecasts for 15 degrees below normal 6 to 10 days out, as weaker cold showed up in the 11 to 15 day outlook,...despite a modest rally after the storage report, prices turned lower on a milder forecast Thursday at ended 5.6 cents lower at $2.772 per mmBTU....prices then inched up 1.7 cents on Friday to end the week 2.8% higher that the prior Friday at $2.789 per mmBTU..

the natural gas storage report for the week ending November 1st from the EIA indicated that the quantity of natural gas held in storage in the US increased by 34 billion cubic feet to 3,729 billion cubic feet by the end of the week, which meant our gas supplies were 530 billion cubic feet, or 16.6% more than the 3,199 billion cubic feet that were in storage on November 1st of last year, and 29 billion cubic feet, or 0.8% above the five-year average of 3,700 billion cubic feet of natural gas that have been in storage as of the 1st of November in recent years....this week's 34 billion cubic feet injection into US natural gas storage was the smallest since April 5th, 5 billion cubic feet less than the average forecast for a 39 billion cubic feet injection from analysts surveyed by S&P Global Platts, and well below the average 57 billion cubic feet of natural gas that have been added to gas storage during the last week of October over the past 5 years, the 1st below average storage build in 15 weeks and only the 3rd below average increase in 34 weeks...the 2,569 billion cubic feet of natural gas that have been added to storage over the 32 weeks of this year's injection season are still near a modern record, eclipsed only by the record 2727 billion cubic feet of natural gas that were injected into storage over the same 32 weeks of the 2014 natural gas injection season...

while there is still a chance for a small injection in next week's report, this week may have been the last one for this year, as the following two graphs from the EIA's Natural Gas Storage Dashboard will show....the first graph we have below shows US residential and commercial natural gas use over the period from October 25th to November 7th, thus covering the current reporting week and the next one, with the November 6th and 7th figures being estimates based on weather forecasts...

November 9 2019 natural gas consumption residential and commercial copy

as the legend indicates, the blue graph shows this year's daily residential and commercial natural gas use over the period, and the green graph shows the residential and commercial natural gas use for the same dates in 2018, while the grey-shaded background shows the range of usage over the prior 5 years...this is from an interactive graphic, so you can get the exact daily totals by going to the EIA's Natural Gas Storage Dashboard and mousing over each part of the graph in question...you can check my addition, but it appears that this week's residential and commercial natural gas use was 54 billion cubic feet more than that of the current report week, which would suggest a withdrawal of natural gas from stoarage except for what the next graph shows..

November 9 2019 natural gas consumption by utilities

the above graph, formatted just like the first one, shows electric utility natural gas use over the period, and as you can see, this reporting week had been unusually high, presumably due to late season air conditioning in the East, where temperatures averaged 5 to 9 degrees above normal over the period, even as the rest of the country was colder than normal...again, by my hand count, this week's utility natural gas use was 10 billion cubic feet less than last week's, not enough to make up for the larger residential increase, which hence still suggests that the coming report will show a modest withdrawal...there are other factors, such as exports and imports, especially across the Canadian border, which impact our supply in any given week, but none are as volatile week to week as residential and commercial consumption and electric power generation...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending November 1st showed that because of a big drop in our oil exports and a slowdown in our refining, we had surplus oil to add to our stored supplies for the seventh time in the past eight weeks...our imports of crude oil fell by an average of 620,000 barrels per day to an average of 6,077,000 barrels per day, after rising by an average of 840,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 956,000 barrels per day to an average of 2,371,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,706,000 barrels of per day during the week ending November 1st, 336,000 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 reported to be unchanged at a record 12,600,000 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 16,306,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 15,761,000 barrels of crude per day during the week ending November 1st, 237,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 1,033,000 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 488,000 barrels per day less than what was reportedly 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 inserted a (+488,000) 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"....that unaccounted oil means that one or all of the oil metrics that the EIA has reported and that we have just transcribed are necessarily well off the mark...however, since the media and most analysts treat these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we continue to report them just as they're seen & believed by 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 fell to an average of 6,232,000 barrels per day last week, now 17.4% less than the 7,554,000 barrel per day average that we were importing over the same four-week period last year....the 1,033,000 barrel per day net addition to our total crude inventories was despite a withdrawal of 100,000 barrels per day from our Strategic Petroleum Reserve, which means that 1,133,000 barrels per day were being added to our commercially available stocks of crude oil....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 28,000 barrel per day increase to 484,000 barrels per day in Alaska's oil production was not enough to impact the final rounded total...last year's US crude oil production for the week ending November 2nd was rounded to 11,600,000 barrels per day, so this reporting week's rounded oil production figure was 8.6% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...   

meanwhile, US oil refineries were operating at 86.0% of their capacity in using 15,761,000 barrels of crude per day during the week ending November 1st, down from 87.1% of capacity the prior week, and somewhat below normal for early November...as a result, the 15,761,000 barrels per day of oil that were refined this week was 3.9% below the 16,408,000 barrels of crude per day that were being processed during the week ending November 2nd, 2018, when US refineries were operating at 90.0% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 148,000 barrels per day to 10,036,000 barrels per day during the week ending November 1st, after our refineries' gasoline output had increased by 86,000 barrels per day the prior week....but even with that decrease in gasoline output, this week's gasoline production was 3​.​3% higher than the 9,714,000 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 95,000 barrels per day to 4,875,000 barrels per day, after our distillates output had increased by 205,000 barrels per day over the prior week...with this week's decrease in distillates output, our distillates' production this week was 1.8% below the 4,963,000 barrels of distillates per day that were being produced during the week ending November 2nd, 2018....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 14th time in 20 weeks and for the 28th time in thirty-five weeks, falling by 2,828,000 barrels to 217,229,000 barrels during the week to November 1st, after our gasoline supplies had decreased by 3,037,000 barrels over the prior week....our gasoline supplies were down again this week even though the amount of gasoline supplied to US markets decreased by 639,000 barrels per day to 9,145,000 barrels per day, because our imports of gasoline fell by 180,000 barrels per day to 493,000 barrels per day and because our exports of gasoline rose by 357,000 barrels per day to 1,009,000 barrels per day....after this week's decrease, our gasoline supplies were 4.7% lower than last November 2nd's inventory level of 228,021,000 barrels, and but remained roughly 1% above the five year average of our gasoline supplies for this time of the year...

likewise, with the decrease in our distillates production, our supplies of distillate fuels fell for the 22nd time in the past 32 weeks, decreasing by 622,000 barrels to 119,132,000 barrels during the week ending November 1st, after our distillates supplies had decreased by 2,715,000 barrels over the prior week...our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 33,000 barrels per day to 4,296,000 barrels per day, because our imports of distillates rose by 148,000 barrels per day to 306,000 barrels per day and because our exports of distillates fell by 38,000 barrels per day to 974,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 3.0% from the 122,857,000 barrels of distillates that we had stored on November 2nd, 2018, but improved to around 9% below the five year average of distillates stocks for this time of the year, since prior years saw greater decreases during the same week ...

finally, this week's drop in oil exports coupled with the decrease in refinery throughput meant our commercial supplies of crude oil in storage rose for the ninth time in twenty-one weeks and for the nineteenth time in 41 weeks, increasing by 7,929,000 barrels, from 438,853,000 barrels on October 25th to 446,782,000 barrels on November 1st ...that increase lifted our crude oil inventories to 3% above the five-year average of crude oil supplies for this time of year, and to nearly 33% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the beginning of November, 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 had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 25th were 3.5% above the 431,787,000 barrels of oil we had stored on November 2nd of 2018, but at the same time were 2.3% below the 457,143,000 barrels of oil that we had in storage on November 3rd of 2017, and 7.9% below the 485,010,000 barrels of oil we had in commercial storage on November 4th of 2016...   

This Week's Rig Count

the US rig count fell for the 11th time in 12 weeks and for the 34th time in 38 weeks over the week ending November 8th, and is now down by 24.6% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 31 month low of 817 rigs this past week, which was also down by 264 rigs from the 1081 rigs that were in use as of the November 9th report of 2018, and 1102 fewer rigs than the shale era high of 1929 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 7 to a 31 month low of 684 oil rigs this week, which was also 202 fewer oil rigs than were running a year ago, and quite a bit below 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 remained unchanged at 130 natural gas rigs, still down by 65 rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those drilling for oil & gas, three rigs classified as miscellaneous were also ​deployed 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 increased by 1 rig to 22 rigs this week, as another rig was added to those drilling offshore from Louisiana this week...the 22 rigs drilling in Louisiana's offshore waters was one ​more than the Gulf of Mexico rig count of 21 a year ago, when 19 rigs were drilling in Louisiana waters and two were drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, whereas a year ago the only offshore rigs were in the Gulf...hence, the national total of 23 offshore rigs is up by 2 rigs from the 21 rigs that were deployed offshore a year ago...

the count of active horizontal drilling rigs was down by 7 rigs to 710 horizontal rigs this week, which was the least horizontal rigs deployed since April 13th, 2017 and hence is virtually a new 31 month low for horizontal drilling...that was also 225 fewer horizontal rigs than the 935 horizontal rigs that were in use in the US on November 9th 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 decreased by 1 to 51 vertical rigs this week, and those were down by 21 from the 72 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count increased by 3 rigs to 56 directional rigs this week, but those were ​also ​down by 18 from the 74 directional rigs that were in use on November 9th 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 November 8th, the second column shows the change in the number of working rigs between last week's count (November 1st) and this week's (November 8th) count, the third column shows last week's November 1st 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 9th of November, 2018...  

November 8 2019 rig count summary

the 4 rig drop in New Mexico all came out of the Permian basin, since the net of Permian basin activity in Texas was unchanged, as 3 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while 3 rigs were added in Texas Oil District 7C, or the southern Permian Midland...the 3 rig drop in Texas ​represents the 3 rig drop in the Eagle Ford shale in the southeast of the state, with 2 of those coming out of Texas Oil District 1 and the other removed from Texas Oil District 4, while drilling activity in all other Texas districts was unchanged...the rig pulled out of North Dakota had obviously been drilling in the Williston, while additions shown above include a​ ​n​ew​ oil rig in an unnamed Alaska basin, an oil rig in Oklahoma's Cana Woodford, and the aforementioned "miscellaneous"​ ​rig in California...the 'miscellaneous' rig in Nevada, meanwhile, represents the first drilling in that state since September of last year...while the table shows no evidence of changes in natural gas drilling, there was in fact a natural gas rig start-up in the northern Louisiana Haynesville while that basin's lone oil rig was shut down, while at the same time one of the 3 rigs pulled out of the Eagle Ford had been targeting natural gas, leaving the Eagle Ford deployment at 7 natural gas rigs and 53 rigs targeting oil...

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+note:  there's more here

Monday, November 4, 2019

a graphic snapshot of natural gas supply and demand + the usual synopsis of weekly reports...

oil prices were down just a bit this past week, as a major rally on Friday nearly reversed four days of lower prices...after rising more than 5% to a month high $56.66 a barrel last week on a drop in US crude supplies, a promise of deeper output cuts from OPEC, and hopes for a U.S.-China trade deal, the price of US light sweet crude for December delivery tracked lower for the first time in five days on Monday, falling 85 cents to $55.81 a barrel on weak Chinese industrial data and forecasts for a US crude oil inventory build... oil prices fell a second day on Tuesday ahead of the expected inventory increase, and ended 27 cents lower at $55.54 a barrel, after earlier hitting a low of $54.61 a barrel when Russia said it’s too early to talk about deeper output cuts, as expectations for large drops in gasoline and distillates supplies offset concerns about crude supplies...prices were little changed early Wednesday after the API had reported a small build in crude supplies, but then tumbled after the EIA reported a larger than expected increase, with oil prices falling to as low as $54.42 a barrel before recovering to $55.06 a barrel, a loss of 48 cents on the day...oil contracts came under renewed selling pressure on Thursday after reports that Chinese factory activity shrank for a sixth straight month while the country’s service sector activity was growing at its slowest pace since February 2016 and continued lower to end down 88 cents at $54.18 a barrel after an oil spill from the Keystone pipeline in North Dakota shut off deliveries of tar sands crude to the Cushing Oklahoma oil depot...oil prices finally moved higher on Friday on stronger-than-expected economic reports from both the US & China, then rallied to finish $2.02 or 3.7% higher at $56.20 a barrel after Chinese state-media said the US and China had reached “consensus on principles” on trade...thus, despite being down more than 5% at one point, oil prices ended down less than 1% for the week, boosted on Friday by strong US jobs data, a fall in the U.S. rig count, and Chinese trade hopes...

natural gas prices, on the other hand, saw their largest weekly gain since January as the long awaited cold arrived and the quoted price switched to the always higher priced December contract... after falling five out of the six prior weeks and ending at $2.300 per mmBTU last Friday, the contract price of natural gas for November delivery rose 14.6 cent Monday and 15.1 cents on Tuesday before trading in that contract expired at $2.597 per mmBTU as the weather models for early November indicated colder than normal temperatures for most of the country east of the Rockies...meanwhile, the natural gas contract for December delivery, which had started the week at $2.459 per mmBTU and risen 9.6 cents on Monday and 8.4 cents on Tuesday, rose another 5.2 cents on Wednesday, before falling back 5.8 cents on Thursday when the weekly storage report indicated more gas had been added to storage than analysts expected...but prices jumped another 8.1 cents on Friday on the early outbreak of November cold to end the week at $2.714 per mmBTU, a gain of 10.4% for the December contract and 41.4 cents or 18% higher than the quoted prices for November gas at the beginning of the week...

the natural gas storage report for the week ending October 25th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 89 billion cubic feet to 3,695 billion cubic feet by the end of the week, which meant our gas supplies were 559 billion cubic feet, or 17.8% more than the 3,136 billion cubic feet that were in storage on October 25th of last year, and 52 billion cubic feet, or 1.4% above the five-year average of 3,643 billion cubic feet of natural gas that have been in storage as of the 25th of October in recent years....this week's 89 billion cubic feet injection into US natural gas storage was 4 billion cubic feet higher than the average forecast for a 85 billion cubic feet injection from analysts surveyed by S&P Global Platts, and it was 24 billion cubic feet above the average 65 billion cubic feet of natural gas that have been added to gas storage during the fourth week of October over the past 5 years, the 31st such average or above average storage build in the last 33 weeks...the 2,519 billion cubic feet of natural gas that have been added to storage over the 31 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2573 billion cubic feet of natural gas that were injected into storage over the same 31 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet….  

with US natural gas supplies now solidly above the 5 year average, in contrast to a year ago, when we were heading into winter with a deficit from normal of more than a 500 billion cubic feet, it seems it would an appropriate time to take a look at how we got here...it so happens that John Kemp of Reuters produced a natural gas chartbook to go with one of his articles this week that will facilitate that...John sends out the articles he publishes on Reuters, along with his daily digest of best in energy news and his research notes, free to those who subscribed to his mailings...if you'd like to be on his list for such mailings, go to this webpage and provide your name and email address: https://twitter.us18.list-manage.com/subscribe?u=92fd2e3ec7962cda008f0732a&id=a5736ab8e1

most of John's Reuters articles include a chartbook with graphics relevant to topic discussed in the article, but since they're usually linked by a small shortened url embedded in the article, it's likely that few readers see them...the natural gas chartbook from which we selected the following graphs opens as a pdf and is here: https://fingfx.thomsonreuters.com/gfx/ce/7/7118/7100/US%20NATURAL%20GAS.pdf and it came with his October 29th article titled U.S. gas market struggles with persistent oversupply...since this article ran before the release of this week's storage report, these graphics do not include this week's data...

the first graph that we're including below shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending October 18th, 2019 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" from the period shown by the red graph as a yellow line, which would thus be from January 2014 up until the end of 2018, and the average of natural gas in storage over the 5 years preceding those same dates shown as a dashed blue line...at the same time, the light blue shaded background on the graph shows us the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the red graph…thus the light shaded area on the far left of the graph shows us the five year average from 2010 to 2014, while the light shaded area on the far right of the graph shows us the five year average from 2014 to 2018, with the rest of it between those dates...the graph also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the end of October, falling through the winter, and usually bottoming out at the end of March...

October 31 2019 gas in storage 5 year history

by following the course of the red line, we can see that natural gas supplies began setting record highs in the Fall of 2015, and continued to set seasonal highs until the Fall of 2016, topping out at a record 4,047 billion cubic feet on November 11th of that year...however, by the winter of 2017-18, natural gas supplies were approaching historical lows for the season, as evidenced by the red graph falling to the bottom of the range...that situation was exacerbated during the first week of January 2018, when one cold snap burned 11.5% of our natural gas supplies in a week's time...supplies vis-a-vis the norm recovered a bit from there, but by the end of that winter our natural gas supplies were 38.3% lower than they were the prior year, which you can see in the separation between the red and yellow graphs for 2018 above...then during the summer of 2018, air conditioning demand that was above normal resulted in lower than normal additions to storage, and our supplies dropped well below the norm for the time of year heading into last winter, as evidenced by the red graph tracking far below the normal range...hence, by the time we headed into that winter, natural gas supplies had fallen to a 15 year low; and natural gas prices had hit 4 year high, and by November 26th, 2018, natural gas supplies were at a 16 year low for the season....however, a milder than normal December took the pressure off, and natural gas supplies eventually began the slow climb back towards normal which we've witnessed this year...

this next graph shows​ us​ how much natural gas was added to storage during the main part of ​each annual injection season​ of the past decade​...while the totals on this graph only go up to October 18th of each year, natural gas is normally added to storage up until the first week of November, so this isn't quite a complete picture...also note that John's numbers differ from the injection season totals i have been quoting because the totals i've quoted start with the week ending March 29th, and thus go back to March 23rd.​.​..i​'ve been​ includ​ing that week in my totals because this year that week had an anomalous early injection of 23 billion cubic feet...either way, this year's total to date is the second largest on record...

October 31 2019 injection season increase by year

the next graphic from John's chart booklet below shows monthly US natural gas production from the beginning of 2000 up to August of this year, which is all we have confirmed data for...monthly ​gas ​production is indicated by yellow dots, while the prior 12 month average from any date is tracked by the white linear graph...we can obviously see that US natural gas output has rapidly accelerated over the past two years, after the two year slump precipitated by record low drilling and an associated downturn in completions​ over 2015-2016​...remember that production for each new gas well typically drops by 80% after the first two years and tails off after that, so ​for output ​to rise from this elevated production level, more wells will have to be drilled and completed than are currently being complete​d​...it's been called the red queen syndrome, since frackers have to run faster and faster each year just to stay in the same place...

October 31 2019 monthly natural gas production

the next graph we'll include shows the quantity of natural gas used for electric power over the 2006 to 2019 time frame, with the monthly gas usage tracked by yellow dots, while the dashed white linear graph tracks the average annual consumption over the prior year for any given date...the peaks are evidently the annual summer highs for air conditioning demand, while the wintertime base probably reflects the trend more accurately...note that the 12 month moving average has nearly doubled over the time frame this graph shows, as more natural gas generating capacity has been added by US utilities while coal plants have been retired...​in 2018, ​the electric power sector accounted for 35% of domestic natural gas use..

October 31 2019 monthly natural gas power usage

the next graph shows US natural gas imports and exports, in billions of cubic feet per month, over the historical record from 1973 to August of 2019, with imports shown as a dijon yellow graphic above the zero line, and exports shown as a dark brown graphic extending below the zero line....the white linear graph then tracks the difference between the two metrics as a "net imports" figure, which has historically been a positive number, but over recent months has flipped to a negative number as exports have exceeded imports....historically, more than 90% of our natural gas imports have come by pipeline from Canada, while almost all of our exports have gone by pipeline to both Mexico and Canada...our exports of LNG is a relatively recent phenomena, rising from 1% of our total exports in 2014 to nearly 50% of the total in recent months...​as a result , ​our net natural gas exports in the first-half of 2019 doubled the year-ago levels for the second year in a row..

October 31, 2019 net imports natural gas  monthly

lastly, we'll include John's graph of natural gas rig counts over the past decade....the natural gas rig count low that we hit in ​August ​2016 was the lowest on record; but the fracking era high of 1,606 rigs of  September 7th, 2008 preceded this what's shown on this graph...however, natural gas rigs at one time numbered over 4,500, during the natural gas drilling boom of the 70s, when natural gas prices were four times what they are now....this week natural gas rigs fell to a 34 month low​, but there's still 50 more of them now than at the nadir in 2016​...

October 31 2019 natural gas drilling rig recent history

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 25th showed that because of a big jump in our oil imports and a decrease in our oil exports, we had surplus oil to add to our stored supplies for the sixth time in the past seven weeks...our imports of crude oil rose by an average of 840,000 barrels per day to an average of 6,697,000 barrels per day, after falling by an average of 438,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 356,000 barrels per day to an average of 3,327,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,370,000 barrels of per day during the week ending October 25th, 1,196,000 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 reported to be unchanged at a record 12,600,000 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 15,970,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,998,000 barrels of crude per day during the week ending October 25th, 133,000 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 714,000 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 743,000 barrels per day less than what was reportedly 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 inserted a (+743,000) 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"....with that much oil unaccounted for again this week, it means that one or all of the oil metrics that the EIA has reported and that we have just transcribed have to be seriously off the mark...​however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill​ for oil​, we continue to report them ​just ​as they're seen & believed by 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 6,268,000 barrels per day last week, still 16.5% less than the 7,509,000 barrel per day average that we were importing over the same four-week period last year....the 714,000 barrel per day net addition to our total crude inventories included a withdrawal of 100,000 barrels per day from our Strategic Petroleum Reserve, which means that 814,000 barrels per day were added to our commercially available stocks of crude oil....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 29,000 barrel per day decrease to 456,000 barrels per day in Alaska's oil production was not enough to impact the final rounded total...last year's US crude oil production for the week ending October 26th was rounded to 11,200,000 barrels per day, so this reporting week's rounded oil production figure was 12.5% above that of a year ago, and 49.5% 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 87.1% of their capacity in using 15,998,000 barrels of crude per day during the week ending October 25th, up from 85.2% of capacity the prior week, and close to normal for the pre-winter refinery maintenance season...however, the 15,998,000 barrels per day of oil that were refined this week was still 2.6% below the 16,417,000 barrels of crude per day that were being processed during the week ending October 26th, 2018, when US refineries were operating at 89.4% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 86,000 barrels per day to 10,184,000 barrels per day during the week ending October 25th, after our refineries' gasoline output had increased by 100,000 barrels per day the prior week....but even with those increases in gasoline output, this week's gasoline production was 1.7% lower than the 10,364,000 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 205,000 barrels per day to 4,970,000 barrels per day, after our distillates output had increased by 77,000 barrels per day over the prior week...but even with those two increases in distillates output, our distillates' production this week was still fractionally below the 4,983,000 barrels of distillates per day that were being produced during the week ending October 26th, 2018.... 

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 13th time in 19 weeks and for the 27th time in thirty-four weeks, falling by 3,037,000 barrels to 220,057​,000​ barrels during the week to October 25th, after our gasoline supplies had decreased by 3,107,000 barrels over the prior week....our gasoline supplies were down again this week as the amount of gasoline supplied to US markets increased by 194,000 barrels per day to 9,784,000 barrels per day, while our imports of gasoline fell by 24,000 barrels per day to 673,000 barrels per day and while our exports of gasoline rose by 27,000 barrels per day to 652,000 barrels per day....after this week's decrease, our gasoline supplies were 2.7% lower than last October 26th's inventory level of 226,169,000 barrels, and but remained roughly 2% above the five year average of our gasoline supplies for this time of the year...

likewise, even with the increase in our distillates production, our supplies of distillate fuels fell for the 21st time in the past 31 weeks, decreasing by 1,032,000 barrels to 226,169,000 barrels during the week ending October 25th, after our distillates supplies had decreased by 2,715,000 barrels over the prior week...our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 187,000 barrels per day to 4,263,000 barrels per day, because our exports of distillates fell by 197,000 barrels per day to 1,012,000 barrels per day while our imports of distillates rose by 25,000 barrels per day to 158,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 5.2% from the 126,322,000 barrels of distillates that we had stored on October 26th, 2018, but actually increased to around 11% below the five year average of distillates stocks for this time of the year​, as prior years saw greater decreases during the same week ​...

finally, with this week's jump in oil imports coupled with the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the eighth time in twenty weeks and for the eighteenth time in 40 weeks, increasing by 5,702,000 barrels, from 433,151,000 barrels on October 18th to 438,853,000 barrels on October 25th....that increase lifted our crude oil inventories to 1% above the five-year average of crude oil supplies for this time of year, and to more than 30% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the last weekend of October, 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 had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 25th were 3.0% above the 426,004,000 barrels of oil we had stored on October 26th of 2018, but at the same time were 3.5% below the 454,906,000 barrels of oil that we had in storage on October 27th of 2017, and 9.1% below the 482,578,000 barrels of oil we had in commercial storage on October 28th of 2016...    

This Week's Rig Count 

the US rig count fell for the 10th time in 11 weeks and for the 33rd time in 37 weeks over the week ending November 1st, and is now down by more than 24% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 8 rigs to a 31 month low of 822 rigs this past week, which was also down by 245 rigs from the 1067 rigs that were in use as of the November 2nd report of 2018, and 1107 fewer rigs than the shale era high of 1929 drilling rigs that were deployed on November 2nd of 2014, the week before OPEC began their attempt to flood the global oil market...

the number of rigs drilling for oil decreased by 5 to a 30 month low of 691 oil rigs this week, which was also 183 fewer oil rigs than were running a year ago, and quite a bit below 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 3 rigs to 130 natural gas rigs, the least natural gas rigs since December 23 2016 and hence a 34 month low for gas rig drilling activity, down by 63 rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition​ to those​, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity ​in the ​Gulf of Mexico increased by 1 rig​ with 21 Gulf rigs running this week, as another rig was added to those drilling offshore from Louisiana this week...the 21 rigs drilling in Louisiana's offshore waters are now 3 more rigs than the Gulf of Mexico rig count of 18 a year ago, when 17 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, whereas a year ago the only offshore rigs were in the Gulf...hence, the national total of 22 offshore rigs is up by 4 rigs from the 18 rigs that were deployed offshore a year ago...meanwhile, offsetting the rig that was added in Louisiana's offshore waters this week, a platform from which there ​had been drilling through an inland body of water in southern Louisiana was shut down this week, leaving just one such "inland waters' rig active in the state and nationally...that's down by 2 from a year ago, when 3 'inland waters rigs" were deployed in southern Louisiana...

the count of active horizontal drilling rigs was down by 11 rigs to 717 horizontal rigs this week, which was the least horizontal rigs deployed since April 21st, 2017 and hence is a new 30 month low for horizontal drilling...that was also 212 fewer horizontal rigs than the 929 horizontal rigs that were in use in the US on November 2nd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count ​increased by 2 rigs to 53 directional rigs this week, but those were down by 20 from the 73 directional rigs that were operating during the same week of last year...in addition, the vertical rig count increased​ ​by 1 to 52 vertical rigs this week, while those were down by 13 from the 65 vertical rigs that were in use on November 2nd of 2018...

the details on this week's changes in drilling activity by state and by major 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 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 November 1st, the second column shows the change in the number of working rigs between last week's count (October 25th) and this week's (November 1st) count, the third column shows last week's October 25th 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 ​2nd of November, 2018...   

November 1 2019 rig count summary

in the Texas Oil Districts that encompass the Texas portion of the Permian basin, Texas Oil District 8, or the core Permian Delaware, had three more rigs added this week, while Texas Oil District 8A, or the northern Permian Midland, and Texas Oil District 7C, or the southern Permian Midland, both dropped a rig from a week ago...with the total Permian ​rig ​count down by 1, that means that the two rigs that were pulled out of New Mexico had been operating in the western reaches of the Permian Delaware...meanwhile, the rig that was removed from the Mississippian shale had been operating in Oklahoma, since the Kansas rig count was unchanged at zero, as was the rig that was removed from the Granite Wash, since activity in Texas Oil District 10 was also unchanged...on the other hand, the rig that was pulled out of the Haynesville had been operating in Texas, since the northern Louisiana rig count was unchanged at 31 while drilling in Texas Oil District 6 was down a rig to 21...that Haynesville rig, plus the two rigs that were pulled out of Pennsylvania's Marcellus, account for all of this week's natural gas rig changes; everything else that moved was targeting oil...but we should also note that other than the changes shown in the major producing states above, Florida also had a rig shut down this week, while they still have one remaining; a year ago, there was no drilling in Florida whatsoever...

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note: there's more here...

Sunday, October 27, 2019

largest drop in drilling activity in 6 months leaves oil rigs at a 30 month low, natural gas rigs at a 33 month low

oil prices rose more than 5% over the past week on a surprise drop in US crude supplies, a promise of deeper output cuts from OPEC, and hopes for a U.S.-China trade deal...after falling 92 cents or 1.7% to $53.78 a barrel last week on a trade talks letdown and on a big jump in US oil supplies, the contract price of US light sweet crude for November delivery continued lower on Monday, after Commerce Secretary Wilbur Ross said a trade deal with China need not be finalized next month, feeding into worries that ​deepening ​global economic weakness would hurt demand for oil, prices for which ended down 47 cents, or 0.9%, at a two week low of $53.31 a barrel...but oil prices rebounded on Tuesday on a sentiment shift of concerns​ on both the UK's Brexit and the U.S.-China trade war, and finished 85 cents higher at $54.16 a barrel, buoyed by a report that OPEC would consider deeper production cuts when they meet in December, as trading in the November oil contract expired...while the price of oil for delivery in December, which had risen 97 cents to $54.48 a barrel on Tuesday, initially started lower on Wednesday on an API report of a larger than expected build of US oil inventories, it quickly reversed and surged higher after the EIA's data showed a surprise draw from U.S. crude stocks, and ultimately closed $1.49, or 2.7% higher at $55.97 per barrel....oil prices then extended that gain on Thursday, with US light sweet crude rising 26 cents to $56.23 a barrel, as the surprise drop in U.S. crude inventories and the prospect of further OPEC cuts offset the demand uncertainty stemming from the trade war and Brexit....oil prices continued rising on Friday after administration officials said they were close to finalizing the first part of a trade deal with China after months of a tariff war and finished the day 43 cents, or 0.8%, higher at $56.66 a barrel, thus ending up over 5% for the week as the news of progress on the so-called 'phase one' of a U.S.-China trade deal eased concerns over a slowdown in economic growth and energy demand...

natural gas prices, on the other hand, fell for a fifth week in the past six as last week's forecasts for a cold weather outbreak moderated and shifted west....after rising 4.8% to $2.320 per mmBTU last week on forecasts for colder than normal temperatures for the broad midsection of the country, the contract price of natural gas for November delivery gave up most of those gains on Monday as the cold forecast by the weather models weakened over the weekend and withdrew to the Rockies, leaving the large population centers in the East and the Midwest near normal, as natural gas prices fell 8.2 cents...gas prices recovered 3.4 cents on Tuesday and another penny on Wednesday as the 6 to 10 day forecast indicated the cold would spread to the south central states, and then gained another 3.4 cents ​on Thursday ​​after the natural gas storage report showed a smaller inventory increase than analysts had expected...however, natural gas prices then slipped back 1.6 cents on Friday to end the week at $2.300 per mmBTU, down 2 cents or less than 1% for the week...

the natural gas storage report for the week ending October 18th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 87 billion cubic feet to 3,606 billion cubic feet by the end of the week, which meant our gas supplies were 519 billion cubic feet, or 16.8% more than the 3,087 billion cubic feet that were in storage on October 18th of last year, and 28 billion cubic feet, or 0.8% above the five-year average of 3,578 billion cubic feet of natural gas that have been in storage as of the 18th of October in recent years....this week's 87 billion cubic feet injection into US natural gas storage was somewhat lower than the average forecast for a 92 billion cubic feet injection from analysts surveyed by S&P Global Platts, but it was well above the average 73 billion cubic feet of natural gas that have been added to gas storage during the third week of October over the past 5 years, the 30th such average or above average storage build in the last 32 weeks...the 2,428 billion cubic feet of natural gas that have been added to storage over the 30 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2482 billion cubic feet of natural gas that were injected into storage over the same 30 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet…. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 18th showed that because of a decrease in our oil imports, an increase in our oil exports, and a pickup in our oil refining, we needed to withdraw oil from storage for the first time in 6 weeks...our imports of crude oil fell by an average of 438,000 barrels per day to an average of 5,857,000 barrels per day, after rising by an average of 70,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 435,000 barrels per day to an average of 3,683,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,174,000 barrels of per day during the week ending October 18th, 873,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be unchanged at a record 12,600,000 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 14,774,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,865,000 barrels of crude per day during the week ending October 18th, 429,000 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 385,000 barrels of oil per day were being withdrawn from 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 706,000 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 (+706,000) 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"....with that much oil unaccounted for again this week, it means that one or all of the oil metrics that the EIA has reported and that we have just transcribed have to be seriously off the mark...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill, we continue to report them as they're seen​ & believed​ by 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 fell to an average of 6,167,000 barrels per day last week, now 19.5% less than the 7,664,000 barrel per day average that we were importing over the same four-week period last year....the 385,000 barrel per day net withdrawal from our total crude inventories included 242,000 barrels per day that were pulled out of our commercially available stocks of crude oil and a withdrawal of 143,000 barrels per day from our Strategic Petroleum Reserve....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, and because Alaska's oil production was unchanged at 485,000 barrels per day...last year's US crude oil production for the week ending October 19th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was 15.6% above that of a year ago, and 49.5% 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 85.2% of their capacity in using 15,865,000 barrels of crude per day during the week ending October 18th, up from 83.1% of capacity the prior week, but still somewhat below the normal, even for a refinery maintenance season...hence, the 15,865,000 barrels per day of oil that were refined this week was 2.5% below the seasonal low 16,268,000 barrels of crude per day that were being processed during the week ending October 19th, 2018, when US refineries were operating at 89.2% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 100,000 barrels per day to 10,098,000 barrels per day during the week ending October 18th, after our refineries' gasoline output had decreased by 68,000 barrels per day the prior week....with that increase in gasoline output, this week's gasoline production was 4.1% lower than the 10,028,000 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 77,000 barrels per day to 4,765,000 barrels per day, after our distillates output had decreased by 147,000 barrels per day over the prior week...since our distillates production is still down by a total of 567,000 barrels per day over the past 5 weeks, our distillates' production this week was still 3.9% below the 4,960,000 barrels of distillates per day that were being produced during the week ending October 19th, 2018.... 

even with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 12th time in 18 weeks and for the 26th time in thirty-three weeks, falling by 3,107,000 barrels to 223,094,000 barrels during the week to October 18th, after our gasoline supplies had decreased by 2,562,000 barrels over the prior week....the decrease in our gasoline supplies was larger this week because the amount of gasoline supplied to US markets increased by 236,000 barrels per day to 9,590,000 barrels per day, while our imports of gasoline rose by 44,000 barrels per day to 697,000 barrels per day and while our exports of gasoline fell by 156,000 barrels per day to 625,000 barrels per day....after this week's decrease, our gasoline supplies were 2.7% lower than last October 19th's inventory level of 229,330,000 barrels, and but remained roughly 2% above the five year average of our gasoline supplies for this time of the year...

likewise, with the increase in our distillates production, our supplies of distillate fuels fell for the 20th time in the past 30 weeks, decreasing by 2,715,000 barrels to 120,786,000 barrels during the week ending October 18th, after our distillates supplies had decreased by 3,823,000 barrels over the prior week...our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 290,000 barrels per day to 4,076,000 barrels per day, while our exports of distillates rose by 144,000 barrels per day to 1,209,000 barrels per day while our imports of distillates fell by 64,000 barrels per day to 133,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 7.4% from the 130,376,000 barrels of distillates that we had stored on October 19th, 2018, and fell to around 12% below the five year average of distillates stocks for this time of the year...

finally, with this week's refinery pickup coupled with the decrease in our net oil imports, our commercial supplies of crude oil in storage fell for the twelfth time in nineteen weeks and for the seventeen time in 39 weeks, decreasing by 1,699,000 barrels, from 434,850,000 barrels on October 11th to 433,151,000 barrels on October 18th....that decrease knocked our crude oil inventories back to the five-year average of crude oil supplies for this time of year, and back to around 30% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the third weekend of October, 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 had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 18th were still 2.5% above the 422,787,000 barrels of oil we had stored on October 19th of 2018, but at the same time were 5.3% below the 457,341,000 barrels of oil that we had in storage on October 20th of 2017, and 7.5% below the 468,158,000 barrels of oil we had in commercial storage on October 21st of 2016...  

This Week's Rig Count

the US rig count fell for the 9th time in 10 weeks and for the 32nd time in 36 weeks over the week ending October 25th, and is now down by 23.4% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 21 rigs to a 30 month low of 830 rigs this past week, the largest drop in 6 months, down by 238 rigs from the 1068 rigs that were in use as of the October 26th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...

the count of rigs drilling for oil decreased by 17 rigs to a 30 month low of 696 oil rigs this week, which was also 179 fewer oil rigs than were running a year ago, and quite a bit below 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 rigs to 133 natural gas rigs, the least natural gas rigs since December 30 2016 and hence a 33 month low for gas rig drilling activity, down by 60 rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

Gulf of Mexico offshore drilling activity decreased by 1 rig to 20 Gulf rigs running this week, as a rig that had been drilling offshore from Louisiana was shut down...that still left 20 rigs drilling in Louisiana's offshore waters, 2 more rigs than the Gulf of Mexico rig count of 18 a year ago, when 17 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago...hence, the national total of 21 offshore rigs is up by 2 rigs from the 19 rigs that were deployed offshore a year ago...

the count of active horizontal drilling rigs was down by 17 rigs to 728  horizontal rigs this week, which was the least horizontal rigs deployed since April 28th, 2017 and hence is a new 30 month low for horizontal drilling...that was also 199 fewer horizontal rigs than the 927 horizontal rigs that were in use in the US on October 26th 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 directional rig count was down by 4 rigs to directional rigs this week, and those were down by 22 from the 72 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count was unchanged at 51 vertical rigs this week, while those were down by 17 from the 68 vertical rigs that were in use on October 26th of 2018...

the details on this week's changes in drilling activity by state and by major 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 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 October 25th, the second column shows the change in the number of working rigs between last week's count (October 18th) and this week's (October 25th) count, the third column shows last week's October 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 26th of October, 2018...   

October 25 2019 rig count summary

we again have a problem with the Permian basin rig count this week, since the Rigs by State - Current and Historical excel file from Baker Hughes appears to show a drop of 7 rigs in the Texas Oil Districts that encompass the Texas portion of that basin.... Texas Oil District 8, or the core Permian Delaware, shows 266 rigs deployed, a drop of 3 from last week; Texas Oil District 8A, or the northern Permian Midland, shows 13 rigs remaining active, a drop of two from a week ago, while Texas Oil District 7C, or the southern Permian Midland, has 26 rigs remaining, also a drop of two rigs from a week ago...last week we had rig additions in those districts that were two greater than the Permian basin increase, and we assumed that those 2 ​additional rigs were ​in the same region but ​not targeting the Permian...however, since we hadn't seen that happen before, and since it has been reversed this week, it's possible that last week's Permian count was in error and this week's count corrected it...as i noted last week, one could search the North America Rotary Rig Count Pivot Table (xls), which has individual well records going back to February 2011, to see what the actual changes were, but unless one knew offhand which counties were in each of those Texas oil districts. it would likely be an all day chore...

at any rate, with the Texas Permian basins showing a 7 rig decrease this week, it seems likely that the rig that was pulled from New Mexico was not a Permian rig...meanwhile, the 6 rig decrease in Oklahoma appears to include the 2​ oil​ rigs pulled out of the Cana Woodford, the single​ oil​ rig pulled out of the Ardmore Woodford, 2 rigs pulled out of basins not tracked separately by Baker Hughes, and ​an oil rig that had been drilling in the Granite Wash, since Texas Oil District 10, or the Texas side of that basin, saw a 1 rig increase....elsewhere, the 2 ​oil ​rigs pulled out of the Williston basin match the North Dakota count, and the rig pulled out of the Gulf of Mexico accounts for 1 rig decrease in Louisiana...however, the two rig decrease in Wyoming probably includes a rig that had been drilling in the Denver-Julesburg Niobrara chalk, since Colorado saw a one rig increase....meanwhile, among rigs targeting natural gas, this week saw two rigs pulled out of the Marcellus, one each from Pennsylvania and from West Virginia, and two rigs removed from those "other basins" not tracked separately by Baker Hughes...we would also note that other than the major producing states listed in the table above, both Alabama and South Dakota saw ​single ​rigs removed this week, leaving both states with no drilling at this time...a year ago, Alabama had one rig deployed, while South Dakota had none...

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Sunday, October 20, 2019

natural gas supplies above average 1st time in 2 years; refineries slowest since Harvey; largest drop in DUC wells ever

oil prices ended modesty lower this week, largely on disappointment in the details of a proposed US-China trade deal and on a big jump in US oil supplies...after rising nearly 4% to $54.70 a barrel on the promise of further OPEC output cuts and on hopes for a US-China trade pact last week, the price of US light sweet crude for November delivery opened 20 cents higher on Monday amid renewed geopolitical tensions in the Middle East, but immediately began falling as details about the first phase of a U.S.-China trade deal did little to reassure there'​d be a quick end to the trade war and ultimately settled $1.11, or 2% lower at $53.59 a barrel...oil prices fell again on Tuesday, as traders worried that the unrelenting U.S.-China trade war would weaken the global economy and that swelling U.S. crude inventories would further pressure prices, with US crude ending 78 cents, or 1.5%, lower at $52.81 a barrel...however, oil prices recovered part of that loss on Wednesday on hopes that OPEC would extend its supply cuts at their coming biannual meeting, and ended 55 cents, or 1%, higher at $53.36 a barrel...oil prices then tumbled early on Thursday as industry data showed a much larger-than-expected build-up in U.S. inventories, but the drop was limited after the United Kingdom and the European Union announced they had reached a deal on Britain's separation from the Union, and then, boosted by a weaker dollar, oil prices reversed and rallied late in the session to end up 57 cents at $53.93 a barrel...oil prices edged lower again on Friday, as concerns about the weakest Chinese GDP report in 30 years outweighed a bullish report from its refining sector, but the day's losses were limited by hopes for progress toward a U.S.-China trade agreement​,​ ​with ​oil end​ing down just 15 cents at $53.78 a barrel...still, oil prices still closed 1.7% lower on the week, as higher US crude inventories and the depressed outlook for energy demand outweighed the optimism about potential future trade deals...

natural gas prices, on the other hand, rose for the first time in 5 weeks, as both the 6 to 10 day and the 8 to 14 day forecasts indicated colder than lower temperatures for the broad midsection of the country, and as the storage report came in slightly under the market consensus...after falling 5.9% to $2.214 per mmBTU on record production and weak demand last week, the contract price of natural gas for November delivery rose 6.6 cents or 3% on Monday as a shift to colder in the weather data snapped a 5 day losing streak for natural gas contract prices...momentum from that move carried into Tuesday as prices rose another 5.9 cents, but prices then fell back 3.6 cents on Wednesday as the midday weather models showed less potential for strong, lasting cold..​.​.prices edged higher on Thursday on short-covering and position-squaring ahead of the weekly storage report and ended 1.5 cents higher when the report showed a smaller increase in stores than was expected​, even though it was the largest on record for the date​....natural gas prices then rose two-tenths of a cent on Friday to finish the week at $2.320 per mmBTU, 4.8% higher than the previous Friday...

the natural gas storage report for the week ending October 11th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 104 billion cubic feet to 3,519 billion cubic feet by the end of the week, which meant our gas supplies were 494 billion cubic feet, or 16.3% more than the 3,025 billion cubic feet that were in storage on October 11th of last year, and 14 billion cubic feet, or 0.4% above the five-year average of 3,505 billion cubic feet of natural gas that have been in storage as of the 11th of October in recent years, the first time out natural gas supplies surpassed the previous five-year average since Sept. 22, 2017.....this week's 104 billion cubic feet injection into US natural gas storage was a bit lower than the consensus forecast for a 108 billion cubic feet injection from analysts surveyed by S&P Global Platts, but it was well above the average 81 billion cubic feet of natural gas that have been added to gas storage during the second week of October over the past 5 years, the 29th such average or above average storage build in the last 31 weeks...the 2,341 billion cubic feet of natural gas that have been added to storage over the 29 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2​387 billion cubic feet of natural gas that were injected into storage over the same 29 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet…. 

with our natural gas supplies now above the five year average for the first time in nearly 25 months, we'll include the graph of natural gas in storage that accompanied this week's storage report...

October 19 2019 natural gas storage for October 11

the above graph comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas in billion cubic feet that was in storage in the lower 48 states over the period from September 2017 up to the week ending October 11th 2019 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background​ graph​ represents the previous upper and lower range of natural gas in storage for any given time of year for the 5 years prior to the two years that are shown by today's graph…thus the grey area also shows us the normal variation of natural gas storage levels as they fluctuate from season to season, with natural gas in storage underground normally building to a maximum by the first weekend in November, falling through the winter, and usually bottoming out at the end of March or the first week of April, depending of course on the spring heating requirements in any given year...as you can see, the level of natural gas supplies as indicated by the blue graph has been consistently below the 5 year average that's indicated by the ​dark ​grey graph over the two year span of this graph, with supplies through much of last year well below the 5 year range, often tracking a 15 year low for each date in question...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 11th showed that because of a decrease in our oil exports and a deepening slowdown in our oil refining, we were left with surplus oil to add to storage for the fifth week in a row...our imports of crude oil rose by an average of 70,000 barrels per day to an average of 6,295,000 barrels per day, after falling by an average of 67,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 153,000 barrels per day to an average of 3,248,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,047,000 barrels of per day during the week ending October 11th, 233,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be unchanged at a record 12,600,000 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 15,647,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,436,000 barrels of crude per day during the week ending October 11th, 221,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 1,145,000 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 933,000 barrels per day less than what was reportedly 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 inserted a (+933,000) 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"....with that much oil unaccounted for again this week,​ it​ means that one or all of the oil metrics that the EIA has reported and that we have just transcribed are seriously off the mark (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 fell to an average of 6,297,000 barrels per day last week, now 18.2% less than the 7,695,000 barrel per day average that we were importing over the same four-week period last year....the 1,145,000 barrel per day net increase in our total crude inventories included 1,326,000 barrels per day that were added to our commercially available stocks of crude oil, which was offset by a withdrawal of 181,000 barrels per day from our Strategic Petroleum Reserve....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 12,000 barrels per day increase to 485,000 barrels per day in Alaska's oil production had no impact on the final rounded national production total...last year's US crude oil production for the week ending October 12th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was 15.6% above that of a year ago, and 49.5% 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 83.1% of their capacity in using 15,436,000 barrels of crude per day during the week ending October 11th, down from 85.7% of capacity the prior week, and the lowest refinery utilization rate since September 2017, ​after Hurricane Harvey had caused the shutdown of 12% of US refining capacity along the western Gulf Coast....hence, the 15,436,000 barrels per day of oil that were refined this week was 5.4% less than the 16,316,000 barrels of crude per day that were being processed during the week ending October 12th, 2018, when US refineries were operating at a seasonal low 88.8% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 68,000 barrels per day to 9,998,000 barrels per day during the week ending October 11th, after our refineries' gasoline output had decreased by 15,000 barrels per day the prior week....with that decrease in gasoline output, this week's gasoline production was 4.1% lower than the 10,430,000 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 147,000 barrels per day to 4,688,000 barrels per day, the lowest since March 2018, after our distillates output had increased by 22,000 barrels per day over the prior week....however, since our distillates production was down by a total of 528,000 barrels per day over the prior 3 weeks, our distillates​'​ production this week was 2.6% below the 4,815,000 barrels of distillates per day that were being produced during the week ending October 12th, 2018.... 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 17 weeks and for the 25th time in thirty-two weeks, falling by 2,562,000 barrels to 226,201,000 barrels during the week to October 11th, after our gasoline supplies had decreased by 1,213,000 barrels over the prior week....the decrease in our gasoline supplies was larger this week even though the amount of gasoline supplied to US markets decreased by 106,000 barrels per day to 9,354,000 barrels per day, while our imports of gasoline rose by 9,000 barrels per day to 651,000 barrels per day while our exports of gasoline fell by 15,000 barrels per day to 781,000 barrels per day....after this week's decrease, our gasoline supplies were 3.4% lower than last October 12th's inventory level of 234,156,000 barrels, and but remained roughly 2% above the five year average of our gasoline supplies for this time of the year...

with the decrease in our distillates production, our supplies of distillate fuels fell for the 19th time in the past 31 weeks, decreasing by 3,823,000 barrels to 123,501,000 barrels during the week ending October 11th, after our distillates supplies had decreased by 3,943,000 barrels over the prior week...our distillates supplies fell this week even though our exports of distillates fell by 389,000 barrels per day to 1,065,000 barrels per day while our imports of distillates rose by 105,000 barrels per day to 197,000 barrels per day, because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 330,000 barrels per day to 4,366,000 barrels per day....after this week's inventory decrease, our distillate supplies were 6.9% less than the 132,638,000 barrels of distillates that we had stored on October 12th, 2018, and fell to around 11% below the five year average of distillates stocks for this time of the year...

finally, with the refinery slowdown and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the seventh time in eighteen weeks and for the twenty-second time in 38 weeks, increasing by 2,927,000 barrels, from 425,569,000 barrels on October 4th to 434,850,000 barrels on October 11th to ...that increase lifted our crude oil inventories to 2% above the five-year average of crude oil supplies for this time of year, and to more than 31.1% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the second weekend of October, 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 had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 4th were still 4.4% above the 416,441,000 barrels of oil we had stored on October 12th of 2018, but at the same time were 4.7% below the 456,485,000 barrels of oil that we had in storage on October 13th of 2017, and 7.2% below the 468,711,000 barrels of oil we had in commercial storage on October 14th of 2016...     

This Week's Rig Count

the US rig count fell for the 8th time in 9 weeks and for the 31st time in 35 weeks over the week ending October 18th, and is now down by nearly 21.5% since the beginning of this year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 30 month low of 851 rigs this past week, which was also down by 216 rigs from the 1067 rigs that were in use as of the October 19th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...

the count of rigs drilling for oil increased by 1 rig to 713 rigs this week, which was still 160 fewer oil rigs than were running a year ago, and quite a bit below 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 6 rigs to 137 natural gas rigs, a 32 month low for gas rig drilling activity, down by 57 rigs from the 194 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, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, a change from a year ago, when there were no such "miscellaneous" rigs deployed..

Gulf of Mexico offshore drilling activity decreased by 2 rigs to 21 Gulf rigs running this week, as 2 rigs that had been drilling offshore from Louisiana were shut down...that still left 21 rigs drilling in Louisiana​'s​ offshore waters, 2 more rigs than the Gulf of Mexico rig count of 19 a year ago, when 18 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago...hence, the national total of 22 offshore rigs is up by 2 rigs from the 20 rigs that were deployed offshore a year ago...however, another rig began drilling through an inland body of water in southern Louisiana this week, where there are now two​ drilling on inland waters​, but still down from the 3 such "inland waters" rigs deployed a year ago...

the count of active horizontal drilling rigs was down by 5 rigs to 745  horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 29 month low for horizontal drilling...that was also 181 fewer horizontal rigs than the 926 horizontal rigs that were in use in the US on October 19th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was unchanged at 55 directional rigs this week, but those were still down by 17 from the 72 directional rigs that were operating during the same week of last year...in addition, the vertical rig count was also unchanged at 51 vertical rigs this week, and those were down by 18 from the 69 vertical rigs that were in use on October 5th of 2018...

the details on this week's changes in drilling activity by state and by major 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 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 October 18th, the second column shows the change in the number of working rigs between last week's count (October 11th) and this week's (October 18th) count, the third column shows last week's October 11th 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 19th of October, 2018...   

October 18 2019 rig count summary

we have a problem with the Permian rig count this week, since the Rigs by State - Current and Historical excel file from Baker Hughes shows that one rig was added in Texas Oil District 8, or the core Permian Delaware, that two rigs were added in Texas Oil District 8A, or the northern Permian Midland, and another rig was added in Texas Oil District 7C, or the southern Permian Midland...as it's likely that the rig pulled out of New Mexico had been operating in the western Permian Delaware, and since the Permian count is only up by one, we have to assume that two of those rigs that were added in Texas Permian districts were not targeting the Permian...to determine where, one could search the North America Rotary Rig Count Pivot Table (xls), which has individual well records going back to February 2011, but unless one knew ​offhand ​which counties were in each of those Texas districts it would likely be a fool's errand...

in addition, there's also a disconnect on the totals in the Marcellus ​shale ​and the states involved, since the Marcellus shows a three rig decrease while West Virginia shows a one rig decrease and Pennsylvania shows 4 fewer rigs...since the West Virginia and Pennsylvania current rig counts add up to the current Marcellus count, that means the shallow vertical rigs targeting gas we noted starting up in Fayette County, Pennsylvania during the week ending Sept 13th and in southern West Virginia earlier this year were both shut down this week...to get from there to the 6 rig decrease in natural gas that this week's report shows, then, we include all 5 of those Appalachian rigs - 3 in the Marcellus and the two shallower rigs targeting formations not tracked separately by Baker Hughes, and two natural gas rig pulled out of the Eagle Ford in southeastern Texas, which are then offset by a rig added in the Barnett shale formation in the north central part of the state...however, neither of those Texas formations shows a change in the table above because their natural gas change was offset by a change in oil rigs; for the Eagle Ford, two oil rigs were added, leaving that basin's count at 52 oil rigs and 8 targeting natural gas, while an oil rig was pulled out of the Barnett shale, leaving the Barnett with two oil rigs and two targeting natural gas...

DUC well report for September

Monday of this past week saw the release of the EIA's Drilling Productivity Report for October, which includes the EIA's September data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the seventh month in a row, this report showed a decrease in uncompleted wells nationally in September, as both drilling of new wells and completions of drilled wells decreased....moreover, the inventory of uncompleted wells fell in every major US basin, including the Permian basin of western Texas and New Mexico, which had seen increases of newly drilled but uncompleted wells (DUCs) every month from August 2016 through August 2019...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 206 wells, the largest decrease on record, falling from a revised 7,946 DUC wells in July to 7,740 DUC wells in September, which still represents 6.2% more than the 7,284 wells that had been drilled but remained uncompleted as of the end of September of a year ago...that DUC decrease occurred as 1,184 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during September, down by 61 from the 1,245 wells that were drilled in August and the lowest in 19 months, while 1,390 wells were completed and brought into production by fracking, a decrease of 5 well completions from the 1,395 completions seen in August....at the September completion rate, the 7,740 drilled but uncompleted wells left at the end of the month still represent a 5.6 month backlog of wells that have been drilled but are not yet fracked, down from a backlog of 5.7 months a month ago...  

both oil producing regions and natural gas producing regions saw DUC well decreases in September, since no major basin saw an increase...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 59, from 885 at the end of August to 826 DUC wells at the end of September, as 82 wells were drilled into the Anadarko basin during September while 141 Anadarko wells were being fracked....in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells fall by 49, from 3,717 DUC wells at the end of August to 3,668 DUCs at the end of September, as 503 new wells were drilled into the Permian, while 552 wells in the region were being fracked....at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 32 to 473, as 168 Niobrara wells were drilled in September while 200 Niobrara wells were completed....meanwhile, DUC wells in the Eagle Ford of south Texas decreased by 24, from 1,468 DUC wells at the end of August to 1,444 DUCs at the end of September, as 175 wells were drilled in the Eagle Ford during August, while 199 already drilled Eagle Ford wells were completed....in addition, DUC wells in the Bakken of North Dakota fell by 21, from 696 DUC wells at the end of August to 675 DUCs at the end of September, as 104 wells were drilled into the Bakken in August, while 125 of the drilled wells in that basin were being fracked...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 16 wells, from 520 DUCs at the end of July to 504 DUCs at the end of September, as 107 wells were drilled into the Marcellus and Utica shales during the month, while 123 of the already drilled wells in the region were fracked...in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 5 wells to 180, as 45 wells were drilled into the Haynesville during September, while 50 Haynesville wells were fracked during the same period....thus, for the month of September, DUCs in the five oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 185 wells to 7,056 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 21 wells to 684 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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