in a dozen years of US fracking, new oil exports have exceeded all new oil production

oil prices rose to an eight week high this week, decoupling from the prices of US stock markets, which saw their worst week in more than two years, even as the same news events impacted both...US crude for April delivery started by falling 28 cents to $62.06 a barrel Monday, initially in tandem with a 1.5% drop in stocks, on fears of a potential trade war brought on by Trump's steel and aluminum tariffs...but oil prices then rose $1.34 as the April oil contract expired at $63.40 a barrel on Tuesday on fears that Trump would reimpose sanctions on Iran, thereby taking their oil exports off the market...then, in trading oil for May delivery on Wednesday, oil prices for that new front month contract rose $1.63 to $65.17 a barrel, after the EIA surprised traders by reporting an unexpected draw of crude oil from US inventories...oil prices then fell 87 cents to $64.30 a barrel on Thursday as Trump announced trade sanctions on China and China in turn retaliated against 128 American made products...however, oil prices then rallied again on Friday, rising $1.58 to an eight week high of $65.88 a barrel, after Trump appointed war criminal John Bolton, whose lies got us into Iraq and who now wants war with Iran and North Korea, as national security adviser, which oil analysts felt increased the likelihood that the U.S. would re-impose sanctions on Iran and thereby disrupt their oil flow...thus the price of the May oil contract gained $3.45, or 5.5% on the week, in the largest weekly increase for oil prices since mid-February...

meanwhile, natural gas prices drifted lower, even as cold weather forecasts lingered, as traders saw the heating season coming to a close....trading natural gas for April delivery all week, prices fell 3.7 cents on Monday, rose 2.4 cents on Tuesday, and then fell another 8.4 cents over the next three days to end the week down 3.6% at $2.591 per mmBTU, the lowest closing price in over a month...the week's natural gas storage report indicated that natural gas in storage in the US fell by 86 billion cubic feet to 1,446 billion cubic feet over the week ending Friday, March 16th, which left our gas supplies 667 billion cubic feet, or 31.6% lower than the 2,113 billion cubic feet that were in storage on March 17th of last year, and 329 billion cubic feet, or 18.5% below the five-year average of 1775 billion cubic feet typically in storage at the end of the eleventh week of the year....the average withdrawal of natural gas during the eleventh week of the year over the past 5 years has been 53 billion cubic feet, so this was the first time in 5 weeks that our natural gas withdrawals exceeded the norm, in what is still a warmer than average winter nationally...

Oil Exports vs Oil Production

this week i'd like to look at a few situations that i didn't have time for last week...the first of those regards our historical oil & oil products exports, which was inspired by the following graph that appeared on the EIA's blog Today in Energy on March 15th, and was subsequently featured as the "Chart of the Week" in the OilPrice Intelligence Report on March 20th

the above graph, from the EIA blogpost titled "U.S. crude oil exports increased and reached more destinations in 2017", shows average US oil exports annually in thousands of barrels per day from 1920 up until 2017...as that post informs us, "U.S. crude oil exports grew to an average of 1.1 million barrels per day (b/d) in 2017...nearly double the level of exports in 2016....supported by increasing U.S. crude oil production and expanded infrastructure."...as you can see, prior to 2016, our oil exports were negligible, because for 40 years there had been a ban on exporting US crude to any countries other than Canada and Mexico, who were exempt from that ban through the provisions of the North American Free Trade Agreement...however, after intense pressure from the oil industry, Congress included a provision to repeal that export ban in the bipartisan budget bill of December, 2015, Obama signed it, and the oil floodgates were opened...

since that graph only shows annual data till 2017, we'll also include a graph that shows weekly US oil exports right up to the current week's report....

the above graph of US crude oil exports was from the weekly package of oil graphs that John Kemp of Reuters emailed out on Wednesday, after the release of the weekly EIA report...it shows weekly US crude oil exports in thousands of barrels per day over the past 18 months, and also highlights the exact amount of our crude exports in thousands of barrels per day over a few select weeks going back to September 1st, when Gulf Coast ports were shut down by Hurricane Harvey...as you can see, our oil exports had only topped a million barrels per day a few times prior to that date...however, after the price of US crude fell to a 10% discount to the comparable international grade, US crude suppliers began to sell as much oil overseas as our pipeline and port infrastructure would allow, and as a result our oil exports have stayed above a million barrels per day since...so far in 2018, our exports of crude oil have average just under 1.5 million barrels per day, compared to well under 100,000 barrels per day in the earlier years of the aughts decade (as shown on the first chart above)...that means our crude exports have increased by more than 1.4 million barrels per day over the period that horizontal drilling & fracking has become the go-to method to increase oil production....now, hold onto that 1.4 million barrels per day increase in oil exports while we look at another graph...

the above graph accompanies the online EIA spreadsheet showing the weekly history of 'Total U.S. Exports of Petroleum Products', and shows our exports of such products in thousands of barrels per day...this is our exports of all the products that are produced by refining crude oil, including gasoline, diesel fuel, heat oil, jet fuel, residual fuels, propane/propylene and other petrochemical feedstocks...as you can see, prior to the advent of fracking, our exports of such products were consistently below 1 million barrels per day (see the spreadsheet)...however, starting around 2005, our exports of these products began to rise, and as you can see from the graph above, have been averaging over 5 million barrels per day over the past 6 months, after the brief spike lower when our refining and exporting was interrupted by last year's hurricanes...hence, our total exports of products that are made from oil has increased by more than 4 million barrels per day since fracking technology has added to our domestic supply...add the increase in our exports of crude to that, and we find that our total exports of crude oil and petroleum products has increased by an average of nearly 5.5 million barrels per day over the past dozen years...

so, let us next look at our oil production history, to see how much the output from US wells has increased over that same time frame....

the above graph accompanies the online EIA spreadsheet showing the weekly history of crude oil production from US wells, and it shows that production in thousands of barrels per day...here we can see that the oil output from legacy US oil wells was gradually decreasing in the early aughts, but save for the interruptions caused by hurricanes and similar acts of nature, stayed above 5 million barrels per day throughout that period...output from US wells then began to rise in the current decade as oil output from fracked wells was added to the conventional wells totals, and as of the most recent week topped 10.4 million barrels per day for the first time in history...thus we could estimate that output from US wells has increased by 5.3 million barrels per day over the past dozen years...but as we showed earlier in this exercise, the exports of that oil and the products from it has increased by 5.5 million barrels per day over the same period...what this simply and clearly demonstrates is that the entirety of increase in US oil production that has resulted from a dozen years fracking was not for the benefit of US consumers, but rather wholly and exclusively for the benefit of US oil companies, who've found it more profitable to supply foreign customers with oil and oil products, at the expense of the health and well being of the US citizens living in those areas where the dangerous and disruptive fracking has been taking place...

OPEC's Monthly Oil Market Report

i also want to quickly review OPEC's March Oil Market Report (covering February OPEC & global oil data), which was released on Wednesday of last week, and which is available as a free download....the first table from this report that we'll look at is from the page numbered 59 of that report (pdf page 67), 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 on this table of official oil production data, OPEC's oil output fell by 77,100 barrels per day in February to 32,186,000 barrels per day, from an January production total of 32,263,000 barrels per day, but that was a figure that was originally reported as 32,302,000 barrels per day, so their production for February was actually a 114,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, one of the main reasons that OPEC's February output fell by 77,100 barrels per day from the revised January figures was the decrease of 52,400 barrels per day in output from Venezuela, which continues to suffer from the effects of economic sanctions imposed by the US...in addition, oil output from the Emirates fell by 34,300 barrels per day and oil output from Iraq fell by 25,500 barrels per day...on the other hand, oil output from Nigeria rose by 24,900 barrels per day, which left them and Iraq as the only OPEC members whose production was 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 for February of this year, and the 2nd column shows the allocated daily production quota in millions of barrels of oil per day for each member, after they agreed to cut their oil output by 4% at their November 2016 meeting, and the 3rd column shows how much each country produced over or under their quota for the month...note that Venezuela alone, now 400,000 barrels per day below quota, more than makes up for smaller amounts of over production by Nigeria and Iraq, and to a lesser extent, Iran and Libya...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from March 2016 to February 2018, and it comes from the page numbered 60 (pdf page 68) of the March OPEC Monthly Oil Market Report...on this graph, 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 record 98.20 million barrels per day in February, up by .37 million barrels per day from a January output total of 97.83 million barrels per day, which was revised up by .15 million barrels per day from the 97.66 million barrels per day global oil output for January that was reported a month ago...global oil output for February was also 2.32 million barrels per day higher than the 95.88 million barrels of oil per day that was being produced globally in February a year ago (see last March's OPEC report online (pdf) for the year ago data)... OPEC's February production of 32,186,000 barrels per day thus represented just 32.8% of what was produced globally, their lowest on record, down from a revised 33.0% in January, as oil output increases by US, Mexico, Norway, UK, Bahrain, Brazil and Kazakhstan were only partially offset by decreases in output from Canada and Russia...OPEC's February 2017 production was at 31,958,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding their new member Equatorial Guinea, are now producing 98,000 more barrels per day of oil than they were producing a year ago, during the second month that their production quotas were in effect, with the increase from last year largely due to recoveries of oil production in Libya and Nigeria... 

the increase in global oil output that we can see in the above purple graph meant there was a surplus 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 32 of the March OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2018 over the rest of the table...on the "Total world" line of the second column, we've circled in blue the figure that's relevant for February, which is their revised estimate of global oil demand for the first quarter of 2018...  

OPEC's estimate is that during the 1st quarter of this year, all oil consuming areas of the globe will be using 97.27 million barrels of oil per day, which is an upward revision from their prior estimate of 97.23 million barrels of oil per day (which we've circled in green).....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, even after the OPEC and non-OPEC production cuts, the world's oil producers were producing 98.20 million barrels per day during February, which means that there was a surplus of around 930,000 barrels per day in global oil production vis-a vis demand during the month...

meanwhile, the 0.15 million barrels per day upward revision to January's global output offset by the 0.04 million barrels of oil per day upward revision to 1st quarter demand means that our previously computed surplus for January should be revised .11 million barrels per day higher, and thus now stands at 540,000 barrels per day...hence, for the first two months of the year, oil production has exceeded supply by roughly 42.8 million barrels...on the other hand, cumulative global oil demand figures for 2017 were revised higher by 0.02 million barrels per day to 97.01 barrels per day (also circled in green) with this report, because of a 0.09 million barrels per day upward revision to 4th quarter demand figures...in round numbers, that means our previous estimate of a 193 million barrel oil shortfall for 2017 was about 8 million barrels too low, so we can now re-estimate that the global oil deficit for 2017 was approximately 201 million barrels...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending March 16th, indicated that due to another big drop in our oil imports and a big increase in refining, we needed to pull oil out of storage for the 2nd time in the past 8 weeks...our imports of crude oil fell by an average of 508,000 barrels per day to an average of 7,077,000 barrels per day during the week, after falling 418,000 barrels per day the prior week, while our exports of crude oil rose by an average of 86,000 barrels per day to an average of 1,573,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 5,504,000 barrels of per day during the week, 594,000 barrels per day less than out net imports during the prior week...at the same time, field production of crude oil from US wells rose by 26,000 barrels per day to a record high of 10,407,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,911,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,777,000 barrels of crude per day, 410,000 barrels per day more than they used during the prior week, while at the same time 375,000 barrels of oil per day were being pulled out of oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 491,000 barrels per day less than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+491,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, is explained here)...

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 7,487,000 barrels per day, which was still 4.8% less than the 7,863,000 barrel per day average we imported over the same four-week period last year....the 375,000 barrel per day decrease in our total crude inventories all came from our commercial stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 26,000 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 6,000 barrel per day increase in output from Alaska...the 10,407,000 barrels of crude per day that were produced by US wells during the week ending March 16th were the highest on record, 14.0% more than the 9,129,000 barrels per day that US wells were producing during the week ending March 17th of last year, and 23.5% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 91.7% of their capacity in using those 16,777,000 barrels of crude per day, up from 90.0% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set eleven weeks earlier, as US refineries are just coming out of their pre-spring blend changeover and scheduled maintenance season....nonetheless, the 16,777,000 barrels of oil that were refined this week was a seasonal record, the most oil that refineries ever processed during February or March...while that elevated level of refining was still 4.7% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, it was 6.2% more than the 15,801,000 barrels of crude per day that were being processed during the week ending March 17th, 2017, when refineries, still wrapping up seasonal maintenance at that time, were operating at 87.4% of capacity....

even with the increase in the amount of oil being refined, gasoline output from our refineries was lower than the prior week, decreasing by 348,000 barrels per day to 9,932,000 barrels per day during the week ending March 16th, after our gasoline output had increased by 357,000 barrels per day during the week ending March 9th....as a result, our gasoline production was only 1.6% greater during the week than the 9,771,000 barrels of gasoline that were being produced daily during the week ending March 17th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 25,000 barrels per day to 4,503,000 barrels per day, after falling by 671,000 barrels per day over the prior 5 weeks...hence, that small increase still left the week's distillates production 6.8% lower than the 4,829,000 barrels of distillates per day than were being produced during the equivalent week of 2017....   

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 1,693,000 barrels to 243,065,000 barrels by March 16th, the third draw in a row, but just the fourth decrease in 19 weeks....our supplies were down even though our domestic consumption of gasoline fell by 318,000 barrels per day to 9,324,000 barrels per day, after rising by 782,000 barrels per day over the prior two weeks....at the same time, our exports of gasoline fell by 99,000 barrels per day to 686,000 barrels per day, while our imports of gasoline fell by 40,000 barrels per day to 564,000 barrels per day...so even after our gasoline supplies have increased during 15 of the last nineteen weeks, our gasoline inventories are now fractionally lower than last March 17th's level of 243,468,000 barrels, even as they are roughly 7.5% above the 10 year average of gasoline supplies for this time of the year...         

at the same time, our supplies of distillate fuels fell by 2,022,000 barrels to 131,044,000 barrels over the week ending March 16th, after falling by 4,360,000 barrels the prior week...our distillate inventories fell even though our exports of distillates fell by 495,000 barrels per day to 997,000 barrels per day, while our imports of distillates fell by 101,000 barrels per day to 122,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 85,000 barrels per day to 3,917,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 15.7% lower than the 155,393,000 barrels that we had stored on March 17th, 2017, and 7.1% lower than the 10 year average of distillates stocks at this time of the year…   

finally, with the drop in our oil imports and the increase in oil refining, we had to pull oil out of our commercial supplies of crude oil for the 11th time in 18 weeks and for the 36th time in the past year, as our commercial crude supplies decreased by 2,622,000 barrels, from 430,928,000 barrels on March 9th to 428,306,000 barrels on March 16th...hence, after sliding most of the past year, our oil inventories as of that date were 19.7% below the 533,110,000 barrels of oil we had stored on March 17th of 2017, and 14.6% lower than the 501,517,000 barrels of oil that we had in storage on March 19th of 2016, and 1.1% below the 425,047,000 barrels of oil we had in storage on March 20th of 2015, at a time when the US glut of oil had just begun to build...our oil supplies have now also dropped below their prior five year average for just the third time in 9 years, as the chart from Barron Energy below shows..   

This Week's Rig Count

US drilling activity increased for the 5th week in a row and for the 14th time in the past 20 weeks during the week ending March 23rd, a period of rising oil prices which has seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 995 rigs in the week ending on Friday, which was also 186 more rigs than the 809 rigs that were in use as of the March 24th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014... 

the number of rigs drilling for oil rose by 4 rigs to 804 rigs this week, which was 152 more oil rigs than were running a year ago, even as the week's oil rig count still remained well 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 increased by 1 rig to 190 rigs this week, which was also 35 more gas rigs than the 155 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, a single rig that was considered "miscellaneous" continued drilling this week, down from the two such "miscellaneous" rigs that were operating a year ago.

drilling in the Gulf of Mexico was unchanged at 13 rigs, still the lowest number of rigs working in the Gulf this century, & down by 5 rigs from the 18 rigs that were deployed in the Gulf of Mexico a year ago....at the same time, a rig which had been working on an inland lake in southern Louisiana was shut down this week, leaving three such inland waters rigs still active, down from the 4 inland waters rigs that were working in southern Louisiana a year earlier...

meanwhile, the week's count of active horizontal drilling rigs rose by 5 rigs to 870 horizontal rigs this week, which was also up by 197 rigs from the 673 horizontal rigs that were in use in the US on March 24th of last year, but 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 up by 6 rigs to 63 vertical rigs this week, which was still down from the 78 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count was down by 6 rigs to 62 directional rigs this week, which was still up from the 58 directional rigs that were deployed on March 24th of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 23rd, the second column shows the change in the number of working rigs between last week's count (March 16th) and this week's (March 23rd) count, the third column shows last week's March 16th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 24th of March, 2017... 

with the drilling increase in the Permian of west Texas exceeding the total increase nationally, it almost looks like this week is a return to the pattern of last spring, when drilling in the Permian surged while activity in the rest of the country stagnated...but you wouldn't guess from looking at the table above that the natural gas rig increase was in the Cana Woodford of Oklahoma, which happened to have 6 oil directed rigs shut down at the same time...that leaves the Cana Woodford with 57 oil rigs and two gas rigs, the largest natural gas deployment in that basin since February 2016...at the same time the Utica, which had gone from zero oil rigs seven weeks earlier to 8 oil rigs last week, saw one of those oil rigs shut down this week, while the Utica's natural gas rigs remained unchanged at 16 rigs...and in addition to the major producing states shown on the table above, Mississippi also saw a rig added this week, and now has 4 rigs running, which is the same number they had running last March 24th...

 

note:  there’s more here…

US crude production at another record, refinery throughput at a seasonal high; record swing in "unaccounted for oil"

oil prices were heading for a modest drop this week, with both international and US prices still falling on Friday morning, when they inexplicably spiked by more than 2% just before noon, with the US price then ending Friday at $62.34 a barrel, a gain of $1.15 for the day but just 30 cents for week...before that Friday jump, oil prices had been down 68 cents at $61.36 a barrel on Monday, after the EIA's monthly drilling productivity report forecast a 131 barrel per day increase in crude production from the major U.S. shale plays in April, and then down another 65 cents to $60.71 a barrel on Tuesday, as a falling stock market dragged commodity prices lower...oil prices were then modestly higher on both Wednesday and Thursday, as the weekly EIA report showed both rising inventories of crude oil and falling inventories of fuel...

meanwhile, natural gas prices first moved higher on Monday on continued forecasts of late-season cold weather throughout much of the country, but then fell later in the week as reports of higher gas production and signs of winter weather fading weighed on prices...the weekly storage report also indicated a smaller than expected withdrawal of natural gas supplies from storage, which precipitated a 5 cent drop in prices on Thursday, as April natural gas went on to end the week at $2.688 per mmBTU, 4.4 cents below last week's close...the week's natural gas storage report indicated that our natural gas in storage fell by 93 billion cubic feet to 1,625 billion cubic feet over the week ending Friday, March 9th, which left our gas supplies 718 billion cubic feet, or 31.9% lower than the 2,250 billion cubic feet that were in storage on March 10th of last year, and 296 billion cubic feet, or 16.1% below the five-year average of 1828 billion cubic feet typically in storage at the end of the tenth week of the year....the average withdrawal of natural gas during the tenth week of the year over the past 5 years has been 97 billion cubic feet, so even though this was the fourth week in a row where our natural gas withdrawals have been below normal, we haven't been gaining much against the long term averages...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending March 9th, indicated that despite a big decrease in our oil imports and a big increase in refining, we apparently still had oil left over to add to storage for the sixth time in seven weeks...our imports of crude oil fell by an average of 418,000 barrels per day to an average of 7,585,000 barrels per day during the week, while our exports of crude oil fell by an average of 11,000 barrels per day to an average of 1,478,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 6,098,000 barrels of per day during the week, 407,000 barrels per day less than out net imports during the prior week...at the same time, field production of crude oil from US wells rose by 12,000 barrels per day to a record high of 10,381,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,479,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,367,000 barrels of crude per day, 432,000 barrels per day more than they used during the prior week, while at the same time 717,000 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 605,000 barrels per day less than what refineries reported they used plus what was added to storage during the week...to account for that disparity, the EIA needed to insert a (+605,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, is explained here)...this was only the second time in 10 years that the adjustment factor was positive by more than 600,000 barrels per day...since that meant there was a record 1,175,000 barrel per day change in that 'unaccounted for oil' figure, from -570,000 barrels per day last week to +605,000 barrels per day this week, the week over week changes reported here are correspondingly unreliable...even so, the data as it's presented here will often drive the price of 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 7,473,000 barrels per day, which was 1.8% less than the 7,608,000 barrel per day average we imported over the same four-week period last year....the 717,000 barrel per day increase in our total crude inventories was all added to our commercial stocks of crude oil, as stocks in our Strategic Petroleum Reserve were unchanged...this week's 12,000 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, which was partially offset by an 8,000 barrel per day decrease in output from Alaska...the 10,381,000 barrels of crude per day that were produced by US wells during the week ending March 9th was the highest on record, 14.0% more than the 9,109,000 barrels per day that US wells were producing during the week ending March 10th of last year, and 23.2% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 90.0% of their capacity in using those 16,367,000 barrels of crude per day, up from 88.0% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set ten weeks earlier, as some US refineries are still down due to pre-spring blend changeover and scheduled maintenance...nonetheless, the 16,367,000 barrels of oil that were refined this week was a seasonal record, the first time refineries processed more than 16 million barrels during the usual refinery maintenance season through February and the first three weeks of March...while that high was 7.4% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, it was 5.8% more than the 15,472,000 barrels of crude per day that were being processed during the week ending March 10th, 2017, when refineries, still undergoing seasonal maintenance at that time, were operating at 85.1% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries also rose, increasing by 357,000 barrels per day to 10,280,000 barrels per day during the week ending March 9th, after our gasoline output had increased by 532,000 barrels per day the prior week....that increase meant our gasoline production was 7.8% greater during the week than the 9,540,000 barrels of gasoline that were being produced daily during the week ending March 10th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 118,000 barrels per day to 4,478,000 barrels per day, after falling by 553,000 barrels per day over the prior 4 weeks...that left the week's distillates production 4.5% lower than the 4,690,000 barrels of distillates per day than were being produced during the equivalent week of 2017....   

the big increase in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still fell by 6,271,000 barrels to 244,758,000 barrels by March 9th, the largest decrease since September, but just the third draw from stocks in 18 weeks....our supplies were down for a second week because our domestic consumption of gasoline rose by 366,000 barrels per day to 9,642,000 barrels per day, after rising by 416,000 barrels per day the prior week....at the same time, our exports of gasoline rose by 25,000 barrels per day to 785,000 barrels per day, while our imports of gasoline fell by 4,000 barrels per day to 604,000 barrels per day...so even after our gasoline supplies have increased 15 of the last eighteen weeks, our gasoline inventories are now fractionally lower than last March 10th's level of 246,279,000 barrels, even as they are roughly 7.5% above the 10 year average of gasoline supplies for this time of the year...        

meanwhile, our supplies of distillate fuels fell by 4,360,000 barrels to 133,066,000 barrels over the week ending March 9th, the largest draw since October despite the cold spells in January...in addition to the drop in production, that drop in supplies was because our exports of distillates rose by 477,000 barrels per day to 1,492,000 barrels per day while our imports of distillates fell by 44,000 barrels per day to 223,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 94,000 barrels per day to 3,832,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 15.4% lower than the 157,303,000 barrels that we had stored on March 10th, 2017, and 5.0% lower than the 10 year average of distillates stocks at this time of the year…  

finally, despite the drop in our oil imports up and the increase in refining, we were still able to add to our commercial supplies of crude oil for the 7th time in 17 weeks and for the 16th time in the past year, as our commercial crude supplies increased by 5,022,000 barrels, from 425,906,000 barrels on March 2nd to 430,928,000 barrels on March 9th....but even with increases in six out of the last seven weeks, our oil inventories as of that date were 18.4% below the 528,156,000 barrels of oil we had stored on March 10th of 2017, and 12.4% lower than the 492,160,000 barrels of oil that we had in storage on March 12th of 2016, even as they were still 1.4% greater than the 425,047,000 barrels of oil we had in storage on March 13th of 2015, at a time when the US glut of oil was just beginning to build...   

This Week's Rig Count

US drilling activity increased for the 4th week in a row and for the 13th time in the past 19 weeks during the week ending March 16th, a period which has seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 6 rigs to 990 rigs in the week ending on Friday, which was also 201 more rigs than the 789 rigs that were in use as of the March 17th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014... 

the number of rigs drilling for oil rose by 4 rigs to 800 rigs this week, which was 169 more oil rigs than were running a year ago, even while the week's oil rig count still remained well 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 increased by 1 rig to 189 rigs this week, which was also 32 more gas rigs than the 157 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, a rig that was considered "miscellaneous" also began drilling this week, in the first such "miscellaneous" rig operating since October 6th, 2017..

drilling in the Gulf of Mexico was unchanged at 13 rigs, the least rigs working in the Gulf this century, & down by 6 rigs from the 19 rigs that were deployed in the Gulf of Mexico a year ago....meanwhile, the week's count of active horizontal drilling rigs jumped by 17 rigs to 865 horizontal rigs this week, which was also up by 207 rigs from the 658 horizontal rigs that were in use in the US on March 17th 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 vertical rig count was down by 4 rigs to 57 vertical rigs this week, which was also down from the 70 vertical rigs that were in use during the same week of last year...at the same time, the directional rig count was down by 7 rigs to 68 directional rigs this week, which was  still up from the 61 directional rigs that were deployed on March 17th of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 16th, the second column shows the change in the number of working rigs between last week's count (March 9th) and this week's (March 16th) count, the third column shows last week's March 9th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 17th of March, 2017...    

while most of the changes above refer to oil rigs, deployment of natural gas rigs increased by one each in the Haynesville of Louisiana and the Fayetteville of Arkansas, and decreased by one in the Marcellus, with the shutdown of 2 rigs in Pennsylvania, while one was added in West Virginia...meanwhile, the rig that was added in the Utica was an oil rig; hence, of the 24 rigs now working the Utica, 8 are drilling into oil-bearing shale and 16 are targeting wet gas formations...in addition to the major producing states shown above, a rig also began drilling for oil in Nevada this week in the first drilling the state has seen in over a year...

 

^{note: there’s more here..}

natural gas & oil output both at record highs, but gas supplies now 29.5% below those of a year ago

oil ended the week higher, with political developments driving prices more than any fundamental changes in oil supply or demand...that's actually been the case for a few weeks now, starting when oil & natural gas prices crashed 10% during the 2nd week of February on a broad selloff in global equity markets; since that time, oil prices have tended to move in tandem with stock prices, almost regardless of the news from the oil sector...thus we saw the widely traded contract for April oil rise $1.32 to $62.57 a barrel on Monday "on forecasts of higher demand" when the stock market indices were much higher, and then we saw that same contract fall $1.45 to $61.15 a barrel on Wednesday and another $1.03 to $60.12 a barrel on Thursday, during the same hours that the markets were falling after the resignation of Trump's chief economic advisor Gary Cohn and in response to his imposition of tariffs on imported aluminium and steel, which sparked fears of a global trade war...stocks and oil prices then rallied on Friday after Trump accepted an invitation to meet with North Korea’s Kim Jong Un, with oil closing the day $1.92 higher at $62.04 a barrel, with the first drop in oil rig activity in 7 weeks contributing to oil’s price rise...thus US oil prices ended the week with a gain of 79 cents, or 1.3%, despite a bearish US oil supply report on Wednesday...

natural gas prices, on the other hand, moved obliviously to the news and other markets, rising early in the week on an outlook for colder weather and the expected increase in demand, and then falling Thursday and Friday after the weekly storage report indicated a smaller than expected withdrawal of supplies from storage, with natural gas prices for April delivery ending the week 3.7 cents higher at 2.732 per mmBTU...the week's natural gas storage report indicated that our natural gas in storage fell by 57 billion cubic feet to 1,625 billion cubic feet over the week ending Friday, March 2nd, which turned out to be the same as the drawdown during the same week last year, and hence our gas supplies remained 680 billion cubic feet, or 29.5% lower than the 2,305 billion cubic feet that were in storage on March 3rd of last year...the average withdrawal of natural gas during the ninth week of the year has been 129 billion cubic feet over the past 5 years, so this constitutes the third week in a row where our natural gas withdrawals have been much below normal...despite that, however, the 1625 billion cubic feet we had in storage on March 2nd was 300 billion cubic feet, or 15.6% below the five-year average of 1925 billion cubic feet in storage at the end of the ninth week of the year...

before we move on, i want to take a quick look at our natural gas production, because i was quite surprised by the spike in natural gas output in a December that took us to a new production high...we'll start with a graph of our dry natural gas output over the last dozen years...

up until the recent couple of months, there's not much of a surprise in what we see above...natural gas production rose steadily as the number of rigs drilling into natural formations topped a thousand early in the aught's decade and rose to 1600 rigs by the summer of 2008, with natural gas prices spiking to over $12 per mmBTU...but when prices for natural gas fell to below $5 per mmBTU the next year, natural gas drilling began a slow decline that culminated with as few as 81 rigs working during the summer of 2016, and production likewise fell as new well completions could not keep up with the depleting output from existing wells...with gas drilling rigs once again increasing to over 180 rigs this past summer, production began to gradually rise, but since the drilling activity remained at less than a sixth of previous levels, i did not expect the increase in output that you see above for the most recent months....so we can see exactly what happened, we'll include a table of natural gas output that roughly matches the period that the above graph shows....

the table above is from the EIA table of US dry natural gas production monthly, which I've lopped off at 2005 because the prior years saw little change...here we can see that US natural gas production rose each year between 2010 and 2015 as fracking of shale brought on new supplies...but then, after March of 2016, the year over year comparisons turned negative, and stayed negative for 15 months, until June and July of this summer saw small increases in output over the prior year...there was another increase in output in October, but when November output failed to follow through, i thought it had reached a plateau...but as you can see above, natural gas output jumped by more than a 100 billion barrels in December to set a new record by a long shot....

now, here's the problem...if our natural gas production from wells was at such an elevated level going into this winter, then why did our supplies of natural gas fall so rapidly during the first few cold snaps? as you'll recall from the graph we showed last week, by the 4th weekend of February, natural gas stocks were down to their second lowest on record, even after a warm spell knocked our seasonal demand for heating to 191 population-weighted heating degree days below normal...in consideration of what we now know was a record level of natural gas output, our natural gas supplies should have stayed above average this winter, in keeping with that lower demand for heating...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending March 2nd, showed there was a large increase in our oil imports and in oil production from the prior week, while at the same time increases in refining and oil exports were relatively modest, which meant that we had oil left over to add to storage for the fifth time in six weeks...our imports of crude oil rose by an average of 721,000 barrels per day to an average of 8,003,000 barrels per day during the week, while our exports of crude oil rose by an average of 53,000 barrels per day to an average of 1,498,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,505,000 barrels of per day during the week, 668,000 barrels per day more than the prior week...at the same time, field production of crude oil from US wells rose by 86,000 barrels per day to a record high of 10,369,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,874,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 15,935,000 barrels of crude per day, 53,000 barrels per day more than they used during the prior week, while at the same time 369,000 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 570,000 barrels per day more than what refineries reported they used plus what was added to storage during the week...to account for that disparity, the EIA needed to insert a (-570,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...(how this weekly oil data is gathered, and the possible reasons for that "unaccounted" oil, is explained here)...since there was a 821,000 barrel per day change in that 'unaccounted for oil' figure, from +252,000 barrels per day last week to -570,000 barrels per day this week, the week over week changes reported here are correspondingly unreliable...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,549,000 barrels per day, still 4.2% less than the 7,879,000 barrel per day average we imported over the same four-week period last year....the 369,000 barrel per day increase in our total crude inventories included a 344,000 barrel per day addition of oil to our commercial stocks of crude oil and a 25,000 barrel per day addition to our Strategic Petroleum Reserve...this week's 86,000 barrel per day increase in our crude oil production included a 80,000 barrel per day increase in output from wells in the lower 48 states and a 6,000 barrel per day increase in output from Alaska...the 10,369,000 barrels of crude per day that were produced by US wells during the week ending March 2nd was the highest on record, 14.1% more than the 9,088,000 barrels per day that US wells were producing during the week ending March 3rd of last year, and 23.0% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 88.0% of their capacity in using those 15,935,000 barrels of crude per day, up from 87.8% of capacity the prior week, but way down from the wintertime record 96.7% of capacity set nine weeks earlier, as some US refineries are still down due to pre-spring blend changeover and scheduled maintenance...the 15,935,000 barrels of oil that were refined this week were 9.5% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, but were 2.9% more than the 15,492,000 barrels of crude per day that were being processed during the week ending March 3rd, 2017, when refineries, also undergoing seasonal maintenance at the time, were operating at 85.9% of capacity....

even with the small increase in the amount of oil being refined, gasoline output from our refineries saw a big jump, increasing by 532,000 barrels per day to 9,923,000 barrels per day during the week ending March 2nd, after gasoline output had decreased by 717,000 barrels per day the prior week....that increase meant our gasoline production was 0.8% greater during the week than the 9,844,000 barrels of gasoline that were being produced daily during the week ending March 3rd of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 127,000 barrels per day to 4,596,000 barrels per day, after falling by 660,000 barrels per day over the prior 3 weeks...thus that increase still left the week's distillates production 3.7% lower than the 4,773,000 barrels of distillates per day than were being produced during the equivalent week of 2017....   

the big jump in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still fell by 788,000 barrels to 251,029,000 barrels by March 2nd, in just the second decrease in 17 weeks....our supplies were down because our domestic consumption of gasoline rose by 416,000 barrels per day to 9,276,000 barrels per day, and because our exports of gasoline rose by 224,000 barrels per day to 760,000 barrels per day, while our imports of gasoline rose by 162,000 barrels per day to 608,000 barrels per day...but since our gasoline supplies have increased 15 of the last seventeen weeks, our gasoline inventories are fractionally higher than last March 3rd's level of 249,334,000 barrels, and roughly 5.9% above the 10 year average of gasoline supplies for this time of the year...        

likewise, even with the week's increase in distillates production, our supplies of distillate fuels still fell by 559,000 barrels to 137,426,000 barrels over the week ending March 2nd, after falling by 3,382,000 barrels the prior two weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, inched up by 5,000 barrels per day to 3,926,000 barrels per day, while our exports of distillates rose by 123,000 barrels per day to 1,015,000 barrels per day and while our imports of distillates rose by 58,000 barrels per day to 265,000 barrels per day...after this week’s inventory decrease, our distillate supplies were 14.9% lower at the end of the week than the 161,532,000 barrels that we had stored on March 3rd, 2017, and 3.5% lower than the 10 year average of distillates stocks at this time of the year…  

finally, with our oil imports up and oil demand metrics little changed, we were able to add to our commercial supplies of crude oil for the 6th time in 16 weeks and for the 15th time in the past 51 weeks, as our commercial crude supplies increased by 2,408,000 barrels, from 423,498,000 barrels on February 23rd to 425,906,000 barrels on March 2nd....but even with increases in five out of the last six weeks, our oil inventories as of that date were 19.4% below the 528,393,000 barrels of oil we had stored on March 3rd of 2017, and 13.2% lower than the 490,843,000 barrels of oil that we had in storage on March 5th of 2016, even as they were still 2.5% greater than the 415,425,000 barrels of oil we had in storage on March 6th of 2015, at a time when the US glut of oil had barely begun to build...  

This Week's Rig Count

US drilling activity increased for 7th time in the past 10 weeks during the week ending March 9th, a period which has seen the increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 3 rigs to 984 rigs in the week ending on Friday, which was also 216 more rigs than the 768 rigs that were deployed as of the March 10th report of 2017, while it was still down by nearly half from 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 796 rigs this week, in the first drop in oil drilling in 7 weeks...but those 796 rigs were still 179 more oil rigs than were running a year ago, even as the week's oil rig count still remained well 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 increased by 7 rigs to 188 rigs this week, which was also 37 more gas rigs than the 151 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

drilling was stopped from another platform in the Gulf of Mexico this week, leaving just 13 rigs active in the Gulf or anywhere in the offshore US, which was down by 7 rigs from the 20 rigs that were deployed in the Gulf of Mexico a year ago, and the least rigs working in the Gulf in Baker Hughes records going back to January 7, 2000, a time when there were 123 rigs drilling in the Gulf....meanwhile, the week's count of active horizontal drilling rigs was up by a single rig to 848 horizontal rigs this week, which was still up by 209 rigs from the 639 horizontal rigs that were in use in the US on March 10th of last year, but 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 up by 2 rigs to 61 vertical rigs this week, which was still down from the 68 vertical rigs that were in use during the same week of last year...meanwhile, the directional rig count was unchanged at 75 directional rigs this week, which was still up from the 61 directional rigs that were deployed on March 3rd of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 9th, the second column shows the change in the number of working rigs between last week's count (March 2nd) and this week's (March 9th) count, the third column shows last week's March 2nd 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 10th of March, 2017...    

despite the 7 rig increase of drilling rigs targeting natural gas, neither the Utica or the Haynesville was affected, with a single rig addition in the Marcellus in Pennsylvania the only major gas basin to see a rig addition...natural gas rigs were also added in the Arkoma Woodford and the Cana Woodford of Oklahoma, which simultaneously saw seven oil rigs shut down, and in 4 other locations not specified in Baker Hughes summaries...drilling in the Utica was unchanged, with 16 rigs targeting wet gas formations and 7 rigs drilling for oil....however, even as Ohio only saw a single rig added over the past year, production of natural gas from the state's wells increased by 38.4% over a year ago in the 4th quarter, which you'll see in the link from the ODNR below...

 

note:  there’s more here…

natural gas supplies 18% below average, despite warm winter; offshore rig count drops to lowest on record

oil prices ended broadly lower this week, as tariffs on steel and aluminum imports announced by Mr. Trump led to fears of a global trade war, which would retard global economic activity and thus reduce demand for oil products...after rising 3.2% to an 18 day high of $63.55 a barrel last week, contract prices for oil to be delivered in April rose another 36 cents to a three week high of $63.91 a barrel on Monday, on strong U.S. demand and comments from the Saudis that they would continue to hold production crude well below their output cap...prices then turned lower on Tuesday on a jump in the US dollar and an anticipated rise in US crude stockpiles, with crude falling 90 cents to end the day at $63.01 a barrel...oil prices were then down for a second day on Wednesday after the EIA data showed a larger-than-expected increase in U.S. crude inventories and a surprisingly large jump in gasoline supplies, with the April oil contract price ending $1.37 lower at $61.64 a barrel...oil prices then fell 65 cents to $60.99 a barrel in a global market selloff on Thursday, following Trump's vow to impose stiff steel and aluminum tariffs, leading to fears of a trade war...oil prices then fell as low as $60.13 a barrel on Friday, but then moved higher after the report of a inconsequential rise in the oil rig count, closing the day with a gain of 26 cents at $61.25 a barrel, but still finishing the week 3.6% lower than the prior week's close.... 

on the other hand, natural gas prices, which tend to react more to weather forecasts than to politics, were up a bit on the week, but still remained near their 21 month lows...trading in the contract for March natural gas expired at $2.639 per mmBTU on Monday after rising 1.4 cents, while the April natural gas contract rose 2.9 cents to close at $2.686 per mmBTU on the same day...the April contract price then fell 0.3 cents to $2.683/MMBtu on Tuesday, and 1.6 cents to $2.667/MMBtu on Wednesday, generally on the persistence of milder than normal weather forecasts for March...natural gas prices were lower Thursday morning too, falling to as low as $2.642 per mmBTU, until the weekly natural gas storage report showed a smaller than normal withdrawal, which prompted a price spike of nearly 9 cents before prices settled back to close at 2.698, a gain of 3.1 cents on the day...prices then drifted three-tenths of a cent lower to close the week at $2.695 per mmBTU, for a gain of 3.78 cents or 1.4% for the week...

the week's natural gas storage report indicated that our natural gas in storage fell by 78 billion cubic feet to 1,682 billion cubic feet in the week ending Friday, February 23rd, which left our gas supplies 680 billion cubic feet, or 28.8% lower than the 2,362 billion cubic feet that was in storage on February 24th of last year, and 372 billion cubic feet, or 18.1% below the five-year average of 2,054 billion cubic feet for the eighth week of the year...the typical natural gas withdrawal for the eighth week of the year has averaged 118 billion cubic feet over the past 5 years, so the withdrawal during the cited week was 40 billion cubic feet below normal...despite two such smaller than normal withdrawals, however, our natural gas supplies are still the second lowest on record for this time of year, eclipsed only by the polar vortex winter of 2014...and our natural gas supplies have continued to erode despite what is now turning out to be a warmer than normal winter, as we will see on the graph below...

the above graphic, which compares this year's heating requirements to the previous two years and to the historical norm, came from a package of natural gas graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out with his daily news on Friday...in this graph, the difference between normal heating demand and the cumulative heating demand for each of the past three heating seasons is shown daily over the span of a year, with the divergence in the current year shown as a solid yellow line, last year's divergence shown as a dashed yellow line, and with the divergence from normal of the 2015/2016 heating season shown as a dashed red line....note that all three graphs trend downward, or negative from zero, because all three years experienced warmer than normal temperatures, hence less heating degree days than normal, over their heating seasons...ie, if it had it been colder than normal nationally this year, the graph would be moving upwards, into a range above zero on the graph...however, for this year's solid yellow line, the downward trending pattern the graph traces generally describes a warmer than normal fall and winter except for January, when the graph moved solidly upward for three out of four weeks...but as the heading on the graph says, this year's cumulative heating demand has been 191 population-weighted heating degree days (PWHDD) below normal, compared to the much warmer prior two years that had heating requirements 570 PWHDD and 477 PWHDD below normal respectively...but while our heating requirements were below normal for this year, we have still had to pull much more natural gas out of storage than any other year on record, except for the "polar vortex" dominated winter of 2014, which we'll see in the next graph....

the above graph also came from the aforementioned package of graphs from John Kemp, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending February 23rd 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" period from January 2014 up until the end of 2017 as a yellow line, and the average of natural gas in storage over the 5 years preceding the same dates shown as a dashed blue line...at the same time, the light blue shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the graph…thus the light shaded area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the middle of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the weather related heating needs during any given season...

as John Kemp notes on the top of this graph, our supplies of natural gas continue to be well below the 5 year average range and near the bottom of the overall range; in fact, if we check the Historical Record of Natural Gas in Working Underground Storage for the Lower 48 States, we see that 2014 was the only year on record to have less natural gas in storage as of the 4th weekend of February than the 1,682 billion cubic feet that we had as of this week's report....yet as we saw in the 1st graph above, our heating requirements so far this year have now been well below normal, so we know the reason that our supplies of natural gas are now well below average hasn't been the weather...rather it has been our increasing use of natural gas to generate electricity, and increasing liquefaction of natural gas (LNG) for export, (which has been as much as 3.2 billion cubic feet per day at the Sabine Pass export terminal alone) that have been responsible for drawing down our supplies of natural gas faster than our stagnant gas production can replace them...over a 167 day heating season, Sabine Pass alone takes over 534 billion cubic feet, or nearly one-quarter of our normal winter natural gas usage and converts it into LNG to be shipped to Europe and Asia...in addition to that, just this past week the Cove Point, Maryland facility saw it's first export cargo of LNG produced from Marcellus shale gas depart after some delay, so henceforth that facility will also be drawing another 0.8 billion cubic feet per day from our storage during the winter months, when production from the field is inadequate to meet our domestic demand...with LNG export facilities in Cameron, Elba Island and Corpus Christi all scheduled for completion by the end of next winter, we could see as much as half of our normal winter natural gas usage heading overseas by this time next year...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending February 23rd, showed that a modest increase in our oil imports, along with a large drop in our oil exports, was enough for us to have oil left over to add to storage for the fourth time in five weeks...our imports of crude oil rose by an average of 261,000 barrels per day to an average of 7,282,000 barrels per day during the week, while our exports of crude oil fell by an average of 599,000 barrels per day to an average of 1,445,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,837,000 barrels of per day during the week, 860,000 barrels per day more than the record low net imports of the prior week...at the same time, field production of crude oil from US wells rose by 13,000 barrels per day to 10,283,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,120,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 15,882,000 barrels of crude per day, 49,000 barrels per day more than they used during the prior week, while at the same time 490,000 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 252,000 barrels per day less than what refineries reported they used plus what was added to storage during the week...to account for that disparity, the EIA needed to insert a (+252,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...(how this weekly oil data is gathered, and the likely reason for that "unaccounted" oil, is explained here)...

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 7,521,000 barrels per day, 8.1% less than the 8,185,000 barrel per day average we imported over the same four-week period last year....the 490,000 barrel per day increase in our total crude inventories included a 431,000 barrel per day addition of oil to our commercial stocks of crude oil and a,58,000 barrel per day addition to our Strategic Petroleum Reserve...this week's 13,000 barrel per day increase in our crude oil production included a 3,000 barrel per day increase in output from Alaska and a 10,000 barrel per day increase in output from wells in the lower 48 states...the 10,283,000 barrels of crude per day that were produced by US wells during the week ending February 23rd was the highest on record, 13.9% more than the 9,032,000 barrels per day that US wells were producing on February 24th of last year, and 22.0% above the interim 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 87.8% of their capacity in using 15,882,000 barrels of crude per day, down from 88.1% of capacity the prior week, and down from the wintertime record 96.7% of capacity set eight weeks earlier, as US refineries are now slowing down due to pre-spring blend changeover and scheduled maintenance...the 15,882,000 barrels of oil that were refined this week were 9.8% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, but were 1.4% more than the 15,664,000 barrels of crude per day that were being processed during the week ending February 24th, 2017, when refineries, undergoing seasonal maintenance, were operating at 86.0% of capacity....

even with the small increase in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 717,000 barrels per day to 9,391,000 barrels per day during the week ending February 23rd, after it had increased by 515,000 barrels per day the prior week....that decrease meant our gasoline production was 0.7% lower during the week than the 9,456,000 barrels of gasoline that were being produced daily during the week ending February 24th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 20,000 barrels per day to 4,469,000 barrels per day, after falling by 322,000 barrels per day the prior week...after those decreases, the week's distillates production was 6.0% lower than the 4,755,000 barrels of distillates per day than were being produced during the equivalent week of 2017....    

the big drop in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still rose by 2,483,000 barrels to 251,817,000 barrels by February 23rd, the fifteenth increase in 16 weeks....our supplies increased because our exports of gasoline fell by 382,000 barrels per day to 536,000 barrels per day, while our imports of gasoline rose by 96,000 barrels per day to 446,000 barrels per day, and because our domestic consumption of gasoline fell by 142,000 barrels per day to 8,860,000 barrels per day...but even after fifteen increases in supplies in sixteen weeks, our gasoline inventories are still 1.6% lower than last February 24th's level of 255,889,000 barrels, even as they are now roughly 8.6% above the 10 year average of gasoline supplies for this time of the year...        

meanwhile, with the week's drop in distillates production, our supplies of distillate fuels fell by 960,000 barrels to 137,985,000 barrels over the week ending February 23rd, after falling by 2,422,000 barrels the prior week...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 303,000 barrels per day to 3,921,000 barrels per day, while our exports of distillates rose by 38,000 barrels per day to 892,000 barrels per day and as our imports of distillates fell by 36,000 barrels per day to 207,000 barrels per day...after this week’s inventory decrease, our distillate supplies were 16.0% lower at the end of the week than the 164,208,000 barrels that we had stored on February 24th, 2017, and 2.8% lower than the 10 year average of distillates stocks at this time of the year…  

finally, with our oil imports increasing and our oil exports way down, we were able to add to our commercial supplies of crude oil for just the 5th time in 15 weeks and for the 14th time in the past 50 weeks, as our commercial crude supplies increased by 3,019,000 barrels, from 420,479,000 barrels on February 16th to 423,498,000 barrels on February 23rd....but even with that increase, our oil inventories as of that date ended the week 18.6% below the 520,184,000 barrels of oil we had stored on February 24th of 2017, and 13.0% lower than the 486,699,000 barrels of oil that we had in storage on February 26th of 2016, even as they were still 3.2% greater than the 410,246,000 barrels of oil we had in storage on February 27th of 2015, at a time when the US glut of oil had just begun to build... 

This Week's Rig Count

US drilling activity increased for 6th time in the past 9 weeks during the week ending March 2nd, a period which has seen the increases far exceed the few decreases, after an extended period of stable counts...Baker Hughes reported that the total count of active rotary rigs running in the US was up by 3 rigs to 981 rigs in the week ending on Friday, which was also 225 more rigs than the 756 rigs that were deployed as of the March 3rd report of 2017, while it was still down by nearly half 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 1 rig to 800 rigs this week, which was also 191 more oil rigs than were running a year ago, while the week's oil rig count still remained well 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 increased by 2 rigs to 181 rigs this week, which was also 35 more gas rigs than the 146 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

drilling activity from platforms in the Gulf of Mexico decreased by 3 rigs to 14 rigs for the week, which was down by 4 rig from the 18 rigs that were deployed in the Gulf of Mexico a year ago, and the least rigs working in the Gulf in Baker Hughes records going back to January 7, 2000, a time when there were 123 rigs drilling in the Gulf....meanwhile, two rigs began drilling from platforms on inland lakes in Louisiana this week, bringing the "inland waters" rig count up to 4 rigs, which was the same number of rigs on inland waters as on March 3rd of last year...

the week's count of active horizontal drilling rigs was up by 5 rigs to 847 horizontal rigs this week, which was also up by 214 rigs from the 633 horizontal rigs that were in use in the US on March 3rd of last year, but 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 up by 6 rigs to 75 directional rigs this week, which was also up from the 61 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 8 rigs to 59 directional rigs this week, which was also down from the 62 vertical rigs that were deployed on March 3rd of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of March 2nd, the second column shows the change in the number of working rigs between last week's count (February 23rd) and this week's (March 2nd) count, the third column shows last week's February 23rd 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 3rd of March, 2017...   

there were also a number of changes this week that were not included in these tables, since the "other basins" category shows an increase of 5 oil rigs and one rig targeting natural gas....in addition to the oil rig decreases that are obvious in the Cana Woodford of Oklahoma, the Niobrara of the Rockies front range, the Permian of west Texas and the Williston of North Dakota, the 3 rigs that were shut down in the Gulf had also been targeting oil, and they were all off the Louisiana shore...on the other hand, an oil rig was added in the Eagle Ford of south Texas, where a natural gas directed rig was shut down, which nets as a "no change"...otherwise, the 2 rig increase in the Marcellus in Pennsylvania is the only other natural gas rig change among the major basins...Ohio drilling remained unchanged, with 16 rigs targeting wet gas formations and 7 rigs drilling for oil....then, other than the changes in the major oil and gas producing states shown above, Mississippi saw 3 rigs started during the week, after having shut down their only two active rigs the prior week...meanwhile, the only two rigs which had been deployed in Kentucky were shut down this week, leaving the state with no drilling activity, same as a year ago...and furthermore, the only rig that had been active in Illinois was also shut down this week; which was also a reduction from the single rig working the state on last March 3rd...

 

note:  there’s more here…