oil prices rose for a 2nd week, following 5 straight weeks of price markdowns, as supply cutoffs in Libya and Venezuela and the falling rate of new coronavirus infections in China supported prices...after rising 3.4% to $52.05 a barrel as oil traders dismissed demand concerns last week, the benchmark price of US light sweet crude for March delivery opened higher on Tuesday after the US imposed sanctions on Rosneft, Russia's largest oil company, for trading with Venezuela, but that brief rally was capped as hopes for an OPEC+ emergency meeting on the impact of the Chinese virus faded and prices closed unchanged on the day...however, a new rally kicked in Wednesday, as the Saudis called for an OPEC “fire brigade” to put out China’s viral pandemic, with oil settling $1.24, or about 2.4% higher, at $53.29 a barrel, as traders turned their focus to the supply squeezes in Venezuela and war torn Libya...oil prices continued higher for the 6th time in seven sessions on Thursday after the EIA reported a smaller crude inventory increase than traders were expecting, as the expiring March WTI oil contract gained 49 cents, or 0.9%, to settle at $53.78 per barrel while the more actively traded April oil benchmark closed up 39 cents, or 0.7%, at $53.88 a barrel....however, renewed concerns about demand being squeezed by the economic impact of the coronavirus outbreak hit prices Friday, and U.S. crude prices for April dropped 50 cents 0.9% to $53.38 a barrel, pressured by a reported rift in the Saudi - Russia crude-production alliance...but despite that Friday selloff, oil prices still finished the week 2.6% higher from the prior week's close at their highest level in about a month, with the April contract price rising 2.0% on the week..
natural gas prices also ended higher this week, largely on the strength of a late-winter cold snap...after ending 1.1% lower at $1.837 per mmBTU after bouncing off a 4 year low last week, the contract price of natural gas for March delivery jumped 14.4 cents on Tuesday, the biggest one-day gain in over a year, in reacting to a much colder forecast for the western half of the country through next week and closed at $1.981 per mmBTU, its highest price in over a month...but prices retreated 2.6 cents from there on Wednesday after warmer revisions to the long-range outlook, and lost another 3.5 cents on Thursday as the cold snap that had driven up demand early in the week was expected to move out beginning Friday...prices continued to slide Friday on further warmer trends in the latest weather models, crushing hopes for a return to $2 gas, with March gas settling down 1.5 cents at $1.905/mmBTU, still holding onto a 3.7% gain on the week..
the natural gas storage report on the week ending February 14th from the EIA indicated that the quantity of natural gas held in storage in the US fell by 151 billion cubic feet to 2,343 billion cubic feet by the end of the week, which left our gas supplies 613 billion cubic feet, or 35.4% higher than the 1,730 billion cubic feet that were in storage on February 14th of last year, and 200 billion cubic feet, or 9.3% above the five-year average of 2,143 billion cubic feet of natural gas that has been in storage as of the 14th of February in recent years....the 151 billion cubic feet that were withdrawn from US natural gas storage this week matched the average forecast for a 151 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, while it was less than the 163 billion cubic feet withdrawal reported during the corresponding week of last year, but was still more than the average 136 billion cubic feet of natural gas that have been pulled from natural gas storage during the second week of February over the past 5 years....
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending February 14th indicated that even with a sizable decrease in our oil imports and a sizable increase in our oil exports, we still had a bit of oil left to add to our stored commercial supplies for the fifteenth time in the past twenty-three weeks....our imports of crude oil fell by an average of 431,000 barrels per day to an average of 6,547,000 barrels per day, after rising by an average of 366,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 594,000 barrels per day to 3,564,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,983,000 barrels of per day during the week ending February 14th, 1,025,000 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 unchanged at 13,000,000 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 15,983,000 barrels per day during this reporting week..
meanwhile, US oil refineries reported they were processing 16,210,000 barrels of crude per day during the week ending February 14th, 190,000 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 an average of 59,000 barrels of oil per day were being added to to the supplies of oil stored in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 286,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+286,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil" ... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports rose to an average of 6,700,000 barrels per day last week, now just 4.1% less than the 6,990,000 barrel per day average that we were importing over the same four-week period last year....the 59,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be unchanged at 13,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,500,000 barrels per day, while a 6,000 barrel per day decrease Alaska's oil production to 481,000 barrels per day still added the same rounded 500,000 barrels per day to the rounded national total....last year's US crude oil production for the week ending February 15th was rounded to 12,000,000 barrels per day, so this reporting week's rounded oil production figure was 8.3% above that of a year ago, and 54.2% 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 89.4% of their capacity in using 16,210,000 barrels of crude per day during the week ending February 14th, up from 88.0% of capacity the prior week, and close to the recent average refinery capacity utilization for the second week of February...however, the 16,210,000 barrels per day of oil that were refined this week were 3.2% more than the 15,711,000 barrels of crude that were being processed daily during the week ending February 15th, 2019, when US refineries were operating at 85.9% of capacity....
with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 284,000 barrels per day to 9,525,000 barrels per day during the week ending February 14th, after our refineries' gasoline output had decreased by 662,000 barrels per day over the prior week... after this week's increase in gasoline output, our gasoline production was fractionally higher than the 9,489,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 15,000 barrels per day to 4,852,000 barrels per day, after our distillates output had decreased by 139,000 barrels per day over the prior week...after this week's increase in distillates output, our distillates' production for the week was nearly 2% above the 4,759,000 barrels of distillates per day that were being produced during the week ending February 15th, 2018....
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the third week in a row after twelve consecutive increases, and for the 17th time in 35 weeks, falling by 1,971,000 barrels to 259,078,000 barrels during the week ending February 14th, after our gasoline supplies had decreased by 72,000 barrels over the prior week....our gasoline supplies decreased by more this week because our exports of gasoline rose by 148,000 barrels per day to 770,000 barrels per day, while our imports of gasoline rose by 15,000 barrels per day to 421,000 barrels per day, and because the amount of gasoline supplied to US markets increased by 196,000 barrels per day to 8,918,000 barrels per day...even after this week's inventory decrease, our gasoline supplies were 0.9% higher than last February 15th's gasoline inventories of 256,847,000 barrels, and 3% above the five year average of our gasoline supplies for this time of the year, which historically has been near the annual supply peak...
meanwhile, with the small increase in our distillates production, our supplies of distillate fuels decreased for the 15th time in 21 weeks and for 30th time in the past 46 weeks, falling by 635,000 barrels to 140,587,000 barrels during the week ending February 14th, after our distillates supplies had decreased by 2,013,000 barrels over the prior week....our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 92,000 barrels per day to 3,728,000 barrels per day, while our exports of distillates fell by 64,000 barrels per day to 1,343,000 barrels per day and while our imports of distillates rose by 25,000 barrels per day to 127,000 barrels per day....but even after this week's decrease, our distillate supplies at the end of the week were still 1.4% more than the 138,683,000 barrels of distillates that we had stored on February 15th, 2019, even as they improved to about 4% below the five year average of distillates stocks for this time of the year...
finally, even with lower oil imports and higher oil exports, our commercial supplies of crude oil in storage rose for the eighteenth time in thirty-five weeks and for the thirtieth time in the past 52 weeks, increasing by 415,000 barrels, from 442,468,000 barrels on February 7th to 442,883,000 barrels on February 14th...but even after 4 straight increases, our crude oil inventories were still roughly 2% below the five-year average of crude oil supplies for this time of year, even as remained roughly 36% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the last week of January, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels....even though our crude oil inventories had generally been rising over the past year, except for during the past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of February 14th were 2.6% below the 454,512,000 barrels of oil we had in commercial storage on February 15th of 2019, while still 5.3% above the 420,479,000 barrels of oil that we had in storage on February 16th of 2018, while at the same time remaining 14.6% below the 518,683,000 barrels of oil we had in commercial storage on February 17th of 2017, which followed a period when we had been adding 10 million barrels per week to storage...
This Week's Rig Count
the US rig count was up a bit for the 3rd time in 25 weeks over the week ending February 21st, after being unchanged the prior two weeks, but it was still down by nearly 27% from the end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US increased by one to 791 rigs this past week, which was still down by 256 rigs from the 1047 rigs that were in use as of the February 22nd report of 2019, and 1,138 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 an attempt to put US shale out of business...
the number of rigs drilling for oil increased by 1 rig to 679 oil rigs this week, which was still 174 fewer oil rigs than were running a year ago, and much less than 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 110 natural gas rigs, still down by 84 gas 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 the rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California, while the "miscellaneous" rig that had been drilling in Washoe County, Nevada, over the past fourteen weeks was shut down... a year ago, there were no such "miscellaneous" rigs deployed..
offshore drilling activity in the Gulf of Mexico was down by one to 22 rigs this week, with 21 of those Gulf rigs drilling in Louisiana waters and one rig drilling offshore from Texas...that was still 3 more Gulf rigs than were deployed a year ago, when 17 rigs were drilling offshore from Louisiana and two were operating in Texas waters...since there are no rigs deployed off other US shores elsewhere at this time, nor were there a year ago, the current Gulf of Mexico rig count as well as the count of last year is equal to the national offshore rig total in both cases..
the count of active horizontal drilling rigs was up by one to 712 horizontal rigs this week, which the highest horizontal rig count since November 1st of last year, but still 202 fewer horizontal rigs than the 916 horizontal rigs that were in use in the US on February 22nd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the vertical rig count was up by 2 rigs to 32 vertical rigs this week, but those were still down by 31 from the 63 vertical rigs that were operating during the same week of last year.... on the other hand, the directional rig count was down by two rigs to 45 directional rigs this week, and those were also down by 23 from the 68 directional rigs that were in use on February 22nd 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 February 21st, the second column shows the change in the number of working rigs between last week's count (February 14th) and this week's (February 21st) count, the third column shows last week's February 14th 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 22nd of February, 2019...
the "zero change" in Texas and the one rig increase in the Permian basin hide a lot of underlying activity in that region this week...in the westernmost Texas Permian basin, four rigs were added in Texas Oil District 8, which corresponds to the core Permian Delaware, while two rigs were pulled out of Texas Oil District 7C, or the southern Permian Midland, and at the same time, 3 rigs were pulled out of Texas Oil District 8A, or the northern Permian Midland ...hence, for the overall Permian basin to be showing a one rig increase for the week, both of the rigs added in New Mexico had to have been set up for drilling in the western reaches of the Permian Delaware...elsewhere, the rig pulled out of the DJ-Niobrara chalk of the Rockies front range accounts for one of Colorado's two rig reduction, while the rig that was added in the Haynesville was in northwest Louisiana, even as the state still saw a decrease on the removal of the Gulf rig and a land based rig in the south...meanwhile, gas rigs were unchanged in spite of that Haynesville shale addition because another gas rig in a basin not tracked separately by Baker Hughes was shut down at the same time...
DUC well report for December
Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for February, which includes the EIA's January data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the eleventh month in a row, this report showed a decrease in uncompleted wells nationally in January, as both drilling of new wells and completions of drilled wells decreased.....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 34 wells, falling from a revised 7,716 DUC wells in December to 7,682 DUC wells in January, which now represents 8.6% fewer DUCs than the 8,401 wells that had been drilled but remained uncompleted as of the end of January of a year ago...this month's DUC decrease occurred as 1,014 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during January, down by 9 from the 1,023 wells that were drilled in December and the lowest number of wells drilled since June 2017, while 1,048 wells were completed and brought into production by fracking, a decrease of 55 well completions from the 1,103 completions seen in December and the least completions since December 2018....at the January completion rate, the 7,682 drilled but uncompleted wells left at the end of the month now represents a 7.3 month backlog of wells that have been drilled but are not yet fracked, up from the 7.0 month backlog of a month ago, as the backlog rate is now rising due to falling completions, rather than through increased drilling...
both oil producing and natural gas producing regions saw DUC well decreases in January, even as three of the seven major basins saw small DUC increases...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 50, falling from 761 at the end of December to 711 DUC wells at the end of January, as 60 wells were drilled into the Anadarko basin during January while 110 Anadarko wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 12, from 1,404 DUC wells at the end of December to 1,392 DUCs at the end of January, as 156 wells were drilled in the Eagle Ford during January, while 168 already drilled Eagle Ford wells were completed....in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range decreased by 10 to 457, as 133 Niobrara wells were drilled in January while 143 Niobrara wells were completed....on the other hand, DUC wells in the Bakken of North Dakota increased by 27, from 814 DUC wells at the end of December to 841 DUCs at the end of January, as 97 wells were drilled into the Bakken in December, while 70 of the drilled wells in that basin were being fracked...in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells rise by 14, from 3,490 DUC wells at the end of December to 3,504 DUCs at the end of January, as 452 new wells were drilled into the Permian, while 438 wells in the region 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 6 wells, from 543 DUCs at the end of December to 537 DUCs at the end of January, as 77 wells were drilled into the Marcellus and Utica shales during the month, while 83 of the already drilled wells in the region were fracked....however, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 3 wells to 240, as 39 wells were drilled into the Haynesville during January, while 36 Haynesville wells were fracked during the same period....thus, for the month of January, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 31 wells to 6,905 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 3 wells to 777 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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