Masters Of War

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

Sunday, December 1, 2019

natural gas prices for January at an all time low; natural gas & oil production both at all time highs

oil prices fell for the first time in four weeks as a report that the Saudis would pressure other OPEC members to carry their own weight at next week's OPEC meeting precipitated a 5% drop on Friday...after closing little changed last week at $57.77 a barrel on conflicting stories on US-China trade, oil inventories, and OPEC, the price of light sweet domestic oil for January delivery started this week higher on new optimism that the US and China would soon sign a deal to end their trade war, and finished Monday up 24 cents at $58.01 a barrel...hopes of progress towards a trade agreement and hopes for an OPEC+ production cut extension pushed prices another 40 cents higher to $58.41 a barrel on Tuesday, even as prices backed backed off before reaching last Thursday's two month high...oil prices then slumped after the American Petroleum Institute (API) reported a crude oil inventory increase much greater than was expected, but came back near the close on Wednesday to end down 30 cents at $58.11 a barrel, as losses were limited by optimism that a U.S.-China trade deal would soon be reached...US oil again traded lower on Thursday in Asia, reacting to the EIA report that oil crude inventories unexpectedly rose last week and ended down 33 cents, or 0.6%, to $57.78 a barrel in overseas trading after Trump signed into law a bipartisan bill backing protesters in Hong Kong, fueling new tensions with China...oil prices then fell sharply in US markets on Friday on rising US-China tensions over Hong Kong and on the resignation of the Iraqi Prime Minister, which traders believed would help quell weeks of unrest in Iraq, and went on to finish $2.94 or 5.1% lower at $55.17 a barrel following reports the Saudis would no longer compensate for excessive production by other OPEC members, and on comments by the Russian Energy Minister that he would prefer if OPEC and other producers delayed the decision on whether to extend their production cuts till April...oil prices thus ended the week 4.5% lower than the prior week's close, but still managed to log an increase of 2.3% for November, their largest monthly gain since June...

meanwhile, natural gas prices fell nearly 16% to an all time low as warmer weather and record high gas production sent prices tumbling...after recovering to lose less than 1% last week at $2.665 per mmBTU, the contract price of natural gas for December delivery fell 13.4 cents on Monday and 6.1 cents on Tuesday, as weekend natural gas production was at a record high while weather models changed from indicating much below normal temperatures over the entire country to just a modest cooling in the East...with trading in the December contract rolling off the boards at $2.470 per mmBTU on Tuesday, the contract price of natural gas for January delivery, which had ended the prior week at $2.710 per mmBTU, fell another 3.2 cents to $2.501 per mmBTU on Wednesday, and then fell 22 cents to an all time low of $2.281 per mmBTU on Friday as the outlook for the second week of December turned warmer, with temperatures expected to be above normal across most of the contiguous U.S.

with natural gas prices for delivery in January thus closing at an all time low, we'll bring up a few price graphs to see what they look like, and what the implications of that record low price might be....the first graph we have here shows the daily price of the January 2020 natural gas contract over the past 6 months...

November 30 2019 daily natural gas prices

the above graph is a screenshot of the interactive daily price of the January natural gas contract at Barchart.com, "the leading provider of real-time or delayed intraday stock and commodities charts and quotes", and it shows the range of prices, in dollars per mmBTU, for that January natural gas contract as a vertical bar for each day over the past 6 months...you might note that each bar has two small horizontal appendages: the one on the left is the opening price for that day, while the appendage on the right is the day's closing price...what we can see here is that up until Friday of this week, this contract had seldom sold for less than $2.50 per mmBTU, and then on Friday it crashed 22 cents to $2.281 per mmBTU, 20 cents lower than it had ever been priced for previously...we should make clear that this graph shows the price of the January contract, which is historically the most expensive, and that mid-summer gas contract prices we have quoted earlier this year were often lower priced...

to extend that price picture out a bit, we'll also include a graph of weekly price of the January natural gas contract over the past year...the format is the same as the graph above, but in this case each bar represents the price range of the January 2020 contract over each of the past 52 weeks...again, the magnitude of this week's price drop compared to other weekly changes stands out..

November 30 2019 weekly natural gas prices

lastly, to give us a long term historical view, we'll include a version of that graph that shows the price range of the January 2020 natural gas contract for each quarter over the past 11 years...:hence, the entirety of what we saw on the daily graph is represented by just the two rightmost bars on this graph, which should give you a good sense of how long natural gas prices have been falling, and how far they have fallen....again, remember this is the graph for the January 2020 futures contract; daily spot prices and the widely quoted front month contract price have been much more volatile over time than the price that a commodity such as natural gas would trade for on a contract that references delivery 5 or 10 years from the date that it's being traded...ie, while futures prices were toying with $9 per mmBTU ten years ago, the then current contract prices topped $12..

November 30 2019 quarterly natural gas prices

these prices represent what a natural gas exploitation company could have locked in to sell their gas in January 2020 at any time over the past 11 years, or the price that a utility could have locked in their purchase of gas over the same period, although in practice, producers and users of gas seldom lock in contract prices that far out...there are similar futures contracts for each month of each year going out at least 5 years (ie, here's natural gas contract prices for February 2024) and then for the beginning month of each quarter going out at least 20 years...while this isn't the lowest price a natural gas contract has traded for, it is the lowest that natural gas contracted for January has ever been priced at...and since futures contract prices farther out generally moved in tandem; ie, natural gas contracted for July 2020 delivery, for instance, fell 11.1 cents on Friday to $2.250 per mmBTU, this week's price move suggests that anyone planning to drill this summer will have a hard time securing a price that will enable profitability..

the natural gas storage report for the week ending November 22nd from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 28 billion cubic feet to 3,610 billion cubic feet by the end of the week, which left our gas supplies 548 billion cubic feet, or 17.9% higher than the 3,062 billion cubic feet that were in storage on November 22nd of last year, but still left our supplies 31 billion cubic feet, or 0.9% below the five-year average of 3,641 billion cubic feet of natural gas that have been in storage as of the 22nd of November in recent years....the 28 billion cubic feet that were withdrawn from US natural gas storage this week was 3 billion cubic feet more than the average forecast of a 25 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, but was quite a bit less than the average 57 billion cubic feet of natural gas that have been pulled from natural gas storage during the third week of November over the past 5 years, which thus suggests that my theory that we may have entered a new normal where both injections and withdrawals would be greater than their previous norms was only a one week wonder...

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 22nd showed that because of increases in our oil imports and oil production, as well as another large draw from the Strategic Petroleum Reserve, we again managed to have a small surplus of oil available to be added to our stored commercial supplies for the tenth time in the past eleven weeks...our imports of crude oil rose by an average of 217,000 barrels per day to an average of 6,190,000 barrels per day, after rising by an average of 222,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 453,000 barrels per day to an average of 3,480,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,710,000 barrels of per day during the week ending November 22nd, 236,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 12,900,000 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 15,610,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,334,000 barrels of crude per day during the week ending November 22nd, 101,000 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 29,000 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 753,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA inserted a (+753,000) 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 must necessarily 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, since commonly held illusions always top reality (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 5,997,000 barrels per day last week, now 21.9% less than the 7,677,000 barrel per day average that we were importing over the same four-week period last year....the 29,000 barrel per day net addition our total crude inventories included a 224,000 barrel per day addition to our commercially available stocks of crude oil, which was mostly offset by a withdrawal of 195,000 barrels per day from our Strategic Petroleum Reserve...this week's crude oil production was reported to be 100,000 barrels per day higher at a record 12,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record 12,400,000 barrels per day, while a 7,000 barrel per day increase to 488,000 barrels per day in Alaska's oil production was not large enough to impact the final rounded total...last year's US crude oil production for the week ending November 23rd was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 10.3% above that of a year ago, and 53.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...   

meanwhile, US oil refineries were operating at 89.3% of their capacity in using 16,334,000 barrels of crude per day during the week ending November 22nd, down from 89.5% of capacity the prior week, and below normal for the third week of November...as a result, the 16,334,000 barrels per day of oil that were refined this week was 6.9% below the 16,855,000 barrels of crude per day that were being processed during the week ending November 23rd, 2018, when US refineries were operating at 95.6% of capacity....

even with a modest decrease in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 12,000 barrels per day to 10,065,000 barrels per day during the week ending November 22nd, after our refineries' gasoline output had decreased by 120,000 barrels per day the prior week....but even with this week's increase in gasoline output, our gasoline production was still 1.0% lower than the 10,186,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 49,000 barrels per day to 5,075,000 barrels per day, after our distillates output had increased by 85,000 barrels per day over the prior week...after this week's decrease in distillates output, our distillates' production for the week was 7.2% below the 5,471,000 barrels of distillates per day that were being produced during the week ending November 23rd, 2018....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 3rd time in nine weeks and for the 9th time in 23 weeks, rising by 5,132,000 barrels to 225,978,000 barrels during the week to November 22nd, after our gasoline supplies had increased by 1,756,000 barrels over the prior week....our gasoline supplies increased by more this week because our imports of gasoline rose by 258,000 barrels per day to 773,000 barrels per day while our exports of gasoline rose by 46,000 barrels per day to 935,000 barrels per day, and while the amount of gasoline supplied to US markets increased by 12,000 barrels per day to 9,204,000 barrels per day....after this week's increase, our gasoline supplies were 0.6% higher than last November 23rd's inventory level of 224,551,000 barrels, and rose to roughly 4% above the five year average of our gasoline supplies for this time of the year...

however, even with the decrease in our distillates production, our supplies of distillate fuels rose for the 1st time in 10 weeks and for 11th time in the past 35 weeks, increasing by 725,000 barrels to 116,406,000 barrels during the week ending November 22nd, after our distillates supplies had decreased by 974,000 barrels over the prior week...our distillates supplies rose this week because our exports of distillates fell by 439,000 barrels per day to 816,000 barrels per day while our imports of distillates fell by 77,000 barrels per day to 238,000 barrels per day, and while the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 70,000 barrels per day to 4,393,000 barrels per day....but even after this week's inventory increase, our distillate supplies were still 4.4% lower than the 121,801,000 barrels of distillates that we had stored on November 23rd, 2018, and fell to around 12% below the five year average of distillates stocks for this time of the year...

finally, despite this week's increase in oil exports, the oil we pulled out of the SPR meant our commercial supplies of crude oil in storage rose for the twelfth time in twenty-four weeks and for the twenty-seventh time in 44 weeks, increasing by 1,379,000 barrels, from 450,380,000 barrels on November 15th to 451,952,000 barrels on November 22nd...after that increase, our crude oil inventories were roughly 3% above the five-year average of crude oil supplies for this time of year, and almost 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after three weeks 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 this year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of November 22nd were still 0.3% above the 450,485,000 barrels of oil we had stored on November 23rd of 2018, but at the same time were 0.4% below the 453,713,000 barrels of oil that we had in storage on November 24th of 2017, and 7.4% below the 488,145,000 barrels of oil we had in commercial storage on November 25th of 2016...    

This Week's Rig Count

the US rig count fell for the 14th time in 15 weeks and for the 37th time in 41 weeks over the week ending November 29th, and is now down by 26% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 1 rig to a 32 month low of 802 rigs this past week, which was also down by 274 rigs from the 1076 rigs that were in use as of the November 30th report of 2018, and 1127 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 3 to a 31 month low of 668 oil rigs this week, which was also 219 fewer oil rigs than were running a year ago, and well 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 increased by 2 rigs to 131 natural gas rigs, which was ​still ​down by 58 rigs from the 189 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'  continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico was unchanged at 22 rigs this week, with all 22 of those drilling offshore from Louisiana...but that's down by one from the Gulf of Mexico rig count of 23 a year ago, when 22 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...since there are no rigs deployed off US shores elsewhere, nor were there a year ago, the Gulf of Mexico count for both years is equal to the national total in each case..

the count of active horizontal drilling rigs was up by 2 rigs to 701 horizontal rigs this week, which was still 233 fewer horizontal rigs than the 934 horizontal rigs that were in use in the US on November 30th 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 vertical rig count was down by 2 to 48 vertical rigs this week, and those were down by 26 from the 74 vertical rigs that were operating during the same week of last year...at the same time, the directional rig count was down by 1 to 53 directional rigs this week, and those were down by 15 from the 68 directional rigs that were in use on November 30th 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 29th, the second column shows the change in the number of working rigs between last week's count (November 22nd) and this week's (November 29th) count, the third column shows last week's November 22nd 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 30th of November, 2018...  

November 29 2019 rig count summary

even though the Permian basin shows no change this week, there was a rig added in Texas Oil District 8, or the core Permian Delaware, while at the same time, a rig was shut down in Texas Oil District 8A, or the northern Permian Midland...since there are no other changes in Texas oil districts that could possibly indicate another Permian change, it's apparent that the rig that was pulled out of New Mexico was operating in an "other" basin in the state, such as the fairly active San Juan Basin in the northwest corner of the state...the two rigs that were pulled out of north-central Texas's Barnett shale were both oil rigs; the two that remain are drilling for natural gas...in addition, an oil rig was pulled out of the Denver-Julesburg NIobrara chalk in Colorado, while the oil rig pulled ​out of the Mississippian​ shale​ came out of Oklahoma, since there haven't been any Mississippian rigs operating in Kansas for quite a while...meanwhile, the increase of 2 rigs targeting natural gas included one added in the Eagle Ford of southeast Texas, which now has 6 natural gas rigs, as an oil rig in that basin was shut down at the same time, and the rig that was added in Texas Oil District 8, or the core Permian Delaware, which is the first natural gas drilling in the Permian since early August 2018....we should also note that a rig started drilling in Nebraska this week, in the first Nebraska activity since April....all 4 Nebraska rig startups since mid-2016 have only lasted a week each time, which is quite unusual...

+

+

note: there’s more here

Sunday, November 24, 2019

DUCs down the most on record as the number of wells drilled in October was at an 18 month low…

oil prices ended the week little changed, despite being down more than 5% by early on Wednesday, as shifting reports on US-China trade, oil inventories, and potential OPEC cuts resulted in the most volatile trading since the Saudi drone attack...after rising less than 1% to $57.72 per barrel on conflicting China-US trade deal and crude inventory reports last week, prices of US light sweet crude for December delivery fell more than 1% on Monday, erasing the prior week’s gains while tumbling alongside U.S. stocks amid lack of progress on a U.S.-China trade deal and ended down 67 cents, or 1.2%, at $57.05 a barrel...prices then fell for the second straight day on Tuesday amid gloom on ongoing trade tariffs and rising U.S. oil inventories and then dropped to a loss of $1.84, or 3.2%, at $55.21 a barrel after reports that Russia was unlikely to agree to deeper output cuts at the coming OPEC meeting... December oil prices opened even lower Wednesday and briefly fell to $54.76 a barrel after the American Petroleum Institute's report of a larger than expected increase in US crude supplies, but then jumped back over $56 a barrel after the EIA contradicted the API in reporting a smaller than expected inventory build, and after Putin said that Russia and OPEC have ‘a common goal’ of keeping the oil market balanced, with the December delivery contract price rising $1.90, or 3.4%, to settle at $57.11 a barrel as trading in the December contract expired, while the contract price for January oil added $1.66, or 3%, to finish at $57.01 a barrel....now quoting prices for January oil, prices rose on Thursday following a Reuters report that OPEC and its allies are likely to extend output cuts through mid-2020 and then surged 2.8% to a two-month high at $58.58 a barrel after China invited U.S. trade negotiators for a new round of talks...but oil prices couldn't hold those gains on Friday as prices slid on continued skeoticism about any U.S.-China trade deal proposal and its potential global economic impact, with the price of January oil ending Friday 81 cents lower at $57.77 a barrel...while that price is 5 cents higher than oil price quotes referencing the December contract were at the end of last week, it's also 6 cents lower than the closing price of the January contract last Friday, which left the media confusingly reporting oil's change both as a price gain for the week and as 0.1% lower for the week...

meanwhile, natural gas prices ended the weekly slightly lower, but they too were up 6.6% from their mid-week nadir by the close on Friday....after falling 3.6% to $2.688 per mmBTU on moderating temperatures last week, the price of natural gas for December delivery crashed 12.2 cents to settle at $2.566/MMBtu on Monday as a forecast of warmer-than-usual temperatures was expected to lead to weaker demand...prices then fell another 5.6 cents Tuesday before recovering 4.9 cents of those losses on Wednesday, and another eight-tenths on Thursday as the EIA reported a withdrawal of gas from storage that was a bit above expectations...then on Friday, a change in the forecast to indicate colder than normal temperatures from Maine to California sparked a rally in natural gas, as prices rose 9.8 cents to finish at $2.665 per mmBTU, cutting the loss for the week to less than 1%...

the natural gas storage report for the week ending November 15th from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 94 billion cubic feet to 3,638 billion cubic feet by the end of the week, which still left our gas supplies 506 billion cubic feet, or 16.2% more than the 3,132 billion cubic feet that were in storage on November 15th of last year, but which meant our stores were now 60 billion cubic feet, or 1.8% below the five-year average of 3,698 billion cubic feet of natural gas that have been in storage as of the 15th of November in recent years....the 94 billion cubic feet that were withdrawn from US natural gas storage this week was 3 billion cubic feet more than the average forecast of a 91 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, and almost triple the average 32 billion cubic feet of natural gas that have been pulled from natural gas storage during the second week of November over the past 5 years...oddly enough, with the shift of the seasons, we seem to have gone from a period of consistently above normal injections into storage, to three weeks in a row wherein the change in our supplies was less than normal, which you should be able to see in the graphic below >>

November 22 2019 weekly change of gas in storage to Nov 15

the above graphic is a screenshot of an interactive graphic that's included on the EIA's weekly natural gas storage dashboard, and as the heading indicates, it shows the weekly change, in billions of cubic feet, of natural gas in storage in the lower 48 states...the blue dots represent the weekly changes of natural gas in storage for this year up to & including the current report, while the dark diamonds represent the 5 year average change of natural gas in storage for each week of the year over the 2014 to 2018 period, with markers above the "0" line representing additions, and markers below the zero line representing withdrawals of natural gas from storage...meanwhile, the shaded grey background to those markers represent the range of changes for each week of the year over that 5 year span....

what i'd like to point out on that graphic is that over the ​entire period from mid-March to late October​, the blue dots for 2019 were consistently above the 5 year average for all but two weeks, certainly beyond what one would ​normally ​expect, no matter how anomalous the weather​, which thus suggests an excess of natural gas production​...however, over the last three weeks, we've seen that surplus to the norm reverse, in that the 2019 change, either positive or negative as in this past week, has been below the historical norm...we experienced much the same during the last heating season, but it was not as consistent as this summer's run...still, since it's only three weeks, it could be due to a run of unusually freaky weather, but the change certainly pays watching, since for one reason or another we may have entered a new normal, wherein both injections and withdrawals are greater than their previous norms...

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 15th showed that because of a large draw from the Strategic Petroleum Reserve, there was a surplus of oil in the system that ultimately was added to our stored commercial supplies​, which thus increased​ for the ninth time in the past ten weeks...our imports of crude oil rose by an average of 222,000 barrels per day to an average of 5,972,000 barrels per day, after falling by an average of 327,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 394,000 barrels per day to an average of 3,027,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,945,000 barrels of per day during the week ending November 15th, 172,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reported to be unchanged at a record 12,800,000 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 15,745,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,435,000 barrels of crude per day during the week ending November 15th, 519,000 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 85,000 barrels of oil per day were being pulled out from the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to ​show that our total working supply of oil from net imports, from oilfield production, and from storage was 605,000 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 (+605,000) 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 this week, it means that one or ​maybe even ​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 ​most ​everyone else (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports rose to an average of 6,124,000 barrels per day last week, still 18.0% less than the 7,503,000 barrel per day average that we were importing over the same four-week period last year....the 85,000 barrel per day net withdrawal from our total crude inventories was due to a withdrawal of 282,000 barrels per day from our Strategic Petroleum Reserve, which was only partially offset by a 197,000 barrel per day addition to our commercially available stocks of crude oil....this week's crude oil production was reported to be unchanged at a record 12,800,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,300,000 barrels per day, while a 10,000 barrel per day decrease to 481,000 barrels per day in Alaska's oil production was rounded away and did not impact the final​​ rounded​ national​ total...last year's US crude oil production for the week ending November 16th was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 9.4% above that of a year ago, and 51.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...   

meanwhile, US oil refineries were operating at 89.5% of their capacity in using 16,435,000 barrels of crude per day during the week ending November 15th, up from 87.8% of capacity the prior week, but still below normal for mid November...as a result, the 16,435,000 barrels per day of oil that were refined this week was still 2.5% below the 16,855,000 barrels of crude per day that were being processed during the week ending November 16th, 2018, when US refineries were operating at 92.7% of capacity....

even with the big increase in the amount of oil being refined, gasoline output from our refineries was somewhat lower, decreasing by 120,000 barrels per day to 10,053,000 barrels per day during the week ending November 15th, after our refineries' gasoline output had increased by 137,000 barrels per day the prior week....but even after this week's decrease in gasoline output, our gasoline production was fractionally higher than the 10,036,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 85,000 barrels per day to 5,124,000 barrels per day, after our distillates output had increased by 164,000 barrels per day over the prior week...but even with th​os​e​ increase​s​ in distillates output, our distillates' production for the week was​ still​ 1.5% below the 5,201,000 barrels of distillates per day that were being produced during the week ending November 16th, 2018....

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 2nd time in eight weeks and for the 8th time in 22 weeks, rising by 1,756,000 barrels to 220,846,000 barrels during the week to November 15th, after our gasoline supplies had increased by 1,861,000 barrels over the prior week....our gasoline supplies increased this week even though our imports of gasoline fell by 164,000 barrels per day to 515,000 barrels per day and even though our exports of gasoline rose by 55,000 barrels per day to 889,000 barrels per day, because the amount of gasoline supplied to US markets decreased by 129,000 barrels per day to 9,192,000 barrels per day....after this week's increase, our gasoline supplies were ​still ​2.0% lower than last November 16th's inventory level of 225,315,000 barrels, but rose to roughly 2% above the five year average of our gasoline supplies for this time of the year...

however, even with the increase in our distillates production, our supplies of distillate fuels fell for the 24th time in the past 34 weeks, decreasing by 974,000 barrels to 115,681,000 barrels during the week ending November 15th, after our distillates supplies had decreased by 2,477,000 barrels over the prior week...our distillates supplies fell by less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 211,000 barrels per day to 4,323,000 barrels per day, and because our imports of distillates rose by 79,000 barrels per day to 315,000 barrels per day while our exports of distillates rose by 165,000 barrels per day to 1,255,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 2.9% from the 119,191,000 barrels of distillates that we had stored on November 16th, 2018, and fell to around 11% below the five year average of distillates stocks for this time of the year...

finally, despite this week's increase in refinery throughput and ​the jump in exports, the oil we pulled out of the SPR was enough to mean our commercial supplies of crude oil in storage rose for the eleventh time in twenty-three weeks and for the twenty-sixth time in 43 weeks, increasing by 1,379,000 barrels, from 449,001,000 barrels on November 8th to 450,380,000 barrels on November 15th...that increase meant our crude oil inventories rose to 3% above the five-year average of crude oil supplies for this time of year, and to 34.7% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after ​two full week​s​ 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 this year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of November 15th were 0.8% above the 446,908,000 barrels of oil we had stored on November 16th of 2018, but at the same time were 1.5% below the 457,142,000 barrels of oil that we had in storage on November 17th of 2017, and 7.9% below the 489,029,000 barrels of oil we had in commercial storage on November 1​8th of 2016...    

This Week's Rig Count

the US rig count fell for the 13th time in 14 weeks and for the 36th time in 40 weeks over the week ending November 22nd, and is now down by 25.9% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 3 rigs to a 32 month low of 803 rigs this past week, which was also down by 276 rigs from the 1079 rigs that were in use as of the November 23rd report of 2018, and 1126 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 3 to a 31 month low of 671 oil rigs this week, which was also 214 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 was unchanged at 129 natural gas rigs, a 35 month low which was down by 65 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 to those drilling for oil & gas, three rigs classified as 'miscellaneous'  continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico was unchanged at 22 rigs this week, with all 22 of those drilling offshore from Louisiana...but that's 3 fewer than the Gulf of Mexico rig count of 25 a year ago, when 23 rigs were drilling in Louisiana waters and two were drilling offshore from Texas...since there are no rigs deployed offshore elsewhere, nor were there a year ago, the Gulf of Mexico count for both years is equal to the national total in each case..

the count of active horizontal drilling rigs was down by 3 rigs to 699 horizontal rigs this week, which was the least horizontal rigs deployed since April 7th, 2017 and hence is another 31 month low for horizontal drilling...that was also 230 fewer horizontal rigs than the 929 horizontal rigs that were in use in the US on November 23rd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....meanwhile, the vertical rig count was unchanged at 50 vertical rigs this week, and those were down by 27 from the 77 vertical rigs that were operating during the same week of last year​, while the directional rig count was also unchanged at 54 directional rigs this week, and those were down by 19 from the 73 directional rigs that were in use on November 23rd 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 22nd, the second column shows the change in the number of working rigs between last week's count (November 15th) and this week's (November 22nd) count, the third column shows last week's November 15th 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 23rd of November, 2018...  

November 22 2019 rig count summary

the net 3 oil rigs that were pulled out of the Permian basin account for this week's decrease, and that happened as 6 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, ​while ​3 rig​s​ were added in Texas Oil District 7C, or the southern Permian Midland, and another rig began operating in Texas Oil District 8A, or the northern Permian Midland, while at the same time a Permian Delaware rig was taken down in southwest New Mexico...meanwhile, the Williston basin showed no net change because while one rig was being pulled out of North Dakota's Bakken, another rig began drilling in the westernmost reaches of the formation in Montana, where there are now two rigs deployed, still down from 4 year ago...the rig that was added in the Denver-Julesburg Niobrara chalk accounts for the Colorado increase, while the rig that was pulled out of Oklahoma's Cana Woodford was offset by the startup of a rig in an other Oklahoma basin that's not tracked separately by Baker Hughes, thus leaving the Oklahoma count unchanged...among natural gas directed rigs, 2 were added in northwest's Louisiana's Haynesville, one was pulled out of Pennsylvania's Marcellus, and one was shut down in a basin not trac​K​ed separately by Baker Hughes...other than the aforementioned rig startup in Montana, this week also saw a rig startup in Mississippi among the states not shown above...however, the 3 rigs now deployed in Mississippi is still down from the 5 rigs that were drilling in the state a year ago...

DUC well report for October

Monday of this past week saw the release of the EIA's Drilling Productivity Report for November, which includes the EIA's October data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the eighth month in a row, this report showed a decrease in uncompleted wells nationally in October, 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 225 wells, the largest decrease on record, falling from a revised 7,867 DUC wells in September to 7,642 DUC wells in October, which still represents 1.6% more than the 7,522 wells that had been drilled but remained uncompleted as of the end of October of a year ago...this month's DUC decrease occurred as 1,148 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, down by 36 from the 1,184 wells that were drilled in September and the lowest since December 2017, while 1,373  wells were completed and brought into production by fracking, a decrease of 15 well completions from the 1,388 completions seen in September and the least completions since February....at the October 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, the same backlog as a month ago...  

both oil producing regions and natural gas producing regions saw DUC well decreases in October, ​and no major basin saw an increase...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 72, falling from 813 at the end of September to 741 DUC wells at the end of October, as 69 wells were drilled into the Anadarko basin during October 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 45, from 3,634 DUC wells at the end of September to 3,589 DUCs at the end of October, as 501 new wells were drilled into the Permian, while 546 wells in the region were being fracked....meanwhile, DUC wells in the Eagle Ford of south Texas decreased by 32, from 1,450 DUC wells at the end of September to 1,418 DUCs at the end of October, as 167 wells were drilled in the Eagle Ford during October, while 199 already drilled Eagle Ford wells were completed....at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 22 to 452, as 168 Niobrara wells were drilled in October while 190 Niobrara wells were completed....in addition, DUC wells in the Bakken of North Dakota fell by 20, from 759 DUC wells at the end of September​ ​to 739 DUCs at the end of October, as 104 wells were drilled into the Bakken in October,  while 124 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 30 wells, from 522 DUCs at the end of September to 492 DUCs at the end of October, as 93 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 4 wells to 211, as 46 wells were drilled into the Haynesville during October, while 50 Haynesville wells were fracked during the same period....thus, for the month of October, 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 191 wells to 6,939 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 34 wells to 703 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

+

+

note: there's more here...

Sunday, November 17, 2019

US oil output at a record high, oil rigs at a 31 month low; global oil shortage at 1.6 million barrels per day despite a 1.7 mbpd supply increase

oil prices ended a bit higher this week, after seesawing on conflicting China-US trade deal and crude inventory reports...after rising $1.04, or 1.9% to $57.24 a barrel last week on repeated rumors that a US-China trade deal was imminent, prices of US light sweet crude for December delivery fell early on Monday after Trump denied reports from last week that the two sides had agreed to roll back existing tariffs on each others’ goods and finished the day 38 cents lower at $56.86 a barrel, as lack of progress in U.S.-China trade negotiations pressured prices, even as bullish Cushing inventory data offered some support...prices climbed more than 1% early on Tuesday amid hopes that a Trump speech later in the day would indicate progress on the trade war, but pared those gains following a Trump speech that offered few new details and ended 6 cents lower at $56.80 a barrel...oil prices then edged up on Wednesday after an OPEC report and comments from Fed Chair Jerome Powell both forecast a robust economy going forward, and extended those gains when the API reported a surprise draw from US crude supplies to finish the day 32 cents higher at $57.12 a barrel....however, those gains were reversed on Thursday when the EIA reported a larger than expected build of domestic oil inventories and record crude production, as oil prices fell 35 cents, or 0.6%, to settle at $56.77 a barrel....but despite those concerns about rising crude supplies oil prices rallied on Friday after Commerce Secretary Ross said trade talks with China were down to the last details and after Baker Hughes reported the fourth straight weekly decline in the number of US rigs drilling for oil and went on to finish 95 cents, or 1.7 percent, higher to close at $57.72 per barrel, a two month high...oil prices thus ended the week with a gain of 48 cents, or 0.8%, even as competing and conflicting signals kept the market prices volatile...

natural gas prices, on the other hand, finished lower for the first time in 3 weeks, as temperature forecasts moderated in the face of record natural gas production...after rising 2.8% to $2.789 per mmBTU last week amid warnings of a historically severe outbreak of cold across the eastern US, the price of natural gas for December delivery gapped down over the weekend and opened 7.3 cent lower on Monday on a major change in the temperature output and a report of record gas well production, and then continued falling throughout the day to end down 15.2 cents at 2.637 per mmBTU...prices drifted 1.6 cents lower on Tuesday and 2.1 cents lower on Wednesday even as the heating demand forecast moved higher over the period and didn't turn higher until the natural gas storage report indicated a smaller addition to storage than natural gas traders had expected...that bullish storage report pushed prices up 4.8 cents on Thursday and another 4.1 cents on Friday to end the week at $2.688 per mmBTU, which was still down 3.6% from where it had ended the prior week..

the natural gas storage report for the week ending November 8th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 3 billion cubic feet to 3,732 billion cubic feet by the end of the week, which meant our gas supplies were 491 billion cubic feet, or 15.1% more than the 3,199 billion cubic feet that were in storage on November 8th of last year, and 2 billion cubic feet, or less than 0.1% above the five-year average of 3,730 billion cubic feet of natural gas that have been in storage as of the 8th of November in recent years....we thus start the official heating season with natural gas supplies 3.1% above the average seasonal normal in the East, 1.9% above normal in the Midwest, 0.3% below normal in the South Central region, 2.8% below normal in the Mountain region, and 11.6% below normal in the Pacific region...

while we had expected this report to show a gas withdrawal, the 3 billion cubic feet injection into US natural gas storage this week was 4 billion cubic feet less than the average forecast for a 7 billion cubic feet injection from analysts surveyed by S&P Global Platts, and well below the average 30 billion cubic feet of natural gas that have been added to gas storage after the first week of November over the past 5 years, the 2nd below average storage build in a row but only the 4th below average increase over the past 35 weeks...the 2,572 billion cubic feet of natural gas that have been added to storage over this year's injection season were still near a modern record, eclipsed only by the record 2767 billion cubic feet of natural gas that were injected into storage during the 2014 natural gas injection season...

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 8th showed that because our oil production rose to a record level, we managed to have a surplus of oil to add to our stored supplies for the eighth time in the past nine weeks...our imports of crude oil fell by an average of 327,000 barrels per day to an average of 5,750,000 barrels per day, after falling by an average of 620,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 262,000 barrels per day to an average of 2,633,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,117,000 barrels of per day during the week ending November 1st, 589,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reported to be 200,000 barrels per day higher at a record 12,800,000 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 15,917,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 15,916,000 barrels of crude per day during the week ending November 8th, 154,000 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 111,000 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 109,000 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 (+109,000) 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"....(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 6,095,000 barrels per day last week, now 18.8% less than the 7,503,000 barrel per day average that we were importing over the same four-week period last year....the 111,000 barrel per day net addition to our total crude inventories was despite a withdrawal of 206,000 barrels per day from our Strategic Petroleum Reserve, which means that a total of 317,000 barrels per day were being added to our commercially available stocks of crude oil....this week's crude oil production was reported to be 200,000 barrels per day higher at a record 12,800,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 200,000 barrels per day to a record 12,300,000 barrels per day, while a 8,000 barrel per day increase to 491,000 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 9th was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 9.4% above that of a year ago, and 51.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...   

with the weekly data now showing our estimated weekly oil production is at a record high, we'll include a graph of what that production looks like compared to its recent history and to the EIA's confirmed oil production totals...

November 16 2019 US crude production to November 8

the above graph was taken from this week's OilPrice Intelligence Report, and it shows the history of confirmed oil production data monthly from January 2016 to August 2019 in blue, and then the weekly estimates of US oil production up until the current week in yellow after that period, with both metrics in thousands of barrels per day...above the graph, OilPrice also gives us the rounded weekly estimates of oil production in thousands of barrels per day for the weeks ending October 4th through November 8th, as was reported by the EIA....as you see, those weekly production estimates had been stuck at 12,600,000 barrels per day for 5 weeks, as apparently the EIA did not get any new information to justify increasing their estimate...however, on the Thursday before last, the EIA released their confirmed monthly data for August, which showed that US oil production had risen to 12,365,000 barrels per day, up from 11,766,000 barrels per day in July...that increase strongly suggested to the EIA that their currently weekly estimates for November had been too low, so they increased that estimate this week...however, despite the fact that the prior weekly totals were more than likely higher than 12,600,000 barrels per day, the EIA will not change their earlier inaccurate weekly estimates to reflect that....nonetheless, we still follow this less than accurate weekly data because it's what the oil traders follow, and hence it moves oil prices and ultimately the decisions on the part of exploitation companies to start drilling for oil...

meanwhile, US oil refineries were operating at 87.8% of their capacity in using 15,916,000 barrels of crude per day during the week ending November 8th, up from 86.0% of capacity the prior week, but still below normal for early November...as a result, the 15,916,000 barrels per day of oil that were refined this week was 3.1% below the 16,432,000 barrels of crude per day that were being processed during the week ending November 9th, 2018, when US refineries were operating at 90.1% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 137,000 barrels per day to 10,173,000 barrels per day during the week ending November 8th, after our refineries' gasoline output had decreased by 148,000 barrels per day the prior week....with this week's increase in gasoline output, our gasoline production was 1.2% higher than the 10,056,000 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 164,000 barrels per day to 5,039,000 barrels per day, after our distillates output had decreased by 95,000 barrels per day over the prior week...with this week's increase in distillates output, our distillates' production for the week was 0.9% above the 4,993,000 barrels of distillates per day that were being produced during the week ending November 9th, 2018....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 1st time in seven weeks and for the 7th time in 21 weeks, rising by 1,861,000 barrels to 217,229,000 barrels during the week to November 8th, after our gasoline supplies had decreased by 2,828,000 barrels over the prior week....our gasoline supplies finally increased this week because our imports of gasoline rose by 186,000 barrels per day to 679,000 barrels per day and because our exports of gasoline fell by 195,000 barrels per day to 814,000 barrels per day, while the amount of gasoline supplied to US markets increased by 176,000 barrels per day to 9,321,000 barrels per day....after this week's increase, our gasoline supplies were 4.7% lower than last November 9th's inventory level of 228,021,000 barrels, but remained roughly 1% above the five year average of our gasoline supplies for this time of the year...

however, even with the increase in our distillates production, our supplies of distillate fuels fell for the 23rd time in the past 33 weeks, decreasing by 2,477,000 barrels to 116,655,000 barrels during the week ending November 8th, after our distillates supplies had decreased by 622,000 barrels over the prior week...our distillates supplies fell by more this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 238,000 barrels per day to 4,534,000 barrels per day, and because our imports of distillates fell by 70,000 barrels per day to 236,000 barrels per day and because our exports of distillates rose by 121,000 barrels per day to 1,095,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 2.2% from the 119,268,000 barrels of distillates that we had stored on November 9th, 2018, and fell back to around 10% below the five year average of distillates stocks for this time of the year​...

finally, ​despite ​this week's drop in oil ​imports​ ​​and the increase in refinery throughput​, our record oil production ​meant our commercial supplies of crude oil in storage rose for the tenth time in twenty-two weeks and for the​ twenty-fifth​ time in 42 weeks, increasing by 2,219,000 barrels, from 446,782,000 barrels on November 1st to 449,001,000 barrels on November 8th...that increase meant our crude oil inventories were 2% above the five-year average of crude oil supplies for this time of year, and roughly 32% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after a full week 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 year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of November 8th were 1.6% above the 442,057,000 barrels of oil we had stored on November 9th of 2018, but at the same time were 2.2% below the 458,997,000 barrels of oil that we had in storage on November 10th of 2017, and 8.4% below the 490,284,010,000 barrels of oil we had in commercial storage on November 11th of 2016...   

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of OPEC's November Oil Market Report, which covers October OPEC & global oil data, and hence ​it ​shows a big rebound in Saudi production as it recovered from the September 14th drone attack on their oil infrastructure...but even with that ​bounce in Saudi output, and a big jump in non-OPEC production, this report still shows there was again a large shortfall in the amount of oil produced globally in October, albeit less than half of the large shortfall seen in September...

the first table from this monthly report that we'll look at is from the page numbered 60 of that report (pdf page 70), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures...

October 2019 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC's oil output jumped by 943,000 barrels per day to 29,650,000 barrels per day in October, from their revised September production total of 28,707,000 barrels per day...however that September output figure was originally reported as 28,491,000 barrels per day, which means that September's production was revised 216,000 barrels per day higher​,​ and hence October's production was, in effect, a 1,159,000 barrel per day increase from the previously reported ​OPEC ​production figures (for your reference, here is the table of the official September OPEC output figures as reported a month ago, before this month's revisions)...

we can also see that the 1,094,000 barrel per day increase in production by the Saudis, largely a rebound after the September attack on their facilities, was the reason for OPEC's September output jump, as decreases of 100,000 barrels per day in output from Ecuador, of 43,000 barrels per day in output from Angola, of 42,000 barrels per day in output from Iraq, and of 37,000 barrels per day in the output from Nigeria were only partially offset by the 42,000 barrel per day increase in output from Venezuela and the 23,000 barrel per day increase from the Emirates, while the oil output from most other OPEC members was comparatively little changed....

even with the jump in Saudi output, their production​,​ and production from most other OPEC members other than Iraq and Nigeria, remains below the output allocation as originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers, and which were extended at their July 1st meeting a little over four months ago...this can be seen in the table of OPEC production allocations we've included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, and it shows average daily production quota in millions of barrels of oil per day for each of the OPEC members as was agreed to at their December 2018 meeting and has ​since been extended through March 2020 as of their ​June meeting....note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by a civil war, are exempt from any production quotas, and that only Libya among those exempt countries is producing more than they did in the 1st quarter of this year, which you can see in the third column of the first, official OPEC production table above...note that a month ago there ​were media reports that OPEC had agreed to raise the quota for Nigeria to 1.774 million barrels per day, but there was no official policy statement to that effect...

the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from November 2017 to October 2019, and it comes from page 61 (pdf page 71) of the November OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...  

October 2019 OPEC report global oil supply

including the 943,000 barrel per day increase in their production from what they produced a month ago, OPEC's​ ​preliminary estimate now indicates that total global oil production increased by 1.67 million barrels per day to 99.34 million barrels per day in October, and that reported increase came after September's total global output figure was revised up by 350,000 barrels per day from the 97.32 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 730,000 barrels per day in October after that revision, with higher oil production from ​the ​US, Canada, Norway, the UK, Australia, Kazakhstan, and China the major reasons for the non-OPEC output increase in October...despite that jump in October's output, the 99.34 million barrels of oil ​per day produced globally in October were still 0.80 million barrels per day, or 0.8% lower than the revised 100.14 million barrels of oil per day that were being produced globally in October a year ago (see the November 2018 OPEC report (online pdf) for the originally reported October 2018 details)...with this month's increase in OPEC's output, their October oil production of 29,650,000 barrels per day rose to 29.8% of what was produced globally during the month, up from the 29.3% share they contributed in September....OPEC's October 2018 production was reported at 32,900,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year's total and new member Congo from this year's, produced 2,966,000 fewer barrels per day of oil than​ what​ they produced a year ago, when they accounted for 33.0% of global output, with a 1,150,000 barrel per day ​drop ​in the output from Iran, a 740,000 barrel per day decrease in output from Saudi Arabia, and a 448,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the small year over year production increases of 60,000 barrels per day by Nigeria, 53,000 barrels per day by Libya, 54,000 barrels per day by the United Arab Emirates and 37,000 barrels per day by Iraq... 

even with the 1,670,000 barrels per day increase in global oil output that was seen during October, there was a substantial shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...     

October 2019 OPEC report global oil demand

the table above came from page 34 of the November OPEC Monthly Oil Market Report (pdf page 44), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2019 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for October, which is their revised estimate of global oil demand during the fourth quarter of 2019...

OPEC has estimated that during the 4th quarter of this year, all oil consuming regions of the globe will be using 100.95 million barrels of oil per day, which was revised from their estimate of 100.89 million barrels of oil per day for the 4th quarter a month ago....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 99.34 million barrels per day during October, which means that there was a shortage of around 1,610,000 barrels per day in global oil production when compared to the demand estimated for the month... 

meanwhile, the upward revision of 350,000 barrels per day to September's global output that's implied in this report means that the 3,380,000 barrel per day shortfall that we had originally figured for September based on last month's figures would now have to be revised to a deficit of 3,030,000 barrels per day...but since data for July and August was unrevised, July's shortfall would be unchanged at a deficit of 2,290,000 barrels per day, and August's shortfall would remain at a deficit of 1,670,000 barrels per day....hence the 3rd quarter​'s​ ​oil shortage averaged 2,330,000 barrels per day...

however, demand figures for both the first quarter and 2nd quarter were revised with this report, as you can see encircled by the green ellipse on the table above...the 160,000 barrels per day downward revision to 2nd quarter demand would mean that we'd have to revise our global oil deficit for June from 470,000 barrels per day to 310,000, that we'd have to revise our May deficit from 840,000 barrels per day to 680,000 barrels per day, and that we'd have to revise our global oil deficit for April from 860,000 barrels per day to 710,000 barrels per day...hence, for the 2nd quarter as a whole, even after those downward revision to demand, the world's oil producers were still producing 457,000 barrels per day less than what was needed...

also encircled in green is an upward revision of 100,000 barrels per day to first quarter demand, a period when​ oil​ suppl​ies exceeded demand....that revision means that the global oil surplus of 290,000 barrels per day we had last figured for March would have to be revised to a global oil surplus of 190,000 barrels per day...similarly, the 740,000 barrel per day global oil output surplus we had for February would now be a 640,000 barrel per day global oil output surplus, and the 650,000 barrel per day global oil output surplus we had for January would be revised to a 550,000 barrel per day oil output surplus..

so as you can see, we have gone from a global oil surplus averaging over 450,000 barrels per day in the first quarter to an oil shortage of 2,330,000 barrels per day by the third quarter, and thence to an oil shortage of around 1,610,000 barrels per day in October....however, most of the media, including industry websites, are still reporting on supplies as if we still have a global glut of oil, because that has become the established narrative and becaus​e ​no one makes the effort to look at the actual data...... 

This Week's Rig Count

the US rig count fell for the 12th time in 13 weeks and for the 35th time in 39 weeks over the week ending November 15th, and is now down by 25.6% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 11 rigs to a 32 month low of 806 rigs this past week, which was also down by 276 rigs from the 1082 rigs that were in use as of the November 16th report of 2018, and 1123 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 10 to a 31 month low of 674 oil rigs this week, which was also 214 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 1 rig to a 34 month low of 129 natural gas rigs, down by 65 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 to those drilling for oil & gas, three rigs classified as miscellaneous continued to drill this week; one on the big island of Hawaii, one in Washoe ​County Nevada, and one in Lake ​County California, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

offshore drilling activity in the Gulf of Mexico was unchanged at 22 rigs this week, with all of those drilling offshore from Louisiana...that's now equal to the the Gulf of Mexico rig count of 22 a year ago, when 20 rigs were drilling in Louisiana waters and two were drilling offshore from Texas...meanwhile, the rig that had been drilling offshore from the Kenai Peninsula in Alaska was shut down this week, so the Gulf of Mexico count is now equal to the national count, and equal to the 22 rigs that were deployed offshore a year ago...however, the last platform that had been set up to drill through an inland body of water in southern Louisiana was shut down this week, and with none of those left nationally, is down from the "inland waters' count of two ​rigs ​a year ago...

the count of active horizontal drilling rigs was down by 8 rigs to 702 horizontal rigs this week, which was the least horizontal rigs deployed since April 7th, 2017 and hence is a new 31 month low for horizontal drilling...that was also 237 fewer horizontal rigs than the 939 horizontal rigs that were in use in the US on November 16th 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 50 vertical rigs this week, and those were down by 22 from the 72 vertical rigs that were operating during the same week of last year....at the same time, the directional rig count decreased by 2 rigs to 54 directional rigs this week, and those were down by 17 from the 71 directional rigs that were in use on November 16th 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 15th, the second column shows the change in the number of working rigs between last week's count (November 8th) and this week's (November 15th) count, the third column shows last week's November 8th 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 16th of November, 2018...  

November 15 2019 rig count summary

in the Permian basin of western Texas and New Mexico, 6 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while the rig counts in Texas Oil District 7C, or the southern Permian Midland and in Texas Oil District 8A, or the northern Permian Midland, were unchanged...that suggests that a rig added in Texas Oil District 7B, east of the Permian Midland on most maps, had been in fact a rig​ targeting the Permian, while the rig added in New Mexico was placed in the far western reaches of the Permian Delaware....at the same time, ​however, ​drilling activity in all other Texas districts & basins remained unchanged...meanwhile, even though Oklahoma rigs were shut down in the Cana Woodford and in the Ardmore Woodford, the state still shows a one rig increase, which means 3 rigs were added in Oklahoma basins not tracked by Baker Hughes...conversely, while just one rig was pulled out of the Denver-Julesburg Niobrara, Colorado saw a one rig decrease while Wyoming was down 2 rigs, meaning 2 of the rigs pulled from those states had also been running in basins not tracked by Baker Hughes...all those aforementioned rig changes, plus the one rig pulled out of North Dakota's Williston basin, had been targeting oil​, while all of the natural gas rig changes this week were in the Appalachian basins, where 3 rigs were pulled out of the Marcellus, two in West Virginia and one from Pennsylvania, while two rigs were added in Ohio's Utica..



NB: the following is an excerpt from an email i sent to a few environmental journalists this week, ​and included here as i ​believe it ​should be of general interest:

​...​in the Permian basin of west Texas, they are now burning off or venting 752 million cubic feet of natural gas per day, which i figure to be 10 times more natural gas than what West Virginia's households consume over a year  (here's the annual data on WVa's consumption, divide by 365 to get their daily use; https://www.eia.gov/dnav/ng/hist/n3010wv2a.htm)....the burned gas all goes into the atmosphere as CO2, while what's vented is released as methane, which i'm sure you know is much worse...they're doing this because they're after the oil, and the natural gas that comes up with it is an inexpensive byproduct they don't want...


Rystad Energy: Permian gas flaring reaches another high | Oil & Gas Journal - Flaring and venting of natural gas in the Permian basin in Texas and New Mexico reached an all-time high in this year’s third quarter, averaging more than 750 MMcfd, according to a preliminary analysis conducted by Rystad Energy.


191105 Rystad Permian Flare Chart



+

+

note: there's more here...