Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, December 30, 2018

oil & natural gas prices both down again in volatile trading; warm spell gives natural gas stores a breather..

oil prices ended lower for the 3rd week in a row in quite volatile trading that largely synched with the wild gyrations in wall street markets this week, which in turn were driven by year end tax strategies of hedge funds and institutions rather than any specific economic developments...after falling $5.61 or 11% to $45.59 a barrel, largely on technical factors last week, contract prices of US oil for February delivery plunged another $3.06 or 6.7% to $42.53 a barrel to start the week on Monday, as fears of an economic slowdown rattled global financial markets and drove unrequited selling in light pre-Christmas trading...those fears apparently dissipated over the holiday, as financial markets roared back to their largest gain in history on Wednesday while oil prices shot back up $3.69, or 8.7%, to $46.22 a barrel, their largest daily gain in more than two years...however, as stock indices retreated again on Thursday, so too did crude prices, as they fell $1.61, or 3.5%, to $44.61 a barrel, "giving back some of the gains that were brought along with the euphoria in the stock market"...oil prices then staged a modest rally on Friday, rising 72 cents to $45.33 a barrel, after the weekly EIA inventory data showed a small drop in US crude inventories, in contrast to Thursday API figures that had showed a massive crude supply build...nonetheless, February US crude still finished with a decline of 0.6% for the week, while the global benchmark February Brent crude, which did not participate in the Friday rally, ended the week 3.0% lower at $52.20 a barrel, after having seen a 4.2% drop on Thursday...

natural gas prices, meanwhile, fell for a fourth consecutive week, as unusually warm weather for December continued to reduce demand for natural gas and thus took the edge off the deep supply deficit we started the winter with...quoting natural gas contracts for January delivery to start the week, prices fell 34.9 cents to $3.467 per mmBTU on Monday, as the forecasts for early January cold which had held up prices the prior week had been lifted over the weekend...prices then edged back up 7.6 cents on Wednesday and another 9.9 cents on Thursday as trading in the January gas contract expired at $3.642 per mmBTU...at the same time, natural gas contracts for February delivery, which had ended the prior week priced at $3.750 per mmBTU, fell 32.7 cents on Christmas eve, rebounded 3.5 cents on Wednesday and 8.8 cents on Thursday, and then crashed 24.3 cents to an 8 week low of $3.303 per mmBTU on Friday, as the temperature forecasts again backed off earlier cold forecasts and the EIA reported the smallest withdrawal of natural gas from storage yet this winter....the February natural gas contract price thus ended down nearly 12% for the week, and 13% below where the January natural gas contract had settled the prior Friday....

the natural gas storage report for the week ending December 21st from the EIA showed that the quantity of natural gas in storage in the US fell by 48 billion cubic feet to 2,725 billion cubic feet over the week, which left our gas supplies 623 billion cubic feet, or 18.6% below the 3,348 billion cubic feet that were in storage on December 22nd of last year, and 647 billion cubic feet, or 19.2% below the five-year average of 3,372 billion cubic feet of natural gas that are typically in storage after the third week of December....this week's 48 billion cubic feet withdrawal from US natural gas supplies was just about what most analysts had been expecting, but it was well below the average of 121 billion cubic feet of natural gas that have been withdrawn from US gas storage during the third week of December in recent years...natural gas storage facilities in the Eastern US saw a 16 billion cubic feet draw from their supplies over the week, half of their average withdrawal over the past five years, as the region's gas supply deficit was reduced to 14.4% below normal for this time of year, while natural gas supplies in the Midwest fell by 23 billion cubic feet, in contrast to the normal 40 billion cubic feet pull, as their supply deficit was reduced to 12.2% below the normal for the third weekend of December...the South Central region only saw a 2 billion cubic feet drop in their supplies, in contrast to their normal 30 billion cubic foot withdrawal, as their natural gas storage deficit was reduced to 25.5% below their five-year average for this time of year...at the same time, 3 billion cubic feet were pulled out of natural gas supplies in the sparsely populated Mountain region, which normally pulls out 7 billion cubic feet for the week, as their deficit from normal fell to 21.9%, while 4 billion cubic feet were withdrawn from storage in the Pacific region, vs 12 billion cubic feet normally withdrawn, and their natural gas supply deficit fell to 27.4% below normal for this time of year....

so, we've just seen our weekly withdrawal drop from 141 billion cubic feet during the week ending December 14th to just 48 billion cubic feet during the current reporting week ending December 21st...as we've mentioned several times, natural gas demand and hence withdrawal of gas from storage is largely driven by changes in temperature, relatively steady industrial and export demand notwithstanding...that can be illustrated quite well with a couple graphics we've pulled from the EIA's natural gas storage dashboard and included below; both are similar, with the first showing daily regional average temperatures from November 30th to December 13th, and the second showing daily regional temperatures from December 14th to December 27th:

December 19 2018 average regional temps Nov 30 to Dec 13

December 29 2018 average regional temps Dec 14 to Dec 27

the above graphics from the EIA's natural gas storage dashboard gives us both the average daily temperature covering the period from November 30th through December 27th in each of the five natural gas regions, and also a color-coded variance from normal for each of those daily temperature averages, with shades of brown indicating the average temperatures in the region were above normal on a given date, while shades of blue indicate average temperatures that were below normal for the date, as indicated in the legend at the bottom....thus this graphic gives us not only the actual average temperature for each region for each day, but also indicates how much that temperature deviated from the norm...as you can see in the first graphic above, temperatures for the heavily populated East, Midwest and South Central regions were generally below normal over the period from December 8th thru December 14th, with the temperatures in the East, which accounts more than a third of the population, consistently averaging in the mid-30s, while temperatures in the Midwest saw average temperatures in the 20s for four days to start the period...that colder than normal period, which included 3 days that were 5 to 9 degrees colder than normal for each of those regions, is what resulted in the 141 billion cubic feet withdrawal from our natural gas supplies over the week ending December 14th, just modestly above the 5 year average withdrawal of 136 billion cubic feet...

now look at the period from December 15th thru December 21st, representing the dates of this week's report; not only were the temperatures in the East, Midwest and South Central regions above normal for each day during the period, but temperatures for all 5 regions were above normal for every day during the period, with temperatures in the East averaging in the mid-40s, and temperatures in the Midwest averaging in the upper 30s over the period...in fact, except for a few counties on the Gulf Coast, the entire US saw above normal temperatures during the week, with the broad area from the northern Rockies to the Great Lakes all more than 10 degrees above normal, as you can see on the map below, also from the natural gas storage dashboard....overall, we can estimate that temperatures for the lower 48 averaged at least 7 degrees warmer during the week ending December 21st than they were during the week ending December 14th...as a result, the daily production of 87.2 billion cubic feet was nearly adequate to meet the country's needs, and hence only 48 billion cubic feet, or about 7 billion cubic feet per day, needed to be withdrawn from storage during the week...furthermore, if we look at the daily regional average temperatures over the 6 days beginning December 22 shown above, they too are all above normal, with the small exception of the 30 degree average on December 27th for the mountain states...that means that the coming week's report for the week ending December 28th will again show a withdrawal from storage much below normal, also serving to alleviate the natural gas deficit which had been running 20% below normal nationally in recent weeks...

December 29 2018 temperature departure from normal for week to Dec 20

The Latest US Oil Supply and Dispostion Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending December 21st, indicated a modest increase in our oil imports and a big jump in our oil exports, while our commercial crude supplies nonetheless remained statistically unchanged, resulting in a large jump in unaccounted for crude....our imports of crude oil rose by an average of 233,000 barrels per day to an average of 7,656,000 barrels per day, after rising by an average of 30,000 barrels per day the prior week, while our exports of crude oil rose by an average of 644,000 barrels per day to an average of 2,969,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,687,000 barrels of per day during the week ending December 21st, 411,000 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 reportedly increased by 100,000 barrels per day to 11,700,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,387,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,350,000 barrels of crude per day during the week ending December 21st, 58,000 barrels per day less than the amount of oil they used during the prior week, while over the same period ​7,000 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 would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was ​​957,000 barrels per day short of 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 inserted a (+957,000) 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"...with our unaccounted for crude reaching 957,000 barrels per day, the largest amount in recent history, all of this week's oil supply and disposition figures ​that we have cited ​must be taken with a big grain of salt...(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) indicate that the 4 week average of our oil imports fell to an average of 7,423,000 barrels per day, now 2.3% less than the 7,598,000 barrel per day average that we were importing over the same four-week period last year....the statistical ​6,000 barrel per day decrease in our total crude inventories included a rounded ​7,000 barrel per day withdrawal from our commercially available stocks of crude oil, while the oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported 100,000 barrels per day higher at 11,700,000 barrels per day because the rounded figure for output from wells in the lower 48 states rose by 100,000 barrels per day to 11,200,000 barrels per day, while a 1,000 barrel per day decrease to 497,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending December 22nd was at 9,754,000 barrels per day, so this week's rounded oil production figure was almost 20% above that of a year ago, and 38.8% 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...     

US oil refineries were operating at 95.1% of their capacity in using th​ose 17,350,000 barrels of crude per day during the week ending December 21st, down from last week's 95.4% of capacity, but still a high capacity utilization rate for December or for any time of year....the 17,350,000 barrels per day of oil that were refined this week were no longer at a seasonal high for the time of year, however, as they were fractionally lower than the previous seasonal high of 17,398,000 barrels of crude per day that were being processed during the week ending December 22nd, 2017, when US refineries were operating at 95.7% of capacity... 

with the small drop in the amount of oil being refined, the gasoline output from our refineries was also lower, decreasing by 190,000 barrels per day to 10,334,000 barrels per day during the week ending December 21st, after our refineries' gasoline output had decreased by 123,000 barrels per day during the week ending December 14th...with that decrease in this week's gasoline output, our gasoline production during the week was 0.8% lower than the 10,222,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 51,000 barrels per day to 5,444,000 barrels per day, after that output had decreased by 152,000 barrels per day the prior week....even with that increase, this week's distillates production was fractionally lower than the 5,476,000 barrels of distillates per day that were being  produced during the week ending December 22nd, 2017.... 

even with the pullback in our gasoline production, our supply of gasoline in storage at the end of the week increased by 3,006,000 barrels to 233,106,000 barrels by December 21st, the 5th increase in the past 10 weeks, which​ nonetheless​ still left our gasoline supplies 3,066,000 barrels lower than they were on the 5th of October, at a time of year when gasoline inventories are usually increasing....our gasoline supplies rose this week even though the amount of gasoline supplied to US markets rose by 105,000 barrels per day to 9,348,000 barrels per day while our exports of gasoline fell by 97,000 barrels per day to 851,000 barrels per day and our imports of gasoline fell by 86,000 barrels per day to 509,000 barrels...with this week's increase, our gasoline inventories are once again at a seasonal high for the third week in December, 2.1% higher than last December 22nd's level of 228,374,000 barrels, and roughly 4% above the five year average of our gasoline supplies for this time of the year...

even with the ongoing elevated level of our distillates production, our supplies of distillate fuels increased for just the 3rd time in fourteen weeks, but just by a statistically insignificant 2,000 barrels to 119,902,000 barrels during the week ending December 21st, after our distillates supplies had decreased by 4,237,000 barrels during the prior week...our distillates supplies eked out that small increase because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 644,000 barrels per day to 4,242,000 barrels per day, while our imports of distillates rose by 65,000 barrels per day to 204,000 barrels per day, and while our exports of distillates rose by 155,000 barrels per day to 1,406,000 barrels per day....despite this week's increase, our distillate supplies finished the week 7.7% below the 129,935,000 barrels that we had stored on December 22nd, 2017, and roughly 11% below the five year average of distillates stocks for this time of the year...   

finally, with the caveat that oil which was unaccounted for this week approached a million barrels per day, our commercial supplies of crude oil slipped by a statistically insignificant 46,000 barrels to 441,411,000 barrels on December 21st, from 441,457,000 barrels on December 14th, the fourth straight decrease after 10 weekly increases, and the 25th down week during 2018....but even after four straight decreases, our crude oil inventories still remained roughly 7% above the five-year average of crude oil supplies for this time of year, and over 28% above the 10 year average of crude oil stocks for the first week of December, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...however, since our crude oil inventories had been falling through most of the past year and a half until this Fall, our oil supplies as of December 21st were only 2.2% above the 431,882,000 barrels of oil we had stored on December 22nd of 2017, and remained 9.2% below the 486,063,000 barrels of oil that we had in storage on December 23rd of 2016, and 3.0% below the 455,106,000 barrels of oil we had in storage on December 25th of 2015..     

This Week's Rig Count

US drilling activity increased for the second week in a row, and was thence up for the 8th time in the past 14 weeks during the week ending December 28th, as drilling for oil continued to expand despite depressed prices and a 6.7 month backlog of uncompleted wells... Baker Hughes reported that the total count of rotary rigs running in the US increased by 3 rigs to 1083 rigs over the week ending December 28th, which was also 154 more rigs than the 929 rigs that were in use as of the December 29th report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil increased by 2 rigs to 885 rigs this week, which was also 138 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 bearing formations increased by 1 rig to 198 natural gas rigs, which was also 16 more rigs than 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... 

drilling activity in the Gulf of Mexico was unchanged at 24 rigs this week, which was up from the 18 rigs deployed in the Gulf of Mexico a year ago at this time...since there is no other offshore drilling off either coast or off Alaska at this time, nor was there during the same week of 2017, those Gulf of Mexico totals are identical to the US totals..

the count of active horizontal drilling rigs increased by 5 rigs to 945 horizontal rigs this week, which was also 149 more horizontal rigs than the 796 horizontal rigs that were in use in the US on December 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 decreased by 1 rig to 68 vertical rigs this week, which was still up from the 65 vertical rigs that were in use during the same week of last year...​at the same time, the directional rig count also decreased by 1 rig to 70 directional rigs this week, which was still up from the 68 directional rigs that were operating on December 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 December 28th, the second column shows the change in the number of working rigs between last week's count (December 21st) and this week's (December 28th) count, the third column shows last week's December 21st active rig count, the 4th column shows the change between the number of rigs running on Friday and those running 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 the 2​9th of December, 2017... 

December 28 2018 rig count summary

in something of an oddity, both this week's state variance table and the shale basin table match the summary figures we have just reviewed; not necessarily because there was no change in activity outside of these major states or basins, but because if there was, it netted out to no change, and thus doesn't show any in either the Current and Historical Rigs by State xls spreadsheet, nor the count by basin table of the North America Rotary Rig Count excel file that we check each week...the Permian basin, which accounts for more than 40% of US drilling activity, also shows a net no change, even though two rigs were added in Texas Oil District 8, the core Permian - Delaware basin, and ​even ​though ​another rig was added to Texas Oil District 7C, or the southern part of the Permian Midland, because 3 rigs were pulled out of Texas Oil District 8A, or the northern Permian Midland...meanwhile, natural gas rigs were added in Ohio's Utica shale and Louisiana's Haynesville, while one natural gas rig was pulled out of Oklahoma's Ardmore Woodford, which shows no net change because an oil rig was added in that basin at the same time...

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note: there's more here...

Sunday, December 23, 2018

oil prices drop another 11% to a 35 month low; record increase in uncompleted wells leaves a 6.7 month backlog

oil prices saw their largest decrease in nearly three years​ this week,​ amid turmoil ​in ​global financial ​markets ​and domestic political chaos....after falling 2.7% to $51.20 a barrel last week despite the OPEC led agreement to remove 1.2 million barrels from production, contract prices of US oil for January delivery fell $1.32 or more than 2.5% to $49.88 a barrel on Monday, the lowest close since September 2017, on fears of oversupply and concerns over global economic growth...with the psychological $50 price support thus pierced, US crude prices plunged $3.64, or 7.3% to a sixteen month low of $46.24 a barrel on Tuesday, as oil supply increases were reported nationally and at the crucial Cushing hub while equity markets fell nearly 2% on signs of a protracted economic downturn in China...oil prices rebounded 96 cents to $47.20 a barrel on Wednesday, after the EIA reported a small drop in domestic crude supplies and the largest draw from distillates supplies since March, as trading in the January contract expired and contract price for February oil rose $1.57 to $48.17 a barrel...now quoting oil contracts for February delivery, those prices fell $2.29, or 4.8%, to a 17 month low of $45.88 a barrel on Thursday, as as equity markets sold off following a Fed rate hike and the Saudis cut prices to Asian buyers...oil prices then fell 29 cents to $45.59 a barrel on Friday, the lowest closing price since January 2016, after earlier hitting $45.13, the lowest intraday price since mid-July 2017, as global oversupply worries kept buyers away from the market ahead of the holidays and the threat of a U.S. government shutdown added to economic uncertainty...oil prices thus ended the week with a loss of more than 11%, the steepest weekly drop since January 2016, leaving them nearly 41% below the 4 year high of $76.41 a barrel seen in trading of November oil on October 3rd...

natural gas prices, meanwhile, ended the week little changed, despite seeing quite a bit of volatility during the week, as weather forecasts were repeatedly revised....trading natural gas contracts for January delivery all week, prices plunged 29.9 cents on Monday, jumped 31 cents Tuesday, fell 11.2 cents on Wednesday and 14.3 cents on Thursday before again jumping 23.3 cents higher on Friday to end the week at $3.816 per mmBTU, just 1.1 cent lower than where they ended the week before.....the natural gas storage report for the week ending December 14th from the EIA showed that the quantity of natural gas in storage in the US fell by 141 billion cubic feet to 2,773 billion cubic feet over the week, which left our gas supplies 697 billion cubic feet, or 20.1% below the 3,470 billion cubic feet that were in storage on December 15th of last year, and 720 billion cubic feet, or 20.6% below the five-year average of 3,493 billion cubic feet of natural gas that are typically in storage after the second week of December....this week's 141 billion cubic feet withdrawal from US natural gas supplies was a bit above the ~136 billion cubic feet that analysts had been expecting, and a bit below the average of 144 billion cubic feet of natural gas that have been withdrawn from storage during the second week of December in recent years...natural gas storage facilities in the East​ern US​ saw a 40 billion cubic feet drop in supplies over the week, which pushed the region's gas supply deficit to 15.8% below normal for this time of year, while natural gas supplies in the Midwest fell by a less than normal 44 billion cubic feet as their supply deficit fell to 13.5% below normal for the second weekend of December...but the South Central region saw an above normal 38 billion cubic feet drop in their supplies, as their natural gas storage deficit increased to 27.2% below their five-year average for this time of year...at the same time, 7 billion cubic feet were pulled out of natural gas supplies in the sparsely populated Mountain region​,​ as their deficit from normal rose to 23.1%, while 11 billion cubic feet were withdrawn from storage in the Pacific region, and their natural gas supply deficit rose to 28.8% below normal for this time of year....however, graphics on the natural gas storage dashboard indicate that all regions of the US saw considerably warmer weather in the week to December 20th, so next week's reports should show that withdrawals have moderated and supply deficits have lessened in each of those regions..

putting this week's storage data into historical perspective, the 2,773 billion cubic feet of natural gas that we had in storage on December 14th was 15.8% lower than the previous five year low for the 2nd week of December of 3,295 billion cubic feet that was set on December 12th of 2014, and was 12.4% below the previous 10 year low of 3167 billion cubic feet that was set on December 12th of 2008...this year's December 14th storage level was also 1.0% below the 15 year low of 2,802 billion cubic feet of natural gas that we had in storage on December 16th of 2005, and 2.7% below the 2,850 billion cubic feet that were in storage on December 12th of 2003, a year when supplies had peaked at a lower level than this one...we have to follow the archived records (xls) back 16 years, to December 13th of 2002, when 2,635 billion cubic feet of natural gas were in storage, to find a lower quantity of natural gas in storage at this time in December than we have now.... 

The Latest US Oil Supply and Dispostion Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting ​on the week ending December 14th, indicated little change in our oil imports, our oil exports, our oil production, and our oil refining, and hence we had another small withdraw oil from our commercial crude supplies for the third in a row, following 10 prior weeks of additions to storage...our imports of crude oil rose by an average of 30,000 barrels per day to an average of 7,423,000 barrels per day, after rising by an average of 174,000 barrels per day the prior week, while our exports of crude oil rose by an average of 51,000 barrels per day to an average of 2,325,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,098,000 barrels of per day during the week ending December 14th, 21,000 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 reportedly unchanged at 11,600,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,698,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,408,000 barrels of crude per day during the week ending December 14th, 28,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 132,000 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 would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was still 578,000 barrels per day short of 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 inserted a (+578,000) 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) indicate that the 4 week average of our oil imports fell to an average of 7,549,000 barrels per day, ​which was ​still 1.6% more than the 7,432,000 barrel per day average that we were importing over the same four-week period last year....the total 132,000 barrel per day decrease in our total crude inventories included a 71,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 61,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve, likely ​representing ​part of a sale of 11 million barrels from those reserves to Exxon et al that closed three and a half months ago....this week's crude oil production was reported as unchanged at 11,600,000 barrels because the rounded figure for output from wells in the lower 48 states was unchanged at 11,100,000 barrels per day, while a 7,000 barrel per day increase to 498,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending December 15th was at 9,789,000 barrels per day, so this week's rounded oil production figure was 18.5% above that of a year ago, and 37.3% 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...     

US oil refineries were operating at 95.4% of their capacity in using that 17,408,000 barrels of crude per day during the week ending December 14th, up from last week's 95.1% of capacity, and a rather high capacity utilization rate for December or for any time of year....the 17,408,000 barrels per day of oil that were refined this week were still at a seasonal high for the time of year for the 26th time out of the past 29 weeks, and 2.0% higher than the previous seasonal high of 17,063,000 barrels of crude per day that were being processed during the week ending December 15th, 2017, when US refineries were operating at 94.1% of capacity... 

with the small drop in the amount of oil being refined, the gasoline output from our refineries was also lower, decreasing by 123,000 barrels per day to 10,334,000 barrels per day during the week ending December 14th, after our refineries' gasoline output had increased by 791,000 barrels per day during the week ending December 7th...despite the decrease in this week's gasoline output, our gasoline production during the week was still the highest on record for mid-December, and 2.7% higher than the 10,065,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 152,000 barrels per day to 5,393,000 barrels per day, after that output had decreased by 26,000 barrels per day the prior week....despite those decreases, this week's distillates production was also the highest on record for mid-December, and 3.6% higher than the 5,206,000 barrels of distillates per day that were being  produced during the week ending December 15th, 2017.... 

even with the pullback in our gasoline production, our supply of gasoline in storage at the end of the week increased by 1,766,000 barrels to 230,103,000 barrels by December 14th, the 4th increase in the past 9 weeks, which still left our gasoline supplies 6,069,000 barrels lower than they were on the 5th of October....our gasoline supplies rose this week even though the amount of gasoline supplied to US markets rose by 207,000 barrels per day to 9,243,000 barrels per day because our exports of gasoline fell by 363,000 barrels per day to 948,000 barrels per day, while our imports of gasoline rose by 70,000 barrels per day to 595,000 barrels...with th​is week's increase, our gasoline inventories are once again at a seasonal high for mid-December, 1.0% higher than last December 15th's level of 227,783,000 barrels, and roughly 3% above the five year average of our gasoline supplies for this time of the year...

even with the ongoing elevated level of our distillates production, our supplies of distillate fuels decreased for the eleventh time in thirteen weeks, falling by 4,237,000 barrels to 119,900,000 barrels during the week ending December 14th, after our distillates supplies had decreased by 1,475,000 barrels during the prior week...our distillates supplies decreased again because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 417,000 barrels per day to a ​​​15 year high ​of ​4,886,000 barrels per day, while our imports of distillates fell by 5,000 barrels per day to 139,000 barrels per day, and while our exports of distillates fell by 180,000 barrels per day to 1,251,000 barrels per day....with this week's decrease, our distillate supplies finished the week 6.9% below the 128,845,000 barrels that we had stored on December 15th, 2017, and roughly 11% below the five year average of distillates stocks for this time of the year...   

finally, with our oil imports, exports and production little changed, our commercial supplies of crude oil decreased for a third straight week after 10 weekly increases, and for the 24th week in 2018, falling by ​a modest ​497,000 barrels during the week, from 441,954,000 barrels on December 7th to 441,457,000 barrels on December 14th...but even with three straight decreases, our crude oil inventories still remained roughly 7% above the five-year average of crude oil supplies for this time of year, and over 28% above the 10 year average of crude oil stocks for the first week of December, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...however, since our crude oil inventories had been falling through most of the past year and a half until this fall, our oil supplies as of December 14th were only 1.1% above the 436,491,000 barrels of oil we had stored on December 15th of 2017, and remained 9.1% below the 485,449,000 barrels of oil that we had in storage on December 16th of 2016, and 2.4% below the 452,477,000 barrels of oil we had in storage on December 18th of 2015..    

This Week's Rig Count

US drilling activity increased for the first time in five weeks, led by an increase in oil drilling, hence defying ​our logic that lower oil prices had been the reason that drilling had been slowing in recent weeks... Baker Hughes reported that the total count of rotary rigs running in the US increased by 9 rigs to 1080 rigs over the week ending December 21st, which was also 149 more rigs than the 931 rigs that were in use as of the December 22nd report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil increased by 10 rigs to 883 rigs this week, which was also 136 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas​ bearing​ formations fell by 1 rig to 197 natural gas rigs, which was still 13 more rigs than the 184 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...

drilling activity in the Gulf of Mexico increased by a single rig to 24 rigs this week, which was up from the 19 rigs deployed in the Gulf of Mexico a year ago at this time...since there is no other offshore drilling off either coast or ​off ​Alaska at this time, nor was there during the same week of 2017, those Gulf of Mexico totals are the same as the US totals..

the count of active horizontal drilling rigs increased by 13 rigs to 940 horizontal rigs this week, the largest increase in horizontal drilling since 14 horizontal rigs were added in the week ending April 6th...it was also 139 more horizontal rigs than the 801 horizontal rigs that were in use in the US on December 22nd 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 decreased by 2 rigs to 69 vertical rigs this week, which was still up from the 64 vertical rigs that were in use during the same week of last year...in addition, the directional rig count also decreased by 2 rigs to 71 directional rigs this week, which was still up from the 66 directional rigs that were operating on December 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 December 21st, the second column shows the change in the number of working rigs between last week's count (December 14th) and this week's (December 21st) count, the third column shows last week's December 14th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running 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 the 22nd of December, 2017...  

December 21 2018 rig count summary

this week's changes in the Permian included a rig addition in New Mexico and ​​a net ​one rig ​decrease in Texas, as two rigs were added in Texas Oil District 8, which would correspond to the core Permian - Delaware basin, while Texas Oil District 8A, which includes part of the Permian Midland, saw 3 rigs pulled out...other Texas changes include an oil rig pulled out of the Eagle Ford in south Texas, and an oil rig added in the Dallas-Ft Worth area Barnett shale, which is more often accessed for gas...while 4 rigs were pulled out of the Granite Wash straddles the Texas panhandle Oklahoma border, only one of those appears to have been in Texas...Oklahoma's count then includes the loss of three of those Granite Wash rigs and the additions of 2 ​rigs ​in the Cana Woodford and 3 ​rigs ​in the Mississippian shale, which straddles the state's border with Kansas...strangely enough, the Granite Wash, which is usually drilled for oil, saw the addition of a natural gas rig this week, while 5 oil rigs were concurrently pulled out...other natural gas rig additions ​were seen in the Pennsylvania Marcellus and the Haynesville, on the Texas side of the Louisiana border, while natural gas rigs were pulled out of Ohio's Utica and 3 "other basins" not tracked separately by Baker Hughes...also note that other than the states shown above, Alabama saw the start up of two drilling rigs after being quiet for ​three ​weeks, matching their total of a year ago, Mississippi also saw the addition of 2 rigs this week and now has 6 running, equal to the most in the state since 2015, while Florida, a state which has only seen sporadic activity over the past 5 years, had its lone active rig pulled out after drilling for the 3 prior weeks...

DUC well report for November

Monday of this past week saw the release of the EIA's Drilling Productivity Report for December, which includes the EIA's November data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 8th month in a row, this report showed an increase in uncompleted wells nationally in November, as both drilling of new wells and completions of drilled wells increased, but the new drilling increased at a faster pace....like most previous months, this month's uncompleted well increase was mostly due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with smaller 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 a record 287 wells, from a revised 8,436 wells in October to 8,723 wells in November, again the highest number of such unfracked wells in the history of this report, and an increase of 35.4% from the 6,442 wells that had been drilled but remained uncompleted in November a year ago...that was as 1,594 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during November, up from the 1,577 drilled in October, while 1,307 wells were completed and brought into production by fracking, a increase of just 9 well completions over the 1,298 completions seen in October...at the November completion rate, the 8,723 drilled but uncompleted wells left at the end of the month now represent a 6.7 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 November 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 248, from 3,791 DUC wells in October to 4,039 DUCs in November, as 686 new wells were drilled into the Permian, but only 438 wells in the region were fracked...at the same time, DUC wells in the Anadarko basin region​ centered​ in Oklahoma increased by 45, from 1,090 DUC wells in October to 1,135 DUCs in November, as 210 wells were drilled in the Anadarko basin during November, while 165 Anadarko basin wells were completed...over the same period, the number of DUC wells in the Eagle Ford of south Texas increased by 28 to 1,563, as 215 wells were drilled into the Eagle Ford while 187 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 9 wells to 210, as 64 wells were drilled into the Haynesville during November, while 55 Haynesville wells were fracked during the same period...

on the other hand, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 19 wells, from 607 DUCs in October to 588 DUCs in November, as 118 wells were drilled into the Marcellus and Utica shales, while 137 of the already drilled wells in the region were fracked...in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 16 wells to 421, as 179 Niobrara wells were drilled while 195 Niobrara wells were being fracked...lastly, DUC wells in the Bakken of North Dakota fell by 8, from 775 DUC wells in October to 767 DUCs in November, as 122 wells were drilled into the Bakken in November, while 130 of the drilled wells in that basin were completed....thus, for the month of November, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 297 wells to 7,795 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 10 wells to 798 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and natural gas...

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note: there's more here...

Monday, December 17, 2018

US gasoline exports at a record high; OPEC report shows a smaller oil glut than widely assumed..

oil prices ended lower this week, despite last Friday's agreement between OPEC, Russia and other oil producers to cut output by 1.2 million barrels per day during the first half of 2019...after ending last week 3.3% higher at $52.61 a barrel on that OPEC announcement, contract prices of US oil for January delivery fell $1.61 or more than 3% to $51.00 a barrel on Monday on what some called profit taking after the 2% OPEC rally, in the absence of other relevant news...oil prices then rose over a dollar early Tuesday, but pared their gain to 65 cents after Mr Trump threatened to shut down the federal government if he didn't get funding for his Mexican border wall, with oil closing at $51.65 a barrel...oil prices rallied early again on Wednesday, on export cuts from Libya and OPEC's production cuts, but slid to a loss of 50 cents for the day at $51.15 a barrel as the EIA reported that US crude supplies rose less than had been expected and Iran’s oil minister said that OPEC was divided and that other cartel members had been unfriendly at last week's meeting...oil continued lower Thursday morning, falling to as low as $50.35 a barrel, but then rallied Thursday afternoon on a report from the International Energy Agency that the combined production cuts by OPEC, Russia and Canada would create an oil market supply deficit by the second quarter of next year, with oil closing $1.43 higher at $52.58 a barrel...but oil prices gave back most of those gains on Friday, sliding $1.38 or 2.6% to $51.20 a barrel, as Wall Street stock averages fell to 7 month lows on weak production and sales data from China, with their car sales heading for first annual drop since early 1990s...oil prices for January thus finished the week 2.7% lower than they ended last week, despite the imminent loss of 1.2 million barrels of Russian and OPEC oil production...  

meanwhile, natural gas prices saw their largest one week drop in nearly three years, as persistent forecasts for warmer December led to falling prices each of the last four days, capped by a 29.7 cent drop on Friday, which left closing natural gas prices for January delivery at $3.827 per mmBTU, a loss of nearly 15% on the week....the natural gas storage report for the week ending December 7th from the EIA showed that the quantity of natural gas in storage in the US fell by 77 billion cubic feet to 2,914 billion cubic feet over the week, which left our gas supplies 722 billion cubic feet, or 19.9% below the 3,636 billion cubic feet that were in storage on December 8th of last year, and 723 billion cubic feet, or 19.9% below the five-year average of 3,637 billion cubic feet of natural gas that are typically in storage after the first week of December....this week's 77 billion cubic feet withdrawal from US natural gas supplies was below the consensus average of 83 billion cubic feet that analysts had expected, and was a bit less than the average of 79 billion cubic feet of natural gas that have been withdrawn from storage during the first week of December in recent years...natural gas storage facilities in the East saw a 20 billion cubic feet drop in supplies over the week, which increased the region's gas supply deficit to 14.5% below normal for this time of year, and natural gas supplies in the Midwest fell by 29 billion cubic feet as their supply deficit rose to 14.7% below normal for the first weekend of December...despite a surprise 8 billion cubic feet injection of natural gas into salt dome storage facilities, the South Central region still saw a net 7 billion cubic feet drop in their supplies, as their natural gas storage deficit slipped to 26.6% below their five-year average for this time of year...at the same time, 8 billion cubic feet were pulled out of natural gas supplies in the sparsely populated Mountain region as their deficit from normal rose to 22.7%, while 15 billion cubic feet were withdrawn from storage in the Pacific region, where their natural gas supply deficit rose to 28.3% below normal for this time of year....  

putting that storage data into historical perspective, the 2,914 billion cubic feet of natural gas that we had in storage on December 7th was 13.2% lower than the previous early December 5 year low of 3,359 billion cubic feet that was set on December 5th of 2014, and was 11.5% below the previous 10 year low of 3,291 billion cubic feet that was set on December 5th of 2008...this year's December 7th storage was also 1.7% below the the 15 year low of 3,166 billion cubic feet of natural gas that we had in storage on December 9th of 2005, and 2.3% below the 2,984 billion cubic feet that were in storage on December 5th of 2003, a year when supplies had peaked at a lower level than this one...we have to follow the archived records (xls) back 16 years, to December 6th of 2002, when 2,794 billion cubic feet of natural gas were in storage, to find a lower quantity of natural gas in storage at this time in December than we have now.... 

over the four weeks of this year's heating season to date, 333 billion cubic feet of natural gas have withdrawn from storage in the lower 48 states; that compares to the 164 billion cubic feet that were used in the first five weeks of last year's heating season; when withdrawals began during the first week of November...for other recent years, there were 241 billion cubic feet of gas withdrawn for use in the 4 weeks up to December 9th of 2016, 154 billion cubic feet in the four weeks up to December 11th of 2015, 252 billion cubic feet withdrawn in the 4 weeks to Dec 5th or 2014, and 301 billion cubic feet withdrawn in the 4 weeks to Dec 6th of 2013...the comparative withdrawals in the 3 years prior to that were all smaller than 123 billion cubic feet, so there is nothing in the recent storage data history (xls) that approaches the early winter natural gas storage withdrawals we have seen this year...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting for the week ending December 7th, showed that despite a big drop in the amount of oil we exported, we still needed to withdraw oil from our commercial crude supplies for the second time in 12 weeks...our imports of crude oil rose by an average of 174,000 barrels per day to an average of 7,393,000 barrels per day, after falling by an average of 943,000 barrels per day the prior week, while our exports of crude oil fell by an average of 929,000 barrels per day from last week's record to an average of 2,274,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,119,000 barrels of per day during the week ending December 7th, 1,103,000 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 reportedly fell by 100,000 barrels per day to 11,600,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,719,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 17,436,000 barrels of crude per day during the week ending December 7th, 51,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 172,000 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 would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was still 545,000 barrels per day short of 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 inserted a (+545,000) 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) indicate that the 4 week average of our oil imports fell to an average of 7,582,000 barrels per day, still 1.9% more than the 7,442,000 barrel per day average that we were importing over the same four-week period last year....the total 172,000 barrel per day decrease in our total crude inventories included a rounded 173,000 barrel per day withdrawal from our commercially available stocks of crude oil, while the oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported as down by 100,000 barrels per day to 11,600,000 barrels because the rounded figure for output from wells in the lower 48 states fell by 100,000 barrels per day to 11,100,000 barrels per day, while a 8,000 barrel per day decrease to 491,000 barrels per day in oil output from Alaska was not enough to change the rounded national total...last year's US crude oil production for the week ending December 8th was at 9,780,000 barrels per day, so this week's rounded oil production figure was 18.6% above that of a year ago, and 37.6% 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...  

US oil refineries were operating at 95.1% of their capacity in using 17,436,000 barrels of crude per day during the week ending December 7th, down a bit from last week's 95.5% of capacity, but still a rather high capacity utilization rate for November or for any time of year....the 17,436,000 barrels per day of oil that were refined this week were still at a seasonal high for the time of year for the 25th time out of the past 28 weeks, and 2.9% higher than the 16,952,000 barrels of crude per day that were being processed during the week ending December 8th, 2017, when US refineries were operating at 93.4% of capacity... 

despite the small drop in the amount of oil being refined, the gasoline output from our refineries was much higher, increasing by 791,000 barrels per day to 10,457,000 barrels per day during the week ending December 7th, after our refineries' gasoline output had decreased by 502,000 barrels per day during the week ending November 30th...after that big increase in this week's gasoline output, our gasoline production during the week was 3.2% higher than the 10,129,000 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) decreased by 26,000 barrels per day to 5,545,000 barrels per day, after that output had increased by 100,000 barrels per day the prior week....despite that decrease, this week's distillates production was 5.7% higher than the 5,247,000 barrels of distillates per day that were being  produced during the week ending December 8th, 2017.... 

with the big jump in our gasoline production, our supply of gasoline in storage at the end of the week increased by 2,087,000 barrels to 228,337,000 barrels by December 7th, the 3rd increase in the past 8 weeks, which still left our gasoline supplies 7,835,000 barrels lower than they were on the 5th of October....our gasoline supplies rose this week even though the amount of gasoline supplied to US markets rose by 159,000 barrels per day to 9,036,000 barrels per day ​and ​even though our exports of gasoline rose by 310,000 barrels per day to a record high 1,311,000 barrels per day, ​as our imports of gasoline rose by 336,000 barrels per day to 525,000 barrels per day​ to offset those exports​...while our gasoline inventories are no longer at a seasonal high, they were still 0.8% higher than last December 8th's level of 226,546,000 barrels, and roughly 6% above the 10 year average of our gasoline supplies for this time of the year...

even with the elevated level of our distillates production, our supplies of distillate fuels decreased for the tenth time in twelve weeks, falling by 1,475,000 barrels to 124,137,000 barrels during the week ending December 7th, after our distillates supplies had increased by 3,811,000 barrels during the prior week...our distillates supplies decreased because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 433,000 barrels per day to 4,469,000 barrels per day, and because our imports of distillates fell by 292,000 barrels per day to 144,000 barrels per day, while our exports of distillates rose by 5,000 barrels per day to 1,431,000 barrels per day....with this week's decrease, our distillate supplies finished the week 3.1% below the 128,076,000 barrels that we had stored on December 8th, 2017, and almost 8% below the 10 year average of distillates stocks for this time of the year...   

finally, despite this week's drop in our oil exports, our commercial supplies of crude oil still decreased for a second week after 10 increases​,​ and for the 23rd time in 2018, falling by 1,208,000 barrels during the week, from 443,162,000 barrels on November 30th to 441,954,000 barrels on December 7th ...but even with that decrease, our crude oil inventories are still roughly 7% above the five-year average of crude oil supplies for this time of year, and over 28% above the 10 year average of crude oil stocks for the first week of December, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of December 7th were still fractionally below the 442,986,000 barrels of oil we had stored on December 8th of 2017, 8.5% below the 483,193,000 barrels of oil that we had in storage on December 9th of 2016, and 3.5% below the 458,354,000 barrels of oil we had in storage on December 11th of 2015..   

OPEC's Monthly Oil Market Report

today we'll also review OPEC's December Oil Market Report (covering November OPEC & global oil data), which was released on Wednesday of this past week, and which 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 70), 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...

November 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC's oil output slipped by an insignificant 11,000 barrels per day to 32,965,000 barrels per day in November, from their October production total of 32,976,000 barrels per day....however, that October figure was originally reported as 32,900,000 barrels per day, so OPEC's October output was therefore revised 76,000 barrels per day higher with this report (for your reference, here is the table of the official October OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column on the table above, the increase of 377,000 barrels per day in the oil output from Saudi Arabia almost completely offset the decrease of 380,000 barrels per day in Iranian output, and the increases of 71,000 barrels per day in the oil output from the United Arab Emirates and 45,000 barrels per day in the oil output from Kuwait almost offset all the other decreases, leaving total output from the cartel little changed....however, excluding new member Congo, the November output of 32,645,000 barrels per day from the other 14 OPEC members was still 85,000 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, another OPEC country that 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 December 2016 to November 2018, and it's taken from the page numbered 59 (pdf page 71) of the December 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...      

November 2018 OPEC report global oil supply

OPEC's preliminary estimate indicates that total global oil production rose by 500,000 barrels per day to a record high 100.64 million barrels per day in November, after October's total global output figure was revised up by 380,000 barrels per day from the 99.76 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 440,000 barrels per day in November after that revision, with increased US and Canadian output the major contributors to the non-OPEC increase....global oil output during November was also 3.05 million barrels per day, or 3.2% higher than the revised 97.69 million barrels of oil per day that were being produced globally in November a year ago (see the December 2017 OPEC report online (pdf) for the originally reported year ago details)...with the November decrease in OPEC's output following the upward revision to their October output, their November oil production of 32,965,000 barrels per day represented 32.8% of what was produced globally during the month, down from the 33.0% share reported for October....OPEC's November 2017 production was reported at 32,448,000 barrels per day, which means that the 14 OPEC members who were part of OPEC last year, excluding new member Congo, are only producing 197,000 more barrels per day of oil than they were producing a year ago, during the eleventh month that their production quotas were in effect, with a 697,000 barrel per day decrease in output from Venezuela and a 864,000 barrel per day decrease in output from Iran from that time nearly offsetting the production increases from the Saudis, the Emirates, Iraq and Libya...  

the 500,000 barrel per day increase in global oil output in November, combined with the upward revision to October's global output, meant that we finally saw a surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...  

November 2018 OPEC report global oil demand

the table above comes from page 32 of the December OPEC Monthly Oil Market Report (pdf page 44), 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 in the fifth column, we've circled in blue the figure that's relevant for November, which is their revised estimate of global oil demand during the fourth quarter of 2018...       

OPEC's estimate is that during the 4th quarter of this year, all oil consuming regions of the globe are using 99.98 million barrels of oil per day, which was unrevised from their estimate of a month ago....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 100.64 million barrels per day during November, which means that there has been a surplus of around 660,000 barrels per day in global oil production as compared to the demand estimated for the month...    

meanwhile, a month ago we estimated a global shortfall of around 220,000 barrels per day in global oil production during October, based on figures published at that time...however, as we saw earlier, October's global output figure was revised up by 380,000 barrels per day from those figures...thus instead of the shortfall indicated by last month's figures, we now find that oil production in October was running roughly 160,000 barrels per day greater than demand...

since there are no revisions to supply or demand for the prior months, the surplus or shortfall figures for those months that we had recomputed last month remained unchanged; for September, oil supply and demand just about matched, while August saw a 550,000 barrels per day shortfall, and July's shortfall was even greater at 930,000 barrels per day....for the remainder of the year, the 2nd quarter months saw shortfalls of 170,000 barrels per day ​in June, 610,000 barrels per day ​in May, and 400,000 barrels per day ​in April, while the first quarter recorded smaller surplus figures of 20,000 barrels per day in March, 200,000 barrels per day in February, and 40,000 barrels per day in January...

by totaling up those 11 monthly estimates of surplus or shortfall, we find that for the first eleven months of 2018, global oil demand exceeded production by roughly 49,070,000 barrels, actually a comparatively tiny net oil shortfall that is the equivalent of less than 12 hours of global oil production at the November production rate...while November global production would be expected to rise from its current 100.64 million barrels per day; so too would global demand, which OPEC is forecasting to average 100.08 barrels per day through 2019...so should the entirely of the 1.2 million barrel production cut come to pass, instead of an oil surplus, we would be looking at a shortfall of up to 640,000 barrels per day during the coming year...it does not appear that the market is yet taking the possibility of an oil shortfall of that magnitude into account..

This Week's Rig Count

US drilling activity decreased for the fourth week in a row, and was hence down for the 6th time in the past 12 weeks during the week ending December 14th, as drilling for oil slowed with currently lower prices, while severe backwardation in natural gas futures is preventing today's drillers from taking advantage of its temporarily higher price... Baker Hughes reported that the total count of rotary rigs running in the US decreased by 4 rig to 1071 rigs over the week ending December 14th, which was still 141 more rigs than the 930 rigs that were in use as of the December 15th report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil decreased by 4 rigs to 873 rigs this week, which was still 126 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 198 natural gas rigs, which was still 15 more rigs than the 183 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...

offshore activity was again unchanged with 23 rigs continuing to drill in the Gulf of Mexico, which was 4 more rigs than the 19 rigs active in the Gulf of Mexico and in total a year ago...the count of active horizontal drilling rigs decreased by 6 rigs to 927 horizontal rigs this week, which was still 125 more horizontal rigs than the 801 horizontal rigs that were in use in the US on December 15th 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 increased by 1 rig to 71 vertical rigs this week, which was also up from the 60 vertical rigs that were in use during the same week of last year....in addition, the directional rig count also increased by 1 rig to 73 directional rigs this week, which was also up from the 69 directional rigs that were operating on December 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 December 14th, the second column shows the change in the number of working rigs between last week's count (December 7th) and this week's (December 14th) count, the third column shows last week's December 7th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running 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 the ​15th of December, 2017...  

December 14 2018 rig count summary

Texas Oil District 8, which would correspond to the core Permian - Delaware basin, saw an increase of 2 rigs, while drilling in other Texas Oil Districts in or partially in the Permian ​basin ​w​ere unchanged, so it appears that all 5 of the rigs shut down in New Mexico this week had been oil rigs targeting the Permian...the 5 rig increase in Wyoming, on the other hand, does not represent new drilling in any of the basins shown above, since activity in the Niobrara chalk of the Rockies front range was unchanged, so those 5 rigs could represent new drilling in the Green River basin, the Powder River basin, the Wind River basin or the Bighorn basin, or even some where else in Wyoming...the three rig drop in the Williston basin includes the 2 rigs shut down in North Dakota plus a rig in Montana, not shown above, which still has 3 rigs active, up from the one rig in Montana a year ago...meanwhile, natural gas rigs ended the week unchanged despite the rigs shut down in Pennsylvania's Marcellus, Oklahoma's Arkoma Woodford, and northwestern Louisiana's Haynesville because there was a natural gas rig added in Ohio's Utica and two natural gas rigs added in "other" basins not shown above or tracked separately by Baker Hughes...finally, we should note that in addition to Montana and the major producing states shown above, Illinois, which has seen on and off drilling with one rig over the past year, saw their lone rig shut down this week, while Mississippi also saw a rig shut down but still had four left​ running​, up from 2 rigs in Mississippi a year ago... 

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note: there's more here...