Masters Of War

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

Sunday, December 27, 2020

oil falls first time in 8 weeks on spread of mutant virus; US oil supplies now more than 50% above the 2010-2014 average

oil prices fell for the first time in 8 weeks this week, as a mutant strain of the coronavirus spreading in the UK prompted a severe lockdown there and new travel restrictions world-wide...after rising more than 5% to $49.10 a barrel last week on a lower dollar and optimism about the vaccine rollouts, the contract price of US light sweet crude for January delivery fell in early trading on Monday as a new, fast-spreading mutant strain of coronavirus in the UK raised concerns that tighter restrictions there and elsewhere would stall th​e​ recovery in the need for fuel, and was down nearly $3 or 6% before recovering to close $1.36 lower at $47.74 a barrel despite the rollout of a new vaccine in the US, a congressional deal for a $900 billion coronavirus aid package, and European approval for the use of the COVID-19 vaccine developed by Pfizer, as trading in the January US oil contract expired...now quoting the contract price of US crude for February delivery, which had fallen $1.27 to $47.97 a barrel on Monday, oil prices continued sliding on Tuesday, following new travel bans and lockdowns in Europe and the U.S. to combat the fast-spreading variant of the disease, as February crude settled 95 cents lower at $47.02 a barrel, with losses limited after France's Europe minister said his country would restart freight to the UK by the next day...US oil prices then drifted lower in overseas trading after the American Petroleum Institute reported a surprise gain of 2.7 million barrels in US crude supplies, and then opened lower in New York on Wednesday and were down nearly 2% before the EIA reported withdrawals from U.S. inventories of crude, gasoline and distillate fuels, sparking a turnaround in oil prices which then settled 2.34%, or $1.10, higher at $48.12 per barrel...oil prices again moved higher on Thursday on news that Britain and the European Union had signed a post-Brexit trade deal and finished the shortened pre-holiday session 11 cents higher at $48.24 per barrel, but still finished the week 2.1% lower as traders fretted that a resurgence in the Covid-19 pandemic in the U.S. and Europe would hurt demand for energy​,​ without a sufficient bailout from government​s​ to promote consumer and business activity...

natural gas prices also ended lower this week, as the weather turned milder and inventory withdrawals failed to meet expectations...after rising 4.2% to $2.700 per mmBTU last week as major winter storms moved through the eastern US population centers, the contract price of natural gas for January delivery opened more than 1% higher on Monday as surging LNG exports and forecasts for colder weather in late December outweighed concerns over the new coronavirus strain, but slid from the initial spurt to close just a half cent higher at $2.705 per mmBTU as new UK travel restrictions were imposed by several European countries and Canada...natural gas prices then jumped on Tuesday on forecasts for colder weather and expectations of a large withdrawal of gas from storage and held on to settle 7.5 cents higher at $2.780 per mmBTU....however, natural gas futures plummeted on Wednesday as weather models continued to seesaw, gas production increased, export cargoes were cancelled, and the awaited inventory report fell sh​ort of market expectations, and finished 17.2 cents, or over 6% lower, at $2.608 per mmBTU...natural gas prices continued to sink in light Christmas eve trading amid mild temperatures and light heating demand across much of the Lower 48 and settled another 9.0 cents lower at $2.518 per mmBTU, thus closing with a 6.7% loss on the week..

the natural gas storage report from the EIA for the week ending December 18th indicated that the quantity of natural gas held in underground storage in the US decreased by 152 billion cubic feet to 3,574 billion cubic feet by the end of the week, which still left our gas supplies 278 billion cubic feet, or 8.4% higher than the 3,296 billion cubic feet that were in storage on December 18th of last year, and 218 billion cubic feet, or 6.8% above the five-year average of 3,356 billion cubic feet of natural gas that have been in storage as of the 18th of December in recent years....the 152 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast from an S&P Global Platts survey of analysts who had expected a 154 billion cubic foot withdrawal, but was higher than the average withdrawal of 127 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and ​more than ​the 146 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of 2019.... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 18th indicated that because of another big increase in our oil exports, we had to withdraw oil from our stored commercial supplies for the 15th time in the past twenty-two weeks and for the 21st time in the past forty-nine weeks ...our imports of crude oil rose by an average of 140,000 barrels per day to an average of 5,564,000 barrels per day, after falling by an average of 1,055,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 472,000 barrels per day to an average of 3,099,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,465,000 barrels of per day during the week ending December 18th, 322,000 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 reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,465,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,014,000 barrels of crude per day during the week ending December 18th, 169,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 80,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 469,000 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 just inserted a (+469,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting that there must have been an error or errors of that size in the oil supply & demand figures that we have just transcribed....furthermore, since last week's fudge factor was at -61,000 barrels per day, there was a 530,000 barrel per day balance sheet difference from a week ago, which renders the week over week supply and demand changes we have just transcribed unreliable...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,717,000 barrels per day last week, which was still 12.9% less than the 6,566,000 barrel per day average that we were importing over the same four-week period last year.....the 80,000 barrel per day net withdrawal from our crude inventories was due to a 80,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 13,000 barrels per day increase to 514,000 barrels per day in Alaska's oil production had no impact on the rounded national total...last year's US crude oil production for the week ending December 20th was rounded to 12,900,000 barrels per day, so this reporting week's rounded oil production figure was 14.7% below that of a year ago, yet still 30.5% 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 78.0% of their capacity while using 14,014,000 barrels of crude per day during the week ending December 18th, down from 79.1% of capacity during the prior week, and excluding ​earlier this year and ​the 2005, 2008, and 2017 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the past twenty-eight years....hence, the 14,014,000 barrels per day of oil that were refined this week were still 17.5% fewer barrels than the 16,980,000 barrels of crude that were being processed daily during the week ending December 20th of last year, when US refineries were operating at 93.3% of capacity...

even with the decrease in the amount of oil being refined, gasoline output from our refineries was higher for the 2nd time in six weeks, increasing by 307,000 barrels per day to 8,829,000 barrels per day during the week ending December 18th, after our refineries' gasoline output had increased by 182,000 barrels per day over the prior week...but since our gasoline production is still recovering from a multi-year low in the wake of this Spring's covid lockdown, this week's gasoline output was still 14.0% less than the 10,269,000 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) decreased by 14,000 barrels per day to 4,590,000 barrels per day, after our distillates output had decreased by 67,000 barrels per day over the prior week....since it's also just coming off a three year low, our distillates' production was 14.9% less than the 5,394,000 barrels of distillates per day that were being produced during the week ending December 20th, 2019...

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the first time in six weeks and for 15th time in 25 weeks, falling by 1,125,000 barrels to 237,754,000 barrels during the week ending December 18th, after our gasoline inventories had increased by 1,020,000 barrels over the prior week...our gasoline supplies decreased this week because this week's adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components was at +103,000 barrels per day vs last week's -370,000 barrels per day, and because the amount of gasoline supplied to US markets increased by 47,000 barrels per day to 8,022,000 barrels per day, and because our imports of gasoline fell by 40,000 barrels per day to 571,000 barrels per day while our exports of gasoline fell by 27,000 barrels per day to 757,000 barrels per day....after this week's decrease, our gasoline supplies were 0.6% lower than last December 20th's gasoline inventories of 239,260,000 barrels, but still about 4% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels decreased for the 11th time in 14 weeks, and for the 30th time in the past year, falling by 2,325,000 barrels to 148,934,000 barrels during the week ending December 18th, after our distillates supplies had increased by 167,000 barrels during the prior week....our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 172,000 barrels per day to 4,174,000 barrels per day, and because our exports of distillates rose by 123,000 barrels per day to 1,193,000 barrels per day, and because our imports of distillates fell by 48,000 barrels per day to 444,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were 19.2% above the 124,944,000 barrels of distillates that we had in storage on December 20th, 2019, and about 10% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) fell for the 17th time in the past twenty-eight weeks and for the 20th time in the past year, decreasing by 562,000 barrels, from 500,096,000 barrels on December 11th to 499,534,000 barrels on December 18th....but even after that ​modest ​decrease, our commercial crude oil inventories rose to 11% above the five-year average of crude oil supplies for this time of year, and ​rose to 50.8% above the prior 5 year (2010 - 2014) average of our crude oil stocks as of the third weekend of December, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of December 18th were 13.2% above the 441,359,000 barrels of oil we had in commercial storage on December 20th of 2019, also 13.2% more than the 441,411,000 barrels of oil that we had in storage on December 21st of 2018, and 14.4% above the 436,491,000 barrels of oil we had in commercial storage on December 15th of 2017...     

This Week's Rig Count

note: this week's rig count was released on Wednesday ahead of the Christmas holiday, and hence only covers five days...nonetheless, the US rig count rose for the 14th time in the past fifteen weeks during the period ending December 23rd, but for just the 16th time in the past 41 weeks, and hence it is still down by 56.​1% over that thirty-eight week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 2 to 348 rigs this past week, which was still down by 457 rigs from the 805 rigs that were in use as of the December 27th report of 2019, and was also still 56 fewer rigs than the all time low rig count prior to this year, and 1,581 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

The number of rigs drilling for oil increased by 1 rig to 264 oil rigs this week, after rising by 5 oil rigs the prior week, leaving us with 413 fewer oil rigs than were running a year ago, and still less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 to 85 natural gas rigs, which was still down by 42 natural gas rigs from the 125 natural gas rigs that were drilling a year ago, and just 5.3% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil ​or gas, one rig classified as 'miscellaneous' continue to drill in Lake County, California this week, while a year ago there were three such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count increased by 1 to 17 rigs this week, with 14 of those rigs drilling for oil in Louisiana's offshore waters and three drilling for oil offshore from Texas...that was still 6 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when 21 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure​s​ are equal to the Gulf rig counts....however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 1 to 309 horizontal rigs this week, which was still 394 fewer horizontal rigs than the 703 horizontal rigs that were in use in the US on December 27th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was up by 1 to 22 directional rigs this week, but those were also still down by 31 from the 53 directional rigs that were operating during the same week of last year....meanwhile, the vertical rig count was unchanged at 17 vertical rigs this week, and those were still down by 32 from the 49 vertical rigs that were in use on December 27th of 2019....

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 December 23rd, the second column shows the change in the number of working rigs between last week's count (December 18th) and this week's (December 23rd) count, the third column shows last week's December 18th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count 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 27th of December, 2019...    

December 23 2020 rig count summary

note that this week saw the first decrease in the Permian basin rig count since September 11th....so, first checking for the details on the Permian in Texas, we find that one rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which roughly corresponds to the southern portion of the Permian Midland, which thus means that the net Permian rig count in Texas was unchanged...since the Permian basin rig count was down by 1 rig nationally, that means that the rig that was shut down in New Mexico must have been pulled out of the farthest west reaches of the Permian Delaware, to account for the national Permian decrease...elsewhere in Texas, we ha​​ve a rig added in Texas Oil District 6, which accounts for one of this week's Haynesville shale rig additions. while the other two Haynesville rigs were added in adjacent north​west​ern Louisiana....those two Haynesville​ gas​ rigs and the oil rig that was added offshore account for Louisiana's 3 rig increase...at the same time, in Oklahoma we ha​d a rig added in the Cana-Woodford while there​ was a two rig increase in the state, which means that an Oklahoma rig was added in an "other" basin that Baker Hughes does not track...on the other hand, the rig count is down by one in Colorado because there was a rig pulled out of the Denver-Julesburg Niobrara chalk....meanwhile, for rigs targeting natural gas, we have the three rigs that were added in the Haynesville​ shale​, while a natural gas rig was pulled out of West Virginia​'s​ Marcellus at the same time..

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note: there's more here....

Sunday, December 20, 2020

OPEC report: global oil shortage at 940,000 barrel per day; EIA: DUCs down most in a year, DUC backlog at 15.3 months

oil prices rose for a 7th consecutive week this week, as the first covid vaccines began to be administered and plans to distribute a second vaccine were approved for next week...after increasing by less than 1% to $46.57 a barrel last week as traders looked past bearish news to the rollout of a new Covid vaccine, the contract price of US light sweet crude for January delivery opened higher on Monday amid hopes that the rollout of coronavirus vaccines would lift global fuel demand and closed up 42 cents, or 0.9%, at $46.99 a barrel even after sliding more than 1% earlier in the session after OPEC said global oil demand would rebound more slowly in 2021 than previously thought...oil prices then slipped early in Tuesday's trading on worries about falling demand as the Covid-19 lockdowns tightened, but recovered to settle 63 cents higher at $47.62 a barrel, finding support from signs of stronger demand from China, as the rollout of the US Covid-19 vaccine helped ease concerns about weak energy demand....oil prices were lower again early Wednesday after the American Petroleum Institute had reported a surprise gain in US crude inventories, but turned around to close 20 cents higher at $47.82 a barrel after the EIA reported a larger-than-expected U.S. crude stockpile draw....oil prices then opened higher on Thursday on record-breaking refinery demand in China and India and continued rising to post a gain of 54 cents at $48​.36​ a barrel as signs of progress toward another round of economic relief by U.S. lawmakers kept prices at their highest levels in more than nine months...oil prices moved higher for a 5th straight session on Friday as efforts to pass another U.S. virus relief package added to optimism that a second vaccine rollout would ​help ​provide a long-awaited boost to demand. and went on to finish 74 cents higher at a nine month high of $49.10 a barrel, thus finishing the week more than 5% higher as this week's decline in the value of the US dollar to a two and a half year low played a significant role in pushing the oil complex higher all week...

natural gas prices also rose this week as major winter storms moved through the eastern US population centers....after rising fractionally to $2.591 per mmBTU last week after the EIA reported the largest early December draw from storage in 13 years, the contract price of natural gas for January delivery opened 4% higher on Monday as forecasts for back-to-back snow storms mid-week drove up demand expectations in the Mid-Atlantic and Northeast, with the January contract closing 9.1 cents higher at $2.682 per mmBTU...but gas prices stalled and then finished unchanged on Tuesday on a dip in LNG demand, even as cash prices remained strong in the Northeast ahead of forecast "near-blizzard" conditions....natural gas prices were nearly flat again on Wednesday, closing a half-cent lower at $2.677 per mmBTU, as traders awaited the report of an expected much larger-than-normal storage withdrawal the next day...however, the report of a large addition to storage failed to sway traders on Thursday, as gas prices fell 4.1 cents to $2.636 per mmBTU on forecasts for milder weather and lower heating demand next week, even as natural gas prices in the Northeast rose to their highest in a year as a major winter storm battered the region...but January contract prices rebounded on Friday ​and ​rose 6.4 cents to a two-week high of $2.700 per mmBTU​​ on forecasts for near record liquefied natural gas exports, colder weather and more heating demand in late December​,​ and thus finished the week with a gain of 4.2%...

the natural gas storage report from the EIA for the week ending December 11th indicated that the quantity of natural gas held in underground storage in the US ​had ​decreased by 122 billion cubic feet to 3,726 billion cubic feet by the end of the week, which left our gas supplies 284 billion cubic feet, or ​still ​8.3% higher than the 3,442 billion cubic feet that were in storage on December 11th of last year, and 243 billion cubic feet, or 7.0% above the five-year average of 3,483 billion cubic feet of natural gas that have been in storage as of the 11th of December in recent years....the 122 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast from an S&P Global Platts survey of analysts who ​had ​expected a 127 billion cubic foot withdrawal, but was higher than the average withdrawal of 105 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and the 97 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of 2019....

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 11th indicated that because of a big drop in our oil imports and big increase in our oil exports, we had to withdraw oil from our stored commercial supplies for the 14th time in the past twenty-one weeks and for the 20th time in the past forty-eight weeks ...our imports of crude oil fell by an average of 1,055,000 barrels per day to an average of 5,424,000 barrels per day, after rising by an average of 1,080,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 793,000 barrels per day to an average of 2,627,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,797,000 barrels of per day during the week ending December 11th, 1,848,000 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 reportedly 100,000 barrels per day lower at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,797,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,183,000 barrels of crude per day during the week ending December 11th, 253,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net total of 448,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 61,000 barrels per day more 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 just inserted a (-61,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting that there must have been an error or errors of that size in the oil supply & demand figures that we have just transcribed....since last week's fudge factor was at +848,000 barrels per day, there was a 908,000 barrel per day balance sheet​ ​difference from a week ago, rendering the week over week supply and demand figures we have just transcribed unreliable...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,633,000 barrels per day last week, which was still 12.1% less than the 6,411,000 barrel per day average that we were importing over the same four-week period last year.....the 448,000 barrel per day net withdrawal from our total crude inventories was due to a 448,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day lower at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 10,500,000 barrels per day, while a 10,000 barrels per day decrease to 501,000 barrels per day in Alaska's oil production had no impact on the rounded national total...last year's US crude oil production for the week ending December 13th was rounded to 12,800,000 barrels per day, so this reporting week's rounded oil production figure was 14.1% below that of a year ago, yet still 30.5% 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 79.1% of their capacity while using 14,183,000 barrels of crude per day during the week ending December 11th, down from 79.9% of capacity during the prior week, and excluding the 2005, 2008, and 2017 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the past twenty-eight years....hence, the 14,183,000 barrels per day of oil that were refined this week were still 14.4% fewer barrels than the 16,562,000 barrels of crude that were being processed daily during the week ending December 13th of last year, when US refineries were operating at 90.6% of capacity...

even with the decrease in the amount of oil being refined, gasoline output from our refineries was higher for the first time in five weeks, increasing by 182,000 barrels per day to 8,522,000 barrels per day during the week ending December 11th, after our refineries' gasoline output had decreased by 244,000 barrels per day over the prior week...but since our gasoline production is still recovering from a multi-year low in the wake of this Spring's covid lockdown, this week's gasoline output was still 13.4% less than the 9,840,000 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) decreased by 67,000 barrels per day to 4,604,000 barrels per day, after our distillates output had increased by 84,000 barrels per day over the prior week....but since it's also just coming off a three year low, our distillates' production was still 9.2% less than the 5,072,000 barrels of distillates per day that were being produced during the week ending December 13th, 2019...

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 5th consecutive week and for 10th time in 24 weeks, rising by 1,020,000 barrels to 238,879,000 barrels during the week ending December 11th, after our gasoline inventories had increased by 4,221,000 barrels over the prior week...our gasoline supplies increased by less this week than last because the amount of gasoline supplied to US markets increased by 375,000 barrels per day to 7,975,000 barrels per day, and because our imports of gasoline fell by 178,000 barrels per day to 611,000 barrels per day while our exports of gasoline fell by 121,000 barrels per day to 784,000 barrels per day....after five increases now in a row, our gasoline supplies were 0.6% higher than last December 13th's gasoline inventories of 237,297,000 barrels, and about 4% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels increased for the 3rd time in 13 weeks, for the 21st time in 37 weeks and for the 22rd time in the past year, rising by 167,000 barrels to 151,092,000 barrels during the week ending December 11th, after our distillates supplies had increased by 5,222,000 barrels during the prior week....our distillates supplies rose by so much less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, jumped by 613,000 barrels per day to 4,002,000 barrels per day, and because our exports of distillates rose by 255,000 barrels per day to 1,070,000 barrels per day, while our imports of distillates rose by 213,000 barrels per day to 492,000 barrels per day....after this week's modest inventory increase, our distillate supplies at the end of the week were 20.9% above the 125,096,000 barrels of distillates that we had in storage on December 13th, 2019, and about 11% above the five year average of distillates stocks for this time of the year...

finally, with the drop in our oil imports and the big increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) fell for the 16th time in the past twenty-seven weeks and for the 20th time in the past year, decreasing by 3,135,000 barrels, from 503,231,000 barrels on December 4th to 500,096,000 barrels on December 11th....but even after that decrease, our commercial crude oil inventories were still more than 10% above the five-year average of crude oil supplies for this time of year, and almost 49% above the prior 5 year (2010 - 2014) average of our crude oil stocks as of the second weekend of December, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of December 11th were 11.9% above the 446,833,000 barrels of oil we had in commercial storage on December 13th of 2019, 13.3% more than the 441,457,000 barrels of oil that we had in storage on December 14​t​h of 2018, and 12.9% above the 442,986,000 barrels of oil we had in commercial storage on December 8th of 2017...    

OPEC's Monthly Oil Market Report

Monday of this past week saw the release of OPEC's December Oil Market Report, which covers OPEC & global oil data for November, and hence it gives us a picture of the global oil supply & demand situation over the fourth month of the extended agreement between OPEC, the Russians, and other oil producers, wherein they have agreed to cut production by 7.7 million barrels a day from the 2018 peak, reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July....before we look at what this month's report shows us, we should again caution that estimating oil demand while the course of the Covid-19 pandemic remains uncertain is pretty speculative, and hence the demand estimates we'll be reporting this month should again be considered as having a much larger margin of error than we'd expect from this report during stable and hence more predictable periods.. 

the first table from this monthly report that we'll check is from the page numbered 49 of this month's report (pdf page 58), 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 thereby avert any potential disputes that could arise if each member reported their own figures...

November 2020 OPEC crude output via secondary sources

as we can see from the above table of their oil production data, OPEC's oil output increased by 707,000 barrels per day to 25,109,000 barrels per day during November, from their revised October production total of 24,402,000 barrels per day...however, that October output figure was originally reported as 24,386,000 barrels per day, which ​thus ​means that OPEC's October production was revised 16,000 barrels per day higher with this report, and hence November's production was, in effect, a rounded 723,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official October OPEC output figures as reported a month ago, before this month's revisions)...

from the above table, we can also see that the Libyan production increase of 656,000 barrels per day was the major reason for OPEC's November output increase, while the production increase of 75,000 barrels per day from the Emirates was offset by decrease of 76,000 barrels per day in Iraq's output, which you may recall were the two major producers who objected to the extension of the current production cuts in meetings earlier this month....​also ​recall that this year's original oil producer's agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months, during May and June, but that agreement was extended to include July at a meeting between OPEC and other producers on June 6th....then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day ​for August and subsequent months, which is thus the agreement that covers ​OPEC's output in ​this month's report...however, war torn Libya and US sanctioned OPEC members Iran and Venezuela were exempt from the production cuts imposed by that agreement, and as you can see above, together those exempt members account for this month's production increase... 

since there has never seemed to be a published table or listing available of how much each OPEC member was expected to produce under the eased production cuts of August through December, we've been including the table that shows the October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to during May, June, and July...from the following table, we can easily compute the production quotas that each of the OPEC members was expected to hold to in November:

April 13th 2020 OPEC   emergency cuts

the above table shows the oil production baseline in thousands of barrel per day from which each of the oil producers was to cut from in the first column, a figure which is based on each of the producer's October 2018 ​oil ​output, ie., a date before the past year's and this year's output cuts took effect, and coincidently the highest production of the era for most of the producers party to these cuts; the second column shows how much each participant had originally committed to cut during May and June in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant had agreed to after that cut...the producer's agreement for August through the end of this year amends the above such that each member would be allowed to increase their production cut shown above (ie, the "voluntary adjustment" shown above) by 20%...for example, Algeria's "cut" was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period...under the new agreement for August and the following months, Algeria would reduce their "cut" by 20%, or to 193,000 barrels per day, thus allowing them to produce 864,000 barrels per day during November...offhand, by comparing this table's allocation +20% to the initial OPEC production table above, it appears that only the Congo has slightly exceeded their production quota for November, and not by any consequential amount...

the next graphic from this month's report that we'll highlight shows us both OPEC and world oil production monthly on the same graph, over the period from December 2018 to November 2020, and it comes from page 50 (pdf page 59) of the November OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly 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.... 

November 2020 OPEC report global oil supply (2)

after the reported 707,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global liquids production increased by a rounded 1.62 million barrels per day to average 92.53 million barrels per day in November, a reported increase which apparently came after October's total global output figure was revised down by 280,000 barrels per day from the 91.17 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 910,000 barrels per day in November after that revision, with oil production increases by Canada, Norway and the US driving the non-OPEC production increase in Novembe​r​...​ ​after that increase in November's global output, the 92.53 million barrels of oil per day that were produced globally in November were 8.78 million barrels per day, or 8.7% less than the revised 101.31 million barrels of oil per day that were being produced globally in November a year ago, ​which was ​the 11th month of OPECs first round of production cuts (see the December 2019 OPEC report (online pdf) for the originally reported November 2019 details)...with this month's increase in OPEC's output, their November oil production of 25,109,000 barrels per day was at 27.1% of what was produced globally during the month, up from their revised 26.8% share of the global total in October.... OPEC's November 2019 production, which included 530,000 barrels per day from former OPEC member Ecuador, was reported at 29,551,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,912,000, or 13.5% fewer barrels per day of oil this November than what they produced a year ago, when they accounted for 29.6% of global output... 

However, even after the increase in OPEC's and global oil output that we've seen in this report, there was still a shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...   

November 2020 OPEC report global oil demand

the above table came from page 26 of the December OPEC Monthly Oil Market Report (pdf page 35), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2020 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for November, which is their estimate of global oil demand during the fourth quarter of 2020...

OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe will be using an average of 93.47 million barrels of oil per day, which is a 200,000 barrels per day downward revision from the 93.67 million barrels of oil per day they were estimating for the 4th quarter a month ago (note ​that ​we have encircled​ this month's​ revisions in green), reflecting quite a bit of coronavirus related demand destruction compared to 2019, when 4th quarter global demand averaged 100.95 million barrels per day....but 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 producing just 92.53 million barrels million barrels per day during November, which would imply that there was a shortage of around 940,000 barrels per day in global oil production in November when compared to the demand estimated for the month...

In addition to figuring November's global oil supply shortfall that's evident in this report, the downward revision of 280,000 barrels per day to October's global oil output that's implied in this report, partly offset by the 200,000 barrels per day downward revision to fourth quarter demand noted above, means that the 2,500,000 barrels per day global oil output shortage we had previously figured for October would now be revised to a shortage of 2,420,000 barrels per day...

However, note that in green we've also circled an upward revision of 160,000 barrels per day to third quarter demand, a quarter when there was already a shortage of oil production as compared to demand....that upward revision to demand means that the 440,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 600,000 barrels per day, that the 1,570,000 barrels per day global oil output shortage we had previously figured for August would now be revised to a shortage of 1,730,000 barrels per day, and that the 2,890,000 barrels per day global oil output shortage we had previously figured for July would now be revised to an estimated shortage of 3,050,000 barrels per day...

Note that we've also circled a downward revision of 30,000 barrels per day to second quarter demand, a quarter when there was a large excess of oil production due to coronavirus related lockdowns...based on that downward revision to demand, our previous estimate that there was a surplus of 4,870,000 barrels per day in June would now be revised up to a 4,900,000 barrels per day surplus, ​that ​the oil surplus of 7,650,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 7,680,000 barrels per day, and ​that ​the 16,400,000 barrels per day surplus​ ​that we had previously figured for April would have to be revised to a surplus of 16,430,000 barrels per day...  

Meanwhile, with no revisions impacting previously published first quarter figures, the record global oil surplus of 17,750,000 barrels per day we had previously figured for March would remain unchanged. as would the 1,970,000 barrel per day global oil production surplus we had for February and the 900,000 barrel per day global oil output surplus we had for January...so despite the shortage of oil that has developed in the second half of this year, it's obvious the world's oil producers had produced a lot of oil earlier this year that no one wanted...  

This Week's Rig Count

The US rig count rose for the 13th time in the past fourteen weeks during the week ending December 18th, but for just the 15th time in the past 40 weeks, and hence it is still down by 56.4% over that thirty-eight week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 8 to 346 rigs this past week, which was still down by 467 rigs from the 813  rigs that were in use as of the December 20th report of 2019, and was also still 58 fewer rigs than the all time low rig count prior to this year, and 1,583 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

The number of rigs drilling for oil increased by 5 rigs to 263 oil rigs this week, after rising by 12 oil rigs the prior week, leaving us with 422 fewer oil rigs than were running a year ago, and still less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 to 81 natural gas rigs, which was still down by 44 natural gas rigs from the 125 natural gas rigs that were drilling a year ago, and just 5% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' were drilling this week; one in Lake County, California, and ​a new one​ in the Permian basin in Reagan county Texas, while a year ago there were three such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count increased by 3 to 16 rigs this week, with 13 of those rigs drilling for oil in Louisiana's offshore waters and three drilling for oil offshore from Texas...that was still 8 fewer Gulf rigs than the 24 rigs drilling in the Gulf a year ago, when 22 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one oil rig was deployed offshore from Texas..​.​since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure are equal to the Gulf rig counts....however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary ​parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there were no such rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 2 to 308 horizontal rigs this week, which was still 398 fewer horizontal rigs than the 706 horizontal rigs that were in use in the US on December 20th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....​in addition, the vertical rig count was up by 2 to 17 vertical rigs this week, but those were still down by 39 from the 56 vertical rigs that were operating during the same week of last year....at the same time, the directional rig count was up by 4 to 21 directional rigs this week, and those were also still down by 30 from the 51 directional rigs that were in use on December 20th of 2019....

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 December 18th, the second column shows the change in the number of working rigs between last week's count (December 11th) and this week's (December 18th) count, the third column shows last week's December 11th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count 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 20th of December, 2019...    

December 18 2020 rig count summary

after last week's rather widespread activity, rig changes this past week were again concentrated in the Permian basin....checking first for the details on the Permian in Texas, we find that one rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 8A, which roughly corresponds to the northern part of the Permian Midland, which mean​s​ that the net Permian rig count in Texas was unchanged...since the Permian basin rig count was up by six rigs nationally, that means that all six rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian increase (​however, ​note that since a miscellaneous rig was added in the Permian on the Edwards Plateau in Reagan county, Texas this week, which is inTexas Oil District 7C, an oil rig must have been shut down in that District at the same time, and hence the Permian only accounts for an increase of 5 oil rigs this week)...elsewhere in Texas, we have the two rigs that were added offshore, and a rig that was added in Texas Oil District 6, which is in the area of the Haynesville shale but apparently not targetting it....meanwhile, in Oklahoma we have a rig pulled out of the Cana-Woodford despite no change in the state, which mean that an Oklahoma rig was added in an "other" basin that Baker Hughes does not track...on the other hand, in Wyoming, there was a rig pulled out of the Denver-Julesburg Niobrara chalk, which means that the 4 rig remaining in Wyoming are also deployed in basins that Baker Hughes does not track..meanwhile, to arrivie at the 2 rigs increase of rig targeting natural gas, we had a natural gas rig added in the Eagle Ford of southeast Texas while an Eagle Ford oil rig was pulled out at the same time, and another gas rig added in a basin that Baker Hughes does not track, which appears to be the rig ​that was ​added in Angelina​ county​ Texas​,​ in Texas Oil District 6...

DUC well report for November

Monday of this past week saw the release of the EIA's Drilling Productivity Report for December, which includes the EIA's November data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 17th time in the past twenty-one months in November, as completions of drilled wells and drilling of new wells both increased, but remained subued....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 144 wells, falling from 7,474 DUC wells in October  to 7,330 DUC wells in November, which was also 7.3% fewer DUCs than the 7,907 wells that had been drilled but remained uncompleted as of the end of November of a year ago...this month's DUC decrease occurred as 334 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during November, up from the 316 wells that were drilled in October, while 478 wells were completed and brought into production by fracking, up from the 446 completions seen in October, but down by 59.2% from the 1,172 completions seen in November of last year....at the November completion rate, the 7,330 drilled but uncompleted wells left at the end of the month represents a 15.3 month backlog of wells that have been drilled but are not yet fracked, down from the 18.8 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by completions that are one-third of the previous norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in November, while no basins reported a DUC increase...the number of uncompleted wells remaining in the Niobrara chalk of the Rockies' front range fell by 41, decreasing from 497 at the end of October to 456 DUC wells at the end of November, as 23 wells were drilled into the Niobrara chalk during October, while 64 Niobrara wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 32, from 1,063 DUC wells at the end of October to 1,031 DUCs at the end of November, as 33 wells were drilled in the Eagle Ford during November, while 65 already drilled Eagle Ford wells were completed...meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 23, falling from 648 at the end of October to 625 DUC wells at the end of November, as just 14 wells were drilled into the Anadarko basin during October, while 37 Anadarko wells were being fracked....in addition, DUCs in the Permian basin of west Texas and New Mexico decreased by 20, from 3,536 DUC wells at the end of October to 3,516 DUCs at the end of November, as 148 new wells were drilled into the Permian, while 168 wells in the region were completed...and there was also a decrease of 12 DUC wells in the Bakken of North Dakota, where DUC wells fell from 818 at the end of October to 806 DUCs at the end of November, as 20 wells were drilled into the Bakken in October, while 32 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 11 wells, from 589 DUCs at the end of October to 578 DUCs at the end of November, as 59 wells were drilled into the Marcellus and Utica shales during the month, while 70 of the already drilled wells in the region were fracked....at the same time, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 5 to 318, as 37 wells were drilled into the Haynesville during November, while 42 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of November, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 128 wells to 6,434 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 16 wells to 896 wells, although as this 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…

Sunday, December 13, 2020

record drop in oil exports; largest crude build in 33 weeks; gasoline ouput at 2​6 wk lo​, demand at 27 wk lo, supplies jump most in 35 weeks; distillate build most in 28 weeks

January 2021 natural gas contract price hits all time low; largest early December draw from natural gas storage in 13 years; biggest ever drop in US oil exports led to largest crude inventory build in 33 weeks; gasoline production was at a 2​6 week low​ despite the highest refinery utilization in 20 weeks, but gasoline demand at a 27 week low still le​d to biggest gasoline inventory build in 35 weeks; distillate exports at a 27 week low l​ed to largest distillate inventory build in 28 weeks..

oil prices managed to increase for a 6th week in a row, despite closing lower 4 out of 5 days this week, as the beginning of the vaccine rollout encouraged oil traders to look past increasing inventories and ​the ​current bearish ​economic ​news.. after rising 1.6% to a nine month high of $46.26 a barrel last week after OPEC and other oil producers came to a compromise agreement on early 2021 oil output cuts, the contract price of US light sweet crude for January delivery opened lower on Monday as surging coronavirus cases and rising tension between the US and China undermined the positive impact from the OPEC+ deal and finished the session down 50 cents at $45.76 a barrel as near-term demand risks from the resurgent pandemic clouded optimism about the vaccine rollout...oil traded in a narrow range Tuesday as traders weighed near-term demand risks from rising Covid cases against hopes for a stimulus package and a vaccine rollout but closed 16 cents lower at $45.60 a barrel after California tightened its pandemic lockdown through Christmas and Covid-19 cases surged in the US and Europe...oil prices shrugged off the major product inventory builds that were reported by the API to move higher after hours Tuesay after two small Iraqi oil wells were attacked and global markets rose on the prospect of additional U.S. stimulus, but then tumbled more than 1% early in the Wednesday session after EIA data showed that U.S. crude, gasoline and distillate inventories all rose by the most in 7 months​; however, they recovered to close just 8 cent lower at $45.52 a barrel as the beginning of mass inoculations in the UK and the prospect of a quick rollout of the coronavirus vaccine in the US pushed markets higher following the report...with the week's huge rise in inventories thus dismissed, oil prices climbed nearly 3% on Thursday, with the international benchmark Brent surging above $50 a barrel for the first time since early March while US crude prices rose $1.26 to settle at $46.78 a barrel, as hopes that safe vaccines could be rolled out by spring boosted the outlook for global oil consumption....US crude prices pulled back on Friday, falling by 21 cents, or nearly 0.5%, to settle at $46.57 a barrel, as new coronavirus-related restrictions on business in New York overshadowed ​the ​progress toward vaccination programs, but still notched a small weekly gain as oil traders took their cue from progress on the rollout of the COVID-19 vaccines and an expected economic recovery...

natural gas prices also managed to eke out a small gain this week after the EIA reported the largest early December draw from storage in 13 years...after falling 9.4% to $2.575 per mmBTU last week after the EIA reported the smallest late November draw from storage in nineteen years, the contract price of natural gas for January delivery opened 5% lower on Monday on forecasts for milder weather and never recovered, closing down 16.9 cents, or 6.6%, at $2.406 per mmBTU, a two month low for natural gas prices and an all time low for the January 2021 contract....those records were extended a bit on Tuesday when natural gas prices slipped another seven-tenths of a cent to $2.399 per mmBTU after the latest midday weather data failed to trend meaningfully colder for the coming 15 days...natural gas prices began their recovery Wednesday, rising 4.3 cents or nearly 2% on record natural gas exports, and then jumped 10 cents on the release of the natural gas storage report on Thursday before settling with a gain of 11.1 cents at 2.553 per mmBTU on that bigger-than-expected storage draw and forecasts for cooler weather over the next two weeks...the January natural gas contract then rose another 3.8 cents on a chillier weather outlook to end the week at $2.591 per mmBTU, thus finishing the week fractionally higher than the prior week's close...

the natural gas storage report from the EIA for the week ending December 4th indicated that the quantity of natural gas held in underground storage in the US decreased by 91 billion cubic feet to 3,848 billion cubic feet by the end of the week, which left our gas supplies 309 billion cubic feet, or 8.7% higher than the 3,539 billion cubic feet that were in storage on December 4th of last year, and 260 billion cubic feet, or 7.2% above the five-year average of 3,588 billion cubic feet of natural gas that have been in storage as of the 4th of December in recent years....the 91 billion cubic feet that were drawn out of US natural gas storage this week was higher than the average forecast from an S&P Global Platts survey of analysts who expected a 78 billion cubic foot withdrawal, and was also much higher than the average withdrawal of 61 billion cubic feet of natural gas that are typically pulled out of natural gas storage during the same week over the past 5 years, and the 57 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of 2019....this week's withdrawal was also the most gas drawn out of storage during the first week of December in 13 years, although there have been late November draws that were larger during that span..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 4th indicated that because of a big increase in our oil imports and a record drop in our oil exports, we had a large surplus of oil to add to our stored commercial supplies for the 7th time in the past twenty weeks and for the 28th time in the past forty-seven weeks....our imports of crude oil rose by an average of 1,080,000 barrels per day to an average of 6,479,000 barrels per day, after rising by an average of 171,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,622,000 barrels per day to an average of 1,834,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,645,000 barrels of per day during the week ending December 4th, 2,702,000 more 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 reportedly unchanged at 11,100,000 barrels per day, and hence 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 reported they were processing 14,436,000 barrels of crude per day during the week ending December 4th, 424,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 2,155,000 barrels of oil per day were being added to the supplies of oil stored in the US....so based on that reported & estimated data, 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 846,000 barrels per day less than what our oil refineries reported they used during the week plus what was added to storage....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+846,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed.... however, since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them as published, just as they're watched & believed to be accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,590,000 barrels per day last week, which was still 10.7% less than the 6,259,000 barrel per day average that we were importing over the same four-week period last year.....the 2,155,000 barrel per day net addition to our total crude inventories ​​was as 2,170,000 barrels per day were added to our commercially available stocks of crude oil, which was sightly offset by the 15,000 barrels per day that was being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is now being leased for commercial use, and hence the recent SPR additions and withdrawals should really be included in our commercial inventories....this week's crude oil production was reported to be unchanged at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,600,000 barrels per day, while a 5,000 barrels per day increase to 512,000 barrels per day in Alaska's oil production had no impact on the rounded national total...last year's US crude oil production for the week ending December 6th was rounded to 12,800,000 barrels per day, so this reporting week's rounded oil production figure was 13.3% below that of a year ago, yet still 31.7% 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 79.9% of their capacity while using 14,436,000 barrels of crude per day during the week ending December 4th, up from 78.2% of capacity during the prior week, and the highest refinery utilization rate since March...even so, the 14,​436,000 barrels per day of oil that were refined this week were still 13.0% fewer barrels than the 16,597,000 barrels of crude that were being processed daily during the week ending December 6th of last year, when US refineries were operating at 90.6% of capacity...

even with the increase in the amount of oil being refined, gasoline output from our refineries was again lower, decreasing by 244,000 barrels per day to 8,340,000 barrels per day during the week ending December 4th, after our refineries' gasoline output had decreased by 266,000 barrels per day over the prior week...and since our gasoline production is still recovering from a multi-year low in the wake of this Spring's covid lockdown, this week's gasoline output was also 14.5% less than the 9,753,000 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) increased by 84,000 barrels per day to 4,587,000 barrels per day, after our distillates output had decreased by 21,000 barrels per day over the prior week....but since it's also just coming off a three year low, our distillates' production was still 10.7% less than the 5,228,000 barrels of distillates per day that were being produced during the week ending December 6th, 2019...

even with our gasoline production​ at it's lowest in 26 weeks​, our supply of gasoline in storage at the end of the week increased for the 9th time in 23 weeks and by the most in 35 weeks, rising by 4,221,000 barrels to 233,638,000 barrels during the week ending December 4th, after our gasoline inventories had increased by 3,491,000 barrels over the prior week...our gasoline supplies increased by more this week than last because the amount of gasoline supplied to US markets decreased by 373,000 barrels per day to a 27 week low of 7,600,000 barrels per day, and because our imports of gasoline rose by 267,000 barrels per day to 789,000 barrels per day, while our exports of gasoline rose by 216,000 barrels per day to 905,000 barrels per day....with​ now​ four ​big ​increases in a row, our gasoline supplies were 1.3% higher than last December 6th's gasoline inventories of 234,768,000 barrels, and about 5% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the modest increase in our distillates production, our supplies of distillate fuels increased for the 2nd time in 12 weeks, for the 20th time in 36 weeks and for the 22rd time in the past year, rising by 5,222,000 barrels to 151,092,000 barrels during the week ending December 4th, after our distillates supplies had increased by 3,238,000 barrels during the prior week....our distillates supplies rose by the most in 28 weeks this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 400,000 barrels per day to 3,389,000 barrels per day, and because our exports of distillates fell by 134,000 barrels per day to 815,000 barrels per day, ​the lowest in 27 weeks, ​while our imports of distillates fell by 335,000 barrels per day to 279,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 22.3% above the 123,587,000 barrels of distillates that we had in storage on December 6th, 2019, and about 11% above the five year average of distillates stocks for this time of the year...

finally, with the record drop in our oil exports and the big increase in our oil imports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) rose for the 11th time in the past twenty-six weeks and for the 32nd time in the past year, increasing by 15,189,000 barrels, from 488,042,000 barrels on November 27th to 503,231,000 barrels on December 4th, the biggest oil inventory incease since April​ 10th​...after that big increase, our commercial crude oil inventories were roughly 11% above the five-year average of crude oil supplies for this time of year, and 49.2% above the prior 5 year (2010 - 2014) average of our crude oil stocks as of the first weekend of December, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of December 4th were 12.3% above the 447,918,000 barrels of oil we had in commercial storage on December 6th of 2019, 13.9% more than the 441,954,000 barrels of oil that we had in storage on December 7th of 2018, and 12.3% above the 448,103,000 barrels of oil we had in commercial storage on December 1st of 2017...    

This Week's Rig Count

The US rig count rose for the 12th time in the past thirteen weeks during the week ending December 11th, but for just the 14th time in the past 39 weeks, and hence it is still down by 57.4% over that thirty-eight week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 15 to 338 rigs this past week, which was still by down 461 rigs from the 799 rigs that were in use as of the December 13th report of 2019, and was also still 66 fewer rigs than the all time low prior to this year, and 1,591 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

The number of rigs drilling for oil increased by 12 rigs to 258 oil rigs this week, after rising by 5 oil rigs the prior week, leaving us with 409 fewer oil rigs than were running a year ago, and still less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 4 to 79 natural gas rigs, which was still down by 50 natural gas rigs from the 129 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, one rig classified as 'miscellaneous' continued to drill  in Lake County, California, while a year ago there were three such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was unchanged at 13 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 10 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when 22 Gulf rigs were drilling offshore from Louisiana and one was deployed offshore from Texas...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure are equal to the Gulf rig counts....however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in Lafourche Parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there were no such rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 17 to 306 horizontal rigs this week, which was still 387 fewer horizontal rigs than the 693 horizontal rigs that were in use in the US on December 13th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....on the other hand, the vertical rig count was down by one to 15 vertical rigs this week, and those were down by 39 from the 54 vertical rigs that were operating during the same week of last year....at the same time, the directional rig count was also down by 1 to 17 directional rigs this week, and those were down by 35 from the 52 directional rigs that were in use on December 13th of 2019....

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 December 11th, the second column shows the change in the number of working rigs between last week's count (December 4th) and this week's (December 11th) count, the third column shows last week's December 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count 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 13th of December, 2019...    

December 11 2020 rig count summary

obviously, we have quite a bit more activity this week than in recent weeks, when rig count changes ha​d been in single digits...checking first for the details on the Permian basin in Texas, we find that two rigs were added in Texas Oil District 7C, which roughly corresponds to the southern part of the Permian Midland, and that one rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, which thus means that Permian basin rigs in Texas were up by a total of three...since the Permian basin rig count was up by four rigs nationally, that means that the rig that was added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian ​basin ​increase (but note that since a miscellaneous rig was also shut down in the Permian basin in Eddy County, New Mexico this week, New Mexico accounts for an increase of two oil rigs)...elsewhere in Texas, we find that two rigs were added in Texas Oil District 1, and one rig was added in Texas Oil District 4, which together would account for Eagle Ford basin increase, while the rig counts in all other Texas Oil Districts remained unchanged...meanwhile, in Oklahoma we ​see there was a rig pulled out of the Cana-Woodford despite the one rig increase in the state, which mean that two Oklahoma rigs were added in "other" basins that Baker Hughes does not track...likewise, in Wyoming, we have a rig added in the Denver-Julesburg Niobrara chalk and three more added in Wyoming basins that Baker Hughes does not track...meanhwile, ​among rigs targeting natural gas, we have the two rigs that were added in Pennsylvania's Marcellus, and two natural gas rigs that were added in Ohio's Utica shale, while the lone oil rig that had been deployed in Ohio's Utica was shut down at the same time...

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note: there's more here...