another sub par natural gas build, US oil production back at record high, refinery utilization rate highest in 17 years

oil prices rose this week for the first time in eight weeks, even as the front month contract shifted to October oil midweek, which was, at the time, priced $1.51 a barrel less than the expiring September contract...after falling $1.72 or 2.6% to $65.91 a barrel last week on concerns about falling global demand, US light sweet crude for September delivery rose 52 cents to $66.43 a barrel on Monday as trade war worries eased and oil traders turned to concerns about the impact of U.S. sanctions on Iran...the Iran sanctions rally then picked up steam on Tuesday, with September oil logging a fourth straight gain before expiring 92 cents higher at $67.35 a barrel, while at the same time oil for October delivery became the quoted contract and rose 42 cents to close Tuesday at $65.84 a barrel...October oil contract prices then jumped $2.02, or more than 3% from that level on Wednesday to a 2 week high of $67.86 a barrel, after the weekly EIA report indicated that U.S. crude supplies fell much more than traders had anticipated...oil prices then steadied on Thursday, as trade talks between the US and China collapsed, offsetting the impact of lower crude inventories, with October US crude ending 3 cents lower at $67.83 a barrel...the rally resumed on Friday, however, amid reports that Iranian tanker loading were already down by 700,000 barrels per day during the first half of August, 3 months before the sanctions were to kick in, as U.S. crude went on to finish the day 89 cents or 1.3% higher at $68.72 a barrel...thus for the week, the widely quoted price of oil rose $2.81 a barrel, or more than 4%, after seven consecutive weekly declines, while the contract for October oil ended $3.51 a barrel or 5.4% higher, having closed the prior week at $65.21 barrel..

meanwhile, prices for natural gas for September delivery continued in the same narrow price range they've been in since Spring, even as the seasonal storage deficit has become critical...after ending last week at $2.946 per mmBTU, natural gas prices rose to as high as $2.993 per mmBTU in early trading Wednesday, before sliding to a 4.7 cent loss on Friday and ending the week at $2.917 per mmBTU....this week's EIA natural gas storage report for week ending August 17th indicated that natural gas in storage in the US rose by 48 billion cubic feet to 2,435 billion cubic feet during the cited week, which still left our gas supplies 684 billion cubic feet, or 21.9% below the 3,119 billion cubic feet that were in storage on August 18th of last year, and 599 billion cubic feet, or 19.7% below the five-year average of 3,034 billion cubic feet of natural gas that are typically in storage heading into the third weekend of August....the 48 billion cubic feet increase in natural gas supplies was close to the expectations of most market participant surveys and thus had little impact on natural gas prices, but it was still below the 52 billion cubic foot average of natural gas that has typically been added to storage during the second full week of August in recent years, thus making for the 7th consecutive below average inventory build...with that in mind, we'll again take a look at the graph from the natural gas storage report to see the effect of this string of below average additions..

the above graph comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas in storage in the lower 48 states over the period from August 2016 up to the week ending August 17th 2018 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey 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 two years shown by the graph…thus the grey 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 end of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the spring heating requirements for any given year...what we want to point out on that graph this week is the divergence between the 5 year average amount of natural gas in storage for any given date of the year, which is shown as a dark grey graph, and that of current supplies of natural gas, shown in blue...notice that the blue line shows that the quantity gas we had stored throughout the summer and fall of 2016 was at a record high for each week during the year, up until October, and then dropped to near normal going into 2017, despite a much milder than normal winter...nonetheless, we can see that our natural gas supplies stayed above the average level through most of 2017, and didn't fall to below normal until the 2017-2018 heating season began...notice that since then, however, the gap separating the grey "normal" line and the blue current supply line has gotten increasingly wider, up until this summer, when the blue line representing current supplies has failed to keep up with the normal level of increase for 7 weeks straight....hence, instead of rebuilding our natural gas supplies back to a normal level before winter, each week we have been getting progressively farther away from what we should have stored before the heating season begins at the beginning of November...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending August 17th, indicated that because of a large drop in our oil imports, we had to withdraw oil from our commercial crude supplies to meet the needs of our refineries for the fifteenth time in the past thirty weeks... our imports  of crude oil fell by an average of 1,496,000 barrels per day to an average of 7,518,000 barrels per day, after rising by an average of 1,083,000 barrels per day the prior week, while our exports of crude oil fell by an average of 437,000 barrels per day to an average of 1,155,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 6,363,000 barrels of per day during the week ending August 17th, 1,059,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 11,000,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,363,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using 17,892,000 barrels of crude per day during the week ending August 17th, 89,000 barrels per day less than the record amount they used during the prior week, while over the same period 834,000 barrels of oil per day were reportedly being pulled out of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 305,000 barrels per day more than what refineries reported they used during the week....to account for that disparity between the supply of oil and the disposition of it, the EIA needed to insert a (-305,000) 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"...since that "unaccounted for crude" figure was at +631,000 barrels per day during the prior week, we know that the week over week changes for one or more of this week's EIA oil metrics must be in error by a statistically significant amount...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer).... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,053,000 barrels per day, now 2.2% less than the 8,233,000 barrel per day average that we were importing over the same four-week period last year....the 834,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged, even as a new sale of 11 million barrels from those reserves was announced this week....this week's crude oil production was reported being 100,000 barrels per day higher at a record 11,000,000 barrels per day because the output from wells in the lower 48 states increased by a rounded 100,000 barrels per day to 10,600,000 barrels per day while oil output from Alaska rose by 34,000 barrels per day, and hence the national total, which is now being rounded to the nearest 100,000 barrels per day to reflect the EIA's inability to accurately model oil output from all the wells in the lower 48 states, was thus also up by 100,000 barrels per day.....US crude oil production for the week ending August 18th 2017 was reportedly at 9,528,000 barrels per day, so this week's rounded oil production figure was roughly 15.4% above that of a year ago, and 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

meanwhile, US oil refineries were operating at 98.1% of their capacity in using 17,892,000 barrels of crude per day during the week ending August 17th, unchanged the prior week, again the highest refinery utilization rates seen in 17 years....the 17,892,000 barrels per day of oil that were refined this week were also at a seasonal high, now for the 12th week in a row, as compared to any previous 3rd week of August....this week's refinery throughput was 2.5% higher than the 17,461,000 barrels of crude per day that were being processed during the week ending August 18th 2017, when US refineries were operating at 95.4% of capacity....

with the modest reduction in the amount of oil being refined this week, gasoline output from our refineries was likewise modestly lower, decreasing by 83,000 barrels per day to 10,151,000 barrels per day during the week ending August 17th, after our refineries' gasoline output had increased by 321,000 barrels per day during the week ending August 10th...with this week's decrease, however, our gasoline production during the week was 3.9% lower than what had been a record 10,566,000 barrels of gasoline that were produced daily during the same week of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 89,000 barrels per day to a seasonal high of 5,426,000 barrels per day, after rising by 100,000 barrels per day over the prior week...that meant this week's distillates production was 6.6% higher than the 5,091,000 barrels of distillates per day that were being produced during the week ending August 18th, 2017...

even with the modest decrease in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,200,000 barrels to a seasonal high of 234,328,000 barrels by August 17th, the 11th increase in 26 weeks, and the 25th increase in 41 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline rose this week because our imports of gasoline rose by 154,000 barrels per day to 817,000 barrels per day, while our exports of gasoline fell by 291,000 barrels per day to 644,000 barrels per day, and because the amount of gasoline supplied to US markets fell by 59,000 barrels per day to 9,453,000 barrels per day, after rising by 166,000 barrels per day the prior week...after this week's increase, our gasoline inventories were 1.9% higher than last August 18th's level of 229,902,000 barrels, and roughly 9.8% above the 10 year average of our gasoline supplies for this time of the year...     

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 1,849,000 barrels to 130,838,000 barrels during the week ending August 17th, the 10th increase in 13 weeks...our supplies increased even though the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 106,000 barrels per day to 4,065,000 barrels per day, after decreasing by 43,000 barrels per day the prior week, and even though our exports of distillates rose by 185,000 barrels per day to 1,043,000 barrels per day, while our imports of distillates fell by 29,000 barrels per day to 145,000 barrels per day....however, since our distillate supplies are still coming off the 14 year seasonal low that they hit 4 weeks ago, because they had been falling during the spring, when distillates supplies are usually increasing, this week's inventory increase still leaves our distillates supplies 11.8% below the 148,415,000 barrels that we had stored on August 18th, 2017, and roughly 12.1% lower than the 10 year average of distillates stocks for this time of the year...  

finally, with our oil imports down by nearly 1.5 million barrels per day, our commercial supplies of crude oil decreased for the 17th time in 2018 and for the 30th  time in the past year, falling by 5,836,000 barrels during the week, from 414,194,000 barrels on August 10th to 408,358,000 barrels on August 17th ...but even with that decrease, our crude oil inventories are still a bit above the five year average of crude oil supplies for this time of year, and roughly 15.5% above the 10 year average of crude oil stocks for the 3rd week of August...but since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of August 17th were 11.8% below the 463,165,000 barrels of oil we had stored on August 18th of 2017, 17.2% below the 492,962,000 barrels of oil that we had in storage on August 19th of 2016, and 2.5% below the 418,990,000 barrels of oil we had in storage on August 21st of 2015, when US supplies of oil had already risen above the nearly stable levels of under 400 million barrels that we'd seen during the prior years...  

This Week's Rig Count

US drilling activity decreased for the sixth time in eleven weeks during the week ending August 24th, following 11 consecutive weeks of increases, as the steady increases in drilling for oil we saw with higher oil prices during the first half of this year have stalled since oil futures' prices have shifted into deep backwardation.... Baker Hughes reported that the total count of rotary rigs running in the US fell by 13 rigs to 1044 rigs over the week ending on Friday, which was still 104 more rigs than the 940 rigs that were in use as of the August 25th report of 2017, but was still down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...    

the count of rigs drilling for oil was down by nine rigs at 860 rigs this week, which was still 101 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 4 rigs to 182 rigs this week, which was only 2 more rigs than the 184 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...meawhile, two rigs drilling exploratory wells considered to be "miscellaneous" continued operating this week, up from just one such "miscellaneous" rig a year ago...

three of the rigs that were shut down this week had been drilling from platforms in the Gulf of Mexico, cutting the Gulf of Mexico rig count down to 16 rigs, down from the 17 rigs that were drilling in the Gulf last year at this time...however, two rigs continued drilling offshore from Alaska this week, so the total national offshore count is at 18 rigs, which is thus up from last year's total of 17 offshore rigs, as a year ago there was no offshore drilling other than in the Gulf...in addition to Gulf rigs, one of the rigs that had been drilling through an inland body of water in southern Louisiana was also shut down this week, leaving the 'inland waters' rig count at 1, down from the 3 rigs that were drilling on inland waters a year ago...

the count of active horizontal drilling rigs was down by 3 rigs to 919  horizontal rigs this week, which was still 123 more horizontal rigs than the 796 horizontal rigs that were in use in the US on August 25th 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 decreased by 2 rigs to 63 vertical rigs this week, which was thus down from the 64 vertical rigs that were in use during the same week of last year...moreover, the directional rig count decreased by 8 rigs to 62 directional rigs this week, which was also down from the 80 directional rigs that were operating on August 25th 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 August 24th, the second column shows the change in the number of working rigs between last week's count (August 17th) and this week's (August 24th) count, the third column shows last week's August 17th active rig count, the 4th column shows the change between the number of rigs running on Friday and those 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 Friday the 25th of August, 2017...  

as you can see, most of this week's drilling pullback was in two states; Louisiana, which shed a total of 7 rigs, and North Dakota, which was down by 4 Williston oil rigs...the Louisiana count includes the 3 newly idled offshore rigs that were in the state's waters in the Gulf of Mexico, the inland waters rig that was shut down, and three rigs in the northern part of the state, with some of those in the Haynesville shale, which saw a 3 rig increase on the Texas side of the state line, thus accounting for the Texas rig increase, even as other rigs were shifted elsewhere around Texas at the same time...note that the count in the major basins was down by 6 rigs, while the total horizontal count was down by just three; that would mean that 3 horizontal rigs began drilling elsewhere, in a basin not tracked separately by Baker Hughes...where that might be is not immediately evident, so one would have to dig through the individual well logs in the Baker Hughes pivot table to ascertain where...meanwhile, there are no changes hidden in the basin counts above, such as a switch of a rig from oil to gas drilling or vice-versa; what we see above are actually the only basin changes that occurred...thus, natural gas rigs were shut down in Ohio's Utica and Pennsylvania's Marcellus, while an additional gas directed rig was added in the Haynesville...the other 3 natural gas rigs that were shut down would have thus had to have been among the rigs other than those we've already accounted for, with even the three Louisiana offshore rigs among the likely possibilities....

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note: there's more here

oil refining at a record pace; largest jump in US crude supplies in 17 months; record global oil output; record backlog of DUC wells, et al

oil prices ended lower for the 7th week in a row, although as we've explained previously, one week in that stretch was due to the switch from quoting the August oil contract to quoting the lower priced September oil contract....after falling 86 cents, or 1.2% to $67.63 a barrel in volatile trading last week, prices for US light sweet crude for September fell 43 cents to $67.20 a barrel on Monday after OPEC lowered their estimate for next year's oil demand growth while US oil supplies increased at the Cushing OK delivery hub...while NYMEX oil prices rallied to as high as $68.37 a barrel on Tuesday morning on news that the Saudis told OPEC that it had cut crude output by 200,000 barrels per day, that rally fizzled on a strengthening U.S. dollar and concerns about the financial crisis in Turkey and oil ended the day 16 cents lower at $67.04 a barrel...oil prices then plunged on Wednesday after the weekly EIA data showed a big, unexpected jump in U.S. crude supplies, with WTI for September delivery falling $2.03, or 3%, to settle at $65.01 a barrel, its lowest close since June 6th...oil prices recovered a bit on Thursday, rising 45 cents to $65.46 a barrel, on prospects of renewed US-China trade talks, alleviating some of the trade war.fears that had pushed prices lower...that positive sentiment carried into Friday, as oil prices rose another 45 cents to $65.91 a barrel, but still ended with a $1.72 or a 2.6% loss on the week on concerns that oversupply would weigh on U.S. markets while trade disputes and slowing global economic growth would dampen global demand for oil.

natural gas prices for September, meanwhile, were little changed on the week, ending just two-tenths of a cent higher at 2.946 per mmBTU after a 3.8 cent increase on Friday reversed the losses from earlier in the week...while the increasing deficit of natural gas supplies heading into winter have provided an impetus for higher prices on the winter contracts, with January natural gas contracts closing at $3.168  per mmBTU and February gas closing at $3.132 per mmBTU, China's threat of a retaliatory 25% tariff on LNG has thrown the future of natural gas demand into question...this week's EIA natural gas storage report for week ending August 10th indicated that natural gas in storage in the US rose by 33 billion cubic feet to 2,387 billion cubic feet during the cited week, which left our gas supplies 687 billion cubic feet, or 22.3% below the 3,074 billion cubic feet that were in storage on August 11th of last year, and 595 billion cubic feet, or 20.0% below the five-year average of 2,982 billion cubic feet of natural gas that are typically in storage heading into the second weekend of August....an S&P Global Platts' survey of analysts had forecast that 30 billion cubic feet of natural gas would be injected into storage during the week ended August 11th, so the actual 33 billion cubic feet increase was higher than expectations and thus contributed to a 4.6 cent natural gas price drop after the report, but that 33 billion cubic foot increase was still well below the 56 billion cubic foot average of surplus natural gas that has typically been added to storage during the first full week of August in recent years, thus making for the 6th consecutive below average build...

checking the historical natural gas storage archive files, we find that this week's natural gas supplies of 2,387 billion cubic feet are again the lowest for this time of year since August 8th, 2003, when natural gas supplies had fallen to 2,222 billion cubic feet...the only other early August records that even came close to this year's nadir were on August 8th of 2014, when natural gas supplies were at 2,467 billion cubic feet and on August 8th of 2008, when natural gas supplies were at 2,567 billion cubic feet...Platts Analytics is now estimating that our supplies will start the natural gas heating season at 3.37 trillion cubic feet, roughly a 500 billion cubic feet deficit from normal....to hit even that low target, we'd have to add an average of more that 75 billion cubic feet over the next 13 weeks...since we have averaged a 39 billion cubic foot weekly injection over the past 6 weeks, we'll have to step up the pace quite a bit this fall to meet that Platts estimate...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending August 10th, indicated that because of a big jump in our oil imports and a modest drop in our oil exports, we had a surplus of oil to add to our domestic commercial crude supplies for the fifteenth time in the past twenty-nine weeks.... our imports of crude oil rose by an average of 1,083,000 barrels per day to an average of 9,014,000 barrels per day, after rising by an average of 182,000 barrels per day the prior week, while our exports of crude oil fell by an average of 258,000 barrels per day to an average of 1,592,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 7,422,000 barrels of per day during the week ending August 10th, 1,341,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at 10,900,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 18,322,000 barrels per day during the reporting week... 

at the same time, US oil refineries were using a record 17,981,000 barrels of crude per day during the week ending August 10th, 383,000 barrels per day more than they used during the prior week, while over the same week 972,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 631,000 barrels per day short of what was added to storage plus what refineries reported they used during the week....to account for that disparity between the supply and the disposition of oil, the EIA needed to insert a (+631,000) 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"...with a difference between oil supply and its disposition as large as that, we have to consider the likelihood that one or more of this week's EIA oil metrics contains a statistically significant error...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer).... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,116,000 barrels per day, which was just 0.9% more than the 8,046,000 barrel per day average that we were importing over the same four-week period last year....the 972,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported being up by 100,000 barrels per day to 10,900,000 barrels per day even as the output from wells in the lower 48 states was reportedly unchanged at 10,500,000 barrels per day because oil output from Alaska rose by 60,000 barrels per day, and since the national total is now being rounded to the nearest 100,000 barrels per day to more reflect the EIA's inability to accurately model oil output from all the wells in the lower 48 states, that 60,000 barrels per day increase was enough to bump the rounded national total up by 100,000 barrels per day.....US crude oil production for the week ending August 11th 2017 was reportedly at 9,502,000 barrels per day, so this week's rounded oil production figure was roughly 14.7% above that of a year ago, and 29.3% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

meanwhile, US oil refineries were operating at 98.1% of their capacity in using 17,981,000 barrels of crude per day during the week ending August 10th, up from 96.6% of capacity the prior week, and the highest refinery utilization rate since our refineries operated at 98.9% of capacity during the week ending September 11, 1998....the 17,981,000 barrels per day of oil that were refined this week were the most barrels refined in any week on record, topping the record level set just seven weeks ago during the week ending June 22nd, and capping off an 11 week run when our seasonal refinery throughput was higher than ever before...hence, this week's refinery throughput was also 2.4% higher than the 17,565,000 barrels of crude per day that were being processed during the week ending August 11th 2017, when US refineries were operating at 96.1% of capacity....

with our oil refining now at a new record high, we'll take a look at a graph of the recent history of that metric for some perspective...

the above graph of US refinery throughput came from the weekly package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, provides by email on Wednesdays, which is also available as a pdf here; it shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput for any given date shown as a light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year....the graph also shows the number of barrels of oil refined for each week in 2017 traced by a yellow line, with our year to date oil refining for each week of 2018 traced by the red graph...you can clearly see that except for the disruptions to refining caused by last year's hurricanes, 2017's refining in yellow had been at the top of the historical range almost all year, and that the pace of refining in 2018 in red has generally been above that, except for during  late April and May...you can also see that the summer is usually when refiners see their seasonal highs, so given that we've been running refineries at a pace above that of the prior years for almost two years running, a breakout to a new record high at this time of year was not unexpected...

with the record amount of oil being refined this week, gasoline output from our refineries was considerably higher, increasing by 321,000 barrels per day to 10,234,000 barrels per day during the week ending August 10th, after our refineries' gasoline output had inexplicably decreased by 570,000 barrels per day during the week ending August 3rd...as a result of this week's increase, our gasoline production during the week was 1.9% higher than the 10,048,000 barrels of gasoline that were being produced daily during the same week of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 100,000 barrels per day to a seasonal high of 5,337,000 barrels per day, after rising by 78,000 barrels per day over the prior week...however, this week's distillates production was only 0.9% higher than the 5,287,000 barrels of distillates per day that were being produced during the week ending August 11th, 2017...

however, even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 740,000 barrels to 233,128,000 barrels by August 10th, the 15th decrease in 25 weeks, but just the 16th decrease in 40 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline fell this week because our exports of gasoline rose by 347,000 barrels per day to 935,000 barrels per day while our imports of gasoline fell by 272,000 barrels per day to 663,000 barrels per day, and because the amount of gasoline supplied to US markets rose by 166,000 barrels per day to 9,512,000 barrels per day, after falling by 532,000 barrels per day the prior week...but even after this week's decrease, our gasoline inventories were still fractionally higher than last August 11th's level of 231,125,000 barrels, and roughly 9.4% above the 10 year average of our gasoline supplies for this time of the year...     

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 3,566,000 barrels to 128,989,000 barrels during the week ending August 10th, the 9th increase in 12 weeks...our supplies increased as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 43,000 barrels per day to 3,959,000 barrels per day, after increasing by 391,000 barrels per day the prior week, and as our exports of distillates fell by 185,000 barrels per day to 1,043,000 barrels per day,  while our imports of distillates rose by 5,000 barrels per day to 174,000 barrels per day....however, since our distillate supplies are still coming off a 14 year seasonal low hit just 3 weeks ago, after falling during a time of year when distillates supplies are usually increasing, this week's inventory increase still leaves our distillates supplies 13.1% below the 148,387,000 barrels that we had stored on August 11th, 2017, and roughly 12.8% lower than the 10 year average of distillates stocks for this time of the year...     

finally, with our oil imports increasing by nearly 1.1 million barrels per day, our commercial supplies of crude oil increased for the 16th time in 2018 and for the 22nd time in the past year, rising by 6,805,000 barrels during the week, from 407,389,000 barrels on August 3rd to 414,194,000 barrels on August 10th...that increase now means our crude oil inventories are now a bit above the five year average of crude oil supplies for this time of year for the first time this year, and roughly 24% above the 10 year average of crude oil stocks for the 2nd week of August...however, since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of August 10th were still 11.2% below the 466,492,000 barrels of oil we had stored on August 11th of 2017, 15.6% below the 490,461,000 barrels of oil that we had in storage on August 12th of 2016, and 2.4% below the 424,442,000 barrels of oil we had in storage on July 31st of 2015, when US supplies of oil had already risen above the nearly stable levels of under 400 million barrels we saw during the prior years...   

OPEC's Monthly Oil Market Report 

next we'll take a look at OPEC's August Oil Market Report (covering July OPEC & global oil data), which was released on Monday and is available as a free download, and hence it's the report we check for monthly global oil supply and demand data...the first table from this monthly report that we'll look at is from the page numbered 57 of that report (pdf page 65), 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 thus 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 increased by 40,700 barrels per day to 32,323,000 barrels per day in July, from their June production total of 32,283,000 barrels per day....however, that June figure was originally reported as 32,327,000 barrels per day, so OPEC's June output was therefore revised 44,000 barrels per day lower with this report (for your reference, here is the table of the official June OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, increases of 78,500 barrels per day in the oil output from Kuwait, of 70,500 barrels per day in the output from Nigeria, and of 69,200 barrels per day in the output from the Emirates were the primary reasons that the cartel's output rose, as those increases offset the decrease of 56,700 barrels per day in Libyan output, the decrease of 56,300 barrels per day in Iranian output, the decrease of 56,200 barrels per day in Saudi output, and the decrease of 47,700 barrels per day in Venezuelan output...the OPEC pledge to pump more oil in the second half of 2018 notwithstanding, OPEC's output excluding new member Congo was at 32,010,000 barrels per day in July, still 720,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly on the big drop in Venezuelan output... 

the next graphic we'll include shows us both OPEC and world monthly oil production on the same graph, over the period from August 2016 to July 2018, and it comes from the page numbered 58 (pdf page 66) of the August 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 estimate indicates that total global oil production rose by a rounded 680,000 barrels per day to a record high 98.53 million barrels per day in July, apparently after June's global output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 640,000 barrels per day in July after that revision....global oil output for July was also 1.74 million barrels per day, or 1.3% higher than the 97.30 million barrels of oil per day that were being produced globally in July a year ago (see the August 2017 OPEC report online (pdf) for the year ago details)...with the jump in global output, OPEC's July oil production of 32,323,000 barrels per day represented 32.8% of what was produced globally during the month, down from their 33.0% of global share reported for June...OPEC's July 2017 production was at 32,869,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding new members Congo and Equatorial Guinea, are now producing 985,000 fewer barrels per day of oil than they were producing a year ago, during the seventh month that their production quotas were in effect, with a 432,000 barrel per day decrease in output from Venezuela and a 337,000 barrel per day decrease in output from Libya from that time largely responsible for the cartel's output drop... 

despite the 680,000 barrel per day increase in global oil output in July, an increase in summertime demand meant that we again saw a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us... 

the table above comes from page 31 of the July  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 fourth column, we've circled in blue the figure that's relevant for July, which is their revised estimate of global oil demand during the third quarter of 2018...     

OPEC's estimate is that during the 3rd quarter of this year, all oil consuming regions of the globe will be using 99.44 million barrels of oil per day, which was a upward revision of a rounded 0.03 million barrels of oil per day from their prior estimate for the quarter....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, the world's oil producers were producing 98.53 million barrels per day during July, which means that there was a shortfall of around 910,000 barrels per day in global oil production vis-a vis the demand estimated for the month...  

note that this report also revised oil demand figures for the 1st and second quarters, which we've circled in green; that means our previous estimates of surplus or shortfall for those months will have to be revised as well...a month ago, we estimated there was a small shortfall of around 30,000 barrels per day in global oil production vis-a vis the demand in June...while oil demand for the 2nd quarter was revised 120,000 barrels per day lower (as you see in the green ellipse above), we also noted earlier that June's global oil output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global total that was reported a month ago; that means our revised oil shortfall for June will be around 70,000 barrels per day...

with the downward revision of 120,000 barrels per day to 2nd quarter demand, the shortfall for May now works out to 510,000 barrels per day, revised from the 630,000 barrel per day shortfall we had figured on a month ago....the 2nd quarter revision to global demand also means that the global shortfall for April would be revised from the 440,000 barrels per day that we figured last month to 320,000 barrels per day... 

however, as is also circled in green above, while global oil demand figures for the second quarter were revised lower, global oil demand figures for the first quarter of 2018 were revised 10,000 barrels per day higher, which means that our previously recomputed oil surplus for the first quarter of 2018 will also have to be recomputed again....since we had figured a global oil surplus of 130,000 barrels per day for March, a surplus of 310,000 barrels per day for February, and a surplus of 150,000 barrels per day for January, the revision means that our new figures show a surplus of 120,000 barrels per day for March, a surplus of 300,000 barrels per day for February, and a surplus of 140,000 barrels per day for January....totaling up all these estimates, that would mean that for the first seven months of 2018, global oil demand exceeded production by roughly 39,260,000 barrels, a relatively small net oil shortfall that is the equivalent of roughly nine and a half hours of global oil production at the July production rate...  

This Week's Rig Count

the pace of US drilling activity stalled during the week ending August 17th, after increasing 15 out of the most recent 20 weeks....Baker Hughes reported that the total count of rotary rigs running in the US was unchanged at 1057 rigs over the week ending on Friday, which was still 111 more rigs than the 946 rigs that were in use as of the August 18th report of 2017, but was still down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...    

the count of rigs drilling for oil was unchanged at 869 rigs this week, which was still 106 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 also unchanged at 186 rigs this week, which was up by 4 rigs from the 182 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, rigs drilling two exploratory wells considered to be "miscellaneous" continued this week, also unchanged, in contrast to a year ago, when all rigs were specifically targeting either oil or gas..

another Gulf of Mexico drilling platform was started back up this week, so there are now 19 rigs drilling in the Gulf of Mexico, up from the 16 rigs that were drilling in the Gulf last year at this time...in addition, two rigs continued drilling offshore from Alaska this week, so the total national offshore count is now at 21 rigs, up from a total of 16 offshore rigs a year ago, a time when there was no drilling elsewhere other than in the Gulf...

the count of active horizontal drilling rigs was down by 2 rigs to 922 horizontal rigs this week, which was still 123 more horizontal rigs than the 799 horizontal rigs that were in use in the US on August 18th 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 decreased by 4 rigs to 65 vertical rigs this week, which was also down from the 66 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count increased by 6 directional rigs this week, which was still down from the 81 directional rigs that were operating on August 18th 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 August 17th, the second column shows the change in the number of working rigs between last week's count (August 10th) and this week's (August 17th) count, the third column shows last week's August 10th active rig count, the 4th column shows the change between the number of rigs running on Friday and those 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 Friday the 18th of August, 2017...       

there's not much that isn't obvious here, except that it appears that at least two and probably three rigs that had been drilling in the Permian on the New Mexico side of the Texas border were either shut down or moved to Texas this week, as the core Permian Texas Oil District saw an increase of three rigs, and Texas District 7B, at the edge of the Permian, also saw an additional rig start up...outside of the Permian, note the large number of rig reductions spread throughout the other major basins, including the 3 rig drop in the Cana Woodford or Oklahoma and the decreases of two rigs each in the Mississippian Lime of the Kansas-Oklahoma border region and the Granite Wash of the Texas-Oklahoma panhandle region; we would not be seeing drilling pullbacks like that in those oil-bearing strata if fracking were a highly profitable venture at current oil prices, given there is still some degree of price backwardation...for rigs targeting natural gas, which were on net unchanged, we have an increase of two in the Pennsylvania Marcellus, an increase of one in the Arkoma Woodford of Oklahoma, and an increase of one in the Granite Wash, where three oil rigs were shut down at the same time, offset by rig decreases in Ohio's Utica shale, the West Virginia Marcellus, the Louisiana Haynesville, and one in a basin not tracked separately by Baker Hughes...we'll also note that outside of the major producing states shown above, Nebraska had the rig that started up last week shut down this week; i dont really know what that's about, since the state has only seen oilfield activity for two weeks over the past two years...

DUC well report for July

Monday of this past week also saw the release of the EIA's Drilling Productivity Report for August, which includes the EIA's July data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 22nd consecutive month, this report again showed an increase in uncompleted wells nationally in June, even as drilling of new wells was down for the 2nd consecutive month....like most previous months, this month's uncompleted well increase was due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with a modest increase of uncompleted wells in the Eagle Ford of south Texas also contributing...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 165, from 7,868 wells in June to 8,033 wells in July, again the highest number of such unfracked wells in the history of this report....that was as 1,441 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down from 1,448 in June, while 1,276 wells were completed and brought into production by fracking, a increase of one completion over the prior month...hence, at the July completion rate, the 8,033 drilled but uncompleted wells left at the end of the month represent a 6.3 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 July DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 167, from 3,303 DUC wells in June to 3,470 DUCs in July, as 601 new wells were drilled into the Permian but only 434 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 32, from 1,480 DUC wells in June to 1,512 DUCs in July, as 207 wells were drilled in the Eagle Ford during July, while 175 Eagle Ford wells were completed...over the same period, the number of DUC wells in the Anadarko region centered in & around Oklahoma increased by 7 to 923, as 167 wells were drilled into the Anadarko basin while 160 Anadarko wells were fracked....in addition, DUC wells in the Bakken of North Dakota rose by 4, from 756 DUC wells in June to 760 DUCs in July, as 131 wells were drilled into the Bakken in July while 127 drilled wells in that basin were completed...meanwhile, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory remain unchanged at 182, as 54 wells were drilled into the Haynesville during July, while 54 Haynesville wells were fracked during the same period...on the other hand, the drilled but uncompleted well count in the Niobrara chalk of the Rockies front range decreased by 40 to 432, as just 158 Niobrara wells were being drilled while 198 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 5 wells, from 759 DUCs in June to 754 DUCs in July, as 123 wells were drilled into the Marcellus and Utica shales, while 128 of the already drilled wells in the region were fracked....thus, for the month of July, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 170 wells to 7,097 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 5 wells to 936 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...   

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note: there’s more here…

seasonal natural gas supply deficit continues to deteriorate; US oil production down a second week, for real this time...

oil prices ended lower for the 6th week in a row, largely on a Wednesday selloff tied to a major escalation of the ongoing trade war between the Trump administration and China...after slipping 20 cents to $68.49 a barrel last week, prices for US crude for September delivery rose 52 cents to $69.01 a barrel on Monday, after OPEC sources said Saudi crude output, which had been expected to replace sanctioned Iranian output, unexpectedly fell in July...prices then rose another 16 cents to $69.17 a barrel on Tuesday, after the U.S. imposed initial sanctions on Iranian goods, leading to further concern that oil sanctions would tighten global oil supplies...however, the bottom fell out of oil prices on Wednesday, as the Chinese responded to another increase in US tariffs on Chinese goods with new 25% tariffs on U.S. fuel and other imports, sending oil prices tumbling $2.23 to a seven week low of $66.94 a barrel....concerns about the accelerating trade wars weighed on prices again on Thursday as oil prices extended their slide another 13 cents to $66.81 a barrel, yet another new 7 week low...but oil prices rallied on Friday after the International Energy Agency raised their 2019 forecast for global oil demand growth by 110,000 barrels a day to 1.5 million barrels while at the same time analysts projected that Iranian crude exports would fall by between 500,000 and 1.3 million barrels per day, with oil finishing up 82 cents at $67.63 a barrel for the day, but still ending with a decline of 86 cents, or 1.2% for the week...

natural gas prices for September, meanwhile, extended last week's rally to a sixth day on Thursday before pulling back 1.1 cents on Friday, and ended the week 9.1 cents higher at $2.944 per mmBTU...while a forecast for warmer weather and hence a greater power burn in mid-August underpinned this week's rally, the natural gas storage deficit compared to the norm continues to be the major factor supporting natural gas prices.....this week's EIA natural gas storage report for week ending August 3rd indicated that natural gas in storage in the US rose by 46 billion cubic feet to 2,354 billion cubic feet during the cited week, which still left our gas supplies 671 billion cubic feet, or 22.2% below the 3,025 billion cubic feet that were in storage on August 4th of last year, and 572 billion cubic feet, or 19.5% below the five-year average of 2,962 billion cubic feet of natural gas that are typically in storage heading into the first weekend of August...since natural gas supplies rose by 82 billion cubic feet to 2389 billion cubic feet during the equivalent week of the modern low supplies year of 2014, this week's natural gas supplies are again the lowest for this time of year since August 1st, 2003 (xls file)...an S&P Global Platts' survey of analysts had forecast that 45 billion cubic feet of natural gas would be added during the week ended August 3rd, so the actual 46 billion cubic feet increase was a bit higher than expectations, but it was still well below the 53 billion cubic foot average of surplus natural gas that has typically been added to storage by the weekend at the beginning of August over recent years...

last year, we began the winter heating season with 3,790 billion cubic feet of natural gas in storage on November 3rd....looking over the modern natural gas storage records (xls), the 3,611 billion cubic feet of natural gas we had stored on November 7th 2014 appears to be the lowest prewinter natural gas storage figure of the past decade...we have to go back to 2008, when 3488 billion cubic feet of natural gas were in storage on November 14th, to find a lower winter start figure...hence, with 2,354 billion cubic feet in storage as of August 3rd, that means we have to add at least 81 billion cubic feet each week for the next 14 weeks to avoid eclipsing the 2008 prewinter low by the 2nd week of November this year...that's probably doable, if we get a cool September and a warm start to November...otherwise, the EIA forecast for a 10 year low for prewinter US natural gas supplies will also go by the boards, and we'll looking at an even more substantial record low for our prewinter supplies.....

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending August 3rd, indicated that a modest increase in our oil imports was not enough to cover a large increase in our oil exports, and hence we had to withdraw oil from our commercial crude supplies for the fourteenth time in the past twenty-eight weeks... our imports of crude oil rose by an average of 182,000 barrels per day to an average of 7,931,000 barrels per day, after falling by an average of 21,000 barrels per day the prior week, while our exports of crude oil rose by an average of 540,000 barrels per day to an average of 1,850,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 6,081,000 barrels of per day during the week ending August 3rd, 358,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day lower at 10,800,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,881,000 barrels per day during the reporting week... 

at the same time, US oil refineries were using 17,598,000 barrels of crude per day during the week ending  August 3rd, 118,000 barrels per day more than they used during the prior week, while 193,000 barrels of oil per day were reportedly being pulled out of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 524,000 fewer barrels per day than what refineries reported they used during the week.....to account for that disparity between the supply of oil and the disposition of it, the EIA needed to insert a (+524,000) 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"...with a difference between oil supply and its disposition as large as that, we have to consider the likelihood that one or more of this week's EIA oil metrics has a statistically significant error.... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)... 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,129,000 barrels per day, 1.4% more than the 8,014,000 barrel per day average we were importing over the same four-week period last year....the 193,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged.....this week's crude oil production was reported being down by 100,000 barrels per day to 10,800,000 barrels per day because the output from wells in the lower 48 states was reported down by 100,000 barrels per day to 10,500,000 barrels per day, while oil output from Alaska rose by 4,000 barrels per day, and since the national total is now being rounded to the nearest 100,000 barrels per day to more reflect the EIA's inability to accurately model oil output from all the wells in the lower 48 states, that total fell by that amount as well.....US crude oil production for the week ending August 4th 2017 was reportedly at 9,423,000 barrels per day, so this week's rounded oil production figure is still roughly 14.6% above that of a year ago, and 28.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

since US crude oil production has now fallen two weeks in a row, after rising 23 weeks in a row and almost continuously since September 2016, we'll take a look at a graph of that and see if we can figure out what might be going on...

the above graph, from this week's OilPrice Intelligence Report, shows the history of confirmed oil production data monthly from January 2016 to May 2018 in blue, and then the weekly estimates of US oil production up until the current week in yellow after that period, with both metrics in thousands of barrels per day...above the graph, OilPrice also supplies the rounded weekly estimates of oil production in thousands of barrels per day for the weeks ending June 29th through August 3rd as reported by the EIA...as we've pointed out on previous occasions, the weekly oil data from the EIA that we cover each week is preliminary, and it is typically more than 2 months before the final confirmed figures, published monthly, are released...despite the likelihood of some inaccuracy in the weekly data, we follow it because it's what the oil traders follow, and hence it moves oil prices and ultimately the decisions on the part of exploitation companies to start drilling for oil...

up until last week, a similar graph of confirmed production through April traced in blue was fairly contiguous with the weekly estimates for May and beyond that was shown in yellow...however, when the confirmed production for May was reported last week, it came in at 10,442,000 barrels per day, qan unexpected drop from the 10,472,000 barrels per day reported in April, thus opening up the large gap between the confirmed data and the weekly estimates that we see at the white dashed perpendicular line above...not only did that mean May's estimates had been too high, but estimates of the following weeks were probably too high as well...thus, when the week ending July 27 data was released the week before last showed a 100,000 barrel per day decrease to 11,900,000 barrels per day, i assumed it was because the EIA model for estimating weekly oil production had been adjusted for the new data from May and produced a estimate for July 27th taking that May production drop into account...at that point, i felt that 100,000 barrel per day decrease did not mean that oil production had actually fallen week over week, but that it just meant that production had been rising more slowly than previous estimated, and that previously released weekly data was probably incorrect (note that the EIA does not revise published weekly estimates that are shown to be incorrect; they are left as is while the corrected data is shown in the confirmed monthly tables)...

however, the EIA only changes their model for estimating weekly oil production based on confirmed monthly figures once a month, the week those confirmed figures are released...that means that the 100,000 barrel per day decrease to 11,800,000 barrels per day for the current week reflects an actual decrease in production, not just a change in the EIA oil production model based on the May figures...some have speculated that oil production might have dropped because of a paucity of pipelines coming out of the Permian, but that could have not caused a drop in output unless the throughput of the extant pipelines had actually been reduced....so i have to go back to the EIA's Drilling Productivity Report for July, which showed there was an actual drop in well completions from May to June...thus, with the number of new wells coming into production stagnating, the well known depletion factor associated with fracked wells would become a major factor in our output; ie, if production from existing wells is falling faster than new well output is coming into production, then the losses from the depletion of the older wells aren't being replaced, and our net oil output will drop.  so that is what appears to have happened this week, although we can no longer get a reasonable fix on how much the output drop really was, because as we've noted, those production figures are now being rounded to the nearest 100,000 barrels per day...

meanwhile, US oil refineries were operating at 96.6% of their capacity in using 17,598,000 barrels of crude per day during the week ending August 3rd, up from 96.1% of capacity the prior week, refinery capacity utilization rates that continue above historical norms...the 17,598,000 barrels of oil that were refined this week were also at a seasonal high, now for the 10th week in a row, as compared to any previous 1st week of August...however, this week's refinery throughput was only fractionally higher than the 17,574,000 barrels of crude per day that were being processed during the week ending August 4th 2017, when US refineries were operating at 96.3% of capacity....

even with the increase in the amount of oil being refined this week, gasoline output from our refineries was reported as being considerably lower, decreasing by 570,000 barrels per day to 10,483,000 barrels per day during the week ending August 3rd, after our refineries' gasoline output had increased by 228,000 barrels per day during the week ending July 27th...as a result of that big drop, our gasoline production during the week was 3.8% lower than the 10,301,000 barrels of gasoline that were being produced daily during the same week of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 78,000 barrels per day to 5,237,000 barrels per day, after falling by 283,000 barrels per day over the prior three weeks...hence, this week's distillates production was still 1.3% lower than the 5,305,000 barrels of distillates per day that were being produced during the week ending  August 4th, 2017...

however, even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 2,900,000 barrels to 233,868,000 barrels by August 3rd, just the 8th increase in 22 weeks, but the 24th increase in 39 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline rose this week because the amount of gasoline supplied to US markets fell by 532,000 barrels per day to 9,346,000 barrels per day, after rising by 603,000 barrels per day over the prior three weeks, and because our imports of gasoline rose by 183,000 barrels per day to 935,000 barrels per day, while our exports of gasoline rose by 75,000 barrels per day to 588,000 barrels per day....after this week's increase, our gasoline inventories ended up 1.2% higher than last August 4th's level of 231,103,000 barrels, and roughly 8.8% above the 10 year average of our gasoline supplies for this time of the year...     

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 1,230,000 barrels to 125,423,000 barrels during the week ending August 3rd, the 8th increase in 11 weeks...our supplies increased even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 391,000 barrels per day to 4,002,000 barrels per day, after decreasing by 556,000 barrels per day the prior week, while our exports of distillates fell by 49,000 barrels per day to 1,228,000 barrels per day, and while our imports of distillates rose by 12,000 barrels per day to 169,000 barrels per day....however, since our distillate supplies are still coming off a 14 year seasonal low hit just 2 weeks ago, after they had been falling during a time of year when distillates supplies are usually increasing, this week's inventory increase still leaves our distillates supplies 15.1% below the 147,685,000 barrels that we had stored on August 4th, 2017, and roughly 14.9% lower than the 10 year average of distillates stocks for this time of the year...     

finally, with our oil exports rising and our refineries using more oil while our oil production was falling, our commercial supplies of crude oil decreased for the 16th time in 2018 and for the 31st time in the past year, falling by 1,351,000 barrels during the week, from 408,740,000 barrels on July 27th to 407,389,000 barrels on August 3rd...and with our crude oil inventories falling most of last year, our oil supplies as of August 3rd were hence 14.3% below the 475,437,000 barrels of oil we had stored on August 4th of 2017, 17.4% below the 492,969,000 barrels of oil that we had in storage on August 5th of 2016, and 3.4% below the 421,822,000 barrels of oil we had in storage on August 7th of 2015, when US supplies of oil had already moved above the nearly stable levels of under 400 million barrels we saw during the prior years...   

This Week's Rig Count

US drilling activity increased for the fifteenth time in the past twenty weeks during the week ending August 10th, and by the most in one week since May 25th.... Baker Hughes reported that the total count of active rotary rigs running in the US increased by 13 rigs to 1057 rigs over the week ending on Friday, which was also 108 more rigs than the 949 rigs that were in use as of the August 11th report of 2017, but was still down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...    

the count of rigs drilling for oil rose by 10 rigs to 869 rigs this week, which was 101 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 increased by 3 rigs to 186 rigs this week, which was also up by 5 rigs from the 181 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, two exploratory wells considered to be "miscellaneous" continued drilling this week, in contrast to a year ago, when all rigs were specifically targeting either oil or gas..

two more Gulf of Mexico drilling platforms were started back up this week, so there are now 18 rigs drilling in the Gulf of Mexico, up from the 17 rigs that were drilling in the Gulf last year at this time...in addition, another platform was deployed offshore from Alaska this week, where there are now two rigs drilling, so the total national offshore count is now at 20 rigs, up from 18 offshore rigs a year ago, when there was only one platform drilling in Alaska's Cook Inlet...

the count of active horizontal drilling rigs was up by 12 to 924 horizontal rigs this week, which was also 123 more horizontal rigs than the 801 horizontal rigs that were in use in the US on August 11th 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 increased by 1 rig to 69 vertical rigs this week, which was still down from the 72 vertical rigs that were in use during the same week of last year...meanwhile, the directional rig count was unchanged at 64 directional rigs this week, which was still down from the 76 directional rigs that were operating on August 11th 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 August 10th, the second column shows the change in the number of working rigs between last week's count (August 3rd) and this week's (August 10th) count, the third column shows last week's August 3rd active rig count, the 4th column shows the change between the number of rigs running on Friday and those 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 Friday the 11th of August, 2017...      

unsurprisingly, the largest increase in US drilling since May was led by a 5 rig increase in the Permian, which now has 108 more rigs drilling than a year ago, thus accounting for the total rig increase in the US over the past year by itself...however, those Permian additions initially appear to have been in New Mexico, since the Texas rig count was down by 2 rigs...however, looking at the Texas Oil and Gas District counts in Baker Hughes state data, there appears to be an increase of three rigs in the core Permian districts, offset by a decrease of three rigs in districts that could be considered partially in the Permian, so without going through the individual well logs in Baker Hughes' pivot table, we can't be sure...meanwhile, Louisiana, with a 6 rig addition, saw the largest increase, on the back of the 2 rigs added in the Gulf offshore, and 4 more rigs in the northern part of the state, one of which was in the Haynesville...the Haynesville, by the way, accounts for two of the natural gas rig increases, since the only rig targeting oil in that basin was shut down this week, while two rigs targeting natural gas started up...other natural gas rig changes include a decrease of one rig in the Pennsylvania Marcellus, a decrease of one rig in the Arkoma Woodford of Oklahoma, a decrease of one rig in the Permian (where all rigs are now targeting oil), a decrease of one rig in the Granite Wash (where all rigs are now also targeting oil), an increase of one rig in Ohio's Utica shale, and an increase of four natural gas rigs in 'other' basins not tracked separately by Baker Hughes...we should also note that outside of the major producing states shown above, Alabama had a rig shut down this week, and now has just one deployed, down from two a year ago, that Florida had a land based rig start drilling this week for the first time since January 2014, and that Nebraska also saw a rig start up this week, for only the 2nd week of oilfield activity in the state in the past year...

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note:  there’s more here…