natural gas prices testing a 3 year low; natural gas drilling activity at a 20 month low

oil prices eked out a small increase this past week, as ongoing oil tanker trouble in the Persian Gulf and a large US inventory withdrawal outweighed ​the impact of falling demand from ​a global economic slowdown.​..​ after falling 7% to $55.63 a barrel last week as Gulf of Mexico production returned and tensions between the US & Iran and the US showed signs of easing, prices of US crude for August delivery rose on Monday on concerns that Iran’s reciprocal seizure of a British tanker could lead to further supply disruptions in the Gulf, with trading in the August oil contract expiring 53 cents higher at $56.22 a barrel​,​ while at the same time the more-active September WTI oil contract price rose 46 cents to end the session at $56.22 a barrel...after opening lower, oil prices continued higher on Tuesday, as expectations of lower U.S. crude supplies were only partially offset by weaker demand forecasts and the full restart of Libya’s largest oil field, with the price of September oil ending 55 cents higher at $56.77 a barrel...oil prices spiked higher early Wednesday on the the American Petroleum Institute report of the largest oil inventory draw so far this year and extended those gains when the EIA confirmed the big crude draw and also reported lower crude production, with oil rising to as high as $57.64 a barrel before traders turned their attention back to concerns about weaker energy demand and quickly pushed oil prices more than 4% lower, before they recovered a bit to close down 89 cents at $55.88 a barrel...oil prices recovered a bit on on Thursday amid ongoing Middle East tensions, but a manufacturing slowdown indicated by purchasing managers reports from Europe & the US capped the gains and US crude finished up just 14 cents, or 0.3%, at $56.02 a barrel...oil prices continued modestly higher on Friday after a stronger-than-expected U.S. GDP report and concerns over the safety of Persian Gulf oil transport, and finished the session up 18 cents at $56.20 a barrel, with September oil thus ending the week with a gain of just under 1%..

natural gas prices, on the other hand, again trended lower, and ended the week just a fraction above the multi-year low seen in June...after falling more than 8% to $2.251 per mmBTU on the recovery of Gulf production last week, prices of natural gas for August delivery moved up 6.1 cents on Monday and closed with the​ir​ first increase in 6 sessions, as forecasts indicated above normal temperatures would become more widespread ​at the end of July and to start August...prices then slipped 1.2 cents on notably lower trading volume on Tuesday, and then fell 8 cent on Wednesday as traders positioned against a possible bearish storage report...when the storage report came in line with expectations, natural gas prices recovered 2.4 cents on Thursday, but they sold off again on Friday on a forecast of cooler weather and a dip in demand in the 11-15 day time frame and ended down 7.5 cents on the day at $2.169 per mmBTU, just a penny higher than the lowest front month quote of the last three years, and only three-tenths of a cent above the June 20th lowest closing quote for this August contract..

the natural gas storage report for the week ending July 19th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 36 billion cubic feet to 2,569 billion cubic feet by the end of the week, which meant our gas supplies were 300 billion cubic feet, or 13.2% greater than the 2,269 billion cubic feet that were in storage on July 19th of last year, while still 151 billion cubic feet, or 5.6% below the five-year average of 2,720 billion cubic feet of natural gas that have been in storage as of the 19th of July in recent years....this week's 36 billion cubic feet injection into US natural gas storage was in line with the consensus market expectation, but it was lower than the average 44 billion cubic feet of natural gas that have been added to gas storage during the third week of July in recent years, the second straight below average storage build, following 17 weeks of above seasonal stock changes.... nonetheless, the 1,391 billion cubic feet of natural gas that have been added to storage over the past 17 weeks has still been the largest injection of gas into storage on record for any prior similar period of the gas injection season...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 19th, indicated that a jump in our oil exports and a drop in our crude oil production resulted in the the 9th withdrawal withdrawal of crude from our supplies in 17 weeks, in a week where the effects of tropical storm Barry on the oil data are still quite evident...our imports of crude oil rose by an average of 194,000 barrels per day to an average of 7,028,000 barrels per day, after falling by an average of 470,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 758,000 barrels per day to 3,292,000  barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,736,000 barrels of per day during the week ending July 19th, 562,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, storm impacted production of crude oil from US wells was reported to be 700,000 barrels per day lower at 11,300,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,036,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,034,000 barrels of crude per day during the week ending July 19th, 233,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 1,548,000 barrels of oil per day were being withdrawn from the supplies of oil stored 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 450,000 barrels per day short of what our oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+450,000) 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 they label 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) indicated that the 4 week average of our oil imports rose to an average of 7,187,000 barrels per day last week, which was still 13.7% less than the 8,331,000 barrel per day average that we were importing over the same four-week period last year...the 1,548,000 barrel per day decrease in our total crude inventories was all pulled out of our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged...this week's crude oil production was reported to be 700,000 barrels per day lower at 11,300,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 700,000 barrels per day lower at 10,800,000 barrels per day, largely due to shut-in wells in the Gulf of Mexico, while a 4,000 barrels per day increase to 459,000 barrels per day in Alaska's oil production was not enough to impact the final rounded national production total...last year's US crude oil production for the week ending July 20th was rounded to 11,000,000 barrels per day, so this reporting week's rounded oil production figure was still 2.7% above that of a year ago, and 34.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 93,1% of their capacity in using 17,034,000 barrels of crude per day during the week ending July 19th, down from 94.4% of capacity the prior week, a drop that can largely be attributed to hurricane Barry....the 17,034,000 barrels per day of oil that were refined this week were almost 1.5% below the 17,285,000 barrels of crude per day that were being processed during the week ending July 20th, 2018, when US refineries were operating at 93.8% of capacity....

even with the decrease in the amount of oil being refined, gasoline output from our refineries was still higher, increasing by 234,000 barrels per day to 10,089,000 barrels per day during the week ending July 19th, after our refineries' gasoline output had decreased by 563,000 barrels per day the prior week....but even with that increase in gasoline output, this week's gasoline production was​ still​ 1.6% less than the 10,255,000 barrels of gasoline that were being produced daily during the same week last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 142,000 barrels per day to 5,219,000 barrels per day, after our distillates output had increased by 3,000 barrels per day the prior week....but even after that decrease, the week's distillates production was 1.2% more than the 5,157,000 barrels of distillates per day that were being produced during the week ending July 20th, 2018.... 

​despite the increase in gasoline production, our supply of gasoline in storage at the end of the week still fell for the fifth time in 6 weeks and for the 17th time in twenty-two weeks, slipping by 226,000 barrels to 232,526,000 barrels over the week to July 19th, after our gasoline supplies had jumped by 3,565,000 barrels over the prior week....our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 459,000 barrels per day to 9,673,000 barrels per day, while our exports of gasoline fell by 59,000 barrels per day to 558,000 barrels per day, and while our imports of gasoline rose by 133,000 barrels per day to 985,000 barrels per day...after our gasoline supplies had reached an all time record high twenty-four weeks ago, they then fell by nearly 13% over 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, and ​as a result they are still fractionally lower than last July 20th's inventory level of 233,504,000 barrels, while just 2% above the five year average of our gasoline supplies at this time of the year...

even with the decrease in our distillates production, our supplies of distillate fuels rose for the 8th time in the past 19 weeks, increasing by 613,000 barrels to 136,816,000 barrels during the week ending July 19th, after our distillates supplies had increased by 5,686,000 barrels over the prior week...the increase in our distillates supplies was smaller this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 699,000 barrels per day to 4,264,000 barrels per day, while our exports of distillates fell by 144,000 barrels per day to 972,000 barrels per day and while our imports of distillates fell by 27,000 barrels per day to 105,000 barrels per day....after this week's inventory increase, our distillate supplies were 12.9% higher than the 121,210,000 barrels of distillates that we had stored on July 20th, 2018, and returned to near the five year average of distillates stocks for this time of the year...

finally, with ​our oil exports ​rising ​while our oil production​ was​ interrupted by tropical storm Barry, our commercial supplies of crude oil in storage fell for a sixth week in a row and for the twelfth time in 27 weeks, decreasing by 10,835,000 barrels, from 455,876,000 barrels on July 12th to 445,041,000 barrels on July 19th ...but even with that big decrease, our crude oil inventories remained roughly 2% above the recent five-year average of crude oil supplies for this time of year, and roughly 33% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the 3rd week of July, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories had generally been rising since this past Fall until the recent 6 weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of July 19th were still 9.9% above the 404,937,000 barrels of oil we had stored on July 20th of 2018, but at the same time were 7.9% below the 483,415,000 barrels of oil that we had in storage on July 21st of 2017, and 9.3% below the 490,501,000 barrels of oil we had stored on July 22nd of 2016...     

This Week's Rig Count

the US rig count fell for the 20th time in 23 weeks during the week ending July 26th, and is now down by nearly 13% for this year so far....Baker Hughes reported that the total count of rotary rigs running in the US fell by 8 rigs to a new 17 month low of 946 rigs this past week, down by 102 rigs from the 1048 rigs that were in use as of the July 27th report of 2018, and quite a bit below 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 fell by 3 rigs to 776 rigs this week, which was also a 17 month low for oil rigs, 85 fewer than were running a year ago, and less than half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 5 rigs to 169 natural gas rigs, which was a twenty month low for natural gas rigs, down by 17 rigs from the 186 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on August 29th, 2008...in addition, a rig classified as miscellaneous continued to drill this week, matching the "miscellaneous" rig count of a year ago...

the rig count in the Gulf of Mexico was down by 2 to 23 rigs this week, as two rigs that had been drilling off the coast of Louisiana were shut down...that still left 22 rigs drilling offshore from Louisiana and a single rig deployed offshore from Texas, an increase of 8 rigs from the 15 rigs that were deployed in the Gulf of Mexico in the same week a year ago, when 13 rigs were drilling in Louisiana waters and two were deployed offshore from Texas...however, another rig started drilling off the coast of Alaska this week, where there are now two rigs deployed, up from the one rig drilling off the Alaskan shore a year ago...​hence, the total US offshore rig count is ​now ​at 25, an increase of 9 offshore rigs from a year ago..

however, both of the rigs that had been drilling through inland bodies of water in southern Louisiana were shut down this week, leaving no such inland waters rigs active in the US this week, the first time in my memory that the US inland waters rig count has gone to zero; a year ago, there were two such inland waters rigs deployed..

the count of active horizontal drilling rigs was down by 6 to 823 horizontal rigs this week, which was the least horizontal rigs deployed since February 2nd, 2018 and hence also a new 17 month low for horizontal drilling...it was also 99 fewer horizontal rigs than the 922 horizontal rigs that were in use in the US on July 27th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was down by 2 rigs to 67 directional rigs this week, but those were up from the 64 directional rigs that were operating during the same week of last year... meanwhile, vertical rig count was unchanged at 56 vertical rigs this week, but that was down by 6 from the 62 vertical rigs that were in use on July 27th of 2018...

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 oil & gas 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 July 26th, the second column shows the change in the number of working rigs between last week's count (July 19th) and this week's (July 26th) count, the third column shows last week's July 19th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before 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 27th of July, 2018...    

in contrast to the recent weeks where most of the variances have been in the Texas Permian, there were quite a few unusual changes ​elsewhere ​this week...as you can see, the entirety of this week's national rig count drop could be accounted for by the 8 oil rigs that were pulled out of the Bakken shale in North Dakota's Williston basin, the largest such drop in the Bakken since February 2015...​in addition, we've already accounted for the 4 rig decrease shown for Louisiana, with the ​2 ​offshore and ​2 ​inland waters rigs from that state that were shut down...on the other hand, Wyoming saw an addition of 4 rigs, including 1 in the Denver-Julesburg Niobrara chalk and three in other basins not shown above, the largest jump in the Wyoming ​rig ​count yet this year....also note that the Permian basin saw a three rig increase while the Texas ​rig ​count showed no change; that was as one rig was pulled out of Texas Oil District 8, or the core Permian Delaware, while single rigs were started up in Texas Oil District 7C, or the southern Permian Midland basin, and in Texas Oil District 8A, or the northern part of the Permian Midland...hence, that means the other two Permian rigs were added in New Mexico, in the western Permian Delaware...

for rigs targeting natural gas, two rigs were shut down in Ohio's Utica shale, two were shut down in the West Virginia Marcellus, and two were shut down in basins not itemized separately by Baker Hughes, while a natural gas rig was started up in Oklahoma's Arkoma Woodford...you might note that West Virginia's rig count is only down by 1; that's because a conventional rig began drilling in Monroe count​y​, W Va,​ targeting natural gas at a depth of less than 5,000 feet; across most of West Virginia, the Marcellus lies more than 15,000 feet below the surface..

also note that in addition to the changes in the major producing states shown above, the only rig that had been drilling in Alabama was also shut down this week, the first time since April ​that ​Alabama has had no drilling activity, and down from 1 rig a year ago; at the same time, a sixth rig began drilling in Mississippi this week, the first time this year that Mississippi had that many rigs deployed; a year ago, there were three rigs drilling in Mississippi...

+

+

Note: there's more here...

oil & gas sell off after Barry clears; DUCs down for a 4th month as drilling slows, uncompleted well backlog at 6 months

oil prices fell more than 7% this week as Gulf of Mexico production came back on line and tensions between Iran and the US showed signs of easing...after rising nearly 5% to $60.21 a barre last week as tropical storm Barry disrupted production and shipping in the Gulf, the contract price of US crude for August delivery initially moved higher on Monday as Chinese industrial production and retail sales reports beat expectations, but ultimately turned lower and gave back a portion of last week’s storm gains, as Gulf of Mexico operations began to recover, with oil closing down 63 cents at $59.58 a barrel...oil prices were again lower on Tuesday morning as more production facilities returned to operation in the Gulf, and then retreated further on Tuesday afternoon after Secretary of State Mike Pompeo said that Iran was ready to negotiate its missile program, with US crude closing down $1.96 at $57.62 a barrel...oil prices initially rose Wednesday even as API data suggested U.S. crude inventories fell less than expected, but then fell to close 84 cents lower at 56.78 a barrel, after the EIA reported massive increases in oil product inventories and Trump sent Senator Rand Paul as his emissary to mediate with Iran, signalling that Trump is serious about getting a deal done...oil prices moved lower again on Thursday, despite Iran’s claim that it seized a foreign oil tanker in the Persian Gulf, as the International Energy Agency’s latest Oil Market Report forecast that a huge glut of oil would build up next year, with oil prices falling $1.48 to $55.30 a barrel by the close...oil prices then moved higher Friday on reports that Iran had seized a British-flagged oil tanker in the Strait of Hormuz, with US crude briefly touching $56.36 a barrel after the U.S. Navy destroyed an Iranian drone nearby, before falling back to $55.63 a barrel by the end of trading in New York, an increase of just 33 cents on the day...nonetheless, US WTI crude still fell 7% for the week while the international oil benchmark Brent lost about 5.5%, the steepest losses for both oil benchmarks since late May...

natural gas prices, meanwhile, ended the week more than 8% lower, despite the onset of a heatwave stretching from Colorado to the East Coast and the first lower than average injection of gas into storage in 18 weeks...after finishing the prior week 1.4% higher at $2.453 per mmBTU as hurricane Barry bore down on Louisiana, prices of natural gas for August delivery started the new week by giving up the entire prior week's gain and then some, falling 4.5 cents as forecasts for the final part of July showed a change to cooler weather....prices then fell 10.2 cents on Tuesday and two-tenths of a cent on Wednesday as the shift to cooler in the weather pattern for the balance of July became more entrenched...prices were quite volatile with the release of the storage report on Thursday, initially jumping more than 5 cents, but then falling back to end down 1.7 cents as traders brushed aside the bullish storage number...the selling of natural gas contracts continued on Friday, as prices slid another 3.6 cents to end the week at $2.251 per mmBTU, thus having fallen every day this week...

the natural gas storage report for the week ending July 12th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 62 billion cubic feet to 2,533 billion cubic feet by the end of the week, which meant our gas supplies were 291 billion cubic feet, or 13.0% greater than the 2,242 billion cubic feet that were in storage on July 12th of last year, while still 143 billion cubic feet, or 5.3% below the five-year average of 2,676 billion cubic feet of natural gas that have been in storage as of the 12th of July in recent years....this week's 62 billion cubic feet injection into US natural gas storage was a bit below S&P Global Platts’ survey of analysts that forecast a 65 billion cubic feet injection into storage, and it was also lower than the average 63 billion cubic feet of natural gas that have been added to gas storage during the second week of July in recent years, the first below average storage change in 18 weeks....nonetheless, the 1,355 billion cubic feet of natural gas that have been added to storage over the past 16 weeks is still the largest injection of gas into storage on record for any similar period of the injection season...this week was the first time this summer that temperatures over the entire densely populated eastern US were above normal (as you can see on the map from the EIA below), and as a result, natural gas consumption for electric generation averaged 41 billion cubic feet per day during the week, in contrast to the average of just over 38 billion cubic feet of natural gas per day that were used for for electric generation during the same week last year...

(source)

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 12th, indicated decreases in our oil imports, our oil exports, our crude oil production and our refining, reflecting the initial impacts of tropical storm Barry which had been building in the Gulf of Mexico that week before making landfall as a hurricane on July 13th...our imports of crude oil fell by an average of 470,000 barrels per day to an average of 6,832,000 barrels per day, after falling by an average of 284,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 514,000 barrels per day to 2,534,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,298,000 barrels of per day during the week ending July 12th, 44,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 300,000 barrels per day lower at 12,000,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,298,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,267,000 barrels of crude per day during the week ending July 12th, 172,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 445,000 barrels of oil per day were being withdrawn from the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 524,000 barrels per day short of what our oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+524,000) 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 they label in their footnotes as "unaccounted for crude oil"....since the prior week's unaccounted for crude was at -472,000 barrels per day, indicating unaccounted for oil supply, the week over week metrics we've just reported differ to the tune of 996,000 barrels per day, and hence should not be relied on....(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) indicated that the 4 week average of our oil imports fell to an average of 7,094,000 barrels per day last week, 16.3% less than the 8,477,000 barrel per day average that we were importing over the same four-week period last year...the 445,000 barrel per day decrease in our total crude inventories was all pulled out of our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged...this week's crude oil production was reported to be 300,000 barrels per day lower at 12,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 400,000 barrels per day lower at 11,500,000 barrels per day, while Alaska's oil production increased by 28,000 barrels per day to 455,000 barrels per day, which was enough to raise the final rounded national production total by 100,000 barrels per day (that's the EIA's arithmetic, not mine)....last year's US crude oil production for the week ending July 13th was rounded to 11,000,000 barrels per day, so this reporting week's rounded oil production figure was roughly 9.1% above that of a year ago, and 42.4% 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 94.4% of their capacity in using 17,267,000 barrels of crude per day during the week ending July 12th, down from 94.7% of capacity the prior week, but still a fairly normal refinery utilization rate for this time of year, despite the approaching hurricane....the 17,267,000 barrels per day of oil that were refined this week were also fractionally above the 17,239 ,000 barrels of crude per day that were being processed during the week ending July 13th, 2018, when US refineries were operating at 94.3% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 563,000 barrels per day to 9,855,000 barrels per day during the week ending July 12th, after our refineries' gasoline output had increased by 470,000 barrels per day the prior week....with that big drop in gasoline output, this week's gasoline production was 4.2% less than the 10,292,000 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) rose by 3,000 barrels per day to 5,361,000 barrels per day, after our distillates output had increased by 22,000 barrels per day the prior week....but after that small increase, the week's distillates production was 3.6% more than the 5,174,000 barrels of distillates per day that were being produced during the week ending July 13th, 2018.... 

even with the big drop in gasoline production, our supply of gasoline in storage at the end of the week rose for the first time in 5 weeks and for just the 5th time in twenty-one weeks, increasing by 3,565,000 barrels to 232,752,000 barrels over the week to July 12th, after our gasoline supplies had decreased by 1,455,000 barrels over the prior week....our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by 540,000 barrels per day to 9,214,000 barrels per day, and because our exports of gasoline fell by 83,000 barrels per day to 617,000 barrels per day, while our imports of gasoline fell by 19,000 barrels per day to 852,000 barrels per day...after our gasoline supplies had reached an all time record high twenty-three weeks ago, they then fell by nearly 13% over 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, and hence they are still 1.3% lower than last July 13th's inventory level of 235,832,000 barrels, while just 2% above the five year average of our gasoline supplies at this time of the year...

with our distillates production little changed, our supplies of distillate fuels rose for the 7th time in the past 18 weeks, increasing by 5,686,000 barrels to 136,203,000 barrels during the week ending July 12th, the largest increase since January, and coming after our distillates supplies had increased by 3,729,000 barrels over the prior week...our distillates supplies rose again this week because our exports of distillates fell by 339,000 barrels per day to 1,116,000 barrels per day while our imports of distillates fell by 49,000 barrels per day to 132,000 barrels per day, while the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 14,000 barrels per day to 3,565,000 barrels per day...after this week's inventory increase, our distillate supplies were 12.3% higher than the 121,311,000 barrels of distillate that we had stored on July 13th, 2018, but still remained 2% below the five year average of distillates stocks for this time of the year...

finally, with lower oil imports and falling oil production, our commercial supplies of crude oil in storage fell for a fifth week in a row and for the eleventh time in 26 weeks, decreasing by 3,116,000 barrels, from 458,992,000 barrels on July 5th to 455,876,000 barrels on July 12th...but even with that decrease, our crude oil inventories remained roughly 4% above the recent five-year average of crude oil supplies for this time of year, and roughly 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the 2nd week of July, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising since this past Fall, up until the past month, after generally falling until then through most of the prior year and a half, our oil supplies as of July 12th were still 10.9% above the 411,084,000 barrels of oil we had stored on July 13th of 2018, but at the same time were 7.1% below the 490,623,000 barrels of oil that we had in storage on July 14th of 2017, and 6.7% below the 488,830,000 barrels of oil we had stored on July 15th of 2016...    

This Week's Rig Count

the US rig count fell for the 19th time in 22 weeks during the week ending July 19th, and is now down by 12% so far this year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 4 rigs to a new 17 month low of 954 rigs this past week, which was also down by 96 rigs from the 1054 rigs that were in use as of the July 13th report of 2018, and quite a bit below 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 fell by 5 rigs to 779 rigs this week, which was also a 17 month low, 79 fewer oil rigs than were running a year ago, and less than  half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 rigs to 174 natural gas rigs, which was still down by 13 rigs from the 187 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on August 29th, 2008...however, one of the rigs classified as miscellaneous was shut down this week and now there is only one such active, matching the "miscellaneous" rig count of a year ago...

the rig count in the Gulf of Mexico was down by 1 to 25 rigs this week, as one of the two rigs that had been drilling off the coast of Texas w​as shut down...that still leaves 24 rigs drilling offshore from Louisiana and a single rig deployed offshore from Texas, an increase of 8 offshore rigs from the 17 rigs that were deployed in the Gulf in the same week a year ago, when 15 rigs were drilling in Louisiana waters and two were deployed offshore from Texas...

the count of active horizontal drilling rigs was down by 2 to 829 horizontal rigs this week, which was the least horizontal rigs deployed since February 2nd, 2018 and hence also a new 17 month low for horizontal drilling...it was also 93 fewer horizontal rigs than the 922 horizontal rigs that were in use in the US on July 20th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was down by 1 rig to 56 vertical rigs this week, and that was also down by 1 from the 57 vertical rigs that were operating during the same week of last year....in addition, the directional rig count was down by 1 rig to 69 directional rigs this week, but those were up from the 67 directional rigs that were in use on July 20th of 2018...

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 oil & gas 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 July 19th, the second column shows the change in the number of working rigs between last week's count (July 12th) and this week's (July 19th) count, the third column shows last week's July 12th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before 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 20th of July, 2018...    

note that while the Texas rig count was down by 2, the two major Texas shale basins were both up: the Permian in the west by 3 and the Eagle Ford in the south by 1; moreover, that was as 4 horizontal rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while two rigs were started up in Texas Oil District 7C, or the southern Permian Midland, which means that rigs in the Texas Permian were down by a net of two...therefore, we can figure that all 5 rigs that were added in New Mexico were in the westernmost extent of the Permian Delaware...meanwhile, the one rig increase in the Eagle Ford also masks a bigger change in that basin, as two Eagle Ford oil rigs were shut down, leaving 58, while three natural gas rigs were started up, bringing the Eagle Ford gas rig count up to 9...elsewhere, natural gas rigs were shut down in West Virginia's Marcellus and Louisiana's Haynesville, while another rig targeting natural gas was started up in an "other' basin not tracked separately by Baker Hughes...we should also note that other than the changes shown for the major producing states above, a rig was also shut down in Alabama this week, where a single rig continues to drill; that single rig is the same ​number ​as a year ago, as Alabama has only rarely had more than 2 rigs active at the same time in recent years...

DUC well report for June

Monday of this past week saw the release of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the fourth month in a row, this report showed a decrease in uncompleted wells nationally in June, as drilling of new wells decreased and completions of drilled wells increased slightly....while there continued to be a increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of western Texas and New Mexico, most other regions saw decreases in their DUC inventory, thus more than offsetting the Permian increases...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 41 wells, from a revised 8,289 DUC wells in May to 8,248 DUC wells in June, which still represents a 19.2% increase from the 6,920 wells that had been drilled but remained uncompleted as of the end of June a year ago...the decrease occurred as 1,342 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during June, down by 33 from the 1,375 wells drilled in May and the lowest in 1 months, while 1,383 wells were completed and brought into production by fracking, an increase of 4 well completions from the 1,379 completions seen in April...at the June completion rate, the 8,248 drilled but uncompleted wells left at the end of the month represent a 6.0 month backlog of wells that have been drilled but are not yet fracked...  

both oil producing regions and natural gas producing regions saw DUC well decreases in June, with only the predominantly oil Permian showing a substantial increase...the number of DUC wells left in the Oklahoma Anadarko decreased by 29, from 968 in May to 939 DUC wells in June, as 127 wells were drilled into the Anadarko basin during June while 156 Anadarko wells were being fracked....at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 22 to 473, as 173 Niobrara wells were drilled in June while 195 Niobrara wells were completed....meanwhile, DUC wells in the Bakken of North Dakota fell by 15, from 709 DUC wells in May to 694 DUCs in June, as 115 wells were drilled into the Bakken in June, while 130 of the drilled wells in that basin were being fracked...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 15 wells, from 447 DUCs in May to 432 DUCs in June, as 124 wells were drilled into the Marcellus and Utica shales during the month, while 139 of the already drilled wells in the region were fracked...in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 3 wells to 189, as 50 wells were drilled into the Haynesville during June, while 53 Haynesville wells were fracked during the same period....

on the other hand, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells rise by 42, from 3,960 DUC wells in May to 4.002 DUCs in June, as 549 new wells were drilled into the Permian, but only 507 wells in the region were fracked....and lastly, DUC wells in the Eagle Ford of south Texas increased by 1, from 1,518 DUC wells in May to 1,519 DUCs in June, as 204 wells were drilled in the Eagle Ford during June, while 203 already drilled Eagle Ford wells were completed.....thus, for the month of June, DUCs in the five oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 23 wells to 7,627 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 18 wells to 621 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and natural gas...

+

+

note: there's more here...

OPEC report shows summer demand exceeding supply by 2 million barrels per day; US rig count falls to 17 month low..

oil prices jumped to a six week high midweek as tropical storm Barry meandered thru the Gulf and forced the shut in of over half of US offshore production....after falling 1.6% to $57.51 a barrel after the OPEC output cut extension disappointed oil traders last week, prices for US crude for August delivery initially jumped nearly 2% on Monday on confirmation that Iran had breached the limit on enriched uranium set by the 2015 accord that had been abrogated by the US, but later pulled back to end with an increase of only 15 cents at 57.66 a barrel, as gains were limited by renewed concerns about a slowing global economy...prices again rose to as high as $59.10 a barrel on Iran tensions early Tuesday, but again fell back to end with a gain of just 17 cents at $57.83 a barrel as concerns over a slowdown in energy demand again kept prices in check...oil prices again opened more than 1% higher on Wednesday after the API had reported that U.S. crude supplies had fallen for a fourth week in a row, but then extended those gains after the EIA confirmed an even larger oil inventory drop and as major producers cut nearly a third of offshore Gulf production, with oil prices finishing $2.60, or 4.5% higher at $60.43 a barrel...the Gulf of Mexico storm and Iran tensions pushed prices to another six-week high at $60.94 a barrel on Thursday before prices fell back to close 23 cents lower at $60.20 a barrel, as OPEC forecast lower demand for its crude oil next year as the U.S. & others lifted production...oil prices rose back to near six-week highs on Friday morning, as Gulf of Mexico oil producers cut more than half their output in the face of tropical storm Barry, but faded again in the afternoon to end just a penny higher at $60.21 a barrel, as concerns over a global crude surplus in the months ahead again limited gains...nonetheless, oil prices still ended nearly 5% higher for the week, as falling inventories, the tropical storm and geopolitical tensions all worked to push prices higher..

natural gas prices also ended higher, as weather forecasts shifted to show widespread heat dominating the Midwest and East over the next couple of weeks, and expectations that hurricane Barry would impact production also pushed prices higher...after finishing the prior week nearly 5% higher at $2.418 per mmBTU, natural gas for August delivery first slipped 1.5 cents on Monday, then rose 2.2 cents on Tuesday and 1.9 cents on Wednesday as the 8 to 14 day forecasts heated up, before falling 2.8 cents on Thursday after the EIA's natural gas storage report showed no surprises....prices then rose 3.7 cents on Friday with Barry bearing down to end the week at $2.453 per mmBTU, 1.4% higher than the prior week's close...

the natural gas storage report for the week ending July 5th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 81 billion cubic feet to 2,471 billion cubic feet by the end of the week, which meant our gas supplies were 275 billion cubic feet, or 12.5% more than the 2,196 billion cubic feet that were in storage on July 6th of last year, while still 142 billion cubic feet, or 5.4% below the five-year average of 2,613 billion cubic feet of natural gas that have been in storage as of the 5th of July in recent years....this week's 81 billion cubic feet injection into US natural gas storage was in line with expectations of an 80 billion cubic feet injection into storage, but was still higher than the average 71 billion cubic feet of natural gas that have been added to gas storage during the first week of July in recent years, the 17th consecutive such above average ​storage change....the 1,283 billion cubic feet of natural gas that have been added to storage over the past 15 weeks has been the largest injection of gas into storage on record for any similar period of the injection season, as the 1,128 billion cubic feet that were added during the same 15 weeks of 2014 (when June was also unusually cool) is the only year that's even close...

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on changes over the week ending July 5th, indicated that a larger than expected withdrawal of oil from our stored crude supplies, the 7th withdrawal in 15 weeks, ​resulted in a major shift in unaccounted for crude from the supply side of the balance sheet to the demand side...our imports of crude oil fell by an average of 284,000 barrels per day to an average of 7,302,000 barrels per day, after rising by an average of 920,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 58,000 barrels per day to 3,048,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,254,000 barrels of per day during the week ending July 5th, 342,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at 12,300,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,554,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,438,000 barrels of crude per day during the week ending July 5th, 148,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that an average of 1,357,000 barrels of oil per day w​as being withdrawn from the supplies of oil stored 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 472,000 barrels per day more than what our oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (-472,000) 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 they label in their footnotes as "unaccounted for crude oil"...since the prior week's unaccounted for crude was at +350,000 barrels per day, indicating unaccounted for supply, the week over week metrics we've just reported are undependable to the tune of 812,000 barrels per day..(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) indicated that the 4 week average of our oil imports fell to an average of 7,253,000 barrels per day last week,​ ​12.3% less than the 8,271,000 barrel per day average that we were importing over the same four-week period last year...the 1,357,000 barrel per day decrease in our total crude inventories was all pulled out of our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged...this week's crude oil production was reported to be 100,000 barrels per day higher at 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,900,000 barrels per day, while Alaska's oil production was statistically unchanged at 426,000 barrels per day....last year's US crude oil production for the week ending July 6th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was roughly 12.8% above that of a year ago, and 45.9% 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 94.7% of their capacity in using 17,438,000 barrels of crude per day during the week ending July 5th, up from 94.2% of capacity the prior week, and a fairly normal refinery utilization rate for this time of year....however, the 17,438,000 barrels per day of oil that were refined this week were still 1.2% below the 17,652,000 barrels of crude per day that were being processed during the week ending July 6th, 2018, when US refineries were operating at 96.7% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was much higher, increasing by 470,000 barrels per day to 10,418,000 barrels per day during the week ending July 5th, after our refineries' gasoline output had inexplicably decreased by 564,000 barrels per day the prior week....but even with that large jump in gasoline output, this week's gasoline production was still 2.6% less than the record 10,699,000 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) rose by 22,000 barrels per day to 5,358,000 barrels per day, after our distillates output had increased by 31,000 barrels per day the prior week....and even with this week's increase, the week's distillates production was still 1.5% less than the 5,442,000 barrels of distillates per day that were being produced during the week ending July 6th, 2018.... 

even with the big increase in gasoline production, our supply of gasoline in storage at the end of the week fell for the 4th week in a row and for the 16th time in twenty weeks, decreasing by 1,455,000 barrels to 229,187,000 barrels over the week to July 5th, after our gasoline supplies had decreased by 1,583,000 barrels over the prior week....our gasoline supplies continued to fall because the amount of gasoline supplied to US markets increased by 262,000 barrels per day to 9,754,000 barrels per day, and because our exports of gasoline rose by 137,000 barrels per day to 700,000 barrels per day, even while our imports of gasoline rose by 335,000 barrels per day to 871,000 barrels per day...after our gasoline supplies had reached an all time record high twenty-two weeks ago, they then fell by nearly 13% over the next 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, and hence they are still 4.1% lower than last July 6th's inventory level of 238,997,000 barrels, while slumping back to near the five year average of our gasoline supplies at this time of the year...

with the increase in our distillates production, our supplies of distillate fuels rose for the 6th time in the past 17 weeks, increasing by 3,729,000 barrels to 130,517,000 barrels during the week ending July 5th, after our distillates supplies had increased by 1,408,000 barrels over the prior week...our distillates supplies jumped this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 277,000 barrels per day to 3,551,000 barrels per day, and because our imports of distillates rose by 83,000 barrels per day to 181,000 barrels per day, while our exports of distillates rose by 50,000 barrels per day to 1,455,000 barrels per day...after this week's inventory increase, our distillate supplies were 7.3% higher than the 121,682,000 barrels of distillate that we had stored on July 6th, 2018, even as they remained 5% below the five year average of distillates stocks for this time of the year...

finally, with lower oil imports and greater refinery throughput, our commercial supplies of crude oil in storage fell for a fourth week in a row and for the tenth time in 25 weeks, decreasing by 9,499,000 barrels, from 468,491,000 barrels on June 28th to 458,992,000 barrels on July 5th...but even with that decrease, our crude oil inventories remained roughly 4% above the recent five-year average of crude oil supplies for this time of year, and roughly 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the end of June, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising this year, & since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of July 5th were still 13.2% above the 405,248,000 barrels of oil we had stored on July 6th of 2018, but at the same time were 7.3% below the 495,350,000 barrels of oil that we had in storage on July 7th of 2017, and 7.0% below the 493,718,000 barrels of oil we had stored on July 8th of 2016...   

OPEC's Monthly Oil Market Report

next we're going to review OPEC's July Oil Market Report (covering June OPEC & global oil data), which was released on Thursday of this past week 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 63 of that report (pdf page 73), 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 a​ means of​ impartial​ly​ adjudicat​ing whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures...

so, as we can see from this table of oil production data, OPEC's oil output fell by 68,000 barrels per day to 29,830,000 barrels per day in June, from their revised May production total of 29,898,000 barrels per day...however that May figure was originally reported as 29,876,000 barrels per day, so that means their production for June was really a 46,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official May OPEC output figures as reported a month ago, before this month's revisions)...

the largely involuntary Iranian output ​reduction of 142,000 barrels per day due to US sanctions on their exports was the primary reason for the cartel's output cut in June, as relatively smaller production cuts by Angola, by Iraq, by Kuwait, by Algeria and by Libya were more than offset by increases in output from Nigeria and the Saudis...​however, that 129,000 barrels per day increase in the output from Nigeria that you see above now puts them well over the output allocations originally ​determined for each member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers, and which were extended at their July 1st meeting a few weeks back...in addition, despite the small June decrease in output from Iraq, their output also remains ​well ​above quota, as can be seen in the table of OPEC production allocations we've included below:

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, and it shows average daily production quota in millions of barrels of oil per day for each of the OPEC members as was agreed to at their December 2018 meeting and has now been extended through March 2020...note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by a civil war, are exempt from any production quotas, and that only Libya has been producing more than they did in the 4th quarter of 2018, as ​you can see in the third column of the OPEC production table above...

the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from July 2017 to June 2019, and it comes from page 64 (pdf page 74) of the July OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale... 

despite the decrease in OPEC's production from what they reported a month ago, their preliminary estimate indicates that total global oil production still rose by 0.47 million barrels per day to 98.56 million barrels per day in June,​ an increase ​that ​came after May's total global output figure was revised down by 170,000 barrels per day from the 98.26 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 540,000 barrels per day in June after that revision, with higher oil output from the US, Brazil, Kazakhstan, Russia and China the major reasons for the non-OPEC production increase.... the 98.56 million barrels per day produced globally in June was still 0.71 million barrels per day, or 0.7% higher than the revised 97.85 million barrels of oil per day that were being produced globally in June a year ago (see the July 2018 OPEC report (online pdf) for the originally reported June 2018 details)...with the decrease in OPEC's output, their June oil production of 29,830,000 barrels per day slipped to 30.3% of what was produced globally during the month, down from the revised 30.5% share they contributed in May....OPEC's June 2018 production was reported at 32,327,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year's total and new member Congo from this year's, are now producing 2,225,000 fewer barrels per day of oil than they were producing a year ago, when they accounted for 33.0% of global output, with a 1,575,000 barrel per day drop in output from Iran, a 607,000 barrel per day decrease in the output from Saudi Arabia, and a 606,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the year over year production increases of 405,000 barrels per day from Libya, 185,000 barrels per day from Iraq, and 186,000 barrels per day from the Emirates...  

despite the 470,000 barrels per day increase in global oil output that was seen during June, there was still a large ​shortfall 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 came from page 33 of the July OPEC Monthly Oil Market Report (pdf page 43), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2019 over the rest of the table...on the "Total world" line in the third column, we've circled in blue the figure that's relevant for June, which is their revised estimate of global oil demand during the second quarter of 2019...

OPEC has estimated that during the 2nd quarter of this year, all oil consuming regions of the globe have been using 99.24 million barrels of oil per day, which was unrevised from their estimate for the 2nd quarter a month ago....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were ​still ​only producing 98.56 million barrels per day during June, which means that there was a shortfall of around 680,000 barrels per day in global oil production when compared to the demand estimated for the month...

in addition, the downward revision of 170,000 barrels per day to May's global output that's implied in this report means that the 980,000 barrels per day shortfall that we had​ originally​ figured for May based on last month's figures would ​now ​have to be revised to a deficit of 1,150,000 barrels per day during May....combined with ​the deficit of 1,020,000 barrels per day that we had previously figured for April, that means that for the 2nd quarter of 2019, global oil production has been running around 950,000 barrels per day short of what's need to cover demand....while those deficits follow a first quarter that saw surpluses of 550,000 barrels per day for January, 640,000 barrels per day in February, and 190,000 barrels per day for March, note that in the 4th column above, global demand during the 3rd quarter, or summertime in the northern hemisphere, is expected to increase by 1,370,000 barrels per day to 100.61 million barrels of oil per day...that means that unless there is an unexpected pickup in oil production from the non-OPEC countries, the third quarter will be seeing oil output deficits near or above 2 million barrels of oil per day, or ​roughly 2%​ of ​total demand....

This Week's Rig Count

the US rig count fell for the 18th time in 21 weeks during the week ending July 12th, and is now down by 11.5% for the year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 17 month low of 958 rigs this past week, which was also down by 96 rigs from the 1054 rigs that were in use as of the July 13th report of 2018, and quite a bit below 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 fell by 4 rigs to 784 rigs this week, which was also 79 fewer oil rigs than were running a year ago, and less than half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 rigs to 172 natural gas rigs, which was also down by 17 rigs from the 189 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on August 29th, 2008...however, another rig classified as miscellaneous was ​began drilling this week and hence there are now two such active, matching the "miscellaneous rig" count of a year ago...

the rig count in the Gulf of Mexico increased by 2 to 26 rigs this week, as two more rigs began drilling off the coast of Louisiana...that means there are now 24 rigs drilling offshore from Louisiana and 2 rigs deployed offshore from Texas, an increase of 7 offshore rigs from the 19 rigs that were deployed in the Gulf in the same week a year ago, when 17 rigs were drilling in Louisiana waters and two were deployed offshore from Texas...on the other hand, one of the 3 platforms that had been drilling through inland waters in ​southern ​Louisiana was shut down this week, leaving two​ still active​, down from the 5 "inland waters" rigs that were drilling in Louisiana on July 13th 2018...

the count of active horizontal drilling rigs was down by 8 to 831 horizontal rigs this week, which was the least horizontal rigs deployed since February 9th, 2018 and hence a new 17 month low for horizontal drilling...it was also 99 fewer horizontal rigs than the 930 horizontal rigs that were in use in the US on July 13th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was down by 1 rig to 57 vertical rigs this week, but those were still up ​by 1 ​from the 56 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count was up by 4 rigs to 70 directional rigs this week, and those were also up from the 68 directional rigs that were in use on July 13th of 2018...

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 oil & gas 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 July 12th, the second column shows the change in the number of working rigs between last week's count (July 5th) and this week's (July 12th) count, the third column shows last week's July 5th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before 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 6th of July, 2018...    

as you can see, this week's rig reductions were concentrated in Texas, in both the Eagle Ford and the Permian basins within Texas...in the Permian, 3 horizontal rigs were pulled out of Texas Oil District 8, which would be the core Permian Delaware, and 3 more were pulled out of Texas Oil District 7C, or the southern Permian Midland...meanwhile, 4 oil rigs and one targeting natural gas were pulled out of the Eagle Ford of southeast Texas, which left 60 oil rigs and 6 natural gas rigs still active in that basin...at the same time, oil targeting rigs were added in the Cana Woodford of central Oklahoma and the DJ Niobrara chalk of the Rockies front range, while a natural gas rig was added in the Haynesville on the Texas side of the border, as the northern Louisiana rig count was unchanged while Texas Oil District 6 saw a one rig increase...meanwhile, two more natural gas rigs were shut down in "other" basins not tracked separately by Baker Hughes...

+

+

note: there's more here...

coolest June in 15 years contributes to largest spring natural gas storage injection on record..

oil prices fell for the first time in three weeks as oil traders "sold on the news" that OPEC + Russia had agreed to extend their production cuts for another 9 months, through March of 2020...after rising 2% to $58.47 a barrel on a big drop in US crude supplies last week, the price of US WTI crude for August delivery opened 80 cents higher and traded above $60 for the first time in over 5 weeks on Monday morning after Saudi Arabia, Russia and Iraq all backed an extension of supply cuts ahead of the OPEC meeting in Vienna, but gave up a substantial portion of its early gains in the afternoon to close up just 62 cents, or 1.1%, at $59.09 a barrel...after opening higher on Tuesday, oil prices resumed their late Monday selloff on worries that a weakening global economy would dent demand outweighed the OPEC supply cuts, and then plunged sharply after the pre-OPEC decision price level was breached to end down $2.84, or 4.8%, to $56.25 a barrel on the sense that the OPEC pact was the bare minimum they could have done to control supplies...oil prices recovered part of those losses on Wednesday, first on an API report of a larger-than-expected in U.S. crude oil inventories, and then on a rally in equities and a drop in the oil rig count, with prices finishing $1.09 higher at $57.34 a barrel...oil prices were lower in overseas trading on the 4th of July holiday and that price weakness carried into early US trading Friday, but prices later rose after Iran threatened to seize a British ship after British forces had seized an Iranian tanker in Gibraltar, and closed 17 cents higher at $57.51 a barrel...but despite those gains late in the week, the Tuesday selloff still left prices down 1.6% on the week, following increases over the prior two weeks...

natural gas prices, meanwhile, rose for a second week, as a notably hotter shift in the weather pattern drove out the shorts and promised to increase power burn demand...natural gas for August delivery initially fell 4.1 cents to $2.267 per mmBTU on Monday, as June had finished as the coolest since 2004, and then slipped another 2.7 cents on Tuesday before rising 5 cents on Wednesday with the early release of the natural gas storage report, and then rising 12.8 cents, or nearly 5% to $2.418 per mmBTU on Friday as a broad upper level ridge set up over the central and eastern U.S. and was expected to produce above-average temperatures going well into next week...

the natural gas storage report from the EIA for the week ending June 28th indicated that the quantity of natural gas held in storage in the US increased by 89 billion cubic feet to 2,390  billion cubic feet by the end of the week, which meant our gas supplies were 249 billion cubic feet, or 11.6% more than the 2,141 billion cubic feet that were in storage on June 28th of last year, while still 152 billion cubic feet, or 6.0% below the five-year average of 2,542 billion cubic feet of natural gas that have been in storage after the fourth week of June in recent years....this week's 89 billion cubic feet injection into US natural gas storage was higher than the average consensus estimate for a 79 billion cubic feet injection in an S&P Global Platts survey, and was much higher than the average 70 billion cubic feet of natural gas that have been added to gas storage during the fourth week of June in recent years, the 16th consecutive such above average injection....the 1,283 billion cubic feet of natural gas that have been added to storage over the past 14 weeks has been the largest injection of gas into storage on record for any similar period of the injection season, as the 1,033 billion cubic feet that were added during the same 14 weeks of 2014 (when June was also unusually cool) is the only year that even appears close...as you know, we've been calling this injection pace record setting and unprecedented for several weeks now, and this week the EIA finally jumped on the bandwagon with a blog post saying the same thing, albeit without the first injection in late March that we've been including in our seasonal totals...

we'll include the latest temperature anomaly map from the EIA's natural gas storage dashboard as a preliminary image before showing you a bar graph on natural gas weighted degree days for June, which have contributed to that record setting pace...

as you can see, the above map color-codes the temperature anomalies over the lower 48 states for the week ending June 27th, and with a preponderance of blue coloring, we can tell that most of the US except for the southeast saw below normal temperatures for the week in question.... several times over the past six months​, ​we've included​ a copy of​ the weekly update of this temperature map as a means of indicating the influence that above or below temperatures had on natural gas consumption, and hence on the amount of natural gas left in storage...while everyone probably understands that below normal temperature for the last week of June would mean less use of air conditioning, the implications of such a map haven't been quite so clear earlier in the year, when the northern parts of the country may still have been heating their homes while the southern tier of states might be turning on the air conditioning at the same time....utilities and traders in natural gas follow a much more precise metric to determine the impact of temperature changes on natural gas consumption, which is shown in the bar graph below...

the above graph, copied from the Monday blog post at Bespoke Weather, shows gas weighted degree days (GWDD) for the month of June from 1981 to to 2019, with 2019 on the left and the oldest years oddly on the right....gas weighted degree days, or GWDDs, are a population weighed metric which includes both heating degree days and cooling degree days in the same sum...heating degree days are a measure of how many degrees a given day​ falls below ​a average daily temperature ​at which ​it is figured that ​heating is necessary (typically 65 degrees), while cooling degree days measure how many degrees ​temperatures rise ​above ​a base average temperature whe​rein it's thought cooling ​would be necessary​ on a given day...for example, if the mean daily temperature for a northern US city is 55F, that city would have 10 heating degree days for that date; if, on the other hand, a southern US city experienced a mean temperature of 80F on that same day, that city would show 15 cooling degree days for that day...averaging the number of degrees days of either type for each​ US population center​, weighted by population, and adding them together for the 30 days of June, yields the metric shown on the bar graph above...

thus we can see that for June of 2019, the population weighted GWDDs fell short of 250 and was the lowest since 2004, meaning that the demand for natural gas for both heating and cooling during the month was the lowest in 15 years...while degree days are not an exact science, as both heating and cooling needs are determined by more than just the average outdoor temperature, they give us, and utilities, a reasonable estimate of expected demand for natural gas and electricity on a given day, and by extension, over a given period... 

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on changes over the week ending June 28th, showed that a big drop in our oil exports combined with a jump in our oil imports meant there was a much smaller withdrawal of oil from our stored crude supplies than last week, even as it was just the 6th withdrawal​ of oil​ in 14 weeks...our imports of crude oil rose by an average of 929,000 barrels per day to an average of 7,585,000 barrels per day, after falling by an average of 812,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 780,000 barrels per day to 2,990,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,595,000 barrels of per day during the week ending June 28th, 1,709,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at 12,200,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,795,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,290,000 barrels of crude per day during the week ending June 28th, 47,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a​n average of 155,000 barrels of oil per day were being withdrawn from the supplies of oil stored 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 340,000 barrels per day short of what our oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+340,000) 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 they label 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) indicated that the 4 week average of our oil imports fell to an average of 7,330,000 barrels per day last week, now 13.1% less than the 8,438,000 barrel per day average that we were importing over the same four-week period last year...the 155,000 barrel per day decrease in our total crude inventories was all pulled out of our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged...this week's crude oil production was reported to be 100,000 barrels per day higher at 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 11,800,000 barrels per day, while a 27,000 barrel per day decrease to 427,000 barrels per day in Alaska's oil production then lowered the final rounded national total by 100,000 [sic]....last year's US crude oil production for the week ending June 22nd was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was roughly 11.9% above that of a year ago, and 44.8% 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...    

meanwhile, US oil refineries were operating at 94.2% of their capacity in using 17,290,000 barrels of crude per day during the week ending June 28th, unchanged from 94.2% of capacity the prior week, and a fairly normal refinery utilization rate for this time of year....however, the 17,290,000 barrels per day of oil that were refined this week were still 2.1% below the 17,653,000 barrels of crude per day that were being processed during the week ending June 29th, 2018, when US refineries were operating at 97.1% of capacity....

even with ​just a modest decrease in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 564,000 barrels per day to 9,948,000 barrels per day during the week ending June 28th, after our refineries' gasoline output had increased by 649,000 barrels per day over the prior four weeks....with that large drop in gasoline output, this week's gasoline production was 3.5% less than the 10,311,000 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) rose by 31,000 barrels per day to 5,336,000 barrels per day, after our distillates output had decreased by 66,000 barrels per day the prior week....so even with this week's increase, the week's distillates production was still 2.3% less than the 5,463,000 barrels of distillates per day that were being produced during the week ending June 29th, 2018.... 

with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week fell for the 3rd week in a row and for the 15th time in 19 weeks, decreasing by 1,583,000 barrels to 230,642,000 barrels over the week to June 28th, after our gasoline supplies had decreased by 996,000 barrels over the prior week...the draw from our gasoline supplies increased even though our exports of gasoline fell by 376,000 barrels per day to 563,000 barrels per day, as our imports of gasoline fell by 280,000 barrels per day to 536,000 barrels per day, while the amount of gasoline supplied to US markets increased by 26,000 barrels per day to 9,492,000 barrels per day...after our gasoline supplies had reached an all time record high twenty-one weeks ago, they then fell by nearly 13% over the next 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, and hence ​they ​are still 3.8% lower than last June 29th's inventory level of 239,691,000 barrels, ​while remain​ing​ near the five year average of our gasoline supplies at this time of the year...

with the increase in our distillates production, our supplies of distillate fuels rose for the 5th time in the past 16 weeks, increasing by 1,408,000 barrels to 126,788,000 barrels during the week ending June 28th, after our distillates supplies had decreased by 2,441,000 barrels over the prior week....our distillates supplies managed to increase this week because our exports of distillates fell by 314,000 barrels per day to 1,405,000 barrels per day and because our imports of distillates rose by 65,000 barrels per day to 98,000 barrels per day, and because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 140,000 barrels per day to 3,828,000 barrels per day....after this week's inventory increase, our distillate supplies were 7.9% higher than the 117,557,000 barrels of distillate that we had stored on June 29th, 2018, even as they remained 6% below the five year average of distillates stocks for this time of the year...

however, even with the big drop in our oil exports and a big increase in our oil imports, our commercial supplies of crude oil in storage fell for a third week in a row and for the ninth time in 24 weeks, decreasing by 1,085,000 barrels, from 469,576,000 barrels on June 21st to 468,491,000 barrels on June 28th...​but ​even with that decrease, our crude oil inventories remained roughly 5% above the recent five-year average of crude oil supplies for this time of year, and 36.3% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the end of June, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of June 28th were still 12.1% above the 417,881,000 barrels of oil we had stored on June 29th of 2018, but at the same time ​were ​6.8% below the 502,914,000 barrels of oil that we had in storage on June 30th of 2017, and 5.1% below the 493,718,000 barrels of oil we had stored on July 1st of 2016...   

This Week's Rig Count

the US rig count fell for the 17th time in 20 weeks during the week ending July 5th, after being unchanged during the prior week, and is now down by 11% so far this year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 4 rigs to 963 rigs this past week, which was also down by 89 rigs from the 1052 rigs that were in use as of the July 6th report of 2018, and ​less than half of 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 fell by 5 rigs to 788 rigs this week, which was also 75 fewer oil rigs than were running a year ago, and ​quite a bit below the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 1 rig to 174 natural gas rigs, which was still down by 13 rigs from the 187 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on August 29th, 2008...in addition, a rig classified as miscellaneous continued to drill in Sandusky county Ohio this week, ​while there were 2 ​such ​"miscellaneous rig​s​" running a year ago, when Cabot Oil & Gas was drilling 2 exploratory wells into the Knox formation in Ohio...

the rig count in the Gulf of Mexico decreased by 2 to 24 rigs this week, as two rigs that had been drilling off the coast of Louisiana were shut down...that le​ft 22 rigs running offshore from Louisiana and 2 rigs deployed offshore from Texas, still up by 6 rigs from the 18 rigs that were deployed in the Gulf in the same week a year ago, when 17 rigs were drilling in Louisiana waters and one was deployed offshore from Texas...however, a year ago there was also a rig drilling offshore from Alaska, while all of this week's offshore activity was in the Gulf of Mexico...

the count of active horizontal drilling rigs was down by 1 to 839 horizontal rigs this week, which was another 16 month low for horizontal drilling and 91 fewer horizontal rigs than the 930 horizontal rigs that were in use in the US on July 6th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was down by 2 rigs to 66 directional rigs this week, and those were down a rig from the 67 directional rigs that were operating during the same week of last year....at the same time, the vertical rig count was down by 1 rig to 58 vertical rigs this week, but those were still up from the 55 vertical rigs that that were in use on July 6th of 2018...

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 oil & gas 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 July 5th, the second column shows the change in the number of working rigs between last week's count (June 28th) and this week's (July 5th) count, the third column shows last week's June 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before 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 6th of July, 2018...     

the 4 rig decrease in Louisiana is pretty straightforward; 2 of those were pulled out of the Gulf, while another 2 came out of the Haynesville shale in the northwest quarter of the state...for the 5 rig decrease in Oklahoma, however, there were 4 oil rigs pulled out of the Cana Woodford, while 2 rigs began drillig for natural gas in the same basin, ​in ​the first drilling for natural gas in the Cana Woodford since March of 2018...hence, three more Oklahoma rigs were shut down in basins not tracked separately by Baker Hughes​ which are not shown above​...for New Mexico, it appears that all three rigs were added in the Permian, because 2 horizontal rigs were pulled out of Texas Oil District 8, which would be the core Permian Delaware, while Texas Oil District 7C, ​or ​the southern Permian Midland​,​ saw one rig start up, so for the Permian to show a two rig increase, three had to have been added in New Mexico...this week's natural gas drilling nets out pretty easily too; while two natural gas rigs were shut down in Louisiana's Haynesville, two were started up in the Cana Woodford, and another one began drilling in West Virginia's Marcellus..

+

+

note: there's more here...