Midwest gas supplies down 58% from a year ago; new record highs for exports of crude oil, distillates, and total exports...

oil prices were down less than half a percent over the past week, as geopolitical concerns competed with supply fundamentals for oil traders' attention...after increasing more than 10% over the prior 10 sessions and closing at $68.40 a barrel last week, US crude oil contracts for June delivery rebounded from a $1.26 drop on Monday morning to finish 24 cents higher at a new 42 month high of $68.64 a barrel, as oil traders feared renewed U.S. sanctions could curtail Iran's oil output and reduce global supplies...prices then dropped 94 cents to $67.70 a barrel on Tuesday, after speeches by Trump and French President Macron telegraphed an agreement on an Iran nuclear deal...however, geopolitical concerns returned to the markets after Venezuela imprisoned Chevron employees for treason on Wednesday, and oil prices subsequently rose 35 cents to $68.05 a barrel, despite a surprising increase in US crude supplies...oil prices rose another 14 cents to $68.19 a barrel on Thursday, as the risk of renewed sanctions on Iran and plunging Venezuelan output offset the effects of a strong dollar...while international oil prices continued to move higher on Iran concerns on Friday, US prices slipped 9 cents to end the week at $68.10 a barrel, 30 cents lower than their previous weekly close, thus logging their first decrease in three weeks...

natural gas prices, meanwhile, were little changed this week, with the June contract ending Friday at a $2.771 per mmBTU, just four-tenths of a cent higher than it closed the previous week, despite a larger than expected withdrawal of gas from storage...the now expired May natural gas contract, on the other hand, was up every day it traded, ending 8.2 cents higher at $2.821 per mmBTU on Thursday, before the June contract became the front month on Friday and fell 6.8 cents...the natural gas storage report from the EIA released on Thursday indicated that natural gas in storage in the US fell by 18 billion cubic feet to 1,281 billion cubic feet over the week ending April 20th, which left our gas supplies 897 billion cubic feet, or 41.2% lower than the 2,178 billion cubic feet that were in storage on April 20th of last year, and 527 billion cubic feet, or 29.1% below the five-year average of 1,808 billion cubic feet typically in storage after the third week of April....the forecasts had been for a 12 billion cubic foot withdrawal, which still would have been unusual for this time of year; normally, the third week of April sees a 60 billion cubic foot surplus of natural gas, which is then injected into storage; last year, there were 71 billion cubic feet of gas added to storage over the week ending April 20th...since the Midwest has been taking the brunt of the withdrawals lately, we'll include a table from that report showing the differences in regional natural gas supply...

the above table is the initial summary table from the EIA's Weekly Natural Gas Storage Report for the week ending April 20th; the first column shows the quantity of natural gas in storage in billions cubic feet for each US region and nationally the week ending April 20th; the second column shows the natural gas in storage for each US region and nationally the week ending April 13th, and the next column shows the change between the two...on the right, under 'Historical Comparisons', they show the billions cubic feet of natural gas in storage for each US region and nationally as of April 20th of last year, and then the average of natural gas in storage for each US region and nationally for the 3rd week in April over the past 5 years...thus we can see that of this week's 18 billion cubic foot withdrawal, 17 billion cubic feet came out of storage in the Midwest, as we would expect, recalling that week, as well as most of April, has seen cooler than normal weather in this region...that left regional gas supplies at 211 billion cubic feet, or 58.0% lower than the 502  billion cubic feet that were in storage in the Midwest on April 20th of last year, and 42.7% below the five-year average of 368 billion cubic feet typically in Midwest storage after the third week of April...

the issue here is not that we're going to run short of natural gas this year anymore, since it's almost certain that the next week will see a surplus, and hence an increase in gas in storage...the question is whether enough natural gas can be added back to storage over the coming months to get our supplies back up to normal by mid-October, when the next heating season begins...that's what we'll be watching as the natural gas injection season progresses...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending April 20th, indicated equally large increases in both our oil imports and in our oil exports, but because of a big pullback in the amount of oil used by our refineries, we were able to add oil to our commercial crude supplies for the eighth time in the past thirteen weeks...our imports of crude oil rose by an average of 539,000 barrels per day to an average of 8,469,000 barrels per day during the week, after falling by 720,000 barrels per day the prior week, while our exports of crude oil rose by an average of 552,000 barrels per day to a record high average of 2,331,000 barrels per day during the week, which meant that our effective trade in oil over the week ending the 20th worked out to a net import average of 6,138,000 barrels of per day during the week, 43,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 46,000 barrels per day to a record high of 10,586,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,724,000 barrels per day during the reporting week...

meanwhile, US oil refineries were using 16,621,000 barrels of crude per day during the week ending April 20th, 328,000 barrels per day less than they used during the prior week, while at the same time 205,000 barrels of oil per day were being added to oil storage in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 102,000 fewer barrels per day than what refineries reported they used during the week plus what was reportedly added to storage...to account for that disparity, the EIA needed to insert a (+102,000) 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"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,237,000 barrels per day, which was 1.5% more the 8,113,000 barrel per day average we imported over the same four-week period last year...the 205,000 barrel per day addition to our total crude inventories included a 310,000 barrel per day increase in our commercially available stocks of crude oil, partially offset by a 105,000 barrel per day decrease the oil in our Strategic Petroleum Reserve, possibly a sale mandated by this year's federal budget...this week's 46,000 barrel per day increase in our crude oil production included a 33,000 barrel per day increase in output from wells in the lower 48 states and a 13,000 barrel per day increase in output from Alaska...the 10,540,000 barrels of crude per day that were produced by US wells during the week ending April 20th were the highest on record, 14.3% more than the 9,265,000 barrels per day that US wells were producing during the week ending April 21st of last year...

since our crude oil production has been hitting new record highs virtually every week this year, it's worth taking a look at a graph of what those production increases looks like compared to the recent historical trend...

the above graph was copied from a zero hedge review of this week's EIA petroleum status report, and it shows our weekly crude oil production in thousands of barrels per day on the right scale from the beginning of 2015 in blue...it also shows the weekly US rig count on the left scale over that same period in green, with dates for those rig counts shifted forward 3 months from the oil production dates in an attempt to line up weekly production with the number of rigs that were drilling three months prior in any given week...however, the fact is that the number of rigs drilling at any point in time has little to do with future oil production anymore, for a couple of reasons...first, drilling during any week in preparation for fracking does not bring that well into production in any given time-frame...as we saw with the DUC well report last week, there was a 6.4 month backlog of drilled but uncompleted wells in the US in March, a total which has been rising for fairly continuously for two years...completions of those wells, which would bring them into production, has been progressing at an increasing pace, irregardless of the changes in the weekly rig count...another reason that the number of rigs has little to do with the ultimate oil output is that horizontal wells are getting much larger, and are being fracked in an increasing number of stages...just this week, ConocoPhillips set a new record for horizontal drilling with a lateral of 21,478 feet, or more than four miles long...other producers are using up to 2 unit trains (~100 cars each) of sand and fracking in as many as 80 stages...these new fracks in longer laterals are a far cry from from the few stages fracking in 5000 foot laterals common just a few years ago, and hence mean considerably more production from each well when they are completed, without any increase in the number of rigs in use...

so, ignoring the rig count, the above graph clearly shows how our oil production has been spiking over the past several months, exceeding 10 million barrels per day for the first time during the week ending February 2nd, and topping 10.5 million barrels per day just 9 weeks later...at 10,586,000 barrels per day, our oil production is now up by 25.6% from the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016, with an increase of 804,000 barrels per day year to date, or up 8.2% from the 9,782,000 barrel per day oil production of December 30th...at that rate we'd see an increase of over 2.5 million barrels per day this year alone...putting that into a bit of perspective, the OPEC oil production cuts of 1.2 million barrels per day have been less than half of that...

returning to our EIA data, US oil refineries were operating at 90.8% of their capacity in using those 16,621,000 barrels of crude per day during the week ending April 20th, down from 92.4% of capacity the prior week, and down from the off-season record 96.7% of capacity set during the last week of 2017...the 16,621,000 barrels of oil that were refined this week were the least oil processed since the first week of March, down 5.6% from the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, and 3.8% less than the 17,285,000 barrels of crude per day that were being processed during the week ending April 21st, 2017, when refineries were operating at 94.4% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was much lower than the prior week, decreasing by 308,000 barrels per day to 9,886,000 barrels per day during the week ending April 20th, after our refineries' gasoline output had increased by 54,000 barrels per day during the week ending April 13th....but even with that large decrease, our gasoline production was still 1.8% greater during the week than the 9,710,000 barrels of gasoline that were being produced daily during the week ending April 21st of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 117,000 barrels per day to 4,977,000 barrels per day, after falling by 162,000 barrels per day the prior week....hence, that decrease meant the week's distillates production was 1.7% less than the 5,063,000 barrels of distillates per day than were being produced during the week ending April 21st, 2017....    

however, even with the drop in our gasoline production, our supply of gasoline in storage at the end of the week rose by 806,000 barrels to 236,807,000 barrels by April 20th, just the second increase in 8 weeks, but the 17th increase in 24 weeks, as gasoline inventories are typically built up over the winter months...our gasoline supplies rose because our domestic consumption of gasoline fell by 744,000 barrels per day from last week's record to a below normal 9,083,000 barrels per day, and because our imports of gasoline rose by 191,000 barrels per day to 896,000 barrels per day, even as our exports of gasoline rose by 144,000 barrels per day to 791,000 barrels per day...but even with this week's increase, our gasoline inventories are still 1.8% lower than last April 21st's level of 241,041,000 barrels, even as they are now roughly 9.2% above the 10 year average of gasoline supplies for this time of the year...          

meanwhile, with this week's decrease in distillates production, our supplies of distillate fuels fell by 2,611,000 barrels to 122,729,000 barrels over the week ending April 20th, the 6th decrease in seven weeks, after falling by 3,017,000 barrels the prior week...our distillate inventories fell again because our exports of distillates rose by 439,000 barrels per day to a record high 1,724,000 barrels per day despite that lower production, while our imports of distillates rose by 20,000 barrels per day to 123,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 607,000 barrels per day to 3,749,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 18.7% lower than the 148,266,000 barrels that we had stored on April 21st, 2017, and roughly 9.6% lower than the 10 year average of distillates stocks at this time of the year…     

finally, despite the jump to a record high by our oil exports, we were still able to add to our commercial supplies of crude oil for the 9th time in 2018 and for the 17th time in the past year because of the increase in our imports and the reduced oil consumption by our refineries, as our commercial crude supplies increased by 2,170,000 barrels during the week, rising from 427,567,000 barrels on April 13th to 429,737,000 barrels on April 20th ...however, after falling most of the past year, our oil inventories as of April 13th were still 18.7% below the 528,702,000 barrels of oil we had stored on April 21st of 2017, 15.6% lower than the 509,311,000 barrels of oil that we had in storage on April 22nd of 2016, and 6.2% below the 458,181,000 barrels of oil we had in storage on April 24th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years...   

since our oil exports have hit yet another record this week, we will again include the latest updated chart of their trajectory over the past 20 months..

the above graph came from the weekly package of oil graphs that John Kemp of Reuters emailed out on Wednesday, and it shows weekly US crude oil exports in thousands of barrels per day over the past 20 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 our exports were choked off as 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 in the wake of the hurricanes, US crude suppliers began to sell as much oil overseas as they could, and as a result our oil exports have stayed above a million barrels per day since...as of Friday, US WTI (West Texas Intermediate) crude for June was selling at $68.10 a barrel, while June North Sea Brent, the international benchmark crude of an equivalent grade, was selling at $74.64 a barrel, so it's evident that US oil traders will be pulling down large windfall profits to sell US crude into the international markets in the months going forward, even after paying the roughly $2 a barrel transport costs...

with the record for crude exports occurring the same week as a record for distillates exports and an increase in our gasoline exports, it shouldn't be much of a surprise that our total exports of oil and the products made from it were also at a record high, eclipsing the old export record by nearly 10%, and that's what the next graph shows:

this is the graph that accompanies the EIA spreadsheet for "Weekly U.S. Exports of Crude Oil and Petroleum Products" which gives us the weekly totals in thousands of barrels per day of all our exports of oil and all products made from oil, including gasoline, distillates, fuel oil, and petrochemical precursors...we exported 8,332,000 barrels per day of such oil & oil products during the week ending April 20th, obviously a new record, up from 6,725,000 barrels per day the prior week, and 39.4% more than the 5,979,000 barrels per day that were being exported during the same week a year earlier...

This Week's Rig Count

US drilling activity increased for the ninth time in the past ten weeks and for 18th time in the past 25 weeks during the week ending April 27th, a period of higher oil prices that has consequentially 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 8 rigs to 1021 rigs in the week ending on Friday, which was also 151 more rigs than the 870 rigs that were in use as of the April 28th 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 increased by 5 rigs to 825 rigs this week, which was also 128 more oil rigs than were running a year ago, while it was still 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 was increased by 3 rigs to 195 rigs this week, which was 24 more gas rigs than the 171 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, there is also a rig drilling currently that is listed as "miscellaneous", unchanged from last week, but down from the 2 "miscellaneous" rigs that were operating a year ago.

drilling activity in the Gulf of Mexico was unchanged at 18 rigs rig this week, while the year ago offshore totals fell, which meant that the total Gulf count and total offshore count is now 1 rig higher than the 17 offshore rigs deployed a year ago...this week also saw a rig set up to drill through an inland lake in Louisiana, where there are now 5 such rigs working, up from the 4 rigs deployed on inland waters during the week ending April 28th of a year ago..

the count of active horizontal drilling rigs increased by 12  rigs to 901 horizontal rigs this week, which was 171 more horizontal rigs than the 730 horizontal rigs that were in use in the US on April 28th 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 68 rigs this week, which was still up from the 63 directional rigs that were in use during the same week of last year....at the same time, the vertical rig count also decreased by 2 rigs to 52 vertical rigs this week, which left their count down from the 77 vertical rigs that were deployed on April 28th 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 April 27th, the second column shows the change in the number of working rigs between last week's count (April 20th) and this week's (April 27th) count, the third column shows last week's April 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report 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 on Thursday the 28th of April, 2017...     

it's a bit of a surprise to see this week's increase led by the 9 rig increase in the Cana Woodford of Oklahoma, as drilling in that basin has been stagnant to lower over recent months, after it rose to 74 rigs in the middle of November, while drilling elsewhere had been on the increase...all those were oil rigs, as was the rig addition in the Ardmore Woodford, while the rig added in the Arkoma Woodford was targeting natural gas...meanwhile, the increase of two natural gas rigs in Ohio's Utica shale was offset by natural gas rig shutdowns in Pennsylvania's Marcellus and Arkansas' Fayetteville...other natural gas rig increases came in the Haynesville of northern Louisiana and in an "other" basin not tracked separately by Baker Hughes...note that other than the major producing states shown above, Nevada also saw a rig added this week and now has two; up until 7 weeks ago, Nevada had gone over a year with no drilling at all...

 

note:  there’s more here..

natural gas supplies now 38.3% below those of a year ago; DUC well report shows 6.4 month backlog of unfracked wells

oil prices were higher again this week, and they might have reached $70 a barrel for the first time in three and a half years had not Trump tweeted against them on Friday...after jumping nearly 9% to a 41 month high of $67.38 a barrel on widespread war fears last week, US oil prices for May delivery sunk $1.17 to $66.22 a barrel on Monday, as news over the weekend made it clear that the weekend missile strikes against Syria were likely just a one-off event, and that a direct US - Russia military confrontation had been avoided...oil prices then recovered 30 cents to $66.52 a barrel on Tuesday, bolstered by a strong stock market and concern that possible renewed U.S. sanctions against Iran would impact global oil supplies...prices then jumped nearly 3% on Wednesday, topping $68 for the first time in more than three years and closing up $1.95 at $68.47 a barrel, after the Saudis indicated an oil price target of $80 or even $100, and the EIA reported that U.S. stockpiles fell across the board....oil prices were up more than a dollar again on Thursday morning, hitting highs not seen since November 2014, before pulling back from that three-and-a-half-year high and closing down 18 cents at $68.29 a barrel, after oil ministers meeting in Saudi Arabia said that the global glut of crude supplies has nearly vanished....oil prices then dropped to as low as $67.50 on Friday morning, after Trump criticized OPEC, tweeting "Looks like OPEC is at it again,” “Oil prices are artificially Very High! No good and will not be accepted!” but later stabilized to close up 9 cents at $68.38 a barrel, after OPEC ministers pushed back, saying prices were not artificially inflated, and that they had no specific price objective in stabilizing oil markets...oil prices thus posted a second straight weekly gain as the May contract expired on Friday, while the new front month contract for June oil closed up 7 cents at $68.40 a barrel, for a 1.6% gain on the week...

natural gas prices for May, on the other hand, were little changed over the week, rising 1.7 cents on Monday, falling 1.4 cents on Tuesday, inching up a tenth of a cent on Wednesday, then falling 7.9 cents on Thursday despite a surprisingly large draw from gas supplies, but then gaining that entire 7.9 cents back on Friday to end the week four-tenths of cent higher at $2.739 per mmBTU, or roughly $2.84 a thousand cubic feet....the week's natural gas storage report from the EIA indicated that natural gas in storage in the US fell by 36 billion cubic feet to 1,299 billion cubic feet over the week ending April 13th, which left our gas supplies 808 billion cubic feet, or 38.3% lower than the 2,107 billion cubic feet that were in storage on April 14th of last year, and 449 billion cubic feet, or 25.7% below the five-year average of 1,748 billion cubic feet typically in storage after the second week of April...that large of a withdrawal was unexpected, and any withdrawal of gas from storage in April is unusual, as the heating season officially ended on March 31st with 1,351 billion cubic feet of natural gas in storage in the US, the lowest level at the end of winter since 2014 and the 2nd lowest amount of gas in storage as that date in the short history of the storage report...however, after that official end of the natural gas withdrawal season, we've now seen two more weeks of draw downs, which we're able to see quite clearly in the following graph...

the above graph came from the twitter feed of John Kemp, senior energy analyst and columnist with Reuters, 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 April 13th 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" from the period shown by the graph, which would thus be 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 those same dates shown as a dashed blue line...at the same time, the light blue shaded background shows us 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, fluctuating of course depending on the temperature related heating needs during any given season...

however, we can see that the red line for this year's natural gas supplies has continued to fall over the past two weeks, while the blue-dashed average of gas in storage, and the yellow line for last year's gas in storage had already turned higher by mid-April...the 36 billion cubic foot drop in supplies referenced by this report compares to an average 38 billion cubic foot build in supplies for the typical second week in April, and the 47 billion cubic feet of natural gas that was added to storage in the week ending April 14th of last year...in fact, if we check the Historical Record of Natural Gas in Working Underground Storage for the Lower 48 States, we can't find any year where there has been a withdrawal of natural gas from storage as late in the year as the 2nd week of April...even the polar vortex of 2014 saw natural gas supplies inch up at the end of March, and saw an increase of 49 billion cubic feet of gas in storage by the week ending April 18th of that year...moreover, the week ending April 20th this year, not yet reported or shown above, is at risk of another withdrawal, since the past week has seen another arctic weather outbreak over the eastern half of the country, where natural gas consumption is the highest...but whatever happens this week, however, it's clear that we will start this year's natural gas injection season with a large deficit...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending April 13th, was almost a reversal of the prior week's, in that it showed that due to a big drop in our oil imports and a big jump in our oil exports, our refineries had to pull oil out of our commercial crude supplies for the fifth time in the past twelve weeks...our imports of crude oil fell by an average of 720,000 barrels per day to an average of 7,930,000 barrels per day during the week, after rising by 752,000 barrels per day the prior week, while our exports of crude oil rose by an average of 544,000 barrels per day to an average of 1,749,000 barrels per day during the week, after falling by 970,000 barrels per day the prior week, which meant that our effective trade in oil over the week ending the 13th worked out to a net import average of 6,181,000 barrels of per day during the week, 1,264,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 15,000 barrels per day to a record high of 10,540,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,721,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,949,000 barrels of crude per day, 70,000 barrels per day less than they used during the prior week, while at the same time 153,000 barrels of oil per day were being pulled out of oil storage facilities in the US....consequently, 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 75,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+75,000) 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"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports actually rose to an average of 8,157,000 barrels per day, which was 2.7 more the 7,941,000 barrel per day average we imported over the same four-week period last year, the first time our 4 week average imports topped the year ago averages this year....the 153,000 barrel per day withdrawal from our total crude inventories was all taken from our commercially available stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 15,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 10,000 barrel per day decrease in output from Alaska...the 10,540,000 barrels of crude per day that were produced by US wells during the week ending April 13th were the highest on record, 13.9% more than the 9,252,000 barrels per day that US wells were producing during the week ending April 14th of last year, and 25.1% 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 92.4% of their capacity in using those 16,949,000 barrels of crude per day, down from 93.5% of capacity the prior week, and and down from the off-season record 96.7% of capacity set during the last week of 2017....hence, the 16,949,000 barrels of oil that were refined this week were 3.7% less than the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, but were statistically unchanged from the 16,938,000 barrels of crude per day that were being processed during the week ending April 14th, 2017, when refineries were operating at 92.9% of capacity....

even with the modest decrease in the amount of oil being refined, gasoline output from our refineries was higher than the prior week, increasing by 54,000 barrels per day to 10,204,000 barrels per day during the week ending April 13th, after our refineries' gasoline output had increased by 35,000 barrels per day during the week ending April 6th....that increase meant that our gasoline production was 4.2% greater during the week than the 9,794,000 barrels of gasoline that were being produced daily during the week ending April 14th of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 162,000 barrels per day to 5,094,000 barrels per day, after rising by 753,000 barrels per day over the prior three weeks....still, that decrease meant the week's distillates production was 1.1% less than the 5,150,000 barrels of distillates per day than were being produced during the week ending April 14th, 2017....    

even with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week fell by 2,968,000 barrels to 235,967,000 barrels by April 13th, the sixth decrease in 7 weeks, but just the 7th decrease in 23 weeks, as gasoline is typically added to storage over the winter months...our gasoline supplies fell because our domestic consumption of gasoline rose by 548,000 barrels per day to a record high of 9,857,000 barrels per day, even while our exports of gasoline fell by 142,000 barrels per day to 647,000 barrels per day, and while our imports of gasoline rose by 50,000 barrels per day to 705,000 barrels per day...with this week's decrease, our gasoline inventories are now 0.7% lower than last April 14th's level of 237,672,000 barrels, even as they remain roughly 7.8% above the 10 year average of gasoline supplies for this time of the year...         

since we have a new record high for domestic gasoline consumption this week, we'll include a graph of the recent history of that metric...

the above graph came from a package of oil graphs on this report that John Kemp mailed out on Wednesday, and it shows gasoline supplied to US markets in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our gasoline usage for any given date shown in the light blue shaded area, and the median of our gasoline consumption, 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 gasoline supplied for each week in 2017 traced weekly by a yellow line, and our year to date gasoline consumption for 2018 represented by the red graph...as John notes at the top, that red line shows that gasoline supplied rose to a record high of 9.68 million barrels per day with this week's report, which is especially notable in that it happened in April, when as you can see, the summer months are usually the highest months for gasoline consumption...note that this 'gasoline product supplied' number does not necessarily mean that driving increased by that much, as it represents deliveries of gasoline to wholesalers, rather than retail sales, which nonetheless would not have set a record unless retail sales to drivers had demanded a restocking by gasoline wholesalers..

meanwhile, with this week's decrease in distillate's production, our supplies of distillate fuels fell by 3,017,000 barrels to 125,340,000 barrels over the week ending April 13th, the 5th decrease in six weeks and the largest drop since the beginning of January...our distillate inventories fell because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 186,000 barrels per day to 4,356,000 barrels per day, and because our imports of distillates fell by 22,000 barrels per day to 103,000 barrels per day, while our exports of distillates fell by 75,000 barrels per day to 1,285,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 15.5% lower than the 148,266,000 barrels that we had stored on April 14th, 2017, and roughly 7.4% lower than the 10 year average of distillates stocks at this time of the year…    

finally, due to the drop in our oil imports and the jump in our oil exports, we had to take oil out of our commercial supplies of crude oil for the 7th time in 2018 and for the 36th time in the past year, as our commercial crude supplies decreased by 1,071,000 barrels, from 428,638,000 barrels on April 6th to 427,567,000 barrels on April 13th...hence, after falling most of the past year, our oil inventories as of April 13th were 19.7% below the 532,343,000 barrels of oil we had stored on April 14th of 2017, 15.7% lower than the 507,312,000 barrels of oil that we had in storage on April 15th of 2016, and 6.3% below the 456,271,000 barrels of oil we had in storage on April 17th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years...  

This Week's Rig Count

US drilling activity increased for the eighth time in the past nine weeks and for 17th time in the past 24 weeks during the week ending April 20th, a period of higher oil prices that has consequentially 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 1013 rigs in the week ending on Friday, which was also 156 more rigs than the 857 rigs that were in use as of the April 21st 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 increased by 5 rigs to 820 rigs this week, which was also 132 more oil rigs than were running a year ago, while it was still 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 was unchanged at 192 rigs this week, which was just 25 more gas rigs than the 167 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, there is also a rig drilling currently that was listed as "miscellaneous", unchanged from last week, but down from the 2 "miscellaneous" rigs that were operating a year ago.

new drilling began from 2 more platforms in the Gulf of Mexico this week, increasing current drilling activity in the Gulf to 18 rigs, which was still 2 rigs less than were working in the Gulf, or anywhere offshore, a year ago...meanwhile, the count of active horizontal drilling rigs increased by 6 rigs to 889 horizontal rigs this week, which was 171 more horizontal rigs than the 718 horizontal rigs that were in use in the US on April 21st 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 70 rigs this week, which was still up from the 60 directional rigs that were in use during the same week of last year....on the other hand, the vertical rig count decreased by 1 rig to 54 vertical rigs this week, which was also down from the 79 vertical rigs that were deployed on April 21st 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 April 20th, the second column shows the change in the number of working rigs between last week's count (April 13th) and this week's (April 20th) count, the third column shows last week's April 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report 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 on Thursday the 21st of April, 2017...      

obviously, this was another week when the whole increase in drilling was in the Permian of west Texas, while rigs the rest of the country were just shifting around like chickens in a barnyard...the largest decrease resulting from that shifting was in the Cana Woodford of Oklahoma, which was down 4 rigs to 61 rigs, which nonetheless only subtracted 1 from the Oklahoma total, as rigs were evidently added elsewhere in the state, likely including the two rigs added in the Mississippian lime near the Kansas border...note that drilling in the Utica shale was down by two rigs this week, both of which were targeting natural gas, one in Pennsylvania and one in Ohio...despite that, the natural gas directed rig count remained unchanged because two natural gas rigs were added in the Eagle Ford of south Texas, where one oil rig was shut down at the same time...that left the Eagle Ford with 68 oil rigs, and 8 drilling for natural gas...also note that other than the major producing states shown above, both Alabama and Indiana had rigs start up this week...for Alabama, that single rig is still down from the two rigs working in the state a year ago, while for Indiana, their new rig represents the first drilling the state has seen since February of 2017...

DUC well report for March

Monday of this week saw the release of the EIA's Drilling Productivity Report for April, which includes the EIA's March data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...we last looked at this monthly report in August of last year, when they consolidated their reporting on the Utica shale and the Marcellus into a single geographic unit labeled 'the Appalachia region", while at the same time initiating coverage on the Anadarko region, which includes 24 Oklahoma and 5 Texas counties, and which includes the STACK and SCOOP reservoirs in the Woodford shale, and the Granite Wash tight sands band transversing the Oklahoma Texas Panhandle border....the productivity report itself gets little coverage, as some writers are put off by the seemingly exact projections of yield per rig for the month ahead, which are inaccurate in themselves in that the action of drilling does not yield product until the wells are fracked, which could be months later...nonetheless, the data on drilled but uncompleted wells (DUCs) gives us a good idea of how many wells are being drilled, how many are being completed, and the backlog of those left to complete in each basin...

for March, this report once again showed a large increase in uncompleted wells nationally, mostly because of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, but also because of modest growth in uncompleted wells in the Eagle Ford of south Texas...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 94, from 7,598 wells in February to 7,692 wells in March, the eighteenth consecutive monthly increase in uncompleted wells, and hence again the highest number of such unfracked wells in the history of this report....that was as 1291 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) and 1197 wells were completed and brought into production by fracking...hence, at the March completion rate, the 7,692 drilled but uncompleted wells left at the end of March represent a 6.4 month backlog of wells that have been drilled but not yet fracked...

as has been the case for most of the past two years, the March DUC increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 122, from 2,922 DUC wells in February to 3,044 DUCs in March, as 566 new wells were drilled into the Permian but only 444 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 22, from 1,485 DUC wells in February to 1,507 DUCs in March, as 182 wells were drilled in the Eagle Ford during March, while 160 Eagle Ford wells were completed...meanwhile, DUC wells in the Anadarko region rose by 4, from 991 DUC wells in February to 995 DUCs in March, as 141 wells were drilled in the Anadarko region in March while 137 drilled wells in the basin were completed....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by one to 175, as 54 wells were drilled into the Haynesville, while 53 Haynesville wells were fracked during the same period....on the other hand, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 15 wells, from 764 DUCs in February to 749 DUCs in March, as 104 wells were drilled into the Marcellus and Utica shales, while 119 of the already drilled wells in the region were fracked...meanwhile, DUC wells in the Niobrara chalk of the Rockies front range decreased by 39 to 506, as just 144 Niobrara wells were drilled while 183 Niobrara wells were being fracked...lastly, DUC wells in the Bakken of North Dakota decreased by 1 to 716, as 100 wells were drilled into the Bakken while 101 Bakken wells were fracked...

thus, for the month of March, DUCs in the 5 oil basins tracked by in this report (ie., Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 108 wells to 6,768 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by 14 wells to 924 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

 

note:  there’s more here…

oil prices jump to 41 month high on war news; global oil output at another record high despite deeper OPEC cuts

oil prices were higher each and every day this week, mostly on wars and rumors of wars, ending at their highest level since November 2014, even as US & global oil supply figures remained bearish...after falling 4.4% to $62.06 a barrel on fears of a trade war with China last week, prices for US crude to be delivered in May rose $1.36 to $63.42 a barrel on Monday, as those trade war fears subsided and oil traders turned their attention to rising tensions in the Middle East, where Israeli missiles hit a Syrian air base and an alleged chemical attack over the weekend allegedly killed dozens of civilians in a rebel-held town near Damascus...oil prices then jumped $2.09 to $65.51 a barrel on Tuesday, the highest close since 2014, after Trump threatened Syria and Russia with a missile strike in response to the alleged gas attack and UN Ambassador Nikki Haley said that the US would retaliate against the alleged attack in Syria regardless of what the UN Security Council finds, even as the US had no evidence of who was behind the alleged attack or if it actually happened at all...then on Wednesday, despite a surprisingly large increase in US crude supplies, oil prices still rose $1.31 to $66.82 a barrel, because the Saudis intercepted Houthi missile attacks on their capital Riyadh and on their oil facilities and Russia said they'd shoot down any and all of the missiles that Trump threatened to fire at Syria....while oil prices were down 49 cents on Thursday morning, they rebounded to eke out a 25 cent gain for the day, closing at $67.07 a barrel, after the Saudis intercepted another missile attack, this time over Jazan, and a report of a large drop in OPEC production dominated the news...oil prices then rose for a fifth straight session Friday, with the U.S. benchmark crude gaining 31 cents to close the week $67.38 a barrel, an increase of nearly 9% on the week in the largest weekly price jump in over 8 months...

natural gas prices, on the other hand, remained unaffected by the geopolitical news, although they also eked out a small gain for the week, as the contract price for May gas delivery ended the week 3.4 cents higher at $2.735 per mmBTU, even after falling 4.5 cents over Monday and Tuesday, as the weekly storage report on Thursday showed a larger than expected withdrawal of natural gas from storage, which boosted prices heading into the weekend...the week's natural gas storage report indicated that natural gas in storage in the US fell by 19 billion cubic feet to 1,335 billion cubic feet over the week ending April 6th, which left our gas supplies 725 billion cubic feet, or 35.2% lower than the 2,060 billion cubic feet that were in storage on April 7th of last year, and 375 billion cubic feet, or 21.9% below the five-year average of 1710 billion cubic feet typically in storage after the first week of April...the average first week of April over the past five years has shown a surplus of 9 billion cubic feet, so this week's shortfall & subsequent withdrawal came at a time of year when natural gas normally starts being injected into storage, although you might recall that last week was colder than normal...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending April 6th, showed that due to a big jump in our oil imports and a big drop in our oil exports, we were able to add to our crude oil supplies for the seventh time in the past eleven weeks...our imports of crude oil rose by an average of 752,000 barrels per day to an average of 8,650,000 barrels per day during the week, after falling by 250,000 barrels per day the prior week, while our exports of crude oil fell from last week's record by an average of 970,000 barrels per day to an average of 1,205,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 7,445,000 barrels of per day during the week, 1,722,000 barrels per day more than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 65,000 barrels per day to a record high of 10,525,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 17,970,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 17,019,000 barrels of crude per day, 83,000 barrels per day more than they used during the prior week, while at the same time 472,000 barrels of oil per day were being added to oil storage facilities in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 479,000 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 (-479,000) 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"... (the details on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, are explained here)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,943,000 barrels per day, which was 1.5% less than the 8,065,000 barrel per day average we imported over the same four-week period last year....the 472,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 65,000 barrel per day increase in our crude oil production included a 85,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 20,000 barrel per day decrease in output from Alaska...the 10,525,000 barrels of crude per day that were produced by US wells during the week ending April 6th were the highest on record, 14.0% more than the 9,235,000 barrels per day that US wells were producing during the week ending April 7th of last year, and 24.9% 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 93.5% of their capacity in using those 17,019,000 barrels of crude per day, up from 93.0% of capacity the prior week, and the highest utilization rate since the first week of this year....the 17,019,000 barrels of oil that were refined this week was a seasonal record, the most oil that US refineries have ever processed this early in any April, beating the record during the week ending April 7th last year...and while this week's level of refining was still 3.3% 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 1.9% more than the 16,697,000 barrels of crude per day that were being processed during that week a year ago, when refineries were operating at 91.0% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was higher than the prior week, increasing by 35,000 barrels per day to 10,150,000 barrels per day during the week ending April 6th, after our gasoline output had decreased by 190,000 barrels per day during the week ending March 30th....with that increase, our gasoline production was 2.2% greater during the week than the 9,927,000 barrels of gasoline that were being produced daily during the week ending April 7th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 240,000 barrels per day to 5,256,000 barrels per day, after rising by 513,000 barrels per day during the prior two weeks....hence, that increase meant the week's distillates production was 3.9% higher than the 5,060,000 barrels of distillates per day than were being produced during the week ending April 7th, 2017....   

with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week rose by 458,000 barrels to 238,935,000 barrels by April 6th, the first increase in 6 weeks, but the 16th increase in 22 weeks....our gasoline supplies rose even as our domestic consumption of gasoline rose by 70,000 barrels per day to 9,273,000 barrels per day because our exports of gasoline fell by 177,000 barrels per day to 789,000 barrels per day, while our imports of gasoline fell by 106,000 barrels per day to 655,000 barrels per day...with this week's increase, our gasoline inventories are now 1.2% higher than last April 7th's level of 236,130,000 barrels, and roughly 13.3% above the 10 year average of gasoline supplies for this time of the year...        

even with the increase in distillate's production, our supplies of distillate fuels fell by 1,044,000 barrels to 128,447,000 barrels over the week ending  April 6th, the 4th decrease in five weeks...our distillate inventories fell because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 283,000 barrels per day to 4,170,000 barrels per day, and because our exports of distillates rose by 209,000 barrels per day to 1,360,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 125,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 14.5% lower than the 150,221,000 barrels that we had stored on April 7th, 2017, and roughly 5.9% lower than the 10 year average of distillates stocks at this time of the year…   

however, because of the drop in our oil exports and the jump in our oil imports, we were able to add oil to our commercial supplies of crude oil for the 8th time in 2018 and for the 16th time in the past year, as our commercial crude supplies increased by 3,306,000 barrels, from 425,332,000 barrels on March 30th to 428,638,000 barrels on April 6th....however, after falling most of the past year, our oil inventories as of April 6th were still 19.6% below the 533,377,000 barrels of oil we had stored on April 7th of 2017, 15.2% lower than the 505,232,000 barrels of oil that we had in storage on April 8th of 2016, and 4.9% below the 450,956,000 barrels of oil we had in storage on April 10th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years...

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of the OPEC's April Oil Market Report (covering March OPEC & global oil data), which is available as a free download, and hence it's the report we check for global oil supply data....the first table from this monthly report that we usually look at is from the page numbered 51 of that report (pdf page 59), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings 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 201,400 barrels per day in March to 31,958,000 barrels per day, from an February production total of 32,159,000 barrels per day, but that was a figure that was originally reported as 32,186,000 barrels per day, so their production for March was actually 228,400 barrels per day lower than the previously reported figures (for your reference, here is the table of the official February OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, oil production cutbacks by several of the OPEC members led to the March drop, with an 81,700 barrel per day decrease in Angolan oil output, a 55,300 barrel per day decrease in Venezuela's oil output, a 46,900 barrel per day decrease in Saudi output, and a 37,200 barrel per day decrease in Libya's output as the major factors...at 31,958,000 barrels per day, OPEC oil output is now 828,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, with only Iraq's 4,426,000 barrel per day output above their 4,350,000 barrel per day allocation...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from April 2016 to March 2018, and it comes from the page numbered 52 (pdf page 60) of the April 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 by 180,000 barrels per day to a record 98.15 million barrels per day in March, after February's global output total was revised down by .23 million barrels per day from the record 98.20 million barrels per day global oil output that was reported a month ago, as a 380,000 barrel per day increase in non-OPEC oil production more than made up for this month's OPEC output cuts....global oil output for March was also 2.33 million barrels per day higher than the 95.82 million barrels of oil per day that were being produced globally in March a year ago (see last April's OPEC report online (pdf) for the year ago data)... OPEC's March oil production of 31,958,000 barrels per day thus represented just 32.6% of what was produced globally, down from a revised 32.9% in February, as oil output increases by US, Norway, UK, Bahrain, Brazil, Russia and China were only partially offset by decreases in oil output from Colombia, Oman and Kazakhstan...OPEC's March 2017 production was at 31,928,000 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 165,000 more barrels per day of oil than they were producing a year ago, during the third 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 this next table from the OPEC report will show us..     

the table above comes from page 31 of the March OPEC Monthly Oil Market Report (pdf page 39), 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 March, which is their revised estimate of global oil demand during the first quarter of 2018...  

so, OPEC's estimate is that during the 1st quarter of this year, all oil consuming areas of the globe have been using 97.40 million barrels of oil per day, which is an upward revision from their prior estimate of 97.27 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 98.15 million barrels per day during March, which means that there was a surplus of around 750,000 barrels per day in global oil production vis-a vis demand during the month...

meanwhile, the 0.23 million barrels per day upward revision to February's global output plus the 0.13 million barrel of oil per day upward revision to 1st quarter demand means that our previously computed surplus for February should be revised .36 million barrels per day lower, and thus now stands at 570,000 barrels per day...likewise, the 0.13 million barrel of oil per day upward revision to 1st quarter demand means that January's surplus was that much lower, now at 410,000 barrels per day...hence, for the first three months of the year, oil production has exceeded supply by roughly 51.9 million barrels...

on the other hand, cumulative global oil demand figures for 2017 were revised higher by 0.03 million barrels per day to 97.07 barrels per day (also circled in green) with this report, because of a 0.13  million barrels per day upward revision to 4th quarter demand figures...with 92 days in the 4th quarter, that means our previous estimate of a 201 million barrel oil shortfall for 2017 was about 12 million barrels too low, so we can now re-estimate that the global oil deficit over all of 2017 was approximately 213 million barrels...

This Week's Rig Count

US drilling activity increased for the seventh time in the past eight weeks and for 16th time in the past 23 weeks during the week ending April 13th, a period of higher oil prices that has consequentially 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 1008 rigs in the week ending on Friday, which was the most rigs running in the US since April 2nd, 2015...that was also 161 more rigs than the 847 rigs that were in use as of the April 13th 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 increased by 7 rigs to 815 rigs this week, which was also 132 more oil rigs than were running a year ago, while it was still 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 fell by 2 rigs to 192 rigs this week, which was still 30 more gas rigs than the 162 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, there is also a rig drilling currently that was listed as "miscellaneous", unchanged from last week, but down from the 2 "miscellaneous" rigs that were operating a year ago.

new drilling began from 4 additional platforms in the Gulf of Mexico this week, increasing current drilling activity in the Gulf to 16 rigs, which was still 5 rigs less than were working in the Gulf, or anywhere offshore, a year ago...meanwhile, the count of active horizontal drilling rigs decreased by one rig to 883 horizontal rigs this week, which was still 177 more horizontal rigs than the 706 horizontal rigs that were in use in the US on April 13th 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 also down by 1 rig to 55 vertical rigs this week, which was also down from the 77 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count increased by 7 rigs to 70 directional rigs this week, which was up from the 64 directional rigs that were deployed on April 13th 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 April 13th, the second column shows the change in the number of working rigs between last week's count (April 6th) and this week's (April 13th) count, the third column shows last week's April 6th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report 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 on Thursday the 13th of April, 2017...    

one thing that isn't shown on this week's tables is the 4 rigs that were added in the Gulf of Mexico; they were all offshore from Louisiana and are hence included in the Louisiana count, which was only up by 1 rig because three land based rigs - one in the northern part of the state, and two in the south, were shut down in Louisiana at the same time...meanwhile, the rig that was added in Ohio's Utica was targeting a natural gas bearing formation, and there was also a new natural gas added in the Arkoma Woodford of Oklahoma; however, natural gas rigs ended down two because of the shutdown of one rig in the Marcellus of West Virginia, one in the Eagle Ford of south Texas (where three oil rigs were added), and two in other basins not shown above...also note that there's a 6 rig increase in the major shale basins shown above; assuming those additions were all horizontal rigs, there then had to be at least 7 horizontal rigs shut down in those "other" basins that Baker Hughes does not track separately...

 

note:  there’s more here…

US oil supplies drop on record crude exports, new drilling at a 3 year high as active rigs top a thousand.

oil prices tumbled with equity markets over the past week, as the Trump administration doubled down on their tariff threats against China, and the specter of a full-scale trade war spooked the markets...after sliding 1.3% to close last week at $64.94 a barrel, US oil prices for May delivery fell $1.93, or nearly 3%, to a two-week low of $63.01 a barrel on Monday, following stocks lower after China retaliated against US tariffs on Chinese steel and aluminum, heightening concerns over a broadening trade war between the U.S. and China...however, oil prices then rebounded 50 cents to $63.51 a barrel on Tuesday as traders shifted their attention back to the oil supply situation and the week's expected draw from US crude inventories....oil prices then fell 14 cents to $63.37 a barrel on Wednesday, as a surprisingly large draw in U.S. crude supplies offset an early drop to lower prices after China proposed a further broad range of tariffs on U.S. exports...with US stock markets rebounding on Thursday, oil prices rose 17 cents to $63.54 a barrel, as Saudi Arabia unexpected hiked their crude prices, even as oil's gain was curbed by strength in the dollar....on Friday, however, Trump threatened an additional $100 billion in tariffs on Chinese goods, sending stocks plummeting 767 points, with oil prices following stocks lower, ending the day down $1.48 at $62.06 a barrel, for a net loss of $2.88 a barrel, or 4.4% for the week...

meanwhile, natural gas prices were also lower for the week, even as they appeared to remain immune to geopolitical influences...after rising to $2.733 per mmBTU on the forecast of colder weather last week, natural gas contract prices for May delivery fell 5 cents $2.683 per mmBTU on Monday, after a report that US natural gas output averaged 78.3 billion cubic feet per day over the prior three calendar days, up by 400 million cubic feet per day from the 77.9 billion cubic feet per day output averaged over March...natural gas prices then rose 1.4 cents on Tuesday and 2.1 cents on Wednesday on the persistence of colder than normal temperature forecasts for the northern half of the country, but then gave all those gains up in falling 4.3 cents to $2.675 per mmBTU on Thursday, on what was seen to be a bearish natural gas storage report, wherein the actual withdrawal of 20 billion cubic feet was less than the median forecast of a 26 billion cubic feet draw...so even though natural gas prices recovered 2.6 cents to $2.701 mmBTU on Friday on that cold April forecast, they still ended the week 3.2 cents lower than the prior week's close...

the week's natural gas storage report indicated that natural gas in storage in the US fell by 29 billion cubic feet to 1,354 billion cubic feet over the week ending March 30th, which left our gas supplies 697 billion cubic feet, or 34.0% lower than the 2,051 billion cubic feet that were in storage on March 31st of last year, and 347 billion cubic feet, or 20.4% below the five-year average of 1701 billion cubic feet typically in storage at the end of March...however, 9 billion cubic feet of this week's decrease was a non-flow-related adjustment to working gas stocks in the South Central Nonsalt region, and hence the actual withdrawal of gas from storage for consumption was 20 billion cubic feet....the average withdrawal of natural gas during the last week of March over the past 5 years has been 28 billion cubic feet, so this week's actual usage fell 8 billion cubic feet short of the norm, even though reported gas in storage fell more than the average amount... 

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 30th, showed that due to a big jump in our oil exports and a modest drop in our oil imports, we saw the largest drop in our crude oil supplies in twelve weeks...our imports of crude oil fell by an average of 250,000 barrels per day to an average of 7,898,000 barrels per day during the week, after rising by 1,071,000 barrels per day the prior week, while our exports of crude oil rose by an average of 597,000 barrels per day to a record average of 2,175,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 5,723,000 barrels of per day during the week, 847,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 27,000 barrels per day to a record high of 10,460,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,183,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,936,000 barrels of crude per day, 141,000 barrels per day more than they used during the prior week, while at the same time 660,000 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 93,000 barrels per day less than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+93,000) 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"... (the details on 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 fell to an average of 7,677,000 barrels per day, which was 3.4% less than the 7,947,000 barrel per day average we imported over the same four-week period last year....the 660,000 barrel per day withdrawal from our total crude inventories was all taken from our commercially available stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 27,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states, and a 2,000 barrel per day increase in output from Alaska...the 10,460,000 barrels of crude per day that were produced by US wells during the week ending March 30th were the highest on record, 13.7% more than the 9,199,000 barrels per day that US wells were producing during the week ending March 31st of last year, and 24.1% 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 93.0% of their capacity in using those 16,936,000 barrels of crude per day, up from 92.3% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set during the last week of 2017, as US refineries are still ramping up after their pre-spring blend changeover and scheduled maintenance season....nonetheless, the 16,936,000 barrels of oil that were refined this week was a seasonal record, the most oil that US refineries have ever processed during February or March...while that elevated level of refining was still 3.8% 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 3.1% more than the 16,429,000 barrels of crude per day that were being processed during the week ending March 31st, 2017, when refineries were operating at 90.8% 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 190,000 barrels per day to 10,115,000 barrels per day during the week ending March 30th, after our gasoline output had increased by 373,000 barrels per day during the week ending March 23rd....nonetheless, our gasoline production was still 6.2% greater during the week than the 9,515,000 barrels of gasoline that were being produced daily during the week ending March 31st of last year....however, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 172,000 barrels per day to 5,016,000 barrels per day, after rising by 341,000 barrels per day during the prior week....hence, that increase meant the week's distillates production was fractionally higher than the 4,967,000 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 1,116,000 barrels to 238,477,000 barrels by March 30th, the fifth draw from supplies in a row, but just the sixth decrease in 21 weeks....our gasoline supplies fell as our domestic consumption of gasoline fell by 5,000 barrels per day to 9,203,000 barrels per day, after falling by 116,000 barrels per day the prior week, and even though our exports of gasoline fell by 133,000 barrels per day to 966,000 barrels per day, while our imports of gasoline rose by 76,000 barrels per day to 761,000 barrels per day...with our gasoline supplies now down 5 weeks in a row, our gasoline inventories are fractionally lower than last March 31st's level of 239,103,000 barrels, even as they are roughly 7.2% above the 10 year average of gasoline supplies for this time of the year...         

with the increase in distillate's production, our supplies of distillate fuels rose by 537,000 barrels to 129,491,000 barrels over the week ending March 30th, after falling by 8,472,000 barrels over the prior three weeks...our distillate inventories rose because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 488,000 barrels per day to 3,887,000 barrels per day, even as our exports of distillates rose by 233,000 barrels per day to 1,151,000 barrels per day, while our imports of distillates fell by 51,000 barrels per day to 99,000 barrels per day...but even after this week’s inventory increase, our distillate supplies still ended the week 15.0% lower than the 152,374,000 barrels that we had stored on March 31st, 2017, and roughly 7.2% lower than the 10 year average of distillates stocks at this time of the year…    

finally, to cover the big increase in our oil exports, we had to take oil out of our commercial supplies of crude oil for the 12th time in 20 weeks and for the 37th time in the past year, as our commercial crude supplies decreased by 4,617,000 barrels, from 429,949,000 barrels on March 23rd to 425,332,000 barrels on March 30th....hence, after falling most of the past year, our oil inventories as of March 30th were 20.6% below the 535,543,000 barrels of oil we had stored on March 31st of 2017, 14.7% lower than the 498,598,000 barrels of oil that we had in storage on April 1st of 2016, and 5.4% below the 449,662,000 barrels of oil we had in storage on March 27th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years... 

since our crude oil exports are the major reason for our falling supplies, and since this week saw a record high for those exports, we'll include here a graph of those exports over the past year and a half...

the above graph of recent US crude oil exports came 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 our exports were choked off as 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 in the wake of the hurricanes, US crude suppliers began to sell as much oil overseas as they could, and as a result our oil exports have stayed above a million barrels per day since...oil exports from the US are being sold from supplies benchmarked to the price of WTI, the light sweet grade of oil that's quoted daily...for the week ending March 30th, when these record exports were recorded, US light crude prices were quoted between $63.72 and $66.55 a barrel, with an average of around $65.25...at the same time, Brent crude, the similar North Sea grade of oil that serves as the international benchmark, was being quoted between $68.78 and $71.05 a barrel, with an average price of just under $70 a barrel...so it's clear that even after accounting for shipping costs of as much as $2 a barrel, US oil producers are incentivized to sell as much of our oil into international markets as our pipeline and port infrastructure will allow for...

This Week's Rig Count

US drilling activity increased for the sixth time in seven weeks and for 15th time in the past 22 weeks during the week ending April 6th, a period of higher oil prices that 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 10 rigs to 1003 rigs in the week ending on Friday, topping 1000 rigs for the first time since April 2nd, 2015...that was also 164 more rigs than the 839 rigs that were in use as of the April 7th 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 increased by 11 rigs to 808 rigs this week, which was also 136 more oil rigs than were running a year ago, while it was still 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 was unchanged at 194 rigs this week, which was 29 more gas rigs than the 165 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...however, one of the rigs that was listed as "miscellaneous" was shut down this week, so now there is just one such "miscellaneous" rigs active, down from the 2 "miscellaneous" rigs that were operating a year ago.

the count of drilling rigs working in the Gulf of Mexico was unchanged at 12 rigs, still the lowest number of rigs working in the Gulf or offshore nationally in Baker Hughes records dating back to 1968, & down by 10 rigs from the 22 rigs that were deployed in the Gulf of Mexico a year ago....the count of active horizontal drilling rigs increased by 14 rigs to 884 horizontal rigs this week, which was also up by 189 rigs from the 695 horizontal rigs that were in use in the US on April 7th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count increased by 3 rigs to 63 directional rigs this week, which was still down from the 71 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 7 rigs to 56 vertical rigs this week, which was also down from the 73 vertical rigs that were deployed on April 7th 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 April 6th, the second column shows the change in the number of working rigs between last week's count (March 30th) and this week's (April 6th) count, the third column shows last week's March 30th 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 7th of April, 2017...   

you've probably noticed the two rig increase in the Utica shale; that increase holds no surprises this week, as both of those new rigs are targeting natural gas, with one of those in Ohio and the other in Pennsylvania, where there are now two rigs targeting the Utica for natural gas in Beaver county, PA...however, Pennsylvania was down a rig this week because two of their Marcellus rigs were shut down, while drilling the Marcellus was down by only one rig with the addition of another Marcellus natural gas directed rig in West Virginia...the natural gas rig count was unchanged, however, because two rigs targeting gas in the Cana Woodford of Oklahoma were switched out for two rigs targeting oil, while another rig targeting natural gas started up in an unnamed basin...also missing from the above tables were 5 new rigs targeting oil that were started up in "other basins", at least one of which was the Unitah of Utah, were there were at least 3 horizontal and two directional rigs working as of April 6th....meanwhile, other than the changes for the major oil & gas producing states shown above, Alabama's only working rig was shut down this week, down from 2 rigs a year ago and marking the first time there was no activity in the state since January 13, 2017, while Mississippi had a rig added and now has 5 deployed, the same as they had working a year ago...

 

note:  there’s more here…