Masters Of War

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

Sunday, July 18, 2021

natural gas rigs at 15 mo high as prices hit 30 mo high; global oil shortage at 830,000 bpd; DUC backlog at 7.6 months

natural gas drilling at a 15 month high as prices hit a 30 month high; distillates exports at an 11 month high; global oil shortage at 830,000 barrel per day; DUC backlog at 7.6 months

oil prices finished lower for a second week, after finishing higher the prior six weeks, as rising Covid cases and the likelihood that OPEC would soon add to global supplies weighed on the market...after slipping 0.8% to $74.56 a barrel last week as traders worried that trouble within OPEC would lead to an increase in crude supplies, the contract price of US light sweet crude for August delivery opened higher on Monday on the prospect of tightening oil supplies should OPEC fail to agree, but turned lower on news that virus-related mobility restrictions had been introduced in Japan, South Korea and Vietnam, clouding the demand outlook for oil and settled with a 46 cents loss at $74.10 a barrel....but oil prices rebounded and rose nearly 2% on Tuesday after the International Energy Agency said the market should expect tighter supply for now due to disagreements among major producers over how much additional crude to ship worldwide, and finished $1.15 higher at $75.25 a barrel, the highest front month close since October 2018...however, oil prices slid in off market trading Tuesday evening after the American Petroleum Institute reported that oil inventories rose less than had been expected, and then tumbled on NYMEX on Wednesday to close $2.12 lower at $73.13 a barrel after the EIA confimed a build in fuel inventories, and a potential OPEC+ agreement to increase supply cooled the buying spree that had pushed the price of oil to a 33 month hiigh....oil's price slide continued Thursday on expectations of more crude hitting the market after the expected compromise OPEC deal, and Wednesday's surprisingly poor reading on U.S. fuel demand. with prices falling another $1.48 or 2% to $71.65 a barrel, suddenly at their lowest in nearly a month, with a rising U.S. dollar reducing the appeal of oil & other commodities priced in the currency...oil prices recovered a bit on Friday followiing the pronounced losses earlier in the week, as mixed economic data in the United States pointed to accelerating inflation amid surging consumer spending, with August oil adding 16 cents, or 0.22 percent, to settle at 71.81 dollars a barrel, sapped in volatile trading by expectations of growing supplies just at the time when a rise in coronavirus cases could lead to lockdown restrictions and depressed demand...but even with that modest rebound, oil prices still suffered their worst week in months, with the US benchmark ending down 3.7%, the largest weekly loss for U.S. crude since the week ended April 2nd...

meanwhile, natural gas prices ended the week unchanged as strong export demand offset cooler weather and a bearish storage report..​..​after slipping 0.7% to $3.674 per mmBTU last week as weather forecasts moderated over the major gas consuming regions, the contract price of natural gas for August delivery jumped 7.5 cents, or more than 2%, to a 30 month high of $3.749 per mmBTU on Monday​,​ as global​ natural​ gas prices in excess of $12 per mmBTU offset forecasts for slightly less hot weather and lower air conditioning demand over the next two weeks than had been expected...but natural gas prices slid lower on Tuesday, following forecasts for a pullback in weather-driven demand and lower LNG output in the wake of maintenance work, and ended down 5.3 cents at $3.696 per mmBTU...natural gas prices rebounded early Wednesday, as LNG levels and export demand bounced back, but bearish weather and storage forecasts weighed on afternoon trading ​and the August contract closed 3.6 cents lower at $3.660 per mmBTU....natural gas prices retreated again on Thursday following a relatively robust storage injection and forecasts for tapered cooling demand over the balance of July and settled 4.6 cents lower at $3.614 per mmBTU...but natural gas bounced back on Friday on concern over the potential for paltry levels of supplies ahead of the winter withdrawal season, as prices came full circle and closed 6.0 cents higher at $3.674 per mmBTU, the same price they ended last week at...

the natural gas storage report from the EIA for the week ending July 9th indicated that the amount of natural gas held in underground storage in the US rose by 55 billion cubic feet to 2,629 billion cubic feet by the end of the week, which still left our gas supplies 543 billion cubic feet, or 17.1% below the 3,172 billion cubic feet that were in storage on July 9th of last year, and 189 billion cubic feet, or 6.7% below the five-year average of 2,818 billion cubic feet of natural gas that have been in storage as of the 9th of July in recent years...the 55 billion cubic feet increase in US natural gas in storage this week was above the median forecast for a 46 billion cubic foot addition from a S&P Global Platts survey of analysts, and close to the average addition of 54​ ​billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, but above the 47 billion cubic feet that were added to natural gas storage during the corresponding week of 2020…  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 9th showed that after a sizeble increase in our oil exports, we again needed to withdraw oil from our stored commercial crude supplies for the eighth consecutive week, and for the 24th time in the past thirty-five weeks….our imports of crude oil rose by an average of 347,000 barrels per day to an average of 6,221,000 barrels per day, after falling by an average of 532,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 1,397,000 barrels per day to an average of 4,025,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,196,000 barrels of per day during the week ending July 9th, 1,050,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,400,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 13,596,000 barrels per day during this reporting week…

meanwhile, US oil refineries reported they were processing 16,093,000 barrels of crude per day during the week ending July 9th, 22,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net ​avarage ​of 1,128,000 barrels of oil per day were being pulled out of 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 1,369,000 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 plugged a (+1,369,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, 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….since last week’s EIA fudge factor was at (+418,000) barrels per day, that ​also ​means there was a rounded 950,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes that we have just transcribed 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 wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be 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)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,361,000 barrels per day last week, which was 0.1% less than the 6,368,000 barrel per day average that we were importing over the same four-week period last year… the 1,128,000 barrel per day net withdrawal from our crude inventories all came from our commercially available stocks of crude oil, while oil stored in our Strategic Petroleum Reserve remained unchanged…over the past four weeks, total US crude inventories have been falling at a 1,192,000 barrel per day clip, just short of the record 1,204,000 barrel per day drop that our inventories had seen during the 4 weeks ending July 2nd...this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,000,000 barrels per day, while an 4,000 barrel per day decrease in Alaska’s oil production to 434,000 barrels per day had no impact on the rounded national total….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 13.0% below that of our production peak, but 35.3% 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…

meanwhile, US oil refineries were operating at 91.8% of their capacity while using those 16,093,000 barrels of crude per day during the week ending July 9th, down from 92.2% of capacity the prior week, and a bit below normal for summertime operations…while the 16,093,000 barrels per day of oil that were refined this week were 12.5% higher than the 14,309,000 barrels of crude that were being processed daily during the pandemic impacted week ending July 10th of last year, they were still 6.8% below the 17,267,000 barrels of crude that were being processed daily during the week ending July 12th, 2019, when US refineries were operating at a close to summertime normal 94.4% of capacity…

with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was​ reported to be​ much lower, decreasing by 696,000 barrels per day to 9,858,000 barrels per day during the week ending July 9th, after our gasoline output had increased by 976,000 barrels per day over the prior week…while this week’s gasoline production was 8.4% higher than the 9,095,000 barrels of gasoline that were being produced daily over the same week of last year, it was just fractionally higher than the gasoline production of 9,855,000 barrels per day during the week ending July 12th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 41,000 barrels per day to 4,926,000 barrels per day, after our distillates output had decreased by 62,000 barrels per day over the prior week…while this week’s distillates output was still 1.4% more than the 4,860,000 barrels of distillates that were being produced daily during the week ending July 10th, 2020, it was 8.1% below the 5,361,000 barrels of distillates that were being produced daily during the week ending July 12th, 2019..

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the eleventh time in fifteen weeks, and for the 21st time in thirty-five weeks, rising by 1,038,000 barrels to 236,535,000 barrels during the week ending July 9th, after our gasoline inventories had decreased by 6,075,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 760,000 barrels per day to 9,283,000 barrels per day, and because our exports of gasoline fell by 101,000 barrels per day to 747,000 barrels per day, while our imports of gasoline rose by 28,000 barrels per day to 1,044,000 barrels per day…but even after this week’s inventory increase, our gasoline supplies were 4.8% lower than last July 10th's gasoline inventories of 248,535,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year…

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels increased for the fifth time in fourteen weeks and for the 15th time in 30 weeks, rising by 3,657,000 barrels to 142,349,000 barrels during the week ending July 9th, after our distillates supplies had increased by 1,616,000 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 676,000 barrels per day to 3,164,000 barrels per day, even as our exports of distillates rose by 289,000 barrels per day to an 11 month high of 1,316,000 barrels per day​,​ while our imports of distillates fell by 54,000 barrels per day to 66,000 barrels per day…but even after the inventory increases over the past two weeks, our distillate supplies at the end of the week were still 19.5% below the 176,809,000 barrels of distillates that we had in storage on July 10th, 2020, and still about 4% below the five year average of distillates stocks for this time of the year…

finally, ​after th​is week's big ​jump in our oil exports, our commercial supplies of crude oil in storage fell for thirteeth time in the past twenty-one weeks and for the 28th time in the past year, decreasing by 7,896,000 barrels over the week, from 445,476,000 barrels on July 2nd to 437,580,000 barrels on July 9th, after our crude supplies had decreased by 6,866,000 barrels the prior week….with 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 about 28% above the average of our crude oil stocks as of the the 2nd weekend of July 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, our commercial crude oil supplies as of this July 9th were 17.7% less than the 531,688,000 barrels of oil we had in commercial storage on July 10th of 2020, and are now 4.0% less than the 455,876,000 barrels of oil that we had in storage on July 12th of 2019, but are still 6.4% more than the 411,084,000 barrels of oil we had in commercial storage on July 13th of 2018…        

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of OPEC's July Oil Market Report, which covers OPEC & global oil data for June, and hence it gives us a picture of the global oil supply & demand situation for the second month of the modest output easing policy initiated by OPEC and other producers at their early April meeting, which was actually the fourth production quota policy change they've made over the past year, all in response to the pandemic-related slowdown and subsequent recovery...note that we are not reporting on, or considering OPEC's recent disagreement on production quotas for August that has been in the news, just their compliance to their June quotas....and before we start, we want to again caution that the oil demand estimates made by OPEC herein, while the course of the Covid-19 pandemic still remains uncertain in most countries around the globe, should be considered as having a much larger margin of error than we'd expect from this report during stable and hence more predictable periods..

the first table from this monthly report that we'll check is from the page numbered 49 of this month's 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 uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures...

June 2021 OPEC crude output via secondary sources

As we can see on the bottom line of the above table, OPEC's oil output increased by 586,000 barrels per day to 26,034,000 barrels per day during June, up from their revised May production total of 25,448,000 barrels per day...however, that May output figure was originally reported as 25,463,000 barrels per day, which therefore means that OPEC's May production was revised 15,000 barrels per day lower with this report, and hence OPEC's June production was, in effect, a 571,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official May OPEC output figures as reported a month ago, before this month's revision)... 

From the above table, we can see that a production increase of 425,000 barrels per day from the Saudis was the major factor in OPEC's June output increase; the reason for that increase is that the Saudis had unilaterally committed to cut their own production by a million barrels per day during February, March and then later during April of this year, and that they are now gradually unwinding that voluntary output decrease, having already increased their production by 345,000 barrrel per day in May... recall that last year's original oil producer's agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June, but that agreement had been extended to include July at a meeting between OPEC and other producers on June 6th....then, in a subsequent meeting in July of last year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August and subsequent months, which was thus the agreement that covered OPEC's output for the rest of 2020...the OPEC+ agreement for January's production, which was later extended to include February and March and then April's output, was to further ease their supply cuts by 500,000 barrels per day to 7.2 million barrels per day from that original baseline...then, during a difficult meeting on April 1st of this year, OPEC and the other oil producers that are aligned with them agreed to incrimentally adjust their oil production higher over the next three months, which is the agreement which governed OPEC's May's production that you see above...

Hence, to determine if all the OPEC members continued to adhere to the production cuts they had committed to during May, we'll include a copy of the production adjustments table that was provided as a downloadable attachment with the OPEC press release following their April 1st meeting with other oil producers...

May 2021 OPEC production quotas

the above table was included with the press release following the 15th OPEC and non-OPEC Ministerial Meeting on April 1st of this year, and it includes the reference production and expected production levels for the 10 members of OPEC that are expected to make cuts, as well as the same information for the other major oil producers who are party to what the press calls the "OPEC + agreement"....the first column in the above table shows the reference oil production baseline, in thousands of barrel per day, from which each of the oil producers was to cut their production from, a figure which is based on each of the oil producer's October 2018 oil output, ie., a date before last year's and the prior year's output cuts took effect, and coincidently the highest monthly production of the era for most of the producers who are party to these cuts...the remaining columns show the adjustment, or cut, that each is expected to make from that reference production level, and then the oil output allowed for each producer under the April agreement for the months of May, June and July...

OPEC arrived at these figures by repeatedly adjusting the original 23%, or 9.7 million barrel per day cut from the October 2018 baseline first agreed to for May and June 2020, first to a 7.7 million barrel per day reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was actually raised to an 8.2 million barrel per day reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during February, March, and then later during April of this year....under the prior agreement, OPEC's production cut in April was at 4,564,000 barrels per day from the October 2018 baseline; as you see above, their cut for June was lowered to 4,010,000 barrels per day from the baseline with the latest agreement...note that war torn Libya, and US sanctioned producers Iran and Venzuela, are exempt from the production cuts that the cartel imposes on its other members, and hence the June production of the other ten members remained below the quotas set at the April 1st meeting. ...

the next graphic from this month's report that we'll highlight shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from July 2019 to June 2021, and it comes from page 50 (pdf page 60) of OPEC's July Monthly Oil Market Report....on this graph, the cerulean 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....

June 2021 OPEC report global oil supply

Including this month's reported 586,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global liquids production increased by a rounded 1,100,000 barrels per day to average 94.49 million barrels per day in June, a reported increase which apparently came after May's total global output figure was revised down by 280,000 barrels per day from the 93.67 million barrels per day of global oil output that was estimated for May a month ago, as non-OPEC oil production rose by a rounded 520,000 barrels per day in June after that revision, with with increases in the oil output from the OECD countries accounting for most of the non-OPEC production increase in June...

After that increase in June's global output, the 94.49 million barrels of oil per day that were produced globally during the month were 7.05 million barrels per day, or 8.1% more than the revised 87.44 million barrels of oil per day that were being produced globally in June a year ago, which was second month of the OPEC + agreement to cut global output by 9.7 million barrels per day (see the July 2020 OPEC report (online pdf) for the originally reported June 2020 details)...with this month's increase in OPEC's output, their June oil production of 26,034,000 barrels per day was at 27.6% of what was produced globally during the month, an increase of 0.3% from their 27.3% share of the global total in May....OPEC's June 2020 production was reported at 22,271,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,763,000, or 16.9% more barrels per day of oil this June than what they produced a year earlier, when they accounted for 25.8% of global output...

However, even after the sizable increase in global oil output that we've seen in this report, the amount of oil being produced globally during the month again fell short of the expected demand, as this next table from the OPEC report will show us..

June 2021 OPEC report global oil demand

the above table came from page 26 of the OPEC July Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and OPEC's estimate of oil demand by region and globally, quarterly over 2021 over the rest of the table...on the "Total world" line in the third column, we've circled in blue the figure that's relevant for June, which is their estimate of global oil demand during the second quarter of 2021... OPEC is estimating that during the 2nd quarter of this year, all oil consuming regions of the globe have been using an average of 95.32 million barrels of oil per day, which is a 60,000 barrels per day upward revision from the 95.26 million barrels of oil per day of demand they were estimating for the second quarter a month ago (note that we have encircled this month's revisions in green), which still reflects quite a bit of coronavirus related demand destruction compared to 2019, when global demand averaged 99.98 million barrels per day....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 94.49 million barrels million barrels per day during June, which would imply that there was a shortage of around 830,000 barrels per day in global oil production in June when compared to the demand estimated for the month...

In addition to figuring June's global oil supply shortfall that's evident in this report, the upward revision of 60,000 barrels per day to second quarter demand that's shown above, combined with the 280,000 barrel per day downward revision to May's global oil supplies that's implied in this report, means that the 1,590,000 barrels per day global oil output shortage we had previously figured for May would now be revised to a shortage of 1,930,000 barrels per day...in addition, the 2,220,000 barrels per day global oil output shortage we had previously figured for April, in light of the 60,000 barrels per day upward revision to second quarter demand, would now be revised to a shortage of 2,280,000 barrels per day...

note that in green we have also circled a downward revision of 130,000 barrels per day to OPEC's previous estimates of first quarter demand....for March, that means that the global oil output surplus of 280,000 barrels per day we had previously figured for March would be revised to a surplus of 410,000 barrels per day... similarly, the downward revision to first quarter demand means that the 930,000 barrels per day global oil output shortage we hadpreviously figured for February would now be revised to a shortage of 800,000 barrels per day, and that the global oil output surplus of 290,000 barrels per day we had previously figured for we had previously figured for January would now be revised to a surplus of 420,000 barrels per day, in light of that 130,000 barrel per day downward revision to first quarter demand...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 37th time out of the past 43 weeks during the week ending July 16th, but it’s still down by 39.0% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by five to 484 rigs this past week, which was also up by 231 rigs from the pandemic hit 253 rigs that were in use as of the July 17th report of 2020, but was still 1,445 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 2 to 378 oil rigs this week, after it rose by 2 oil rigs the prior week, and it’s also 180 more oil rigs than were running a year ago, while it’s still just 23.6% of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 4 to a 15 month high of 104 natural gas rigs, which was also up by 33 natural gas rigs from the 71 natural gas rigs that were drilling during the same week a year ago, but still just 6.5% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

The Gulf of Mexico rig count was unchanged at 17 rigs this week, with 16 of those rigs drilling for oil in Louisiana’s offshore waters and one drilling for oil offshore from Texas….that was five more rigs than the 12 rigs that were drilling in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig count… in addition to those rigs offshore, we continue to have a rig drilling through an inland body of water in Terrebonne Parish of southern Louisiana, whereas there were no such “inland waters” rigs running a year ago…

The count of active horizontal drilling rigs was up by 1 to 434 horizontal rigs this week, which was also up by 215 rigs from the 215 horizontal rigs that were in use in the US on July 17th of last year, but less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was also up by one to 32 directional rigs this week, and those were up by 9 from the 23 directional rigs that were operating during the same week a year ago….in addition, the vertical rig count was up by 3 to 18 vertical rigs this week, and those were also up by 3 from the 15 vertical rigs that were in use on July 17th 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 July 16th, the second column shows the change in the number of working rigs between last week’s count (July 9th) and this week’s (July 16th) count, the third column shows last week’s July 9th 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 17th of July, 2020..

July 16 2021 rig count summary

from the tables above, it's not immediately obvious what happened this week…so checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that two rigs were added in Texas Oil District 8, which is the core Permian Delaware in the westernmost part of the state, while an oil rig was pulled out in Texas Oil District 8A, which encompasses the northern counties of the Permian Midland, and that two more oil rigs were pulled out of Texas Oil District 7C, which includes the southern counties of the Permian Midland...since the Permian basin rig count was up by one, that means that the 2 rigs that were added in Texas Oil District 7B, which could target the farthest east reaches of the Permian Midland, were both apparently Permian rigs...moreover, one of those Permian rig additions this week was a natural gas rig, the first Permian basin gas drilling in 8 weeks...elsewhere in Texas, two rigs were pulled out of Texas Oil District 6, one of which was in the Haynesville shale, which was concurrently replaced by a Haynesville rig in northern Louisiana, leaving the Haynesville shale basin count unchanged....there was also at least one natural gas rig added in Texas Oil District 1, while an oil rig was pulled out in Texas Oil District 2, both of which represent Eagle Ford changes, where the natural gas rig count increased by 2 to three, while the Eagle Ford oil rig count fell by two to 29....at the same time, a Granite Wash oil rig was pulled out of Texas Oil District 10, meaning this week's oil rig count in Texas was down by 5, while the state's natural gas rig count rose by three....meanwhile, the Cana Woodford removal from Oklahoma was apparently more than offset by the additon of three rigs in Oklahoma basins not tracked by Baker Hughes, while Wyoming also saw the addition of three rigs in a basin that Baker Hughes doesn't cover; and yet another rig that Baker Hughes doesn't cover was added added in Alaska, probably on the North Slope, the site of all other Alaska oil well drilling..

DUC well report for June

Monday of this past week saw the release of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for 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 13th month in a row, as both completions of drilled wells and drilling of new wells increased, but remained below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 269 wells, falling from 6,521 DUC wells in May to 6,252 DUC wells in June, which was also 30.3% fewer DUCs than the 8,965 wells that had been drilled but remained uncompleted as of the end of June of a year ago...this month's DUC decrease occurred as 549 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during June, up from the 533 wells that were drilled in May, while 818 wells were completed and brought into production by fracking, up from the 798 completions seen in May, and up from the pandemic hit 248 completions seen in June of last year, but down by 35.6% from the 1,271 completions of June 2019....at the June completion rate, the 6,252 drilled but uncompleted wells left at the end of the month represents a 7.6 month backlog of wells that have been drilled but are not yet fracked, down from the 8.4 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by a completion rate that is still more than a third below the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in June, while none of the major basins reported DUC well increases....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 123, from 2,598 DUC wells at the end of May to 2,475 DUCs at the end of June, as 253 new wells were drilled into the Permian during June, while 386 wells in the region were completed...at the same time, DUC wells in the Niobrara chalk of the Rockies' front range fell by 41, decreasing from 402 at the end of May to 361 DUC wells at the end of June, as 51 wells were drilled into the Niobrara chalk during June, while 92 Niobrara wells were being fracked....in addition, DUCs in the Eagle Ford of south Texas also decreased by 41, from 1,012 DUC wells at the end of May to 971 DUCs at the end of June, as 56 wells were drilled in the Eagle Ford during June, while 97 already drilled Eagle Ford wells were completed.... at the same time, there was also a decrease of 28 DUC wells in the Bakken of North Dakota, where DUC wells fell from 656 at the end of May to 628 DUCs at the end of June, as 31 wells were drilled into the Bakken during May, while 59 of the drilled wells in the Bakken were being fracked..... meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 19, falling from 863 at the end of May to 844 DUC wells at the end of June, as 30 wells were drilled into the Anadarko basin during June, while 49 Anadarko wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 17 wells, from 598 DUCs at the end of May to 581 DUCs at the end of June, as 68 wells were drilled into the Marcellus and Utica shales during the month, while 85 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 unchanged at 392 DUCs, as 50 wells were drilled into the Haynesville during June, while 50 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of June, 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 252 wells to 5,279 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 17 wells to 973 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

+

+

  nore: there's more here...

Monday, July 12, 2021

US crude supplies falling at a record pace, down 17.4% YoY; gasoline output​ at a 22 month high; record gasoline demand

After briefly hitting a 6 year high early this week, oil prices finished lower for the first time in seven weeks, as traders worried that the collapse of talks between OPEC and other ol producers would lead to a increase in crude supplies...after rising 1.5% to a 32 month high at $75.16 a barrel last week, the contract price of US light sweet crude for August delivery opened higher on Tuesday after the holiday and climbed to its highest level in nearly seven years after a Monday OPEC meeting was called off without an agreement and OPEC+ sources said there would be no oil output increase in August, but then drifted lower during the session and ultimately settled down $1.79, or 2.4%, at $73.37 per barrel as traders feared that the strife would lead some producers to open the taps and start exporting more barrels....prices remained volatile on Wednesday as traders assessed the ongoing impasse among OPEC+ producers over plans to boost output​, with oil​ initially trading 1% higher before tumbling again to close down $1.17 at $72.20 a barrel, as traders feared what this week's collapse in Opec+ talks might mean for worldwide production... oil prices finally rose on Thursday, rebounding from early losses after EIA data showed a much bigger drop in ​US ​crude and gasoline inventories than was expected, and finished trading 74 cents, or 1% higher at $72.94 a barrel as US crude production remained “lackluster” despite improv​ed​ prices...the rally on falling oil and product inventories carried into a second day on Friday and the August oil contract ​saw ​$1.62 added ​to its price and settle​d​ at $74.56 a barrel after Citigroup analysts said the global oil market will remain in “deep deficit” of more than 3 million barrels per day through the third quarter of the year....however, oil prices still finished the week 0.8% lower, their first weekly loss since mid-May, as worries about trouble within OPEC tempered the​ recent​ bull market ​in oil​...​

meanwhile, natural gas prices also fell from last week's 30 month high as weather forecasts moderated over the major gas consuming regions...after rising 5.1% to $3.700 per mmBTU last week as an unprecedented heat wave set all-time record high temperatures across the Pacific Northwest, the contract price of natural gas for August delivery opened higher on ​Tuesday and rose more than 3% to another 30 month high at $3.822 per mmBTU, before turning lower to end down 6.3 cents, or 1.7% at $3.637 per mmBTU​,​ after forecasts showed a broader area of normal-to-below normal temperatures in the major gas consuming areas...natural gas prices moved lower again on Wednesday, falling another 4.2 centts to $3.596 per mmBTU, as traders mulled weather-driven demand, stagnated liquefied natural gas (LNG) levels, and the potential storage injection with the EIA's report due Thursday morning...but natural gas prices bounced back on Thursday, bolstered by an anemic increase in inventories that pointed to a tight supply/demand balance, igniting concerns about adequate storage levels, as the August contract closed 9.2 cents higher at $3.688 per mmBTU....natural gas prices moved higher again most of Friday, lifted by supply concerns, steady domestic demand and a broader rally in commodities. but shed their gains in the final hour as traders took profits and settled 1.4 cents lower at $3.674 per mmBTU...​as a result, natural gas prices finished 0.7% lower for the week, just the 3rd small downturn in the past fourteen weeks....

the natural gas storage report from the EIA for the week ending July 2nd indicated that the amount of natural gas held in underground storage in the US rose by 16 billion cubic feet to 2,574 billion cubic feet by the end of the week, which left our gas supplies 551 billion cubic feet, or 17.6% below the 3,125 billion cubic feet that were in storage on July 2nd of last year, and 190 billion cubic feet, or 6.9% below the five-year average of 2,764 billion cubic feet of natural gas that have been in storage as of the 2nd of July in recent years... the 16 billion cubic feet increase in US natural gas in storage this week was below the median forecast for a 29 billion cubic foot addition from a Reuters survey of analysts, and was way below the average addition of 63 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, as well as well below the 57 billion cubic feet that were added to natural gas storage during the corresponding week of 2020… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 2nd showed that even after a sizeble decrease in our oil exports and a modest decrease in our refinery throughput, we still needed to withdraw oil from our stored commercial crude supplies for the seventh consecutive week, and for the 23rd time in the past thirty-four weeks….our imports of crude oil fell by an average of 532,000 barrels per day to an average of 5,875,000 barrels per day, after falling by an average of 536,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,089,000 barrels per day to an average of 2,628,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,247,000 barrels of per day during the week ending July 2nd, 557,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 200,000 barrels per day higher at 11,300,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,547,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 16,115,000 barrels of crude per day during the week ending July 2nd, 164,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,150,000 barrels of oil per day were being pulled out of 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 418,000 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 plugged a (+418,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed…..furthermore, since last week’s EIA fudge factor was at (+1,350,000) barrels per day, that means there was a 932,000 barrel per day balance sheet difference in the​ crude oil ​fudge ​figure from a week ago, thus rendering the week over week supply and demand changes that we have just transcribed 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 wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be 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)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,492,000 barrels per day last week, which was 2.2% less than the 6,636,000 barrel per day average that we were importing over the same four-week period last year… the 1,150,000 barrel per day net withdrawal from our crude inventories included a 981,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 169,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commercial purposes…over the past four weeks, ​total ​US crude inventories have been falling at a 1,205,000 barrel per day clip, the largest four-week decline of crude supplies in EIA records going back to 1982....this week’s crude oil production was reported to be 200,000 barrels per day higher at 11,300,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,900,000 barrels per day, while an 10,000 barrel per day decrease in Alaska’s oil production to 438,000 barrels per day had no impact on the rounded national total….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 13.7% below that of our production peak, but 34.1% 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…     

meanwhile, US oil refineries were operating at 92.2% of their capacity while using those 16,115,000 barrels of crude per day during the week ending July 2nd, down from 92.9% of capacity the prior week, and a bit below normal for summertime operations…while the 16,115,000 barrels per day of oil that were refined this week were 12.3% higher than the 14,347,000 barrels of crude that were being processed daily during the pandemic impacted week ending July 3rd of last year, they were still 7.6% below the 17,438,000 barrels of crude that were being processed daily during the week ending July 5th, 2019, when US refineries were operating at a close to summertime normal 94.7% of capacity…

even with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was much higher, increasing by 976,000 barrels per day to 9,578,000 barrels per day during the week ending July 2nd, after our gasoline output had decreased by 749,000 barrels per day over the prior week…since this week’s gasoline production was among the highest on record, it was ​thus ​16.7% higher than the 9,045,000 barrels of gasoline that were being produced daily over the same week of last year, and 1.3% higher than the gasoline production of 10,418,000 barrels per day during the week ending July 5th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 62,000 barrels per day to 4,967,000 barrels per day, after our distillates output had decreased by 83,000 barrels per day over the prior week…while this week’s distillates output was still 4.4% more than the 4,756,000 barrels of distillates that were being produced daily during the week ending July 3rd, 2020, it was 7.3% below the 5,358,000 barrels of distillates that were being produced daily during the week ending July 5th, 2019..,…

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the fourth time in fourteen weeks, and for the 20th time in thirty-four weeks, falling by 6,075,000 barrels to 235,497,000 barrels during the week ending July 2nd, after our gasoline inventories had increased by 1,522,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 870,000 barrels per day to a record 10,043,000 barrels per day, and because our exports of gasoline jumped by 402,000 barrels per day to 848,000 barrels per day, while our imports of gasoline rose by 226,000 barrels per day to 1,016,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 6.4% lower than last July 3rd’s gasoline inventories of 251,682,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year… 

meanwhile, ​even ​with the decrease in our distillates production, our supplies of distillate fuels increased for the fourth time in thirteen weeks and for the 14th time in 29 weeks, rising by 1,616,000 barrels to 138,692,000 barrels during the week ending July 2nd, after our distillates supplies had decreased by 859,000 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 330,000 barrels per day to 3,840,000 barrels per day, and because our exports of distillates fell by 201,000 barrels per day to 1,027,000 barrels per day while our imports of distillates fell by 114,000 barrels per day to 131,000 barrels per day while …but after nine inventory decreases over the past thirteen weeks, our distillate supplies at the end of the week were 21.8% below the 177,262,000 barrels of distillates that we had in storage on July 3rd, 2020, and still about 6% below the five year average of distillates stocks for this time of the year…

finally, ​even ​with the drop in our oil ​ex​ports and the increase in our oil ​production, our commercial supplies of crude oil in storage fell for twelveth time in the past twenty weeks and for the 28th time in the past year, decreasing by 6,866,000 barrels over the week, from 452,342,000 barrels on June 25th to 445,476,000 barrels on July 2nd, after our crude supplies had decreased by 6,718,000 barrels the prior week….with this week’s decrease, our commercial crude oil inventories fell to about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still 29.3% above the average of our crude oil stocks as of the the 1st weekend of July 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, our commercial crude oil supplies as of this July 2nd were 17.4% less than the 539,181,000 barrels of oil we had in commercial storage on July 3rd of 2020, and are now 2.9% less than the 458,992,000 barrels of oil that we had in storage on July 5th of 2019, but are still 9.9% more than the 405,248,000 barrels of oil we had in commercial storage on July 6th of 2018…       

This Week’s Rig Count

The number of drilling rigs active in the US ​increased for the 36th time out of the past 42 weeks during the week ending July 9th, but it’s still down by 39.6% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by four to 479 rigs this past week, which was also up by 221 rigs from the pandemic hit 258 rigs that were in use as of the July 10th report of 2020, but was still 1,450 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 2 to 378 oil rigs this week, after rising by 4 oil rigs the prior week, and that’s also 197 more oil rigs than were running a year ago, while it’s still just 23.5% of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 2 to 101 natural gas rigs, which was also up by 26 natural gas rigs from the 75 natural gas rigs that were drilling during the same week a year ago, but still just 6.3% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

The Gulf of Mexico rig count was up by 3 to 17 rigs this week, with 16 of those rigs drilling for oil in Louisiana’s offshore waters and one drilling for oil offshore from Texas….that was five more than the 12 rigs that were drilling in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and two more were deployed for oil in Texas waters….since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig count… in addition to those rigs offshore, we currently continue to have a rig drilling through an inland body of water in Terrebonne Parish of southern Louisiana, whereas there were no such “inland waters” rigs running a year ago…

The count of active horizontal drilling rigs was up by 4 to 433 horizontal rigs this week, which was also up by 213 rigs from the 220 horizontal rigs that were in use in the US on July 10th of last year, but less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was up by one to 31 directional rigs this week, and those were up by 12 from the 19 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was down by 1 to 15 vertical rigs this week, and those were also down by 4 from the 19 vertical rigs that were in use on July 10th 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 July 9th, the second column shows the change in the number of working rigs between last week’s count (July 2nd) and this week’s (July 9th) count, the third column shows last week’s July 2nd 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 10th of July, 2020..    

July 9 2021 rig count summary

with ​an increase of 3 directional rigs in the Gulf of Mexico, there's very little ​left ​to show on the basin table this week….checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that an oil rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, while an oil rig was pulled out in Texas Oil District 8A, which encompasses the northern counties of the Permian Midland, and hence the Permian basin rig count was unchanged...however, there was an increase of two natural gas rigs in Texas Oil District 6, ​one of ​which​ was in the Haynesville shale, which thus accounts for the Texas rig change this month...the Haynesville shale rig count remained unchanged, however, because a Haynesville rig was concurrently removed from northern Louisiana....Louisiana's rig count was up by one despite that​,​ and ​despite ​the removal of an inland waters rig in St Mary parish​,​ with the addition of three rigs in the state's offshore waters...while there was a rig added in the Niobrara chalk in Wyoming, there was also one pulled out of that formation in Colorado, and hence the Niobrara count remained unchanged...likewise, while there was a rig added in the Marcellus shale in West Virginia, there was also one pulled out of the Marcellus in Pennsylvania, and hence the Marcellus rig count also remained unchanged...meanwhile, the natural gas rig count was up by two with the addition of one in Ohio's Utica shale and the two in Texas Oil District 6, partly offset by the removal of one in Louisiana's Haynesville shale...

+

+

note: there's more here....

Monday, July 5, 2021

oil prices hit new 32 month high, natural gas at a 30 month high, largest 4 week drop in US crude supplies on record

oil prices hit a new 32 month high again this week, their sixth consecutive week testing the October 2018 highs, as US crude supplies again fell sharply, while OPEC failed to reach an agreement on production cuts for the remainder of this year... after rising 3.9% to $74.05 a barrel last week after negotiations to lift Iranian sanctions broke off and US crude supplies fell more than was expected, the contract price of US light sweet crude for August delivery opened lower on Monday on a decline in the Asian markets, and later tumbled to finish down $1.14 or 1.5% at $72.91 a barrel, as a spike in COVID-19 cases in Asia and Europe cut off a rally heading to new 32 month highs...oil prices steadied on Tuesday, as broad hopes for a demand recovery were fueled by comments from OPEC's secretary general, and settled 7 cents higher at $72.98 a barrel as traders awaited a Thursday meeting of OPEC and its allies, when fairly modest production increases were expected...oil prices then opened 49 cents higher on Wednesday on a Reuters report that OPEC+ was expected to discuss the extension of the oil supply cuts beyond April 2022 after data from the American Petroleum Institute showed an unexpectedly large draw in US crude inventories, and held those gains to settle at $73.47 a barrel after the EIA confirmed that U.S. crude stockpiles fell for a sixth straight week and an OPEC report foresaw an undersupplied market this year...oil prices drifted sideways early Thursday, as traders awaited a decision from OPEC+ on whether they would maintain or ease supply cuts in the second half of the year, but then rallied to close $1.76 higher at a 32 month high of $75.23 a barrel after talks among the OPEC+ alliance ended with no final agreement on production policy, on the belief that the expected OPEC production hike of 400,000 or 500,000 barrels per day would not be enough to keep prices down....oil prices steadied on Friday, as traders stayed on the sidelines as the OPEC+ talks dragged on, and settled 7 cents lower at $75.16 a barrel after OPEC+ ended Friday's meeting without a deal, with plans to seek an agreement on oil output policy on Monday...despite that, oil prices still finished the week 1.5% higher, again with the highest weekly close since October 2018..

meanwhile, natural gas prices rose to a 30 month high as an unprecedented heat wave demolished all time record high temperatures across the Pacific Northwest and Canada...after rising 8.7% to a 29 month high of $3.496 per mmBTU last week as exports rose and domestic gas inventories remained well below normal, the contract price of natural gas for July delivery opened higher on Monday and quickly jumped 4% to a 30 month high as "virtually unheard of" temperatures continued to smother the Pacific Northwest, leading to pipeline issues and amplified demand, before prices settled 12.1 cents higher at $3.617 per mmBTU as trading in the July gas contract expired...at the same time, the more actively traded contract price of natural gas for August delivery, which had been priced at 3.520 per mmBTU going in, rose 7.3 cents to settle at $3.593 per mmBTU...August gas prices rose from that point on Tuesday, climbing 3.7 cents or 1% to $3.630 per mmBTU, as oppressive heat led to more shattered records and rolling blackouts in the Pacific Northwest, while New England also saw temperatures and power demand much above normal...natural gas prices rose to a fresh 30-month high on Wednesday on soaring global gas prices and forecasts for higher U.S. air-conditioning demand over the next two weeks than was previously expected, and then edged up 1.1 cents to another 30 month high on Thursday, as traders brushed off a large miss in the latest government storage report amid uncertainty created by a sharp decline in production...natural gas prices rose for a ninth consecutive day on Friday on curtailment of a pipeline in West Virginia and on natural gas prices exceeding $12 per mmBTU in Asia and Europe, settling up another 3.9 cents at $3.700 per mmBTU and thus finishing 5.1% higher on the week...

the natural gas storage report from the EIA for the week ending June 25th indicated that the amount of natural gas held in underground storage in the US rose by 76 billion cubic feet to 2,558 billion cubic feet by the end of the week, which still left our gas supplies 510 billion cubic feet, or 16.6% below the 3,068 billion cubic feet that were in storage on June 25th of last year, and 143 billion cubic feet, or 5.3% below the five-year average of 2,701 billion cubic feet of natural gas that have been in storage as of the 25th of June in recent years... the 76 billion cubic feet increase in US natural gas in storage this week was well above the average forecast of a 63 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also above the average addition of 65 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week of June over the past 5 years, as well a bit above the 73 billion cubic feet that were added to natural gas storage during the corresponding week of 2020…  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 25th showed that with a sizeble decrease in our oil imports and a modest increase in our refinery throughput, we needed to withdraw oil from our stored commercial crude supplies for the eighth time in the past nine weeks, and for the 22nd time in the past thirty-three weeks….our imports of crude oil fell by an average of 536,000 barrels per day to an average of 6,536,000 barrels per day, after rising by an average of 179,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 66,000 barrels per day to an average of 3,717,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,689,000 barrels of per day during the week ending June 25th, 602,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 13,789,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 16,299,000 barrels of crude per day during the week ending June 25th, 178,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,160,000 barrels of oil per day were being pulled out of 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 1,350,000 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 plugged a (+1,350,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed…..furthermore, since last week’s EIA fudge factor was at (+390,000) barrels per day, that means there was a 961,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, thus rendering the week over week supply and demand changes that we have just transcribed nonesense…. 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 wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be 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)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,683,000 barrels per day last week, which was 2.8% more than the 6,504,000 barrel per day average that we were importing over the same four-week period last year… the 1,160,000 barrel per day net withdrawal from our crude inventories included a 960,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 200,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commercial purposes…over the past four weeks, US crude inventories have been falling at a 1,153,000 barrel per day clip, the largest four-week decline of crude supplies in EIA records going back to 1982....this week’s crude oil production was reported to be unchanged at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,700,000 barrels per day, while an 3,000 barrel per day increase in Alaska’s oil production to 448,000 barrels per day had no impact on the rounded national total….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 15.3% below that of our production peak, yet still 31.7% 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…     

meanwhile, US oil refineries were operating at 92.9% of their capacity while using those 16,299,000 barrels of crude per day during the week ending June 25th, up from 92.2% of capacity the prior week, but still a shade below normal for summertime operations…while the 16,299,000 barrels per day of oil that were refined this week were 16.1% higher than the 14,033,000 barrels of crude that were being processed daily during the pandemic impacted week ending June 26th of last year, they were still 5.7% below the 17,290,000 barrels of crude that were being processed daily during the week ending June 28th, 2019, when US refineries were operating at a close to summertime normal 94.2% of capacity…

even with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was lower, decreasing by 749,000 barrels per day to 9,578,000 barrels per day during the week ending June 25th, after our gasoline output had increased by 401,000 barrels per day over the prior week…while this week’s gasoline production was still 6.6% higher than the 8,905,000 barrels of gasoline that were being produced daily over the same week of last year, it was 3.7% lower than the gasoline production of 9,948,000 barrels per day during the week ending June 28th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 83,000 barrels per day to 5,029,000 barrels per day, after our distillates output had increased by 56,000 barrels per day over the prior week…while this week’s distillates output was 8.7% more than the 4,624,000 barrels of distillates that were being produced daily during the week ending June 26th, 2020, it was still 5.8% below the 5,336,000 barrels of distillates that were being produced daily during the week ending June 28th, 2019..,…

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the tenth time in thirteen weeks, and for the 24th time in thirty-three weeks, rising by 1,522,000 barrels to 241,572,000 barrels during the week ending June 25th, after our gasoline inventories had decreased by 2,930,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 267,000 barrels per day to 9,173,000 barrels per day, and because our exports of gasoline fell by 449,000 barrels per day to 446,000 barrels per day, while our imports of gasoline fell by 50,000 barrels per day to 790,000 barrels per day…after this week’s inventory increase, our gasoline supplies were still 5.8% lower than last June 26th’s gasoline inventories of 256,521,000 barrels, but close to the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels decreased for the ninth time in twelve weeks and for the 15th time in 28 weeks, falling by 859,000 barrels to 137,945,000 barrels during the week ending June 25th, after our distillates supplies had increased by 1,754,000 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 223,000 barrels per day to 4,170,000 barrels per day, even as our imports of distillates fell by 31,000 barrels per day to 245,000 barrels per day while our exports of distillates rose by 38,000 barrels per day to 1,228,000 barrels per day…after nine inventory decreases over the past twelve weeks, our distillate supplies at the end of the week were 21.3% below the 174,127,000 barrels of distillates that we had in storage on June 26th, 2020, and about 5% below the five year average of distillates stocks for this time of the year…

finally, with the decrease in our oil imports and the pickup in our oil refining, our commercial supplies of crude oil in storage fell for eleventh time in the past nineteen weeks and for the 27th time in the past year, decreasing by 6,718,000 barrels over the week, from 459,060,000 barrels on June 18th to 452,342,000 barrels on June 25th, after our crude supplies had decreased by 7,614,000 barrels the prior week….with this week’s decrease, our commercial crude oil inventories fell to about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still over 30% above the average of our crude oil stocks as of the the 4th week of June 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, our commercial crude oil supplies as of this June 25th were 15.2% less than the 533,527,000 barrels of oil we had in commercial storage on June 26th of  2020, and are now 3.4% less than the 468,491,000 barrels of oil that we had in storage on June 21st of 2019, but are still 8.3% more than the 417,881,000 barrels of oil we had in commercial storage on June 22nd of 2018…       

This Week’s Rig Count

The US rig count was higher during the week ending July 2nd, after being unchanged the prior week, and rising 35 out of 40 weeks before that, but it’s still down by 40.1% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by five to 475 rigs this past week, which was also up by 212 rigs from the pandemic hit 263 rigs that were in use as of the July 2nd report of 2020, but was still 1,454 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the 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 4 to 376 oil rigs this week, after falling by 1 oil rig the prior week, and that’s also 191 more oil rigs than were running a year ago, while it’s still just 23.3% of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 1 to 99 natural gas rigs, which was also up by 23 natural gas rigs from the 76 natural gas rigs that were drilling during the same week a year ago, but still just 6.2% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

The Gulf of Mexico rig count was unchanged at 14 rigs this week, with 13 of those rigs drilling for oil in Louisiana’s offshore waters and one drilling for oil offshore from Texas….that was two more than the 12 rigs that were drilling in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and two more were deployed for oil in Texas waters….since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig count… however, in addition to those rigs offshore, we continue to have 2 rigs drilling through inland bodies of water in southern Louisiana; with one in Terrebonne Parish, and the other in St Mary parish, Louisiana, whereas there were no such “inland waters” rigs running a year ago…

The count of active horizontal drilling rigs was up by 8 to 429 horizontal rigs this week, which was also up by 203 rigs from the 226 horizontal rigs that were in use in the US on July 2nd of last year, but less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was unchanged at 30 directional rigs this week, but those were up by 10 from the 20 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 16 vertical rigs this week, and those were also down by 1 from the 17 vertical rigs that were in use on July 2nd 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 July 2nd, the second column shows the change in the number of working rigs between last week’s count (June 25th) and this week’s (July 2nd) count, the third column shows last week’s June 25th 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 a Thursday, the 2nd of July, 2020..    

July 2 2021 rig count summary

with oil prices near 3 year highs, drilling activity continues to pick up outside of the core areas in Texas and nearby states….checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that one oil rig was added in Texas Oil District 8, which is the core Permian Delaware, while the rig counts in all other Texas districts were unchanged, which thus gives us a net increase of one rig in the Texas Permian…elsewhere, we find that three oil rigs were added to the Denver-Julesburg Niobrara chalk in Colorado, which means that the rig that was stacked in Wyoming had been drilling in that same formation...meanwhile, the week's other oil rig addition was in the Bakken shale of North Dakota's Williston basin, while this week's lone natural gas rig change was the addition of a rig in Pennsylvania's Marcellus...

+

+

+

note: there's more here..