oil falls back to pre-Saudi attack price; natural gas supplies increase by most in any Fall week in 4 years

oil prices retreated this week after reports that Saudi Arabia's oil production had been completely restored after the crippling September 14th drone strike, with prices briefly falling below their September 13th closing low...after rising 6% to $58.09 a barrel in volatile and record trading volume last week in the wake of the attacks on Saudi infrastructure, prices of US light sweet crude for November delivery, which had moved in tandem with the expiring October oil contract last week, opened 2% higher on Monday following reports that full recovery of Saudi Arabia’s oil fields hit by the drone attack might take many months and held on for a 1% increase to $58.64 a barrel, even though the Saudis reportedly restored much of their lost output, as prices were supported by growing tensions in the Persian Gulf...however, the bottom fell out of oil prices on Tuesday after Trump accused China of unfair trade practices, “massive” market barriers, currency manipulation and intellectual property theft, rekindling fears that the U.S.-China trade war would dampen global economic activity, with US oil futures closing $1.35 lower at $57.29 a barrel...oil prices then opened 1% lower at $56.70 a barrel on Wednesday after a Tuesday evening American Petroleum Institute report of a unexpected crude oil inventory increase, and extended those losses after the EIA reported an even larger inventory increase, with oil ending down 80 cents at $56.49 a barrel, as Trump said he saw a path to peace with Iran, further cooling the risk premium that had built into oil prices...oil prices then fell for the third straight day on Thursday, as Saudi Arabia’s moves to quickly restore their output after the attacks on their oil infrastructure promised yet more oil supply, with US crude ending down 8 cents at $56.41 a barrel, having fallen 2% to $55.41 a barrel earlier in the day...prices fell further again on Friday on news that Saudi Arabia had declared a partial cease-fire in Yemen, further dialing down the tension that had prompted the Yemeni attack, with oil falling to as low as $54.75 a barrel on claims by Iranian President Rouhani that the U.S. had offered to lift all sanctions if Iran was willing to negotiate, but pared those losses after Trump denied that any such offer had been made, and ended just 50 cents lower at $55.91 a barrel, thus finishing the week with a loss of 3.6%, its steepest drop since mid-July, as prior fears about supply shortages waned...

natural gas prices also fell this past week, closing lower each day, with most of the drop coming after the EIA reported a surprisingly large injection of natural gas into storage...after falling after falling more than 3% to $2.534 per mmBTU on a bearish storage report last week, the price of natural gas for October delivery slipped seven-tenths of a cent on Monday and 2.4 cents in volatile trading on Tuesday, as traders speculated as to whether the weather would turn bullish or bearish in October, with the possibility that cooling might still be needed in the South if the month stayed warm simultaneously reducing the need for heating in the northern tier of states...natural gas prices slipped another tenth of a cent in quiet trading on Wednesday, and then fell 7.4 cents to close at $2.428 per mmBTU after the EIA reported the first triple digit storage addition of natural gas to storage of the season as trading in the October gas contract expired...at the same time, contracts for November delivery of natural gas, which had ended last week priced at $2.555 per mmBTU, fell 7.5 cents to 2.443 mmBTU on Thursday, and then another 3.9 cents on Friday to end the week at $2.404 per mmBTU, a 5.9% drop from where that contract had ended the prior week (note that natural gas valuations vary seasonally, so we can't compare the nominal price of one month's contract to another's) 

the natural gas storage report for the week ending September 20th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 102 billion cubic feet to 3,205 billion cubic feet by the end of the week, which meant our gas supplies were 444 billion cubic feet, or 16.1% more than the 2,761 billion cubic feet that were in storage on September 20th of last year, while still 47 billion cubic feet, or 1.4% below the five-year average of 3,252 billion cubic feet of natural gas that have been in storage as of the 20th of September in recent years....this week's 103 billion cubic feet injection into US natural gas storage was somewhat more than the forecast for an 93 billion cubic feet injection by analysts surveyed by S&P Global Platts, while it was well above the average 82 billion cubic feet of natural gas that have been added to gas storage during the third week of September over the past 5 years, the 26th such average or above average storage build in the last 28 weeks...the 2,027 billion cubic feet of natural gas that have been added to storage over the 26 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2093 billion cubic feet of natural gas that were injected into storage over the same 26 weeks of the 2014 natural gas injection season, a coolish summer when there were no injections below 76 billion cubic feet…. 

what's most interesting about this week's 102 billion cubic feet of surplus natural gas is that it came during a week when temperatures over most of the country were above normal, as you can see in the map below of the reporting week’s temperature anomalies:

the above temperature anomaly map came from the EIA's weekly interactive natural gas storage dashboard, and as you can gather, it shows how much the temperature in each of several hundred regions of the country varied from the norm, with the brown shading showing above normal temperatures...one would have thought with temperatures in that broad area in the middle of the country 5 to 9 degrees above normal, air conditioning demand would have also been above normal....but if you go to the natural gas storage dashboard and scroll down to the interactive graph showing the daily requirements of natural gas for electrical generation, you can see by mousing over it that natural gas for electricity averaged a billion cubic feet per day less than a year ago, despite a 10% year over year increase in gas driven generation capacity...& as a result of that inexplicable low demand for natural gas generated electric power, natural gas storage saw its first Autumn 100 billion cubic feet injection into storage since 2015..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 20th showed that despite of a big drop in our oil imports, we were still left with surplus oil to add to storage for the second time in 5 weeks, essentially due to a big jump in unaccounted for crude...our imports of crude oil fell by an average of 672,000 barrels per day to an average of 6,378,000 barrels per day, after rising by an average of 326,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 192,000 barrels per day to an average of 2,983,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,395,000 barrels of per day during the week ending September 20th, 480,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 12,500,000 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 15,895,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,513,000 barrels of crude per day during the week ending September 20th, 193,000 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 average of 344,000 barrels of oil per day were being added to 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 and from oilfield production was 962,000 barrels per day less than what was reportedly added to storage and what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA inserted a (+962,000) 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"....with that great a quantity of oil unaccounted for once again this week, it calls into question all the other oil metrics that the EIA has reported and that we have just transcribed (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 6,764,000 barrels per day last week, still 13.1% less than the 7,783,000 barrel per day average that we were importing over the same four-week period last year...the 344,000 barrel per day increase in our total crude inventories was all added to 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 a record 12,500,000 barrels per day even though the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,000,000 barrels per day, because a 49,000 barrels per day increase to 472,000 barrels per day in Alaska's oil production added 100,000 barrels per day to the final rounded national production total (EIA's math, not mine)...last year's US crude oil production for the week ending September 21st was rounded to 11,100,000 barrels per day, so this reporting week's rounded oil production figure was 12.1% above that of a year ago, and 48.3% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 89.8% of their capacity in using 16,513,000 barrels of crude per day during the week ending September 20th, down from 91.2% of capacity the prior week, & somewhat below the normal refinery utilization rate for a non-hurricane week in mid-September...nonetheless, the 16,513,000 barrels per day of oil that were refined this week were not much changed from the 6,514,000 barrels of crude per day that were being processed during the week ending September 21st, 2018, when US refineries were operating at 90.4% of capacity....

even with the decrease in the amount of oil being refined, gasoline output from our refineries was quite a bit higher, increasing by 789,000 barrels per day to 10,240,000 barrels per day during the week ending September 20th, after our refineries' gasoline output had decreased by 909,000 barrels per day to a nine month low the prior week...with that big increase in gasoline output, this week's gasoline production was 4.1% higher than the 9,832,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 109,000 barrels per day to 5,000,000 barrels per day, after our distillates output had decreased by 232,000 barrels per day the prior week....but even with those decreases, our distillates production was still pretty close to the 4,995,000 barrels of distillates per day that were being produced during the week ending September 21st, 2018.... 

with the big jump in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 6th time in 15 weeks but for just the 7th time in thirty weeks, increasing by 519,000 barrels to 230,204,000 barrels during the week to September 20th, after our gasoline supplies had increased by 781,000 barrels over the prior week....the increase in our gasoline supplies was limited this week because the amount of gasoline supplied to US markets increased by 407,000 barrels per day to 9,346,000 barrels per day, and because our exports of gasoline rose by 113,000 barrels per day to 805,000 barrels per day, while our imports of gasoline rose by 299,000 barrels per day to 800,000 barrels per day....but even after this week's increase, our gasoline supplies were still 2.3% lower than last September 21st's inventory level of 235,680,000 barrels, while remaining roughly 4% above the five year average of our gasoline supplies for this time of the year...

with the decrease in our distillates production, our supplies of distillate fuels fell for the 16th time in the past 28 weeks, decreasing by 2,978,000 barrels to 133,685,000 barrels during the week ending September 20th, after our distillates supplies had increased by 437,000 barrels over the prior week...our distillates supplies decreased this week because our exports of distillates rose by 297,000 barrels per day to 1,623,000 barrels per day, while our imports of distillates fell by 58,000 barrels per day to 94,000 barrels per day, while the amount of distillates supplied to US markets, a​n indicator ​​of our domestic demand, increased by 38,000 barrels per day to 3,897,000 barrels per day....after this week's inventory decrease, our distillate supplies were 3.0% less than the 137,881,000 barrels of distillates that we had stored on September 21st, 2018, and fell to around 7% below the five year average of distillates stocks for this time of the year...

finally, even though our oil imports were much lower, our commercial supplies of crude oil in storage still rose for the fourth time in fifteen weeks and for the nineteenth time in 36 weeks, increasing by 2,412,000 barrels, from 417,126,000 barrels on September 13th to 419,538,000 barrels on September 20th...that increase brought our crude oil inventories back to near the five-year average of crude oil supplies for this time of year, and to more than 25% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the second week of September, 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 over the past year up until the most recent fifteen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of September 20th were still 5.9% above the 395,989,000 barrels of oil we had stored on September 21st of 2018, but at the same time were 10.9% below the 470,986,000 barrels of oil that we had in storage on September 22nd of 2017, and 11.1% below the 472,084,000 barrels of oil we had in commercial storage on September 23rd of 2016...    

This Week's Rig Count

the US rig count fell for the 28th time in 32 weeks over the week ending September 27th, and is now down by 20.6% since the beginning of the year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 8 rigs to a 29 month low of 860 rigs this past week, which was also down by 194 rigs from the 1054 rigs that were in use as of the September 28th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...

the count of rigs drilling for oil decreased by 6 rigs to 713 rigs this week, which was a 28 month low for oil rigs and 150 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 fell by 2 rigs to 146 natural gas rigs, a 30 month low for gas rig drilling activity and down by 43 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 September 7th, 2008...in addition, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, down by one from the miscellaneous rig count of a year ago, when 2 miscellaneous rigs were deployed..

Gulf of Mexico offshore drilling activity was down by 1 rig to 22 rigs running this week, as a platform offshore from Louisiana was shut down...​however, the 22 rigs left drilling offshore from Louisiana was still 4 more than the 18 Gulf of Mexico rigs deployed a year ago, when 17 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, two rigs continue to drill offshore from the Kenai Peninsula in Alaska, one targeting oil at 5,000 to 10,000 feet and the other targeting natural gas at a depth of more than 15,000 feet, which matches the offshore Alaska count of a year ago...hence, the national total of 24 offshore rigs is up by 4 rigs from the 20 rigs that were deployed offshore a year ago...

the count of active horizontal drilling rigs was down by 4 rigs to 752 horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 28 month low for horizontal drilling...that was also 170 fewer horizontal rigs than the 922 horizontal rigs that were in use in the US on September 28th 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 4 to 57 directional rigs this week, and those were down by 12 from the 69 directional rigs that were operating during the same week of last year...meanwhile, the vertical rig count was unchanged at 51 vertical rigs this week, and those were also down by 12 from the 63 vertical rigs that were in use on September 28th of 2018...

the details on this week's changes in drilling activity by state and by major 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 table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 27th, the second column shows the change in the number of working rigs between last week's count (September 20th) and this week's (September 27th) count, the third column shows last week's September 20th 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 28th of September, 2018...  

the five rig decrease in Texas included all three of the Permian basin tear-downs, as one rig was pulled out of Texas Oil District 8, or the core Permian Delaware, and 2 more rigs were shut down in Texas Oil District 7C, or the southern part of the Permian Midland...the rig pulled out of the Eagle Ford in the southern part of the state was a natural gas rig, leaving the Eagle Ford with a deployment of 56 rigs targeting oil and 6 rigs targeting natural gas; it seems likely that rig came of out of Texas Oil District 2, which was down by two rigs, because the Eagle Ford gas trend is closer to the Gulf coast...in addition, the rig pulled from the Granite Wash was also a natural gas rig, but it appears to have come out of the area of Oklahoma bordering the Texas panhandle, since the rig count in Texas Oil District 10 was unchanged at one; the 2 Granite Wash rigs that remain​ ​are targeting oil...meanwhile, drilling in all three of the major natural gas basins - Ohio's Utica, the Marcellus of Pennsylvania and West Virginia, and the northwest Louisiana Haynesville - was unchanged for the 2nd week in a row..

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Note: there's more here...

oil jumps on record volume after Saudi attack; horizontal drilling at a 28 month low; DUCs drop most in 3 years

oil prices were much higher in volatile trading this past week in the wake of the drone & missile attack on Saudi oil infrastructure last Saturday, with the biggest move coming in the opening hour of trading​ on​ Monday...after falling 3% to $54.85 a barrel last week, ironically on the hope that war with Iran was less likely after the firing of national security advisor John Bolton, prices of US crude for October delivery opened 12% higher on Monday with the news that 5.7 million barrels, or more than 5.7% of global daily crude production had been knocked out by the​ drone​ strikes, with many traders figuring that Saudi production would take months to recover...prices remained volatile throughout the session as the Saudis were silent and speculation swirled, slipping back to as low as $58.77 a barrel by midday, but later rallying to close $8.05, or 14.7% higher at $62.90 a barrel on record trading volume of 1.4 million contracts, ​the equivalent of 112 times more oil than the US produces in a day..​.​.however, oil prices opened lower and slid backwards on Tuesday, as traders reassessed the long term fallout from the attack, with US October oil closing $3.54, or 5.7% lower at $59.34 a barrel after the Saudi oil minister said Saudi oil production would be fully back online by the end of September...oil extended its pullback on Wednesday, first on the prior night's surprise API report of a crude oil inventory increase, and then after the EIA confirmed the crude build, with the October WTI ending $1.23 lower at $58.11 per barrel following reports that 50% of Saudi production was already back online...but oil prices rose again early Thursday, carried by an equity market rally following the Fed's rate cut, reaching as high as $59.54 a barrel as risks to Saudi output came into focus, but pulled back near the close to end with a gain of just two cents at $58.13 a barrel...prices eased lower on Friday on renewed concern over the U.S.-China trade war, ending down 4 cents at $58.09 a barrel, but still posted a 6% gain for the week, the biggest weekly gain in 3 months...

with a record volume of trading in oil on Monday, i went looking for some more details on that, which seems to be fairly well captured in the graph and table below:

the above graph and table of crude oil trading volume for Monday September 16 came from the CME group website, as the CME (Chicago Mercantile Exchange) is the owner of the NYMEX (New York Mercantile Exchange) where US oil contracts are traded....directly above, we have the first part of the table showing the volume of trading in each of the first five current oil futures contracts, monthly from October ​2019 ​thru February​ 2020​...on the October line, we've circled in blue the Monday trading volume of the October contract, which is the contract quoted by the media as "the price of oil", which was over 1.4 million contracts...since each contract is for a thousand barrels, Monday's trading in the October contract represents more than 1.4 billion barrels of US light sweet crude changing hands, or roughly 112 times the amount of oil produced in the entire country on an average day...in addition, on the interactive bar chart above the table, we've moused over the bar for the total trading in all oil futures contracts on Monday, to expose that total trading volume for the day was over 3.68 million contracts, or 3.68 billion barrels of crude...on the same bar in red indicates that another 517 million options to buy or sell crude contracts were also traded on Monday, bringing our total volume of oil contract trading on Monday to a figure that represents nearly 4.2 billion barrels of crude...that's 344 times the amount of oil actually produced in the US during the same period, which ​just goes to ​show​ that it's the speculators in New York and London who control the price of oil, just based on the shear volume of it they trade electronically...

meanwhile, natural gas prices finished lower for the first time in four weeks, mostly on a larger than expected injection of gas into storage...after rising 4.7% to $2.614 per mmBTU on short covering following warmer forecasts last week, the natural gas contract for October delivery jumped 6.7 cents higher Monday on notably hotter forecasts for the eastern & southern US during the second half of September, suggesting a continuation of summerlike cooling demand....​even so, natural gas prices ​still slipped 1.3 cents on Tuesday and 3.1 cents on Wednesday in advance of the Thursday storage report, which indicated more surplus gas was added to storage than​ was​ expected, driving prices 9.9 cents lower by the end of trading on Thursday...prices then slipped another four-tenths of a cent on Friday to end the week down more than 3% at $2.534 mmBTU..

the natural gas storage report for the week ending September 13th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 84 billion cubic feet to 3,103 billion cubic feet by the end of the week, which meant our gas supplies were 393 billion cubic feet, or 14.5% more than the 2,710 billion cubic feet that were in storage on September 13th of last year, while still 75 billion cubic feet, or 2.4% below the five-year average of 3,187 billion cubic feet of natural gas that have been in storage as of the 13th of September in recent years....this week's 84 billion cubic feet injection into US natural gas storage was somewhat more than the forecast for an 76 billion cubic feet injection by analysts surveyed by S&P Global Platts, ​and it was also a bit above the average 82 billion cubic feet of natural gas that have been added to gas storage during the second week of September over the past 5 years, the 25th such average or above average storage build in the last 27 weeks​... as a result, the weekly storage injections so far this season are averaging 29% above the five-year average...the 1,925 billion cubic feet of natural gas that have been added to storage over the 25 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 1995 billion cubic feet of natural gas that were injected into storage over the same 24 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet…. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 13th ​showed that because of a big drop in our refinery throughput while our oil imports were rising, we were left with surplus oil to add to storage for the first time in 4 weeks...our imports of crude oil rose by an average of 326,000 barrels per day to an average of 7,050,000 barrels per day, after falling by an average of 180,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 120,000 barrels per day to an average of 3,175,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,875,000 barrels of per day during the week ending September 13th, 446,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be unchanged from the prior week at 12,400,000 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 16,275,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,707,000 barrels of crude per day during the week ending September 13th, 788,000 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 average of 151,000 barrels of oil per day were being added to 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 and from oilfield production was 583,000 barrels per day less than what was reportedly added to storage and what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA inserted a (+583,000) 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"....with that great a quantity of oil unaccounted for again this week, it calls into question the other oil totals that the EIA has reported and that we have just transcribed (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 6,652,000 barrels per day last week, now 12.7% less than the 7,704,000 barrel per day average that we were importing over the same four-week period last year...the 151,000 barrel per day increase in our total crude inventories was all added to 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 unchanged at 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,000,000 barrels per day, while a 25,000 barrels per day increase to 423,000 barrels per day in Alaska's oil production had no impact on the final rounded national production total...last year's US crude oil production for the week ending September 7th was rounded to 11,00,000 barrels per day, so this reporting week's rounded oil production figure was 12.7% above that of a year ago, and 47.1% 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 91.2% of their capacity in using 16,707,000 barrels of crude per day during the week ending September 13th, down from 95.1% of capacity the prior week, ​& ​somewhat below the normal refinery utilization rate for mid-September...as a result, the 16,707,000 barrels per day of oil that were refined this week were 4.1% below the 17,415,000 barrels of crude per day that were being processed during the week ending September 14th, 2018, when US refineries were operating at 95.4% of capacity....

with the big d​rop in the amount of oil being refined, gasoline output from our refineries was quite a bit lower, decreasing by 909,000 barrels per day to a nine-month low of 9,451,000 barrels per day during the week ending September 13th, after our refineries' gasoline output had increased by 88,000 barrels per day over the prior week...with that big decrease in gasoline output, this week's gasoline production was 8.0% lower than the 10,270,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 232,000 barrels per day to 5,109,000 barrels per day, after our distillates output had increased by 187,000 barrels per day the prior week....with that decrease, our distillates production was 6.4% less than the 5,457,000 barrels of distillates per day that were being produced during the week ending September 14th, 2018.... 

however, even with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week managed to increase for the 5th time in 14 weeks and for just the 6th time in twenty-nine weeks, increasing by 781,000 barrels to 229,685,000 barrels during the week to September 13th, after our gasoline supplies had fallen by 682,000 barrels over the prior week....our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by 868,000 barrels per day to 8,939,000 barrels per day, while our exports of gasoline rose by 55,000 barrels per day to 692,000 barrels per day, and while our imports of gasoline fell by 296,000 barrels per day to 501,000 barrels per day...but even after this week's increase, our gasoline supplies were still 1.9% lower than last September 14th's inventory level of 234,150,000 barrels, while increasing to roughly 4% above the five year average of our gasoline supplies for this time of the year...

likewise, even with the big decrease in our distillates production, our supplies of distillate fuels rose for the 12th time in the past 27 weeks, increasing by 437,000 barrels to 136,663,000 barrels during the week ending September 13th, after our distillates supplies had increased by 2,704,000 barrels over the prior week...our distillates supplies increased this week even as the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 55,000 barrels per day to 3,859,000 barrels per day, and while our exports of distillates rose by 136,000 barrels per day to 1,330,000 barrels per day, as our imports of distillates rose by 98,000 barrels per day to 142,000 barrels per day....but even after this week's inventory increase, our distillate supplies were still 2.5% less than the 140,122,000 barrels of distillates that we had stored on September 14th, 2018, and remained around 6% below the five year average of distillates stocks for this time of the year...

finally, as our imports rose while our refineries processed much less oil, our commercial supplies of crude oil in storage rose for the third time in fourteen weeks and for the eighteenth time in 35 weeks, increasing by 1,058,000 barrels, from 416,068,000 barrels on September 6th to 417,126,000 barrels on September 13th...that modest increase still left our crude oil inventories 2% below the five-year average of crude oil supplies for this time of year, but more than 24% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the second week of September, 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 over the past year up until the most recent fourteen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of September 13th were still 5.8% above the 394,137,000 barrels of oil we had stored on September 14th of 2018, but at the same time were 8.8% below the 472,832,000 barrels of oil that we had in storage on September 15th of 2017, and also 8.8% below the 473,966,000 barrels of oil we had in commercial storage on September 16th of 2016...   

This Week's Rig Count

the US rig count fell for the 27th time in 31 weeks over the week ending September 20th, and is now down by 20% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 18 rigs to a 29 month low of 868 rigs this past week, which was also down by 185 rigs from the 1053 rigs that were in use as of the September 21st  report of 2018, and well 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 ​an attempt to flood the global oil market...

the count of rigs drilling for oil decreased by 14 rigs to 719 rigs this week, which was a 28 month low for oil rigs and 147 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 fell by 5 rigs to 148 natural gas rigs, a 30 month low for gas rig drilling activity and down by 38 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 September 7th, 2008...however, a vertical rig classified as miscellaneous began drilling on the island of Hawaii this week, targeting a formation between 5000 and 10,000 feet below the surface, matching the miscellaneous rig count of a year ago, when the miscellaneous​ rig​ was​ drilling​ in Richland county Ohio..

Gulf of Mexico offshore drilling activity was down by 2 to 23 rigs running this week, as two  platforms offshore from Louisiana were shut down...the 23 rigs still left drilling offshore from Louisiana were ​up by 5 from the 18 Gulf of Mexico rigs deployed a year ago, when there was 17 rigs drilling in Louisiana waters and one drilling offshore from Texas...in addition to the Gulf, a directional rig began drilling offshore from the Kenai Peninsula in Alaska, where there are now two​ rigs​, one targeting oil and the other targeting natural gas at a​ greater​ depth of more than 15,000 feet...that offshore Alaska count matches the offshore Alaska count of a year ago, so the national total of 25 offshore rigs is up by 5 rigs from the 20​ rigs​ that were deployed offshore a year ago...

the count of active horizontal drilling rigs was down by 20 rigs to 756 horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 28 month low for horizontal drilling...that was also 163 fewer horizontal rigs than the 921 horizontal rigs that were in use in the US on September 21st 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 2 to 51 vertical rigs this week, and those were ​also down by 14 from the 65 vertical rigs that were operating during the same week of last year...on the other hand, the directional rig count was up by 4 to 61 directional rigs this week, but those were still down by 8 from the 69 directional rigs that were in use on September 21st  of 2018...

the details on this week's changes in drilling activity by state and by major 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 table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 20th, the second column shows the change in the number of working rigs between last week's count (September 13th) and this week's (September 20th) count, the third column shows last week's September 13th 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 21st of September, 2018...      

a significant number of the rigs that were shut down this week had been drilling in basins not tracked separately by Baker Hughes, so the basin table above comes up short on identifying the rigs shut down in the various states...for instance, the 10 rigs idled in Oklahoma include ​single ​oil rigs in the Arkoma Woodford and Ardmore Woodford, two oil rigs and one natural gas rig in the Cana Woodford, and 5 rigs in those "other basins" that Baker Hughes does not track...in Texas, we saw a rig added in Texas Oil District 8, or the core Permian Delaware, and 2 rigs added in Texas Oil District 8A, encompassing the northern part of the Permian Midland, while 6 rigs were shut down in Texas Oil District 7C, or the southern part of the Permian Midland, for a net loss of 3 Permian​ oil​ rigs in Texas, which thus means that the New Mexico start-up was in the far western Permian Delaware​ basin​...the 2 oil rigs and single natural gas rig shut down in the south Texas Eagle Ford account for 3 more Texas losses, leaving just one Texas retirement in a basin not tracked separately by Baker Hughes...elsewhere, the two rigs shut down in the Williston basin match the North Dakota count, but the rig added in the Denver-Julesburg NIobrara of the Rockies front range means that 2 rigs in either Wyoming or Colorado were shut down in those "other" basins that Baker Hughes doesn't track...those "other" basins also account for the remaining 3 natural gas rig closures. as the rig count in all the major natural gas basins was unchanged this week...also note that other than the changes in activity in the major producing states shown above, Mississippi had two rigs start up this week and now has three rigs drilling, still down from 5 rigs a year ago, while Montana also saw a rig start up in the first drilling in that state since January...the aforementioned miscellaneous rig that started drilling in Hawaii, by the way, is the first drilling in that state since July 2016...

DUC well report for August

Monday of this past week saw the release of the EIA's Drilling Productivity Report for September, which includes the EIA's August data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the sixth month in a row, this report showed a decrease in uncompleted wells nationally in July, as both drilling of new wells and completions of drilled wells decreased....moreover, the Permian basin of western Texas and New Mexico, which had been seeing an increase of newly drilled but uncompleted wells (DUCs) ever​y​ month of late, also saw a decrease in DUCs​ in​ August​ ​for the first time since August 2016...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 142 wells, the largest decrease in 36 months, falling from a revised 8,092 DUC wells in July to 7,950 DUC wells in August, which still represents a 10.7% increase from the 7,181 wells that had been drilled but remained uncompleted as of the end of August a year ago...th​at DUC decrease occurred as 1,247 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, down by 62 from the 1,311 wells drilled in July and the lowest in 17 months, while 1,389 wells were completed and brought into production by fracking, a decrease of 6 well completions from the 1,395 completions seen in July....at the August completion rate, the 7,950 drilled but uncompleted wells left at the end of the month still represent a 5.7 month backlog of wells that have been drilled but are not yet fracked, the same backlog as a month ago...  

both oil producing regions and natural gas producing regions saw DUC well decreases in August, with only the natural gas producing Haynesville shale showing a small increase...the number of DUC wells left in the Oklahoma Anadarko decreased by 46, from 906 at the end of July to 860 DUC wells at the end of August, as 102 wells were drilled into the Anadarko basin during August while 148 Anadarko wells were being fracked....in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells fall by 25, from 3,864 DUC wells at the end of July to 3,839 DUCs at the end of August, as 525 new wells were drilled into the Permian, while 550 wells in the region were being fracked....at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 23 to 438, as 178 Niobrara wells were drilled in August while 201 Niobrara wells were completed....meanwhile, DUC wells in the Bakken of North Dakota fell by 22, from 674 DUC wells at the end of July to 652 DUCs at the end of August, as 97 wells were drilled into the Bakken in August, while 119 of the drilled wells in that basin were being fracked...in addition, DUC wells in the Eagle Ford of south Texas decreased by 16, from 1,474 DUC wells at the end of July to 1,458 DUCs at the end of August, as 184 wells were drilled in the Eagle Ford during August, while 200 already drilled Eagle Ford wells were completed..

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 12 wells, from 529 DUCs at the end of July to 517 DUCs at the end of August, as 116 wells were drilled into the Marcellus and Utica shales during the month, while 128 of the already drilled wells in the region were fracked...on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 2 wells to 188, as 45 wells were drilled into the Haynesville during August, while 43 Haynesville wells were fracked during the same period....thus, for the month of August, 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 132 wells to 7,247 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 10 wells to 703 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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Note: there's more here...

OPEC report shows a 1,450,000 barrel per day global oil shortage in August; US rig count falls to a new 28 month low

oil prices fell for the first time in 3 weeks after Trump fired national security advisor and reprobate warhawk John Bolton, which oil traders took to mean that a war with Iran was less likely, thus reducing risks of a war-related oil price spike...after rising 2.6% to $56.52 a barrel last week on falling US crude supplies and China trade optimism, prices of US crude for October delivery opened higher on Monday after the new Saudi minister committed to continuing OPEC's output cuts and moved to a 6 week high as oil bulls interpreted his appointment as a sign that the Saudis would focus on pushing up crude prices, with oil closing $1.33 higher at $57.85 a barrel...the oil price rally continued into early Tuesday, with prices rising to as high as $58.76 a barrel before Trump announced on Twitter that he fired national security advisor John Bolton, sending oil prices tumbling to close down 45 cents at $57.40 a barrel...however, oil price moved back up in after hours trading Tuesday after the API reported a big draw on crude & gasoline supplies and thus opened higher on Wednesday and rose to as high as $58.30 after the EIA also reported a larger than expected draw in crude oil inventories, but then tumbled by as much as 5% on a report that Trump had discussed easing Iranian sanctions as a prelude to talks, with oil prices closing $1.65 lower at $55.75 a barrel...oil prices continued falling on Thursday, after OPEC and its allies delayed discussing bigger production cuts till December and after the EIA lowered its 4th quarter price forecast for Brent, the international benchmark, by $5, with US oil closing down 66 cents at $55.09 a barrel...prices edged lower again on Friday, as forecasts for weakening demand outweighed signs of progress in the U.S.-China trade dispute, with oil prices finishing the day 24 cents lower at $54.85 a barrel...oil thus ended the week $1.67, or 3% lower after four straight days of declines, posting its biggest weekly drop since July, amid oversupply concerns ...

natural gas prices, on the other hand, finished higher the third week in a row, largely on continued short covering, as traders looked past the summer glut to the heating season ahead...after rising nearly 10% to $2.496 per mmBTU on short covering after forecasts for late summer heat last week, natural gas for October delivery opened higher Monday and moved up 8.9 cents as the forecasts trended hotter, before pulling back a half cent on Tuesday and 2.8 cents on Wednesday, even as an unseasonably strong upper level ridge set up in the eastern half of the nation and limited the retreat...the rally resumed Thursday after the EIA report showed a smaller addition of gas to storage than was expected, with October natural gas prices rising 2.2 cents Thursday and 4 cents Friday to end the week at $2.614 per mmBTU, an increase of 4.7% on the week and nearly 28% higher than its early August lows...

the natural gas storage report for the week ending September 6th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 78 billion cubic feet to 3,019 billion cubic feet by the end of the week, which meant our gas supplies were 393 billion cubic feet, or 15.0% more than the 2,626 billion cubic feet that were in storage on September 6th of last year, while still 77 billion cubic feet, or 2.5% below the five-year average of 3,096 billion cubic feet of natural gas that have been in storage as of the 6th of September in recent years....this week's 78 billion cubic feet injection into US natural gas storage was somewhat below the forecast for an 87 billion cubic feet injection by analysts surveyed by S&P Global Platts, while it was still above the average 73 billion cubic feet of natural gas that have been added to gas storage during the first week of September over the past 5 years, the 24th such average or above average storage build in the last 26 weeks...the 1,841 billion cubic feet of natural gas that have been added to storage over the 24 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 1906 billion cubic feet of natural gas that were injected into storage over the same 24 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet….

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 6th indicated that because our refinery throughput and oil exports rose while our oil imports fell, we had to pull oil out of storage for the eleventh time in 13 weeks...our imports of crude oil fell by an average of 180,000 barrels per day to an average of 6,725,000 barrels per day, after rising by an average of 976,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 234,000 barrels per day to an average of 3,295,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,430,000 barrels of per day during the week ending September 6th, 414,000 fewer barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be unchanged from the prior week at 12,400,000 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 15,830,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 17,495,000 barrels of crude per day during the week ending September 6th, 114,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 987,000 barrels of oil per day were being pulled out of 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 678,000 barrels per day less than what our oil refineries reported they used during the week...to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA inserted a (+678,000) 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"....with that great a quantity of oil unaccounted for this week, it calls into question the other oil totals that the EIA has reported and that we have just transcribed (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 6,694,000 barrels per day last week, now 11.7% less than the 7,577,000 barrel per day average that we were importing over the same four-week period last year...the 987,000 barrel per day decrease in our total crude inventories all came 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 unchanged at 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,000,000 barrels per day, while a 44,000 barrels per day increase to 398,000 barrels per day in Alaska's oil production had no impact on the final rounded national production total...last year's US crude oil production for the week ending September 7th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was 13.6% above that of a year ago, and 47.1% 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 95.1% of their capacity in using 17,495,000 barrels of crude per day during the week ending September 6th, up from 94.8% of capacity the prior week, refinery utilization rates that are fairly typical for late summer...however, the 17,495,000 barrels per day of oil that were refined this week were still 2.0% below the 17,857,000 barrels of crude per day that were being processed during the week ending September 7th, 2018, when US refineries were operating at 97.6% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was modestly higher, increasing by 88,000 barrels per day to 10,360,000 barrels per day during the week ending September 6th, after our refineries' gasoline output had decreased by 388,000 barrels per day over the prior week...but even with that increase in gasoline output, this week's gasoline production was still fractionally lower than the 10,384,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 187,000 barrels per day to 5,341,000 barrels per day, after our distillates output had decreased by 39,000 barrels per day the prior week....but even with that increase, our distillates production was still 3.5% less than the 5,536,000 barrels of distillates per day that were being produced during the week ending September 7th, 2018.... 

with ​just a modest increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell for the 9th time in 13 weeks and for the 23rd time in twenty-eight weeks, decreasing by 682,000 barrels to 228,904,000 barrels during the week to September 6th, after our gasoline supplies had fallen by 2,396,000 barrels over the prior week....our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 336,000 barrels per day to 9,807,000 barrels per day even while our exports of gasoline fell by 182,000 barrels per day to 637,000 barrels per day, and while our imports of gasoline rose by 80,000 barrels per day to 797,000 barrels per day...after this week's decrease, our gasoline supplies were 3.0% lower than last September 7th's inventory level of 235,869,000 barrels, while remaining roughly 3% above the five year average of our gasoline supplies for this time of the year...

with the big increase in our distillates production, our supplies of distillate fuels rose for the 11th time in the past 26 weeks, increasing by 2,704,000 barrels to 136,226,000 barrels during the week ending September 6th, after our distillates supplies had decreased by 2,538,000 barrels over the prior week...our distillates supplies increased this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, decreased by 310,000 barrels per day to 3,804,000 barrels per day, and because our exports of distillates fell by 315,000 barrels per day to 1,194,000 barrels per day, while our imports of distillates fell by 82,000 barrels per day to 44,000 barrels per day....but even after this week's inventory increase, our distillate supplies were still 2.2% less than the 139,283,000 barrels of distillates that we had stored on September 7th, 2018, and remained around 6% below the five year average of distillates stocks for this time of the year...

finally, as our exports rose and our refineries processed more oil, our commercial supplies of crude oil in storage fell for the eleventh time in thirteen weeks but for the seventeenth time in 34 weeks, decreasing by 6,912,000 barrels, from 422,980,000 barrels on August 30th to 416,068,000 barrels on September 6th...that decrease left our crude oil inventories 2% below the five-year average of crude oil supplies for this time of year, but still roughly 24% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after the first week of September, 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 over the past year up until the most recent thirteen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of September 6th were still 5.0% above the 396,194,000 barrels of oil we had stored on September 7th of 2018, but at the same time were 11.1% below the 468,241,000 barrels of oil that we had in storage on September 8th of 2017, and 13.3% below the 480,166,000 barrels of oil we had in commercial storage on September 9th of 2016...  

OPEC's Monthly Oil Market Report

this week we're also going to review OPEC's September Oil Market Report (covering August OPEC & global oil data), which was released on Wednesday 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...​as you’ll see, it shows there was ​again ​a large shortfall in the amount of oil produced ​globally ​in ​August, ​contrary to the story that​'s being told elsewhere​...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 impartially adjudicating 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...

as we can see from the above table of oil production data, OPEC's oil output rose by 136,000 barrels per day to 29,741,000 barrels per day in August, from their revised July production total of 29,605,000 barrels per day...however that July figure was originally reported as 29,609,000 barrels per day, so that means their production for August was, in effect, a 132,000 barrel per day increase from the previously reported production figures (for your reference, here is the table of the official July OPEC output figures as reported a month ago, before this month's revisions)...

​we can also see that the 118,000 barrel per day increase by the Saudis, the 86,000 barrel per day increase by Nigeria, and the 43,000 barrel per day increase by Iraq were the reasons that OPEC output rose in August, as most other OPEC members either cut their output or were little changed...however, those increases in the output from Nigeria and Iraq means that both countries are now well over their output allocation as originally determined for each OPEC 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 little over two months ago...this 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 as of their recent meeting....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 none of those exempt countries are producing more than they did in the 4th quarter of 2018, which 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 September 2017 to August 2019, and it comes from page 64 (pdf page 74) of the September OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale... 

including the increase in OPEC's production from what they produced a month ago, their preliminary estimate now indicates that total global oil production rose by 0.83 million barrels per day to 99.24 million barrels per day in August, but that reported increase came after July's total global output figure was revised down by 300,000 barrels per day from the 98.71 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 700,000 barrels per day in August after that revision, with higher oil production from the US, Canada, Malaysia, Brazil and Russia the major reasons for the non-OPEC output increase in August.... the 99.24 million barrels per day produced globally in August was also 0.36 million barrels per day, or 0.4% higher than the 98.88 million barrels of oil per day that were being produced globally in August a year ago (see the September 2018 OPEC report (online pdf) for the originally reported August 2018 details)...but even with ​this month's increase in OPEC's output, their August oil production of 29,741,000 barrels per day slipped to 30.0% of what was produced globally during the month, down from the revised 30.1% share they contributed in July....OPEC's August 2018 production was reported at 32,565,000 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 2,527,000 fewer barrels per day of oil than they were producing a year ago, when they accounted for 32.9% of global output, with a 1,394,000 barrel per day drop in output from Iran, a 596,000 barrel per day decrease in the output from Saudi Arabia, and a 523,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the year over year production increases of 141,000 barrels per day from Nigeria, 130,000 barrels per day from Libya, 130,000 barrels per day from Iraq, and 113,000 barrels per day from the United Arab Emirates...   

despite the 830,000 barrels per day increase in global oil output that was seen during August, 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 35 of the September OPEC Monthly Oil Market Report (pdf page 45), 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 fourth column, we've circled in blue the figure that's relevant for August, which is their revised estimate of global oil demand during the third quarter of 2019...

OPEC ​​has estima​​ted that during the 3rd quarter of this year, all oil consuming regions of the globe will be using 100.63 million barrels of oil per day, which was revised from their estimate of 100.69 million barrels of oil per day for the 3rd 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 99.24 million barrels per day during August, which means that there was a shortfall of around 1,450,000 barrels per day in global oil production when compared to the demand estimated for the month... in addition, the downward revision of 300,000 barrels per day to July's global output that's implied in this report, partially offset by the 60,000 barrels per day downward revision to 3rd quarter demand that we've just noted, means that the 1,980,000 barrel per day shortfall that we had previously figured for July based on last month's figures would now be revised to a deficit of 2,220,000 barrels per day....

however, demand figures for both the first quarter and 2nd quarter were also revised lower with this report, as you can see encircled by the green ellipse on the table above...the 170,000 barrels per day downward revision to 2nd quarter demand would mean that we'd have to revise our global oil deficit for June from 790,000 barrels per day to 620,000, that we'd have to revise our May deficit from 1,160,000 barrels per day to 990,000 barrels per day, and revise our global oil deficit for April from 1,030,000 barrels per day to 860,000 barrels per day...hence, for the 2nd quarter as a whole, even after those downward revision to demand, the world's oil producers were producing 767,000 barrels per day less than what was needed...

note that in green we've also circled a downward revision of 30,000 barrels per day to first quarter demand...that means that the global oil surplus of 160,000 barrels per day we had previously figured for March would have to be revised to a global oil surplus of 190,000 barrels per day...similarly, the 610,000 barrel per day global oil output surplus we had for February would now be a 640,000 barrel per day global oil output surplus, and the 520,000 barrel per day global oil output surplus we had for January would be revised to a 550,000 barrel per day oil output surplus.. 

our green ellipse above also highlights that OPEC has revised 2018's oil demand 10,000 barrels per day higher...when demand for 2018 was revised a month ago we adjusted our previously computed 2018 figures and for that revision and figured that for all of 2018, global oil demand exceeded production by roughly 47,240,000 barrels of oil for the year as a whole...the 10,000 barrels per day upward revision to 2018 demand would thus add 3,650,000 barrels to that deficit for a total shortfall of 50,890,000 barrels for 2018.​..​

This Week's Rig Count

the US rig count fell for the 26th time in 30 weeks over the week ending September 13th, and is now down by 18.2% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 12 rigs to a 28 month low of 886 rigs this past week, which was also down by 169 rigs from the 1055 rigs that were in use as of the September 14th report of 2018, and well 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 decreased by 5 rigs to 733 rigs this week, which was a 22 month low for oil rigs and 134 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 fell by 7 rigs to 153 natural gas rigs, a 30 month low for gas rig drilling activity and down by 33 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 September 7th, 2008...

offshore drilling activity was down by 2 to 26 rigs running this week, as platforms offshore from Texas and from Alaska were shut down...that still left 25 rigs drilling offshore from Louisiana and one offshore from the Kenai Peninsula in Alaska, a net increase of six offshore rigs from a year ago, when 11 rigs were drilling in Louisiana waters, one was drilling offshore from Texas, and two were deployed offshore from Alaska....

the count of active horizontal drilling rigs was down by 7 rigs to 776 horizontal rigs this week, which was the least horizontal rigs deployed since November 17th, 2017 and hence is a 22 month low for horizontal drilling...that was also 145 fewer horizontal rigs than the 921 horizontal rigs that were in use in the US on September 14th 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 10 to 57 directional rigs this week, and those were down by 14 from the 71 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count was up by 5 to 53 vertical rigs this week, but those were ​still ​down by 10 from the 63 vertical rigs that were in use on September 14th of 2018...

the details on this week's changes in drilling activity by state and by major 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 table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 13th, the second column shows the change in the number of working rigs between last week's count (September 6th) and this week's (September 13th) count, the third column shows last week's September 6th 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 14th of September, 2018...     

even with the majority of this week's rig decrease coming out of those drilling for natural gas, the 8 rig decrease in the oil-bearing Permian was still two-thirds of the total that were idled this week....of those, just one rig was shut down in Texas Oil District 8, or the core Permian Delaware, which still has 267 rigs drilling; while 2 rigs were shut down in Texas Oil District 8A, encompassing the northern part of the Permian Midland, and 5 rigs were shut down in Texas Oil District 7C, or the southern part of the Permian Midland, which now only has 9 rigs still drilling...other major changes in Texas include the startup of 4 rigs in Texas Oil District 7B, which accounts for the 3 rig increase in the Barnett shale, and 3 rigs that were shut down in Texas Oil District 10, the panhandle region, which corresponds to the Granite Wash...since the Granite Wash rig count is unchanged, it seems likely that 3 rigs began operation in the Oklahoma portion of Granite Wash to offset ​the ​shutdowns in Texas, given that the Oklahoma rig count increased despite the idling of 3 rigs in the Cana Woodford....oddly enough, even with this week's pullback in natural gas, the Cana Woodford, historically an oil play, saw a 2nd natural gas rig startup this week, while 4 oil rigs were idled in the basin, while the Barnett shale, more recently ployed for natural gas, had 3 oil ​seeking ​rigs added...another natural gas rig began operations in the Haynesville, apparently on the Texas side, since the Louisiana side of the basin shows a decrease...meanwhile, 3 natural gas rigs were shut down in West Virginia's Marcellus, one was shut down in Ohio' Utica, and 6 natural gas rigs were shut down in "other" basins not tracked separately by Baker Hughes...i'm not sure how to account for the 2 rig increase in Pennsylvania; all of the PA rigs shown to be drilling this week by the North America Rotary Rig Count Pivot Table (excel) are indicated to be in the Marcellus, but of the two rigs drilling in Fayette County, one is shown to be horizontal at a depth greater than 15,000 feet, while the other is indicated to be vertical at less than 5,000 feet...since that's physically impossible, we can probably assume that new PA rig in Fayette county is not targeting the Marcellus, thus accounting for the discrepancy in this week's count...we should also note that a horizontal rig started drilling for oil in Midland county Michigan this week, in the first drilling that state has seen since a 2 week stint in May of 2017...

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