oil ends 2017 above $60, first time in 30 months; US refining at wintertime high, distillates production at a record high

oil prices rose for the 2nd week in a row this week and ended at their highest level of the year, closing above $60 a barrel for the first time since June of 2015...after being little changed in light overseas trading through the Christmas weekend, US crude oil prices for February delivery surged $1.50 to close at a 2-1/2-year high of $59.97 a barrel on Tuesday, on news that an explosion on a major Libyan oil pipeline had disrupted the country's crude supply...prices then eased back 33 cents on Wednesday to close at $59.64 a barrel after the head of the Libyan state oil firm told Reuters the pipeline repair could take a week but would not have a major impact on exports, and on news that the cracked North Sea Forties pipeline was gradually resuming operations...oil prices then see-sawed on Thursday and ended 20 cents higher at $59.84 a barrel after the weekly EIA report showed a continuation of the ongoing decline in US oil supplies...US crude prices then rose 58 cents to close at $60.42 a barrel on Friday, 41% higher than its lowest point earlier this year, as oil traders interpreted a decline in US crude production and the weekly rig count to mean that producers were being cautious about ramping up their output...prices thus ended the week 12.5% higher than at the end of 2016, and up 132% from their low in February 2016...

since oil prices are at a two and a half year high and appear to have clearly broken out of the trading range they've been in for the past year and a half, we'll next include a graph of that price history so we can see how this price rally has developed..

the above graph is a screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for one week of oil trading between May 2011 and December 29th of this year, wherein green bars represent the weeks when the price of oil went up, and red bars represent the weeks when the price of oil went down...for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar...barely visible in this compressed view, there are also feint grey "wicks" above and below each bar to indicate trading prices during each week that were above or below the opening to closing price range for that week...

on this graph, we can see how oil prices stayed in a range roughly between $80 and $110 a barrel from mid-2011 till the fall of 2014, a period that saw widespread drilling and fracking helter-skelter across the breadth of the US...oil prices had already slipped to $78 a barrel the week before the Thanksgiving 2014 OPEC meeting that declared war on US fracking, after which oil prices quickly fell to $65 a barrel, and then continued lower, albeit with some intervening price rallies, until bottoming out at $26.02 a barrel on February 11, 2016, before spiking back up to $29 a barrel a day later (look closely at the graph, and you can see the 'wick' for that price dip at the bottom of the red candlestick for that week)...oil prices climbed to $50 a barrel pretty quickly after that, and generally stayed in a range between $44 a barrel and $54 a barrel from the Spring of 2016 through the Autumn of this year, a price range which kept the frackers confined to the most profitable sweet spots in the most productive oil fields...with prices now trending higher, we would expect to see a gradual expansion by exploration and exploitation enterprises into areas of the US that have seen little activity over the past few years...

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 December 22nd, showed that despite an increase in our oil imports and a decrease in our oil exports, we once again had to pull quite a bit of oil out of storage, mostly because US refineries were running at a record pace for this time of year...our imports of crude oil rose by an average of 159,000 barrels per day to an average of 7,993,000 barrels per day during the week, while our exports of crude oil fell by an average of 648,000 barrels per day to an average of 1,210,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,783,000 barrels of per day during the week, 807,000 barrels per day more than the net imports of the prior week...at the same time, field production of crude oil from US wells fell by 35,000 barrels per day to 9,754,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,537,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 17,398,000 barrels of crude per day, 335,000 barrels per day more than they used during the prior week, while at the same time 644,000 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 still 217,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+217,000) 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, a fudge factor that is labeled 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 7,598,000 barrels per day, still 5.9% less than the 8,075,000 barrels per day average imported over the same four-week period last year....the 644,000 barrel per day decrease in our total crude inventories came about on a 658,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 14,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency... this week's 35,000 barrel per day decrease in our crude oil production was due to a 24,000 barrel per day decrease in output from wells in the lower 48 states, and an 11,000 barrels per day decrease in output from Alaska....the 9,754,000 barrels of crude per day that were produced by US wells during the week ending December 22nd was still 11.2% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 15.7% above the recent low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...

US oil refineries were operating at 95.7% of their capacity in using those 17,398,000 barrels of crude per day, up from 94.1% of capacity the prior week, and the highest capacity utilization on record for any week in December since 1998....the 17,398,000 barrels of oil that were refined this week was only 1.8% less than the record 17,725,000 barrels per day that were being refined at the end of August of this year, and was 5.1% more than the 16,557,000 barrels of crude per day that were being processed during week ending December 23rd, 2016, when refineries were operating at 91.0% of capacity, and roughly 12.5% above the 10-year seasonal average for this time of the year... 

we'll include a graph of what that refinery throughput looks like, since it's so far above the norm, and almost a record at a out of season time of year..

the above graph came from the package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out last week...this graph shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput for any given date shown in the light blue shaded area, and the median of our refinery throughput, 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 oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented by the red graph...since John was on vacation this week, i've taken the liberty of adding this week's refinery spike to his graph of the prior week, so you can see how far above last year's record level this week's refining has been...in fact, you can also see that this year's oil refining has been beating what were the record or near record levels of last year by a large margin since the beginning of April, except for during the disruptions to refining resulting from this year's hurricanes, setting several record highs on the way...

with the big increase in the amount of oil being refined, gasoline output from our refineries was likewise higher, increasing by 181,000 barrels per day to 10,246,000 barrels per day during the week ending December 22nd, after slipping during the prior week despite increased refining....however, even with this week's increase, our gasoline production was still 2.8% lower than the record 10,537,000 barrels of gasoline that were being produced daily during the week ending December 23rd of last year....however, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 270,000 barrels per day at the same time to a record high of 5,476,000 barrels per day, which was also 10.5% more than the 4,957,000 barrels of distillates per day that were being produced during the the same week a year ago....  

with the increase in our gasoline production, our gasoline inventories at the end of the week rose by 591,000 barrels to 228,374,000 barrels by December 22nd, their seventh increase in a row...that was as our domestic consumption of gasoline increased by 59,000 barrels per day to 9,485,000 barrels per day, and as our exports of gasoline rose by 58,000 barrels per day to 862,000 barrels per day, while our imports of gasoline fell by 99,000 barrels per day to 388,000 barrels per day....however, with significant gasoline supply withdrawals throughout the summer months, our gasoline inventories are still down by 5.8% from their pre-summer high of 242,444,000 barrels, even as they are up fractionally from last December 23rd's level of 227,143,000 barrels, and roughly 4.4% above the 10 year average of gasoline supplies for this time of the year...     

meanwhile, with our distillates production at a record level, our supplies of distillate fuels rose by 1,090,000 barrels to 129,935,000 barrels over the week ending December 22nd, in just the sixth increase in distillates supply in seventeen weeks...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 400,000 barrels per day to 4,326,000 barrels per day, and as our imports of distillates fell by 141,000 barrels per day 239,000 barrels per day, while our exports of distillates fell by 317,000 barrels per day to 4,326,000 barrels per day...even after this week’s inventory increase, however, our distillate supplies were still 14.3% lower at the end of the week than the 151,634,000 barrels that we had stored on December 23rd, 2016, and roughly 5.0% lower than the 10 year average of distillates stocks at this time of the year…

finally, with US refineries using oil at a record pace, our commercial crude oil inventories fell for the 31st time in the past 38 weeks, decreasing by 4,609,000 barrels, from 436,491,000 barrels on December 15th to a 26 month low of 431,882,000 barrels on December 22nd ....while our oil inventories as of December 22nd were thus 11.1% below the 486,063,000 barrels of oil we had stored on December 23rd of 2016, and 5.1% lower than the 455,106,000 barrels of oil that we had in storage on December 25th of 2015, they were still 22.4% greater than the 352,979,000 barrels of oil we had in storage on December 26th of 2014, when the buildup to an oil glut in the US was just getting started... 

This Week's Rig Count

US drilling activity decreased for the second time in 8 weeks during the week ending December 29th, but all the changes over the past 4 weeks have really been insignificant....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rig to 929 rigs in the week ending on Friday, which was still 271 more rigs than the 658 rigs that were deployed as of the December 30th report in 2016, while it was still 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 unchanged at 747 rigs this week, which was still 222 more oil rigs than were running a year ago, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations fell by 2 rigs to 182 rigs this week, which was still only 50 more gas rigs than the 132 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...

with the shutdown of a drilling platform offshore from Texas, drilling activity in the Gulf of Mexico was was down by 1 rig to 18 rigs this week, which was also down from the 22 rigs that were drilling from platforms in the Gulf of Mexico a year ago...the total national offshore count was also down 1 rig at 18 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, for a national total of 23 offshore rigs that were working last December 30th...

this week's count of active horizontal drilling rigs was down by 5 rigs to 796 horizontal rigs this week, but it was still up by 264 rigs from the 532 horizontal rigs that were in use in the US at the end of last year, but of course was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count was up by 1 rig to 65 vertical rigs this week, but that was still down from the 70 vertical rigs that were working during the same week last year....in addition, the directional rig count was up by 2 rigs to 68 rigs this week, which was also up from the 56 directional rigs that were deployed on December 30th 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 December 29th, the second column shows the change in the number of working rigs between last week's count (December 22nd) and this week's (December 29th) count, the third column shows last week's December 22nd 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 30th of December, 2016...               

you'll notice that despite the decrease of two rigs targeting natural gas nationally, there was still a rig added in Ohio's Utica shale; at the same time, gas rigs were pulled out of the Haynesville in Texas at the Louisiana border, and out of two 'other' gas fields not named in Baker Hughes summaries...otherwise, the few changes you see on the tables above seem to be the extent of this week's changes, as it seems even most decisions in the oil fields were put on hold during the holiday week...

 

note: there’s more here..

US oil, products exports rising again as international markets command premium prices

after slipping a bit on Monday, oil prices moved steadily higher the rest of the week and approached a two and a half year high in closing up for the first time in four weeks....after initially trading as high as $57.78 a barrel on Monday, US light sweet crude for January delivery fell 14 cents for the day to end at $57.16 a barrel, as the EIA forecast that US crude production from shale would grow by 94,000 barrels a day during January, negating upward price pressure from the North Sea pipeline outage and a Nigerian oil worker's strike that drove international oil prices 18 cents higher...with international prices up 59 cents on Tuesday on the cutoff of North Sea supplies, US oil prices also rose, with the expiring January WTI contract closing 30 cents higher at $57.46 a barrel on bullish overseas news and expectations that US crude stockpiles data would show a fourth consecutive large weekly drawdown of US crude supplies...now trading oil contracts for February, which had closed Tuesday up 34 cents to $57.56 a barrel, that front month US crude price rose 53 cents to close at $58.09 a barrel on Wednesday, after the EIA data indicated an even larger-than-expected drop in US crude oil inventories...U.S. crude futures for February then rose for a third straight day on Thursday to settle up 27 cents at $58.36 a barrel, their second highest level of the year, on a follow-thru on the previous day's news of falling crude inventories...US crude prices then tacked on another 11 cents in thin pre-holiday trading on Friday, on a promise from Russian Energy Minister Alexander Novak that OPEC and Russia would exit their output cuts smoothly to avoid creating any new oil surplus, closing the week with a 2% gain at $58.47 a barrel, the highest weekly close since November 24th and the second highest close since June 22nd, 2015...

at the same time, international oil prices, as represented by trading in February contracts for North Sea Brent crude, were up every day during the past week, rising over $2 or 3.2% during the week to close to $65.25 a barrel, its highest price in more than two years...that means the premium of international oil prices over US prices is again approaching 12%, a premium that encouraged weeks of record high US oil exports just two months ago...in like manner, premiums for LNG in Asia and Europe saw a record spread over the benchmark price for US natural gas as set at the Henry Hub in Louisiana this week...with the price of LNG delivered to Japan, Korea and Malaysia averaging $10.85 per mmBTU early this week, LNG delivered to northeast Asia was $8.11 per mmBTU higher than the US price, while the UK's natural gas price climbed to as high as $8.83 per mmBTU over the US price...with US natural gas for January delivery hitting a cycle low of $2.598 per mmBTU on Thursday before closing the week at  $2.667 per mmBTU, US natural gas suppliers could be in a position to triple what they get from domestic natural gas customers, even after paying for liquefaction and transportation costs, if they could export larger quantities of that gas today...with the weekly Natural Gas Storage Report from the EIA indicating that US natural gas supplies are now 5% below their level of the same week of a year ago, our domestic stocks are not yet really threatened, but that will certainly be something to watch as the wave of new US LNG export capacity additions starts to come online in the 2nd half of next year..

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 December 15th, showed that our oil exports jumped back to near record levels while our refineries ran at an above normal pace for this time of year, which meant we again had to pull quite a bit of oil out of storage to meet those needs...our imports of crude oil rose by an average of 471,000 barrels per day to an average of 7,834,000 barrels per day during the week, while our exports of crude oil rose by an average of 772,000 barrels per day to average 1,858,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,976,000 barrels of per day during the week, 301,000 barrels per day less than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 9,000 barrels per day to another record high of 9,789,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,765,000 barrels per day during the reporting week...  

during the same week, US oil refineries were using 17,063,000 barrels of crude per day, 111,000 barrels per day more than they used during the prior week, while at the same time 873,000 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 425,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+425,000) 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, a metric that is labeled 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 slipped to an average of 7,432,000 barrels per day, 6.2% less than the 7,921,000 barrels per day average imported over the same four-week period last year....the 873,000 barrel per day decrease in our total crude inventories came about on a 928,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 55,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency...this week's 9,000 barrel per day increase in our crude oil production came by way of a 15,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 6,000 barrels per day decrease in output from Alaska....the 9,789,000 barrels of crude per day that were produced by US wells during the week ending December 15th was yet another new record high for US output, 11.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up 16.1% from the recent output nadir of 8,428,000 barrels per day produced during the last week of June 2016...

US oil refineries were operating at 94.1% of their capacity in using those 17,063,000 barrels of crude per day, up from 93.4% of capacity the prior week, and the highest capacity utilization on record for the 2nd week of December....the 17,063,000 barrels of oil that were refined this week were 3.7% less than the record 17,725,000 barrels per day that were being refined at the end of August, but 2.4% more than the 16,658,000 barrels of crude per day that were being processed during week ending December 16th, 2016, when refineries were operating at 91.5% of capacity, and 10.4% above the 10-year seasonal average for this time of the year... 

even with the increase in the amount of oil being refined, gasoline output from our refineries was slightly lower, as it decreased by 64,000 barrels per day to 10,065,000 barrels per day during the week ending December 15th, after rising last week on slower refining....that decrease meant our gasoline production was 0.8% lower than the 10,150,000 barrels of gasoline that were being produced daily during the week ending December 16th of last year...at the same time, our  refineries' production of distillate fuels (diesel fuel and heat oil) fell by 41,000 barrels per day to 5,206,000 barrels per day....however, that was still 1.6% more than the 5,122,000 barrels per day of distillates that were being produced during the the same week a year ago....     

with the relatively small decrease in our gasoline production, our gasoline inventories at the end of the week rose by 1,237,000 barrels to 227,783,000 barrels by December 15th, their sixth increase in a row...that was despite an increase of 335,000 barrels to 9,426,000 barrels per day in our domestic consumption of gasoline, while our exports of gasoline also rose by 73,000 barrels per day to 804,000 barrels per day, and while our imports of gasoline inched up by 4,000 barrels per day to 487,000 barrels per day....however, with significant gasoline supply withdrawals in 15 out of the prior 21 weeks, our gasoline inventories are still down by 6.0% from their pre-summer high of 242,444,000 barrels, and down fractionally from last December 16th's level of 228,736,000 barrels, even as they are roughly 4.1% above the 10 year average of gasoline supplies for this time of the year...    

meanwhile, with the small drop in our distillates production, our supplies of distillate fuels rose by 769,000 barrels to 128,845,000 barrels over the week ending December 15th, in just the fifth increase in distillates supply in sixteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 454,000 barrels per day to 3,926,000 barrels per day, even as our exports of distillates rose by 338,000 barrels per day to 1,550,000 barrels per day, while our imports of distillates rose by 231,000 barrels per day to a 33 week high of 380,000 barrels per day...even after this week’s increase, our distillate inventories were still 16.1% lower at the end of the week than the 153,515,000 barrels that we had stored on December 16th, 2016, and roughly 5.4% lower than the 10 year average of distillates stocks at this time of the year…

finally, with the week's increase in our oil exports and the increase in our refining, our commercial crude oil inventories fell for the 30th time in the past 37 weeks, decreasing by 6,495,000 barrels, from 442,986,000 barrels on December 8th to a 26 month low of 436,491,000 barrels on December 15th....while our oil inventories as of December 15th were thus 10.1% below the 485,449,000 barrels of oil we had stored on December 16th of 2016, and 3.5% lower than the 452,477,000 barrels of oil that we had in storage on December 18th of 2015, they were still 23.0% greater than the 354,733,000 barrels of oil we had in storage on December 19th of 2014, when the buildup to an oil glut in the US was just getting started... 

This Week's Rig Count

US drilling activity increased for the sixth time in seven weeks but for just the 9th time out of the last 21 weeks during the week ending December 22nd, but just barely...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 1 rig to 931 rigs in the week ending on Friday, which was also 278 more rigs than the 653 rigs that were deployed as of the December 23rd report in 2016, while it was still 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 unchanged at 747 rigs this week, which was still 224 more oil rigs that were running a year ago, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations rose by 1 rig to 184 rigs this week, which was still only 55 more gas rigs than the 129 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...

drilling activity in the Gulf of Mexico was unchanged at 19 rigs this week, which was down from the 24 rigs that were drilling from platforms in the Gulf of Mexico a year ago...with no other offshore drilling elsewhere, the national offshore count was also at 19 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, for a national total of 25 offshore rigs...

this week's count of active horizontal drilling rigs was unchanged at 801 horizontal rigs this week, but it was still up by 275 rigs from the 526 horizontal rigs that were in use in the US on December 23rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count was up by 4 rigs to 64 vertical rigs this week, but that was still down from the 69 vertical rigs that were working during the same week last year....on the other hand, the directional rig count was down by 3 rigs to 66 rigs this week, which was still up from the 58 directional rigs that were deployed on December 23rd 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 December 22nd, the second column shows the change in the number of working rigs between last week's count (December 15th) and this week's (December 22nd) count, the third column shows last week's December 15th 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 23rd of December, 2016...              

there appears to be a few unexplained disparities between the state rig counts from those in the major basins this week....first, note that the central Oklahoma Cana Woodford saw a 4 rig increase, despite the state count being down by a single rig...that would suggest that a net of 4 rigs drilling conventional wells were pulled out of the state, since the only other basin in Oklahoma to show a change was the Mississippian on the Kansas border....then, noting the 4 rig increase in New Mexico, it's possible 3 of those were in the Permian, since the west Texas districts that include the Permian in that state were down by 2 rigs, while drilling in the Dallas area Barnett shale increased by two rigs...also note that all the basin count changes involve oil rigs; the single natural gas rig addition was in an "other" unnamed basin...and in addition to the changes in the major producing states shown above, Alabama also added a rig this week and now has two; that's also the same number of rigs they had active as of December 23rd 2016...

 

note: there’s more here..

OPEC oil output at a 6 month low; global oil output at a 12 month high..

US oil prices ended slightly lower for the third week in a row this past week, but the major movement in oil prices was in the international markets, where North Sea Brent crude, the international benchmark, spiked to a two and a half year high on Tuesday, after a crack was discovered in the Forties pipeline, which carries about 40% of the North Sea's output to the UK, forcing its shutdown and the shutdown of the 80 offshore platforms it had been servicing...the same day, an explosion and fire at the Baumgarten natural gas hub in Austria near the Slovak border shut down what is one of the main distribution hubs of Russian natural gas in Europe, temporarily shutting off gas to parts of Germany, France, Hungary, Italy, Slovenia and Croatia, sending European natural gas prices to a six year high, and prompting a state of emergency in Italy, where gas prices jumped 150%...while the operator of the Austrian hub managed to quickly reroute gas supplies to most destinations in central Europe, the British pipeline is expected to be shut down for weeks for repair work, forcing closure of a major UK refinery...meanwhile, while natural gas was priced at $9.86 per mmBTU in Europe and at $9.61 per mmBTU for December and January deliveries to Japan, the benchmark price for natural gas in the US was falling to a 16 month low at $2.61 per mmBTU…

we're going to start this week by reviewing OPEC's December Oil Market Report (covering November OPEC & global oil data), which was released on Wednesday of the past week, and which is available as a free download....the first table from this report that we'll look at is from page 64 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...    

as we can see from this table of official oil production data, OPEC oil output decreased by 133,500 barrels per day in November, to a six month low of 32,448,000 barrels per day, from an October production total of 32,581,000 barrels per day, a figure that was originally reported as 32,589,000 barrels per day (for your reference, here is the table of the official October OPEC output figures as reported a month ago, before this month's revisions)...as you'll note in the far right column above, the reasons that OPEC's output fell by 133,500 barrels per day in November was that the decrease of 108,700 barrels per day in output from Angola more than offset the 95,800 barrel per day increase in output from Nigeria, and that the Saudis, the Emirates and Venezuela all also saw sizable reductions in their oil output...the cutback in Angolan production now lowers their output to below their agreed to quota, leaving Iraq as the only OPEC member whose production is well in excess what their pact calls for, 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 eleven 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 ten months of this year that the OPEC pact to curtail production has been in effect...one minor clarification would be that Nigeria and Libya are no longer exempt from the pact, in that they have agreed to a combined output cap of 2.8 million barrels per day at the November 30th OPEC meeting two weeks ago...with a combined output of 2,983,000 barrels per day in November, they were obviously in excess of that new quota for one month, possibly as they overpumped in anticipation of having to throttle back in December...but 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, whose production has averaged nearly 2% higher than what they committed to...however, cuts in excess of what was agreed to by the Saudis, Venezuela, and other OPEC countries have more than made up for the 83,000 barrels per day that Iraq has been overproducing, so the organization as a whole has kept their commitment to reduce supply....  

for a visualization of how OPEC's cuts have progressed, we'll next include a longer term historical graph of their monthly oil output:

the above graph, taken from the "OPEC November Oil Production" post at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the current 14 members of OPEC, for the period from January 2005 to November 2017, using the history of the same official data from secondary sources that we saw in the first table above...here we can obviously see that OPEC's November production of 32,448,000 barrels per day is lower than their production of the past five months, but up from earlier this year...but we can also see how their production spiked to a record last November, just before they announced their output cuts, giving them quite a bit of leeway to "reduce" production from those elevated levels, without ever having to fully cut back to the level they were producing at in late 2015 and early 2016...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from December 2015 to November 2017, and it comes from page 65 of the December OPEC Monthly Oil Market Report....the cerulean 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...  

OPEC's preliminary data indicates that total global oil production rose to a 12 month high of 97.44 million barrels per day in November, up by .84 million barrels per day from a October total of 96.60 million barrels per day, which was revised .11 million barrels per day lower from the 96.71 million barrels per day global oil output for October that was reported a month ago...global oil output for November was also 0.60 million barrels per day higher than the 96.84 million barrels of oil per day that was being produced globally in November a year ago (see last December's OPEC report online (pdf) for the year ago data)... OPEC's November production of 32,448,000 barrels per day thus represented 33.3% of what was produced globally, down from their 33.7% share of October global output, as oil output increases by the US, Canada, Norway, the UK and Brazil more than made up for OPEC's decrease...OPEC's November 2016 production, excluding ex-member Indonesia, was at 33,131,000 barrels per day, so even after their production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are only producing 2.5% less oil than they were producing a year ago, at a time when they were producing at a record level...

  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, as the next table from the OPEC report will show us..  

the table above comes from page 38 of the Decmeber 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 estimate of oil demand by region and globally quarterly over 2017 over the rest of the table...on the "Total world" line of the fifth column, we've circled in blue the figure that's relevant for November, which is their estimate of global oil demand for the fourth quarter of 2017...  

OPEC's estimate is that over the 4th quarter of this year, all oil consuming areas of the globe will be using 98.08 million barrels of oil per day.....at the same time, 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 97.44 million barrels per day during November, which means that there has been a shortfall of around 640,000 barrels per day in global oil production vis-a vis demand during the month... 

global oil production estimates for October were also revised lower with this report, to 96.60 million barrels per day, so that now means there was also a deficit of 1,480,000 barrels per day in October global output, which we had previously figured to be a global oil deficit of around 1,370,000 barrels per day...meanwhile, since there were no revisions to oil production or demand estimates for the prior months, that means the figures we computed for the previous months of this year remain as they were...those include a shortfall of 1,540,000 barrels per day in September global output, and a global shortfall of 1,630,000 barrels per day in August, when global oil production was even lower...

prior to that, we estimated a global oil deficit of 560,000 barrels per day in July, a global oil surplus of 850,000 barrels per day in June, a global oil deficit of 360,000 barrels per day in May, a global oil deficit of 670,000 barrels per day in April, a global surplus of 390,000 barrels per day in March and average surpluses over January and February of around 610,000 barrels per day....taken together, the data from these monthly OPEC reports means that after eleven months of OPEC production cuts, the global oil glut has been reduced by roughly 95.27 million barrels of oil since the 1st of the year, with most of that reduction coming over the past four months...more than 30.9 million barrels of that drawdown from global oil supplies came out of US oil inventories; last week we reported that US crude inventories had fallen to 448,103,000 barrels as of December 1st; that was down from the 479,012,000 barrels we had in storage on December 30th 2016, in the last report for last year...as we'll see, that draw out of US supplies also continued into early December, according to the latest EIA report...

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 December 8th, showed that our oil imports edged up as dilbit flows from Canada were restored, while our refineries slowed to using oil at a near normal pace for this time of year, but still found it necessary to pull oil out of storage to meet their needs...our imports of crude oil rose by an average of 161,000 barrels per day to an average of 7,363,000 barrels per day during the week, while our exports of crude oil fell by an average of 272,000 barrels per day to average 1,086,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,277,000 barrels of per day during the week, 433,000 barrels per day more than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 73,000 barrels per day to another record high of 9,780,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,057,000 barrels per day during the reporting week...  

during the same week, US oil refineries were using 16,952,000 barrels of crude per day, 243,000 barrels per day less than they used during the prior week, while at the same time 696,000 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 199,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+199,000) 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, a metric that is labeled 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 fell to an average of 7,442,000 barrels per day, 3.3% less than the 7,697,000 barrels per day average imported over the same four-week period last year....the 696,000 barrel per day decrease in our total crude inventories came about on a 731,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 35,000 barrel per day addition of oil to our Strategic Petroleum Reserve, which was likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency...this week's 73,000 barrel per day increase in our crude oil production included a 65,000 barrel per day increase in output from wells in the lower 48 states, and a 8,000 barrels per day increase in output from Alaska....the 9,780,000 barrels of crude per day that were produced by US wells during the week ending December 8th was yet another new record high for US output, 11.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up 16.0% from the recent output nadir of 8,428,000 barrels per day produced during the last week of June 2016...

US oil refineries were operating at 93.4% of their capacity in using those 16,952,000 barrels of crude per day, down from 93.8% of capacity the prior week, still a bit above their normal pace for this time of year....the 16,952,000 barrels of oil that were refined this week was 4.4% less than the record 17,725,000 barrels per day that were being refined at the end of August, but still 2.9% more than the 16,474,000 barrels of crude per day that were being processed during week ending December 9th, 2016, when refineries were operating at 90.5% of capacity, and 10.4% above the 10-year seasonal average for this time of the year... 

even with the decrease in the amount of oil refined, gasoline output from our refineries was 4.5% higher, increasing by 371,000 barrels per day to 10,129,000 barrels per day during the week ending December 8th, after two equally inexplicable gasoline output drops in a row...that increase meant our gasoline production was 3.1% higher than the 9,828,000 barrels of gasoline that were being produced daily during the week ending December 9th of last year...on the other hand, our  refineries' production of distillate fuels (diesel fuel and heat oil) fell by 155,000 barrels per day to 5,247,000 barrels per day, down from last week's record high output...however, that was still 4.8% more than the 5,009,000 barrels per day of distillates that were being produced during the the same week a year ago....     

with the increase in our gasoline production, our gasoline inventories at the end of the week rose by 5,664,000 barrels to 226,546,000 barrels by December 1st, following a year-high 6,780,000 barrel jump in gasoline supplies the prior week...that was as our domestic consumption of gasoline rose by 196,000 barrels per day to 9,091,000 barrels per day, while our exports of gasoline fell by 163,000 barrels per day to 731,000 barrels per day, and while our imports of gasoline fell by 5,000 barrels per day to 483,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 26 weeks, our gasoline inventories are still down by 6.6% from their pre-summer high of 242,444,000 barrels, and down by 1.5% from last December 9th's level of 230,045,000 barrels, even as they are now roughly 4.1% above the 10 year average of gasoline supplies for this time of the year...   

meanwhile, with the drop in our distillates production, our supplies of distillate fuels fell by 1,370,000 barrels to 128,076,000 barrels over the week ending December 8th, the eleventh decrease in distillates supply in fifteen weeks...this week's drop was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 643,000 barrels per day to 4,380,000 barrels per day, even as our exports of distillates fell by 360,000 barrels per day to 1,212,000 barrels per day, while our imports of distillates rose by 4,000 barrels per day to 149,000 barrels per day...after this week’s decrease, our distillate inventories were thus 17.9% lower at the end of the week than the 155,935,000 barrels that we had stored on December 9th, 2016, and roughly 5.9% lower than the 10 year average of distillates stocks at this time of the year…

finally, even with the week's increase in our oil imports and the decrease in our refining, our commercial crude oil inventories still fell for the 29th time in the past 36 weeks, decreasing by 5,117,000 barrels, from 448,103,000 barrels on December 1st to a 26 month low of 442,986,000 barrels on December 8th....while our oil inventories as of December 8th were thus 8.3% below the 483,193,000 barrels of oil we had stored on December 9th of 2016, and 3.4% lower than the 458,354,000 barrels of oil that we had in storage on December 11th of 2015, they were still 27.5% greater than the 347,466,000 barrels of oil we had in storage on December 12th of 2014, before the current oil glut in the US had really built up our crude supplies to above normal levels...  

This Week's Rig Count

US drilling activity decreased for the first time in 6 weeks during the week ending December 15th, with a drop in oil directed rigs responsible for the decrease, despite elevated oil prices...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 1 rig to 930 rigs in the week ending on Friday, which was still 293 more rigs than the 637 rigs that were deployed as of the December 16th report in 2016, while it was still 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 fell by 4 rigs to 747 rigs this week, which was still 237 more oil rigs that were running a year ago, while the week's oil rig count was far below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations rose by 3 rigs to 183 rigs this week, which was still only 57 more gas rigs than the 126 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...

offshore drilling activity in the Gulf of Mexico and nationally was down by 1 rig to 19 rigs this week, which was also down from the 22 rigs deployed in the Gulf of Mexico and nationally a year ago....the count of active horizontal drilling rigs increased by 5 rigs to 801 horizontal rigs this week, which was up by 289 rigs from the 512 horizontal rigs that were in use in the US on December 16th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the directional rig count was down by 2 rigs to 69 rigs this week, which was still up from the 54 directional rigs that were working during the same week last year....likewise, the vertical rig count was down by 4 rigs to 60 vertical rigs this week, but that was also down from the 71 vertical rigs that were deployed on December 16th 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 December 15th, the second column shows the change in the number of working rigs between last week's count (December 8th) and this week's (December 15th) count, the third column shows last week's December 8th 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 9th of December, 2016...             

as you can see from the above, the 3 rig increase of rigs targeting natural gas was all in the Marcellus and all in Pennsylvania, the second week in a row that the Marcellus has seen a three rig increase...it's possible the new drilling there was meant to coincide with the opening of several pipelines that would take natural gas away from this area; the original start date for the Rover was to be in December, but that was delayed when their drilling was shut down after several fluid spills...FERC just gave the Rover the go ahead this week, and in addition the Leach XPress pipeline, which originates near the PA border and will deliver gas to central Ohio and thence points south, is expected to commence service on January 1st...we should also note that outside of the major producing states listed in the first table above, a rig was also shut down in Montana this week, where one rig still remains active, which is nonetheless an increase from a year ago, when no rigs were working in Montana..

 

note: there’s more here…

US oil supplies drop to 25 month low, distillates production at a record high…

oil prices ended lower for the second week in a row this week, but still remain well above the average break-even prices for most US shale basins, and hence remain at a level that will only encourage further exploitation...after falling a mere 47 cents from a two and a half year high last week, contracts to buy or sell US light crude in January fell 89 cents to end at $57.47 a barrel on Monday, on concerns that higher prices would encourage growth of domestic crude production, as evidenced by the growing US rig count...oil prices then recouped some of those losses on Tuesday, rising 15 cents to $57.62 a barrel, in anticipation that the weekly reports from the API and EIA would show another sizable drop in U.S. crude supplies....while both reports did show decreases in excess of 5 million barrels of crude oil supplies, both reports simultaneously showed surprisingly sharp increases in U.S. inventories of refined fuels, with gasoline supplies seeing the largest increase since January, which thus precipitated a selloff in crude contracts, with oil prices ending Wednesday down $1.66, or 3%, at a three week low of $55.96 a barrel...oil prices then returned to the plus side on Thursday, rising 73 cents, or 1.3%, to settle at $56.69 a barrel, with the rally attributed to a threatened strike in Nigeria, which prompted traders who had sold oil they didn't own on Wednesday to cover their trades and buy it back...oil prices then rose another 67 cents on Friday, on reports of a jump in Chinese crude imports and a Platts report that OPEC production had hit a 6 month low in November, as oil still closed the week 1.7% lower than last week at $57.36 a barrel....

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 December 1st, showed that our oil imports remained lower than recent weeks, likely due to the Keystone pipeline shutdown, while our refineries were using oil at a record pace for this time of year, and therefore they again found it necessary to pull quite a bit of oil out of storage to meet their needs...our imports of crude oil fell by an average of 127,000 barrels per day to an average of 7,202,000 barrels per day during the week, while our exports of crude oil fell by an average of 54,000 barrels per day to 1,358,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,844,000 barrels of per day during the week, 73,000 barrels per day less than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 25,000 barrels per day to another record high of 9,707,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,551,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 17,195,000 barrels of crude per day, 192,000 barrels per day more than they used during the prior week, while at the same time 1,151,000 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 493,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+493,000) 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, a metric that is labeled 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 fell to an average of 7,576,000 barrels per day, 4.9% less than the 7,963,000 barrels per day average imported over the same four-week period last year....the 1,151,000 barrel per day decrease in our total crude inventories included an 801,000 barrel per day withdrawal from our commercial stocks of crude oil and a 350,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was included in a Federal budget deal 25 months ago...this week's 25,000 barrel per day increase in our crude oil production included a 20,000 barrel per day increase in output from wells in the lower 48 states, and a 5,000 barrels per day increase in output from Alaska....the 9,682,000 barrels of crude per day that were produced by US wells during the week ending December 1st was yet another new record high for US output, 10.7% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.6% more than the 8,697,000 barrels per day of oil that were being produced during the during the equivalent week a year ago...

US oil refineries were operating at 93.8% of their capacity in using those 17,195,000 barrels of crude per day, up from 92.6% of capacity the prior week, thus operating a bit above their normal pace for this time of year...while the 17,195,000 barrels of oil that were refined this week were still 3.0% less than the record 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, they were at a record level for any week outside of the summer months, 4.7% more than the 16,417,000 barrels of crude per day that were being processed during week ending December 2nd, 2016, when refineries were operating at 90.4% of capacity, and 11.7% above the 10-year seasonal average for this time of the year...

even with increase in the amount of oil refined, gasoline output from our refineries was 4.5% lower, decreasing by 464,000 barrels per day to 9,758,000 barrels per day during the week ending December 1st, the second significant drop in a row...that meant out gasoline production was 1.6% lower than the 9,913,000 barrels of gasoline that were being produced daily during the week ending December 2nd of last year...on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 118,000 barrels per day to a record high of 5,402,000 barrels per day, eclipsing the record set two weeks ago...that was also 6.3% more than the 5,083,000 barrels per day of distillates that were being produced during the the same week a year ago....   

even with the drop in our gasoline production, our gasoline inventories at the end of the week rose by 6,780,000 barrels to 220,882,000 barrels by December 1st, the largest jump in gasoline supplies since the third week in January of this year...that was as our exports of gasoline fell by 319,000 barrels per day from last week's record high to 894,000 barrels per day, while our imports of gasoline fell by 38,000 barrels per day to 488,000 barrels per day, and as our domestic consumption of gasoline rose by 171,000 barrels per day to 8,895,000 barrels per day at the same time...however, with significant gasoline supply withdrawals in 15 out of the last 25 weeks, our gasoline inventories are still down by 8.9% from their pre-summer high of 242,444,000 barrels, and down by 3.8% from last December 2nd's level of 229,548,000 barrels, even as they are still roughly 3.4% above the 10 year average of gasoline supplies for this time of the year...  

meanwhile, with our distillates production at a record high, our supplies of distillate fuels rose by 1,667,000 barrels to 129,446,000 barrels over the week ending December 1st, in just the fourth increase in distillates supply in fourteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 145,000 barrels per day to 3,737,000 barrels per day, and as our exports of distillates rose by 442,000 barrels per day to 1,572,000 barrels per day, while our imports of distillates rose by 25,000 barrels per day to 145,000 barrels per day...even after this week’s increase, our distillate inventories were still 17.4% lower at the end of the week than the 156,697,000 barrels that we had stored on December 2, 2016, and 5.1% lower than the 10 year average of distillates stocks at this time of the year…

finally, with oil imports remaining below normal while refining continued at a seasonal record pace, our commercial crude oil inventories fell for the 28th time in the past 35 weeks, decreasing by 5,160,000 barrels, from 453,713,000 barrels on November 24th to 448,103,000 barrels on December 1st....since that's now the least amount of oil we've had in commercial storage in more than two years, since the week ending October 23rd, 2015, we'll include a graph that will show the trajectory that brought us to this low point:

on the above graph, taken from the EIA's This Week in Petroleum Oil Section, the blue line shows the recent track of US oil inventories over the period from December 4th, 2015 to December 1st 2017, while the grey shaded area represents the range of US oil inventories millions of barrels as reported weekly by the EIA over the prior 5 years for any given time of year…thus the grey area also shows us the normal range of US oil inventories as they fluctuate from season to season, typically with a high in the springtime, before the summer driving season, and a low in the fall...and as you can see by the blue line, that pattern continued into early this year, where we were announcing a record glut of oil almost weekly up until the week ending March 24th, 2017, when our oil supplies topped out at 535,543,000, an increase of almost 68% from the early 2014 low of 319,079,000 barrels...however, as you can also see by following the blue line, our oil supplies have been falling since, and at 448,103,000 barrels are now 19.5% below their March 24 high...still, while our oil inventories as of December 1st were 7.6% below the 485,756,000 barrels of oil we had stored on December 2nd of 2016, and 1.2% lower than the 453,553,000 barrels of oil that we had in storage on December 4th of 2015, they were still 28.6% greater than the 348,313,000 barrels of oil we had in storage on December 5th of 2014, before the oil glut in the US had really built our crude supplies up to above normal levels...      

This Week's Rig Count

US drilling activity increased for the 5th week in a row, but for just the 8th time out of the last 19 weeks during the week ending December 8th, with only oil directed rigs seeing a small increase...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 2 rigs to 931 rigs in the week ending on Friday, which was also 307 more rigs than the 624 rigs that were deployed as of the December 9th report in 2016, while that was still 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 rose by 2 rigs to 751 rigs this week, which was also an increase of 253 oil rigs over the past year, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations was unchanged at 180 rigs this week, which was only 55 more gas rigs than the 125 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...

offshore drilling activity in the Gulf of Mexico and elsewhere nationally was unchanged at 20 rigs this week, which was down from the 22 rigs deployed in the Gulf of Mexico and nationally a year ago...however, there was a new drilling platform that started up on a lake in southern Louisiana this week, where there are now two such drilling platforms deployed, up from the one working on inland waters a year ago...

the count of active horizontal drilling rigs increased by 4 rigs to 796 rigs this week, which was up by 293 rigs from the 503 horizontal rigs that were in use in the US on December 9th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was unchanged at 71 rigs this week, which was still up from the 51 directional rigs that were working during the same week last year....on the other hand, the vertical rig count was down by 2 rigs to 64 vertical rigs this week, which was also down from the 70 vertical rigs that were deployed on December 9th 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 December 8th, the second column shows the change in the number of working rigs between last week's count (December 1st) and this week's (December 8th) count, the third column shows last week's December 1st 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 9th of December, 2016...           

as you can see from the above, the small net change in the number of rigs running masked considerable activity in several different states and basins this week, with the number of increases just barely eclipsing the number of decreases over the period...what is certainly most notable was the 4 rig decrease in drilling in Ohio, which may include the shut down of a non-shale vertical rig, since the net decrease in the 3 state area of Ohio, Pennsylvania and West Virginia is not reflected in the change in Marcellus and Utica activity...the 26 rigs still working in Ohio are the least since July 2nd, as are the 27 rigs that remained deployed in the Utica shale, probably reflective of natural gas prices which have remained below the average break-even price for the region and have trended lower all year...meanwhile, in addition to the major producing states shown in the first table above, Kansas also saw its only working rig shut down this week, leaving none, down from a year ago, when there was one rig active in the state...

 

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OPEC extends output cuts to end of 2018; US gasoline exports hit a record high

as was widely expected, OPEC oil ministers at their biannual meeting in Vienna on Thursday agreed to extend their reduced oil output quotas at the same level they've been at since the beginning of 2017 until the end of 2018; that was, in effect, a nine month extension of the production cut agreement already in place, since at their meeting at the end of May of this year they had agreed to extend the original 6 month agreement of November 2016 by 9 months, from June 2017 through March 2018...the only noteworthy change from the original pact was that Nigeria and Libya, who were previously exempt from the production limits because their oil output had already been reduced by civil strife, have now agreed to a combined cap of 2.8 million barrels per day, less than 100,000 barrels per day above their average output of the last two months, but quite a bit more than the 2.25 million barrels of oil per day the two countries were producing when the first production curtailment agreement was signed...the non-OPEC participants who were in the original pact, led by Russia, also agreed to hold their production at reduced levels, and, since Russian oil companies were reluctant to commit to production cuts for over a year into the future on concerns that an extension for the entirety of 2018 could prompt a spike in crude production in the US, OPEC also agreed to review this deal at their June meeting, with the possibility that they would adjust the agreement at that time, based on any changes in global market conditions they had not foreseen.... 

since the final disposition of this OPEC meeting was largely discounted by oil traders beforehand, the market reaction to the news from this meeting was fairly muted, and trading volumes were not out of the ordinary...oil prices did end 47 cents lower on the week, however, which as it turns out was the largest weekly price drop in 2 months, since oil prices have been in an extended rally over that entire period, and closed last week at a 2½-year high of $58.95 a barrel...from there, it was not unexpected to see oil prices fall 84 cents to $58.11 a barrel in profit taking on Monday, as doubts about the OPEC pact overcame the prior week's exuberance, and Keystone pipeline imports from Canada resumed...as jittery oil traders stayed on the sidelines awaiting the OPEC news, U.S. oil prices for January delivery then fell 12 cents on Tuesday and then another 69 cents to $57.30 a barrel on Wednesday, as the EIA reported that both gasoline and distillates supplies showed large increases...oil prices then yo-yoed in advance of the OPEC meeting Thursday morning, first rising, then falling below $57 a barrel before ending 10 cents higher at $57.40 a barrel on the news, with overseas prices seeing a larger 46 cent increase....US oil prices then rocketed to as high as $58.88 on Friday, but then retreated to close with a gain of 96 cents at $58.36 a barrel, as all US markets were rocked when former national security adviser Michael Flynn plead guilty to lying under oath and implicated Donald Trump for meddling in Russia while Obama was still president...

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 November 24th, showed a big drop in our oil imports (due to the Keystone shutdown) while our refineries were using oil at a record pace for this time of year, and hence we needed to pull quite a bit of oil out of storage to meet their needs...our imports of crude oil fell by an average of 544,000 barrels per day to an average of 7,329,000 barrels per day during the week, while our exports of crude oil fell by an average of 179,000 barrels per day to 1,412,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,917,000 barrels of per day during the week, 365,000 barrels per day less than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 24,000 barrels per day to another record high of 9,682,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,599,000 barrels per day during the reported week... 

during the same week, US oil refineries were using 17,003,000 barrels of crude per day, 165,000 barrels per day more than they used during the prior week, while at the same time 828,000 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 576,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+576,000) 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, a metric that is labeled 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 slipped to an average of 7,619,000 barrels per day, 1.7% less than the 7,748,000 barrels per day average imported over the same four-week period last year....the 828,000 barrel per day decrease in our total crude inventories included a 490,000 barrel per day withdrawal from our commercial stocks of crude oil and a 338,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was included in a Federal budget deal 25 months ago...this week's 24,000 barrel per day increase in our crude oil production included a 20,000 barrel per day increase in output from wells in the lower 48 states, and a 4,000 barrels per day increase in output from Alaska....the 9,682,000 barrels of crude per day that were produced by US wells during the week ending November 24th was yet another new record high for US output, 10.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.3% more than the 8,699,000 barrels per day of oil that were being produced during the during the equivalent week a year ago...

US oil refineries were operating at 92.6% of their capacity in using those 17,003,000 barrels of crude per day, up from 91.3% of capacity the prior week, and above normal for this time of year...while the 17,003,000 barrels of oil that were refined this week were still 4.1% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, they were at a record level for any week during the autumn months, 4.4% more than the 16,283,000 barrels of crude per day that were being processed during week ending November 25th, 2016, when refineries were operating at 89.8% of capacity, and 11.8% above the 10-year seasonal average for this time of the year... 

even with increase in the amount of oil refined, gasoline output from our refineries was 2.0% lower, decreasing by 210,000 barrels per day to 10,222,000 barrels per day during the week ending November 24th, after increasing by 580,000 barrels per day the prior week...that production was still 2.4% higher than the 9,986,000 barrels of gasoline that were being produced daily during the week ending November 25th last year, and a new high for any comparable November week on record....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 51,000 barrels per day from last week's November record to 5,284,000 barrels per day, which was still 1.3% more than the 5,216,000 barrels per day of distillates that were being produced during the the same week a year ago....    

with our gasoline production remaining elevated, our gasoline inventories at the end of the week rose by 3,627,000 barrels to 214,102,000 barrels by November 24th, primarily because our domestic consumption of gasoline fell by 871,000 barrels per day to 8,724,000 barrels per day at the same time, even as our exports of gasoline rose by 431,000 barrels per day to a record high 1,213,000 barrels per day, while our imports of gasoline rose by 12,000 barrels per day to 526,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 24 weeks, our gasoline inventories are still down by 11.7% from their pre-summer high of 242,444,000 barrels, and more than 5.3% below last November 25th's level of 226,123,000 barrels, even as they are still roughly 1.8% above the 10 year average of gasoline supplies for this time of the year...   

since our gasoline exports happened to jump to a record high this week, we'll include a graph below of what those exports look like historically...

the above graph comes from a Zero Hedge post on this week's EIA report, and it shows US gasoline exports in thousands of barrels per day from mid-2010 to the current week, with gasoline exports prior to July 2016 shown monthly, and gasoline exports after that date shown weekly; prior to 2010, our gasoline exports were negligible and were not tracked separately...as you can see, there is a seasonal pattern to gasoline exports, in that they rise during the fall and winter months, when domestic use of gasoline is at its lowest, and then fall back in the summer, when US demand is higher...although we've recently expressed concern, bordering on dire, about the elevated level of our distillates exports, this one week of record high gasoline exports is not yet that critical, especially during a week when our own supplies were near normal and rising...

meanwhile, with our distillates production still near record levels, our supplies of distillate fuels rose by 2,747,000 barrels to 127,779,000 barrels over the week ending November 24th, in just the third supply increase in thirteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 175,000 barrels per day to 3,882,000 barrels per day, and as our exports of distillates fell by 300,000 barrels per day to 1,130,000 barrels per day, while our imports of distillates fell by 70,000 barrels per day to 120,000 barrels per day...even after this week’s increase, our distillate inventories were still 17.1% lower at the end of the week than the 154,196,000 barrels that we had stored on November 25th, 2016, and 5.2% lower than the 10 year average of distillates stocks at this time of the year…

finally, the big drop in our crude oil imports, combined with another increase in domestic refining demand, meant that our commercial crude oil inventories fell for the 27th time in the past 34 weeks, decreasing by 3,429,000 barrels, from 457,142,000 barrels on November 17th to 453,713,000 barrels on November 24th....while our oil inventories as of November 24th were 7.1% below the 488,145,000 barrels of oil we had stored on November 25th of 2016, and fractionally lower than the 457,212,000 barrels of oil that we had in storage on November 27th of 2015, they were still 30.9% greater than the 347,015,000 barrels of oil we had in storage on November 28th  of 2014, at a time when the buildup of our oil glut in the US was just getting started...      

This Week's Rig Count

because of last week's Thanksgiving holiday and resulting early report, this week's Baker Hughes rig count report for the week ending December 1st covers changes in drilling activity for the nine days from November 22nd to December 1st...for that period, they reported that drilling rig activity increased for the 4th week in a row, but for just the 7th time out of the last 18 weeks, as the active rig count rose by 6 rigs, from 923 rigs on November 22nd to 929 rigs on December 1st....that was also 332 more rigs than the 593 rigs that were deployed as of the December 2nd report last year, but still well down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

the number of rigs drilling for oil rose by 2 rigs to 749 rigs this week, which was also up by 272 oil rigs over the past year, while this week's oil rig 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 rose by 4 rigs to 180 rigs this week, which was still only 61 more gas rigs than the 119 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...

activity on two platforms that had been drilling in the Gulf of Mexico offshore from Louisiana was shut down this week, which reduced the Gulf of Mexico rig count to 20 rigs, which was still down from the 22 rigs active in the Gulf of Mexico a year ago...since there were no other offshore rigs active other than those deployed in the Gulf either this week or a year ago, those Gulf of Mexico rig counts are also the same count as the total US offshore count...

the count of active horizontal drilling rigs increased by 6 rigs to 792 rigs this week, which was up by 307 rigs from the 485 horizontal rigs that were in use in the US on December 2nd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, both the vertical rig count and the directional rig counts were unchanged at 66 rigs and 71 rigs respectively, with the vertical rig count also unchanged from a year ago, while the directional rig count was up from the 46 directional rigs that were working on December 2nd a year ago..

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 December 1st, the second column shows the change in the number of working rigs between last week's count (November 22nd) and this week's (December 1st) count, the third column shows last week's November 22nd 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 2nd of December, 2016...           

as you can see, despite the 4 unit increase in rigs drilling for natural gas, the Marcellus and Utica rig counts remained unchanged, as did the corresponding rig counts for Ohio, Pennsylvania and West Virginia...of the new natural gas rigs, three were in the Haynesville, on the Texas side of the northwestern Lousiana border, and one was in an "other" unnamed basin; the rig that was shut down in the Dallas area Barnett shale was an oil rig, leaving the Barnett with 3 gas rigs and one oil rig remaining...otherwise, the above tables are pretty much indicative what changes in activity occurred this past week...

 

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