oil prices ended the week little changed, despite being down more than 5% by early on Wednesday, as shifting reports on US-China trade, oil inventories, and potential OPEC cuts resulted in the most volatile trading since the Saudi drone attack...after rising less than 1% to $57.72 per barrel on conflicting China-US trade deal and crude inventory reports last week, prices of US light sweet crude for December delivery fell more than 1% on Monday, erasing the prior week’s gains while tumbling alongside U.S. stocks amid lack of progress on a U.S.-China trade deal and ended down 67 cents, or 1.2%, at $57.05 a barrel...prices then fell for the second straight day on Tuesday amid gloom on ongoing trade tariffs and rising U.S. oil inventories and then dropped to a loss of $1.84, or 3.2%, at $55.21 a barrel after reports that Russia was unlikely to agree to deeper output cuts at the coming OPEC meeting... December oil prices opened even lower Wednesday and briefly fell to $54.76 a barrel after the American Petroleum Institute's report of a larger than expected increase in US crude supplies, but then jumped back over $56 a barrel after the EIA contradicted the API in reporting a smaller than expected inventory build, and after Putin said that Russia and OPEC have ‘a common goal’ of keeping the oil market balanced, with the December delivery contract price rising $1.90, or 3.4%, to settle at $57.11 a barrel as trading in the December contract expired, while the contract price for January oil added $1.66, or 3%, to finish at $57.01 a barrel....now quoting prices for January oil, prices rose on Thursday following a Reuters report that OPEC and its allies are likely to extend output cuts through mid-2020 and then surged 2.8% to a two-month high at $58.58 a barrel after China invited U.S. trade negotiators for a new round of talks...but oil prices couldn't hold those gains on Friday as prices slid on continued skeoticism about any U.S.-China trade deal proposal and its potential global economic impact, with the price of January oil ending Friday 81 cents lower at $57.77 a barrel...while that price is 5 cents higher than oil price quotes referencing the December contract were at the end of last week, it's also 6 cents lower than the closing price of the January contract last Friday, which left the media confusingly reporting oil's change both as a price gain for the week and as 0.1% lower for the week...
meanwhile, natural gas prices ended the weekly slightly lower, but they too were up 6.6% from their mid-week nadir by the close on Friday....after falling 3.6% to $2.688 per mmBTU on moderating temperatures last week, the price of natural gas for December delivery crashed 12.2 cents to settle at $2.566/MMBtu on Monday as a forecast of warmer-than-usual temperatures was expected to lead to weaker demand...prices then fell another 5.6 cents Tuesday before recovering 4.9 cents of those losses on Wednesday, and another eight-tenths on Thursday as the EIA reported a withdrawal of gas from storage that was a bit above expectations...then on Friday, a change in the forecast to indicate colder than normal temperatures from Maine to California sparked a rally in natural gas, as prices rose 9.8 cents to finish at $2.665 per mmBTU, cutting the loss for the week to less than 1%...
the natural gas storage report for the week ending November 15th from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 94 billion cubic feet to 3,638 billion cubic feet by the end of the week, which still left our gas supplies 506 billion cubic feet, or 16.2% more than the 3,132 billion cubic feet that were in storage on November 15th of last year, but which meant our stores were now 60 billion cubic feet, or 1.8% below the five-year average of 3,698 billion cubic feet of natural gas that have been in storage as of the 15th of November in recent years....the 94 billion cubic feet that were withdrawn from US natural gas storage this week was 3 billion cubic feet more than the average forecast of a 91 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, and almost triple the average 32 billion cubic feet of natural gas that have been pulled from natural gas storage during the second week of November over the past 5 years...oddly enough, with the shift of the seasons, we seem to have gone from a period of consistently above normal injections into storage, to three weeks in a row wherein the change in our supplies was less than normal, which you should be able to see in the graphic below >>
the above graphic is a screenshot of an interactive graphic that's included on the EIA's weekly natural gas storage dashboard, and as the heading indicates, it shows the weekly change, in billions of cubic feet, of natural gas in storage in the lower 48 states...the blue dots represent the weekly changes of natural gas in storage for this year up to & including the current report, while the dark diamonds represent the 5 year average change of natural gas in storage for each week of the year over the 2014 to 2018 period, with markers above the "0" line representing additions, and markers below the zero line representing withdrawals of natural gas from storage...meanwhile, the shaded grey background to those markers represent the range of changes for each week of the year over that 5 year span....
what i'd like to point out on that graphic is that over the entire period from mid-March to late October, the blue dots for 2019 were consistently above the 5 year average for all but two weeks, certainly beyond what one would normally expect, no matter how anomalous the weather, which thus suggests an excess of natural gas production...however, over the last three weeks, we've seen that surplus to the norm reverse, in that the 2019 change, either positive or negative as in this past week, has been below the historical norm...we experienced much the same during the last heating season, but it was not as consistent as this summer's run...still, since it's only three weeks, it could be due to a run of unusually freaky weather, but the change certainly pays watching, since for one reason or another we may have entered a new normal, wherein both injections and withdrawals are greater than their previous norms...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending November 15th showed that because of a large draw from the Strategic Petroleum Reserve, there was a surplus of oil in the system that ultimately was added to our stored commercial supplies, which thus increased for the ninth time in the past ten weeks...our imports of crude oil rose by an average of 222,000 barrels per day to an average of 5,972,000 barrels per day, after falling by an average of 327,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 394,000 barrels per day to an average of 3,027,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,945,000 barrels of per day during the week ending November 15th, 172,000 fewer barrels per day than the net of our imports minus our 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 12,800,000 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 15,745,000 barrels per day during this reporting week..
meanwhile, US oil refineries were reportedly processing 16,435,000 barrels of crude per day during the week ending November 15th, 519,000 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 85,000 barrels of oil per day were being pulled out from the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to show that our total working supply of oil from net imports, from oilfield production, and from storage was 605,000 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 (+605,000) 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 this week, it means that one or maybe even 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 for oil, we continue to report them, just as they're seen & believed by most 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 rose to an average of 6,124,000 barrels per day last week, still 18.0% less than the 7,503,000 barrel per day average that we were importing over the same four-week period last year....the 85,000 barrel per day net withdrawal from our total crude inventories was due to a withdrawal of 282,000 barrels per day from our Strategic Petroleum Reserve, which was only partially offset by a 197,000 barrel per day addition to our commercially available stocks of crude oil....this week's crude oil production was reported to be unchanged at a record 12,800,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,300,000 barrels per day, while a 10,000 barrel per day decrease to 481,000 barrels per day in Alaska's oil production was rounded away and did not impact the final rounded national total...last year's US crude oil production for the week ending November 16th was rounded to 11,700,000 barrels per day, so this reporting week's rounded oil production figure was 9.4% above that of a year ago, and 51.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 89.5% of their capacity in using 16,435,000 barrels of crude per day during the week ending November 15th, up from 87.8% of capacity the prior week, but still below normal for mid November...as a result, the 16,435,000 barrels per day of oil that were refined this week was still 2.5% below the 16,855,000 barrels of crude per day that were being processed during the week ending November 16th, 2018, when US refineries were operating at 92.7% of capacity....
even with the big increase in the amount of oil being refined, gasoline output from our refineries was somewhat lower, decreasing by 120,000 barrels per day to 10,053,000 barrels per day during the week ending November 15th, after our refineries' gasoline output had increased by 137,000 barrels per day the prior week....but even after this week's decrease in gasoline output, our gasoline production was fractionally higher than the 10,036,000 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) rose by 85,000 barrels per day to 5,124,000 barrels per day, after our distillates output had increased by 164,000 barrels per day over the prior week...but even with those increases in distillates output, our distillates' production for the week was still 1.5% below the 5,201,000 barrels of distillates per day that were being produced during the week ending November 16th, 2018....
even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 2nd time in eight weeks and for the 8th time in 22 weeks, rising by 1,756,000 barrels to 220,846,000 barrels during the week to November 15th, after our gasoline supplies had increased by 1,861,000 barrels over the prior week....our gasoline supplies increased this week even though our imports of gasoline fell by 164,000 barrels per day to 515,000 barrels per day and even though our exports of gasoline rose by 55,000 barrels per day to 889,000 barrels per day, because the amount of gasoline supplied to US markets decreased by 129,000 barrels per day to 9,192,000 barrels per day....after this week's increase, our gasoline supplies were still 2.0% lower than last November 16th's inventory level of 225,315,000 barrels, but rose to roughly 2% above the five year average of our gasoline supplies for this time of the year...
however, even with the increase in our distillates production, our supplies of distillate fuels fell for the 24th time in the past 34 weeks, decreasing by 974,000 barrels to 115,681,000 barrels during the week ending November 15th, after our distillates supplies had decreased by 2,477,000 barrels over the prior week...our distillates supplies fell by less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 211,000 barrels per day to 4,323,000 barrels per day, and because our imports of distillates rose by 79,000 barrels per day to 315,000 barrels per day while our exports of distillates rose by 165,000 barrels per day to 1,255,000 barrels per day...after this week's inventory decrease, our distillate supplies were down by 2.9% from the 119,191,000 barrels of distillates that we had stored on November 16th, 2018, and fell to around 11% below the five year average of distillates stocks for this time of the year...
finally, despite this week's increase in refinery throughput and the jump in exports, the oil we pulled out of the SPR was enough to mean our commercial supplies of crude oil in storage rose for the eleventh time in twenty-three weeks and for the twenty-sixth time in 43 weeks, increasing by 1,379,000 barrels, from 449,001,000 barrels on November 8th to 450,380,000 barrels on November 15th...that increase meant our crude oil inventories rose to 3% above the five-year average of crude oil supplies for this time of year, and to 34.7% higher than the prior 5 year (2009 - 2013) average of crude oil stocks after two full weeks of November, 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 this year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of November 15th were 0.8% above the 446,908,000 barrels of oil we had stored on November 16th of 2018, but at the same time were 1.5% below the 457,142,000 barrels of oil that we had in storage on November 17th of 2017, and 7.9% below the 489,029,000 barrels of oil we had in commercial storage on November 18th of 2016...
This Week's Rig Count
the US rig count fell for the 13th time in 14 weeks and for the 36th time in 40 weeks over the week ending November 22nd, and is now down by 25.9% since the end of last year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 3 rigs to a 32 month low of 803 rigs this past week, which was also down by 276 rigs from the 1079 rigs that were in use as of the November 23rd report of 2018, and 1126 fewer rigs than 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 number of rigs drilling for oil decreased by 3 to a 31 month low of 671 oil rigs this week, which was also 214 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 was unchanged at 129 natural gas rigs, a 35 month low which was down by 65 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 to those drilling for oil & gas, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, in contrast to a year ago, when there were no such "miscellaneous" rigs deployed..
offshore drilling activity in the Gulf of Mexico was unchanged at 22 rigs this week, with all 22 of those drilling offshore from Louisiana...but that's 3 fewer than the Gulf of Mexico rig count of 25 a year ago, when 23 rigs were drilling in Louisiana waters and two were drilling offshore from Texas...since there are no rigs deployed offshore elsewhere, nor were there a year ago, the Gulf of Mexico count for both years is equal to the national total in each case..
the count of active horizontal drilling rigs was down by 3 rigs to 699 horizontal rigs this week, which was the least horizontal rigs deployed since April 7th, 2017 and hence is another 31 month low for horizontal drilling...that was also 230 fewer horizontal rigs than the 929 horizontal rigs that were in use in the US on November 23rd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....meanwhile, the vertical rig count was unchanged at 50 vertical rigs this week, and those were down by 27 from the 77 vertical rigs that were operating during the same week of last year, while the directional rig count was also unchanged at 54 directional rigs this week, and those were down by 19 from the 73 directional rigs that were in use on November 23rd of 2018...
the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us 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 November 22nd, the second column shows the change in the number of working rigs between last week's count (November 15th) and this week's (November 22nd) count, the third column shows last week's November 15th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same 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 23rd of November, 2018...
the net 3 oil rigs that were pulled out of the Permian basin account for this week's decrease, and that happened as 6 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while 3 rigs were added in Texas Oil District 7C, or the southern Permian Midland, and another rig began operating in Texas Oil District 8A, or the northern Permian Midland, while at the same time a Permian Delaware rig was taken down in southwest New Mexico...meanwhile, the Williston basin showed no net change because while one rig was being pulled out of North Dakota's Bakken, another rig began drilling in the westernmost reaches of the formation in Montana, where there are now two rigs deployed, still down from 4 year ago...the rig that was added in the Denver-Julesburg Niobrara chalk accounts for the Colorado increase, while the rig that was pulled out of Oklahoma's Cana Woodford was offset by the startup of a rig in an other Oklahoma basin that's not tracked separately by Baker Hughes, thus leaving the Oklahoma count unchanged...among natural gas directed rigs, 2 were added in northwest's Louisiana's Haynesville, one was pulled out of Pennsylvania's Marcellus, and one was shut down in a basin not tracKed separately by Baker Hughes...other than the aforementioned rig startup in Montana, this week also saw a rig startup in Mississippi among the states not shown above...however, the 3 rigs now deployed in Mississippi is still down from the 5 rigs that were drilling in the state a year ago...
DUC well report for October
Monday of this past week saw the release of the EIA's Drilling Productivity Report for November, which includes the EIA's October data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the eighth month in a row, this report showed a decrease in uncompleted wells nationally in October, 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 225 wells, the largest decrease on record, falling from a revised 7,867 DUC wells in September to 7,642 DUC wells in October, which still represents 1.6% more than the 7,522 wells that had been drilled but remained uncompleted as of the end of October of a year ago...this month's DUC decrease occurred as 1,148 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, down by 36 from the 1,184 wells that were drilled in September and the lowest since December 2017, while 1,373 wells were completed and brought into production by fracking, a decrease of 15 well completions from the 1,388 completions seen in September and the least completions since February....at the October 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, the same backlog as a month ago...
both oil producing regions and natural gas producing regions saw DUC well decreases in October, and no major basin saw an increase...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 72, falling from 813 at the end of September to 741 DUC wells at the end of October, as 69 wells were drilled into the Anadarko basin during October 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 45, from 3,634 DUC wells at the end of September to 3,589 DUCs at the end of October, as 501 new wells were drilled into the Permian, while 546 wells in the region were being fracked....meanwhile, DUC wells in the Eagle Ford of south Texas decreased by 32, from 1,450 DUC wells at the end of September to 1,418 DUCs at the end of October, as 167 wells were drilled in the Eagle Ford during October, while 199 already drilled Eagle Ford wells were completed....at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 22 to 452, as 168 Niobrara wells were drilled in October while 190 Niobrara wells were completed....in addition, DUC wells in the Bakken of North Dakota fell by 20, from 759 DUC wells at the end of September to 739 DUCs at the end of October, as 104 wells were drilled into the Bakken in October, while 124 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 30 wells, from 522 DUCs at the end of September to 492 DUCs at the end of October, as 93 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 4 wells to 211, as 46 wells were drilled into the Haynesville during October, while 50 Haynesville wells were fracked during the same period....thus, for the month of October, 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 191 wells to 6,939 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 34 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...
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