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, January 17, 2022

Commercial crude supplies at 45 month low, total US supplies lowest since January 2012; gasoline demand at 11 month low

Strategic Petroleum Reserve at a new 19 year low; commercial crude inventories fall to 45 month low, total US oil supplies lowest since January 20th 2012; implied gasoline demand at 11 month low; largest jump in drilling rigs since April 1st as the Haynesville and the Marcellus are targeted for oil

oil prices rose for the fourth straight week on a softening of Fed rhetoric and on a production shortfall by OPEC and its allies....after rising 4.9% to $78.90 a barrel last week on political unrest and production difficulties among several OPEC allied producers, the contract price for US light sweet crude for February delivery traded higher early on Monday as supply disruptions in Kazakhstan and Libya offset worries about continued rise in Covid-19 cases worldwide, but weakened Monday afternoon after Libyan production ticked up and fears about demand stoked by the rapid global rise of Omicron infections overtook concerns about Kazakhstan, and settled 67 cents lower at $78.23 a barrel...but oil prices rallied early on Tuesday with rising equity markets as the U.S. dollar rapidly weakened against foreign currencies, and then surged in afternoon trading after Fed chair Powell’s comments to the Senate Banking Committee appeared to be less hawkish than the Fed had recently telegraphed to finish $2.99 higher at $81.22 a barrel, following surveys suggesting that a number of OPEC allied producers missed their quotas last month, thus underdelivering on their pledges to boost crude supplies...oil prices moved to fresh highs early Wednesday on expectations that U.S. crude oil inventories had declined for a sixth consecutive week and that global oil supply availability would tighten amid underproduction from those OPEC+ members, and then extended their gains after the EIA reported a crude inventory draw that was more than twice expectations, before finally settling $1.42 higher at a two month high of $82.64 a barrel, as the larger-than-expected drawdown from commercial crude inventories overshadowed another weekly build in gasoline supplies and a sharp contraction in fuel demand amid a consumer pullback on travel...oil prices moved lower on profitg taking amid interest rate hike worries early Thursday and settled down 52 cetns at $82.12 a barrel on deepening evidence of omicron-led demand destruction in the domestic gasoline market, as mixed economic data in the US overshadowed recent production shortfalls from several OPEC+ members....but the oil rally resumed on Friday, boosted by supply constraints and worries of a Russian attack on Ukraine, pushing prices toward their fourth weekly gain, despite sword that China was set to release crude reserves around the Lunar New Year. and settled the day's trading $1.70 or more than 2% higher at a nine week high of $83.82 per barrel, amid early signs that omicron infections were leveling off in the U.S. cities where the omicron variant had hit first, suggesting a national peak may be approaching, while broader commodity prices also got a lift from a weekly decline in the U.S. dollar. thus finishing 6.3% higher for the week.

natural gas prices also finished higher again on an outbreak of polar air in the densely populated northeastern US...after rising 5.0% to $3.916 per mmBTU last week amid vacillating weather forecasts, the contract price of natural gas for February delivery opened nearly 6% higher on Monday after gas demand in the Lower 48 states had jumped to a record high on Friday as cold weather had blanketed most of the country, and held most of the initial gain to settle 16.3 cents higher at $4.079 per mmBTU, as European calls for U.S. exports remained robust and forecasts pointed to continued strong domestic weather-driven demand...natural gas prices rose more than 4% for a second day on Tuesday after power prices in New England jumped to their highest since January 2018 amid the region's coldest day so far this winter, and settled 17 cents higher at $4.249 per mmBTU...natural gas prices then surged more than 14% on Wednesday as a blast of cold air was expected to test Texas production during the final 10 days of this month, and as LNG demand reached a record 13 billion cubic feet as Europe continued to suffer the effects of a cold winter and low gas stocks. with the February contract advancing 60.8 cdnts or 14.3% to finish the day's trading at $4.857 per mmBTU, the highest settlement since late November... however, gas prices nosedived on Thursday as traders took profits after a massive four-day rally, and the February contract dropped 58.7 cents or 12% to  $4.270 per mmBTU, reversing most of Wednesday's gain on forecasts for less cold weather and lower heating demand this week and next than had been previously expected...natrual gas prices steadied on Friday despite cold weather in New York and New England and higher prices in Europe and settled eight-tenths of a cent lower at $4.262per mmBTU, while still posting a 8.8% gain on the week

The EIA's natural gas storage report for the week ending Janaury 7th indicated that the amount of working natural gas held in underground storage in the US fell by 179 billion cubic feet to 3,016 billion cubic feet by the end of the week, which left our gas supplies 199 billion cubic feet, or 6.2% below the 3,215 billion cubic feet that were in storage on Janaury 7th of last year, but still 72 billion cubic feet, or 2.4% above the five-year average of 2,944 billion cubic feet of natural gas that have been in storage as of the 7th of Janaury over the most recent five years....the 179 billion cubic foot withdrawal from US natural gas working storage for the cited week was close to the average forecast for a 177 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, but quite a bit more than the 134 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also more than the average withdrawal of 155 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 7th indicated that despite a big drop in our oil exports, a concurrent shift of “unaccounted for crude oil” from supply to demand meant we still needed to pull oil out of our stored commercial crude supplies for the seventh week in a row and for the 23rd time in the past thirty-three weeks….our imports of crude oil rose by an average of 185,000 barrels per day to an average of 6,069,000 barrels per day, after falling by an average of 875,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 599,000 barrels per day to an average of 1,955,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 4,114,000 barrels of per day during the week ending January 7th, 784,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day lower at 11,700,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,814,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,573,000 barrels of crude per day during the week ending January 7th, an average of 293,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 693,000 barrels of oil per day were being pulled out the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 934,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-934,000) 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 balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...moreover, since last week’s EIA fudge factor was at (+238,000) barrels per day, that means there was a 1,172,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are meaningless.....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 693,000 barrel per day decrease in our overall crude oil inventories left our total supplies at 1,006,680,000 barrels, the lowest level since January 20th 2012, or nearly at a 10 year low....this week's oil inventory decrease came as 650,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 43,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers....including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 57,937,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to the lowest since November 15th, 2002, or to an 19 year low of 593,382,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,227,000 barrels per day last week, which was still 10.7% more than the 5,625,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,700,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,300,000 barrels per day, while Alaska’s oil production was 1,000 barrels per day higher at 460,000 barrels per day and had no impact on the rounded national production total...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 10.7% below that of our pre-pandemic production peak, but 38.8% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 88.4% of their capacity while using those 15,573,000 barrels of crude per day during the week ending January 7th, down from a utilization rate of 89.8% the prior week, and lower than the historical utilization rate for early January refinery operations…the 15,867,000 barrels per day of oil that were refined this week were 8.3% more barrels than the 14,376,000 barrels of crude that were being processed daily during the pandemic impacted week ending January 8th of 2021, but 8.2% less than the 16,973,000 barrels of crude that were being processed daily during the week ending January 10th, 2020, when US refineries were operating at what was then a more seasonal 92.2% of capacity...

Even with the decrease in oil being refined this week, gasoline output from our refineries was a bit higher, increasing by 68,000 barrels per day to 8,574,000 barrels per day during the week ending January 7th, after our gasoline output had decreased by 1,607,000 barrels per day over the prior week.…this week’s gasoline production was 14.1% more than the anomalously low 7,512,000 barrels of gasoline that were being produced daily over the same week of last year, but 7.6% less than the gasoline production of 9,281,000 barrels per day during the week ending January 10th, 2020.....on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 177,000 barrels per day to 4,788,000 barrels per day, after our distillates output had increased by 30,000 barrels per day over the prior week…even after that decrease, our distillates output was still 2.7% more than the 4,661,000 barrels of distillates that were being produced daily during the week ending January 8th of 2021, but 8.0% less than the 5,205,000 barrels of distillates that were being produced daily during the week ending January 10th, 2020...

Even with our gasoline production remaining at depressed levels, our supplies of gasoline in storage at the end of the week rose for the fifth time in seven weeks, after falling each week over the preceding six weeks, increasing by 7,961,000 barrels to 240,748,000 barrels during the week ending January 7th, after our gasoline inventories had increased by 10,128,000 barrels over the prior week...our gasoline supplies increased again this week because the amount of gasoline supplied to US users decreased by 266,000 barrels per day to 7,906,000 barrels per day, the lowest level of implied gasoline demand in 11 months, while our imports of gasoline fell by 7,000 barrels per day to 589,000 barrels per day and our exports of gasoline rose by 56,000 barrels per day to 526,000 barrels per day…even after this week’s big inventory increase, our gasoline supplies were still 1.9% lower than last January 8th's gasoline inventories of 245,476,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

Likewise, even with the decrease in our distillates production, our supplies of distillate fuels increased for the seventh time in twenty weeks, rising by 2,537,000 barrels to 129,383,000 barrels during the week ending January 7th, after our distillates supplies had increased by 4,418,000 barrels during the prior week….our distillates supplies rose again this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 10,000 barrels per day to 3,749,000 barrels per day, and as our exports of distillates rose by 81,000 barrels per day to 892,000 barrels per day, and as our imports of distillates fell by 1,000 barrels per day to 216,000 barrels per day....but after twenty-six inventory decreases over the past forty weeks, our distillate supplies at the end of the week were still 20.7% below the 163,205,000 barrels of distillates that we had in storage on January 8th of 2021, and about 15% below the five year average of distillates inventories for this time of the year…

Meanwhile, even with the big drop in our oil exports, our commercial supplies of crude oil in storage fell for the 16th time in 23 weeks and for the 34th time in the past year, decreasing by 4,553,000 barrels over the week, from 417,851,000 barrels on December 31st to 413,298,000 barrels on January 7th, leaving our commercial crude supplies at the lowest level since October 5th, 2018, after they had decreased by 2,144,000 barrels over the prior week…with this week’s decrease, our commercial crude oil inventories remained about 8% below the most recent five-year average of crude oil supplies for this time of year, but were still around 27% above the average of our crude oil stocks as of the first week of January over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this January 7th were 14.3% less than the 482,211,000 barrels of oil we had in commercial storage on January 8th of 2021, and are now 3.6% less than the 428,511,000 barrels of oil that we had in storage on January 10th of 2020, and also 5.4% less than the 437,055,000 barrels of oil we had in commercial storage on January 11th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 4,782,000 barrels this week, from 1,788,433,000 barrels on December 31th to 1,783,651,000 barrels on January 7th, leaving our total inventories at the 2nd lowest level since August 29th, 2014.....   

This Week's Rig Count

The number of drilling rigs ​running in the US increased for the 58th time over the past 69 weeks during the week ending January 14th, but ​they ​still remained 24.0% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs ​drilling in the US increased by thirteen to 601 rigs this past week, which was also 228 more rigs than the pandemic hit 373 rigs that were in use as of the January 15th report of 2021, but was also still 1,328 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 11 to 492 oil rigs during this week, after they had increased by 1 during the prior week, and there are now 205 more oil rigs active now than were running a year ago, even as they still amount to just 30.6% of the shale era 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 up by 2 to 109 natural gas rigs, which was also up by 24 natural gas rigs from the 85 natural gas rigs that were drilling during the same week a year ago, but still only 6.9% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….however, note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was up by 2 to 18 rigs this week, with seventeen of this week's Gulf rigs drilling for oil in Louisiana waters and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's now two more Gulf rig​s​ than the 16 rigs that were active in the Gulf a year ago, when 15 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is not any drilling off our other coasts at this time, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....

In addition to those rigs offshore, we now have 2 water based rigs drilling inland; one is a horizontal rig targeting oil at a depth of between 5000 and 10,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is a directional rig drilling for oil at a depth of over 15,000 feet in the Galveston Bay area...however, the inland waters rig count of two is still down from the three inland waters rigs that were drilling a year ago..

The count of active horizontal drilling rigs was up by 9 to 541 horizontal rigs this week, which was also 209 more rigs than the 3​32 horizontal rigs that were in use in the US on January 15th of last year, but still 61.3% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by 2 to 35 directional rigs this week, and those were also up by 13 from the 22 directional rigs that were operating during the same week a year ago….in addition, the vertical rig count was also up by 2 rigs to 25 vertical rigs this week, and those were also up by 6 from the 19 vertical rigs that were in use on January 15th of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of January 14th, the second column shows the change in the number of working rigs between last week’s count (January 7th) and this week’s (January 14th) count, the third column shows last week’s January 7th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 15th of January, 2021..

even as Texas again led this week's drilling increase, most new activity ​in the state ​was centered in the Eagle Ford shale, rather than in the ​dominant ​Permian basin...by checking the Rigs by State file at Baker Hughes for possible changes in that basin, we find that two rigs were pulled out of Texas Oil District 1, but that four rigs were added in Texas Oil District 2, and two more rigs were added in Texas Oil District 4...since the Eagle Ford rig count increased by 6, we have to assume that the two rigs removed from District 1 had not been targeting the Eagle Ford, but rather some other basin that Baker Hughes does not track....elsewhere in Texas, we had two rigs added in Texas Oil District 6, which ​should account for two of the Haynesville shale rig additions, and another rig added in Texas Oil District 8A, which would account for the Permian basin increase..

meanwhile, the Louisiana rig count was up by 3 this week with the addition of two Gulf of Mexico rigs in the state's offshore waters, and another rig in the northwestern part of the state, which accounts for the third rig added in the Haynesville shale...the rig added in Alaska was drilling for oil on the North Slope, as are all other Alaskan rigs, while two rigs were added in the Marcellus, one of which was drilling for natural gas in Pennsylvania, while the other was drilling horizontally for oil in Wetzel county, West Virginia, in the first Marcellus oil well since April 17, 2015...at the same time, two of this week's Haynesville rig additions were also targeting oil, bringing the Haynesville oil rig count up to four, the most oil rigs in that natural gas basin since November 1, 2013….but on the other hand, one of the Eagle Ford rig additions was targeting natural gas, which at 7 gas rigs now has the largest natural gas rig deployment since November 15 2019...the national natural gas rig additions finish at two, however, because there was also a natural gas rig pulled out of a basin that Baker Hughes doesn't track, possibly from Texas Oil District 1...

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Note: there’s more here…

Monday, January 10, 2022

US oil supplies near a 10 year low; biggest hit to gasoline output & demand since 2020 lockdown, fuel inventories jump

Strategic Petroleum Reserve at a new 19 year low; total crude supplies near a 10 year low; gasoline production & gasoline demand fall by most in 21 months; gasoline supplies rise by most in 21 months; distillate supplies rise by most in a year

oil prices rose for the third consecutive week on political unrest and/or production difficulties among several OPEC allied producers....after rising 1.9% to $75.21 a barrel last week as oil traders became convinced that Omicron posed little risk to oil demand, the contract price for US light sweet crude for February delivery opened 47 cents higher on Monday amid reports that OPEC and Russia-led producers expected that the​ omicron disruption to global oil demand would be isolated to the first quarter​,​ and​ later​ settled 87 cents higher at $76.08 a barrel on hopes of​ a​ further demand recovery in 2022, despite the cartel's readiness to agree to another output increase, amid skepticism about whether OPEC and its allies c​ould successfully raise output as much as they intended...oil prices continued higher early Tuesday after the technical committee for OPEC signaled tighter supply-demand fundamentals for the first quarter, and as unplanned supply disruptions in a number of smaller oil producers, including Libya and Ecuador, offset a tsunami of Omicron infections in major oil-consuming countries. with oil finishing 91 cents higher at a six week high of $76.99 a barrel as OPEC and Russia agreed to stick with their planned production increase for February​,​ based on indications that the Omicron​ variant would have only a mild impact on demand....oil prices opened higher again on Wednesday and rallied to $78.58 a barrel after the American Petroleum Institute reported a larger-than-expected drop in U.S. commercial crude oil inventories during the final week of 2021 accompanied by massive builds in gasoline and distillates fuel supplies, signs of Omicron-led destruction to domestic fuel demand, but then slipped back below $78 after the EIA reported the biggest build in gasoline inventories since April 2020 amid plunging fuel demand, but still settled with a gain of 86 cents on the day at $77.85 a barrel, extending gains even after OPEC+ producers stuck to an agreed output target increase for February output....oil slipped from that 6 week high in early Thursday trading, as fuel supplies had surged amid declining demand​,​ while the draw in U.S. crude inventories was smaller than expected, but rallied on escalating unrest in major oil producer Kazakhstan and supply outages in Libya to settle $1.61, or 2.1%, higher at $79.46 a barrel, after earlier touching a session high of $80.24....oil prices rose again early Friday and briefly traded a dollar higher, as ongoing protests in Kazakhstan prompted fears of a disrupted crude supply from the OPEC and its allies (OPEC+), along with decreased production in Libya, where the political situation continued to deteriorate, but turned downward following a disappointing employment report in the US that heightened concerns over a laggard recovery in the world's largest​ consuming​ economy to finish trading 56 cents lower at $78.90 a barrel, but still finished with a gain of 4.9% on the week, and at the highest level since late November...

natural gas prices also finished higher in seesaw trading this week amid vacillating weather forecasts....after rising 2.8% to $3.730 per mmBTU last week on an outbreak of polar air, the contract price of natural gas for February delivery rose 8.5 cents, or 2.3%, to $3.815 per mmBTU on Monday after production fell over the New Years weekend because cold weather had frozen some production wells in Texas, New Mexico and ​in ​Colorado, reminding traders of what can happen when temperatures drop...but that gain was more than reversed on Tuesday as prices tumbled 9.8 cents to $3.717 per mmBTU after midday forecasts called for less cold weather and lower heating demand over the next two weeks than had previously been expected...however, strength in cash prices and expectations for ongoing blasts of frigid air over swaths of the Lower 48 pushed natural gas prices upwards on Wednesday, as the February contract settled 16.5 cents higher on the day at $3.882 per mmBTU...however, natural gas prices stumbled again on Thursday, after the EIA's weekly inventory report showed ample supplies and relatively modest early-winter heating demand, with gas shedding 7.0 cents to finish at $3.812 per mmBTU...but prices were rising again on Friday and finished 10.4 cents higher at $3.916, as a major winter storm blanketed the Northeast in snow, driving overall gas demand to its highest in a day since hitting a record in 2019 and left natural gas prices 5.0% higher on the week..

The EIA's natural gas storage report for the week ending December 31st indicated that the amount of working natural gas held in underground storage in the US fell by a modest 31 billion cubic feet to 3,195 billion cubic feet by the end of the week, which left our gas supplies 154 billion cubic feet, or 4.6% below the 3,349 billion cubic feet that were in storage on December 31st of last year, but 96 billion cubic feet, or 3.1% above the five-year average of 3,099 billion cubic feet of natural gas that have been in storage as of the 31st of December over the most recent five years....the 31 billion cubic foot withdrawal from US natural gas working storage for the cited week was quite a bit less than the average forecast for a 50 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, and was far less than the 127 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2020, and also far less than the average withdrawal of 108 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 31st showed that despite a major shift of “unaccounted for crude oil” from demand to supply, a concurrent drop in our oil imports meant we still needed to pull oil out of our stored commercial crude supplies for the sixth week in a row and for the 22nd time in the past thirty-two weeks….our imports of crude oil fell by an average of 875,000 barrels per day to an average of 5,884,000 barrels per day, after rising by an average of 565,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 375,000 barrels per day to an average of 2,554,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,330,000 barrels of per day during the week ending December 31st, 500,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly unchanged at 11,800,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,130,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,867,000 barrels of crude per day during the week ending December 31st, an average of 163,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 499,000 barrels of oil per day were being pulled out the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 238,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+238,000) 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 balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...and since last week’s EIA fudge factor was at (-631,000) barrels per day, that means there was a 869,000 barrel per day difference between this week's error and the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are just about meaningless.....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 499,000 barrel per day decrease in our total crude oil inventories left them at 1,011,533,000 barrels, the lowest level since February 17th 2012, or nearly at a 10 year low....this week's oil inventory decrease came as 306,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 192,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers....including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 57,980,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 19 year low of 593,682,000 barrels per day, or to the lowest since November 29, 2002, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,327,000 barrels per day last week, which was still 16.7% more than the 5,421,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be changed at 11,800,000 barrels per day even as the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,400,000 barrels per day, because Alaska’s oil production was 10,000 barrels per day lower at 459,000 barrels per day and hence added 100,000 barrels per day to the reported rounded national production total (by the EIA's math)...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 9.9% below that of our pre-pandemic production peak, but 40.0% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 89.8% of their capacity while using those 15,867,000 barrels of crude per day during the week ending December 31st, up from a utilization rate of 89.7% the prior week, but still lower than the historical utilization rate for late December refinery operations…the 15,867,000 barrels per day of oil that were refined this week were 10.4% more barrels than the 14,287,000 barrels of crude that were being processed daily during the pandemic impacted week ending January 1st of 2021, but 9.4% less than the 16,897,000 barrels of crude that were being processed daily during the week ending January 3rd. 2020, when US refineries were operating at what was then a more seasonal 93.0% of capacity...

Even with the increase in oil being refined this week, the gasoline output from our refineries was quite a bit lower, decreasing by 1,607,000 barrels per day to 8,506,000 barrels per day during the week ending December 31st, the largest drop in 21 months, after our gasoline output had increased by 171,000 barrels per day over the prior week.…this week’s gasoline production was still 6.2% more than the 8,010,000 barrels of gasoline that were being produced daily over the same week of last year, but 4.2% less than the gasoline production of 8,887,000 barrels per day during the week ending January 3rd. 2020, when gasoline output had also seen a steep drop at year end….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 30,000 barrels per day to 4,965,000 barrels per day, after our distillates output had increased by 83,000 barrels per day over the prior week…after those increases, our distillates output was 3.8% more than the 4,785,000 barrels of distillates that were being produced daily during the week ending January 1st of 2021, but 6.5% less than the 5,310,000 barrels of distillates that were being produced daily during the week ending January 3rd. 2020...

Even with the big drop in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the fourth time in thirteen weeks, and by the most in 21 months, increasing by 10,128,000 barrels to 232,787,000 barrels during the week ending December 31st, after our gasoline inventories had decreased by 1,459,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 1,552,000 barrels per day to 8,172,000 barrels per day, the largest drop in implied demand in 21 months, and because our imports of gasoline rose by 164,000 barrels per day to 596,000 barrels per day, while our exports of gasoline fell by 144,000 barrels per day to 470,000 barrels per day…after this week’s big inventory increase, our gasoline supplies were still 3.4% lower than last January 1st's gasoline inventories of 241,081,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

With the increase in our distillates production, our supplies of distillate fuels increased for the sixth time in nineteen weeks and by the most in 51 weeks, rising by 4,418,000 barrels to 126,846,000 barrels during the week ending December 31st, after our distillates supplies had decreased by 1,726,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 312,000 barrels per day to 3,739,000 barrels per day, and because our exports of distillates fell by 481,000 barrels per day to 811,000 barrels per day, and because our imports of distillates rose by 55,000 barrels per day to 217,000 barrels per day....but after twenty-six inventory decreases over the past thirty-nine weeks, our distillate supplies at the end of the week were 19.9% below the 158,419,000 barrels of distillates that we had in storage on January 1st of 2021, and about 16% below the five year average of distillates inventories for this time of the year…

Meanwhile, with the big drop in our oil imports, our commercial supplies of crude oil in storage fell for the 15th time in 22 weeks and for the 34th time in the past year, decreasing by 2,144,000 barrels over the week, from 419,995,000 barrels on December 24th to 417,851,000 barrels on December 31st, after our commercial crude supplies had decreased by 3,576,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories fell to about 8% below the most recent five-year average of crude oil supplies for this time of year, but were still around 28% above the average of our crude oil stocks as of year end over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this December 31st were 13.9% less than the 485,459,000 barrels of oil we had in commercial storage on January 1st of 2021, and are now 3.1% less than the 431,060,000 barrels of oil that we had in storage on January 3rd of 2020, and also 5.0% less than the 439,738,000 barrels of oil we had in commercial storage on January 4th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, rose by 8,819,000 barrels this week, from 1,779,614,000 barrels on December 24th to 1,788,433,000 barrels on December 31th, but still left our total inventories at the 2nd lowest level since August 29th, 2014.....  

This Week's Rig Count

The number of drilling rigs active in the US increased for the 57th time over the past 68 weeks during the week ending January 7th, but still remained 25.9% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by two to 588 rigs this past week, which was also 228 more rigs than the pandemic hit 360 rigs that were in use as of the January 8th report of 2020, but was also still 1,341 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 1 to 481 oil rigs during this week, after they had been unchanged during the prior week, and there are now 206 more oil rigs active now than were running a year ago, even as they still amount to just 29.9% of the shale era 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 up by 1 to 107 natural gas rigs, which was also up by 23 natural gas rigs from the 84 natural gas rigs that were drilling during the same week a year ago, but still only 6.7% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was up by 1 to 16 rigs this week, with fifteen of this week's Gulf rigs drilling for oil in Louisiana waters and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's one less Gulf rig than the 17 rigs that were active in the Gulf a year ago, when 14 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters…since there is not any drilling off our other coasts at this time, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....but In addition to those rigs offshore, we continue to have one water based rig drilling for oil inland in the Galveston Bay area, and hence the inland waters rig count of one is down from two a year ago..

The count of active horizontal drilling rigs was up by 2 to 532 horizontal rigs this week, which was also 212 more than the 320 horizontal rigs that were in use in the US on January 8th of last year, but still 61.3% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by 3 to 33 directional rigs this week, and those were also up by 11 from the 22 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was down by 3 to 23 vertical rigs this week, but those were still up by 5 from the 18 vertical rigs that were in use on January 8th of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of January 7th, the second column shows the change in the number of working rigs between last week’s count (December 31st) and this week’s (January 7th) count, the third column shows last week’s December 31st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 8th of January, 2021..

the Louisiana rig count was up by 3 this week with the addition of two Gulf of Mexico rigs in the state's offshore waters, and another rig in the northern part of the state, in an area we'd usually associate with the Haynesville shale, but apparently not targeting that formation this time...on the other hand, the Texas rig count was down by three with the shut down of a Gulf rig that had been drilling for oil in Alaminos Canyon, offshore from the state, and ​the ​removal of two rigs that ha​d been drilling in Texas Oil District 8, which is the core Permian Delaware....since the Texas Permian rig count was thus down by two while the national Permian rig count was down by just one, the rig that was added in New Mexico had to have been deployed in the western Permian Delaware to balance the national total....while we can see there were two rigs pulled out of the Cana Woodford, the Oklahoma rig count remained unchanged, which means that two rigs were added in an Oklahoma basin that Baker Hughes doesn't track...in addition, the rig added in the Denver-Julesburg Niobrara chalk appears to have been set up in Wyoming, since the Colorado rig count was unchanged...and finally, this week's new natural gas rig was set up in a basin that Baker Hughes doesn't track, and hence doesn't show up in the table above...

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Note: there’s more here

Monday, January 3, 2022

2021’s oil price rise was most in 12 years; multi-year lows for total crude supply and total oil + products inventories

oil prices rose 55% in 2021, the most since 2009; with oil in the Strategic Petroleum Reserve at fresh 19 year low, total crude supplies fell to a 118 month low; distillate supplies fell to a 21 month low, leading total oil & products supplies to largest drop in 63 months, ending at a 7 1/2 year low for total of all inventories…

oil prices rose for a second week after the initial Omicron selloff, as oil traders and most everyone else have become convinced that Omicron poses little risk to oil demand...after rising 4.3% to $73.79 a barrel last week on trouble in Libya, a big drawdown on US crude supplies, and on a refinery explosion in Texas, the contract price for US light sweet crude for February delivery opened lower on Monday amid new Omicron related travel restrictions, as traders worried if Omicron risks had been prematurely dismissed, but then reversed the early morning losses to rally to one month highs despite surging Omicron infections, chasing equitiy prices higher after the resumption of multilateral nuclear talks with Iran in Vienna, and settled 2.4%, or $1.78, higher at $75.57 per barrel on hopes that the Omicron variant would have a limited impact on global demand in 2022....oil rose another 2% to fresh one month highs early Tuesday along with rallying equities and a sagging U.S. dollar index, after the CDC shortened the recommended quarantine times for those who have tested positive for COVID-19 from ten days to five days , but pared a portion of the earlier gains in afternoon trading on a stronger US dollar ahead of the weekly release of U.S. inventory data from the American Petroleum Institute, to settle with a gain of 41 cents on the day to $75.98 a barrel...oil contracts again traded higher Wednesday morning after the API’s weekly report, and then spiked to new one-month highs after the EIA reported big withdrawals from crude and oil product inventories, but turned lower amid profit-taking ahead of end-year accounting and the upcoming holiday weekend, while later recovering to settle 58 cents higher at a five week closing high of $76.56 a barrel, as Americans resumed year-end travel and festivities after being assured of lower risks from Covid’s Omicron variant...after initially moving lower, oil prices again rose to new intraday highs on Thursday, as fading omicron concerns and signs of strong uptake of energy-related assets helped to support year-end buying, and settled 43 cents higher at $76.99 a barrel​,​ driven by data showing strong demand along with falling inventories and production levels in the U.S. and elsewhere still below pre-pandemic levels...oil's seven session rising streak, the longest since an eight-session rally ended February 10th, finally came to an end on Friday, when prices tumbled steadily to end $1.78 lower at $75.21 a barrel, largely due to profit taking after recent gains, but still ended 1.9% higher on the week, and 13.7% higher for December, and more than 55% higher for the year, to clinch its sharpest annual increase since 2009..

meanwhile, natural gas price quotes finished slightly lower on a change in the cited contracts, even as the now current February contract price ended higher... after rising 1.1% to $3.731 per mmBTU last week on signs of an impending polar air mass intrusion, the contract price of natural gas for January delivery opened 6% higher on Monday after forecasts showed that a bout of cold temperatures would spur heating demand for large parts of the U.S. this week, and continued rising to settle 32.9 cents higher at $4.060 per mmBTU, the largest one day price jump in over a month...natural gas prices held onto those gains on Tuesday, slipping only a half cent to $4.0​55 per mmBTU, on forecasts for milder weather and less heating demand over the next two weeks than was previously expected, while the more heavily traded February​ natural​ gas contract fell 5.7 cents to $3.885 per mmBTU at the same time, reflecting additional warming in the longer term forecast...after an initial spurt 5% higher on the potential for cold weather to last a couple of weeks, Wednesday's trading in the contract for January gas expired with gas priced 3.1 cents lower at 4.024 per mmBTU, while the incoming ​front-month February contract settled at $3.850 per mmBTU, down 3.5 cents from Tuesday's close...with the contract price of natural gas for February delivery now being quoted as the price of natural gas, prices tumbled 28.9 cents or 7.5% to a six month low of $3.561 per mmBTU on Thursday, following a 10% slide to a three week low in European gas prices despite a bigger-than-expected storage withdrawal and colder forecasts​, ​​as domestic ​gas ​production continued to rise...however, natural gas prices rebounded to recover more than half of that drop on Friday, settling 16.9 higher at $3.730 per mmBTU, on a heating degree days forecast over the next two weeks that was higher than the 30-year normal for this time of year...natural gas prices thus finished the week a tenth of a cent lower than last week's closing quote, while the February contract price, which had finished last week at $3.630 per mmBTU, ended the week 2.8% higher....for the year, natural gas prices finished over 47% higher, their biggest annual percentage rise since 2016.

The EIA's natural gas storage report for the week ending December 24th indicated that the amount of working natural gas held in underground storage in the US fell by 136 billion cubic feet to 3,226 billion cubic feet by the end of the week, which left our gas supplies 250 billion cubic feet, or 7.2% below the 3,476 billion cubic feet that were in storage on December 24th of last year, but still 19 billion cubic feet, or 0.6% above the five-year average of 3,207 billion cubic feet of natural gas that have been in storage as of the 24th of December over the most recent​ five​ years...the 136 billion cubic foot withdrawal from US natural gas working storage this week was more than the average forecast for a 127 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, and was also more than the 121 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2020, and more than the average withdrawal of 120 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 24th showed that despite increases in our oil imports and in our oil production, we still needed to pull oil out of our stored commercial crude supplies for the fifth week in a row for the 21st time in the past thirty-one weeks….our imports of crude oil rose by an average of 565,000 barrels per day to an average of 6,759,000 barrels per day, after falling by an average of 277,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 50,000 barrels per day to an average of 2,929,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,830,000 barrels of per day during the week ending December 24th, 515,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 200,000 barrels per day higher at 11,800,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,630,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,703,000 barrels of crude per day during the week ending December 24th, an average of 115,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 704,000 barrels of oil per day were being pulled out the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 631,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-631,000) 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 balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...and since last week’s EIA fudge factor was at (-133,000) barrels per day, that means there was a 498,000 barrel per day difference between this week's error and the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are fairly useless.....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 704,000 barrel per day decrease in our total crude oil inventories left them at 1,015,023,000 barrels, the lowest level since February 10th 2012, or at a 118 month low....this week's inventory drop came as 511,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 193,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers...however, most of that unrefined sour crude is expected to go to China and India, so how it could impact US gasoline prices is unclear... including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 57,787,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 19 year low of 595,028,000 barrels per day, or to the lowest since November 29, 2002, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,481,000 barrels per day last week, which was still 13.7% more than the 5,698,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 200,000 barrels per day higher at 11,800,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 300,000 barrels per day higher at 11,400,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day lower at 449,000 barrels per day and subtracted 100,000 barrels per day from the reported rounded national production total (by the EIA's math)...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 9.9% below that of our pre-pandemic production peak, but is now 40.0% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 89.7% of their capacity while using those 15,703,000 barrels of crude per day during the week ending December 24th, up from a utilization rate of 89.6% the prior week, but still lower than the historical utilization rate for late December refinery operations…the 15,703,000 barrels per day of oil that were refined this week were 9.9% more barrels than the 14,287,000 barrels of crude that were being processed daily during the pandemic impacted week ending December 25th of last year, but 9.1% less than the 17,283,000 barrels of crude that were being processed daily during the week ending December 27th, 2019, when US refineries were operating at what was a more seasonal 94.5% of capacity...

Even with the decrease in oil being refined this week, the gasoline output from our refineries was somewhat higher, increasing by 171,000 barrels per day to 10,113,000 barrels per day during the week ending December 24th, after our gasoline output had decreased by 100,000 barrels per day over the prior week.…this week’s gasoline production was 10.0% more than the 9,191,000 barrels of gasoline that were being produced daily over the same week of last year, but 0.6% less than the gasoline production of 10,173,000 barrels per day during the week ending December 27th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 83,000 barrels per day to 4,935,000 barrels per day, after our distillates output had increased by 40,000 barrels per day over the prior week…after that increase, our distillates output was 6.4% more than the 4,639,000 barrels of distillates that were being produced daily during the week ending December 25th, 2020, but 7.1% less than the 5,311,000 barrels of distillates that were being produced daily during the week ending December 27th, 2019..

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the ninth time in twelve weeks, and for the fourteenth time in thirty-six weeks, decreasing by 1,459,000 barrels to 222,659,000 barrels during the week ending December 24th, after our gasoline inventories had increased by 5,533,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 738,000 barrels per day to 9,724,000 barrels per day, and because our imports of gasoline fell by 256,000 barrels per day to 432,000 barrels per day, while our exports of gasoline fell by 207,000 barrels per day to 614,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 5.9% lower than last December 25th's gasoline inventories of 236,562,000 barrels, and about 6% below 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 decreased for the thirteenth time in eighteen weeks and for the 26th time in 38 weeks, falling by 1,726,000 barrels to a 21 month low of 122,428,000 barrels during the week ending December 24th, after our distillates supplies had increased by 396,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 229,000 barrels per day to 3,882,000 barrels per day, and because our exports of distillates rose by 116,000 barrels per day to 4,051,000 barrels per day, and because our imports of distillates fell by 41,000 barrels per day to 162,000 barrels per day....after twenty-six inventory decreases over the past thirty-eight weeks, our distillate supplies at the end of the week were 19.5% below the 152,029,000 barrels of distillates that we had in storage on December 25th, 2020, and about 14% below the five year average of distillates inventories for this time of the year…

Meanwhile, despite the increases in our oil imports and in our domestic oil production, our commercial supplies of crude oil in storage fell for the 14th time in 21 weeks and for the 34th time in the past year, decreasing by 3,576,000 barrels over the week, from 423,571,000 barrels on December 17th to 419,995,000 barrels on December 24th, after our commercial crude supplies had decreased by 4,715,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories were about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still 28.1% above the average of our crude oil stocks as of the fourth weekend of December over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this December 24th were 14.9% less than the 493,469,000 barrels of oil we had in commercial storage on December 18th of 2020, and are now 2.3% less than the 441,359,000 barrels of oil that we had in storage on December 27th of 2019, and also 4.9% less than the 441,418,000 barrels of oil we had in commercial storage on December 28th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 20,267,000 barrels this week, from 1,799,881,000 barrels on December 17th to 1,779,614,000 barrels on December 24th, the largest total inventory drop since September 30 2016, and left our total inventories at the lowest level since June 27th, 2014, or at a 7 1/2 year low... 

This Week's Rig Count

The number of drilling rigs active in the US w​as unchanged over the week ending December 31st, after they had risen 56 times over the prior 66 weeks, but still remained 26.1% below the prepandemic rig count....​(​note that last week's rig count was released on December 23rd ahead of the ensuing holiday, and hence this week's report covers the intervening eight days​)...Baker Hughes reported that the total count of rotary rigs running in the US was unchanged at 586 rigs after that period, which was still 235 more rigs than the pandemic hit 351 rigs that were in use as of the December 30th report of 2020, but was ​also ​still 1,343 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was unchanged at 480 oil rigs during this week, after they had increased by 5 rigs during the prior week, while there are still 213 more oil rigs active now than were running a year ago, even as they still amount to just 29.8% of the shale era 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 106 natural gas rigs, which was still up by 23 natural gas rigs from the 83 natural gas rigs that were drilling during the same week a year ago, but still only 6.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at 15 rigs this week, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas...that's two less than the count of 17 rigs that were active in the Gulf a year ago, when 14 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters…since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....In addition to those rigs offshore, we continue to have one water based rig drilling for oil inland in the Galveston Bay area, and hence the inland waters rig count of one is down from two a year ago..

The count of active horizontal drilling rigs was up by 2 to 530 horizontal rigs this week, which was also 217 more than the 313 horizontal rigs that were in use in the US on December 30th of last year, but still 61.4% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the vertical rig count was down by 1 to 26 vertical rigs this week, but those were still up by 9 from the 17 vertical rigs that were operating during the same week a year ago….at the same time, the directional rig count was​ also​ down by one to 30 directional rigs this week, but those were also still up by 9 from the 21 directional rigs that were in use on December 30th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of December 31st, the second column shows the change in the number of working rigs between last week’s count (December 23rd) and this week’s (December 31st) count, the third column shows last week’s December 23rd active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 December, 2020...

with just a few changes this week, we'll start by checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin...there we find that two rigs were pulled out of Texas Oil District 8, which is the core Permian Delaware, and that the rig counts in the other Texas Permian basin Districts were unchanged....since the Texas Permian rig count was thus down by two while the national Permian rig count was down by just one, that means that the rig that was added in New Mexico had to have been deployed in the western Permian Delaware...meanwhile, since there are no other ​rig count ​changes elsewhere in Texas, the 2 Permian rigs that were pulled out of District 8 account for this week's 2 rig Texas decrease..

in Louisiana, we have a natural gas rig addition in the Haynesville shale in the northwestern part of the state, and in Oklahoma, we have an oil rig addition in the Cana Woodford, while in Utah, there was an oil rig pulled out of the Uintah basin, which Baker Hughes does not report but which we were able to ​ascertain by checking the individual well records in the North America Rotary Rig Count Pivot Table (Feb 2011 - Current), which shows that a directional rig targeting oil rig ​was missing from Duchesne county, which happens to overlie the Uintah basin in that state...meanwhile, not apparent in the tables above is that a natural gas rig was pulled out of a basin that Baker Hughes doesn't track, which would have had to have been matched by a similar untracked oil rig addition in the same state, because all of our other counts balance otherwise...

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Note: there’s more here

Monday, December 27, 2021

SPR at a 19 year low; total oil & products supplies near a 7 year low; distillates demand falls most in 5 years​; DUC backlog at 5.5 months..​

natural gas supplies above average for first time since April; Strategic Petroleum Reserve at a 19 year low; total oil & products supplies near a 7 year low; total oil supply falls by most in 25 weeks; gasoline supplies jump most in 20 months; distillates demand falls by most in 5 years​; DUC wells in four basins are lowest on record; DUC backlog at 5.5 months is below prepandemic norm..​

oil prices rose for the 2nd time in the past nine weeks, rallying ​first ​on a force majeure declaration in Libya, ​then on ​the largest drawndown in US crude supplies in 5 monhs, and ​lastly on ​a refiney explosion in Texas....after falling 1.1% to $70.86 a barrel last week as the rapid spread of the Omicron virus variant began to impact oil demand, the contract price for US light sweet crude for January delivery opened more than 1% lower on Monday and slid to a two-week low of $66.04 a barrel in early trading, as global oil demand was seen to be further restrained amid increased travel restrictions in Europe amid spiking COVID cases, but recovered from the day's lows as the January contracted expired with a loss of $2.63 at $68.23 a barrel, after Biden’s $2 trillion spending package was derailed by Senator Joe Manchin...with oil price quotes now citing the contract price for US light sweet oil for February, which had fallen $2.11 to $68.61 a barrel on Monday, ​prices moved higher in early trading Tuesday, retracing a portion of Monday's selloff, as oil traders mulled over the effects of the omicron variant on global oil demand. and settled with a gain of $2.51 at $71.12 a barrel as traders' appetite for risk improved even as the fast-moving Omicron variant swept the world, throwing Christmas travel plans into chaos and unnerving financial markets...oil prices were little changed early Wednesday after a force majeure declaration by Libya's National Oil Company staved off a selloff sparked by increasing mobility restrictions in Europe, and then rallied ​again ​on the EIA's report of the largest oil inventory drawdown since July to close $1.64 higer at $72.76 a barrel...the rally continued into pre-holiday trading on Thursday morning, with gasoline and oil prices trading at one month highs following an explosion and fire at a gasoline unit at ExxonMobil's Baytown refinery near Houston. and settled $1.03, or 1.4%, higher at $73.79 a barrel as signs that the worst effects of the Omicron variant might be more containable than previously feared were countered by new COVID-19 restrictions amid surging infections...oil prices thus finished the week 4.1% higher at a one month high, while the February oil contract, which had closed the prior week at $70.72 a barrel, ended the week up more than 4.3%...

natural gas prices also finished the week higher for the first time in 4 weeks on signs of a​n impending​ polar air mass intrusion.....after falling 6% to  $3.690 per mmBTU last week on continued mild temperature forecasts for December, the contract price of natural gas for January delivery opened lower on Monday but rebounded with a flurry, driven higher by surging demand for U.S. exports of LNG​,​ and ​by ​domestic forecasts for colder weather in the month ahead. and settled 14.4 cents ​or nearly 4% higher at $3.834 per mmBTU....prices see-sawed higher on Tuesday, shrugging off forecasts for milder weather, and settled with a 3.5 cent gain at $3.869 per mmBTU​,​ after gas prices in Europe jumped to an all-time high a​fter Russian gas shipments to Germany through a major transit pipeline reversed direction and colder weather increased demand....natural gas ​price​s shot even higher Wednesday, on the increasing likelihood that frigid air would finally descend into vast stretches of the US in early January, and settled with a 10.7 cents gain at $3.976 per mmBTU....​however, natural gas prices gave up most of the week's gains on Thursday in tumbling 24.5 cents to $3.731 per mmBTU​,​ as the weather forecast for the new year shifted milder and European gas prices slid from record-high levels, and thus finished the week​ with​ just ​a ​1.1%​ ​​gain...

The EIA's natural gas storage report for the week ending December 17th indicated that the amount of working natural gas held in underground storage in the US fell by 55 billion cubic feet to 3,362 billion cubic feet by the end of the week, which left our gas supplies 234 billion cubic feet, or 6.5% below the 3,596 billion cubic feet that were in storage on December 17th of last year, but 34 billion cubic feet, or 1.0% above the five-year average of 3,328 billion cubic feet of natural gas that have been in storage as of the 17th of December over the most recent years...the 55 billion cubic foot withdrawal from US natural gas working storage this week was slightly below the average forecast for a 57 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, but was much less than the 147 billion cubic feet that were pulled from natural gas storage during the corresponding ​​week of 2020, and was also much less than the average withdrawal of 153 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 17th showed that despite a drop in our oil exports, we needed to pull oil out of our stored commercial crude supplies for the sixth time in thirteen weeks and for the twenty-sixth time in the past thirty-eight weeks….our imports of crude oil fell by an average of 277,000 barrels per day to an average of 6,471,000 barrels per day, after falling by an average of 28,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 766,000 barrels per day to an average of 2,879,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,315,000 barrels of per day during the week ending December 17th, 489,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day lower at 11,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 14,915,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,818,000 barrels of crude per day during the week ending December 17th, an average of 148,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,036,000 barrels of oil per day were being pulled out the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield  production was 133,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-133,000) 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 balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 1,036,000 barrel per day decrease in our total crude oil inventories, the largest since July 2nd, came as 674,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 362,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers...however, most of that unrefined sour oil is expected to go to China and India, so how it could impact US gasoline prices is unclear...including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 57,594,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 19 year low of 596,381,000 barrels per day, or to the lowest since November 29, 2002, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete..

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,502,000 barrels per day last week, which was still 12.7% more than the 5,717,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,600,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day lower at 11,100,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day higher at 449,000 barrels per day and added 100,000 barrels per day from the reported rounded national production total (by the EIA's math)...US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 11.4% below that of our pre-pandemic production peak, but still 37.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 89.6% of their capacity while using those 15,818,000 barrels of crude per day during the week ending December 17th, down from a utilization rate of 89.8% the prior week, and lower than the historical utilization rate for mid December refinery operations… the 15,818,000 barrels per day of oil that were refined this week were 12.9% more barrels than the 14,183,000 barrels of crude that were being processed daily during the pandemic impacted week ending December 18th of last year, but 6.2% less than the 16,980,000 barrels of crude that were being processed daily during the week ending December 20th, 2019, when US refineries were operating at what was then also a bit less than seasonal 90.6% of capacity...

Even with the increase in oil being refined this week, the gasoline output from our refineries was somewhat lower, decreasing by 100,000 barrels per day to 9,942,000 barrels per day during the week ending December 10th, after our gasoline output had increased by 479,000 barrels per day over the prior week.…this week’s gasoline production was still 12.6% more than the 8,829,000 barrels of gasoline that were being produced daily over the same week of last year, but 3.2% less than the gasoline production of 10,269,000 barrels per day during the week ending December 20th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 40,000 barrels per day to 4,852,000 barrels per day, after our distillates output had decreased by 105,000 barrels per day over the prior week…after that increase, our distillates output was 5.7% more than the 4,590,000 barrels of distillates that were being produced daily during the week ending December 18th, 2020, but 10.0% less than the 5,394,000 barrels of distillates that were being produced daily during the week ending December 20th, 2019..

Even with the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the third time in eleven weeks, and for the twenty-first time in thirty-five weeks, increasing by 5,533,000 barrels to 218,585,000 barrels during the week ending December 17th, the largest jump in 20 months, after our gasoline inventories had decreased by 719,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 486,000 barrels per day to 8,986,000 barrels per day, and because our imports of gasoline rose by 189,000 barrels per day to 688,000 barrels per day, while our exports of gasoline rose by 200,000 barrels per day to 821,000 barrels per day…after this week’s big inventory increase, our gasoline supplies were still 5.7% lower than last December 18th's gasoline inventories of 238,879,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

With the increase in our distillates production, our supplies of distillate fuels increased for the fourth time in seventeen weeks and for the 12th time in 37 weeks, rising by 396,000 barrels to 124,154,000 barrels during the week ending December 17th, after our distillates supplies had decreased by 2,852,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by a near record 1,074,000 barrels per day to 3,882,000 barrels per day, even as our exports of distillates rose by 403,000 barrels per day to 1,176,000 barrels per day, and as our imports of distillates fell by 247,000 barrels per day to 203,000 barrels per day....but after twenty-five inventory decreases over the past thirty-seven weeks, our distillate supplies at the end of the week were still 16.6% below the 148,934,000 barrels of distillates that we had in storage on December 18th, 2020, and about 8% below the five year average of distillates stocks for this time of the year…

Meanwhile, despite the drop in our oil exports and the big SPR release, our commercial supplies of crude oil in storage fell for the 20th time in the past thirty weeks and for the 34th time in the past year, and by the most in 15 weeks, decreasing by 4,715,000 barrels over the week, from 428,286,000 barrels on December 10th to 423,571,000 barrels on December 17th, after our commercial crude supplies had decreased by 4,584,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories slipped to around 8% below the most recent five-year average of crude oil supplies for this time of year, but were still about 23% above the average of our crude oil stocks as of the third weekend of December over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this December 17th were 15.2% less than the 499,534,000 barrels of oil we had in commercial storage on December 18th of 2020, and are now 4.0% less than the 441,359,000 barrels of oil that we had in storage on December 20th of 2019, and also 4.0% less than the 441,411,000 barrels of oil we had in commercial storage on December 21st of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 9,525,000 barrels this week, from 1,809,406,000 barrels on December 10th to 1,799,881,000 barrels on December 17th, and is now at the lowest level since December 26th, 2014, or nearly at a 7 year low...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 56th time during the past 66 weeks during the holiday shortened week ending December 23rd, but still remained 26.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by seven to 586 rigs this past week, which was also 238 more rigs than the pandemic hit 348 rigs that were in use as of the December 23rd report of 2020, but was still 1,343 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil increased by 5 to 480 oil rigs during this week, after they had increased by 4 rigs during the prior week, and there are now 218 more oil rigs active now than were running a year ago, even as they still amount to just 29.8% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 2 to 106 natural gas rigs, which was ​also up by 23 natural gas rigs from the 81 natural gas rigs that were drilling during the same week a year ago, but still only 6.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at 15 rigs this week, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas...that's now two less than the count of 17 rigs that were active in the Gulf a year ago, when 14 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters…most of those Gulf rigs appear to be directional rigs targeting oil at depths greater than 15,000 feet, and include five targeting the Mississippi Canyon and three targeting oil under the Green Canyon...since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....In addition to those rigs offshore, we continue to have one water based rig drilling for oil inland in the Galveston Bay area, and hence the inland waters rig count of one is now down from two a year ago..

The count of active horizontal drilling rigs was up by 7 to 528 horizontal rigs this week, which was also 219 more than the 309 horizontal rigs that were in use in the US on December 23rd of last year, but also 61.6% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was up by 1 to 27 vertical rigs this week, and those were up by 10 from the 17 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was down by one to 31 directional rigs this week, but those were still up by 9 from the 22 directional rigs that were in use on December 23rd of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of December 23rd, the second column shows the change in the number of working rigs between last week’s count (December 17th) and this week’s (December 23rd) count, the third column shows last week’s December 17th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 December, 2020...

with the majority of this week's rig increase coming in the Permian basin, .we'll start by checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin...there we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, and that another rig was added in Texas Oil District 7C, which includes the northernmost counties in the Permian Midland, but that three rig​s​ were pulled out of Texas Oil District 8A, which covers the southern counties in the Permian Midland....since the Texas Permian rig count was thus up by a net of two and the national Permian rig count was up by six, that means that the four rigs that were added in New Mexico were deployed in the western Permian Delaware...

elsewhere in Texas, three rigs were added in Texas Oil District 6, which encompasses the portion of the Haynesville shale in the state; at the same time, a Haynesville shale rig was pulled out of northern Louisiana....since the Haynesville shale rig count was only up by one nationally, we'll have to assume one of those district 6 additions was not targeting the Haynesville...note that Texas also saw a rig removed from Texas Oil District 3, but that rig was also not targeting one of the basins that Baker Hughes reports details on...

the only other change in the table above we've not accounted for is the two rig addition in Oklahoma's Cana Woodford...however, since the Oklahoma rig count was unchanged, we know that two other rigs were pulled out of Oklahoma, from a basin that Baker Hughes doesn't track...meanwhile, for natural gas rigs, we have the Haynesville shale addition, and another natural gas rig added in a basin that Baker Hughes lists as "other", which could have been anywhere, but which can be determined by tediously checking the individual well records in the North America Rotary Rig Count Pivot Table (Feb 2011 - Current), if anyone really needs to know..

DUC well report for November

Monday​ of last week​ saw the release of the EIA's Drilling Productivity Report for December, which includes the EIA's November data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 18th consecutive month, as both completions of drilled wells and drilling of new wells remained well below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 226 wells, falling from 5,081 DUC wells in October to 4,855 DUC wells in November, which was also 39.1% fewer DUCs than the 7,968 wells that had been drilled but remained uncompleted as of the end of November of a year ago...this month's DUC decrease occurred as 659 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during November, up from the 649 wells that were drilled in October, while 885 wells were completed and brought into production by fracking, up from the 876 completions seen in October, and up from the pandemic hit 589 completions seen in November of last year, but still down by 9.4% from the 979 completions of November 2019....at the November completion rate, the 4,885 drilled but uncompleted wells left at the end of the month represents a 5.5 month backlog of wells that have been drilled but are not yet fracked, down from the 5.9 month DUC well backlog of a month ago, a ratio that is now below that of the year prior to the pandemic, despite a completion rate that is still around 20% lower than  the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in November, while none of the major basins reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 105, from 1,669 DUC wells at the end of October to 1,564 DUCs at the end of November, as 300 new wells were drilled into the Permian during November, while 405 wells in the region were being fracked...at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 35, from 796 DUC wells at the end of October to a record low of 761 DUCs at the end of November, as 63 wells were drilled in the Eagle Ford during November, while 98 already drilled Eagle Ford wells were completed....in addition, there was also a decrease of 30 DUC wells in the Bakken of North Dakota, where DUC wells fell from 516 at the end of October to a record low of 486 DUCs at the end of November, as 43 wells were drilled into the Bakken during November, while 73 of the drilled wells in the Bakken were being fracked....meanwhile, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 11, falling from 372 at the end of October to a record low 361 DUC wells at the end of November, as 87 wells were drilled into the Niobrara chalk during November, while 98 Niobrara wells were being fracked...in addition, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 10, falling from 799 at the end of October to 789 DUC wells at the end of November, as 47 wells were drilled into the Anadarko basin during November, while 57 Anadarko wells were completed.....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 28 wells, from 537 DUCs at the end of October to a record low of 511 DUCs at the end of November, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 97 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by nine to 383 DUCs, as 48 wells were drilled into the Haynesville during November, while 57 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of November, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 191 wells to 3,961 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 35 wells to 894 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there’s more here