US oil & oil products exports at a record high, wiping out a decade of US oil production gains (and then some)

in lieu of a detailed review of how oil prices moved this week, i'll just include a quick graph to show you how they moved...as you see below, US oil prices for December were up $2.33 a barrel, or about 4.3%, to a 6 month high of $53.90 a barrel...news that the Saudis and the Russians want to extend their production cuts fueled the increase...at the same time, North Sea Brent futures for December rose $3.07 a barrel, more than 5%, to $60.44 a barrel, a two year high...thus the international premium for light sweet crude oil remains more than 12% over that of similar US crude, continuing to underpin the drive by those with holdings of US oil to export it overseas...

i want to start today with a few graphs that i intended to write about last week, but couldn't because my internet service was down, and hence i was unable to access any of the supporting data...the point that i want to make with these graphs is very simple; the entire increase in oil output that has resulted since the advent of widespread fracking has gone overseas, whether directly or as a downstream product; all the gains, if there are any, have accrued to the exploitation companies, the refiners, and the shippers; not one drop of oil has been added to the supply of US consumers...

i'll start by showing you the graph of recent US crude & product exports that made that clear to me...

the above graph was copied from the October 18th post at "Today in Energy", the daily blog of the Energy Information Administration (EIA), which was titled "Crude oil and petroleum product exports reach record levels in the first half of 2017"...it shows our total crude and oil product exports in millions of barrels per day over the period from January 1st 2010 to June 30th of this year in a stacked graph, wherein monthly crude exports are shown in maroon, other liquids exports are shown in cerulean blue, propane exports are shown in navy, gasoline exports are shown in chocolate, distillate exports are shown in caramel and other refined products, which includes chemical feedstocks, are shown in sepia, with the top of the colored area for any given month thus showing the total of all oil and oil product exports for that month...the spreadsheet of the EIA"s monthly data shown on that chart is here, and the breakdown by type of product exported is here, which will be the sources of any amounts we'll refer to subsequently...

what we can see from that chart is that at the beginning of 2010, before the advent of widespread fracking, our total crude and oil product exports were under 2 million barrels per day, and they have gradually increased over the period until the first half of this year, when they were averaging over 6 million barrels per day, with the high mark on the chart representing our 6,443,000 barrel per day of exports in February...

next, we'll look at a graph which will illustrate the change in our crude oil output over the same period....

the above graph is from the webpage of the EIA spreadsheet of our weekly crude oil production totals, and it shows the oil output from US wells, in thousands of barrels per day, from late 1999 until October 20th of this year...comparing our monthly crude production to the same periods we cited above for our gross exports, we find that our crude oil production was averaging around 5.4 million barrels per day at the beginning of 2010, and that it had grown to an average of over 9.4 million barrels per day by mid 2015, before falling back due to lower prices, only to recover to just below those levels in recent months (ignoring the weeks when production was shut in due to hurricanes, which we'll consider to be an aberration for this exercise...

so, what we find when we compare the data shown by these two graphs is that our total exports of crude and oil products increased by over 4 million barrels per day in the first seven and a half years of this decade, while the production of oil from US has increased by almost the same amount over that same span....that means that the entirety of the increase that has accrued to US oil production during this period of widespread fracking, has, on a barrels of oil or products basis, ending up on ships or pipelines heading out of this country...understand we're not saying that all fracked oil is exported, as some of our oil exports no doubt comes from conventional wells, while some of our refined products exports were refined from oil first imported from overseas, but that on a net basis, the increase in oil from fracking has matched, barrel for barrel, by an increase in our exports of oil and oil products...

furthermore, notice that the first chart we included above only included export data up until the end of June...in recent months, however, the balance has shifted further towards exports, and we are now exporting much more crude oil and refined products than our increased production can account for, which we'll also show by way of a few graphs...we'll start with a graph of our weekly crude oil exports over the past year....

the above graph comes from a weekly emailed package of oil graphs distributed by John Kemp, senior energy analyst and columnist with Reuters...it shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 8 weeks...what we can see from this graph is that our weekly crude oil exports were quite volatile over the first half of this year, generally over 500,000 barrels per day, but occasionally jumping to as high as 1,200,000 or 1,300,000 barrels per day...the average of our crude oil exports for the first six months of this year was 918,000 barrels per day....however, since US crude has been selling at a 10% to 12% discount to the international price of oil, our exports have jumped to an average of 1,693,000 barrels per day over the past 5 weeks, a pace we believe will continue for the foreseeable future, since contract prices for US oil several months out are similarly discounted...

next, we have a graph which shows those crude oil exports combined with oil products exports over the past year, which serves to update the picture shown in the initial EIA graph, which only covers the year to June...

the above graph, from a Zero Hedge post on this week's EIA report, shows weekly gasoline exports from the US in black, weekly distillates exports from the US in blue, and the weekly total of all crude oil and oil products exports in green over the past year, up until the week ending October 20th...it should be immediately clear that as of the most recent week, our total oil & products exports hit a new record of 7,663,000 barrels per day, beating the previous record of 7,023,000 barrels set three weeks earlier by more than 9%...during the same week, our exports of distillates were at 1,576,000 barrels per day, just short of the distillates export record of 1,612,000 barrels per day set just two weeks earlier...and while our gasoline exports weren't a record, the 906,000 barrels of gasoline we exported per day was the most gasoline we've exported since the week ending January 13th...

returning to the comparison we made with the initial two graphs in this series, oil production from US wells during the week ending October 20th was at 9,507,000 barrels per day, or about 4.1 million barrels per day more than our January 2010 baseline...our record gross exports of 7,663,000 barrels per day, on the other hand, were about 5.7 million barrels per day higher than January 2010 gross exports....so although this is only one week's data, and likely an outlier, our gross exports of oil and products over time are now rising much faster than our field production of oil, the so-called fracking boom notwithstanding...that's a pace which is clearly unsustainable, but seems destined to continue until such time as US prices rise to those of the rest of the world, which may take a severe domestic shortage to achieve....

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending October 20th, showed large increases in both our oil imports and our domestic production of oil, enough so that a small amount of surplus oil could be returned to storage, despite a large increase in the amount of oil used by US refineries at the same time....our imports of crude oil rose by an average of 640,000 barrels per day to an average of 8,123,000 barrels per day during the week, while our exports of crude oil rose by 126,000 barrels per day to a near record 1,924,000 barrels per day, which meant that our effective imports netted out to an average of 6,199,000 barrels per day during the week, 514,000 barrels per day more than during the prior week...at the same time, field production of crude oil from US wells rose by 1,101,000 barrels per day to an average of 9,507,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,706,000 barrels per day during the reported week... 

at the same time, US oil refineries were using 16,025,000 barrels of crude per day, 586,000 barrels per day more than they used during the prior week, while during the same period 77,000 barrels of oil per day were being added to oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 396,000 fewer barrels per day than what refineries reported they used plus what was added to storage during the week...to account for that discrepancy, the EIA needed to insert a (+396,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,609,000 barrels per day, 3.2% above the imports of the same four-week period last year....the total 77,000 barrel per day addition to our total crude inventories came about on a 122,000 barrel per day addition to our commercial stocks of crude oil, which was partially offset by a 45,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 1,101,000 barrel per day increase in our crude oil production was due to a 1,109,000 barrel per day surge in output from wells in the lower 48 states, as production came back after Hurricane Nate, while output from Alaska fell by 8,000 barrels per day at the same time...the 9,507,000 barrels of crude per day that were produced by US wells during the week ending October 20th was 8.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.8% more than the 8,504,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 1.1% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...  

US oil refineries were operating at 87.8% of their capacity in using those 16,025,000 barrels of crude per day, up from 84.5% of capacity the prior week, a fairly normal pace for a fall seasonal maintenance period...the 16,025,000 barrels of oil that were refined this week were 9.6% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, but were still 3.0% more than the 15,552,000 barrels of crude per day that were being processed during week ending October 21st, 2016, when refineries were operating at 85.5% of capacity...

despite the pickup in US oil refining, gasoline output from our refineries was lower, decreasing by 95,000 barrels per day to 9,936,000 barrels per day during the week ending October 20th, which was still 1.0% higher than the 9,837,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 11,000 barrels per day to 4,795,000 barrels per day, which was 5.7% more than the 4,536,000 barrels per day of distillates that were being produced during the week ending October 21st last year....   

with the decrease in our gasoline production, our end of the week gasoline inventories fell by 5,456,000 barrels to 216,869,000 barrels by October 20th, the first drop in gasoline inventories in 5 weeks...the size of the decrease was exacerbated by a 270,000 barrel per day increase to 906,000 barrels per day in our exports of gasoline, while our imports of gasoline fell by 457,000 barrels per day to 233,000 barrels per day, the least gasoline we've imported since November 5 1995...also contributing to the decrease in our supplies, our domestic consumption of gasoline rose by 178,000 barrels per day to 9,314,000 barrels per day at the same time...with significant gasoline supply withdrawals in 13 out of the last 19 weeks, our gasoline inventories are now down by 10.5% from June 9th's level of 242,444,000 barrels, and 4.0% below last October 14th's level of 226,011,000 barrels, even as they are still roughly 4.8% above the 10 year average of gasoline supplies for this time of the year...   

with our distillates production little changed, our supplies of distillate fuels fell by 5,246,000 barrels to 129,241,000 barrels over the week ending October 20th, the seventh decrease in eight weeks...that large drop in our supplies was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 624,000 barrels per day to 4,101,000 barrels per day, and because our exports of distillates rose by 237,000 barrels per day to a near record 1,576,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 133,000 barrels per day...after this week’s large increase, our distillate inventories ended the week 15.2% lower than the 152,378,000 barrels that we had stored on October 21st, 2016, and 7.2% lower than the 10 year average for distillates stocks for this time of the year…if the forecast La Nina materializes, we will see a shortage of heat oil this winter...

finally, with the big rebound in our oil production and the large increase in our oil imports, our commercial crude oil inventories rose for just the 5th time in the past 29 weeks, increasing by 856,000 barrels, from 456,485,000 barrels on October 13th to 457,341,000 barrels on October 20th...while our oil inventories as of October 20th were still 2.3% below the 468,158,000 barrels of oil we had stored on October 21st of 2016, they were 2.1% higher than the 447,994,000 barrels in of oil that were in storage on October 23rd of 2015, and 31.2% greater than the 348,475,000 barrels of oil we had in storage on October 24th of 2014...

This Week's Rig Count

US drilling activity decreased for the 4th week in a row and for 10th time in the past 13 weeks during the week ending October 27th, with this week's cutbacks entirely in rigs targeting natural gas...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 909 rigs in the week ending on Friday, which was still 352 more rigs than the 557 rigs that were deployed as of the October 28th report in 2016, while it was less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 1 rig to 737 rigs this week, only their 2nd increase in 12 weeks, which meant active oil rigs were up by 296 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 5 rigs to 172 rigs this week, which was the smallest natural gas rig deployment since May 12th and just 58 more gas rigs than the 114 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the count of rigs drilling offshore was unchanged at 20 rigs this week, as 20 platforms remained active in the Gulf of Mexico, down from the 21 in the Gulf and one offshore from Alaska a year ago...however, one of the working Gulf rigs was moved from offshore Louisiana to offshore of Texas, where there are now 2 rigs drilling, up from one rig offshore from Texas a year earlier.... 

the count of active horizontal drilling rigs was down by 2 rigs to 769 rigs this week, which was the smallest number of horizontal rigs active since May 26th...however, that was still up by 319 rigs from the 450 horizontal rigs that were in use in the US on October 28th of last year, while down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was down by 6 rigs to 74 rigs this week, which was still up from the 54 directional rigs that were deployed during the same week last year.....on the other hand, the vertical rig count was up by 4 rigs to 66 vertical rigs this week, which was also up from the 53 vertical rigs that were working on October 28th of 2016......

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 October 20th, the second column shows the change in the number of working rigs between last week's count (October 13th) and this week's (October 20th) count, the third column shows last week's October 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 21st of October, 2016...        

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 October 27th, the second column shows the change in the number of working rigs between last week's count (October 20th) and this week's (October 27th) count, the third column shows last week's October 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 28th of October, 2016...        

other than the changes inidcated for the major producing states shown in the first table above, a rig also started drilling in Nebraska this week, which was the first drilling seen in that state since early July of last year...

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note: there’s more here…

US oil production falls to lowest in 42 months, rig count drops most in 20 months

US oil prices were up 4 days out of 5 again this week, but still only ended 2 cents higher, while Brent, the widely quoted international oil price, was also up 4 out of 5 days and ended 58 cents higher, and hence the premium that's been driving record US oil exports widened...the contract for US oil for November delivery first rose 42 cents to $51.87 a barrel on Monday, as US trained and armed Iraqi forces moved on the key oil-producing city of Kirkuk, which had been occupied by US trained and armed Kurdish forces over the past three years...with conflicting reports out of Iraq on Tuesday, US oil prices rose to as high as $52.25 on Tuesday morning, then dropped to as low as $51.21 Tuesday afternoon, but ended the day at  $51.88 a barrel, up just 1 cent on the day....prices then rose 16 cents to a three week high close of $52.04 a barrel on Wednesday, as EIA data showed a larger-than-expected draw from U.S. crude stockpiles on near record oil exports...oil prices then fell for the first time in 5 days on Thursday, dropping 75 cents to $51.29 a barrel, pressured by larger-than-expected product inventories and profit-taking after the recent run-up, as Iraq occupied Kirkuk and promised that the oil would continue flowing....US WTI crude futures for November were then mostly flat on Friday in see-saw trading, but ended the session 18 cents higher at $51.47 per barrel, after Baker Hughes reported the largest drilling rig pull back in 20 months... 

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending October 13th, showed both the aforementioned large increase in our oil exports as well as a large drop in our domestic production of oil, which meant that a larger quantity of oil had to be pulled out of storage to meet the needs of our refineries, which also slowed....our imports of crude oil fell by an average of 134,000 barrels per day to an average of 7,483,000 barrels per day during the week, while at the same time our exports of crude oil rose by 528,000 barrels per day to a near record 1,798,000 barrels per day, which meant that our effective imports netted out to an average of 6,347,000 barrels per day during the week, 662,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 1,047,000 barrels per day to an average of 8,406,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,091,000 barrels per day during the reported week...

at the same time, US oil refineries were using 15,439,000 barrels of crude per day, 819,000 barrels per day less than they used during the prior week, while during the same period 927,000 barrels of oil per day were being withdrawn from oil storage facilities in the US...hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production and from storage, was 421,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+421,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,435,000 barrels per day, 1.9% below the imports of the same four-week period last year....the 927,000 barrel per day withdrawal from our total crude inventories came about on a 819,000 barrel per day withdraw from our commercial stocks of crude oil and a 108,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 1,074,000 barrel per day decrease in our crude oil production was due to a 1,084,000 barrel per day drop in output from wells in the lower 48 states due to Hurricane Nate, the largest drop since August 2012, while output from Alaska rose by 9,000 barrels per day...the 8,406,000 barrels of crude per day that were produced by US wells during the week ending October 13th was the least oil that we've produced since the last week of April 2014, 4.2% less than the 8,770,000 barrels per day we were producing at the end of 2016, but just fractionally lower than the 8,464,000 barrels per day of oil we produced during the during the week ending October 14th a year ago...

US oil refineries were operating at just 84.5% of their capacity in using those 15,439,000 barrels of crude per day, down from 89.2% of capacity the prior week, a reduction in throughput that was mostly due to normal seasonal maintenance.... the 15,439,000 barrels of oil that were refined this week was 12.9% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck, just seven weeks earlier, but it was actually a bit more than the 15,370,000 barrels of crude per day that were being processed during week ending October 14th, 2016, when refineries were operating at 85.0% of capacity...

despite the slowdown in US oil refining, gasoline production from our refineries was higher, increasing by 290,000 barrels per day to 10,031,000 barrels per day during the week ending October 13th, which was also 5.6% higher than the 9,935,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 180,000 barrels per day to 4,784,000 barrels per day, which was 4.0% more than the 4,599,000 barrels per day of distillates that were being produced during the week ending October 14th last year....  

with the increase in our gasoline production, our end of the week gasoline inventories rose by 908,000 barrels to 222,334,000 barrels by October 13th, the fourth increase in gasoline inventories in a row...that was even as our exports of gasoline rose by 227,000 barrels per day to 636,000 barrels per day, while our imports of gasoline fell by 170,000 barrels per day to 690,000 barrels per day...offsetting that imbalance, however, our domestic consumption of gasoline fell by 344,000 barrels per day to 9,136,000 barrels per day at the same time...still, with significant gasoline supply withdrawals in 12 out of the last 18 weeks, our gasoline inventories are still down by 8.3% from June 9th's level of 242,444,000 barrels, and 2.5% below last October 14th's level of 227,967,000 barrels, even as they are still roughly 7.2% above the 10 year average of gasoline supplies for this time of the year...  

even with the decrease in our distillates production, our supplies of distillate fuels rose by 528,000 barrels to 134,487,000 barrels over the week ending October 13th, the first increase in seven weeks...that was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 171,000 barrels per day to 3,477,000 barrels per day, the lowest seasonal level in more than 10 years, and because our exports of distillates fell by 273,000 barrels per day to 1,339,000 barrels per day, while our imports of distillates rose by 23,000 barrels per day to 107,000 barrels per day...however, even after this week’s increase, our distillate inventories ended the week still 13.6% lower than the 155,732,000 barrels that we had stored on October 14th, 2016, and 5.5% lower than the 10 year average for distillates stocks for this time of the year…

finally, with our oil exports continuing at near record levels, our commercial crude oil inventories fell for the 24th time in the past 28 weeks, decreasing by 5,731,000 barrels, from 462,216,000 barrels on October 6th to 456,485,000 barrels on October 13th...while our oil inventories as of October 13th were 2.6% below the 468,711,000 barrels of oil we had stored on October 14th of 2016, they were still 2.7% higher than the 444,618,000 barrels in of oil that were in storage on October 16th of 2015, and 31.8% greater than the 346,414,000 barrels of oil we had in storage on October 17th of 2014...

This Week's Rig Count

US drilling activity decreased for 9th time in the past 12 weeks during the week ending October 20th, with this week's total pullback the largest since the week ending February 19th 2016...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 15 rigs to 913 rigs in the week ending Friday, which was still 360 more rigs than the 553 rigs that were deployed as of the October 21st report in 2016, while it was less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was down by 7 rigs to 736 rigs this week, their 10th decrease in 11 weeks, which still left active oil rigs up by 293 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 8 rigs to 177 rigs this week, which was the smallest natural gas rig deployment since May 10th and just 69 more gas rigs than the 108 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

there was no change in offshore drilling this week, as 20 platforms, all in the Gulf of Mexico, continued to see drilling activity, down from the 22 in the Gulf and one offshore from Alaska a year ago....the count of active horizontal drilling rigs was down by 15 rigs to 771 rigs this week, which was the smallest number of working horizontal rigs since July 2nd...however, that was still up by 326 rigs from the 445 horizontal rigs that were in use in the US on October 21st of last year, while down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the vertical rig count was down by 1 rig to 62 vertical rigs this week, but still up from the 57 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was up by 1 rig to 80 rigs this week, which was also up from the 51 directional rigs that were deployed on October 21st of of 2016.....

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 October 20th, the second column shows the change in the number of working rigs between last week's count (October 13th) and this week's (October 20th) count, the third column shows last week's October 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 21st of October, 2016...      

it's pretty clear from the first table which states saw rig shutdowns this past week, but the table of major basin variances misses a lot of this week's changes; Baker Hughes details indicate that 5 oil rigs and 4 gas rigs were shut down in "other' basins, which they do not name...for starters, we know that Alaska had two rigs shut down, but none of the Alaskan oil fields are listed, so that accounts for two of those missing from the basin table...likewise for Wyoming, where the 2 rig reduction, which could have been pulled out of the Powder River basin, is not accounted for in the Baker Hughes basin table...Utah also saw a rig shut down, while none of the Utah basins, such as the Unita, are listed above..then, since Louisiana had one rig shut down in the Haynesville while one rig started in the south, we can figure there's two Haynesville rigs that must have been shut down in Texas...since there were two rigs added in the Eagle Ford in south Texas while 5 rigs were pulled out of the Texas side of the Permian, three more of the unaccounted for basin reductions must have been in Texas...likewise, there's an unaccounted rig shutdown in Oklahoma, since there were 2 rigs added in the Cana Woodford while one was pulled out of the Ardmore Woodford...and outside of the states included among the major producers in the first table above, Illinois also had a rig shut down this week, leaving them with just 1 rig still running, the same number they had running on October 21st a year ago...

 

note:  there’s more here…

US exports record distillates as domestic shortage worsens; OPEC revises oil demand estimates higher, glut disappears

oil prices rose in 4 out of 5 trading sessions this week and ended at a 2 week high...US WTI crude for November delivery initially rose 29 cents on Monday to close at $49.58 a barrel, on indications from OPEC that they would extend their production cuts past March of next year and attempt to get other producers who were not part of the original pact to go along...the embryonic rally picked up steam on Tuesday after the Saudis announced they would cut their exports by 560,000 barrels per day in November, shorting their Asian customers 10% of their allocations, with US crude increasing $1.34 or 2.7% to close at $50.92 a barrel...prices then rose for a third day on Wednesday, closing 38 more cents higher at $51.30, as Kurdish and Iraqi troops moved to confrontational positions after a Kurdish independence vote and OPEC reported increasing demand for oil...oil prices then slipped on Thursday despite the EIA report that showed lower oil supplies, as the same EIA report showed an unexpected increase in gasoline supplies and the International Energy Agency lowered its 2018 forecast for oil demand, with US crude for November closing 70 cents lower at $50.60 a barrel...oil then pushed to a two week high on Friday after Trump refused to certify Iran’s compliance with the international nuclear deal, raising the specter of new sanctions on their oil output, with US crude up 85 cents, or 1.7%, to settle at $51.45 a barrel, a gain of more than 4% for the week...

international oil prices were also higher this week, with North Sea Brent for December closing Friday at $57.17 a barrel, 10.5% higher than the US December WTI closing price of $51.73 a barrel, so the underpricing of US oil that's been resulting in record US oil exports that we've been complaining about the past month still persists...while US crude exports for this reporting week were down more than 35% from the prior week's record high, they were still at their 4th highest in US history...

OPEC's October oil report

with OPEC jawboning moving the oil markets again, we're going start by reviewing OPEC's October Oil Market Report (covering September OPEC & global oil data), which was released on Wednesday of this past week....the first table from this report that we'll include here is from page 66 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures...  

from the above table of official oil production data, we can see that OPEC oil output increased by 88,500 barrels per day in September, to 32,748,000 barrels per day, from a August production total of 32,659,000 barrels per day, a figure that was originally reported as 32,755,000 barrels per day (for your reference, here is the table of the official August OPEC output figures before this month's revisions)...as we can see in the far right column, the reasons that OPEC's output rose 88,500 barrels per day were the 53,900 barrel per day increase in output from Libya, and the 50,800 barrel per day increase from Nigeria, the two countries that were exempt from the output quotas due to domestic strife...other than those two countries, these totals mean most OPEC members other than Iraq remain close to their agreed to production quota, as can be seen in the table below:

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first nine months of this year, and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as was agreed to at their November 2016 meeting, and the 3rd column shows how much each has averaged over or under their quotas for the eight months of this year that OPEC has curtailed production...as you can see from the above, most OPEC members are pretty close to meeting their commitment to cutting their production back 4%, except for Iraq, who has consistently overproduced by more than 2%...however, cuts in excess of those agreed to by the Saudis and several other OPEC countries have generally made up for the 89,000 barrels per day that Iraq is overproducing, so the organization as a whole has kept their commitment to reduce supply....

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from October 2015 to September 2017, and it comes from page 67 of the October OPEC Monthly Oil Market Report....the light blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...

the preliminary OPEC data indicates that total global oil production rose to 96.50 million barrels per day in September, up by .41 million barrels per day from a August total of 96.09 million barrels per day, which was revised .66 million barrels per day lower than the 96.75 million barrels per day global oil output for August that was reported a month ago...global oil output for September was still 0.10 million barrels per day higher than the 96.40 million barrels of oil per day that was being produced globally in September a year ago (see last October's OPEC report for the year ago data)... OPEC's September production of 32,748,000 barrels per day represented 33.9% of what was produced globally, a small decrease from their revised 34.0% share of August global output...OPEC's September 2016 production, excluding ex-member Indonesia, was at 32,672,000 barrels per day, so even after the alleged production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are still producing a bit more oil than they were producing a year ago, when they were supposedly producing flat out...

however, even after the increase in global oil output that we can see on the above graph, there was again a deficit in the amount of oil being produced globally, partly because of an upward revision in the estimate of global demand for oil, as the next table from the OPEC report will show us.. 

the table above comes from page 37 of the October OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally quarterly over 2017 over the rest of the table...on the "Total world" line of the fourth column, we've circled in blue the figure that's relevant for September, which is their estimate for global oil demand for the third quarter of 2017... 

OPEC's estimate is that during the 3rd quarter of this year, all oil consuming areas of the globe have been using 97.49 million barrels of oil per day, which is a small downward revision from their prior estimate of 97.57 million barrels of oil per day.....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, after the OPEC and non-OPEC production cuts, the world's oil producers were only producing 96.50 million barrels per day during September, which means that there was a shortfall of around 990,000 barrels per day in global oil production vis-a vis demand during the month...

also note that we have highlighted last month's estimates for global demand in green, so as to point out the other revisions that came with this report, which means our previous computations of global surplus or deficit oil for the past 8 months will also have to be revised...global oil demand for the second quarter was revised 160,000 barrels per day higher, to 96.21 barrels per day, and demand for the first quarter was revised 50,000 barrels per day higher, to 95.59 barrels per day...moreover, global oil production for August was concurrently revised lower, to 96.09 million barrels per day, so that means there was also a deficit of 1,400,000 barrels per day in August output, which we had previously figured to be a global oil deficit of around 820,000 barrels per day...July's global oil production of 97.16 million barrels per day was also a shortfall, but by just 330,000 barrels per day...

in addition, the 160,000 barrels per day upward revision to second quarter demand reduces the June surplus that we had computed to 920,000 barrels per day, and increases the May deficit to 290,000 barrels per day...before that, April's recomputed figures now show a 600,000 barrel per day deficit for the month, and prior to that the global oil surplus during March would be revised down to 470,000 barrels per day, and average surpluses over January and February would be reduced to around 690,000 barrels per day....taken together, this reports data means that after nine months of OPEC production cuts, the global oil glut has been reduced by roughly 27.5 million barrels of oil since the 1st of the year, reversing the 48 million barrel addition to the glut we reported last month, and the even larger additions to the glut we had reported in the months before that...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending October 6th, showed an increase in our oil imports and a drop in our oil exports, but as refinery throughput also increased, our crude oil supplies fell again, for the fourth week in a row... our imports of crude oil rose by an average of 403,000 barrels per day to an average of 7,617,000 barrels per day during the week, while at the same time our exports of crude oil fell by 715,000 barrels per day to a still high 1,270,000 barrels per day, which meant that our effective imports netted out to an average of 6,347,000 barrels per day during the week, 1,117,000 barrels per day more than during the prior week...at the same time, our field production of crude oil fell by 81,000 barrels per day to an average of 9,480,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,857,000 barrels per day during the reported week...

at the same time, US oil refineries were using 16,258,000 barrels of crude per day, 229,000 barrels per day more than they used during the prior week, while during the same period 564,000 barrels of oil per day were being withdrawn from oil storage facilities in the US...hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production and from storage, was 133,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (-133,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports still fell to an average of 5,988,000 barrels per day, 19.3% below the imports of the same four-week period last year....the rounded 564,000 barrel per day withdrawal from our total crude inventories came about on a 392,000 barrel per day withdraw from our commercial stocks of crude oil and a 171,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by Hurricane Harvey...this week's 81,000 barrel per day decrease in our crude oil production was due to a 87,000 barrel per day decreases in output from wells in the lower 48 states, possibly due to Hurricane Nate, while output from Alaska rose by 6,000 barrels per day...the 9,480,000 barrels of crude per day that were produced by US wells during the week ending October 6th was still 8.1% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.2% more than the 8,450,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was 1.4% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015... 

US oil refineries were operating at 89.2% of their capacity in using those 16,258,000 barrels of crude per day, up from 88.1% of capacity the prior week, but still way down from the 96.6% capacity utilization rate refineries saw in the week before Hurricane Harvey struck....the 16,258,000 barrels of oil that was refined this week was still 8.3% less than the 17,725,000 barrels per day that were being refined six weeks earlier, but it was 5,4% more than the 15,552,000 barrels of crude per day that were being processed during week ending October 7th, 2016, when refineries were operating at 85.5% of capacity, a reduction probably due to seasonal maintenance...

even with the increase in US oil refining, gasoline production from our refineries was lower, dropping by 112,000 barrels per day to 9,741,000 barrels per day during the week ending October 6th, which was also 2.0% lower than the 9,935,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 35,000 barrels per day to 4,964,000 barrels per day, which was 10.4% more than the 4,496,000 barrels per day of distillates that were being produced during the week ending October 7th last year....  

even with the drop in our gasoline production, our end of the week gasoline inventories rose by 2,490,000 barrels to 221,426,000 barrels by October 6th, the third increase in gasoline inventories in a row...that increase was mostly because our exports of gasoline fell by 231,000 barrels per day to 409,000 barrels per day, while our imports of gasoline fell by 2,000 barrels per day but remained elevated at 860,000 barrels per day...offsetting that, however, our domestic consumption of gasoline rose by 239,000 barrels per day to a seasonal high of 9,480,000 barrels per day at the same time...still, with significant gasoline supply withdrawals in 11 out of the last 17 weeks, our gasoline inventories are still down by 8.7% from June 9th's level of 242,444,000 barrels, and 1.8% below last October 7th's level of 225,498,000 barrels, even as they are still roughly 4.7% above the 10 year average of gasoline supplies for this time of the year...  

even with the increase in our distillates production, our supplies of distillate fuels still fell by 1,480,000 barrels to 133,959,000 barrels over the week ending October 6th, the 6th weekly drop in a row....that was because our exports of distillates rose by 246,000 barrels per day to a record 1,612,000 barrels per day, while our imports of distillates rose by 14,000 barrels per day to 85,000 barrels per day...at the same time, the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 359,000 barrels per day to 3,648,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 14.7% lower than the 156,972,000 barrels that we had stored on October 7th, 2016, and 5.6% lower than the 10 year average for distillates stocks for this time of the year…

finally, with our oil exports still at an elevated level, our commercial crude oil inventories fell for the 23rd time in 28 weeks, decreasing by 2.747,000 barrels, from 464,963,000 barrels as of September 29th to 462,216,000 barrels on October 6th...while our oil inventories as of October 6th were 2.5% below the 473,958,000 barrels of oil we had stored on October 7th of 2016, they were still 5.9% higher than the 436,590,000 barrels in of oil that were in storage on October 9th of 2015, and 36.2% greater than the 339,303,000 barrels of oil we had in storage on October 10th of 2014...

This Week's Rig Count

US drilling activity decreased for 8th time in the past 11 weeks during the week ending October 13th, and we've now seen only 4 increases in drilling in the past 14 weeks, following an expansion of drilling activity that ran 23 consecutive weeks earlier this year...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 8 rigs to 928 rigs in the week ending Friday, which was still 389 more rigs than the 539 rigs that were deployed as of the October 14th report in 2016, while it was less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was down by 5 rigs to 743 rigs this week, their 9th decrease in 10 weeks, which still left active oil rigs up by 311 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 2 rigs to 185 rigs this week, which was 80 more rigs than the 105 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, the only rig that was classified as miscellaneous was shut down this week, leaving none such active, in contrast to the 2 miscellaneous rigs that were deployed during the same week last year..

2 drilling platforms in the Gulf of Mexico off the shore of Louisiana were shut down this week, leaving 20 rigs still running in the Gulf, down from 22 Gulf rigs a year ago...however, last year there was also a rig drilling in the Cook Inlet, offshore of Alaska, which means this week's total offshore rig count of 20 rigs is down three rigs from the 23 offshore rigs of a year ago....

the count of active horizontal drilling rigs was down by 6 rigs to 786 rigs this week, which was still up by 355 rigs from the 431 horizontal rigs that were in use in the US on October 14th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the vertical rig count was down by 2 rigs to 63 vertical rigs this week, but still up from the 57 vertical rigs that were deployed during the same week last year....meanwhile, the directional rig count was unchanged at 79 rigs this week, which was up from the 51 directional rigs that were deployed on October 14th of of 2016.....

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 October 13th, the second column shows the change in the number of working rigs between last week's count (October 6th) and this week's (October 13th) count, the third column shows last week's October 6th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 14th of October, 2016...     

it looks like the largest losses this week were in two of the Texas basins, as the Eagle Ford in the south saw six rigs shut down, and the Barnett shale underlying the Dallas/Ft Worth region had their count cut back by 4 rigs...those two basins also account for the natural gas rig reductions, since the Eagle Ford saw its gas directed rig count drop by 2 rigs to 5 rigs, while Barnett shale drillers cut one gas rig and three oil rigs and had 3 gas rigs and one oil rig remaining...the natural gas addition to balance those closures was in the Denver-Julesburg Niobrara, where a well was spud seeking natural gas for the first time in two years...drilling in the Utica and the Marcellus remained unchanged in the aggregate, although it does appear that one Marcellus rig was shut down in West Virginia while one was started in Pennsylvania at the same time....outside of the states shown among the major producers in the first table above, Mississippi also had a rig shut down this week, leaving them with 3 rigs still running, the same number they had running on October 14th a year ago...

 

NOTE: there’s more here…

Consumer Prices up 0.5% in September on Gasoline Price Spike

the consumer price index increased by 0.5% in September, as gasoline prices spiked after the Texas Gulf Coast refineries were shut down by Hurricane Harvey, accounting for about three-fourths of the month’s overall price increase...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.5% in September after rising 0.4% in August. 0.1% in July, being unchanged in June and after falling 0.1% in May....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 245.519 in August to 246.819 in September, which left it statistically 2.233% higher than the 241.428 index reading of last September, which is reported as a 2.2% year over year increase...with higher prices for gasoline driving the gain in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 252.460 to 252.941, which put it 1.69% ahead of its year ago reading of 248.731...

the volatile seasonally adjusted energy price index increased by 6.1% in September, after it had risen 2.8% in August but after it fell by 0.1% in July, 1.6% in June, and 2.7% in May...however, energy prices are now averaging 10.1% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were up by 12.6% in September, while the index for energy services fell by 0.2%, after falling 0.1% in August, 0.2% in July and 0.5% in June... the increase in the energy commodity index included a 13.0% jump in the price of gasoline, the largest component, and a 8.2% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.8%…within energy services, the index for utility gas service fell by 0.8% after decreasing by 0.5% in August and 2.3% in July, but utility gas is still priced 3.8% higher than it was a year ago, while the electricity price index was unchanged for the second month in a row....energy commodities are now priced 18.9% above their year ago levels, with gasoline prices averaging 19.3% higher than they were a year ago...meanwhile, the energy services price index is now 2.2% higher than last September, as electricity prices have also risen by 1.7% over that period..

the seasonally adjusted food price index was up 0.1% in September, after rising 0.1% in August, 0.2% in July, being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as the index for food purchased for use at home was unchanged in September, while prices for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.4% and prices at full service restaurants both rose 0.2%, while food prices at schools rose 2.1%...

in the food at home categories, the price index for cereals and bakery products increased by 0.1%, as prices for bread fell 0.7% while other bakery product prices rose 1.0%...the price index for the meats, poultry, fish, and eggs group was down 0.4% as beef prices fell 0.7% and ham prices fell 2.2%, while the index for dairy products was 0.6% lower on 1.6% decrease in the price of fresh milk other than whole...the fruits and vegetables index was 0.2% lower on a 0.8% decrease in prices for fresh vegetables, and a 1.5% decrease in prices for frozen fruits and vegetables...on the other hand, the beverages index was 0.4% higher as roast coffee prices were up 1.3% and carbonated drink prices rose 0.5%....lastly, prices in the ‘other foods at home’ category were 0.3% lower on average, as butter prices fell 2.0% and salad dressing prices were 0.6% lower.......among food at home line items, only bacon, which is now priced 13.4% higher than a year ago, has seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1% in September after rising by 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods fell by 0.2%, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust September retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.4% lower on a 1.5% decrease in prices for laundry appliances and a 3.2% drop in prices for dishes and flatware, while the apparel price index was 0.1% lower as a 3.2% increase in prices for men's suits and outerwear was offset by a 5.1% decrease in prices for women's outwear...prices for transportation commodities other than fuel were down 0.3%, as prices for new cars were down 0.5% while prices for motor oil, coolant, and fluids fell 0.9%...meanwhile, prices for medical care commodities were 0.8% lower on a 1.4% decrease in nonprescription drug prices...on the other hand, the recreational commodities index was unchanged as another 1.5% drop in TV prices was offset by a 1.0% increase in prices for film and photographic supplies and a 1.2% increase in the index for toys, games, hobbies and playground equipment...at the same time, the education and communication commodities index was 1.2% lower on 1.9% decreases in prices for college textbooks and for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.4% on 0.8% higher beer prices, while the price index for ‘other goods’ was up 0.5% on a 1.1% increase in the index for hair, dental, shaving, and other personal care products and a 1.7% increase in prices for stationery, gift wrap and other personal paper supplies..

within core services, the price index for shelter rose 0.3% on a 0.2% increase in rents, a 0.2% increase in owner's equivalent rent, and a 1.7% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.3% and other household operation costs were unchanged....meanwhile, the index for medical care services was up 0.1%, as prices for both hospital services and physicians' services were up 0.2% while health insurance was 0.2% lower...at the same time, the transportation services index was 0.3% higher on an 1.8% increase in intracity mass transit fees and 0.8% higher motor vehicle repairs....the recreation services index rose 0.2% as film processing rose 2.1% and video & audio rental services rose 1.2%, while the index for education and communication services also rose 0.2% as wireless telephone services rose 0.4% and college tuitions rose 0.6%...lastly, the index for other personal services was unchanged as tax return services rose 0.1% and legal services fell 0.2%...among core prices, only the index for clocks, lamps, and decorator items, which is now 13.1% lower than a year ago, and prices for wireless phone services, which are now 11.7% lower than a year ago, have seen prices drop by more than 10% over the past year, while no core line item has seen prices rise by a double digit magnitude in that span..  

 

NOTE: there’s more economic news here…

US oil exports hit another record high as US oil continues to sell at a 12% discount

US oil prices were broadly lower this week for the first time since August, but international prices still remain 12% higher for comparative grades of oil, which has now resulted in a second week of record high US oil exports...US prices started the week by falling $1.09 a barrel to $50.58 a barrel on Monday, after a Reuters survey indicated that OPEC had increased their oil output in September....US crude for November delivery then fell another 16 cents to $50.42 a barrel on Tuesday, as speculators continued to cash in their profits after big third quarter gains...oil prices then slipped below $50 a barrel for the first time in more than two weeks on Wednesday, shedding 44 cents to close at $49.98 a barrel, as the EIA report that the US was exporting oil at a record 2 million barrels per day fanned fears that US exports would exacerbate global oversupply...oil prices then recovered and rose 81 cents on Thursday to close at $50.79 a barrel, as indications that Saudi Arabia and Russia would limit production through 2018 pushed prices higher globally....US crude futures then dropped $1.50, or nearly 3%, to $49.29 a barrel on Friday, as yet another hurricane approached the Gulf Coast ports and traders pulled back in advance of Trump's decision next week on the international deal that curbs Iran's nuclear program...US crude thus ended nearly 5% lower for the week, in its first weekly decline in over a month...

however, the problem for US oil remains that despite this week's drop, global oil prices remain roughly 12% higher than those here, which is spurring record exports of US crude....to look at how that developed, we'll include a graph that shows the premium price of Brent crude, the global benchmark, over that of West Texas Intermediate (WTI) crude, the US benchmark, right up to Thursday of this week....

the above graph was part of a chart book that was linked to in an article by John Kemp at Reuters titled 'WTI discount to Brent reflects logistics constraints: Kemp', published on Friday of this week, and it tracks the premium of the price for North Sea Brent, the global oil benchmark, over that of West Texas Intermediate (WTI), the US benchmark, since the beginning of this year, with both prices quoted for December delivery (because trading for November Brent expired last Friday)...the point that John makes in his article is that even as overall US crude supplies have been falling, they've been increasing in the Midwest, or more specifically in PADD 2, (Petroleum Administration for Defense District 2) a geographic aggregation that includes all the states from Ohio to Oklahoma and North Dakota...since WTI is priced at Cushing Oklahoma, his thinking goes, that Midwest glut is pushing down the price of WTI vis-a-vis the rest of the world...

while that may be true as far as WTI goes, it's hard for me to see how that Midwest glut could be having such an impact on all North American oil prices....oilprice.com publishes daily a list of over 50 different oil prices from around the US and around the globe, and we can see from that table that US oil prices that should not be impacted by the Midwest glut are similarly discounted...Mars crude, which is an index of Gulf of Mexico deepwater crudes, was priced at $50.52 on Friday, $1.23 more than WTI but still $4.10 lower than Brent...furthermore, there's a list of over a dozen grades of Texas crude, with easy access to the Gulf ports, that are all priced below $46 a barrel....Eagle Ford crude at $45.74 a barrel, for instance, is just a stone's throw away from Corpus Christi, the largest US crude export terminal; if the same oil will fetch $55 a barrel on global markets, they'd be foolish not to export it an pocket the profit...even worse, US crude oil has been selling at a price so low that the Saudis, who own the largest US refinery, could buy it, ship it to their country, resell it as their own and still make a 10% profit...and that disconnect will continue until such time as the spread between US prices and international prices closes enough to prohibit it...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending September 29th, showed a modest decrease in the amount of oil used by refineries and a modest decrease in our oil imports coupled with a big jump in our now record oil exports, and as a result our crude oil supplies fell by the most in four weeks.... our imports of crude oil fell by an average of 213,000 barrels per day to an average of 7,214,000 barrels per day during the week, while at the same time our exports of crude oil rose by 419,000 barrels per day to a record high of 1,984,000 barrels per day, which meant that our effective imports netted out to an average of 5,230,000 barrels per day during the week, 706,000 barrels per day less than during the prior week...at the same time, our field production of crude oil rose by 14,000 barrels per day to an average of 9,561,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,791,000 barrels per day during the reported week...

at the same time, US oil refineries were using 16,029,000 barrels of crude per day, 145,000 barrels per day less than they used during the prior week, while during the same period 996,000 barrels of oil per day were being withdrawn from oil storage facilities in the US...hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production and from storage was 242,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+242,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports inched up to an average of 7,122,000 barrels per day, which was 10.7% below the imports of the same four-week period last year....the rounded 996,000 barrel per day withdrawal from our total crude inventories came about on a 860,000 barrel per day withdrawal from our commercial stocks of crude oil and a 136,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which is still being tapped to address temporary spot shortages caused by Hurricane Harvey...this week's 14,000 barrel per day increase in our crude oil production all came by way of an increase in oil output from Alaska as output from wells in the lower 48 states was unchanged...the 9,561,000 barrels of crude per day that were produced by US wells during the week ending September 29th was the most oil produced in any week since July 17th, 2015, 9.0% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 13.0% more than the 8,460,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still a half percent below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015... 

US oil refineries were operating at 88.1% of their capacity in using those 16,029,000 barrels of crude per day, down from 88.6% of capacity the prior week, and down from the 96.6% capacity utilization rate in the week before Harvey struck....the 16,029,000 barrels of oil that was refined this week was still 9.6% less than the 17,725,000 barrels per day that were being refined five weeks earlier, but it was virtually the same as the 16,032,000 barrels of crude per day that were being processed during week ending September 30th, 2016, when refineries were operating at 88.3% of capacity, as they are now slowing down during this time of seasonal maintenance...

with the modest decrease in US oil refining, gasoline production from our refineries was little changed, slipping by just 2,000 barrels per day to 9,853,000 barrels per day during the week ending September 29th, which was 1.4% lower than the 9,988,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 290,000 barrels per day to 4,929,000 barrels per day, which was 4.5% more than the 4,713,000 barrels per day of distillates that were being produced during the week ending September 30th last year....  

with little change in our gasoline production, our end of the week gasoline inventories rose by 1,525,000 barrels to 217,292,000 barrels by September 29th, just the 5th increase in gasoline inventories in 16 weeks...that increase was mostly because our domestic consumption of gasoline fell by 281,000 barrels per day to 9,241,000 barrels per day, while our imports of gasoline fell by 179,000 barrels per day but remained elevated at 862,000 barrels per day, and while our exports of gasoline rose by 90,000 barrels per day to 640,000 barrels per day...still, with significant gasoline supply withdrawals in 11 out of the last 16 weeks, our gasoline inventories are still down by 9.7% from June 9th's level of 242,444,000 barrels, and 3.7% below last September 30th's level of 227,405,000 barrels, even as they are still roughly 2.3% above the 10 year average of gasoline supplies for this time of the year...

even with the increase in our distillates production, our supplies of distillate fuels fell by 1,644,000 barrels to 135,439,000 barrels over the week ending September 29th, the 5th weekly drop in a row....that was mostly because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 261,000 barrels per day to 4,007,000 barrels per day, and because our exports of distillates rose by 273,000 barrels per day to 1,366,000 barrels per day, while our imports of distillates fell by 12,000 barrels per day to 72,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 15.7% lower than the 160,718,000 barrels that we had stored on September 30th, 2016, and 5.6% lower than the 10 year average for distillates stocks for this time of the year…since our distillates supplies are now abnormally low for this time of year, we'll again include a graph of what that looks like compared to their recent history:

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the median of our distillates inventory, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year...the graph also shows the number of barrels of distillates we had stored for each week in 2016 traced weekly by a yellow line, with our 2017 year to date distillates supplies for each week traced in red...notice in the light blue shaded area that there is an obvious seasonality to distillates supplies, as they're normally built up during the summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heat oil is greatest...however, this summer, when supplies of distillates should have been increasing like they have every other year, they were falling all summer instead, beginning even before the post-Harvey refinery shut downs...we're now heading into a period where refineries will be partially shut down for annual maintenance, so it now looks likely that heat oil supplies will be very tight going into winter...

finally, with the big jump in our oil exports and a decrease in imports, our commercial crude oil inventories fell for the 22nd time in 27 weeks, decreasing by 6,023,000 barrels, from 470,986,000 barrels as of September 22nd to 464,963,000 barrels on September 29th...while our oil inventories as of September 29th were still fractionally below the 469,108,000 barrels of oil we had stored on September 30th of 2016, they were still 8.4% higher than the 429,028,000 barrels in of oil that were in storage on October 2nd of 2015, and 40.7% greater than the 330,380,000 barrels of oil we had in storage on October 3rd of 2014... 

since the major oil story this week is again our record oil exports, we'll include this week's graph of them so you can see how much they've jumped..

the above graph also comes from that weekly emailed package of oil graphs from John Kemp of Reuters...this graph shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 5 weeks...last week i thought our record oil exports might just be a rebound after the Gulf ports reopened after Harvey's damage was cleared; this week it's clear that our exports are now far and above what any rebound would result in, and that's it's now clear our oil is being exported simply because it's so cheaply priced...

This Week's Rig Count

US drilling activity decreased for 7th time in the past 10 weeks during the week ending October 6th, as it continued the contraction that began in mid-July, following an expansion of activity that ran 23 consecutive weeks earlier this year...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 936 rigs in the week ending Friday, which was still 412 more rigs than the 524 rigs that were deployed as of the October 7th report in 2016, while it was less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was down by 2 rigs to 748 rigs this week, their 8th decrease in 9 weeks, which still left active oil rigs up by 320 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 2 rigs to 187 rigs this week, which was 93 more rigs than the 94 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one rig that was classified as miscellaneous continued drilling this week, down from the 2 miscellaneous rigs that were deployed the same week last year..

drilling continued from 22 platforms the Gulf of Mexico this week, unchanged from last week and from a year ago...however, last year there was also a rig drilling in the Cook Inlet, offshore of Alaska, which means this week's total offshore rig count of 22 rigs is down a rig from the 23 rigs of a year ago....in addition, another platform that had been drilling on an inland lake in southern Louisiana was shut down this week, leaving an 'inland waters' count of just 1 rig, the same as the inland waters count of a year ago...

the count of active horizontal drilling rigs fell by 2 rigs to 792 rigs this week, which was still up by 379 rigs from the 413 horizontal rigs that were in use in the US on October 7th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was down by 3 rigs to 79 rigs this week, which was still up from the 50 directional rigs that were deployed on October 7th of of 2016.....on the other hand, the vertical rig count was up by 1 rig to 65 vertical rigs this week, up from the 61 vertical rigs that were deployed during the same week last year... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 October 6th, the second column shows the change in the number of working rigs between last week's count (September 29th) and this week's (October 6th) count, the third column shows last week's September 29th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 7th of October, 2016...     

 

note:  there’s more here…