Masters Of War

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

Sunday, October 27, 2019

largest drop in drilling activity in 6 months leaves oil rigs at a 30 month low, natural gas rigs at a 33 month low

oil prices rose more than 5% over the past week on a surprise drop in US crude supplies, a promise of deeper output cuts from OPEC, and hopes for a U.S.-China trade deal...after falling 92 cents or 1.7% to $53.78 a barrel last week on a trade talks letdown and on a big jump in US oil supplies, the contract price of US light sweet crude for November delivery continued lower on Monday, after Commerce Secretary Wilbur Ross said a trade deal with China need not be finalized next month, feeding into worries that ​deepening ​global economic weakness would hurt demand for oil, prices for which ended down 47 cents, or 0.9%, at a two week low of $53.31 a barrel...but oil prices rebounded on Tuesday on a sentiment shift of concerns​ on both the UK's Brexit and the U.S.-China trade war, and finished 85 cents higher at $54.16 a barrel, buoyed by a report that OPEC would consider deeper production cuts when they meet in December, as trading in the November oil contract expired...while the price of oil for delivery in December, which had risen 97 cents to $54.48 a barrel on Tuesday, initially started lower on Wednesday on an API report of a larger than expected build of US oil inventories, it quickly reversed and surged higher after the EIA's data showed a surprise draw from U.S. crude stocks, and ultimately closed $1.49, or 2.7% higher at $55.97 per barrel....oil prices then extended that gain on Thursday, with US light sweet crude rising 26 cents to $56.23 a barrel, as the surprise drop in U.S. crude inventories and the prospect of further OPEC cuts offset the demand uncertainty stemming from the trade war and Brexit....oil prices continued rising on Friday after administration officials said they were close to finalizing the first part of a trade deal with China after months of a tariff war and finished the day 43 cents, or 0.8%, higher at $56.66 a barrel, thus ending up over 5% for the week as the news of progress on the so-called 'phase one' of a U.S.-China trade deal eased concerns over a slowdown in economic growth and energy demand...

natural gas prices, on the other hand, fell for a fifth week in the past six as last week's forecasts for a cold weather outbreak moderated and shifted west....after rising 4.8% to $2.320 per mmBTU last week on forecasts for colder than normal temperatures for the broad midsection of the country, the contract price of natural gas for November delivery gave up most of those gains on Monday as the cold forecast by the weather models weakened over the weekend and withdrew to the Rockies, leaving the large population centers in the East and the Midwest near normal, as natural gas prices fell 8.2 cents...gas prices recovered 3.4 cents on Tuesday and another penny on Wednesday as the 6 to 10 day forecast indicated the cold would spread to the south central states, and then gained another 3.4 cents ​on Thursday ​​after the natural gas storage report showed a smaller inventory increase than analysts had expected...however, natural gas prices then slipped back 1.6 cents on Friday to end the week at $2.300 per mmBTU, down 2 cents or less than 1% for the week...

the natural gas storage report for the week ending October 18th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 87 billion cubic feet to 3,606 billion cubic feet by the end of the week, which meant our gas supplies were 519 billion cubic feet, or 16.8% more than the 3,087 billion cubic feet that were in storage on October 18th of last year, and 28 billion cubic feet, or 0.8% above the five-year average of 3,578 billion cubic feet of natural gas that have been in storage as of the 18th of October in recent years....this week's 87 billion cubic feet injection into US natural gas storage was somewhat lower than the average forecast for a 92 billion cubic feet injection from analysts surveyed by S&P Global Platts, but it was well above the average 73 billion cubic feet of natural gas that have been added to gas storage during the third week of October over the past 5 years, the 30th such average or above average storage build in the last 32 weeks...the 2,428 billion cubic feet of natural gas that have been added to storage over the 30 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2482 billion cubic feet of natural gas that were injected into storage over the same 30 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 October 18th showed that because of a decrease in our oil imports, an increase in our oil exports, and a pickup in our oil refining, we needed to withdraw oil from storage for the first time in 6 weeks...our imports of crude oil fell by an average of 438,000 barrels per day to an average of 5,857,000 barrels per day, after rising by an average of 70,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 435,000 barrels per day to an average of 3,683,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,174,000 barrels of per day during the week ending October 18th, 873,000 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 at a record 12,600,000 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 14,774,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,865,000 barrels of crude per day during the week ending October 18th, 429,000 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 average of 385,000 barrels of oil per day were being withdrawn from the supplies of oil stored in the US....hence, ​we can see that ​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 706,000 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 (+706,000) 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 much oil unaccounted for again this week, it means that one or all of the oil metrics that the EIA has reported and that we have just transcribed have to be seriously off the mark...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill, we continue to report them as they're seen​ & believed​ by everyone else (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 6,167,000 barrels per day last week, now 19.5% less than the 7,664,000 barrel per day average that we were importing over the same four-week period last year....the 385,000 barrel per day net withdrawal from our total crude inventories included 242,000 barrels per day that were pulled out of our commercially available stocks of crude oil and a withdrawal of 143,000 barrels per day from our Strategic Petroleum Reserve....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, and because Alaska's oil production was unchanged at 485,000 barrels per day...last year's US crude oil production for the week ending October 19th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was 15.6% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 85.2% of their capacity in using 15,865,000 barrels of crude per day during the week ending October 18th, up from 83.1% of capacity the prior week, but still somewhat below the normal, even for a refinery maintenance season...hence, the 15,865,000 barrels per day of oil that were refined this week was 2.5% below the seasonal low 16,268,000 barrels of crude per day that were being processed during the week ending October 19th, 2018, when US refineries were operating at 89.2% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 100,000 barrels per day to 10,098,000 barrels per day during the week ending October 18th, after our refineries' gasoline output had decreased by 68,000 barrels per day the prior week....with that increase in gasoline output, this week's gasoline production was 4.1% lower than the 10,028,000 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 77,000 barrels per day to 4,765,000 barrels per day, after our distillates output had decreased by 147,000 barrels per day over the prior week...since our distillates production is still down by a total of 567,000 barrels per day over the past 5 weeks, our distillates' production this week was still 3.9% below the 4,960,000 barrels of distillates per day that were being produced during the week ending October 19th, 2018.... 

even with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 12th time in 18 weeks and for the 26th time in thirty-three weeks, falling by 3,107,000 barrels to 223,094,000 barrels during the week to October 18th, after our gasoline supplies had decreased by 2,562,000 barrels over the prior week....the decrease in our gasoline supplies was larger this week because the amount of gasoline supplied to US markets increased by 236,000 barrels per day to 9,590,000 barrels per day, while our imports of gasoline rose by 44,000 barrels per day to 697,000 barrels per day and while our exports of gasoline fell by 156,000 barrels per day to 625,000 barrels per day....after this week's decrease, our gasoline supplies were 2.7% lower than last October 19th's inventory level of 229,330,000 barrels, and but remained roughly 2% above the five year average of our gasoline supplies for this time of the year...

likewise, with the increase in our distillates production, our supplies of distillate fuels fell for the 20th time in the past 30 weeks, decreasing by 2,715,000 barrels to 120,786,000 barrels during the week ending October 18th, after our distillates supplies had decreased by 3,823,000 barrels over the prior week...our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 290,000 barrels per day to 4,076,000 barrels per day, while our exports of distillates rose by 144,000 barrels per day to 1,209,000 barrels per day while our imports of distillates fell by 64,000 barrels per day to 133,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 7.4% from the 130,376,000 barrels of distillates that we had stored on October 19th, 2018, and fell to around 12% below the five year average of distillates stocks for this time of the year...

finally, with this week's refinery pickup coupled with the decrease in our net oil imports, our commercial supplies of crude oil in storage fell for the twelfth time in nineteen weeks and for the seventeen time in 39 weeks, decreasing by 1,699,000 barrels, from 434,850,000 barrels on October 11th to 433,151,000 barrels on October 18th....that decrease knocked our crude oil inventories back to the five-year average of crude oil supplies for this time of year, and back to around 30% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the third weekend of October, 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 July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 18th were still 2.5% above the 422,787,000 barrels of oil we had stored on October 19th of 2018, but at the same time were 5.3% below the 457,341,000 barrels of oil that we had in storage on October 20th of 2017, and 7.5% below the 468,158,000 barrels of oil we had in commercial storage on October 21st of 2016...  

This Week's Rig Count

the US rig count fell for the 9th time in 10 weeks and for the 32nd time in 36 weeks over the week ending October 25th, and is now down by 23.4% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 21 rigs to a 30 month low of 830 rigs this past week, the largest drop in 6 months, down by 238 rigs from the 1068 rigs that were in use as of the October 26th 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 17 rigs to a 30 month low of 696 oil rigs this week, which was also 179 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 4 rigs to 133 natural gas rigs, the least natural gas rigs since December 30 2016 and hence a 33 month low for gas rig drilling activity, down by 60 rigs from the 193 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, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..

Gulf of Mexico offshore drilling activity decreased by 1 rig to 20 Gulf rigs running this week, as a rig that had been drilling offshore from Louisiana was shut down...that still left 20 rigs drilling in Louisiana's offshore waters, 2 more rigs than the Gulf of Mexico rig count of 18 a year ago, when 17 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago...hence, the national total of 21 offshore rigs is up by 2 rigs from the 19 rigs that were deployed offshore a year ago...

the count of active horizontal drilling rigs was down by 17 rigs to 728  horizontal rigs this week, which was the least horizontal rigs deployed since April 28th, 2017 and hence is a new 30 month low for horizontal drilling...that was also 199 fewer horizontal rigs than the 927 horizontal rigs that were in use in the US on October 26th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the directional rig count was down by 4 rigs to directional rigs this week, and those were down by 22 from the 72 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count was unchanged at 51 vertical rigs this week, while those were down by 17 from the 68 vertical rigs that were in use on October 26th 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 October 25th, the second column shows the change in the number of working rigs between last week's count (October 18th) and this week's (October 25th) count, the third column shows last week's October 18th 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 26th of October, 2018...   

October 25 2019 rig count summary

we again have a problem with the Permian basin rig count this week, since the Rigs by State - Current and Historical excel file from Baker Hughes appears to show a drop of 7 rigs in the Texas Oil Districts that encompass the Texas portion of that basin.... Texas Oil District 8, or the core Permian Delaware, shows 266 rigs deployed, a drop of 3 from last week; Texas Oil District 8A, or the northern Permian Midland, shows 13 rigs remaining active, a drop of two from a week ago, while Texas Oil District 7C, or the southern Permian Midland, has 26 rigs remaining, also a drop of two rigs from a week ago...last week we had rig additions in those districts that were two greater than the Permian basin increase, and we assumed that those 2 ​additional rigs were ​in the same region but ​not targeting the Permian...however, since we hadn't seen that happen before, and since it has been reversed this week, it's possible that last week's Permian count was in error and this week's count corrected it...as i noted last week, one could search the North America Rotary Rig Count Pivot Table (xls), which has individual well records going back to February 2011, to see what the actual changes were, but unless one knew offhand which counties were in each of those Texas oil districts. it would likely be an all day chore...

at any rate, with the Texas Permian basins showing a 7 rig decrease this week, it seems likely that the rig that was pulled from New Mexico was not a Permian rig...meanwhile, the 6 rig decrease in Oklahoma appears to include the 2​ oil​ rigs pulled out of the Cana Woodford, the single​ oil​ rig pulled out of the Ardmore Woodford, 2 rigs pulled out of basins not tracked separately by Baker Hughes, and ​an oil rig that had been drilling in the Granite Wash, since Texas Oil District 10, or the Texas side of that basin, saw a 1 rig increase....elsewhere, the 2 ​oil ​rigs pulled out of the Williston basin match the North Dakota count, and the rig pulled out of the Gulf of Mexico accounts for 1 rig decrease in Louisiana...however, the two rig decrease in Wyoming probably includes a rig that had been drilling in the Denver-Julesburg Niobrara chalk, since Colorado saw a one rig increase....meanwhile, among rigs targeting natural gas, this week saw two rigs pulled out of the Marcellus, one each from Pennsylvania and from West Virginia, and two rigs removed from those "other basins" not tracked separately by Baker Hughes...we would also note that other than the major producing states listed in the table above, both Alabama and South Dakota saw ​single ​rigs removed this week, leaving both states with no drilling at this time...a year ago, Alabama had one rig deployed, while South Dakota had none...

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Note: there's more here...

Sunday, October 20, 2019

natural gas supplies above average 1st time in 2 years; refineries slowest since Harvey; largest drop in DUC wells ever

oil prices ended modesty lower this week, largely on disappointment in the details of a proposed US-China trade deal and on a big jump in US oil supplies...after rising nearly 4% to $54.70 a barrel on the promise of further OPEC output cuts and on hopes for a US-China trade pact last week, the price of US light sweet crude for November delivery opened 20 cents higher on Monday amid renewed geopolitical tensions in the Middle East, but immediately began falling as details about the first phase of a U.S.-China trade deal did little to reassure there'​d be a quick end to the trade war and ultimately settled $1.11, or 2% lower at $53.59 a barrel...oil prices fell again on Tuesday, as traders worried that the unrelenting U.S.-China trade war would weaken the global economy and that swelling U.S. crude inventories would further pressure prices, with US crude ending 78 cents, or 1.5%, lower at $52.81 a barrel...however, oil prices recovered part of that loss on Wednesday on hopes that OPEC would extend its supply cuts at their coming biannual meeting, and ended 55 cents, or 1%, higher at $53.36 a barrel...oil prices then tumbled early on Thursday as industry data showed a much larger-than-expected build-up in U.S. inventories, but the drop was limited after the United Kingdom and the European Union announced they had reached a deal on Britain's separation from the Union, and then, boosted by a weaker dollar, oil prices reversed and rallied late in the session to end up 57 cents at $53.93 a barrel...oil prices edged lower again on Friday, as concerns about the weakest Chinese GDP report in 30 years outweighed a bullish report from its refining sector, but the day's losses were limited by hopes for progress toward a U.S.-China trade agreement​,​ ​with ​oil end​ing down just 15 cents at $53.78 a barrel...still, oil prices still closed 1.7% lower on the week, as higher US crude inventories and the depressed outlook for energy demand outweighed the optimism about potential future trade deals...

natural gas prices, on the other hand, rose for the first time in 5 weeks, as both the 6 to 10 day and the 8 to 14 day forecasts indicated colder than lower temperatures for the broad midsection of the country, and as the storage report came in slightly under the market consensus...after falling 5.9% to $2.214 per mmBTU on record production and weak demand last week, the contract price of natural gas for November delivery rose 6.6 cents or 3% on Monday as a shift to colder in the weather data snapped a 5 day losing streak for natural gas contract prices...momentum from that move carried into Tuesday as prices rose another 5.9 cents, but prices then fell back 3.6 cents on Wednesday as the midday weather models showed less potential for strong, lasting cold..​.​.prices edged higher on Thursday on short-covering and position-squaring ahead of the weekly storage report and ended 1.5 cents higher when the report showed a smaller increase in stores than was expected​, even though it was the largest on record for the date​....natural gas prices then rose two-tenths of a cent on Friday to finish the week at $2.320 per mmBTU, 4.8% higher than the previous Friday...

the natural gas storage report for the week ending October 11th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 104 billion cubic feet to 3,519 billion cubic feet by the end of the week, which meant our gas supplies were 494 billion cubic feet, or 16.3% more than the 3,025 billion cubic feet that were in storage on October 11th of last year, and 14 billion cubic feet, or 0.4% above the five-year average of 3,505 billion cubic feet of natural gas that have been in storage as of the 11th of October in recent years, the first time out natural gas supplies surpassed the previous five-year average since Sept. 22, 2017.....this week's 104 billion cubic feet injection into US natural gas storage was a bit lower than the consensus forecast for a 108 billion cubic feet injection from analysts surveyed by S&P Global Platts, but it was well above the average 81 billion cubic feet of natural gas that have been added to gas storage during the second week of October over the past 5 years, the 29th such average or above average storage build in the last 31 weeks...the 2,341 billion cubic feet of natural gas that have been added to storage over the 29 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2​387 billion cubic feet of natural gas that were injected into storage over the same 29 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet…. 

with our natural gas supplies now above the five year average for the first time in nearly 25 months, we'll include the graph of natural gas in storage that accompanied this week's storage report...

October 19 2019 natural gas storage for October 11

the above graph comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas in billion cubic feet that was in storage in the lower 48 states over the period from September 2017 up to the week ending October 11th 2019 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background​ graph​ represents the previous upper and lower range of natural gas in storage for any given time of year for the 5 years prior to the two years that are shown by today's graph…thus the grey area also shows us the normal variation of natural gas storage levels as they fluctuate from season to season, with natural gas in storage underground normally building to a maximum by the first weekend in November, falling through the winter, and usually bottoming out at the end of March or the first week of April, depending of course on the spring heating requirements in any given year...as you can see, the level of natural gas supplies as indicated by the blue graph has been consistently below the 5 year average that's indicated by the ​dark ​grey graph over the two year span of this graph, with supplies through much of last year well below the 5 year range, often tracking a 15 year low for each date in question...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 11th showed that because of a decrease in our oil exports and a deepening slowdown in our oil refining, we were left with surplus oil to add to storage for the fifth week in a row...our imports of crude oil rose by an average of 70,000 barrels per day to an average of 6,295,000 barrels per day, after falling by an average of 67,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 153,000 barrels per day to an average of 3,248,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,047,000 barrels of per day during the week ending October 11th, 233,000 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 at a record 12,600,000 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 15,647,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,436,000 barrels of crude per day during the week ending October 11th, 221,000 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 1,145,000 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 933,000 barrels per day less than what was reportedly added to storage plus 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 (+933,000) 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 much oil unaccounted for again this week,​ it​ means that one or all of the oil metrics that the EIA has reported and that we have just transcribed are seriously off the mark (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 6,297,000 barrels per day last week, now 18.2% less than the 7,695,000 barrel per day average that we were importing over the same four-week period last year....the 1,145,000 barrel per day net increase in our total crude inventories included 1,326,000 barrels per day that were added to our commercially available stocks of crude oil, which was offset by a withdrawal of 181,000 barrels per day from our Strategic Petroleum Reserve....this week's crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 12,000 barrels per day increase to 485,000 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 October 12th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was 15.6% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 83.1% of their capacity in using 15,436,000 barrels of crude per day during the week ending October 11th, down from 85.7% of capacity the prior week, and the lowest refinery utilization rate since September 2017, ​after Hurricane Harvey had caused the shutdown of 12% of US refining capacity along the western Gulf Coast....hence, the 15,436,000 barrels per day of oil that were refined this week was 5.4% less than the 16,316,000 barrels of crude per day that were being processed during the week ending October 12th, 2018, when US refineries were operating at a seasonal low 88.8% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 68,000 barrels per day to 9,998,000 barrels per day during the week ending October 11th, after our refineries' gasoline output had decreased by 15,000 barrels per day the prior week....with that decrease in gasoline output, this week's gasoline production was 4.1% lower than the 10,430,000 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 147,000 barrels per day to 4,688,000 barrels per day, the lowest since March 2018, after our distillates output had increased by 22,000 barrels per day over the prior week....however, since our distillates production was down by a total of 528,000 barrels per day over the prior 3 weeks, our distillates​'​ production this week was 2.6% below the 4,815,000 barrels of distillates per day that were being produced during the week ending October 12th, 2018.... 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 17 weeks and for the 25th time in thirty-two weeks, falling by 2,562,000 barrels to 226,201,000 barrels during the week to October 11th, after our gasoline supplies had decreased by 1,213,000 barrels over the prior week....the decrease in our gasoline supplies was larger this week even though the amount of gasoline supplied to US markets decreased by 106,000 barrels per day to 9,354,000 barrels per day, while our imports of gasoline rose by 9,000 barrels per day to 651,000 barrels per day while our exports of gasoline fell by 15,000 barrels per day to 781,000 barrels per day....after this week's decrease, our gasoline supplies were 3.4% lower than last October 12th's inventory level of 234,156,000 barrels, and but remained roughly 2% 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 19th time in the past 31 weeks, decreasing by 3,823,000 barrels to 123,501,000 barrels during the week ending October 11th, after our distillates supplies had decreased by 3,943,000 barrels over the prior week...our distillates supplies fell this week even though our exports of distillates fell by 389,000 barrels per day to 1,065,000 barrels per day while our imports of distillates rose by 105,000 barrels per day to 197,000 barrels per day, because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 330,000 barrels per day to 4,366,000 barrels per day....after this week's inventory decrease, our distillate supplies were 6.9% less than the 132,638,000 barrels of distillates that we had stored on October 12th, 2018, and fell to around 11% below the five year average of distillates stocks for this time of the year...

finally, with the refinery slowdown and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the seventh time in eighteen weeks and for the twenty-second time in 38 weeks, increasing by 2,927,000 barrels, from 425,569,000 barrels on October 4th to 434,850,000 barrels on October 11th to ...that increase lifted our crude oil inventories to 2% above the five-year average of crude oil supplies for this time of year, and to more than 31.1% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the second weekend of October, 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 July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 4th were still 4.4% above the 416,441,000 barrels of oil we had stored on October 12th of 2018, but at the same time were 4.7% below the 456,485,000 barrels of oil that we had in storage on October 13th of 2017, and 7.2% below the 468,711,000 barrels of oil we had in commercial storage on October 14th of 2016...     

This Week's Rig Count

the US rig count fell for the 8th time in 9 weeks and for the 31st time in 35 weeks over the week ending October 18th, and is now down by nearly 21.5% since the beginning of this year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 30 month low of 851 rigs this past week, which was also down by 216 rigs from the 1067 rigs that were in use as of the October 19th 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 increased by 1 rig to 713 rigs this week, which was still 160 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 6 rigs to 137 natural gas rigs, a 32 month low for gas rig drilling activity, down by 57 rigs from the 194 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, a change from a year ago, when there were no such "miscellaneous" rigs deployed..

Gulf of Mexico offshore drilling activity decreased by 2 rigs to 21 Gulf rigs running this week, as 2 rigs that had been drilling offshore from Louisiana were shut down...that still left 21 rigs drilling in Louisiana​'s​ offshore waters, 2 more rigs than the Gulf of Mexico rig count of 19 a year ago, when 18 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago...hence, the national total of 22 offshore rigs is up by 2 rigs from the 20 rigs that were deployed offshore a year ago...however, another rig began drilling through an inland body of water in southern Louisiana this week, where there are now two​ drilling on inland waters​, but still down from the 3 such "inland waters" rigs deployed a year ago...

the count of active horizontal drilling rigs was down by 5 rigs to 745  horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 29 month low for horizontal drilling...that was also 181 fewer horizontal rigs than the 926 horizontal rigs that were in use in the US on October 19th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was unchanged at 55 directional rigs this week, but those were still down by 17 from the 72 directional rigs that were operating during the same week of last year...in addition, the vertical rig count was also unchanged at 51 vertical rigs this week, and those were down by 18 from the 69 vertical rigs that were in use on October 5th 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 October 18th, the second column shows the change in the number of working rigs between last week's count (October 11th) and this week's (October 18th) count, the third column shows last week's October 11th 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 19th of October, 2018...   

October 18 2019 rig count summary

we have a problem with the Permian rig count this week, since the Rigs by State - Current and Historical excel file from Baker Hughes shows that one rig was added in Texas Oil District 8, or the core Permian Delaware, that two rigs were added in Texas Oil District 8A, or the northern Permian Midland, and another rig was added in Texas Oil District 7C, or the southern Permian Midland...as it's likely that the rig pulled out of New Mexico had been operating in the western Permian Delaware, and since the Permian count is only up by one, we have to assume that two of those rigs that were added in Texas Permian districts were not targeting the Permian...to determine where, one could search the North America Rotary Rig Count Pivot Table (xls), which has individual well records going back to February 2011, but unless one knew ​offhand ​which counties were in each of those Texas districts it would likely be a fool's errand...

in addition, there's also a disconnect on the totals in the Marcellus ​shale ​and the states involved, since the Marcellus shows a three rig decrease while West Virginia shows a one rig decrease and Pennsylvania shows 4 fewer rigs...since the West Virginia and Pennsylvania current rig counts add up to the current Marcellus count, that means the shallow vertical rigs targeting gas we noted starting up in Fayette County, Pennsylvania during the week ending Sept 13th and in southern West Virginia earlier this year were both shut down this week...to get from there to the 6 rig decrease in natural gas that this week's report shows, then, we include all 5 of those Appalachian rigs - 3 in the Marcellus and the two shallower rigs targeting formations not tracked separately by Baker Hughes, and two natural gas rig pulled out of the Eagle Ford in southeastern Texas, which are then offset by a rig added in the Barnett shale formation in the north central part of the state...however, neither of those Texas formations shows a change in the table above because their natural gas change was offset by a change in oil rigs; for the Eagle Ford, two oil rigs were added, leaving that basin's count at 52 oil rigs and 8 targeting natural gas, while an oil rig was pulled out of the Barnett shale, leaving the Barnett with two oil rigs and two targeting natural gas...

DUC well report for September

Monday of this past week saw the release of the EIA's Drilling Productivity Report for October, which includes the EIA's September data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the seventh month in a row, this report showed a decrease in uncompleted wells nationally in September, as both drilling of new wells and completions of drilled wells decreased....moreover, the inventory of uncompleted wells fell in every major US basin, including the Permian basin of western Texas and New Mexico, which had seen increases of newly drilled but uncompleted wells (DUCs) every month from August 2016 through August 2019...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 206 wells, the largest decrease on record, falling from a revised 7,946 DUC wells in July to 7,740 DUC wells in September, which still represents 6.2% more than the 7,284 wells that had been drilled but remained uncompleted as of the end of September of a year ago...that DUC decrease occurred as 1,184 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during September, down by 61 from the 1,245 wells that were drilled in August and the lowest in 19 months, while 1,390 wells were completed and brought into production by fracking, a decrease of 5 well completions from the 1,395 completions seen in August....at the September completion rate, the 7,740 drilled but uncompleted wells left at the end of the month still represent a 5.6 month backlog of wells that have been drilled but are not yet fracked, down from a backlog of 5.7 months a month ago...  

both oil producing regions and natural gas producing regions saw DUC well decreases in September, since no major basin saw an increase...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 59, from 885 at the end of August to 826 DUC wells at the end of September, as 82 wells were drilled into the Anadarko basin during September while 141 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 49, from 3,717 DUC wells at the end of August to 3,668 DUCs at the end of September, as 503 new wells were drilled into the Permian, while 552 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 32 to 473, as 168 Niobrara wells were drilled in September while 200 Niobrara wells were completed....meanwhile, DUC wells in the Eagle Ford of south Texas decreased by 24, from 1,468 DUC wells at the end of August to 1,444 DUCs at the end of September, as 175 wells were drilled in the Eagle Ford during August, while 199 already drilled Eagle Ford wells were completed....in addition, DUC wells in the Bakken of North Dakota fell by 21, from 696 DUC wells at the end of August to 675 DUCs at the end of September, as 104 wells were drilled into the Bakken in August, while 125 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 16 wells, from 520 DUCs at the end of July to 504 DUCs at the end of September, as 107 wells were drilled into the Marcellus and Utica shales during the month, while 123 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 5 wells to 180, as 45 wells were drilled into the Haynesville during September, while 50 Haynesville wells were fracked during the same period....thus, for the month of September, 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 185 wells to 7,056 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 21 wells to 684 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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Sunday, October 13, 2019

global oil shortage at 3.38 million barrels per day in Sept as OPEC output fell 1.32 mbpd, non OPEC output fell 0.45 mbpd

oil prices ended higher this past week, as prospects for a US-China trade deal rallied financial ​and ​commodity markets worldwide....after falling more than 5% to $52.81 a barrel on weak economic data and the Saudi's production recovery last week, prices for US light sweet crude for November delivery initially rose more than $1 on Monday, as deadly anti-government demonstrations gripped Iraq, but gave up those gains to close 6 cents lower at $52.75 a barrel, pressured by prevailing worries over energy demand, despite reports of a drop in OPEC output....with U.S.-China trade talks looming over oil markets, oil prices fell again on Tuesday as US blacklisting of more Chinese companies dampened hopes for a quick trade deal, but closed down just 12 cents at 52.63 a barrel, as unrest in Iraq and Ecuador lent support to prices... oil prices slipped for a third consecutive session on Wednesday as the prospect of the United States and China striking a trade deal in talks this week dimmed, and ended 4 cents lower at 52.59 a barrel, as minutes from the Fed’s September meeting raised economic worries and the weekly EIA data revealed a fourth straight rise in domestic crude supplies...oil prices initially fell more than $1 on Thursday on concerns of trade-war related lower fuel demand, but then rallied on comments by OPEC Secretary-General Barkindo that they would take action to balance oil markets at their December meeting and closed 96 cents higher at $53.55 a barrel...oil prices edged slowly higher early on Friday, on hopes for deeper OPEC output cuts and hopes for a US-China trade pact, then jumped more than 2% after Iranian media said a state-owned oil tanker was attacked near Saudi Arabia, and went on to close $1.15 higher at $54.70 a barrel, on reports that the U.S. and China had reached partial agreement that could lead to a truce in the trade war...oil prices were thus able to log a weekly gain of nearly 4%, in their first weekly increase since the September 14th drone strikes on Saudi oil facilities..

natural gas prices, on the other hand, fell every day this past week and ended lower for a 4th consecutive week, as record production and weak demand continued to weigh on prices...after falling 2.2% to $2.352 per mmBTU on record production and weak demand last week, the contract price of natural gas for November delivery fell 4.9 cents or more than 2% on Monday after natural gas production had increased to a new all-time high over the weekend and the weather pattern shifted to indicate below normal demand...​gas ​prices ​then ​fell 1.5 cents on Tuesday and another 5.4 cents on Wednesday, as forecasts lessened the odds of a durable early season cold snap, ​thus ​pushing prices lower...prices slipped another 1.6 cents on Thursday on an EIA natural gas storage report that was higher than expected but still within the range of the various market estimates and then inched down another four-tenths of a cent on Friday to end the week at $2.214 per mmBTU, down 5.9% from the prior Friday and down 18.6% from its September 16th close...

the natural gas storage report for the week ending October 4th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 98 billion cubic feet to 3,415 billion cubic feet by the end of the week, which meant our gas supplies were 472 billion cubic feet, or 16.0% more than the 2,943 billion cubic feet that were in storage on October 4th of last year, while still 9 billion cubic feet, or 0.3% below the five-year average of 3,423 billion cubic feet of natural gas that have been in storage as of the 4th of October in recent years....this week's 98 billion cubic feet injection into US natural gas storage was more than the consensus forecast for a 94 billion cubic feet injection from analysts surveyed by S&P Global Platts, and it was also above the average 89 billion cubic feet of natural gas that have been added to gas storage during the first week of October over the past 5 years, the 28th such average or above average storage build in the last 30 weeks...the 2,237 billion cubic feet of natural gas that have been added to storage over the 28 weeks of this year's injection season is the second most for the same period in the modern record, eclipsed only by the record 2294 billion cubic feet of natural gas that were injected into storage over the same 28 weeks of the 2014 natural gas injection season, a coolish 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 October 4th showed that because of a deepening slowdown in our oil refining, we were left with surplus oil to add to storage for the fourth week in a row...our imports of crude oil fell by an average of 67,000 barrels per day to an average of 6,224,000 barrels per day, after falling by an average of 87,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 534,000 barrels per day to an average of 3,401,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,823,000 barrels of per day during the week ending October 4th, 601,000 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 200,000 barrels per day higher at a record 12,600,000 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 15,423,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,656,000 barrels of crude per day during the week ending October 4th, 496,000 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 389,000 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 623,000 barrels per day less than what was reportedly added to storage plus 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 (+623,000) 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 much  oil unaccounted for 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 fell to an average of 6,486,000 barrels per day last week, now 16.8% less than the 7,797,000 barrel per day average that we were importing over the same four-week period last year....the 389,000 barrel per day net increase in our total crude inventories included 418,000 barrels per day that were added to our commercially available stocks of crude oil, which was offset by a withdrawal of 29,000 barrels per day from our Strategic Petroleum Reserve....this week's crude oil production was reported to be 100,000 barrels per day higher at a record 12,600,000 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 a record 12,100,000 barrels per day, while a 8,000 barrels per day decrease to 473,000 barrels per day in Alaska's oil production ha no impact on the final rounded national production total...last year's US crude oil production for the week ending October 4th was rounded to 11,200,000 barrels per day, so this reporting week's rounded oil production figure was 12.5% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 86.4% of their capacity in using 15,656,000 barrels of crude per day during the week ending October 4th, down from 86.4% of capacity the prior week, & well below the normal refinery utilization rate for mid-September, possibly due to the residual effects of tropical storm Imelda's track through southeastern Texas...whatever the reason, the 15,656,000 barrels per day of oil that were refined this week was 3.6% less than the 16,239,000 barrels of crude per day that were being processed during the week ending October 5th, 2018, when US refineries were operating at 88.8% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 15,000 barrels per day to 10,066,000 barrels per day during the week ending October 4th, after our refineries' gasoline output had decreased by 159,000 barrels per day the prior week...but even with that decrease in gasoline output, this week's gasoline production was 3.7% higher than the 9,711,000 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 22,000 barrels per day to 4,835,000 barrels per day, after our distillates output had decreased by 528,000 barrels per day over the prior 3 weeks....​hence, after those​ prior​ larger decreases, our distillates production was 3.8% below the 5,028,000 barrels of distillates per day that were being produced during the week ending October 5th, 2018.... 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 17 weeks and for the 25th time in thirty-two weeks, falling by 1,213,000 barrels to 228,763,000 barrels during the week to October 4th, after our gasoline supplies had decreased by 228,000 barrels over the prior week....the decrease in our gasoline supplies was larger this week because the amount of gasoline supplied to US markets increased by 223,000 barrels per day to 9,460,000 barrels per day, and because our imports of gasoline fell by 201,000 barrels per day to 642,000 barrels per day while our exports of gasoline fell by 124,000 barrels per day to 796,000 barrels per day....after this week's decrease, our gasoline supplies were 3.1% lower than last October 5th's inventory level of 236,172,000 barrels, and slipped back to roughly 2% above the five year average of our gasoline supplies for this time of the year...

even with the small increase in our distillates production, our supplies of distillate fuels fell for the 18th time in the past 30 weeks, decreasing by 3,943,000 barrels to 127,324,000 barrels during the week ending October 4th, after our distillates supplies had decreased by 2,418,000 barrels over the prior week...the decrease in our distillates supplies was more extreme this week because our exports of distillates rose by 205,000 barrels per day to 1,454,000 barrels per day  while our imports of distillates rose by 42,000 barrels per day to 92,000 barrels per day, and because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 76,000 barrels per day to 4,036,000 barrels per day....after this week's inventory decrease, our distillate supplies were 4.6% less than the 133,465,000 barrels of distillates that we had stored on October 5th, 2018, and fell to around 9% below the five year average of distillates stocks for this time of the year...

finally, with the increase in oil production and the refinery slowdown, our commercial supplies of crude oil in storage rose for the sixth time in seventeen weeks and for the twenty-first time in 38 weeks, increasing by 2,927,000 barrels, from 422,642,000 barrels on September 27th to 425,569,000 barrels on October 4th...that increase still left our crude oil inventories near the five-year average of crude oil supplies for this time of year, but more than 25% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the first weekend of October, 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 seventeen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of October 4th were still 3.8% above the 409,951,000 barrels of oil we had stored on October 5th of 2018, but at the same time were 7.9% below the 462,216,000 barrels of oil that we had in storage on October 6th of 2017, and 10.2% below the 473,958,000 barrels of oil we had in commercial storage on October 7th of 2016...     

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of OPEC's October Oil Market Report​, which cover​s September OPEC & global oil data, and ​hence serves to give us the first snapshot of the impact that the September 14th drone attack on Saudi oil infrastructure had on their crude oil production, OPEC's oil output, and global oil supplies....as you’ll see, this report shows there was again a large shortfall in the amount of oil produced globally in September, almost twice the large shortfall seen in August...

the first table from this monthly report that we'll look at is from the page numbered 58 of that report (pdf page 68), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as 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...

September 2019 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC's oil output fell by 1,318,000 barrels per day to 28,491,000 barrels per day in September, from their revised August production total of 29,809,000 barrels per day...however that August figure was originally reported as 29,741,000 barrels per day, which means that August​'s production​ was revised 68,000 barrels per day higher and hence September's production was, in effect, a 1,250,000 barrel per day decrease from the previously reported production figures (for your reference, here is the table of the official August OPEC output figures as reported a month ago, before this month's revisions)...

we can also see that the 1,280,000 barrel per day decrease in production from the Saudis, largely due to the attack on their facilities, was the reason for ​OPEC's ​September output drop, as decreases of 82,000 barrels per day in output from Venezuela and 60,000 barrels per day in the output from Iraq were largely offset by the 104,000 barrel per day increase in output from Libya and the 24,000 barrel per day increase by Angola, while the oil output from most other OPEC members was​ comparatively​ little changed....we should note that the Saudis reported to OPEC that their production was only lower by 660,000 barrels per day, or only by half as much as the official figures....this can be seen in the the table below, also from the supply section of the report:

September 2019 OPEC crude output as reported

this table is also from the page numbered 58 of OPEC's October Oil Market Report (pdf page 68), and it shows the oil production totals that several of the OPEC members reported directly to the OPEC Secretariat...usually, these self reported totals are pretty close to the official output totals shown in the first table we posted, but as you see here, in September there was quite a divergence between the official production totals and what several of the OPEC members reported they produced...most notable, of course, is the much smaller output decrease that the Saudis reported...one would think that sophisticated producers such as the Saudis would have a better idea what they produced than outside agencies, but the Saudis have been putting a lot of ​​effort into minimizing the perceived effects of the attack on their output, with repeated reassurances in the media that ​their ​production quickly recovered, since they are still planning to go ahead with the IPO of Saudi Aramco, and are trying to reverse any bad publicity that would effect the eventual pricing of their stock offering...

production from most other OPEC members, other than Iraq and Nigeria, also remains below the 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 three months ago...this can be seen in the table of OPEC production allocations we've included below:

February 6 2019 Platts on OPEC allocations

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 only Libya among those exempt countries is producing more than they did in the 4th quarter of 2018, which you can see in the third column of the first, official OPEC production table above...​we should note that there are media reports that ​OPEC has ​agreed to ​raise the quota for Nigeria to 1.774 million ​barrels per day, but there was no official policy statement to that effect...

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 October 2017 to September 2019, and it comes from page 59 (pdf page 69) of the September OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale... 

September 2019 OPEC report global oil supply

including the 1.32 million barrels per day decrease in OPEC's production from what they produced a month ago, their preliminary estimate now indicates that total global oil production fell by 1.77 million barrels per day to 97.32 million barrels per day in September, and that reported decrease came after August's total global output figure was revised down by 150,000 barrels per day from the 99.24 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 450,000 barrels per day in September after that revision, with lower oil production from Canada, Norway, Kazakhstan, and Russia the major reasons for the non-OPEC output decrease in September...the 97.32 million barrels per day produced globally in September was also 2.00 million barrels per day, or 2.0% lower than the revised 99.32 million barrels of oil per day that were being produced globally in September a year ago (see the October 2018 OPEC report (online pdf) for the originally reported September 2018 details)...with this month's decrease in OPEC's output, their September oil production of 28,491,000 barrels per day fell to 29.3% of what was produced globally during the month, down from the revised 30.1% share they contributed in August....OPEC's September 2018 production was reported at 32,761,000 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, produced 3,989,000 fewer barrels per day of oil than they produced a year ago, when they accounted for 33.1% of global output, with a 1,948,000 barrel per day drop in output from Saudi Arabia, a 1,288,000 barrel per day decrease in the output from Iran, and a 553,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the small year over year production increases of 111,000 barrels per day by Nigeria, 111,000 barrels per day by Libya, 78,000 barrels per day by the United Arab Emirates and 74,000 barrels per day by Iraq...

with the 1,770,000 barrels per day decrease in global oil output that was seen during September, there was a substantial shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...     

September 2019 OPEC report global oil demand

the table above came from page 32 of the October OPEC Monthly Oil Market Report (pdf page 42), 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 September, which is their revised estimate of global oil demand during the third quarter of 2019...

OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe have been using 100.70 million barrels of oil per day, which was revised from their estimate of 100.63 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 only producing 97.32 million barrels per day during September, which means that there was a shortage of around 3,380,000 barrels per day in global oil production when compared to the demand estimated for the month... 

in addition, the downward revision of 150,000 barrels per day to August's global output that's implied in this report, combined with the 70,000 barrel per day upward revision to 3rd quarter demand, means that the 1,450,000 barrel per day shortfall that we had originally figured for August based on last month's figures would now have to be revised to a deficit of 1,670,000 barrels per day...similarly, the 70,000 barrel per day upward revision to 3rd quarter demand means that the 2,220,000 barrel per day shortfall that we had originally figured for July would have to be revised to a deficit of 2,290,000 barrels per day....thus, the oil supply deficit for the 3rd quarter as a whole has averaged nearly 2,440,000 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 150,000 barrels per day downward revision to 2nd quarter demand would mean that we'd have to revise our global oil deficit for June from 620,000 barrels per day to 470,000, that we'd have to revise our May deficit from 990,000 barrels per day to 840,000 barrels per day, and we'd have to revise our global oil deficit for April from 860,000 barrels per day to 710,000 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 617,000 barrels per day less than what was needed...

encircled in green is also a downward revision of 100,000 barrels per day to first quarter demand, a period when supply exceeded demand....that means that the global oil surplus of 190,000 barrels per day we had previously figured for March would have to be revised to a global oil surplus of 290,000 barrels per day...similarly, the 640,000 barrel per day global oil output surplus we had for February would now be a 740,000 barrel per day global oil output surplus, and the 550,000 barrel per day global oil output surplus we had for January would be revised to a 650,000 barrel per day oil output surplus.. so as you can see, we have gone from a global oil surplus averaging over 550,000 barrels per day in the first quarter to an oil shortage of 2,440,000 barrels per day by the third quarter, a swing of 3 million barrels per day....however, most of the media, including industry websites, is still reporting as if we still have a global glut of oil...

This Week's Rig Count

the US rig count rose for the first time in 8 weeks and for the 4th time in 34 weeks over the week ending October 11th, but is still down by nearly 21% since the beginning of this year....Baker Hughes reported that the total count of rotary rigs running in the US rose by 1 rig to 856 rigs this past week, which was still down by 193 rigs from the 1063 rigs that were in use as of the October 12th 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 an attempt to flood the global oil market...

the count of rigs drilling for oil increased by 2 rigs to 710 rigs this week, which was still 157 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 1 rig to 143 natural gas rigs, a 32 month low for gas rig drilling activity and down by 50 rigs from the 193 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, which is equal to the "miscellaneous" rig count of a year ago..

Gulf of Mexico offshore drilling activity was increased by 1 rig to 23 Gulf rigs running this week, with all of those drilling offshore from Louisiana... that's one more rig than the Gulf of Mexico rig count of a year ago, when 21 rigs were drilling in Louisiana waters and one was drilling offshore from Texas...in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago...hence, the national total of 24 offshore rigs is up by 1 rig from the 23 rigs that were deployed offshore a year ago...

the count of active horizontal drilling rigs was up by 1 rig to 750 horizontal rigs this week, which was still 177 fewer horizontal rigs than the 927 horizontal rigs that were in use in the US on October 12th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...likewise, the directional rig count was up by 1 to 55 directional rigs this week, but those were still down by 15 from the 70 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count decreased by 1 to 51 vertical rigs this week, and those were also down by 15 from the 66 vertical rigs that were in use on October 5th 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 October 11th, the second column shows the change in the number of working rigs between last week's count (October 4th) and this week's (October 11th) count, the third column shows last week's October 4th 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 12th of October, 2018...   

October 11 2019 rig count summary

as you can see, rig activity managed its first increase in eight weeks on the back of that six rig increase in the Permian basin, which is currently being targeted for oil...in the Texas Permian in the western part of the state, 4 rigs were added in Texas Oil District 8, or the core Permian Delaware, 2 rigs were added in Texas Oil District 8A, or the northern Permian Midland, and another rig was added in Texas Oil District 7C, which corresponds to southern Permian Midland...hence, with the Texas Permian seeing a 7 rig increase, it's clear that the rig pulled out of New Mexico this week had been operating in the western reaches of the Permian Midland...those oil rig increases were offset by the 3 oil rigs pulled out of the Cana Woodford in Oklahoma, and an oil rig in another basin not tracked separately by Baker Hughes...among rigs drilling for natural gas, this week saw two rigs added in the Haynesville (one in northwest Louisiana and the other in Texas Oil District 6) and three rigs added in West Virginia's Marcellus, while four natural gas rigs were shut down in Pennsylvania's Marcellus, another was shut down in Ohio's Utica, and one more was pulled from offshore of the Kenai Peninsula in Alaska, where they had been targeting natural gas at a depth of more than 15,000 feet...

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