US oil production at a record high; oil prices highest in nearly 4 years; September natural gas supplies lowest in 15 years

US oil prices rose for a third week running while global prices repeatedly tested 4 year highs this past week, as US imposed sanctions against Iran threatened to shut in more than 2% of global oil production...after increasing $2.01 a barrel, or nearly 3% to $70.78 a barrel on global supply concerns last week, US oil contract prices for November delivery jumped nearly $2 more in early trading Monday, after OPEC said it wouldn't raise its output to replace sanctioned Iranian oil, before easing back to close $1.30 higher at $72.08 a barrel...prices then rallied to as high as $72.78 a barrel Tuesday before sliding back to $78.28 a barrel at the close, after Trump once again called on OPEC to pump more oil and stop raising prices...however, oil prices retreated on Wednesday and closed 71 cents lower at $71.57 a barrel after the EIA reported the first increase in US crude supplies in six weeks...but the oil price rally resumed on Thursday, with US crude prices up 55 cents to $72.12 a barrel, as oil traders bet that the loss of Iranian exports due to Trump sanctions was not going to be made up...US crude rose another $1.13 to $73.25 a barrel on Friday, while Brent, the international benchmark, rose to a four-year high at $82.72 a barrel, on news that even China’s Sinopec, under intense pressure from Washington, was halving their loadings of crude oil from Iran this month...US oil prices thus ended 3.5% higher for the week and 4.9% higher for September, their second straight monthly gain...meanwhile, the impact of Iran sanctions was even more pronounced on grades of oil which might be seen as substitutes for Iranian crude; Omani oil, for instance, a low-quality crude which usually trades at a discount to the better known international grades, traded as high as $90.90 a barrel on the Dubai Mercantile Exchange on Wednesday, before closing at $88.96 a barrel, $16.60 a barrel more than the US price at the time...

front month contract natural gas prices, meanwhile, traded at their highest level since February this week, with natural gas for November moving 5.5 cents higher on Monday and 2.9 cents higher on Tuesday on forecasts of a large storage deficit to the start of winter heating season...however, after trading as high as $3.111 per mmBTU on Thursday after the EIA storage report, natural gas prices fell back 4.8 cents on Friday to end the week at 3.008 per mmBTU, just 3.4 cents higher than where they started...surprisingly natural gas for January, which regularly trade at higher prices than warmer months, didn't do much better, rising just 3.8 cents over the week to end at 3.169 per mmBTU, which is actually lower than that contract was trading for in August...

the week's natural gas storage report from the EIA for week ending September 21st indicated that natural gas in storage in the US rose by 46 billion cubic feet to 2,768 billion cubic feet during that week, which left our gas supplies 690 billion cubic feet, or 20.0% below the 3,458 billion cubic feet that were in storage on September 22nd  of last year, and 621 billion cubic feet, or 18.3% below the five-year average of 3,389 billion cubic feet of natural gas that are typically in storage after the third week of September....this week's 46 billion cubic feet increase in natural gas supplies was far short of the 61 billion cubic feet increase that a S&P Global Platts' analysts survey had predicted, and it was barely half of the 81 billion cubic foot average of natural gas that have typically been added to storage during the third week of September in recent years, and thus the tenth below average inventory increase in the past twelve weeks...natural gas storage facilities in the Midwest saw a 30 billion cubic feet increase this week, still leaving their supplies 15.1% below normal, while supplies in the East increased by 20 billion cubic feet and are now 11.6% below normal for this time of year...on the other hand, the South Central region saw a 11 billion cubic foot withdrawal from storage as their natural gas storage deficit increased to 26.0% below their five-year average, while just 4 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where natural gas supplies are 21.8% below normal for this time of year....

comparing this week's 2,768 billion cubic feet of natural gas in storage to equivalent dates in the natural gas storage historical record (xls) for those years when we began the heating season with a deficit, we find that natural gas in storage in the lower 48 states was at 2,988 billion cubic feet on September 19th, 2014, at 3,023 billion cubic feet on September 19th, 2008; at 2,885 billion cubic feet on September 23rd, 2005, and at 2,719 billion cubic feet September 19th 2003, so it appears that we're still on track to begin the winter with supplies at a 15 year low...and no sooner than i completed digging those data points out of the historical record than i opened an email from John Kemp of Reuters in which was included a graph showing just that, which we will therefore include here below...

again, the above graph comes from a package of natural gas graphs assembled by John Kemp of Reuters, which is available as an online pdf here...as the graph heading indicates, each bar shows the amount of natural gas in storage after the third week in September for each of the past 25 years...as you can clearly see, supplies this year are the lowest since 2003, and then 2000 before that...the difference is that the supplies we go into winter with now don't have to just heat our homes, they also have to cover several LNG export contracts as well as meet demand for almost one-third of US electrical generation...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending September 21st, showed that despite lower oil imports and higher oil exports, we were able to add oil to our commercial crude supplies for the first time in six weeks because of a sharp pullback in oil refining... our imports of crude oil fell by an average of 222,000 barrels per day to an average of 7,802,000 barrels per day, after rising by an average of 433,000 barrels per day the prior week, while our exports of crude oil rose by an average of 273,000 barrels per day to an average of 2,640,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,162,000 barrels of per day during the week ending September 21st, 495,000 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 reportedly up by 100,000 barrels per day to 11,100,000 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 16,262,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using 16,514,000 barrels of crude per day during the week ending September 21st, 901,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 265,000 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 517,000 fewer barrels per day than what refineries reported they used during the week plus what oil was added to storage....to account for that disparity between the supply of oil and the consumption of it, the EIA needed to insert a (+517,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily 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 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 7,783,000 barrels per day, now 9.8% more than the 7,090,000 barrel per day average that we were importing over the same four-week period last year....the 265,000 barrel per day increase in our total crude inventories was added to our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve still remained unchanged, even as a sale of 11 million barrels from those reserves to Exxon et al closed three weeks ago....this week's crude oil production was reported as being up by 100,000 barrels per day to 11,000,000 barrels per day because a rounded 100,000 barrels per day increase to 10,600,000 barrels per day in the output from wells in the lower 48 states combined with a 2,000 barrels per day increase in oil output from Alaska was only enough to raise the national total, which is now being rounded to the nearest 100,000 barrels per day, by 100,000 barrels per day to 11,100,000 barrels per day....US crude oil production for the week ending September 22nd 2017 had recovered to 9,547,000 barrels per day after Hurricane Harvey, so this week's rounded oil production figure was 16.3% above that of a year ago, and 31.7% 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...

with preliminary US oil production figures thus at a new high, we'll include a graph of that and the confirmed monthly data to show what that looks like...

the above graph, from this week's OilPrice Intelligence Report, shows the history of confirmed oil production data monthly from January 2016 to July 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 August 17th through September 21st, as reported by the EIA...as we've pointed out on several 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...the confirmed oil production figures for July were released this week and showed our crude production at a higher than expected 10,964,000 barrels per day, up from 10,695,000 barrels per day in June, which more than likely changed the models for the rounded weekly estimates, which then came in 100,000 barrels per day higher than in the prior week...

meanwhile, US oil refineries were operating at 90.4% of their capacity in using 16,514,000 barrels of crude per day during the week ending September 21st, down from 95.4% the prior week, but still a refinery utilization rate higher than any in September over the prior 14 years....even with the big drop in refinery throughput, the 16,514,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 16th out of the past 17 weeks, 2.1% higher than the 16,174,000 barrels of crude per day that were processed during the week ending September 22nd 2017, when US refineries were operating at 88.6% of capacity....

with the big drop in the amount of oil being refined this week, gasoline output from our refineries was likewise much lower, decreasing by 432,000 barrels per day to 9,832,000 barrels per day during the week ending September 21st, after our refineries' gasoline output had decreased by 114,000 barrels per day during the week ending September 14th...as a result, our gasoline production during the week was fractionally lower than the 9,855,000 barrels of gasoline that were being produced daily during the same week last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 462,000 barrels per day to 4,995,000 barrels per day, after that output had fallen by 79,000 barrels per day the prior week....but even after the large drop, this week's distillates production was still nearly 7.7% higher than the 4,639,000 barrels of distillates per day that were being produced during the week ending September 22nd 2017, as refineries have been producing more distillates vis a vis gasoline than usual in recent weeks in order to catch up with the distillates shortfall.... 

however, even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,530,000 barrels to a seasonal high of 235,680,000 barrels by September 21st, the 14th increase in the past 31 weeks, through the spring and summer periods of higher consumption when gasoline supplies usually trend lower....our supplies of gasoline rose this week primarily because the amount of gasoline supplied to US markets fell by 547,000 barrels per day to 8,987,000 barrels per day, after falling by 200,000 barrels per day the prior two weeks, and because our imports of gasoline rose by 302,000 barrels per day to 863,000 barrels per day, while our exports of gasoline rose by 265,000 barrels per day to 961,000 barrels per day...hence, after this week's increase, our gasoline inventories are again at a seasonal high, 8.5% higher than last September 22nd's level of 217,292,000 barrels, and roughly 9.3% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels were also lower, decreasing by 2,241,000 barrels to 137,881,000 barrels during the week ending September 21st, in their first decrease in nine weeks...our distillates supplies decreased as the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 139,000 barrels per day to 4,291,000 barrels per day, after rising by 864,000 barrels per day the prior week, and as our imports of distillates fell by 17,000 barrels per day to 124,000 barrels per day, while our exports of distillates fell by 178,000 barrels per day to 1,148,000 barrels per day....this week's decrease means that our distillate supplies are now fractionally lower than the 138,045,000 barrels that we had stored on September 22nd, 2017, and still roughly 4.8% below the 10 year average of distillates stocks for this time of the year...     

finally, with the pullback in refinery crude processing, our commercial supplies of crude oil increased for the 17th time in 2018 and for the 20th time over the past year, rising by 1,852,000 barrels during the week, from 394,137,000 barrels on September 14th to 395,989,000 barrels on September 21st...however, even though our crude oil inventories remain below the five-year average of crude oil supplies for this time of year, they are nonetheless roughly 18.6% above the 10 year average of crude oil stocks for the third week of September, because it wasn't early 2015 that our oil inventories first rose above 400 million barrels...but since our crude oil inventories have now been falling through most of the past year and a half, our oil supplies as of September 21st were 15.9% below the 470,986,000 barrels of oil we had stored on September 22nd of 2017, 16.1% below the 472,084,000 barrels of oil that we had in storage on September 23rd of 2016, and 7.0% below the 425,988,000 barrels of oil we had in storage on September 25th of 2015...  

This Week's Rig Count

US drilling rig activity saw a small increase for the second time in 3 weeks during the week ending September 28th, but still remains slower than at the end of May, as the steady increases in drilling for oil we saw with higher oil prices during the first part of this year have stalled, with oil futures' prices remaining in backwardation and the backlog of uncompleted wells increasing monthly....Baker Hughes reported that the total count of rotary rigs running in the US increased by 1 rigs to 1054 rigs over the week ending on Friday, which was still 114 more rigs than the 940 rigs that were in use as of the September 29th report of 2017, but was 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 three rigs to 863 rigs this week, which was still 113 more oil rigs than were running a year ago, while it was 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 three rigs to 189 rigs, which is the same number of 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, another rig that was categorized as "miscellaneous" began drilling this week, with that count of two now up from the one such "miscellaneous" rig that was deployed a year ago...

offshore drilling in the Gulf of Mexico was unchanged from last week at 18 rigs, which was down from the 22 Gulf of Mexico rigs active a year ago...however, two rigs continued to drill offshore from Alaska this week, so the total national offshore count remains at 20 rigs, still down from last year's total of 22 offshore rigs, as a year ago there was no offshore drilling other than in the Gulf.....

the count of active horizontal drilling rigs was up by 3 rigs to 922 horizontal rigs this week, which was also 128 more horizontal rigs than the 795 horizontal rigs that were in use in the US on September 29th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the vertical rig count was down by 2 rigs to 63 vertical rigs this week, which was also down from the 64 vertical rigs that were in use during the same week of last year...meanwhile, the directional rig count was unchanged at 69 directional rigs this week, which was still down from the 82 directional rigs that were operating on September 29th 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 September 28th, the second column shows the change in the number of working rigs between last week's count (September 21st) and this week's (September 28th) count, the third column shows last week's September 21st active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend 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 22nd of September, 2017...   

while it appears from the table above that there was a sudden jump of 7 rigs in Oklahoma's Cana Woodford, most of that is actually just a reversal of last week's drop of 6 rigs in that basin, so we'd judge that last week's drop just represented a half dozen rigs that were idled between jobs, which thus show up as new startups this week...however, since all those Cana Woodford rigs were oil rigs, we can just about figure every other reduction we see above is likely an oil rig, in order to end with a minus three count for oil rigs this week...natural gas rig start ups, on the other hand, were in the Haynesville and Oklahoma's Ardmore Woodford, with one of the Haynesville rigs in northwestern Louisiana and the other across the border in eastern Texas...we should also note that other than the changes shown for the major producing states above, Nevada also saw its only active rig idled this week, ending the drilling that began there in mid-March; a year ago, there were no rigs in Nevada...

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note: there's more here...

DUC wells at a record, up 33% YoY; US military spends more protecting OPEC imports than the cost of the oil itself..

oil prices continued to rally for a second week on concerns over global supply this past week, stalling only after Trump tweeted threats towards OPEC producers on Thursday...after rising 1.6% to $68.99 a barrel in volatile trading last week, contract prices for US crude for October delivery slipped 8 cents to $68.91 a barrel on deepening US-China trade-tensions on Monday, as Trump telegraphed his intention to impose a fourth round of tariffs on Chinese imports, and the Chinese vowed to retaliate...nonetheless, oil prices still rose 94 cents to $69.85 a barrel on Tuesday on signs that OPEC was not prepared to raise oil output to cover shrinking exports from Iran, and as the Saudis signaled they'd be comfortable with prices above $80 per barrel...oil prices then surged $1.27 to $71.12 a barrel on Wednesday after the EIA reported the fifth consecutive weekly decline in U.S. crude oil inventories amid ongoing global supply concerns over U.S. sanctions on Iran...however, oil prices fell back from early gains to close 32 cents lower as the October oil contract expired at $70.80 a barrel on Thursday, after Trump accused Mideast producers of pushing oil price higher, warning that they need to keep crude prices lower because of the military protection the U.S. provides for the region...now quoting oil contract prices for November delivery, which had closed Thursday 45 cents lower at $70.32 a barrel, oil prices reversed their Trump tweet losses and rose to as high as $71.80 a barrel on Friday, but then pared that gain by more than a dollar to close just 46 cents higher at 70.78 a barrel on a report that oil producers planned to increase production by another 500,000 barrels a day in a joint ministerial committee meeting in Algeria this weekend...hence the widely quoted price of oil ended the week with an increase of $1.79 a barrel, or 2.6%, while the November oil contract, which had closed last week at $68.77 a barrel, ended $2.01 a barrel higher, an increase of nearly 3%...

in the wake of Trump's tweets about the military protection the U.S. provides for the Mideast oil producers, Securing America's Future Energy, a think tank that advocates reduced U.S. dependence on oil, released a study showing that the US military spends about $81 billion a year to protect oil supplies around the globe...since that $81 billion a year is probably an incomprehensible number to most readers, we figured some context as it relates to oil was appropriate...as we saw in OPEC's report last week, global oil production averaged around 96 million barrels of oil per day through 2017, and that has increased to around 98 million barrels of oil per day so far this year...,since that's a daily output amount, we multiply 98 million times 365 to find that global oil production has been running at about 35.77 billion barrels annually...that means that the $81 billion a year we spend on military to protect oil works out to $2.26 a barrel for every barrel of oil produced worldwide...however, since that overseas military spending isn't really to protect oil being produced stateside, another way of looking at that military expenditure would be to look at just our oil imports, which have been averaging around 8 million barrels per day...using the same math, that means we're spending $27.74 a barrel to protect our oil imports... however, since the majority of our oil imports come from Canada and other allies, we can assume that the military expenditures to protect that portion of our imports are negligible...so if we look at just our oil imports from OPEC countries, which have been averaging 3.1 million barrels of oil per day over recent years, we could say that our military outlays to protect those oil imports are running roughly $71.50 a barrel, or more than the price of the oil itself...

natural gas prices were also higher this week, to a degree that surprised some analysts, as the news was relatively bearish, with widespread power outages and cooler weather in the wake of Hurricane Florence reducing demand...natural gas prices for October delivery rose 11.9 cents on Tuesday as the storm was downgraded to a tropical depression, and then rose another 6.8 cents with the storage report on Thursday in rising 21 cents to $2.977 per mmBTU over the week, an increase of nearly 7.6%.....the week's natural gas storage report from the EIA for week ending September 14th indicated that natural gas in storage in the US rose by 86 billion cubic feet to 2,722 billion cubic feet during that week, which left our gas supplies 672 billion cubic feet, or 19.8% below the 3,394 billion cubic feet that were in storage on September 15th of last year, and 586 billion cubic feet, or 17.7% below the five-year average of 3,308 billion cubic feet of natural gas that are typically in storage after the second week of September....this week's 86 billion cubic feet increase in natural gas supplies was a bit more than the 83 billion cubic feet increase that a S&P Global Platts' analysts survey had expected, and it was also above the 76 billion cubic foot average of natural gas that have typically been added to storage during the second week of September in recent years, in just the second above average inventory increase in the past eleven weeks...natural gas storage facilities in the Midwest saw a 36 billion cubic feet increase this week, while supplies in the East increased by 30 billion cubic feet and are now just 11.5% below normal for this time of year...on the other hand, the South Central region saw a 12 billion cubic foot injection as their natural gas storage deficit increased to 23.6% below their five-year average, while just 5 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where natural gas supplies are 22.3% below normal for this time of year....analysts from Platts are now forecasting that natural gas in storage will peak at 3.26 trillion cubic feet before withdrawals begin in early November, which would be the lowest level to start the heating season since 2003, when pre-winter natural gas supplies peaked at 3.18 trillion cubic feet...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending September 14th, showed that despite higher oil imports and a sharp pullback in oil refining, we again had to withdraw more oil from our commercial crude supplies for the fifth week in a row, because our oil exports jumped at the same time... our imports of crude oil rose by an average of 433,000 barrels per day to an average of 8,024,000 barrels per day, after falling by an average of 123,000 barrels per day the prior week, while our exports of crude oil rose by an average of 539,000 barrels per day to an average of 2,367,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,657,000 barrels of per day during the week ending September 14th, 106,000 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 reportedly up by 100,000 barrels per day to 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 16,657,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using 17,415,000 barrels of crude per day during the week ending September 14th, 443,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 294,000 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 464,000 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 consumption of it, the EIA needed to insert a (+464,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily 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 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 7,704,000 barrels per day, now 6.9% more than the 7,209,000 barrel per day average that we were importing over the same four-week period last year....the 294,000 barrel per day decrease in our total crude inventories was again all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve still remained unchanged, even as a sale of 11 million barrels from those reserves to Exxon et al was closed two weeks ago....this week's crude oil production was reported as being up by 100,000 barrels per day to 11,000,000 barrels per day because a rounded 100,000 barrels per day increase to 10,500,000 barrels per day in the output from wells in the lower 48 states combined with a 18,000 barrels per day increase in oil output from Alaska was only enough to raise the national total, which is now being rounded to the nearest 100,000 barrels per day, by 100,000 barrels per day to 11,000,000 barrels per day....US crude oil production for the week ending September 15th 2017 had recovered to 9,510,000 barrels per day after Hurricane Harvey, so this week's rounded oil production figure was 15.7% 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 95.4% of their capacity in using 17,415,000 barrels of crude per day during the week ending September 14th, down from 97.6% the prior week, but still a refinery utilization rate higher than any in September over the prior 14 years....the 17,415,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 15th out of the past 16 weeks, but not directly comparable to the 15,172,000 barrels of crude per day that were processed during the week ending September 15th 2017, when US refineries were still operating at a reduced 83.2% of capacity in the aftermath of Hurricane Harvey..

with the decrease in the amount of oil being refined this week, gasoline output from our refineries was likewise lower, decreasing by 114,000 barrels per day to 10,270,000 barrels per day during the week ending September 14th, after our refineries' gasoline output had increased by 169,000 barrels per day during the week ending September 7th...due to Hurricane Harvey's impact on refining, our gasoline production during the week is not comparable to that of a year ago, but this week's gasoline output was still 3.1% lower than what had been a record 10,602,000 barrels of gasoline that were produced daily during the pre-hurricane week ending August 25th of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 79,000 barrels per day to a still high 5,457,000 barrels per day, after they had risen by 357,000 barrels per day over the prior two weeks...for a rough year over year comparison absent hurricane impacts, we'd note this week's distillates production was nearly 8% higher than the 5,055,000 barrels of distillates per day that were being produced during the week ending August 25th, 2017, so you can see that refineries have been producing more distillates vis a vis gasoline to catch up with the distillates shortfall.... 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 1,719,000 barrels to 234,150,000 barrels by September 14th, the 17th decrease in 30 weeks, but just the 18th decrease in 45 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline fell this week even as the amount of gasoline supplied to US markets fell by 115,000 barrels per day to 9,534,000 barrels per day, after falling by 85,000 barrels per day the prior week, because our imports of gasoline fell by 492,000 barrels per day to 561,000 barrels per day, while our exports of gasoline rose by 16,000 barrels per day to 696,000 barrels per day...but even after this week's decrease, our gasoline inventories were still at a seasonal high, 8.3% higher than last September 15th's level of 216,185,000 barrels, and roughly 9.3% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels were nonetheless higher, increasing by 839,000 barrels to 140,122,000 barrels during the week ending September 14th, the 13th increase in 17 weeks...our distillates supplies increased even though the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 864,000 barrels per day to 4,152,000 barrels per day, after falling by 1,002,000 barrels per day last week in a post Labor Day adjustment....in addition, our exports of distillates fell by 91,000 barrels per day to 1,326,000 barrels per day, while our imports of distillates rose by 91,000 barrels per day to 141,000 barrels per day, thus adding to supplies....moreover, this week's increase means that our distillate supplies have recovered from the 14 year seasonal low that they hit 7 weeks ago, as they are now fractionally higher than the 138,859,000 barrels that we had stored on September 15th, 2017, even as they remain roughly 4.5% lower than the 10 year average of distillates stocks for this time of the year...     

finally, because of the ongoing elevated level of our oil exports, our commercial supplies of crude oil decreased for the 21st time in 2018 and for the 32nd time over the past year, falling by 2,057,000 barrels during the week, from 396,194,000 barrels on September 7th to 394,137,000 barrels on September 14th, our lowest supplies of crude oil since February 13, 2015...however, even though our crude oil inventories are now about 3.5% below the five-year average of crude oil supplies for this time of year, they are still roughly 18% above the 10 year average of crude oil stocks for the second week of September, because it wasn't early 2015 that our oil inventories first rose above 400 million barrels...but since our crude oil inventories have now been falling through most of the past year and a half, our oil supplies as of September 14th were 16.6% below the 472,832,000 barrels of oil we had stored on September 15th of 2017, 16.8% below the 473,966,000 barrels of oil that we had in storage on September 16th of 2016, and 6.6% below the 422,033,000 barrels of oil we had in storage on September 18th of 2015... 

This Week's Rig Count

US drilling activity decreased for the first time in 4 weeks but for the seventh time in fifteen weeks during the week ending September 21st, as the steady increases in drilling for oil we saw with higher oil prices during the first part of this year have stalled since May, with oil futures' prices remaining in backwardation and the backlog of uncompleted wells increasing....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 2 rigs to 1053 rigs over the week ending on Friday, which was still 118 more rigs than the 935 rigs that were in use as of the September 22nd report of 2017, but was 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 one rig to 866 rigs this week, which was still 122 more oil rigs than were running a year ago, while it was 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 186 rigs for the third week in row, which was now down by 4 rigs from the 190 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...in addition, one of the two rigs that had been drilling exploratory wells in central Ohio categorized as "miscellaneous" was shut down this week, thus equaling the count of one such "miscellaneous" rig that was deployed a year ago...

offshore drilling in the Gulf of Mexico was unchanged from last week at 18 rigs, which was down from the 19 Gulf of Mexico rigs active a year ago...however, two rigs continued to drill offshore from Alaska this week, so the total national offshore count is now at 20 rigs, which is thus up by a rig from last year's total of 19 offshore rigs, since a year ago there was no offshore drilling other than in the Gulf.....

the count of active horizontal drilling rigs was down by 2 rigs to 919  horizontal rigs this week, which was still 129 more horizontal rigs than the 795 horizontal rigs that were in use in the US on September 22nd 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 also decreased by 2 rigs to 69 directional rigs this week, which was also down from the 77 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was up by 2 rigs to 65 vertical rigs this week, which was still down from the 68 vertical rigs that were operating on September 22nd 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 September 21st, the second column shows the change in the number of working rigs between last week's count (September 14th) and this week's (September 21st) count, the third column shows last week's September 14th active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend 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 15th of September, 2017...    

it's pretty clear that this week's rig variance story can be summed up as 'Texas drilling is up and everywhere else is unchanged or down', although it does appear likely that the Granite Wash rig addition was on the Oklahoma side of the Texas panhandle border...we can note from the 4th column that 102 of the 122 rigs that were added in the past year were in the Permian basin of western Texas and southeast New Mexico, but it's also worth noting that the lion's share of that new drilling has been in the core Permian Texas Oil District 8, indicated as the Delaware basin, where 326 of the active Permian basin rigs are now located...that's an increase of 10 rigs from a week ago, as 5 Midland basin rigs, 4 in Texas District 7C and 1 in District 7B, were shut down at the same time...another oddity this week that's not apparent in the tables above is hidden in the two rig decrease in shown in Ohio's Utica shale; one of those idled rigs had been targeting oil, while the other was a miscellaneous rig that had been drilling an exploratory well into the Knox formation in Ashland county, not even a Utica shale well at all...the Utica shale natural gas rig count actually remained unchanged at 19 rigs, as the only natural gas rig addition was in Oklahoma's Arkoma Woodford, where an oil rig was shut down at the same time, resulting in the net no change you see above... also note that last week i missed noticing that a new rig had started drilling in South Dakota, in the first drilling that state had seen since November 2014...

DUC well report for August

Monday of this past week saw the release of the EIA's Drilling Productivity Report for September, which includes the EIA's August data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 23rd consecutive month, this report again showed an increase in uncompleted wells nationally in August, as both drilling of new wells and completions of those drilled increased....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 modest increases of uncompleted wells in the Anadarko basin of Oklahoma and 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 238, from 8,031 wells in July to 8,269 wells in August, again the highest number of such unfracked wells in the history of this report, and up 33% from the 6,227 drilled but uncompleted wells in August a year ago...that was as 1,520 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, up from 1,509 in July, while 1,282 wells were completed and brought into production by fracking, a increase of 24 well completions over the 1258 completions seen in July...at the August completion rate, the 8,269 drilled but uncompleted wells left at the end of the month represent a 6.5 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 August DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian basin saw its total count of uncompleted wells rise by 211, from 3,419 DUC wells in July to 3,630 DUCs in August, as 636 new wells were drilled into the Permian but only 425 wells in the region were fracked...at the same time, DUC wells in the Anadarko basin region centered in & around Oklahoma rose by 34, from 992 DUC wells in July to 1026 DUCs in August, as 196 wells were drilled in the Anadarko basin during August, while 162 Anadarko wells were completed...over the same period, the number of DUC wells in the Eagle Ford of south Texas increased by 28 to 1,545, as 204 wells were drilled into the Eagle Ford while 176 Eagle Ford wells were fracked....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 8 wells to 191, as 60 wells were drilled into the Haynesville during August, while 52 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 20 to 427, as 180 Niobrara wells were drilled while 200 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 19 wells, from 718 DUCs in July to 699 DUCs in August, as 118 wells were drilled into the Marcellus and Utica shales, while 137 of the already drilled wells in the region were fracked....lastly, DUC wells in the Bakken of North Dakota fell by 4, from 755 DUC wells in July to 751 DUCs in August, as 126 wells were drilled into the Bakken in August while 130 drilled wells in that basin were completed....thus, for the month of August, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 249 wells to 7,379 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 11 wells to 890 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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US crude supplies at a 43 month low; August global oil output at a record high, but still a half million bpd short of demand

oil prices ended modestly higher in a week that saw several sharp price moves, both to the upside and to the downside...after falling nearly 3% to $67.75 a barrel in their first drop in three weeks last week, contract prices for US crude for October delivery pulled back from an early rally to end 21 cents lower at $67.54 a barrel on Monday, after weekly data from Bloomberg suggested U.S. oil inventories were rising, contradicting an earlier report from Genscape forecasting declining inventories...however, with Hurricane Florence threatening East Coast supplies and ongoing turmoil in Libyan and Iraqi oil fields, traders betting that Iran sanctions would leave the market short of crude pushed oil prices 3% higher to over $70 a barrel on Tuesday on reports that South Korea, Japan and India had already reduced their Iranian crude imports, before prices settled back to close at $69.25 a barrel, an increase of $1.71, or 2.5%, on the day...oil prices then rose past $71 a barrel in a rally on Wednesday after the EIA reported a larger-than-expected drop in U.S. crude inventories before again settling back to close $1.12 higher at $70.37 a barrel...however, oil prices saw their steepest drop in over a month on Thursday in falling $1.78 to $68.59 a barrel, after OPEC reported rising crude production and the IEA (International Energy Agency) pegged global oil supplies at a record high....however, the price rally commenced again on Friday with oil up as much as 2% after it was reported that Secretary of State Pompeo was going to announce new sanctions on Iran, but then faded into a retreat after Trump instructed aides to proceed with tariffs on about $200 billion more of Chinese products, with oil prices closing just 40 cents higher at $68.99 a barrel, an increase of 1.6% for the week...

natural gas prices, meanwhile, were up 5.3 cents over the first three days of last week before a less bullish than expected storage report knocked prices back 6.2 cents over Thursday into Friday to end the week at $2.767 per mmBTU, down less than a penny for the week overall...this week's EIA natural gas storage report for week ending September 7th indicated that natural gas in storage in the US rose by 69 billion cubic feet to 2,636 billion cubic feet during that cited week, which left our gas supplies 662 billion cubic feet, or 20.1% below the 3,298 billion cubic feet that were in storage on September 8th of last year, and 596 billion cubic feet, or 18.4% below the five-year average of 3,232 billion cubic feet of natural gas that are typically in storage after the first week of September....this week's 69 billion cubic feet increase in natural gas supplies was more than analyst's expectations for a 65 billion cubic feet increase, but it was below the 74 billion cubic foot average of natural gas that have typically been added to storage during the first week of September in recent years, the ninth such below average inventory increase in the past ten weeks...natural gas storage facilities in the Midwest saw another 32 billion cubic feet increase this week, while supplies in the East increased by 20 billion cubic feet and are now just 12.9% below normal for this time of year...on the other hand, just 4 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where  natural gas supplies are 23.3% below normal for this time of year, while the South Central region saw a 7 billion cubic foot injection as their natural gas storage deficit increased to 23.4% below their five-year average..

The Latest US Oil Data from the EIA 

this week's US oil data from the US Energy Information Administration, covering the week ending September 7th, showed that due to lower oil imports, higher oil exports, and an increase in refining, we had to withdraw more oil from our commercial crude supplies for the eighteenth time in the past thirty-three weeks... our imports of crude oil fell by an average of 123,000 barrels per day to an average of 7,591,000 barrels per day, after rising by an average of 229,000 barrels per day the prior week, while our exports of crude oil rose by an average of 320,000 barrels per day to an average of 1,828,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,763,000 barrels of per day during the week ending August 31st, 443,000 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 reportedly down by 100,000 barrels per day to 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 16,663,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using a near record high 17,857,000 barrels of crude per day during the week ending September 7th, 210,000 barrels per day more than the amount of oil they used during the prior week, while over the same period 757,000 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 437,000 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 consumption of it, the EIA needed to insert a +437,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily 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 -179,000 barrels per day during the prior week, the 611,000 barrel per day swing in that metric from last week means 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 7,577,000 barrels per day, still fractionally more than the 7,565,000 barrel per day average that we were importing over the same four-week period last year....the 757,000 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 sale of 11 million barrels from those reserves to Exxon et al was closed at the end of last week....this week's crude oil production was reported as being down by 100,000 barrels per day to 10,900,000 barrels per day because a rounded 200,000 barrels per day decrease to 10,400,000 barrels per day in the output from wells in the lower 48 states combined with a 6,000 barrels per day increase in oil output from Alaska was only enough to lower the national total, which is now being rounded to the nearest 100,000 barrels per day, by 100,000 barrels per day to 10,900,000 barrels....US crude oil production for the week ending September 8th 2017 had been reduced to 9,353,000 barrels per day in the aftermath of Hurricane Harvey, so this week's rounded oil production figure was roughly 16.5% 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 97.6% of their capacity in using 17,857,000 barrels of crude per day during the week ending September 7th, up from 96.6% the prior week and the highest September refinery utilization rate in 20 years....the 17,857,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 14th out of the past 15 weeks, and far more than have ever been refined in a week in September, but not directly comparable to the 14,078,000 barrels of crude per day that were processed during the week ending September 8th 2017, when US refineries were operating at just 77.7% of capacity, because Gulf Coast refineries had been shut down in the aftermath of Hurricane Harvey at that time..

with the increase in the amount of oil being refined this week, gasoline output from our refineries was likewise higher, increasing by 169,000 barrels per day to 10,384,000 barrels per day during the week ending September 7th, after our refineries' gasoline output had decreased by 22,000 barrels per day during the week ending August 31st...again, due to Hurricane Harvey, our gasoline production during the week is not comparable to that of a year ago, but it was still 2.1% lower than what had been a record 10,602,000 barrels of gasoline that were produced daily during the week ending August 25th of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 97,000 barrels per day to a near record high of 5,536,000 barrels per day, after they had risen by 260,000 barrels per day over the prior week...for a rough year over year comparison absent hurricane impacts, we'd note this week's distillates production was 9.5% higher than the 5,055,000 barrels of distillates per day that were being produced during the week ending August 25th, 2017.... 

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose by 1,250,000 barrels to 235,869,000 barrels by September 7th, the 13th increase in 29 weeks, and the 27th increase in 44 weeks, as gasoline inventories, as usual, were being built up over the winter months....our supplies of gasoline rose this week as the amount of gasoline supplied to US markets fell by 85,000 barrels per day to 9,649,000 barrels per day, after falling by 165,000 barrels per day the prior week, and as our imports of gasoline rose by 65,000 barrels per day to 1,053,000 barrels per day, while our exports of gasoline rose by 203,000 barrels per day to 680,000 barrels per day...after this week's increase, our gasoline inventories were at another seasonal high, 8.0% higher than last September 8th's level of 218,310,000 barrels, and roughly 10.3% above the 10 year average of our gasoline supplies for this time of the year...

meanwhile, with big increase in our distillates production, our supplies of distillate fuels were likewise much higher, increasing by 6,163,000 barrels to 139,283,000 barrels during the week ending September 7th, the 12th increase in 16 weeks and the largest increase this year...the major reason our distillates supplies increased was because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 1,002,000 barrels per day to 3,288,000 barrels per day, as domestic distributors apparently cut their purchases after having stocked up before the holiday....partially offsetting that, our exports of distillates rose by 429,000 barrels per day to 1,418,000 barrels per day, while our imports of distillates fell by 236,000 barrels per day to 50,000 barrels per day....however, with our distillate supplies still recovering from the 14 year seasonal low that they hit 6 weeks ago, this week's big inventory increase still leaves our distillates supplies 3.6% below the 144,552,000 barrels that we had stored on September 8th, 2017, and roughly 6.9% lower than the 10 year average of distillates stocks for this time of the year...     

finally, with rising oil exports and near record refining of crude, our commercial supplies of crude oil decreased for the 20th time in 2018 and for the 31st time over the past year, falling by 4,302,000 barrels during the week, from 401,490,000 barrels on August 31st to 396,194,000 barrels on September 7th, which marks the first time our crude supplies were below 400,000 barrels since February 2015...however, even though our crude oil inventories are now about 3 percent below the five-year average of crude oil supplies for this time of year, they are still roughly 18.6% above the 10 year average of crude oil stocks for the first week of September, because it wasn't early 2015 that our oil inventories first rose above 400 million barrels...but since our crude oil inventories have now been falling through most of the past year and a half, our oil supplies as of September 7th were 15.4% below the 468,241,000 barrels of oil we had stored on September 8th of 2017, 17.5% below the 480,166,000 barrels of oil that we had in storage on September 9th of 2016, and 6.5% below the 423,958,000 barrels of oil we had in storage on September 11th of 2015...  

OPEC's Monthly Oil Market Report

next we're going to review OPEC's September Oil Market Report (covering August OPEC & global oil data), which was released on Wednesday 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 58 of that report (pdf page 68), 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 278,000 barrels per day to 32,565,000 barrels per day in August, from their July production total of 32,287,000 barrels per day....however, that July figure was originally reported as 32,323,000 barrels per day, so OPEC's July output was therefore revised 36,000 barrels per day lower with this report (for your reference, here is the table of the official July OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, an increase of 256,000 barrels per day in the oil output from Libya was the major reason for this month's increase, with increases of 90,000 barrels per day in oil output from Iraq and 74,000 barrels per day in output from Nigeria more than offsetting the decrease of 150,000 barrels per day in Iranian output...however, excluding new member Congo, OPEC's August output of 32,245,000 barrels per day was still 485,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly due to the big drop in Venezuelan output, which has also been impacted by US sanctions... 

the next graphic we'll look at shows us both OPEC and global monthly oil production on the same graph, over the period from September 2016 to August 2018, and it's taken from the page numbered 59 (pdf page 69) of the September 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 millions of barrels per day of global output shown on the right scale...      

OPEC's preliminary estimate indicates that total global oil production rose by a rounded 490,000 barrels per day to a record high 98.88 million barrels per day in August, after July's global output total was revised down by 140,000 barrels per day from the 98.53 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 210,000 barrels per day in August after that revision....global oil output for August was also 2.13 million barrels per day, or 2.2% higher than the 96.75 million barrels of oil per day that were reported as being produced globally in August a year ago (see the September 2017 OPEC report online (pdf) for the year ago details)...with the increase OPEC's output, their August oil production of 32,565,000 barrels per day represented 32.9% of what was produced globally during the month, up from their 32.8% of global share reported for July...OPEC's August 2017 production was at 32,755,000 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 still producing 637,000 fewer barrels per day of oil than they were producing a year ago, during the eighth month that their production quotas were in effect, with the 638,000 barrel per day decrease in output from Venezuela from that time responsible for the cartel's output drop... 

despite the 490,000 barrel per day increase in global oil output in August, elevated 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 32 of the September OPEC Monthly Oil Market Report (pdf page 42), 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 August, 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 have been using 99.38 million barrels of oil per day, which was a downward revision of 0.06 million barrels of oil per day from their prior consumption 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 98.88 million barrels per day during August, which means that there was a still a shortfall of around 500,000 barrels per day in global oil production vis-a vis the demand estimated for the month...  

while global demand for the 3rd quarter was revised 0.06 million barrels per day lower, total global oil output for July was revised down by 140,000 barrels per day at the same time, which means the global shortfall of 910,000 barrels per day that we had figured for July last month would now be revised to 990,000 barrels per day...also notice that this report 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 shortfall of around 70,000 barrels per day in global oil production vis-a vis the demand in June, a shortfall for May of 510,000 barrels per day, and a shortfall in April of 320,000 barrels per day... but as we see in the green ellipse above, oil demand for the 2nd quarter was revised 10,000 barrels per day lower, so our revised global oil shortfalls for the 2nd quarter months will thus be 60,000 barrels per day for June, 500,000 barrels per day for May, and 310,000 barrels per day for April...

while global oil demand figures for the second quarter were revised lower, global oil demand figures for the first quarter of 2018 were revised 60,000 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 last figured a global oil output 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, that revision means that our new figures will show a surplus of 60,000 barrels per day for March, a surplus of 240,000 barrels per day for February, and a surplus of 80,000 barrels per day for January....totaling up all these 8 monthly estimates of surplus or shortfall, we find that for the first eight months of 2018, global oil demand exceeded production by roughly 61,370,000 barrels, actually a comparatively small net oil shortfall that is the equivalent of roughly 15 hours of global oil production at the August production rate...   

This Week's Rig Count

US drilling activity increased for the seventeenth time in twenty-five weeks during the week ending September 14th, even as the steady increases in drilling for oil we saw with higher oil prices during the first part of this year have stalled since May, with oil futures' prices remaining in backwardation, albeit now less so than in recent weeks....Baker Hughes reported that the total count of rotary rigs running in the US increased by 7 rigs to 1055 rigs over the week ending on Friday, which was 119 more rigs than the 936 rigs that were in use as of the September 15th 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 up by 7 rigs to 867 rigs this week, which was also 118 more oil rigs than were running a year ago, while it was 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 186 rigs this week, which was also unchanged from the 186 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...meanwhile, two rigs drilling exploratory wells in central Ohio considered to be "miscellaneous" continued to operate this week, an increase from just one such "miscellaneous" rig a year ago...

offshore drilling in the Gulf of Mexico saw a net increase of 1 rig to 18 rigs, up from 17 Gulf of Mexico rigs a year ago...in addition, two rigs continued to drill offshore from Alaska this week, so the total national offshore count is now at 20 rigs, which is thus up by 3 rigs from last year's total of 17 offshore rigs, since a year ago there was no offshore drilling other than in the Gulf...in addition, two more rigs began drilling through inland bodies of water in southern Louisiana this week, where there are now five such rigs operating, up from the 4 rigs that were drilling through inland waters there a year ago...

the count of active horizontal drilling rigs was up by 3 rigs to 921 horizontal rigs this week, which was also 126 more horizontal rigs than the 795 horizontal rigs that were in use in the US on September 15th 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 6 rigs to 71 directional rigs this week, which was still down from the 74 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 2 rigs to 63 vertical rigs this week, which was also down from the 67 vertical  rigs that were operating on September 15th 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 September 14th, the second column shows the change in the number of working rigs between last week's count (September 7th) and this week's (September 14th) count, the third column shows last week's September 7th active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend 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 15th of September, 2017...    

Louisiana saw a three rig increase despite having a land based rig shut down in the southern part of the state because of a two rig increase on inland waters and because two additional Gulf of Mexico rigs were in state waters, while one rig offshore from Texas was idled...meanwhile, the three rig increase in Pennsylvania includes two rigs targeting the Marcellus and one rig targeting the Utica....the Utica shale count remained unchanged, however, because a Utica shale rig in Ohio was shut down at the same time...meanwhile, the natural gas rig count remained unchanged because 2 rigs targeting natural gas basins not tracked separately by Baker Hughes were shut down at the same time...all other activity shown above is oil directed, again with basins not tracked by Baker Hughes not shown...

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