Masters Of War

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

Monday, July 4, 2022

US oil supplies at an 18 year low, SPR at a 36 year low, total oil + oil products supplies at a 13½ year low

After finishing June with the first monthly price drop since November, oil prices rallied Friday to finish the week higher for first time in three weeks, as production outages in Libya, Ecuador and Norway offset recession fears...after falling 0.3% to $107.62 a barrel last week as fears of a monetary policy induced recession kept the pressure on prices, the contract price for US light sweet crude for August delivery edged higher in early trade Monday following reports that the Group of Seven wealthy countries was discussing a price cap on Russian crude oil sold under Western insurance and shipping mechanisms, and then rallied due to persistent fears of supply tightness, spurred by a worsening crisis in Libya and anti-government unrest in Ecuador to settle up $1.95, or 1.8%, at $109.57 a barrel as the prospect of even tighter supplies loomed after the Group of Seven rich nations vowed to tighten the squeeze on Russian oil...oil prices rose in Asian trading Tuesday, after China slashed the quarantine time for visitors, fuelling hope for a boost to demand and then extended those gains in early trading in New York as Saudi Arabia and the United Arab Emirates appeared unlikely to be able to boost output significantly, while political unrest in Libya and Ecuador added to supply concerns, and settled $2.19 higher at $111.76 a barrel as G7 leaders agreed to explore a Russian oil price cap and supply pressures mounted, while the easing of COVID curbs in China lifted hopes for demand....oil prices moved higher for a fourth straight session on Wednesday after EIA data showed a drawdown in U.S. crude stockpiles, adding to ongoing worries of tight supplies, but tumbled in afternoon trading to close $1.98 lower at $109.78 a barrel after June US consumer confidence data fell to the lowest since February 2021 and recession fears continued to loom...oil prices edged lower early Thursday, as traders weighed concerns of global supply and a build in U.S. fuel product inventories, and then fell further after OPEC+ confirmed it would only increase output in August as much as previously announced​,​ despite tight global supplies, but made no commitment for September​,​ and settled $4.02, or 3.7% lower at $105.76 a barrel, as traders squared their positions ahead of the 3-day Fourth of July weekend...oil prices extended those losses early Friday as lingering fears of a recession weighed on sentiment and put the benchmarks on track for their third straight weekly loss, but then rallied as supply outages in Libya and an expected shutdown in Norway outweighed expectations that an economic slowdown could dent demand and settled $2.67 higher at $108.43 a barrel, thus managing to salvage an 0.8% increase on the week...

meanwhile, natural gas prices finished sharply lower for a third straight week, as the damage at the Freeport LNG export terminal allowed ​even ​more gas to be added to domestic supplies than had been expected...after falling 10.4% to an eleven week low of $6.220 per mmBTU last week as the prospect of lower LNG exports more than offset rising domestic demand, the contract price of natural gas for July delivery rose 28.1 cents to $6.501 per mmBTU on Monday, as an early price slide on the outlook for cooler weather gave way to a technical bounce midday ahead of options expirations on the next day....July contract prices were up another 5.0 cents before that contract expired at $6.5510 per million British thermal units on Tuesday, while the contract price of natural gas for August delivery, which would be the quoted front month price the next day, settled 2.4 cents higher at $6.570 per mmBTU on a preliminary report of a drop in daily output and forecasts for hotter weather over the next two weeks...with price quotes now referencing the August contract, natural gas reversed and settled 7.2 cents lower at $6.498 per mmBTU on Wednesday, on expectations that the storage build would be near normal despite hotter weather, as the Freeport gas export plant outage left more gas available to stockpile for next winter...while natural gas prices initially moved higher early Thursday, the bottom fell out when the EIA reported ​a ​larger-than-expected storage injection, and as an update on the Freeport LNG outage sent prices tumbling further to levels not seen in months, and ended the session $1.074, or 16.5% lower at $5.424 per mmBTU​.​...prices recovered part of those losses on Friday, rising 30.6 cents to $5.730 per mmBTU on a technical bounce following the big price drop in the prior session, and on forecasts for hotter weather over the next two weeks than had been previously expected, but they still ended 7.9% lower on the week, while the August gas contract, which had finished the prior week at $6.281 per mmBTU​,​ logged an 8.8% loss...

The EIA's natural gas storage report for the week ending June 24th indicated that the amount of working natural gas held in underground storage in the US rose by 82 billion cubic feet to 2,251 billion cubic feet by the end of the week, which left our gas supplies 296 billion cubic feet, or 11.6% below the 2,547 billion cubic feet that were in storage on June 24th of last year, and 322 billion cubic feet, or 12.5% below the five-year average of 2,573 billion cubic feet of natural gas that have been in storage as of the 24th of June over the most recent five years....the 82 billion cubic foot injection into US natural gas working storage for the cited week was more than the average forecast for a 72 billion cubic foot injection from an S&P Global Platts survey of analysts, and higher than the 73 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and also more than the average injection of 73 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years....  

The Latest US Oil Supply and Disposition Data from the EIA

The US oil data reported this week by the US Energy Information Administration includes updated data for the week ending June 17th, which should have been published last week but wasn't due to a hardware failure, and the new data for the week ending June 24th, published on schedule this week...while we're going to cover that most recent update as we usually do, we'll also try to include the most important changes for the week ending June 17th in our narrative...

The EIA's data for the week ending June 24th showed that after a big increase in our refinery throughput and a decrease in our oil imports, and even after the addition of more than a half million barrels per day in oil supplies that could not be accounted for and another big oil withdrawal from the SPR, we had to pull oil out of our stored commercial crude supplies for the 5h time in 7 weeks, and for the 19th time over the past 31 weeks…our imports of crude oil fell by an average of 228,000 barrels per day to an average of 5,998,000 barrels per day, after falling by an average of 759,000 barrels per day during the week ending June 17th, while our exports of crude oil fell by 192,000 barrels per day to 3,380,000 barrels per day, after falling by 153,000 barrels per day during the prior week, which meant that our trade in oil worked out to a net import average of 2,618,000 barrels of oil per day during the week ending June 24th, 36,000 fewer barrels per day than the net of our imports minus our exports during the week ending June 17th…over the same period, production of crude from US wells reportedly rose by 100,000 barrels per day to 12,100,000 barrels per day, after being unchanged during the week ending June 17th, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 14,718,000 barrels per day during the June 24th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,666,000 barrels of crude per day during the week ending June 24th, an average of 403,000 more barrels per day than the amount of oil than our refineries processed during the week ending June 17th, while over the same period the EIA’s surveys indicated that a net of 1,387,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US, after an oil storage drawdown of 1,026,000 barrels of crude per day during the week ending June 17th...so based on that reported & estimated data, the crude oil figures from the EIA for the week ending June 24th appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 560,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+560,000) 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 must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed....even so, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more  on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 1,387,000 barrel per day decrease from our overall crude oil inventories left our total oil supplies at 913,434,000 barrels at the end of the week, our lowest oil inventory level since March 12th, 2004, and therefore at an 18 year low….our oil inventory decreased this week as 395,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 993,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, and came after 55,000 barrels per day were pulled out of our commercially available stocks and 971,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve during the week ending June 17th....those draws on the SPR would have included an emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that is expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further at least up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address the initial Russian supply related shortfalls....the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption wrapped up in May.... including that, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 158,279,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 23 months, and as a result the 497,868,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since April 25th, 1986, or at a 36 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases....now the total 180,000,000 barrel drawdown expected over the current six month release program to November will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at today's consumption rate... 

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,341,000 barrels per day last week, which was 5.1% less than the 6,683,000 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 12,100,000 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 11,700,000 barrels per day, even as Alaska’s oil production was 25,000 barrels per day lower at 404,000 barrels per day but had no impact on the final rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 7.6% below that of our pre-pandemic production peak, but was 43.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 95.0% of their capacity while using those 16,666,000 barrels of crude per day during the week ending June 24th, up from the 94.0% utilization rate during the week ending June 17th, and bit higher than the normal refinery utilization rate for early summer…the 16,666,000 barrels per day of oil that were refined this week were 2.3% more than the 16,299,000 barrels of crude that were being processed daily during week ending June 25th of 2021, but 3.9% less than the 17,337,000 barrels that were being refined during the prepandemic week ending June 21st, 2019, when refinery utilization was at a fairly normal 94.2% for late June...

With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 143,000 barrels per day to 9,497,000 barrels per day during the week ending June 24th, after our gasoline output had decreased by 665,000 barrels per day during the week ending June 17th…this week’s gasoline production was 0.8% less than the 9,926,000 barrels of gasoline that were being produced daily over the same week of last year, and 9.7% below our gasoline production of 10,512,000 barrels per day during the week ending June 21st, 2019, ie, during the year before the pandemic impacted US gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 85,000 barrels per day to 5,136,000 barrels per day, after our distillates output had increased by 93,000 barrels per day during the week ending June 17th…while our distillates output was 2.1% more than the 5,029,000 barrels of distillates that were being produced daily during the week ending June 25th of 2021, it was still 3.2% less than the 5,371,000 barrels of distillates that were being produced daily during the week ending June 21st, 2019...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the second consecutive week, after falling 18 out of the prior 19 weeks, increasing by 2,645,000 barrels to 221,608,000 barrels during the week ending June 24th, after our gasoline inventories had increased by 1,489,000 barrels during the week ending June 17th...our gasoline supplies increased this week even though the amount of gasoline supplied to US users increased by 417,000 barrels per day to 8,922,000 barrels per day, after domestic gasoline supplied had fallen 588,000 barrels per day during the week ending June 17th, while our imports of gasoline rose by 41,000 barrels per day to 824,000 barrels per day, and while our exports of gasoline rose by 39,000 barrels per day to 969,000 barrels per day ...but after 18 inventory drawdowns over the past 21 weeks, our gasoline supplies were still 8.3% lower than last June 25th's gasoline inventories of 241,572,000 barrels, and 8% below the five year average of our gasoline supplies for this time of the year…

After the recent increases in our distillates production, our supplies of distillate fuels increased for the 6th time in seven weeks and for the 16th time in forty-three weeks, rising by 2,559,000 barrels to 112,401,000 barrels during the week ending June 24th, after our distillates supplies had increased by 133,000 barrels during the week ending June 17th….our distillates supplies rose by more this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 294,000 barrels per day to 3,568,000 barrels per day, while our exports of distillates rose by 35,000 barrels per day to 1,299,000 barrels per day, and while our imports of distillates rose by 2,000 barrels per day to 97,000 barrels per day....but after forty-two inventory withdrawals over the past sixty-three weeks, our distillate supplies at the end of the week were still 18.0% below the 137,076,000 barrels of distillates that we had in storage on June 25th of 2021, and still about 20% below the five year average of distillates inventories for this time of the year…

Meanwhile, with the increase in oil going to refineries and the decrease in our oil imports, and even after this week's big release of crude from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage fell for the 7th time in 14 weeks and for the 32nd time in the past year, decreasing by 2,762,000 barrels over the week, from 418,328,000 barrels on June 17th to 415,566,000 barrels on June 24th, after our commercial crude supplies had decreased by 386,000 barrels over the week ending June 17th…after this week’s decrease, our commercial crude oil inventories remained about 13% below the most recent five-year average of crude oil supplies for this time of year, but about 18% above the average of our crude oil stocks as of the fourth weekend 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 commercial crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this June 24th were 8.1% less than the 452,342,000 barrels of oil we had in commercial storage on June 25th of 2021, and were 22.1% less than the 533,527,000 barrels of oil that we had in storage on June 26th of 2020, and 11.3% less than the 468,491,000 barrels of oil we had in commercial storage on June 28th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 602,000 barrels this week, from 1,679,111,000 barrels on June 17th to 1,678,509,000 barrels on June 24th, after our total inventories had fallen by 3,068,000 barrels during the week ending June 17th....that left our total liquids inventories down by 109,924,000 barrels over the first 25 weeks of this year, and at the lowest since October 24th, 2008, or at a 13 1/2 year low...

This Week's Rig Count

The number of drilling rigs running in the US decreased for just the second time in 36 weeks and for the 8th time over the prior 92 weeks during the week ending July 1st, and still remained 5.4% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by 3 to 750 rigs this past week, which was still 275 more rigs than 475 rigs that were in use as of the July 2nd report of 2021, but was also 1,179 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil increased by 1 to 595 oil rigs during the past week, after rigs targeting oil had risen by 10 during the prior week, and there are 219 more oil rigs active now than were running a year ago, even as they still amount to just 37.0% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 12.9% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 4 to 153 natural gas rigs, which was still up by 54 natural gas rigs from the 99 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.5% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and natural gas, Baker Hughes continues to show two "miscellaneous" rigs still active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was increased by 1 to 16 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's two more than the 14 offshore rigs that were active in the Gulf a year ago, when 13 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas.…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....

in addition to rigs offshore, we continue to have 3 water based rigs drilling through inland bodies of water this week, including a directional rig drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there were two such "inland waters" rig deployed...

The count of active horizontal drilling rigs was down by three to 682 horizontal rigs this week, which was still 253 more rigs than the 429 horizontal rigs that were in use in the US on July 2nd of last year, but less than half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the vertical rig count was down by 2 to 25 vertical rigs this week, while those were still up by 9 from the 16 vertical rigs that were operating during the same week a year ago…on the other hand, the directional rig count was up by two to 43 directional rigs this week, and those were up by 13 from the 30 directional rigs that were in use on July 2nd of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of July 1st, the second column shows the change in the number of working rigs between last week’s count (June 24th) and this week’s (July 1st) count, the third column shows last week’s June 24th 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 2nd of July, 2021....

note that even though the Cana Woodford count was down by 5 oil rigs, the Oklahoma count was unchanged due to oil rig additions in the Arkoma Woodford and the Ardmore Woodford, and three oil rig additions in basins that Baker Hughes doesn't track....to account for the drop of four rigs in the Eagle Ford, we check the Rigs by State file at Baker Hughes for the changes in that area, where we find that four rigs were pulled out of Texas Oil District 1, but that a rig was added in Texas Oil District 2 and another rig was added in Texas Oil District 3....since the Eagle Ford shale was down by 4 rigs​ with the removal of two oil ​rigs ​and two gas ​rigs, those 4 must have come out of District 1, while the additions in Districts 2 and 3 must have been targeting basins that that Baker Hughes doesn't track in the same region....with those four rig removals, the Eagle Ford is left with 8 natural gas rig and 60 rigs targeting oil​ still drilling​...

in the Texas oil districts covering the Permian basin, we find that two rigs were added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, but that rigs were pulled out of Texas Oil District 8, which covers the core Permian Delaware, from Texas Oil District 8A, which includes the northern counties of the Permian Midland, and from Texas Oil District 7B, which includes the easternmost counties of the Permian Midland...since that ​appears to indicate that the Texas Permian rig count was down by one, it's reasonable to conclude that the rig added in New Mexico must have been added in the western Permian Delaware in the southeast corner of that state...elsewhere in Texas, a rig was added in Texas Oil District 5, which appears to be targeting a basin that Baker Hughes doesn't track...

changes ​in drilling activity ​elsewhere include the offshore oil rig added in Louisiana's waters, the only change in that state, and rigs pulled out of Utah's Uintah basin, Ohio's Utica shale, and Pennsylvania's Marcellus...the latter two were natural gas rigs, and when added to the two natural gas rigs pulled out of the Eagle Ford, ​they ​account for this week's four gas rig decrease....

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Note: there’s more here

Monday, June 27, 2022

no new EIA oil data; lowest DUCs on record; DUC backlog at 4.4 months; completions 16% below 2019 average..

this week's EIA oil data was not updated; natural gas rigs at a 33 month high; DUCs lowest on record; 4.4 month DUC backlog is lowest in 7 years; completions still 16% below the prepandemic average..

oil prices fell for a second week after 7 straight weekly increases as fears of a monetary policy induced recession kept the pressure on prices...after falling 9.2% to $109.56 a barrel last week after the Fed raised interest rates three-quarters of a percent and Russian oil output returned to pre-war levels, the contract price for US light sweet crude for July delivery was volatile in overseas trading Monday, first rising more than $1 in Asia as tightening supplies outweighed concerns about slowing global economic growth and fuel demand. then tumbling to trade lower as concerns about slowing global economic growth and fuel demand offset worries about tightening supplies, as US markets were closed in observance of the Juneteenth holiday...oil prices were higher in mid-morning trade in Asia on Tuesday as the recessionary fears that plagued markets receded and traders focused on bullish near-term fundamentals, and continued higher in New York on high summer fuel demand and tight supplies to settle with a gain of $1.09 at $110.65 a barrel as trading in the July oil contract expired, while the more active August crude contract rose $1.53 to $109.52 a barrel at the same time...with Wednesday's price quotes referencing the contract for WTI for August delivery, oil prices skidded $6 in early Asian trading on Wednesday amid a push by US President Biden to bring down fuel costs, including by pressuring on major US oil firms and were still off by more than 4% as​ US​ traders turned their focus to concerns over inflation and expectations for continued tighter monetary policy ahead of Congressional testimony from Fed Chairman Powell and settled $3.33 lower at $106.19 a barrel as traders worried that​ the​ Fed​'s​ rate hikes could push the U.S. economy into recession, dampening demand for fuel....oil prices fell another 1% in early trading Thursday, after the American Petroleum Institute reported U.S. crude and gasoline inventories unexpectedly increased during the prior week, and came under further pressure as the U.S. Dollar rallied after weaker-than-expected manufacturing data in the Eurozone, and settled Thursday’s trade down $1.92, or 1.8%, at a six week low of $104.27 per barrel after another round of remarks from Federal Reserve Chair Jerome Powell fanned worries that interest rate hikes would slow economic growth....however, oil prices more than reversed Thursday's drop in early trading Friday, on comments from the Libyan oil minister that Libya's oil production had risen in the past week to around 700,000 to 800,000 barrels a day, with those figures in doubt as the National Oil Corporation chairman was withholding production data from him, and settled the session $3.35, or 3.2% higher, at $107.62 a barrel, supported by tight supplies just as demand was recovering from the Covid pandemic...while oil price​ quote​s finished 1.8% lower than last week's close, the August contract price, which finished last week at $107.99 a barrel, was only 0.3% lower..

natural gas prices also finished lower this week, as the prospect of lower LNG exports more than offset rising domestic demand...after falling 21.5% to a seven week low of $6.944 per mmBTU last week on the news that the Freeport LNG export terminal would be down for months, the contract price of natural gas for July delivery slid 13.6 cents, or 2% to  $6.808 per mmBTU on Monday on a forecast ​for a ​break from the record heat by the coming weekend...but prices recovered 5.0 cents of that loss to settle at $6.858 per mmBTU on Wednesday, on record power demand in Texas and on a slow slide in daily gas output...however, natural gas prices imploded on Thursday after the EIA reported natural gas working stocks rose by a larger-than-expected 74 billion cubic feet during the prior week and settled 61.9 cents or 9% lower at an eleven week low of $6.239 per mmBTU, as the bigger-than-expected storage build indicated that the extended shutdown of the Freeport LNG export plant would allow utilities to quickly rebuild low gas stockpiles...natural gas prices slipped another 1.9 cents to settle at eleven week low of $6.220 per mmBTU on Friday as the drop in LNG exports offset forecasts for hotter weather, higher demand and less output than last month, and thus finished 10.4% lower on the week...

The EIA's natural gas storage report for the week ending June 17th indicated that the amount of working natural gas held in underground storage in the US rose by 74 billion cubic feet to 2,169 billion cubic feet by the end of the week, which left our gas supplies 305 billion cubic feet, or 12.3% below the 2,474 billion cubic feet that were in storage on June 17th of last year, and 331 billion cubic feet, or 13.2% below the five-year average of 2,500 billion cubic feet of natural gas that have been in storage as of the 17th of June over the most recent five years....the 74 billion cubic foot injection into US natural gas working storage for the cited week was more than the average forecast for a 70 billion cubic foot injection from an S&P Global Platts survey of analysts, and substantially higher than the 49 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, but less than the average injection of 82 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years.... 

The Latest US Oil Supply and Disposition Data from the EIA (not)

as you know, i've been covering the Weekly Petroleum Status Report from the EIA in this weekly newsletter for several years now. but this week there wasn't any; the header on the report's main access page (https://www.eia.gov/petroleum/supply/weekly/) simply says Next Release Date: TBD

the following notice was on top of all the EIA oil websites i usually access all week:

Several U.S. Energy Information Administration product releases scheduled for the week of June 20, 2022, will be delayed as a result of systems issues.

their press release on this issue says: 

EIA statement on data releases for the week of June 20, 2022
Several U.S. Energy Information Administration (EIA) product releases scheduled for the week of June 20, 2022, will be delayed as a result of systems issues. Our experts are working on a solution to restore the affected systems.
We will release the Weekly Natural Gas Storage Report as scheduled on June 23. All other data releases scheduled for this week will be delayed. We will resume our normal production schedule and release delayed data as soon as possible.
We apologize for the inconvenience of this delay, and remain committed to our mission of collecting, analyzing, and disseminating independent and impartial energy information as we resolve this issue.

In a dozen years of covering weekly and monthly reports from government agencies, i've never seen anything like it....

This Week's Rig Count

The number of drilling rigs running in the US rose for the 77th time over the prior 91 weeks during the week ending June 24th, but still remained 5.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 13 to 753 rigs this past week, which was also 283 more rigs than 470 rigs that were in use as of the June 25th report of 2021, but was also 1,176 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil increased by 10 to 594 oil rigs during the past week, after rigs targeting oil rose by 4 during the prior week, and there are 222 more oil rigs active now than were running a year ago, even as they still amount to just 36.9% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 13.0% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 3 to 157 natural gas rigs, which was the most natural gas rigs deployed since September 6th, 2019, and up by 59 natural gas rigs from the 98 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.8% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and natural gas, Baker Hughes continues to show two "miscellaneous" rigs still active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was unchanged at fifteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's one more than the 14 offshore rigs that were active in the Gulf a year ago, when 13 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas.…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....

in addition to rigs offshore, we continue to have 3 water based rigs drilling through inland bodies of water this week, including a directional rig drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there were two such "inland waters" rig deployed...

The count of active horizontal drilling rigs was up by eleven to 685 horizontal rigs this week, which was 2​64 more rigs than the 42​1 horizontal rigs that were in use in the US on June 25th of last year, but less than half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the directional rig count was up by two to 41 directional rigs this week, and those were up by 11 from the 30 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 27 vertical rigs this week, while those were up by 8 from the 19 vertical rigs that were in use on June 25th of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 24th, the second column shows the change in the number of working rigs between last week’s count (June 17th) and this week’s (June 24th) count, the third column shows last week’s June 17th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 25th of June, 2021....

as usual, we'll start by checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian basin...there we find that there were two rigs added in Texas Oil District 8, which covers the core Permian Delaware, and that there was a rig added in Texas Oil District 7C, which includes the southern counties of the Permian Midland....since that means that the Texas Permian rig count was up by 3 rigs, we can then conclude that the rig added in New Mexico must have been added in the western Permian Delaware in the southeast corner of that state for the national Permian count to be up four...

elsewhere in Texas, we find that two rigs were added in Texas Oil District 1, and that two more rigs were added in Texas Oil District 4....three of those four rig additions were in the Eagle Ford, and included two oil rigs and one targeting natural gas, while the other addition was targeting a basin that Baker Hughes doesn't track​ in the same region​; the Eagle Ford now has 10 natural gas rigs, in addition to 62 targeting oil...​meanwhile, a rig was pulled out of Texas Oil District 6, which was likely targeting natural gas in the Haynesville shale, because a rig was added in the Haynesville shale region of northwest Louisiana at the same...for those who are counting, the Texas rig count was up by 6 due to the addition of the rig in the state's offshore waters, not covered by a state district..

while there were three rigs added in Colorado, the DJ Niobrara chalk of the Rockies front range only saw a one rig increase, so two of those Colorado rigs and the rig in Wyoming were apparently targeting basins that Baker Hughes doesn't track....in Oklahoma, there were three rigs added in the Cana Woodford, but there were rigs pulled out of those areas of the Granite Wash and the Mississippian basins within the state at the same time, so the Oklahoma count was just up by one...meanwhile, the natural gas rig count was up by 3 because two natural gas rigs were added in a basin or basin that Baker Hughes doesn't track, in addition to the natural gas rig addition we've already noted in the Eagle Ford...

DUC well report for May

Monday of last week (June 13) saw the release of the EIA's Drilling Productivity Report for June, which included the EIA's May data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (shown under the report's tab 3)....that data showed a decrease in uncompleted wells nationally for the 23rd consecutive month, as both completions of drilled wells and drilling of new wells increased in May, but remained well below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 46 wells, falling from 4,295 DUC wells in April to 4,249 DUC wells in May, which was the lowest number of US wells left uncompleted on record, and also 33.0% fewer DUCs than the 6,339 wells that had been drilled but remained uncompleted as of the end of May of a year ago...this month's DUC decrease occurred as 911 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during May, up from the 824 wells that were drilled in April, while 957 wells were completed and brought into production by fracking them, up by 13 from the 944 well completions seen in April, and up by 157 from the 800 completions seen in May of last year....at the May completion rate, the 4,249 drilled but uncompleted wells remaining at the end of the month represents a 4.4 month backlog of wells that have been drilled but are not yet fracked, down from the 4.5 month DUC well backlog of a month ago, and the lowest backlog since December 2014, despite a completion rate that is still more than 16% below 2019's pre-pandemic average...

only the oil producing regions saw a DUC well decreases during May, since both the natural gas producing Appalachian and Haynesville shales saw modest DUC well increases....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 37, from 1,294 DUC wells at the end of April to 1,257 DUCs at the end of May, as 399 new wells were drilled into the Permian basin during May, while 436 already drilled wells in the region were being fracked....in addition, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 9, falling from 724 at the end of April to 715 DUC wells at the end of May, as 61 wells were drilled into the Anadarko basin during May, while 70 Anadarko wells were completed....meanwhile, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 6, falling from 320 at the end of April to a record low of 314 DUC wells at the end of May, as 99 wells were drilled into the Niobrara chalk during May, while 105 Niobrara wells were completed....at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 5, from 612 DUC wells at the end of April to a record low of 607 DUCs at the end of May, as 105 wells were drilled in the Eagle Ford during May, while 110 already drilled Eagle Ford wells were being fracked....in addition, there was a decrease of 3 DUC wells in the Bakken of North Dakota, where DUC wells fell from 429 at the end of April to a record low of 426 DUCs at the end of May, as 75 wells were drilled into the Bakken during May, while 78 of the drilled wells in the Bakken were being fracked.....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, rose by one well, from 497 DUCs at the end of April to 498 DUCs at the end of May, as 98 wells were drilled into the Marcellus and Utica shales during the month, while 97 of the already drilled wells in the region were fracked....at the same time, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 13, from 419 DUCs in April to 432 DUCs by the end of May, as 74 wells were drilled into the Haynesville during May, while 61 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of May, 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 60 wells to 3,319 DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) increased by net of 14 wells to 930 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there’s more here

Monday, June 20, 2022

natgas down 22% on plant outage; global oil surplus at 560,000 bpd in May, OPEC output drops to million bpd below quota

US natural gas price falls 21.5% on export plant outage; US oil supplies at new 17½ year low, SPR at a 35 year low after the largest SPR release on record; gasoline supplies at a 6 month low; global oil surplus at 560,000 barrels per day in May, 4th straight surplus, even as OPEC output dropped to 1.049 million bpd below quota; natural gas rigs at a 33 month high....

.oil prices fell for the first time in 8 weeks after the Fed raised interest rates three-quarters of a percent ​and Russian oil output returned to pre-war levels...after rising 1.5% to a 13 year high weekly close of $120.67 last week as record high fuel prices showed no signs of dampening demand, the contract price for US light sweet crude for July delivery fell nearly 1.5% in Asian trading early Monday as pandemic-related concerns in China and higher-than-expected US inflation weighed on sentiment, and was off by $2 a barrel in trading​ trading in ​New York on worries that fresh COVID-19 outbreaks in China could lead to further lockdowns, but later spiked higher on reports that Libya had shut down nearly all Its oil fields and settled 26 cents higher at $120.93 per barrel, even as gasoline ​contracts ​plunged 3.3% and diesel ​contracts ​fell 1.9% at the same time​,​ on concerns over the lost demand growth expected this summer as the US economy slowed in response to Fed inflation fighting policy...oil prices rose again early on Tuesday after ​​credit rating agency Fitch Ratings increased its short- and medium-term oil price forecasts and after OPEC reported its ​oil ​production actually decreased in May, as tight global supplies outweighed worries that fuel demand would be hit by a possible US recession and fresh COVID-19 curbs in China, but the rally evaporated amid signs that Democrats were considering more energy legislation as they and the White House faced increasing pressure to curb US energy costs​,​ and oil settled $2 lower at $118.93 per barrel, as traders repositioned ahead of the weekly inventory data release and the ​interest ​rate announcement from the Fed, where a 75-basis point hike was being considered...oil prices fell further in early morning trading Wednesday after the International Energy Agency (IEA) forecast that the global oil market was likely to rebalance in the second half of the year, driven by slowing demand growth and accelerated gains in non-OPEC oil supplies that ​would partially offset the loss of Russian barrels. and then extended its losses after the EIA reported an unexpected crude inventory build and a slowing of gasoline demand, and then fell sharply to settle $3.62 lower at $115.31 a barrel as traders worried about a fall in demand after the Fed hiked interest rates by three-quarters of a percentage point...oil prices erased early gains to fall to a two-week low on Thursday on inflation concerns highlighted by interest rate hikes in the U​S,​Britain and Switzerland, though tight oil supply limited losses, and recovered from the day's lows to turn positive again, supported by tight oil supply and peak summer consumption, and advanced $2.28 to settle at $117.59 a barrel, supported by a sharp drop in the U.S. Dollar Index after a number of European central banks raised ​their ​interest rates....but ​global ​markets wobbled and oil prices sank on Friday over growing fears that inflation-fighting interest rate hikes by central banks could trigger a recession and was down roughly 5% to a three-week low by mid​​day, led by a slump in US gasoline futures, as the US dollar rose to its highest since December 2002, and settled $8.03, or 6.8% lower at $109.56 a barrel​,​ as traders worried that interest rate hikes from major central banks could slow the global economy and cut demand for energy...with that selloff, oil prices notched a 9.2% decrease for the week, with all petroleum contracts posting their first weekly loss since April, amid signs of a tentative rebound in Russian oil production supported by strong demand from Asian and European buyers..

natural gas prices also fell sharply this week, on the news that the Freeport LNG export terminal would be down for months, thus adding 2 billion cubic feet per day to domestic supplies,,,,after rising 3.8% to $8.850 per mmBTU last week as a rally to a 13 year high on record high temperatures was cut off after the explosion at Freeport, the contract price of natural gas for July delivery slid 24.1 cents, or almost 3% to a one-week low of $8.609 per mmBTU on Monday, as the shutdown of the Freeport export plant cut demand for gas, even though power demand in Texas hit an all-time high....natural gas prices then crashed early on Tuesday after representatives from Freeport reported that the company d​id not expect the export facility to be fully repaired for months, sending gas prices tumbling $1.42, or 17%, to $7.189 per mmBTU, the third largest drop on record, as a prolonged outage would leave more gas to refill low U.S. stockpiles before next winter...prices recovered a bit on Wednesday, regaining 23.1 cents to settle at $7.420 per mmBTU, as traders' focus returned to soaring demand amid countrywide heat waves....natural gas prices edged up again on Thursday, on forecasts for record power demand in Texas, soaring global gas prices and a small decline in U.S. daily gas output, and settled 4.4 cents higher at $7.464 per mmBTU, despite a bigger-than-usual stockpile build, a revised increase in the amount of gas in storage​, and a decline in forecast U.S. gas demand...but prices tumbled again on Friday on forecasts for lower demand ​for ​the next two weeks, and on expectations that the extended shutdown of the Freeport plant would allow utilities to quickly rebuild low U.S. gas stockpiles, and settled 52 cents or 7% lower at a seven week low of $6.944 per mmBTU, and thus finished with a 21.5% loss on the week...

The EIA's natural gas storage report for the week ending June 10th indicated that the amount of working natural gas held in underground storage in the US rose by 92 billion cubic feet to 2,095 billion cubic feet by the end of the week, after gas in storage at the end of the prior week was revised from 1,999 billion cubic feet to 2,003 billion cubic feet to reflect resubmissions of data during the prior three-week period....that still left our gas supplies 330 billion cubic feet, or 13.6% below the 2,425 billion cubic feet that were in storage on June 10th of last year, and 323 billion cubic feet, or 13.4% below the five-year average of 2,418 billion cubic feet of natural gas that have been in storage as of the 10th of June over the most recent five years....the 92 billion cubic foot injection into US natural gas working storage for the cited week was more than average forecast for a 89 billion cubic foot injection from an S&P Global Platts survey of analysts, and more than the average injection of 79 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years, and more than triple the 28 billion cubic feet that were added to natural gas storage during the corresponding week of 2021...

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 10th showed that after a big increae in our oil imports, another big oil withdrawal from the SPR, and an increase in oil supplies that could not be accounted for more than covered a near record jump in our oil exports, we had oil left to add our stored commercial crude supplies for the 7th time in 11 weeks, and for the 22nd time in the past 50 weeks…our imports of crude oil rose by an average of 831,000 barrels per day to an average of 6,985,000 barrels per day, after falling by an average of 64,000 barrels per day during the prior week, while our exports of crude oil rose by 1,493,000 barrels per day to 3,725,000 barrels per day, after falling by 1,758,000 barrels per day during the prior week, which meant that our trade in oil worked out to a net import average of 3,260,000 barrels of oil per day during the week ending June 10th, 622,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude from US wells reportedly rose by 100,000 barrels per day to 12,000,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,260,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,320,000 barrels of crude per day during the week ending June 10th, an average of 67,000 fewer barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 822,000 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 storage, from net imports and from oilfield production was 238,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+238,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet 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 must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....even so, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

week's 822,000 barrel per day decrease from our overall crude oil inventories left our total oil supplies at 930,326,000 barrels at the end of the week, our lowest oil inventory level since October 1st, 2004, and therefore a 17 1/2 year low….our oil inventory decreased this week even though 279,000 barrels per day were being added to our commercially available stocks of crude oil, because 1,102,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, the largest SPR withdrawal on record, at the same time....that draw on the SPR would now include the initial emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that is expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further at least up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address the initial Russian supply related shortfalls....the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption wrapped up in May.... including that, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 144,535,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 22 months, and as a result the 511,612,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since Januar 2nd, 1987, or at a 35 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's releases....so now, the total 180,000,000 barrel drawdown expected over the six months to November will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at today's consumption rate...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,641,000 barrels per day last week, which was 2.2% more than the 6,322,000 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 12,000,000 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 11,600,000 barrels per day, even as Alaska’s oil production was 10,000 barrels per day lower at 435,000 barrels per day andand and has no impact on the final rounded national total...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 8.4% below that of our pre-pandemic production peak, but was 42.4% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 93.7% of their capacity while using those 16,320,000 barrels of crude per day during the week ending June 10th, down from the 94.2% utilization rate of the prior week, but still a typical refinery utilization rate for early summer…but the 16,320,000 barrels per day of oil that were refined this week were a bit less than the 16,337,000 barrels of crude that were being processed daily during week ending June 11th of 2021, and 5.5% less than the 17,264,000 barrels that were being refined during the prepandemic week ending June 14th, 2019, when refinery utilization was also at a fairly normal 93.9% for the second weekend of June...

With the decrease in the amount of oil being refined this week, gasoline output from our refineries was also lower, decreasing by 21,000 barrels per day to 10,019,000 barrels per day during the week ending June 10th, after our gasoline output had increased by 73,000 barrels per day over the prior week.…this week’s gasoline production was 0.9% more than the 9,926,000 barrels of gasoline that were being produced daily over the same week of last year, but 4.1% below our gasoline production of 10,451,000 barrels per day during the week ending June 14th, 2019, ie, during the year before the pandemic impacted US gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 57,000 barrels per day to 5,944,000 barrels per day, after our distillates output had increased by 17,000 barrels per day over the prior week…and our distillates output was 2.2% less than the 5,056,000 barrels of distillates that were being produced daily during the week ending June 11th of 2021, and 8.0% less than the 5,371,000 barrels of distillates that were being produced daily during the week ending June 14th, 2019...

Even with the recent increases in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the eighteenth time in nineteen weeks, decreasing by 710,000 barrels to a six month low of 217,474,000 barrels during the week ending June 10th, after our gasoline inventories had decreased by 812,000 barrels over the prior week....our gasoline supplies decreased again this week even though the amount of gasoline supplied to US users decreased by 106,000 barrels per day to 9,093,000 barrels per day, because our imports of gasoline fell by 526,000 barrels per day to 650,000 barrels per day while our exports of gasoline fell by 31,000 barrels per day to 926,000 barrels per day ...and after 18 inventory drawdowns over the past 19 weeks, our gasoline supplies were 10.5% lower than last June 11th's gasoline inventories of 242,980,000 barrels, and 11% below the five year average of our gasoline supplies for this time of the year…

Even with the decrease in our distillates production, our supplies of distillate fuels increased for the 7th time in twenty-two weeks and for the 14th time in forty-one weeks, rising by 725,000 barrels to 109,709,000 barrels during the week ending June 10th, after our distillates supplies had increased by 2,592,000 barrels during the prior week….our distillates supplies rose by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 31,000 barrels per day to 3,619,000 barrels per day because our exports of distillates rose by 178,000 barrels per day to 1,379,000 barrels per day, and because our imports of distillates fell by 62,000 barrels per day to 158,000 barrels per day....but after forty-two inventory withdrawals over the past sixty-one weeks, our distillate supplies at the end of the week were 19.4% below the 136,191,000 barrels of distillates that we had in storage on June 11th of 2021, and still about 23% below the five year average of distillates inventories for this time of the year… 

Meanwhile, after this week's big release of crude from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage rose for the 12th time in 29 weeks and for the 20th time in the past year, increasing by 1,956,000 barrels over the week, from 416,758,000 barrels on June 3rd to  418,714,000 barrels on June 10th, after our commercial crude supplies had increased by 2,025,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories rose to 14% below the most recent five-year average of crude oil supplies for this time of year, and to about 18% above the average of our crude oil stocks as of the second weekend 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 spring 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude oil supplies as of this June 3rd were 10.3% less than the 466,674,000 barrels of oil we had in commercial storage on June 11th of 2021, and were 22.4% less than the 539,280,000 barrels of oil that we had in storage on June 12th of 2020, and 13.2% less than the 482,364,000 barrels of oil we had in commercial storage on June 14th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 2,764,000 barrels this week, from 1,684,943,000 barrels on June 3rd to 1,682,179,000 barrels on June 10th, after our total inventories had risen by 3,682,000 barrels during the prior week....that left our total liquids inventories down by 106,254,000 barrels over the first 23 weeks of this year, and less than one million barrels from a 13 1/2 year low..


OPEC's Report on Global Oil for May

Tuesday of this week saw the release of OPEC's June Oil Market Report, which includes details on OPEC & global oil data for May, and hence it gives us a picture of the global oil supply & demand situation at a time when major cities in China were under restrictive Covid lockdowns, while at the same time exports of Russian oil were curtailed by sanctions imposed by the West....in light of those offsetting circumstances, OPEC and aligned oil producers had again agreed to increase their output by 400,000 barrels per day for a tenth consecutive month, ie the 10th such increase from the previously agreed to July 2021 level, which was in turn part of the fifth production quota policy reset that they've made over the past twenty-three months, all in response to the pandemic-related slowdown and subsequent irregular recovery....note that with the course and impact of the Ukraine war and the pandemic still uncertain, we consider the demand projections made herein to be pretty speculative, and hence will not address any projections beyond the May estimates..

The first table from this month's report that we'll review is from the page numbered 47 of this month's report (pdf page 57), 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 production estimates by 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... 

As we can see on the bottom line of the above table, OPEC's oil output decreased by 176,000 barrels per day to 28,508,000 barrels per day during May, down from their revised April production total that averaged 28,684,000 barrels per day....however, that April output figure was originally reported as 28,648,000 barrels per day, which therefore means that OPEC's April production was revised 36,000 barrels per day higher with this report, and hence OPEC's May production was, in effect, just 140,000 barrels per day lower than the previously reported OPEC production figure (for your reference,here is the table of the official April OPEC output figures as reported a month ago, before this month's revision)...

As we can see from that table, the primary reason for the decrease in OPEC's output in May was the 186,000 barrel per day drop in oil production from Libya, where demonstrations against the prime minister had further curtailed production in a country already impacted by repeated bouts of civil strife...but Libya wasn't the cartel's only problem; production fell in more than half its members, and left a deficit that the Saudis and the Emirates, the two OPEC members with surplus capacity, couldn't make up..

According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, 2021, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day each month through December 2021, which was subsequently renewed at monthly meetings to include further 400,000 barrel per day production increases in January, February, March, April, May and June of 2022, and which would indicate an increase of 254,000 barrels per day each month from the OPEC members listed above, with the rest of the 400,000 bpd supplied by other producers. including Russia....but OPEC's decrease of 176,000 barrels per day nearly reversed their expected increase....and while the production decreases in Libya and Nigeria, which has ongoing pipeline theft and leakage problems, were obviously the major reason for the May decrease. several other OPEC members continue to be short of what they were expected to produce, as we'll see in the next table..

The adjacent table was originally included as a downloadable attachment to the press release following the 27th OPEC and non-OPEC Ministerial Meeting on March 31st, 2022, which set OPEC's and other aligned producers' production quotas for May... since war torn Libya and US sanctioned producers Iran and Venezuela are exempt from the production cuts imposed by the joint agreement that governs the output of the other OPEC producers, they are not shown here, and OPEC's quota is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,589,000 barrels per day in May....therefore, the 24,540,000 barrels those 10 OPEC members actually produced in May were 1,049,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for most of this month's shortfall, while only the UAE was able to produce what was expected of them...

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Recall that the original 2020 oil producer's agreement was to jointly cut their oil production by 23%, or by 9.7 million barrels per day, from an October 2018 baseline for just two months early in the pandemic, during May and June of 2020, but that initial 9.7 million bpd production cut agreement was extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in July of that 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 2020 and subsequent months, which thus became the agreement that governed OPEC's output for the rest of 2020...the OPEC+ agreement for their January 2021 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 a reduction of 7.2 million barrels per day from that original 2018 baseline...then, during a difficult meeting on April 1st of last year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month by a pre-set amount for each country over the following three months, thus extending their joint output cut agreement through July....production levels for August and the following months of last year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over the 2018 reference production levels, and a subsequent attempt to restart that meeting on July 5th was called off....so it wasn't until July 18th 2021 that a tentative compromise addressing August 2021's output quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August, and again by that amount in each of the following months, and also to boost reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022, which is now reflected in the OPEC production quota table you see above, and which now makes the effective monthly production increase 432,000 barrels per day....OPEC and other producers then agreed to increase their production in January 2022 by a further 400,000 barrels per day in a meeting concluded on the 2nd of December, 2021, and reaffirmed their intention to continue that policy with another 400,000 barrel per day increase in February at a meeting concluded January 4, 2022, and then agreed to stick to that 400,000 bpd oil output increase in March, despite pressure from the US to raise output more quickly, at a meeting on February 2nd....then, at a meeting on March 2nd, OPEC and its oil-producing allies, which included Russia, decided to hold their production increase at that level thru April in an OPEC+ meeting that only lasted 13 minutes, their shortest meeting ever...then on March 31, OPEC and aligned producers agreed to reaffirm the decisions of the prior Ministerial meetings and again limit their production increase for May to the agreed 400,000 barrels per day, because "the current [oil market]volatility is not caused by fundamentals, but by ongoing geopolitical developments"...then again, in an OPEC and non-OPEC Ministerial Meeting held on May 5th, they again reaffirmed the decision of the July18th 2021 meeting to increase production by 432,000 barrels per day in June of this year...most recently, however, in a meeting held June 2nd, they agreed to advance the 432,000 barrel per day increase scheduled for September, with that increase to be split evenly between July and August...hence, the production increase now scheduled for those two months is 648,000 barrels per day...

Hence OPEC arrived at the production quotas for August 2021 through MAY of this year by repeatedly readjusting the original 23%, or 9.7 million barrel per day production cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day output 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 subsequently raised to an 8.2 million barrel per day oil output reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during the Covid surge of February, March, and then later during April of last year....under the agreement prior to the current one affecting this month, OPEC's production cut in April 2021 was set at 4,564,000 barrels per day below the October 2018 baseline, which was lowered to a cut of 3,650,000 barrels per day from the baseline with the prior comprehensive agreement, which thus set the July production quota for the "OPEC 10" at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by that agreement....for OPEC and the other producers to increase their output by 400,000 barrels per day from that July 2021 level, each producer would be allowed to initially increase their production by just over 1% per month since that time...for OPEC alone, that meant a 254,000 barrel per day increase for each month from July 2021 to April 2022, at which time the incremental 32,000 barrels per day adjustment they arrived at in July 2021 kicked iN...adding together those monthly increases since last July, when the quota was at 23,033,000 barrels per day, is how they arrived at the 25,589,000 barrels per day quota for OPEC for May that you see on the table above..

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 June 2020 to May 2022, and it comes from page 48 (pdf page 58) of OPEC's June 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....


after this month's 176,000 barrel per day decrease in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production decreased by a rounded 150,000 barrels per day to average 98.75 million barrels per day in May, a reported decrease which came after April's total global output figure was apparently revised up by 160,000 barrels per day from the 99.74 million barrels per day of global oil output that was estimated for April a month ago, as non-OPEC oil production inched up by 23,000 barrels per day in May after that upward revision, as 400,000 barrels per day production growth in non-OPEC Eurasia and Latin American countries was offset by output decreases totaling 400,000 barrels per day by Canada and the UK...

Even after that decrease in May's global output, the 98.75 million barrels of oil per day that were produced globally during the month were still 5.82 million barrels per day, or 6.2% more than the revised 93.93 million barrels of oil per day that were being produced globally in May a year ago, which was the first month that OPEC and their allied producers began their program of monthly production increases from the 7.2 million barrels per day production cut that had governed the production of the prior four months (see the June 2021 OPEC report (online pdf) for the originally reported May 2021 details)...with this month's decrease in OPEC's output greater than the global decrease, their May oil production of 28,508,000 barrels per day amounted to 28.9% of what was produced globally during the month, down from their revised 29.0% share of the global total in April....OPEC's May 2021 production was reported at 25,463,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,045,000 barrels per day, or 14.2% more barrels per day of oil this April than what they produced a year earlier, when they accounted for 27.2% of global output...

Even after the decrease in both OPECs and global oil output that we've seen in this report, the amount of oil being produced globally during the month was still more than the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 28 of the June Oil Market Report (pdf page 38), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 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 May, which is their estimate of global oil demand during the second quarter of 2022....OPEC has estimated that during the 2nd quarter of this year, all oil consuming regions of the globe have been using an average of 98.19 million barrels of oil per day, which is a downward revision of 250,000 barrels per day from their estimate for 2nd quarter demand of a month ago (that revision is circled 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 producing 98.75 million barrels per day during May, which would imply that there was a surplus of around 560,000 barrels per day of global oil production in May, when compared to the demand estimated for the month...

In addition to figuring May's global oil supply surplus that's evident in this report, the downward revision of 250,000 barrels per day to second quarter demand that's shown circled in green above, combined with the 160,000 barrel per day upward revision to April's global oil supplies that's implied in this report, means that the 300,000 barrels per day global oil output surplus we had previously figured for April would now be revised to a surplus of 710,000 barrels per day...those daily surpluses would follow the 230,000 barrels per day surplus we had figured for March, and the 10,000 barrels per day surplus we had figured for February...so despite the oil shortage concerns that have driven oil prices over $100 a barrel since the war began, the world's oil producers have managed to produce more barrels of oil each day than anyone wanted over that entire span...

This Week's Rig Count

The number of drilling rigs running in the US rose for ​the 76th time over the prior 90 weeks during the week ending June 17th, but still remained 6.7% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 7 to 740 rigs this past week, which was also 270 more rigs than 470 rigs that were in use as of the June 18th report of 2021, but was also 1,189 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil increased by 4 to 584 oil rigs during this week, after rigs targeting oil rose by 6 during the prior week, and there are 211 more oil rigs active now than were running a year ago, even as they still amount to just 36.3% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 14.5% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 3 to 154 natural gas rigs, which was the most natural gas rigs deployed since September 6th, 2019, and up by 57 natural gas rigs from the 97 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two "miscellaneous" rigs still active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was up by one to fifteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's two more than the count of offshore rigs that were active in the Gulf a year ago, when all 13 Gulf rigs were drilling for oil offshore from Louisiana…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....

in addition to rigs offshore, we continue to have 3 water based rigs drilling through inland bodies of water this week, including a directional rig drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there was just one such "inland waters" rig deployed...

The count of active horizontal drilling rigs was up by six to 676 horizontal rigs this week, which was 248 more rigs than the 420 horizontal rigs that were in use in the US on June 11th of last year, but still 50.9% ​below​ the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the directional rig count was up by one to 39 directional rigs this week, and those were up by 14 from the 25 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 27 vertical rigs this week, while those were up by 7 from the 20 vertical rigs that were in use on June 11th of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 17th, the second column shows the change in the number of working rigs between last week’s count (June 10th) and this week’s (June 17th) count, the third column shows last week’s June 10th 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 18th of June, 2021..

to determine where the 7 rigs added in New Mexico were located, we first check the Rigs by State file at Baker Hughes for the changes in the Texas Permian basin...there we find that there were three rigs pulled out of Texas Oil District 8, which is the core Permian Delaware, and that there were 4 rigs pulled out of Texas Oil District 7C, which includes the southern counties of the Permian Midland....since that means that the Texas Permian rig count was down by 7 rigs, then all 7 New Mexico rigs must have been added in the western Permian Delaware in the southeast corner of that state for the national Permian count to remain unchanged...

elsewhere in Texas, we find that two rigs were added in Texas Oil District 1, that one rig was added in Texas Oil District 3, and that another rig was added in Texas Oil District 4  but that one rig was pulled out of Texas Oil District 2....one of those four rig additions was in the Eagle Ford, and it's possible another one could have been, if the rig pulled out of District 2 had been targeting that basin...Texas also had a rig added in Texas Oil District 5, apparently targeting a basin that Baker Hughes doesn't track, and two rigs added in Texas Oil District 6, both of which were likely targeting natural gas in the Haynesville shale, because the Haynesville shale region of northwest Louisiana had a rig pulled out at the same...there was also a rig added in Texas Oil District 10, which would have been in the Granite Wash, thus suggesting that two rigs were pulled out of the Granite Wash in Oklahoma at the same time....note that Oklahoma's count remained unchanged as two oil rigs were added in the Cana Woodford and another oil rig was added in the Ardmore Woodford in the state at the same time...likewise, Louisiana's rig count remained unchanged because an oil rig was added in the state's offshore waters, while the natural gas rig was pulled out of the northwest corner of the state...however, the natural gas rig count was up by 3 because two natural gas rigs were added in a basin or basin that Baker Hughes doesn't track..

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