oil prices fall to $0 and beyond; both oil & natural gas rig counts drop to lowest in 44 months

oil prices finished lower for the eighth week ​out of the last nine this past week, but the real oil price story this week was what happened on Monday, when oil prices went to zero and then turned significantly negative, closing down $55.90 at -$37.63 a barrel, the largest price drop in history and the lowest closing price in history, both by a long shot...to set the stage, the last time we talked about oil prices, the contract price of US light sweet crude for May delivery had fallen 19.7% to end the week before Easter at $22.76 per barrel, despite a just completed agreement between OPEC & Russia to cut their oil production by a record amount....then last week, the price of that same May oil contract fell every day to end down an additional 19.7% at an 18 year low of $18.27 a barrel, as fears that the building global oil glut would lead to full storage space with no place to put new oil, which was a prelude to what happened this week..

now, to comprehend what happened Monday, one needs to first understand what we mean when we talk about "the price of oil"...when you see an oil price quote in the business press, that price is referring to the price per barrel of a contract to have 1000 barrels of a light sweet crude oil called West Texas Intermediate (WTI) delivered to Cushing Oklahoma in the "front" month, with the price determined in electronic trading at the New York Mercantile Exchange, or NYMEX...while trading at NYMEX includes monthly contracts at least as far as 20 years into the future, the "front month" is the nearest month to the present for which oil contracts are still trading, or in the case of Monday's "oil price", it was WTI oil for delivery in May...now, for the most part, what’s traded at NYMEX is hypothetical oil; as we've pointed out previously, the amount of oil referenced by trading at NYMEX in any given day is often 100 times the amount of oil that actually exists in the country at the same time, and the number of oil contracts outstanding is usually far more than could ever be physically delivered...however, most of those who are buying and selling oil at NYMEX have no intention of receiving oil nor any intention of delivering oil; they are just speculating on the direction that the price of oil will take, and planning to reverse their position with a profit (or loss) at some time in the future...the problem is that these are still real contracts for real oil, for which trading expires on the 3rd business day prior to the 25th calendar day of the month prior to the contract month, at which time 1000 barrels​ of ​oil ​per contract ​must be either delivered or accepted at Cushing​,​ Oklahoma, depending on whether one is a seller or a buyer..

what precipitated the price drop in the May contract on Monday was that as the expiration of trading in May oil approached on Tuesday, there was no uncommitted storage space left at the Cushing oil depot, the designated place where such WTI ​oil ​contracts are settled...that meant that even if there were potential buyers of oil as its price was falling, there was no place to put the oil when they were expected to take delivery in May...so as those who had bought oil contracts as a speculation with no intention to actually take possession of oil came to the market to close out their positions before the contract expired on Tuesday, there were few potential buyers of that contract who could take possession of the oil those contracts represented....hence,​ as those who didn't want oil delivered attempted to sell,​ the price of that benchmark oil contract fell rapidly throughout the day, falling to $4 a barrel by noon, and then turning negative by one o'clock, at which time buying completely evaporated as the price plummeted to minus $40.32 a barrel... while some buyers came back in later in the day and pushed prices back up to around -$16, prices faded again towards the close and finished the session at minus $37.63 a barrel...

so ​just ​what does a negative oil price of $37.63 a barrel actually mean?  with the main US oil storage depot full, it implies that oil producers with new oil coming out of ground would have to pay someone $37.63 a barrel to haul away and dispose of any excess crude that they had not yet already contracted to deliver to a customer in May....with -$37.63 a barrel as a contract price, it means the seller of an oil contract not only has to supply the buyer 1000 barrels of oil, he also has to pay the buyer $37,630 for taking it....it also means that a hypothetical oil trader who thought he was getting a real bargain by buying 1000 barrels of oil at $1 a barrel in the noon hour probably got a call from their broker later Monday afternoon telling them that they had to put up another $37,630 just to get out of that contract...

however, the real losers Monday were not the oil companies or the professional traders, but those who bought into an ETF (exchange traded fund) or​​ other financial product that purports to track the price of oil...those funds buy the current front month contract, or in this case May, and hold it for a month or less, and then sell that contract as it approaches expiration to then buy into the next month's contract, in this case June...many of those funds were stuck holding May oil when it turned negative, had to take a loss to get out of that contract, then had to buy into June oil at a positive price...in the case of the United States Oil Fund, the largest ETF, their losses were so great they had to execute a one-for-eight reverse share split to ensure their shares would trade high enough to meet the requirements for continued exchange listings; in the case of some Chinese investors in similar financial products based on US oil, they were left owing money to their banks when the price of US crude fell below $0...

however, those negative oil prices only lasted one day, which probably limited the damage, as the May oil contract opened at minus $14 on Tuesday and later turned positive, rising as high as $13.86 before expiring at $10.01 a barrel, $47.64 higher on the day, ironically the largest oil price jump in history..​..​oil prices for the rest of the week were ​just a denouement...the contract price of the US benchmark crude for June delivery, which had fallen $4.60 to $20.43 a barrel on Monday and then dropped another $8.86 to $11.57 a barrel on Tuesday, rebounded $2.21 to $13.78 a barrel on Wednesday after Trump tweeted that he'd “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.” and then rose another $2.72 to $16.50 a barrel on Thursday after the commander of Iran's Islamic Revolutionary Guards responded that he had ordered his forces in the Gulf to destroy any vessel or combat unit that threatened the safety of Iranian ships​,​ an exchange ​of threats ​which might have been more about boosting the price of oil rather than any real belligerence...June oil then added another 44 cents finish the week at $16.94 a barrel on Friday, still down more than 32% from the previous Friday's close, despite a nearly 50% price rise over the the prior three days... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 17th indicated that a big decrease in our oil exports and another pullback in our oil refining ​were major ​contributor​s to another big surplus of oil ​being add​ed​ to our stored commercial supplies, the twenty-fourth addition of oil to storage in the past thirty-two weeks....our imports of crude oil fell by an average of 743,000 barrels per day to an average of 4,937,000 barrels per day, after falling by an average of 194,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 546,000 barrels per day to 2,890,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,047,000 barrels of per day during the week ending April 17th, 197,000 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 fell by 100,000 barrels per day to 12,200,000 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 14,247,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 12,456,000 barrels of crude per day during the week ending April​p;[​ 17th, 209,000 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 2,146,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at that 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 354,000 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 plugged a (+354,000) 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", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed....however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as 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 fell to an average of 5,635,000 barrels per day last week, now 15.0% less than the 6,626,000 barrel per day average that we were importing over the same four-week period last year....the 2,146,000 barrel per day 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 down by 100,000 barrels per day to 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 11,700,000 barrels per day, while a 10,000 barrel per day decrease in Alaska's oil production to 467,000 barrels per day did not impact the rounded national total....last year's US crude oil production for the week ending April 19th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was still roughly the same as that of a year ago, and 44.8% 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 67.6% of their capacity in using 12,456,000 barrels of crude per day during the week ending April 17th, down from 69.1% of capacity during the prior week, and the lowest capacity utilization rate since September 2008, when the aftermath of Hurricane Ike shut down Texas Gulf Coast refining....hence, the 12,456,000 barrels per day of oil that were refined this week were the fewest barrels refined in any week since September 26th 2008, and 24.9% fewer barrels than the 16,583,000 barrels of crude that were being processed daily during the week ending April 19th, 2019, when US refineries were operating at 90.1% of capacity....

even with the decrease in the amount of oil being refined, gasoline output from our refineries was somewhat higher, increasing by 290,000 barrels per day to 6,205,000 barrels per day during the week ending April 10th, after our refineries' gasoline output had increased by 97,000 barrels per day over the prior week....but since the increases of the past two weeks followed two near record drops in gasoline output, our gasoline production this week was still 36.6% lower than the 9,781,000 barrels of gasoline that were being produced daily over the same week of last year....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 80,000 barrels per day to 5,007,000 barrels per day, after our distillates output had decreased by 55,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was still 1.1% less than the 5,064,000 barrels of distillates per day that were being produced during the week ending April 19th, 2019....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 4th week in a row, following 8 weeks of decreases, rising by 1,017,000 barrels to a record 263,234,000 barrels during the week ending April 17th, after our gasoline supplies had increased by 4,914,000 barrels over the prior week...our gasoline supplies increased by less this week because the amount of gasoline supplied to US markets increased by 230,000 barrels per day to 5,331,000 barrels per day, while our exports of gasoline rose by 29,000 barrels per day to 784,000 barrels per day and our imports of gasoline fell by 34,000 barrels per day to 368,000 barrels per day....after this week's inventory increase, our gasoline supplies were 16.6% higher than last April 19th's gasoline inventories of 225,826,000 barrels, and roughly 12% above the five year average of our gasoline supplies for this time of the year...

with the increase in our distillates production, our supplies of distillate fuels increased for the third time in 14 weeks and for the 8th time in 29 weeks, rising by 7,876,000 barrels to 136,880,000 barrels during the week ending April 17th, after our distillates supplies had increased by 6,280,000 barrels over the prior week....our distillates supplies rose by more this week because our exports of distillates fell by 725,000 barrels per day to 860,000 barrels per day and while our imports of distillates fell by 207,000 barrels per day to 106,000 barrels per day, and while the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 371,000 barrels per day to 3,128,000 barrels per day....after this week's big inventory increase, our distillate supplies at the end of the week were 7.8% above the 127,029,000 barrels of distillates that we had stored on April 19th, 2019, but still about 1% below the five year average of distillates stocks for this time of the year...

finally, with lower oil exports and depressed oil refining, our commercial supplies of crude oil in storage rose for the twenty-fifth time in forty-two weeks and for the thirty-third time in the past 52 weeks, increasing by 15,022,000 barrels, from 518,640,000 barrels on April 17th to 503,618,000 barrels on April 10th, the 3rd largest increase on record, beaten only by the increases of the prior two weeks....but even after 13 straight increases and three straight record level increases, our crude oil inventories were just 9% above the five-year average of crude oil supplies for this time of year, but more than 48.8% higher than the prior 5 year (2010 - 2014) average of crude oil stocks as of the third Friday in April, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels, and continued rising from there....since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of April 17th were 12.6% above the 460,633,000 barrels of oil we had in commercial storage on April 19th of 2019, and 20.7% above the 429,737,000 barrels of oil that we had in storage on April 20th of 2018, while at the same time remaining 1.9% below the 528,702,000 barrels of oil we had in commercial storage on April 21st of 2017...   

This Week's (and Last Week's) Rig Count

the US rig count fell by 10% or more for the 3rd week in a row during the week ending April 24th, and is now down 57.1% from its interim high at end of 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 64 rigs to 465 rigs this past week, which was the least rigs deployed since August 8, 2016, and hence is a 44 month low for the US rig count...that total was also down by 420 rigs from the 1022 rigs that were in use as of the April 12th report of 2019, and 1,​4​64 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....during the​ previous​ week ending April 17th, which we did not cover, the US rig count fell by 73 rigs, from 602 rigs to 529 rigs, the largest percentage ​rig ​drop on record....

the number of rigs drilling for oil decreased by 60 rigs to 378 oil rigs this week, after falling by 66 rigs the prior week, leaving oil rig activity at its lowest in 44 months, 427 fewer oil rigs than were running a year ago, and less than a quarter 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 decreased by 4 to 85 natural gas rigs, after falling by 7 rigs the prior week, leaving the fewest natural gas rigs active since August 26th of 2016, and hence also a new 44 month low for natural gas drilling, down by 101 natural gas rigs from the 186 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those 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... a year ago, there were no such "miscellaneous" rigs deployed..

the Gulf of Mexico rig count was unchanged at 17 rigs this week, with 16 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that's four less than the rig count in the Gulf a year ago, when 18 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, just as it has been since the onset of winter...

the count of active horizontal drilling rigs decreased by 57 rigs to 426 horizontal rigs this week, which was the fewest horizontal rigs active since October 7th, 2016, and hence is a 42 month low for horizontal drilling...it was also 447 fewer horizontal rigs than the 873 horizontal rigs that were in use in the US on April 26th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was down by five to 23 directional rigs this week, and those were also down by 48 from the 71 directional rigs that were operating during the same week of last year....in addition, the vertical rig count was down by 2 to 16 vertical rigs this week, and those were down by 31 from the 47 vertical rigs that were in use on April 16th of 2019...

since we missed last week's report, we'll include herein screenshots ​from both week's rig count summaries pdf from Baker Hughes that give us the details on the weekly changes in drilling activity by state and by major shale basin...

the tables above are for the week ending April 17th, while the tables below are for the week ending 24th, with each set of tables showing first the weekly and year over year rig count changes for the major oil & gas producing states, and then the weekly and year over year rig count changes for the major US geological oil and gas basins...in each of those tables, the first column shows the active rig count as of the ​given reporting week, the second column shows the change in the number of working rigs between the prior week's count and the current week's count, the third column shows the prior week's active rig count, the 4th column shows the change between the number of rigs running at the end of the reporting week 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 for the tables above was the 19th of April, 2019 and for the tables below was the rig count as of April 26th, 2019..

as you can see from the tables from both weeks, the shutdown of drilling activity has been widespread across the major producing states and basins, with no major basin unscathed...the majority of the oil targeting rigs have been pulled out of the Permian basin of western Texas and New Mexico, the Williston shale of North Dakota, and the Eagle Ford shale of southeastern Texas, while the natural gas rig reductions have come from the Haynesville of northwestern Louisiana and adjacent Texas and the Marcellus in West Virginia...with both oil and natural gas prices well below the price needed to even break even, we can expect the rig count to continue falling in the weeks ahead, possibly to record low levels before stabilizing ....

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note: there’s more here…

March global oil surplus at 17.7 million barrels per day; 2nd quarter surplus to be at 6.2 million bpd even after OPEC, Russian, & US cuts

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 10th indicated that an increase in our oil exports was not enough to offset a another big pullback in our oil refining, leaving us with an even higher record surplus of oil to add to our stored commercial supplies, the twenty-third addition of oil to storage in the past thirty-one weeks....our imports of crude oil fell by an average of 194,000 barrels per day to an average of 5,680,000 barrels per day, after falling by an average of 173,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 603,000 barrels per day to 3,436,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,244,000 barrels of per day during the week ending April 10th, 797,000 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 fell by 100,000 barrels per day to 12,300,000 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 14,544,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 12,665,000 barrels of crude per day during the week ending April 10th, 969,000 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 record average of 2,750,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at that 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 871,000 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 plugged a (+871,000) 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", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed....however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as 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 fell to an average of 5,929,000 barrels per day last week, still 8.4% less than the 6,474,000 barrel per day average that we were importing over the same four-week period last year....the 2,750,000 barrel per day 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 down by 100,000 barrels per day to 12,300,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 11,800,000 barrels per day, while a 4,000 barrel per day decrease in Alaska's oil production to 477,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending April 12th was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was still 1.7% above that of a year ago, and 45.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 69.1% of their capacity in using 12,665,000 barrels of crude per day during the week ending April 10th, down from 75.6% of capacity during the prior week, and the lowest capacity utilization rate since September 2008, when the aftermath of Hurricane Ike shut down Texas Gulf Coast refining....hence, the 12,665,000 barrels per day of oil that were refined this week were 21.2% fewer barrels than the 16,078,000 barrels of crude that were being processed daily during the week ending April 12th, 2019, when US refineries were operating at 87.7% of capacity, and also the fewest barrels refined in any week since September 26th 2008....

even with the big drop in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 97,000 barrels per day to 5,915,000 barrels per day during the week ending April 10th, after our refineries' gasoline output had decreased by 1,638,000 barrels per day over the prior week....but since that small increase followed two near record drops in gasoline output, our gasoline production this week was 40.4% lower than the 9,917,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 55,000 barrels per day to 4,927,000 barrels per day, after our distillates output had increased by 16,000 barrels per day over the prior week...but even after this week's decrease in distillates output, our distillates' production for the week was still 2.2% more than the 5,038,000 barrels of distillates per day that were being produced during the week ending April 12th, 2019....

with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 3rd week in a row, following 8 weeks of decreases, rising by 4,914,000 barrels to 262,217,000 barrels during the week ending April 10th, after our gasoline supplies had increased by a near record 10,497,000 barrels over the prior week...our gasoline supplies increased this week as the amount of gasoline supplied to US markets increased by 16,000 barrels per day to 5,081,000 barrels per day, while our exports of gasoline fell by 15,000 barrels per day to 755,000 barrels per day and our imports of gasoline fell by 91,000 barrels per day to 402,000 barrels per day....after this week's inventory increase, our gasoline supplies were 15.0% higher than last April 12th's gasoline inventories of 227,955,000 barrels, and roughly 12% above the five year average of our gasoline supplies for this time of the year...

with the increase in our distillates production, our supplies of distillate fuels increased for the second time in 13 weeks and for the 7th time in 28 weeks, rising by 6,280,000 barrels to 129,004,000 barrels during the week ending April 10th, after our distillates supplies had increased by 476,000 barrels over the prior week....our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 1,050,000 barrels per day to a 28 year low of 2,757,000 barrels per day, while our exports of distillates rose by 292,000 barrels per day to 1,585,000 barrels per day and because our imports of distillates rose by 128,000 barrels per day to 313,000 barrels per day....after this week's big inventory increase, our distillate supplies at the end of the week were 1.0% above the 127,691,000 barrels of distillates that we had stored on April 12th, 2019, but still about 7% below the five year average of distillates stocks for this time of the year...

finally, another big pullback in our oil refining, our commercial supplies of crude oil in storage rose for the twenty-fourth time in forty-one weeks and for the thirty-third time in the past 52 weeks, increasing by a record 19,248,000 barrels, from 484,370,000 barrels on April 3rd to 503,618,000 barrels on April 10th, the largest increase on record....but even after 12 straight increases and two straight record increases, our crude oil inventories were just 6% above the five-year average of crude oil supplies for this time of year, but nearly 45% higher than the prior 5 year (2010 - 2014) average of crude oil stocks as of the second Friday in April , with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels, and continued rising from there....since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of April 10th were 10.6% above the 455,154,000 barrels of oil we had in commercial storage on April 12th of 2019, and 17.8% above the 427,567,000 barrels of oil that we had in storage on April 13th of 2018, while at the same time remaining 5.4% below the 532,343,000 barrels of oil we had in commercial storage on April 14th of 2017...       

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of OPEC's March Oil Market Report, which covers OPEC & global oil data for March, and hence it gives us a picture of the global oil supply & demand situation after the breakdown of OPECs agreement to cut oil production in the first quarter, when Saudi and its allies were engaged in an oil price war against the Russians and US shale, but before last week's agreement to cut production by 9.7 million barrels a day....we should note as a caveat that estimating oil demand while an epidemic is spreading is pretty much a crapshoot, and hence the numbers we'll be reporting this month should be considered having a much larger margin of error than we'd normally expect from this report..

the first table from this monthly report that we'll look at is from the page numbered 45 of that report (pdf page 55), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures... 

as we can see from the above table of oil production data, OPEC's oil output jumped by 821,000 barrels per day to 28,612,000 barrels per day in March, from their revised February production total of 27,790,000 barrels per day...however that February output figure was originally reported as 27,772,000 barrels per day, which means that OPEC's February production was revised 18,000 barrels per day higher with this report, and hence March's production was, in effect, an  839,000 barrel per day increase from the previously reported OPEC production figures (for your reference, here is the table of the official February OPEC output figures as reported a month ago, before this month's revisions)...

from that OPEC table, we can also see that increases of 388,000 barrels per day from the Saudis, 386,000 barrels per day from the Emirates, and 170,000 barrels per day from Kuwait were the reason for the March output increase, far outweighing decreases of 100,000 barrels per day from sanctioned Venezuela, 52,000 barrels per day from sanctioned Iran, and 54,000 barrels per day from wartorn Libya ...but except for the increases from the three Saudi allies, it appears that most other OPEC members continued to adhere to the output allocations that were originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers and the additional production cuts of 500,000 barrels per day through to March 2020 that were announced at their December 6th, 2019 meeting..

the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from April 2018 to March 2020, and it comes from page 46 (pdf page 56) of the March OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale... 

due to the 821,000 barrel per day jump in OPEC's production from what they produced a month ago, OPEC's preliminary estimate indicates that total global oil production increased by a rounded 0.62 million barrels per day to average 99.86 million barrels per day in March, a reported increase which apparently came after February's total global output figure was revised lower by 510,000 barrels per day from the 99.75 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 200,000 barrels per day in March after that revision, with lower oil production from the OECD Americas, Norway, Brazil and Kazakhstan the major reasons for the non-OPEC output decrease in March...with the increase in March's global output, the 99.86 million barrels of oil per day produced globally in March were 1.11 million barrels per day, or 1.1% greater than the revised 98.75 million barrels of oil per day that were being produced globally in March a year ago, the 3rd month of OPECs first round of production cuts (see the April 2019 OPEC report (online pdf) for the originally reported February 2019 details)...with this month's upward revision to and increase in OPEC's output, their March oil production of 28,612,000 barrels per day rose to 28.7% of what was produced globally during the month, up from the 28.1% share OPEC contributed in February, and the 28.3% global share they had in January...OPEC's March 2019 production, which included 524,000 barrels per day from former member Ecuador, was reported at 30,022,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 886,000 fewer barrels per day of oil in March than what they produced a year ago, when they accounted for 30.2% of global output, with a 1,003,000 barrel per day drop in the output from Libya and a 680,000 barrel per day drop in the output from Iran only partially offset by a 392,000 barrel per day increase in the output from the Emirates, a 266,000 barrel per day increase in output from Saudi Arabia, and smaller year over year increases in the output from Kuwait and Nigeria...

with the big jump in OPEC's output that we've seen in this report, there was a substantial surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...    

the above table came from page 25 of the April 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 second column, we've circled in blue the figure that's relevant for March, which is their estimate of global oil demand during the first quarter of 2019...

OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe have been using an average of 92.92 million barrels of oil per day, which is a 4.66 million barrel per day downward revision from the 97.58 million barrels of oil per day they were estimating for the 1st quarter a month ago (circled in green), largely reflecting coronavirus related demand destruction....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 99.86 million barrels per day during March, which would imply that there was a surplus of around 6,940,000 barrels per day in global oil production in March when compared to the demand estimated for the month... 

however, as we know, most of that downward revision in 1st quarter demand was due to shutdowns and lockdowns imposed worldwide during the month of March, as the economic and fuel consumption impacts during February were mostly limited to China and Korea...that means to get a reasonable idea of what the impact of the reduced demand metric implies, we'll have to recompute the oil production figures for the first quarter as a whole, and then make our own estimates as how those apply to each month, based on what we know about the impact of the coronavirus...

as we saw earlier, February's global oil output was revised lower by 510,000 barrels per day to 99.24 million barrels per day with this report, while January's global oil output was revised to 100.04 million barrels per day with last month's OPEC report...since this month's report indicates that March's global oil output was at 99.86 million barrels per day, that means global oil output for the first quarter averaged 99.724 million barrels per day...given OPEC's global demand estimate of 92.92 million barrels of oil per day, we can therefore estimate with reasonable accuracy that there was a surplus of around 6,800,000 barrels per day in global oil production over the first quarter when compared to the demand estimated for the quarter... 

now it gets tricky...since the virus was largely confined to China during January, and Chinese authorities had not even admitted to human to human transmission until January 20th, we can figure the impacts of the virus outbreak on global fuel consumption were negligible during January...hence, we'll take our original estimate of a surplus of 610,000 barrels per day in global oil production during January and adjust it for the revisions to global production reported in February to estimate that there was a global surplus of 690,000 barrels per day in global oil production during January...next, since we have no special information as to the impacts of the virus outbreak in February, we'll use our estimate from last month's OPEC data that there was a surplus of around 2,170,000 barrels per day in global oil production in February, and adjust it with the 510,000 barrels per day downward revision to global output reported this month to estimate that February's surplus oil production was at 1,660,000 barrels per day during the month...then, backing those oil surplus figures for January and February out of the first quarter's oil production surplus of 6,940,000 barrels per day leaves us with nearly 550 million barrels of surplus oil in March, or an average surplus during the month of around 17,718,000 barrels per day...

given that massive surplus for March, what can we expect in the future in light of last week's OPEC pact with Russia and other major producers to cut production by 9.7 barrels per day over May and June?  to explain what's in play for the next three months, we'll start by including a table of the production cuts each of the participants in last week's meeting agreed to... 

the above table was taken from an article at Zero Hedge, and it shows the oil production baseline in thousands of barrel per day off of which each of the oil producers will cut from in the first column, a number which is based on each of the producer's October 2018 output, ie., a date before the past year's and past quarter's output cuts took effect; the second column shows how much each participant will cut in thousands of barrel per day, which is 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant has agreed to after that 23% cut..

using October 2018 as a basis for their cuts means they're not actually cutting 23% from recent production, because almost all of these producers had higher production back then than they do now...if you simply go back to the first OPEC table we've included here (Table 5-8), you can see that OPEC's production in 2018 was at 31,344,000 barrels per day, 12.8% more than their pre-price war February production of 27,790,000 barrels per day...when we check OPEC's October 2018 production, we find it was the highest of that year, in fact the highest in 3 years, at 32,965,000 barrels per day, so it begins to look like they cherry-picked that baseline to make it seem their new cuts are more than they actually are.....

moreover, Iran, Libya and Venezuela, whose production has already been beaten down, are not even required to make any cuts...if we were to add the October 2018 production from Iran, Libya and Venezuela back to OPEC's "proposed voluntary cut level" of 20,599,000 barrel per day, we'd find that OPEC's May and June production could be as high as 26,185,000 barrels per day, down just 5.8% from their pre-price war production of 27,790,000 barrels per day...so the widely promoted "10 million barrel per day" production cuts are just a deception, designed to underpin oil prices and keep them from falling to a level that would reflect the actual supply demand imbalance....

we find that by excluding whatever Iran, Libya and Venezuela produce, the other OPEC members will be voluntarily reducing their production 15% from their pre-price war levels....then, outside of OPEC, there are really only 3 producers who's cuts have the potential to make a difference on a global scale; Russia, Kazakhstan, and Mexico, so we'll check their recent production to see how much they're really cutting their output...according to page 43 of the April OPEC Monthly Oil Market Report, Russia's crude oil production was at 10.58 million barrels per day in both February and March, so their "proposed voluntary cut level" of 8,492,000 barrels per day is a 19.7% cut from their current production level....next, according to page 44 of the April OPEC Monthly Oil Market Report, Kazakhstan's February production level was at 1.65 million barrels per day (their March output is not given), so their "proposed voluntary cut level" of 1,319,000 barrels per day represents a 20% cut from their February production...and for Mexico, page 44 of the April OPEC Monthly Oil Market Report shows their February production level was at 1.73 million barrels per day (again, March is not given), so their "proposed voluntary cut level" of 1,653,000 barrels per day represents a 5.5% cut from what they were producing in February (note that Mexico is a special case, because they are so heavily hedged by buying oil puts that they stand to make more on their hedges if oil prices fall than they'll lose in selling their oil below cost, so they have no incentive to cut production; hence, OPEC simply had to accept what they offered, or they'd walk away..)

so, given the reality of the much ballyhoo'd production cuts, let's try to estimate what the 2nd quarter supply / demand balance might be...back on Table 4-2, World Oil Demand in 2020, we've also circled in red the figure that's relevant for the 2nd quarter on the "Total world" line in the third column...OPEC has estimated that during the 2nd quarter, global consumption of oil will be at an 86.70 million barrels of oil per day average, which is a 11.50 million barrel per day downward revision from the 98.20 million barrels of oil per day they had estimated or the 2nd quarter a month ago...since April was half gone before the ink was dry on this most recent production cut agreement, we see no reason that OPEC's April production will fall from March levels; indeed, it may even rise, considering that the Saudis, the Emirates, & Kuwait were engaged in an all-out production & price war at the beginning of the month...but we''ll just use March's OPEC output figures for April to simplify our estimate...then we'll also estimate that oil production will fall by 1 million barrels per day for producing countries other than OPEC, largely on cutbacks to expensive US shale and Canadian tar-sands production, due to depressed oil prices...hence, that would leave April's global oil production at 98.86 million barrels per day...then in May, these OPEC+ production cuts that we've been discussing kick in...rather than the advertised 9.7 million barrels per day cut, we've figured that they'll actually be closer to 7.2 million barrels per day lower than what the same countries produced in February (if they meet their "voluntary" targets)...again, generously estimating that oil production will again fall by 1 million barrels per day for other producing countries not included in this pact would leave May's global oil production at 89.86 million barrels per day (temporarily accepting more significant digits than our data warrants)...since we have no special insight into what might happen to oil prices by June, we'll just repeat May's production figure of 89.86 million barrels per day as our estimate for June...that gives us an average oil production figure of 92.86 million barrels per day for the 2nd quarter against OPEC demand estimate of 86.70 million barrels per day, suggesting that even after Russian & OPEC production cuts, 2nd quarter global production will still be 6,160,000 barrels per day greater than demand...

DUC well report for March

Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for April, which includes the EIA's March data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the thirteenth month in a row, this report showed a decrease in uncompleted wells nationally in February, as both the 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 79 wells, falling from a revised 7,655 DUC wells in February to 7,576 DUC wells in March, which now is 10.8% fewer DUCs than the 8,489 wells that had been drilled but remained uncompleted as of the end of March of a year ago...this month's DUC decrease occurred as 990 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, down by 24 from the 1,014 wells that were drilled in February and the lowest number of wells drilled since June 2017, while 1,070 wells were completed and brought into production by fracking, a decrease of 12 well completions from the 1,082 completions seen in February, and down from the 1,332 completions seen in March of last year....at the March completion rate, the 7,576 drilled but uncompleted wells left at the end of the month still represents a 7.1 month backlog of wells that have been drilled but are not yet fracked, same as the DUC well backlog of a month ago...

both oil producing and natural gas producing regions saw DUC well decreases in March, even as two of the seven major basins saw modest DUC increases...the number of DUC wells remaining in the Oklahoma Anadarko decreased by 52, falling from 728 at the end of February to 676 DUC wells at the end of March, as 52 wells were drilled into the Anadarko basin during January while 105 Anadarko wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 18, from 1,368 DUC wells at the end of February to 1,350 DUCs at the end of March, as 152 wells were drilled in the Eagle Ford during February, while 170 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 11 to 442, as 130 Niobrara wells were drilled in March while 141 Niobrara wells were completed....on the other hand, DUC wells in the Bakken of North Dakota increased by 12, from 870 DUC wells at the end of February to 882 DUCs at the end of March, as 95 wells were drilled into the Bakken in January, while 83 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 8, from 3,433 DUC wells at the end of February to 3,441 DUCs at the end of March, as 450 new wells were drilled into the Permian, while 442 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 18 wells, from 562 DUCs at the end of February to 544 DUCs at the end of March, as 74 wells were drilled into the Marcellus and Utica shales during the month, while 92 of the already drilled wells in the region were fracked....on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region had their uncompleted well inventory remain unchanged at 241, as 36 wells were drilled into the Haynesville during March, while 36 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of March, 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 61 wells to 6,791 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 18 wells to 785 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…

record jump in crude supplies; gasoline output at a 35 year low; gasoline demand at a record low..

2nd largest build of gasoline stores on record: refinery utilization at the lowest since September 2008 (hurricane Ike), refining the fewest barrels in 9 years; rig count at a 40 month low

oil prices finished lower for the sixth week in the past seven despite an agreement between OPEC & Russia to cut a record amount of oil production, as analysts pointed out the cuts were less than half of what was needed to balance supply and demand in the wake of the global COVID-19 imposed economic shutdown... after rising 31.7% to $28.34 a barrel last week on hopes for an end to the Saudi-Russian price war and an agreement to cut supplies, the contract price of US light sweet crude for May delivery opened 8% lower at $26.09 a barrel after the OPEC+ video conference that was originally scheduled for Monday was delayed until Thursday amid an intensifying dispute between Russia and Saudi Arabia over who was to blame for falling crude prices, and despite moving back up to $28.24 during the Monday session on optimism that an agreement to cut production would be reached, faded near the close to end down $2.26 at $$26.08 a barrel.....oil prices rallied in Asia trading early Tuesday, with US crude trading at $27.15, after a Russian exec opined that his country was “very, very close” to an agreement to cut production, but opened at $26.34 in New York on doubts that any production cuts could be enough, and tumbled to $23.63 a barrel after the EIA cut its 2020 oil price outlook by over 20% and lowered its crude production forecasts...oil traded flat early Wednesday after the American Petroleum Institute and the EIA both reported huge crude oil inventory increases, but strengthened late in the session on hopes for a production cut agreement to end the day's trading $1.46, or 6.2% higher at $25.09 a barrel, as Russia signaled willingness to cut their output...oil prices then jumped 12% to trade at $28.36 per barrel early Thursday on a report that Saudi Arabia and Russia had reached a deal to cut as much as 20 million barrels per day, but then tumbled more than 20% in the afternoon after Mexico balked at the cuts they were expected to make, throwing the entire agreement into doubt, while US crude went on to close $2.33, or 9.3% lower at $22.76 per barrel....while US markets were closed Friday due to Good Friday and US crude thus finished the week 19.7% lower, Brent crude, the international benchmark, did trade on Friday and was down nearly 2.5% to $31.82 per barrel, despite the deal that should end the price war between Saudi Arabia and Russia...

on the other hand, natural gas prices finished higher on forecasts for cooler weather and a resumption of Chinese LNG imports... after bouncing off a series of 24 year lows to close at $1.621 per mmBTU last week, the contract price for natural gas for May delivery opened higher and rose 11.0 cents or 6.8%, to settle at $1.731 per mmBTU on forecasts for cooler weather and higher heating demand for the following week than was previously expected...the rally continued uninterrupted on Tuesday, on reports that deliveries of U.S. natural gas to China had resumed after more than a year, as May gas rose 12.1 cents, or 7.0% to $1.852 per mmBTU, the highest close in three weeks...however, a warmer turn in weather models ended the brief rally on Wednesday, as the May contract settled at $1.783 per mmBTU, down 6.9 cents, as the electricity trade group Edison Electric Institute said power demand fell to a 16-year low ...natural gas prices then fell 5 cents, or almost 3%, to $1.733 per mmBTU on Thursday on a bigger-than-expected storage build and long-range forecasts calling for demand destruction due to the coronavirus outbreak, but still ended the week 6.9% higher than the prior week's close...

the natural gas storage report from the EIA for the week ending April 3rd indicated that the quantity of natural gas held in underground storage in the US rose by 38 billion cubic feet to 2,024 billion cubic feet by the end of the week, which lifted our gas supplies to 876 billion cubic feet, or 76.3% higher than the 1,148 billion cubic feet that was in storage on April 3rd of last year, and 324 billion cubic feet, or 19.1% above the five-year average of 1,700 billion cubic feet of natural gas that has been in storage as of the 3rd of April in recent years....the 38 billion cubic feet that were added to US natural gas storage this week was well above the consensus estimate from a survey of analysts by S&P Global Platts for a 25 billion cubic feet addition, and was also above the 25 billion cubic feet of natural gas that have been pulled from natural gas storage during the same week over the past 5 years, and way above the 6 billion cubic feet addition of natural gas to storage 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 April 3rd indicated that a big drop in our oil production and a drop in our oil imports was not enough to offset a near-record pullback in our oil refining, leaving us with a record surplus of oil to add to our stored commercial supplies, the twenty-second addition of oil to storage in the past thirty weeks....our imports of crude oil fell by an average of 173,000 barrels per day to an average of 5,874,000 barrels per day, after falling by an average of 70,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 322,000 barrels per day to 2,833,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,041,000 barrels of per day during the week ending April 3rd, 149,000 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 fell by 600,000 barrels per day to 12,400,000 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 15,441,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,634,000 barrels of crude per day during the week ending April 3rd, 1,263,000 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 record average of 2,186,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at that 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 361,000 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 plugged a (+361,000) 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", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,144,000 barrels per day last week, now 8.4% less than the 6,709,000 barrel per day average that we were importing over the same four-week period last year....the 2,186,000 barrel per day 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 down by 600,000 barrels per day to 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 600,000 barrels per day to 11,900,000 barrels per day, while a 16,000 barrel per day increase in Alaska's oil production to 475,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending April 5th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was still 1.6% above that of a year ago, and 47.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 75.6% of their capacity in using 13,634,000 barrels of crude per day during the week ending April 3rd, down from 82.3% of capacity during the prior week, and the lowest capacity utilization rate since September 2008, when the aftermath of Hurricane Ike shut down Texas Gulf Coast refining....hence, the 13,634,000 barrels per day of oil that were refined this week were 15.3% fewer barrels than the 16,100,000 barrels of crude that were being processed daily during the week ending April 5th, 2019, when US refineries were operating at 87.5% of capacity, and also the fewest barrels refined in any week since February 18, 2011....

with the big drop in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 1,638,000 barrels per day to a 35 year low of 5,818,000 barrels per day during the week ending April 3rd, after our refineries' gasoline output had decreased by 1,502,000 barrels per day over the prior week....after those two big drops in gasoline output, our gasoline production was 42.8% lower than the 9,813,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 16,000 barrels per day to 4,982,000 barrels per day, after our distillates output had increased by 128,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production for the week was still 1.1% less than the 5,038,000 barrels of distillates per day that were being produced during the week ending April 5th, 2019....

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 2nd time in 10 weeks and by the second most in history, rising by 10,497,000 barrels to 257,303,000 barrels during the week ending April 3rd, after our gasoline supplies had increased by 7,524,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by 1,594,000 barrels per day to 5,065,000 barrels per day, indicating the lowest gasoline demand on record, while our exports of gasoline rose by 97,000 barrels per day to 770,000 barrels per day and our imports of gasoline fell by 243,000 barrels per day to 493,000 barrels per day....after this week's big inventory increase, our gasoline supplies were 12.3% higher than last April 5th's gasoline inventories of 229,129,000 barrels, and roughly 10% above the five year average of our gasoline supplies for this time of the year...

with the increase in our distillates production, our supplies of distillate fuels increased for the first time in 12 weeks and for the 6th time in 27 weeks, rising by 476,000 barrels to 122,724,000 barrels during the week ending April 3rd, after our distillates supplies had decreased by 2,194,000 barrels over the prior week....our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 100,000 barrels per day to 3,807,000 barrels per day, and because our exports of distillates fell by 206,000 barrels per day to 1,293,000 barrels per day and because our imports of distillates rose by 58,000 barrels per day to 185,000 barrels per day....but even after this week's inventory increase, our distillate supplies at the end of the week were still 4.2% below the 128,053,000 barrels of distillates that we had stored on April 5th, 2019, and about 12% below the five year average of distillates stocks for this time of the year...

finally, with the near-record pullback in our oil refining and the big drop in exports, our commercial supplies of crude oil in storage rose for the twenty-third time in forty weeks and for the thirty-third time in the past 52 weeks, increasing by a record 15,177,000 barrels, from 469,193,000 barrels on March 27th, 484,370,000 barrels on April 3rd, the largest increase on record....but even after 11 straight increases, our crude oil inventories were just 2% above the five-year average of crude oil supplies for this time of year, but 40.1% higher than the prior 5 year (2010 - 2014) average of crude oil stocks as of the first Friday in April , with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels, and continued rising from there....since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of April 3rd were 6.1% above the 456,550,000 barrels of oil we had in commercial storage on April 5th of 2019, and 13.0% above the 428,638,000 barrels of oil that we had in storage on April 6th of 2018, while at the same time remaining 9.2% below the 533,377,000 barrels of oil we had in commercial storage on April 7th of 2017...      

This Week's Rig Count

the US rig count decreased for the 25th time in the past 30 weeks during the short week ending April 9th, and is now down 44.4% from the interim high at end of 2018 (note that because of the Good Friday holiday, this week's rig count was released a day early and hence only covers six days)....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 62 rigs to 602 rigs this past week, which was the least rigs deployed since December 2, 2016, and hence is a 40 month low for the US rig count...that total was also down by 420 rigs from the 1022 rigs that were in use as of the April 12th report of 2019, and 1,327 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 decreased by 58 rigs to 504 oil rigs this week, which was also the least oil rig activity in 40 months, 329 fewer oil rigs than were running a year ago, and less than a third of the rigs 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 decreased by 4 to 96 natural gas rigs, which was the least number of natural gas rigs active since October 7th of 2016, and hence was a new 42 month low for natural gas drilling, down by 93 gas rigs from the 189 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those 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... a year ago, there were no such "miscellaneous" rigs deployed..

the Gulf of Mexico rig count was unchanged at 18 rigs this week, with 17 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that's five less than the rig count in the Gulf a year ago, when 20 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, just as it has been all winter...

the count of active horizontal drilling rigs decreased by 48 rigs to 545 horizontal rigs this week, which was the fewest horizontal rigs active since January 13th 2017, and hence is a 39 month low for horizontal drilling...it was also 344 fewer horizontal rigs than the 889 horizontal rigs that were in use in the US on April 12th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was down by six to 35 directional rigs this week, and those were also down by 43 from the 78 directional rigs that were operating during the same week of last year....in addition, the vertical rig count was down by 8 to 22 vertical rigs this week, and those were down by 33 from the 55 vertical rigs that were in use on April 12th 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 April 9th, the second column shows the change in the number of working rigs between last week's count (April 3rd) and this week's (April 9th) count, the third column shows last week's April 3rd 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 12th of April, 2019...    

as you can see, this weeks basin totals indicate a decrease of 49 rigs, one more than the decrease of the horizontal rig count nationally, which thus means that a horizontal rig was added in a basin not tracked separately by Baker Hughes...to account for the 35 rig decrease in the Permian basin, we'll again start in Texas, where we note that 28 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while a rig was actually added in Texas Oil District 7C, or the southern Permian Midland...that means that the Permian in Texas saw a total reduction of 27 rigs, which means that the 7 rigs that were shut down in New Mexico had been drilling in the western Permian Delaware, and still leaves us a rig short of the 35 Permian rigs that were stacked this week...assuming those totals are accurate, it's possible that a rig might have started up elsewhere in New Mexico, such as in the San Juan basin, while 8 Permian rigs were shut down in the state, or it's also possible that one of the three rigs pulled out ofTexas Oil District 1 could have been in the Val Verde basin along the Rio Grande, an area shown to be in the easternmost Permian on some maps; either way, it's a shift we hadn't seen previously...

elsewhere in Texas, two rigs were pulled from Texas Oil District 2, one rig was removed from Texas Oil District 3, and two more rigs were stacked in Texas Oil District 4, which together with the District 1 rig losses would more than account for the 6 rigs pulled out of the Eagle Ford formation...Texas Oil District 10 had one rig stacked, accounting for the decrease in the Granite Wash basin, and Texas Oil District 6 was again down a rig, thus accounting for the Haynesville shale natural gas rig loss, while the 25 Haynesville shale rigs deployed in northwest Louisiana again remained unchanged...

in other states, the two rig loss in the Williston shale includes 1 rig from North Dakota and 1 rig from Montana, and the two rigs pulled out of the Niobrara chalk were most likely from Colorado, while the 2 rigs pulled out of the Cana Woodford are the only named basin rigs that came out of Oklahoma, so there was another rig shut down in a basin not tracked separately by Baker Hughes...in addition, rig cutbacks you see above in Alaska, California, Utah, and Wyoming all came out of basins that Baker Hughes doesn't itemize...finally, to account for the decrease of four rigs seeking natural gas, we start with the Texas Haynesville rig and then add the rig pulled out of West Virginia's Marcellus, and then find that the other two natural gas rigs​ ​were also removed from one of those "other basins" not tracked separately by Baker Hughes...

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refinery utilization lowest since Harvey; gasoline production lowest in 22 years; gasoline demand lowest since Feb 1992 after record drop in demand..

oil ​prices ​see largest one-day and one-week percentage ​​gains on record​ after hitting 18 year low​​;​ natural gas prices hit 24 year lows; end of winter natural gas supplies up 77% from a year ago; oil supplies jump most since Oct 2016; refinery utilization lowest since Sept 2017; gasoline production lowest in 22 years; gasoline demand lowest since Feb 1992​​; the biggest one week ​gasoline ​demand drop ever​; ​biggest rig drop in 5 years, and not one shale driller is profitable at today's prices..

this week's oil prices finished higher for the first time in 6 weeks on hopes that the Saudis and Russians would end their price war and cut oil production...after falling 5% to $21.51 a barrel last week after the selling due to the Saudi-Russia price war which had driven oil prices 30% lower the prior week subsided, the contract price of US light sweet crude for May delivery opened 3% lower on Monday ​and ​tumbled to an 18 year low of $19.27 a barrel after extended coronavirus lockdowns had cascaded through the world’s largest economies over the weekend, before recovering some of the earlier losses and closing down $1.42 at $20.09 a barrel, also an 18 year closing low...oil prices clawed back Monday's losses on Tuesday, rising to as high as $21.89 on end of quarter trading strategies, before slipping back to finish just 39 cents, or 1.9%, higher at $20.48 a barrel, thus ending March with the largest quarterly percentage drop on record...crude prices fell on Wednesday as a bigger-than-expected rise in U.S. inventories and a widening rift within OPEC heightened oversupply fears, with US oil prices again slipping below $20 a barrel on the largest jump in gasoline supplies since the 1st week of the year, before finishing down less than 1% at $20.31 a barrel...oil prices then surged as much as 13% on Thursday morning, following a report that China is planning to start buying cheap crude for its strategic reserves, and then soared to a 35% gain at $27.39, after Trump tweeted that he had talked to Russian and Saudi leaders and that they would soon cut production by 10 to 15 million barrels per day, before prices fell back below $25 after the Kremlin said that Putin had not spoken to his Saudi counterpart and hasn’t agreed to reduce production, but still managed to finish the session $5.01 higher at $25.32 a barrel, the largest one-day percentage gain on record, edging out a similar ​record ​gain two weeks earlier...Oil prices surged again on Friday after OPEC and its allies announced they would hold a virtual meeting on Monday, and rose to as high as $29.13 before finishing the session with a gain of $3.02, or nearly 12% at $28.34 a barrel...hence, US crude prices ended the week 31.7% higher, with May's crude oil logging its best week on records going back to the contract’s inception in 1983...

meanwhile, without Trump tweeting on their behalf, natural gas prices closed at 24 year lows on Wednesday and Thursday before bouncing off an even lower 24 year​ ​low to rally​ to a gain​ on Friday, ​while ​still finishing the week 3% lower...after trading in the April natural gas contract expired 1.9% higher at $1.634 per mmBTU last week, the contract price for natural gas for May delivery opened this week at $1.630 per mmBTU, 4.1 cents lower than its $1.671 Friday close, but clawed back to finish 1.9 cents higher at $1.690 per mmBTU, as the prospect of potential production cuts outweighed coronavirus related demand destruction...but gas prices fell 5 cents or 3% to $1.640 per mmBTU on Tuesday on an increase in natural gas output and on forecasts for milder weather and lower heating demand next week....natural gas ​prices then tumbled to their lowest close since August 1995 on Wednesday, ending down 5.3 cents at $1.587 per mmBTU, as the coronavirus ​pandemic ​was seen to cut global demand for energy in the wake of Trump’s comments that we'd see a very painful two weeks ahead...prices fell another 3.5 cents to another 24 year low of $1.552 per mmBTU on Thursday, on a bearish natural gas storage report​, and were heading for a 3rd straight 24 year low at $1.530 per mmBTU on Friday, before rallying to close 6.9 cents higher at $1.621 per mmBTU on forecasts for cooler weather and higher heating demand in mid April than had been expected...

the natural gas storage report from the EIA on the week ending March 27th indicated that the quantity of natural gas held in underground storage in the US fell by ​19 billion cubic feet to 1,986 billion cubic feet by the end of the week, which left our gas supplies 863 billion cubic feet, or 76.8% higher than the 1,123 billion cubic feet that remained in storage on March 27th of last year, and 292 billion cubic feet, or 17.2% above the five-year average of 1,694 billion cubic feet of natural gas that has been in storage as of the 27th of March in recent years....the 19 billion cubic feet that were withdrawn from US natural gas storage this week was somewhat below the consensus estimate for a 27 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, but matched the average 19 billion cubic feet of natural gas that have been pulled from natural gas storage during the fourth week of March over the past 5 years, while the corresponding week of 2019 had an unusual 6 billion cubic feet March addition of natural gas to storage..

Dallas Fed Energy Survey

with oil prices hitting 18 year lows again this week, many have probably been wondering what oil prices oil producing companies need to cover their operating expenses, and what levels of oil prices the exploitation companies need to profitably drill a new well...while many analysts have been making educated guesses on those "break-even" points, perhaps the most accurate figures come from a survey of oil company executives themselves, in the Fed district that accounts for the lion's share of US oil companies...

every quarter the Dallas Fed conducts a survey of more than 200 oil and gas companies headquartered in or operating in their district, which includes western Louisiana and eastern New Mexico in addition to Texas, and which forms the basis of the Fed's economic research on the oil & gas industry....in addition to the usual quarterly survey, each survey also includes a set of different questions each quarter, and this year's First Quarter Dallas Fed Energy Survey included a set of special questions to update to their data on break-even oil prices by basin....157 oil and gas firms responded to the special questions survey, and in an overview, they present the results of that survey graphically, and that's what we'll look at today...

as the heading on this first graphic from that survey indicates, the first special question the Dallas Fed asked the oil executives was what WTI oil price they needed to cover their expenses on existing wells, and the range of their responses are indicated in a bar graph format below...

in the above graph, the blue, brick, yellow, orange, green, purple, and turquoise colored bars represent the range of oil price responses to that operating expenses question given by oil company executives with operations in the Eagle Ford of south Texas, in the Permian Delaware of far west Texas and New Mexico, in the Permian Midland shale of central western Texas, in the Bakken Shale of North Dakota, in other US oil producing shale basins outside of those graphed, from executives with operations in other Permian shale regions, and​ from those execs with wells in non-shale oil producing areas, as the headings above the colored bars indicate...in addition, underneath each of those bars, they've indicated the number of oil executives that responded to that headline question for each of those basins or collectives...thus, what the first blue bar tells us is that ​according to 8 oil company executives with wells in the Eagle Ford shale, at least one company needs oil priced at $45 a barrel to cover its operating expenses, at least one oil company can cover their Midland basin expenses at $12 a barrel oil, and the average price needed to cover operating expenses for all oil companies producing oil in that basin is $23 a barrel...similarly, in the brick colored bar, we can see that at least one oil company of the 18 with wells in the Permian Delaware can cover it's expenses with oil at $5 a barrel, while another company needs as much as $54 a barrel to cover their operating expenses in the same basin, while the average oil price the 18 companies with wells in the Permian Delaware needs is $28 a barrel...meanwhile, on the far right, the turquoise bar indicates responses from 44 companies operating in non shale basins around the country and appears to indicate some of those non-shale wells could continue to be operated profitably even if oil fell to $3 a barrel, while others need prices as high $59 to continue pumping oil without losing money...the Dallas Fed advises that 35% of the responses they received to this survey were at or below the average WTI spot price ​of ​$24 per barrel​ ​for the week ending March 20th, which means many oil companies can’t even cover their operating expenses at current prices, and hence are losing money with every barrel of oil they produce...

next we have a similar graphic showing what oil price each of the survey respondents said they needed to profitably drill a new well:

like the first graphic, the colored bars in this 2nd graphic outline the range of responses to the Dallas Fed question as to what oil price each of the executives says they need to profitably drill a new well, with the basin bars arranged left to right from the lowest average oil price to the highest, ie, in a slightly different order than for the operating expenses question...hence, we can see from the yellow bar ​on the left ​that among the 22 oil executives with operations in the Permian Midland shale who answered this question, at least one can drill a new well and make a profit with $30 oil, while at least one other company needs $60 oil to cover his costs of drilling a new well, while the average oil price needed to turn a profit drilling a new well for all those operating in the Permian Midland taking part in the survey was $46 a barrel...similarly, for the 7 oil execs who might be drilling new wells in the Eagle Ford (​as indicated by the ​blue bar), the responses ranged from those who could profit with oil price of $40 a barrel to those who need a price of $55 a barrel, with the average response for those drilling in that basin also at $46 a barrel...on the far right, we can see that the 16 drillers in the Permian Delaware have the highest average break-even price in the US at $52 a barrel, with some needing prices as high as $70 a barrel to profitably drill a new well, while others could break-even at $35 a barrel oil...but the obvious point we need to make is that with even with oil prices up 31​.7​% this wee​k​ at $28.34 a barrel, there is no oil company horizontally drilling into shale in the US who can contract to drill a new well and expect to make a profit, unless they've contracted for that drilling at a much higher price months ago....in fact, the only companies that can profitably drill today are a handful of the conventional non-shale drillers​ shown in ​turquoise​ ​who are presumably drilling vertical wells, as at least one of them can ​drill & ​break even with oil at $15 a barrel....but even among them, the average breakeven price is $50 a barrel, and some need $70 oil, so oil prices would have to nearly double from today's level just to make half of any new drilling in the US profitable...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 27th indicated that a drop in our oil exports and big pullback in our oil refining meant we were left with a big surplus of oil to add to our stored commercial supplies, the twenty-first addition of oil to storage in the past twenty-nine weeks....our imports of crude oil fell by an average of 70,000 barrels per day to an average of 6,047,000 barrels per day, after falling by an average of 422,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 695,000 barrels per day to 3,155,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,892,000 barrels of per day during the week ending March 27th, 625,000 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 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 15,892,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,898,000 barrels of crude per day during the week ending March 27th, 940,000 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 an average of 1,976,000 barrels of oil per day were being added to to the supplies of oil stored in the US....so looking at all that 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 982,000 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 plugged a (+982,000) 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", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone else...(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,279,000 barrels per day last week, now 6.9% less than the 6,745,000 barrel per day average that we were importing over the same four-week period last year....the 1,976,000 barrel per day 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 16,000 barrel per day increase in Alaska's oil production to 475,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending March 29th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was 6.6% 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 82.3% of their capacity in using 14,898,000 barrels of crude per day during the week ending March 27th, down from 87.3% of capacity during the prior week, and the lowest capacity utilization rate since September 8, 2017, when the aftermath of Hurricane Harvey shut down Texas Gulf Coast refining....hence, the 14,898,000 barrels per day of oil that were refined this week were 6.0% fewer barrels than the 15,849,000 barrels of crude that were being processed daily during the week ending March 29th, 2019, when US refineries were operating at 86.4% of capacity, and also the fewe​st barrels refined in any week since Hurricane Harvey....

with the big drop in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 1,502,000 barrels per day to a 22 year low of 7,456,000 barrels per day during the week ending March 27th, after our refineries' gasoline output had decreased by 1,016,000 barrels per day over the prior week...that drop in gasoline o​ tput was probably because wholesale gasoline has selling at less than 50 cents per gallon, and refineries have been losing up to $17 per barrel on every barrel they process...after this week's drop in gasoline output, our gasoline production was 24.0% lower than the 9,813,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 128,000 barrels per day to 4,966,000 barrels per day, after our distillates output had increased by 150,000 barrels per day over the prior week...so after this week's increase in distillates output, our distillates' production for the week was 2.0% more than the 4,870,000 barrels of distillates per day that were being produced during the week ending March 29th, 2019....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose for the 1st time in 9 weeks but for the 13th time in 21 weeks, rising by 7,524,000 barrels to 246,806,000 barrels during the week ending March 27th, after our gasoline supplies had decreased by 1,537,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by a record 2,178,000 barrels per day to 6,659,000 barrels per day, indicating the lowest gasoline demand since February 14th 1992, and because our exports of gasoline fell by 162,000 barrels per day to 673,000 barrels per day, while our imports of gasoline fell by 98,000 barrels per day to 736,000 barrels per day...after this week's big inventory increase, our gasoline supplies were 4.2 higher than last March 29th's gasoline inventories of 236,839,000 barrels, and roughly 4% above the five year average of our gasoline supplies for the same time of the year...

even with the increase in our distillates production, our supplies of distillate fuels decreased for the 11th week in a row and for the 20th time in 26 weeks, falling by 2,194,000 barrels to 122,248,000 barrels during the week ending March 27th, after our distillates supplies had decreased by 678,000 barrels over the prior week....our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 112,000 barrels per day to 3,907,000 barrels per day, and because our exports of distillates rose by 243,000 barrels per day to 1,499,000 barrels per day while our imports of distillates rose by 12,000 barrels per day to 127,000 barrels per day....after this week's inventory decrease, our distillate supplies at the end of the week were 4.6% below the 128,169,000 barrels of distillates that we had stored on March 29th, 2019, and fell to about about 13% below the five year average of distillates stocks for this time of the year...

finally, with ​the pullback in refining and ​​the big drop in exports​, our commercial supplies of crude oil in storage rose for the twenty-third time in forty weeks and for the thirty-third time in the past 52 weeks, increasing by 13,833,000 barrels, from 455,360,000 barrels on March 20th to 469,193,000 barrels on March 27th, the largest increase since October 2016....but even after 10 straight increases, our crude oil inventories are still near the five-year average of crude oil supplies for this time of year, but about 30% higher than the prior 5 year (2010 - 2014) average of crude oil stocks after the fourth week of March, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels and continued rising....since our crude oil inventories had generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of March 27th were 4.4% above the 449,521,000 barrels of oil we had in commercial storage on March 29th of 2019, and 10.3% above the 425,332,000 barrels of oil that we had in storage on March 30th of 2018, while at the same time remaining 12.4% below the 535,543,000 barrels of oil we had in commercial storage on March 31st of 2017...      

This Week's Rig Count

the US rig count decreased for the 24th time in the past 29 weeks during the week ending April 3rd, but this time they fell by the most since mid-March of 2015... Baker Hughes reported that the total count of rotary rigs running in the US decreased by 64 rigs to 664 rigs this past week, which was the smallest number of rigs deployed since December 30, 2016, and hence a 39 month low for the rig count...that total was also down by 361 rigs from the 1025 rigs that were in use as of the April 5th report of 2019, and 1,265 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 decreased by 62 rigs to 562 oil rigs this week, which was the least oil rig activity in 38 months, 269 fewer oil rigs than were running a year ago, and more than a thousand less​ rigs​ 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 decreased by 2 to 100 natural gas rigs, which was the least number of natural gas rigs active since October 7th of 2016, and hence was a new 41 month low for natural gas drilling, down by 94 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 those 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... a year ago, there were no such "miscellaneous" rigs deployed..

the Gulf of Mexico rig count was unchanged at 18 rigs this week, with all 18 of those rigs drilling for oil in Louisiana's offshore waters...that's four less than the rig count in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, as it has been all winter...

the count of active horizontal drilling rigs decreased by 60 rigs to 593 horizontal rigs this week, which was the fewest horizontal rigs active since January 27th 2017, and hence is a 38 month low for horizontal drilling...it was also 308 fewer horizontal rigs than the 901 horizontal rigs that were in use in the US on April 5th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was down by six to 41 directional rigs this week, and those were also down by 29 from the 70 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was up by 2 to 30 vertical rigs this week, but those were still down by 24 from the 54 vertical rigs that were in use on April 5th 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 April 3rd, the second column shows the change in the number of working rigs between last week's count (March 27th) and this week's (April 3rd) count, the third column shows last week's March 27th 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 5th of April, 2019...    

the basin totals above are missing a lot of specifics, since they show a loss of just 48 rigs, while we know the horizontal rig count was down by 60 nationally...let's again start with the rig losses in the Texas part of Permian basin, where 17 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, 3 more rig were shut down in Texas Oil District 8A, which corresponds to the northern Permian Midland, and two more rigs were stacked in Texas Oil District 7C, or the southern Permian Midland...that means that the Permian in Texas saw a total reduction of 22 rigs, which therefore means that the 9 rigs that were shut down in New Mexico had been drilling in the western Permian Delaware...elsewhere in Texas, 3 rigs were pulled out of Texas Oil District 1, 3 rigs were pulled from Texas Oil District 2, and another ​rig ​was removed from Texas Oil District 3, any 6 of which would account for the Eagle Ford shale rig reduction...Texas Oil District 6 was also down a rig, thus accounting for the Haynesville shale loss, while the 25 Haynesville shale rigs ​deployed ​in northwest Louisiana remained unchanged...elsewhere, the six Williston shale rig loss was from North Dakota, while the 2 rigs pulled out of the Cana Woodford are the only named basin rigs that came out of Oklahoma, so we'd have to figure a number of those missing horizontal rigs had been deployed elsewhere in the Anandarko basin in that state...Wyoming also has a few shale basins that Baker Hughes does not track separately, so some or all of the 5 rigs pulled out of that state could have also been "other" horizontal rigs...the two natural gas rigs that were shut down this week were from the Haynesville and from the Eagle Ford, which now has 55 oil rigs and 2 natural gas rigs remaining...

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