US oil imports at a 4 year high, oil production at a 41 month high; global oil supply was 1,360,000 barrels per day short of global demand in August as OPEC's output was 816,000 barrels per day below the level they said they'd cut to.
US oil prices rose for the 10th time in eleven weeks and ended the week 3.7% higher at $90.77 a barrel, topping $90 for the first time in 10 months, propelled by forecasts from the IEA and OPEC for increased demand and tighter supplies for the rest of this year and into the next....meanwhile, natural gas contracts traded mostly sideways during the week but managed to finish 1.5% higher at $2.644 per mmBTU, rallying on short term disruptions to global and domestic gas production...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending September 8th indicated that after a big increase in our oil imports and a major drop in our oil exports, we had surplus oil to add to our stored commercial crude supplies for the second time in nine weeks, and for the twentieth time in the past 38 weeks, even after a big drop in oil supplies that the EIA could not account for....Our imports of crude oil rose by an average of 812,000 barrels per day to a four year high of 7,582,000 barrels per day, after rising by an average of 154,000 barrels per day the prior week, while our exports of crude oil fell by 1,842,000 barrels per day to average 3,090,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 4,492,000 barrels of oil per day during the week ending September 8th, 2,654,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day higher at a forty-one month high of 12,900,000 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 averaged a total of 17,392,000 barrels per day during the September 8th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,800,000 barrels of crude per day during the week ending September 8th, an average of 177,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 606,000 barrels of oil per day were being added to the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending September 8th appear to indicate that our total working supply of oil from net imports and from oilfield production was 15,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week. To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +15,000 ] barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there was a discrepancy in the week’s oil supply & demand figures that we have just transcribed.... However, since last week’s “unaccounted for crude oil” figure was at [+1,198,000] barrels per day, that means there was a 1,183,000 barrel per day difference between this week's modest oil balance sheet error and the EIA's much larger crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, and therefore useless...But since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)
This week's 606,000 barrel per day increase in our overall crude oil inventories came as an average of 565,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 41,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the sixth consecutive increase in the SPR after three years of withdrawals. Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports jumped to an average of 6,976,000 barrels per day last week, which was 13.0% more than the 6,174,000 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 higher at a forty-one month high of 12,900,000 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 higher at a forty-one month high of 12,500,000 barrels per day, while Alaska’s oil production was 19,000 barrels per day higher at 420,000 barrels per day but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 1.5% below that of our pre-pandemic production peak, but was 33.0% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021.
US oil refineries were operating at 93.7% of their capacity while processing those 16,800,000 barrels of crude per day during the week ending September 8th, up from their 93.1% utilization rate during the prior week, a utilization rate that is in the normal range for late summer... The 16,800,000 barrels per day of oil that were refined this week were 4.9% more than the 16,022,000 barrels of crude that were being processed daily during week ending September 9th of 2022, but 4.0% less than the 17,495,000 barrels that were being refined during the prepandemic week ending September 6th, 2019, when our refinery utilization rate was at 95.1%, also within the normal range for this time of year...
Even with an increase in the amount of oil being refined this week, the gasoline output from our refineries was seasonally lower, decreasing by 576,000 barrels per day to 9,212,000 barrels per day during the week ending September 8th, after our refineries' gasoline output had decreased by 217,000 barrels per day during the prior week. This week’s gasoline production was 2.5% less than the 9,453,000 barrels of gasoline that were being produced daily over the same week of last year, and 11.1% less than the gasoline production of 10,360,000 barrels per day during the prepandemic week ending September 6th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 6,000 barrels per day to 5,017,000 barrels per day, after our distillates output had decreased by 6,000 barrels per day during the prior week. With those minor decreases, our distillates output was fractionally less than the 5,019,000 barrels of distillates that were being produced daily during the week ending September 9th of 2022, and 6.1% less than the 5,341,000 barrels of distillates that were being produced daily during the week ending September 6th, 2019...
Even with this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the ninth time in thirty weeks, increasing by 5,561,000 barrels to 220,307,000 barrels during the week ending September 8th, after our gasoline inventories had decreased by 2,666,000 barrels to a nine month low during the prior week. Our gasoline supplies rose this week because the amount of gasoline supplied to US users crashed by 1.014,000 barrels per day to 8,307,000 barrels per day, and because our exports of gasoline fell by 92,000 barrels per day to 911,000 barrels per day, while our imports of gasoline fell by 83,000 barrels per day to 899,000 barrels per day, ....Even after twenty-one gasoline inventory decreases over the past thirty weeks, our gasoline supplies were 3.4% more than last September 9th's gasoline inventories of 213,040,000 barrels, while about 2% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with our distillates production essentially unchanged, our supplies of distillate fuels increased for the fourteenth time in twenty-seven weeks, rising by 3,931,000 barrels to 122,533,000 barrels during the week ending September 8th, after our distillates supplies had increased by 679,000 barrels during the prior week. Our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 288,000 barrels per day to 3,578,000 barrels per day, and because our imports of distillates rose by 55,000 barrels per day to 185,000 barrels per day, and because our exports of distillates fell by 128,000 barrels per day to 1,056,000 barrels per day....With 39 inventory increases over the past sixty-nine weeks, our distillates supplies at the end of the week were 5.6% above the 116,020,000 barrels of distillates that we had in storage on September 9th of 2022, but were still about 13% below the five year average of our distillates inventories for this time of the year...
Finally, with our oil imports much higher and our oil exports much lower, our commercial supplies of crude oil in storage rose for 8th time in twenty-three weeks and for the 26th time in the past year, increasing by 3,955,000 barrels over the week, from a nine month low of 416,637,000 barrels on September 1st to 420,592,000 barrels by September 8th, after our commercial crude supplies had decreased by 6,307,000 barrels over the prior week. With this week's increase, our commercial crude oil inventories rose to about 2% below the most recent five-year average of commercial oil supplies for this time of year, and to about 27% above the average of our available crude oil stocks as of the second weekend of September over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this September 8th were 2.1% less than the 429,633,000 barrels of oil we had in commercial storage on September 9th of 2022, but were 0.8% more than the 417,445,000 barrels of oil that we still had in storage on September 10th of 2021, while 15.2% less than the 496,045,000 barrels of oil we had in commercial storage on September 11th of 2020, after early pandemic precautions had left a lot of oil unused…
OPEC's Report on Global Oil for August
Tuesday of this past week saw the release of OPEC's September Oil Market Report, which includes the details on OPEC's & global oil data for August, and hence it gives us a picture of the global oil supply & demand situation as Chinese demand remained depressed for a second month after after a first half recovery from the country's Covid policy, while oil supplies were impacted by an additional million barrel per day unilateral production cut by the Saudis and an ongoing 500,000 million barrel per day supply cut by Russia...August was also the eighth month that OPEC and aligned oil producers were operating under a 2 million barrel per day production cut, meant to take roughly 2% of global oil supplies off the market, in response to a perceived global surplus and related lower prices, and the fourth month of a Saudi led cut of an additional 1.16 million barrels per day, which, when combined with the unilateral Russian cut, was intended to take an additional 1.66 million barrels per day off the market for the rest of this year...all told, then, the members of the cartel have committed to holding 4.66 million barrels per day off the market, or roughly 4.6% of global supplies...
The first table from this month's report that we'll review is from the page numbered 49 of the report (pdf page 59), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC has used an average of production estimates by as many as eight "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA), the industry newsletter Petroleum Intelligence Weekly, the energy consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures…
As we can see in the bottom right hand corner of the above table, OPEC's oil output increased by 113,000 barrels per day to 27,310,000 barrels per day during August, up from their revised June production total that averaged 27,336,000 barrels per day....however, that July OPEC output figure was originally reported as 27,310,000 barrels per day, which therefore means that OPEC's June production was revised 26,000 barrels per day higher with this report, and hence OPEC's August production was, in effect, 139,000 barrels per day more than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official July OPEC output figures as reported a month ago, before this month's revision)...
the additional million barrel per day output cut the Saudis first implemented in July was the latest in a series of oil supply cuts imposed by the OPEC+ cartel over the past year, beginning with a 2 million barrel per day production cut that the joint agreement imposed on all producers in October...following that, six OPEC oil producers, led by the Saudis, and two other oil producers aligned with OPEC+, came to an agreement at the beginning of April to further reduce their combined production by an additional 1.16 million barrels per day beginning in May, over and above the formal OPEC cuts...in addition, Russia agreed to extend their ongoing 500,000 barrels per day cut for the rest of the year for a total cut of 1.66 million barrels per day from those nine producers...production cuts for OPEC members under that agreement included 500,000 barrels per day (bpd) from the Saudis, 211,000 bpd from Iraq, 140,000 bpd from the Emirates, 128,000 bpd from Kuwait, 48,000 barrels per day from Algeria, and 8,000 barrels per day from Gabon...three months ago, our assessment was that only the Saudis managed to hit the additional production cut target in May, and only Algeria joined them in June, indeed, most of the others increased their production in June and July, rather than cutting it, and it appears that's also been the case in August....hence, the net production reduction remains less than half of what had been committed to by the parties to that April 2nd agreement..
furthermore, OPEC and other aligned oil producers had previously agreed to reduce production by 2,000,000 barrels per day beginning in November, so the net 1,207,000 barrels per day OPEC ex-Saudi Arabia has cut since then is also short of that...however, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce when that policy was initiated in October, so the 27,449,000 barrels per day OPEC produced in August still leaves them far short of what they were expected to produce during the month, as we'll see in the next table...
The above table was originally included as a downloadable attachment to the press release following the 33rd OPEC and non-OPEC Ministerial Meeting on October 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for November and the following months through the end of 2023, and the quotas shown above were reaffirmed by the cartel for 2023 in during the 34th OPEC and non-OPEC Ministerial Meeting on December 4th, 2022....the first column above, labeled "August 2022 required production", actually matches the October 2018 baseline production level on which OPEC and aligned producers have based all of their quotas since the onset of the pandemic, and the "Voluntary adjustment" is the production cut each country is expected to make from that benchmark level to achieve a 2 million barrel per day cut for the cartel as a whole, leaving each country with a "Voluntary Production" level they're expected to hit each month during 2023, whether they've produced that much recently or not....since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers since May 2020, they are not shown on the above list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,416,000 barrels per day from November 2022 through December 2023...
with the April 2nd agreement, six members of OPEC agreed to further reduce their production by 1,035.000 starting in May and through the end of the year....thus the voluntary production level for the OPEC 10 would have been reduced to 24,381,000 through December....subtracting the million barrel per day cut from the Saudi's production initiated in July leaves OPEC's voluntary production level at 23,381,000 barrels in August....therefore, the 22,565,000 barrels those 10 OPEC members actually produced in August were 816,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of this month's production shortfall...
The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from September 2021 thru August 2023, and it comes from page 50 (pdf page 60) of OPEC's September Oil Market Report....on this graph, the sky blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....
After this month's 113,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production was essentially unchanged at an average of 100.7 million barrels per day in August, as non-OPEC oil production fell by a rounded 100,000 barrels per day in August, with most of August’s non-OPEC production decrease due to less oil output from Russia, which more than offset greater production from China and from "other Eurasian" countries...
With little change in global oil output in August, the amount of oil being produced globally during the month fell short of the expected global demand, as this next table from the OPEC report will show us...
The above table came from page 26 of the September Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2022 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2023 over the rest of the table…on the "Total world" line in the fourth column, we've circled in blue the figure that's relevant for August, which is their estimate of global oil demand during the third quarter of 2023….OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe have been using an average of 102.06 million barrels of oil per day, which was revised a rounded 90,000 barrels of oil per day higher from the 101.96 million barrels per day estimated for the third quarter a month ago (we've circled this month's revisions in green)....but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 100.70 million barrels per day during August, which would imply that there was a shortage of around 1,360,000 barrels per day of global oil production in August, when compared to the demand estimated for the month...
In addition to figuring that August oil shortage implied by this report, the upward revision of 900,000 barrels per day to 3rd quarter demand that we've circled in green means that the 1,260,000 barrels per day global oil output surplus we had previously figured for July would now be revised to a 1,360,000 barrels per day (after allowing for rounding)....
Note that in green we have circled an upward revision of 80,000 barrels per day to OPEC's previous estimate for second quarter demand...so, based on that upward revision to demand, our previous estimate of a shortage of 280,000 barrels per day in June would now be revised to a shortage of 360,000 barrels per day...in addition, the 580,000 barrels per day global oil output shortage we had previously figured for May would now be revised to a shortage of 660,000 barrels per day...meanwhile, the global surplus of 40,000 barrels per day we had previously figured for April would now be reversed to a shortage of 40,000 barrels per day, in light of that 80,000 barrel per upward revision to 2nd quarter demand....
Note that in green we have also circled an upward revision of 80,000 barrels per day to OPEC's previous estimates of first quarter demand...for March, that means that the 130,000 barrels per day global oil output surplus we had previously figured for March would be revised to a surplus of just 50,000 barrels per day.. similarly, the upward revision to first quarter demand means that the global oil surplus of 430,000 barrels per day we had previously figured for February would now be revised to a surplus of 350,000 barrels per day, but that the 320,000 barrels per day global oil output shortage we had previously figured for January would be revised to a shortage of 400,000 barrels per day, in light of the 80,000 barrel per day upward revision to first quarter demand...
This Week's Rig Count
in lieu of our usual rig count coverage, we are again just including below a screenshot of the rig count summary pdf from Baker Hughes...in the table below, the first column shows the active rig count as of September 15th, the second column shows the change in the number of working rigs between last week’s count (September 8th) and this week’s (September 15th) count, the third column shows last week’s September 8th 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 16th of September, 2022...
natural gas rig increases came as three oil rigs in the Eagle Ford shale were switched to target gas, while five natural gas rigs were added to basins not tracked by Baker Hughes
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Note: there’s more here..
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