Masters Of War

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

Monday, June 29, 2020

natural gas prices hit 25 year low; crude supplies and oil + oil product supplies again at new all-time highs

oil prices fell for the 2nd week in the past three this week, on a resurgence of covid-19 cases in the US and globally, which threatened the chance for an economic recovery...after rising nearly 10% to $39.75 a barrel last week on signs of rising demand and on the apparent success of the OPEC+ output cuts, the contract price of US light sweet crude for July delivery opened 1.5% lower on Monday on White House trade adviser Peter Navarro's comments that the trade deal with China was "over", but moved back up after Trump tweeted that the trade agreement was "fully intact" and finished 71 cents higher at $40.46 a barrel on tighter supplies from major producers and an improvement in the long-term demand outlook as trading in the July oil contract expired...now quoting the price of US light sweet crude for August delivery, which had ended last week at $39.83 a barrel and risen 90 cents to $40.73 a barrel on Monday, oil prices moved lower on Tuesday, as a rising number of Covid-19 cases sparked demand fears, and as traders braced for reports expected to show swelling U.S. crude inventories and ended down 36 cents at $40.37 a barrel...oil prices then opened below $40 Wednesday morning following a surprisingly large crude build reported by API overnight and then went on to fall $2.36 or nearly 6% to $38.01 a barrel after the EIA confimed that U.S. crude supplies had hit another record and as mounting coronavirus cases in the US, China, Latin America and India unnerved speculators and pressured oil prices...but oil prices found support on Thursday as data showed that fewer Americans had filed for unemployment benefits last week and that orders for key capital goods had rebounded in May and ended 71 cents higher at $38.72 a barrel, as data provided to Reuters showed road traffic in some of the world's major cities had returned to 2019 levels in June...oil prices then pulled back on Friday as a record rise in U.S. coronavirus cases and growing infections in parts of the world pointed to long-term challenges for a recovery in crude-oil demand and ended down 23 cents at $38.49 a barrel, thus posting a weekly drop of 3.6%, after record U.S. crude inventory data had dragged prices lower midweek...

meanwhile, natural gas prices tumbled to their lowest level since 1995 after a big storage injection was reported Thursday and barely rebounded from there, thus ending lower for a 4th straight week....after falling 3.6% to $1.669 per mmBTU on falling LNG exports last week, the contract price of natural gas for July delivery slipped another half cent on Monday as rising natural gas output offset forecasts for warmer-than-normal weather and higher air conditioning demand over the next two weeks...natural gas prices fell another 2.7 cents on Tuesday, as a weakened heat outlook further weighed on July contract prices, and then fell another 4 cents to a two-month low of $1.597 on Wednesday on forecasts of a big weekly storage build...natural gas prices collapsed over 14 cents to a 25-year low of $1.440 per mmBTU on Thursday after the EIA reported that big build, prompting fears that underground storage caverns would be full by the end of the summer, before ending the session off 11.5 cents at $1.482 per mmBTU....prices then edged up 1.3 cents to finish the week still down more than 10% at $1.495 per mmBTU on Friday despite ongoing demand destruction from expanding coronavirus cases, on a continued slowing of gas output, a small rise in pipeline and LNG exports, and an increase in cooling demand..

Since we haven't looked at natural gas prices lately, we'll ​first ​include a graph of their recent trajectory below..

June 27 2020 natural gas prices

the above graph is a screenshot of the interactive daily price chart for the July natural gas futures contract at Barchart.com, and it shows the range of prices, in dollars per mmBTU, for​ ​​the​ July natural gas futures contract as a vertical bar for each day over the past year...one can barely see it in this view, but each bar has two small horizontal appendages: the one on the left is the opening price for the day the bar indicates, while the appendage on the right is the day's closing price...

​next, we'll include a graph of ​natural gas prices going back 30 years, to 1990:

June 27 2020 natural gas prices max

​this graph also came from ​​the same the interactive daily price chart for the July natural gas futures contract at Barchart.com​, but we have reset the interactive feature to show the maximum price history, which displays the range of natural gas prices over each month in that history as a vertical bar​...since the July 2020 contract was not trading over that history, this had the effect of changing the focus of the graph to the prices for the nearest monthly natural gas contract that was trading at any given time, which is the same as what is being quoted as 'the price of natural gas' daily...​however, since trading in the July natural gas contract expired​ on​ Friday, ​this and other longer term graphs now reflect natural gas prices for ​the ​August​ gas contract​, which averaged about 5 cents higher than the July contract prices we've discussed today...​nonetheless, it's stil clear that natural gas prices have fallen to their lowest level since 1995..​

the natural gas storage report from the EIA for the week ending June 19th indicated that the quantity of natural gas held in underground storage in the US rose by 120 billion cubic feet to 3,012 billion cubic feet by the end of the week, which left our gas supplies 739 billion cubic feet, or 32.5% higher than the 2,273 billion cubic feet that were in storage on June 19th of last year, and 466 billion cubic feet, or 16.9% above the five-year average of 2,546 billion cubic feet of natural gas that has been in storage as of the 19th of June in recent years....the 120 billion cubic feet that were added to US natural gas storage this week was well above the consensus forecast from S&P Global Platts' survey of analysts calling for a 107 billion cubic feet increase, and was way more than the average of 73 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and it was also above the 103 billion cubic feet addition of natural gas to storage during the corresponding week of 2019... it was also the most natural gas added to storage during any June week in the modern record, and also the 3rd largest natural gas storage increase in the past decade...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 19th indicated that a sizable increase in our oil production was almost enough to cover a large increase our oil exports, again leaving us with surplus oil to add to our stored commercial supplies of crude oil for the 3rd week in a row, and for the 30th time in the past forty-one weeks....our imports of crude oil fell by an average of 102,000 barrels per day to an average of 6,540,000 barrels per day, after falling by an average of 222,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 695,000 barrels per day to an average of 3,157,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,383,000 barrels of per day during the week ending June 19th, 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 rose by 500,000 barrels per day to 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,383,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,840,000 barrels of crude per day during the week ending June 19th, 239,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 490,000 barrels of oil per day were being added to the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 53,000 barrels per day more than what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just ​inserted a (-53,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the average daily 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 6,556,000 barrels per day last week, which was 11.6% less than the 7,415,000 barrel per day average that we were importing over the same four-week period last year....the 490,000 barrel per day net addition to our total crude inventories included 284,000 barrels per day that were added to our Strategic Petroleum Reserve, and 206,000 barrels per day that were being added to our commercially available stocks of crude oil ....this week's crude oil production was reported to be up by 500,000 barrels per day to 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was up by 500,000 barrels per day to 10,600,000 barrels per day, while a 1,000 barrel per day increase in Alaska's oil production to 362,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending June 21st was rounded to 12,100,000 barrels per day, so this reporting week's rounded oil production figure was about 9.1% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 74.6% of their capacity while using 13,840,000 barrels of crude per day during the week ending June 19th, up from 73.8% of capacity during the prior week, but excluding the 2005 & 2008 hurricane​-related refinery ​interruptions, still one of the lowest refinery utilization rates of the last thirty years...hence, the 13,840,000 barrels per day of oil that were refined this week were still 20.2% fewer barrels than the 17,337,000 barrels of crude that were being processed daily during the week ending June 21st, 2019, when US refineries were operating at 94.2% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 438,000 barrels per day to 8,794,000 barrels per day during the week ending June 19th, after our refineries' gasoline output had increased by 217,000 barrels per day over the prior week... however, since our gasoline production is still recovering from a multi-year low, this week's gasoline output was still 16.3% lower than the 10,512,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 63,000 barrels per day to 4,561,000 barrels per day, after our distillates output had decreased by 264,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production was 14.0% less than the 5,305,000 barrels of distillates per day that were being produced during the week ending June 21st, 2019....

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 6th time in 9 weeks and for the 14th time in 21 weeks, falling by 1,673,000 barrels to 255,322,000 barrels during the week ending June 19th, after our gasoline supplies had decreased by 1,666,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 738,000 barrels per day to 8,608,000 barrels per day, while our imports of gasoline rose by 174,000 barrels per day to 704,000 barrels per day, and while our exports of gasoline fell by 209,000 barrels per day to 286,000 barrels per day....even after this week's inventory decrease, our gasoline supplies were still 9.9% higher than last June 21st's gasoline inventories of 232,225,000 barrels, and roughly 9% 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 eleventh time in 23 weeks and for the 16th time in 38 weeks, rising by 249,000 barrels to 174,720,000 barrels during the week ending June 19th, after our distillates supplies had decreased by 1,358,000 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 89,000 barrels per day to 3,466,000 barrels per day, and because our exports of distillates fell by 173,000 barrels per day to 1,128,000 barrels per day, while our imports of distillates fell by 94,000 barrels per day to 69,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 39.4% above the 125,380,000 barrels of distillates that we had stored on June 21st, 2019, and about 28% above the five year average of distillates stocks for this time of the year...

finally, even with the drop in our crude oil output and the decrease in our oil imports, our commercial supplies of crude oil in storage rose for the 19th time in twenty-two weeks and for the 34th time in the past 52 weeks, increasing by 1,442,000 barrels, from a record high of 539,280,000 barrels on June 12th to another all time high of 540,722,000 barrels on June 19th...that meant our our commercial crude oil inventories were around 16% above the five-year average of crude oil supplies for this time of year, and around 54% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the third week of June, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories have generally been rising since September 2018, except for during last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of June 19th were 15.2% above the 469,576,000 barrels of oil we had in commercial storage on June 21st of 2019, 29.8% above the 416,636,000 barrels of oil that we had in storage on June 22nd of 2018, and 6.2% above the 509,213,000 barrels of oil we had in commercial storage on June 16th of 2017...  

furthermore, once again checking the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 3,932,000 barrels this week to ​yet ​another record high of 1,450,655,000 barrels, 11.6% more than the 1,299,928,000 barrel total of the same week a year ago...   

This Week's Rig Count

the US rig count fell for the 16th week in a row during the week ending June 26th, but just by the minimum, leaving the rig count down by 66.6% over that fifteen week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 1 rig to 265 rigs this past week, which was the fewest active rigs in Baker Hughes records going back to 1940 and 139 fewer rigs than the all time low prior to this year, and was also down by 702 rigs from the 967 rigs that were in use as of the June 28th report of 2019, and 1,664 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

the number of rigs drilling for oil decreased by 1 rig to 188 oil rigs this week, after falling by 10 oil rigs the prior week, leaving oil rig activity at its lowest since June 12, 2009, which was also 605 fewer oil rigs than were running a year ago, and less than an eighth 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 was unchanged at 75 natural gas rigs, matching the lowest number of natural gas rigs running in at least 80 years, down by 98 natural gas rigs from the 173 natural gas rigs that were drilling a year ago, and less than a twentieth of 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 was just one such "miscellaneous" rig deployed, drilling a test well in Sandusky county Ohio..

the Gulf of Mexico rig count was unchanged at 11 rigs this week, with all of those rigs drilling for oil in Louisiana's offshore waters...that matches the fewest number of rigs working in the Gulf or offshore nationally in Baker Hughes offshore records dating back to 1968, and was 15 fewer rigs than the 26 rigs drilling in the Gulf a year ago, when 24 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters...there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of last winter...

the count of active horizontal drilling rigs decreased by 4 rigs to 234 horizontal rigs this week, which was the fewest horizontal rigs active since December 30th, 2005, and hence is a new 14 year low for horizontal drilling...it was also 610 fewer horizontal rigs than the 840 horizontal rigs that were in use in the US on June 28th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the directional rig count increased by 2 to 20 directional rigs this week, but those were still down by 48 from the 68 directional rigs that were operating during the same week of last year...at the same time, the vertical rig count rose by 1 rig to 15 vertical rigs this week, but those were also still down by 44 from the 59 vertical rigs that were in use on June 28th 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 June 19th, the second column shows the change in the number of working rigs between last week's count (June 12th) and this week's (June 19th) count, the third column shows last week's June 12th 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 21st of June, 2019...    

June 26 2020 rig count summary

as you can see, there was very little change in drilling activity ​anywhere this week, suggesting that prices have risen high enough that drillers are no longer anxious to shut down money-losing operations, but not high enough to encourage ​the ​addition of new rigs to the field...checking the rig counts in the Texas part of Permian basin, we find no changes in either Texas Oil District 8, which is the core Permian Delaware, or in Texas Oil District 7C and Texas Oil District 8A, the southern and northern reaches of the Permian Midland respectively...with the rig count in the Texas Permian thus unchanged, that means that the rig that was shut down in New Mexico would have been drilling in the western Permian Delaware to account for the 1 rig decrease in the Permian basin rig count nationally...​.​the lone rig that was added in Texas this week was Texas Oil District 3, which we usually attribute to the Eagle Ford shale, but rigs in that basin were unchanged this week, so the ​District 3 rig was ​apparently ​targeting some other unnamed formation...elsewhere, the rig pulled out of Colorado had been drilling in the Denver-Julesburg Niobrara chalk, and the rig pulled out of Wyoming had been drilling in another basin not tracked by Baker Hughes, while the rig added in Oklahoma was drilling in the Cana Woodford, where the rig count rose to 6 but was still down from 49 rigs a year ago...we should also note that there were no changes in natural gas rigs anywhere in the country this week...

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note: there's more here..

Sunday, June 21, 2020

global oil surplus at 8.6 million bpd, despite 6.3 million bpd OPEC cuts; wells drilled and wells completed lowest on record

May’s surplus oil output was at 8.6 million barrels per day, despite OPEC cuts of 6.3 million bpd; US wells drilled and wells completed were lowest on record; the DUC backlog was 16.5 months; US offshore rigs were at a record low; while US oil supplies & oil+products supplies were record highs.

oil prices rose for the 7th week out of the past eight this week, on signs of rising demand and on the apparent success of the OPEC+ output cuts...after falling more than 8% to $36.26 a barrel last week on fears of a second wave of the coronavirus, the contract price of US light sweet crude for July delivery opened lower and slid to as low as $34.48 a barrel early Monday, as new coronavirus infections hit China and the US, stoking fears of weak fuel demand, but rebounded from those early losses after the UAE energy minister voiced confidence that OPEC+ countries would meet their commitments and reported signs that oil demand was picking up, and ended Monday 86 cents higher at $37.12 a barrel...oil prices then followed a stock market rally higher on Tuesday, rising $1.26, or 3.4% to settle at $38.38 a barrel, after the International Energy Agency increased its oil demand forecast for 2020, citing higher than expected consumption during the lockdowns...but oil prices gave up some of those gains in post-settlement trade Tuesday evening after the American Petroleum Institute reported U.S. crude inventories rose by more than was expected, and thus opened lower & fell to $37.21 a barrel early Wednesday but finished off the day's lows at $37.96 a barrel after the EIA reported that domestic product supplies had declined and oil traders weighed the data in the monthly OPEC report...oil prices rose more than 2% on Thursday on the output cut compliance indicated by that OPEC report to settle 88 cents higher at $38.84 per barrel after major producers at a meeting of the Joint Ministerial Monitoring Committee (JMMC), which monitors compliance with OPEC output quotas, moved to ensure that certain countries made up for failing to fully meet their reduction targets last month....oil prices pushed higher in early trade on Friday after OPEC producers and their allies reaffirmed their supply cut commitments and two major oil traders said demand was recovering well and went on to finish 91 cents higher at a ten week high of $39.75 a barrel, a gain of nearly 10% for the week, as Iraq and Kazakhstan submitted “compensations schedules” to the JMMC to make up for falling short of their pledges to reduce output...

natural gas prices. on the other hand, ended lower for the 3rd straight week, as lower gas output and warmer weather forecasts weren't enough to offset the impact of falling exports...after falling 2.9% to a two-week low of $1.731 per mmBTU last week on milder weather that reduced demand for air conditioning, the contract price of natural gas for July delivery tumbled 6.2 cents to a one month low $1.669 per mmBTU on Monday, on forecasts for lower demand over the next two weeks than was previously expected, despite a report of slowing production...prices then fell another 5.5 cents to a two month low on Tuesday, as already depressed LNG exports were reported still lower, while natural gas production was reported higher....but prices recovered 2.4 cents of their losses on Wednesday, on a forecast for warmer weather and greater demand in the coming week...natural gas prices held steady at $1.638 per mmBTU on Thursday, as a continued drop in LNG exports offset the forecast for an increase in demand next week and then rose 3.1 cents to finish the week at $1.669 per mmBTU, as forecasts for warmer weather and higher air conditioning demand over the next two weeks intensified... 

the natural gas storage report from the EIA for the week ending June 12th indicated that the quantity of natural gas held in underground storage in the US rose by 85 billion cubic feet to 2,892 billion cubic feet by the end of the week, which left our gas supplies 722 billion cubic feet, or 33.3% higher than the 2,170 billion cubic feet that were in storage on June 12th of last year, and 419 billion cubic feet, or 16.9% above the five-year average of 2,473 billion cubic feet of natural gas that has been in storage as of the 12th of June in recent years....the 85 billion cubic feet that were added to US natural gas storage this week was above the consensus forecast from S&P Global Platts' survey of analysts calling for a 79 billion cubic feet increase, but it was a bit less than the average of 87 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and it was well below the 117 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 June 12th indicated that even with a big drop in our oil production and a modest decrease our oil imports, we still had surplus oil to add to our stored commercial supplies of crude oil for the 3rd time in six weeks, and for the 29th time in the past forty weeks....our imports of crude oil fell by an average of 222,000 barrels per day to an average of 6,642,000 barrels per day, after rising by an average of 685,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 23,000 barrels per day to an average of 2,462,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,180,000 barrels of per day during the week ending June 12th, 245,000 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 600,000 barrels per day to 10,500,000 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 14,680,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,600,000 barrels of crude per day during the week ending June 12th, 116,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 421,000 barrels of oil per day were being added to the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 659,000 barrels per day more than 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 (-659,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the average daily 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 usually treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill for oil, we'll continue to report them as is, 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 rose to an average of 6,721,000 barrels per day last week, which was still 10.0% less than the 7,467,000 barrel per day average that we were importing over the same four-week period last year....the 421,000 barrel per day net addition to our total crude inventories included 247,000 barrels per day that were added to our Strategic Petroleum Reserve, and 174,000 barrels per day that were being added to our commercially available stocks of crude oil ....this week's crude oil production was reported to be down by 600,000 barrels per day to 10,500,000 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 10,100,000 barrels per day, while a 1,000 barrel per day increase in Alaska's oil production to 361,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending June 14th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was about 13.9% below that of a year ago, yet still 24.6% 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 73.8% of their capacity while using 13,600,000 barrels of crude per day during the week ending June 12th, up from 73.1% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years...hence, the 13,600,000 barrels per day of oil that were refined this week were still 21.2% fewer barrels than the 17,264,000 barrels of crude that were being processed daily during the week ending June 14th, 2019, when US refineries were operating at 93.9% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 217,000 barrels per day to 8,356,000 barrels per day during the week ending June 12th, after our refineries' gasoline output had increased by 360,000 barrels per day over the prior week... however, since our gasoline production is still recovering from a multi-year low, this week's gasoline output was still 19.8% lower than the 10,423,000 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 264,000 barrels per day to 4,498,000 barrels per day, after our distillates output had increased by 48,000 barrels per day over the prior week...after this week's decrease in distillates output, our distillates' production was 16.6% less than the 5,371,000 barrels of distillates per day that were being produced during the week ending June 14th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 5th time in 8 weeks and for the 13th time in 20 weeks, falling by 1,666,000 barrels to 256,995,000 barrels during the week ending June 12th, after our gasoline supplies had increased by 866,000 barrels over the prior week...our gasoline supplies decreased this week because our imports of gasoline fell by 99,000 barrels per day to 530,000 barrels per day, and because our exports of gasoline rose by 187,000 barrels per day to 495,000 barrels per day, while the amount of gasoline supplied to US markets decreased by 30,000 barrels per day to 7,870,000 barrels per day....but even with this week's inventory decrease, our gasoline supplies were still 10.2% higher than last June 14th's gasoline inventories of 233,221,000 barrels, and roughly 10% above the five year average of our gasoline supplies for this time of the year...  

with the decrease in our distillates production, our supplies of distillate fuels decreased for the twelfth time in 22 weeks and for the 22nd time in 37 weeks, falling by 1,358,000 barrels to 174,471,000 barrels during the week ending June 12th, after our distillates supplies had increased by 1,568,000 barrels over the prior week....our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 253,000 barrels per day to 3,555,000 barrels per day, while our imports of distillates fell by 14,000 barrels per day to 163,000 barrels per day and our exports of distillates fell by 112,000 barrels per day to 1,301,000 barrels per day,...even after this week's inventory decrease, our distillate supplies at the end of the week were still 36.5% above the 127,821,000 barrels of distillates that we had stored on June 14th, 2019, and about 28% above the five year average of distillates stocks for this time of the year...

finally, even with the drop in our crude oil output and the decrease in our oil imports, our commercial supplies of crude oil in storage rose for the 18th time in twenty-one weeks and for the 33rd time in the past 52 weeks, increasing by 1,215,000 barrels, from a record high of 538,065,000 barrels on June 5th to another all time high of 539,280,000 barrels on June 12th...that meant our our commercial crude oil inventories were around 15% above the five-year average of crude oil supplies for this time of year, and 53% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the second week of June, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories have generally been rising over the past year and a half, except for during last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of June 12th were 11.8% above the 482,364,000 barrels of oil we had in commercial storage on June 14th of 2019, 26.4% above the 426,527,000 barrels of oil that we had in storage on June 15th of 2018, and 5.9% above the 509,095,000 barrels of oil we had in commercial storage on June 16th of 2017...  

furthermore, once again checking the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 7,085,000 barrels this week to another record high of 1,446,723,000 barrels, 10.3% more than the 1,311,841,000 barrel total of the same week a year ago...  

OPEC's Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC's June Oil Market Report, which covers OPEC & global oil data for May, and hence it gives us a picture of the global oil supply & demand situation during the first month of the two month agreement between OEC, the Russians, and other oil producers to cut production by 9.7 million barrels a day from an elevated October 2018 baseline....before we start, ​i have to caution that estimating oil demand while most countries on the planet are restarting their economies after a month or two of lockdown is pretty ​speculative, and hence the demand figures we'll be reporting this month should be considered as 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 review is from the page numbered 44 of this month's report (pdf page 54), 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... 

May 2020 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC's oil output ​was cut by 6,300,000 barrels per day to 24,195,000 barrels per day during May, from their revised April production total of 30,495,000 barrels per day...however that April output figure was originally reported as 30,412,000 barrels per day, which means that OPEC's April production was revised 83,000 barrels per day higher with this report, and hence May's production was, in effect, a 6,213,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official April OPEC output figures as reported a month ago, before this month's revisions)...

from the above table, we can also see that production decreases of 3,160,000 barrels per day from the Saudis, 1,364,000 barrels per day from the Emirates, 921,000 barrels per day from Kuwait, and 340,000 barrels per day from Iraq accounted for the lion's share of the May decrease, even as every other OPEC producer except for Iran, whose production is exempt from the agreement, also made appropriate production cuts...to facilitate understanding how each of the OPEC members have been adhering to their production cut agreement, we'll next include a table which shows the October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to....

April 13th 2020 OPEC   emergency cuts

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...​sanctioned OPEC members Iran ​and Venezuela and war-torn Libya are exempt from these cuts...

with a net 6,300,000 barrels per day decrease in their production, it appears that OPEC has exceeded the 6,084,000 barrels per day they had committed to cut...however, the baseline for the May thru July cuts is OPEC's production of October 2018, and the 6,300,000 barrels per day drop in their production represents the output change since April, so we can't really compare the two...moreover, production of some of the OPEC members is still well above their target level...for instance, Iraq had committed to cut their production by 1,061,000 barrels per day and only produce 3,592,000 barrels per day in May, but they only cut their production by 340,000 barrels per day in May, and thus produced 4,165,000 barrels per day, 572,000 barrels per day more than they were supposed to...

the next graphic from this month's report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from June 2018 to May 2020, and it comes from page 45 (pdf page 55) of the June OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent monthly 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....

May 2020 OPEC report global oil supply

including the 6,300,000 barrel per day ​cut in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global oil production decreased by a rounded 10.04 million barrels per day to average 89.89 million barrels per day in May, a reported decrease which apparently came after May 's total global output figure was revised lower by 470,000 barrels per day from the 99.46 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 3,740,000 barrels per day in May after that revision, with lower oil production from Russia, the US, Kazakhstan, Oman, Canada, Azerbaijan, Norway and Mexico the major reasons for the non-OPEC output decrease in May...with the big decrease in May's global output, the 89.89 million barrels of oil per day produced globally in May were 8.2 million barrels per day, or 8.4% less than the revised 98.09 million barrels of oil per day that were being produced globally in May a year ago, the 5th month of OPECs first round of production cuts (see the June 2019 OPEC report (online pdf) for the originally reported May 2019 details)...with this month's big drop in OPEC's output, their May oil production of 24,195,000 barrels per day fell to 26.9% of what was produced globally during the month, down from the 30.5% share OPEC contributed in April, and the 28.7% global share they had in March...OPEC's May 2019 production, which included 529,000 barrels per day from former member Ecuador, was reported at 29,876,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 5,152,000, or 17.6% fewer barrels per day of oil in May than what they produced a year ago, when they accounted for 30.4% of global output...

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

May 2020 OPEC report global oil demand

the above table came from page 25 of the June 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 third column, we've circled in blue the figure that's relevant for May, which is their estimate of global oil demand during the second quarter of 2020...

OPEC is estimating that during the 2nd quarter of this year, all oil consuming regions of the globe will be using an average of 81.30 million barrels of oil per day, unrevised from their estimate for the 2nd quarter a month ago, 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 still producing 89.89 million barrels per day during May, which would imply that there was a surplus of around 8,590,000 barrels per day in global oil production in May, still 10.6% greater than the demand estimated for the month... 

in addition to ​noting ​the May surplus, the downward revision of 470,000 barrels per day to April's global output that's implied in this report, means that the record 18,160,000 barrels per day of global oil surplus we had ​previously ​figured for April would now be revised to a surplus of 17,690,000 barrels per day...since we had also figured a 18,068,000 barrels per day surplus in March, and since March supply & demand were unrevised in this report, that means the record oil surplus now occurred in March rather than in April...although OPEC reports that their demand figure for the first quarter is unchanged from the last report, we note that the table shows that it fell from 92.40 million barrels per day to 92.39 million barrels per day, which we've lightly circled in green...al​though that ​is essentially just a rounding error, the 92.40 million barrels per day​ figure​ is the number we used to figure January's and February's surplus...hence we should also revise our February surplus oil production estimate from 2,190,000 barrels per day to 2,180,000 barrels per day, and revise our January surplus oil production estimate from 1,220,000 barrels per day to 1,210,000 barrels per day...

This Week's Rig Count

the US rig count fell for the 15th week in a row during the week ending June 19th, and is now down by 66.5% over that fifteen week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 13 rigs to 266 rigs this past week, which was the fewest active rigs in Baker Hughes records going back to 1940 and 138 fewer rigs than the all time low prior to this year, and was also down by 701 rigs from the 967 rigs that were in use as of the June 21st report of 2019, and 1,663 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

the number of rigs drilling for oil decreased by 10 rigs to 189 oil rigs this week, after falling by 7 oil rigs the prior week, leaving oil rig activity at its lowest since June 12, 2009, which was also 600 fewer oil rigs than were running a year ago, and less than an eighth 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 fell by 3 to 75 natural gas rigs, which was the least natural gas rigs running in at least 80 years, and down by 102 natural gas rigs from the 177 natural gas rigs that were drilling a year ago, and less than a twentieth of 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 was ​just ​one such "miscellaneous" rig deployed, drilling a test well in Sandusky county Ohio..

the Gulf of Mexico rig count was down by 2 to 11 rigs this week, with all of those rigs drilling for oil in Louisiana's offshore waters...that was the fewest number of rigs working in the Gulf or offshore nationally in Baker Hughes offshore records dating back to 1968, and 13 fewer rigs than the 24 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters...there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of last winter...

the count of active horizontal drilling rigs decreased by 12 rigs to 234 horizontal rigs this week, which was the fewest horizontal rigs active since January 20th, 2006, and hence is a new 14 year low for horizontal drilling...it was also 612 fewer horizontal rigs than the 846 horizontal rigs that were in use in the US on June 21st of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count decreased by 4 to 18 directional rigs this week, and those were also down by 50 from the 68 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count rose by 3 rigs to 14 vertical rigs this week, but those were still down by 39 from the 53 vertical rigs that were in use on June 21st 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 June 19th, the second column shows the change in the number of working rigs between last week's count (June 12th) and this week's (June 19th) count, the third column shows last week's June 12th 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 21st of June, 2019...    

June 19 2020 rig count summary

the net of the basin totals shown above is a decrease of 11 rigs, and since we had 1​2​ horizontal rigs removed nationally this week, ​an additional horizontal rig would have had to have been shut down in ​an​other basin not tracked separately by Baker Hughes and hence not shown above....checking the rig counts in the Texas part of Permian basin, we find that 3 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while two rigs were added in Texas Oil District 7C, or the southern Permian Midland, and one rig was added in Texas Oil District 8A, or the northern Permian Midland​ ​at the same time...with the total rig count in the Texas Permian thus unchanged, that means that all five rigs that were shut down in New Mexico would have been drilling in the western Permian Delaware to account for the 5 rig decrease in the Permain basin rig count nationally...elsewhere in Texas, rigs were pulled out of Texas Oil District 2 and Texas Oil District 4, which would account for the 2 rigs removed from the Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and touches on both of those Oil Districts...in addition, a rig was also removed from Texas Oil District 6, which accounts for the rig pulled from the Haynesville shale, since the Haynesville rig count in northern Louisiana remained unchanged at 21​...mean​while​,​ Louisiana's count was down by 2 because of the removal of the two rigs that had been drilling in the state's offshore waters....elsewhere, the rig pulled out of North Dakota was the Williston basin rig, and the rig pulled out of Oklahoma was the last Arkoma Woodford natural gas rig....that Arkoma Woodford​ ​rig, the rig pulled out of the Texas Haynesville, and the removal of a natural gas rig from West Virginia's Marcellus account for the decrease of three natural gas rigs this week, and ​that leaves nothing else on the board unexplained...

DUC well report for May

Monday of this past week saw the release of the EIA's Drilling Productivity Report for June, which includes the EIA's May data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....for the fourteenth time in fifteen months, this report showed a decrease in uncompleted wells nationally in M​a​y, as both the drilling of new wells and completions of drilled wells decreased, but drilling decreased by more.....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 33 wells, falling from a revised 7,624 DUC wells in April to 7,591 DUC wells in May, which ​was also 12.6% fewer DUCs than the 8,681 wells that had been drilled but remained uncompleted as of the end of May of a year ago...this month's DUC ​decrease occurred as 428 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during May, down by 287 from the 715 wells that were drilled in April and the lowest number of wells drilled in the history of this report, while 461 wells were completed and brought into production by fracking, a decrease of 262 well completions from the 723 completions seen in April, and down by 65% from the 1,317 completions seen in May of last year, and also the lowest number of completions ​in one month ​since completions have been reported by the EIA....at the May completion rate, the 7,591 drilled but uncompleted wells left at the end of the month represents a 16.5 month backlog of wells that have been drilled but are not yet fracked, up from the 10.8 month DUC well backlog of a month ago, with a recognition that this normally indicative backlog figure is being skewed by record low completions...

both oil producing regions and natural gas producing regions saw a net DUC well decrease​s​ in May, even as some basins still showed small increases...the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 15 in May, falling from 677 at the end of April to 662 DUC wells at the end of May, as 14 wells were drilled into the Anadarko basin during May while 29 Anadarko wells were being fracked....there was also a decrease of 13 DUC wells in the Eagle Ford of south Texas, from 1,362 DUC wells at the end of April to 1,349 DUCs at the end of May, as 55 wells were drilled in the Eagle Ford during May, while 68 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 5 to 478, as 35 Niobrara wells were drilled in May while 40 Niobrara wells were completed...on the other hand, DUCs in the Permian basin of west Texas and New Mexico increased by 6, from 3,462 DUC wells at the end of April to 3,468 DUCs at the end of May, as 201 new wells were drilled into the Permian, while 195 wells in the region were being fracked....at the same time, DUC wells in the Bakken of North Dakota increased by 3, from 861 DUC wells at the end of April to 864 DUCs at the end of May, as 33 wells were drilled into the Bakken in May, while 30 of the drilled wells in that basin were being fracked...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 10 wells, from 532 DUCs at the end of April to 513 DUCs at the end of May, as 61 wells were drilled into the Marcellus and Utica shales during the month, while 71 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 saw their uncompleted well inventory increase by 1 to 257, as 29 wells were drilled into the Haynesville during May, while 28 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of May, 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 24 wells to 6,821 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 9 wells to 770 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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Note: there’s more here

Sunday, June 14, 2020

US crude inventories and total commercial crude plus total products inventories both at record highs…

oil prices fell this week for the first time in seven weeks on fears that a second wave of the coronavirus would damage the embryonic economic recovery....after rising 11% to $39.55 a barrel last week on improving US economic data and on the prospect that OPEC would extend their production cuts, the contract price of US light sweet crude for July delivery initially moved higher on the weekend extension of the OPEC cuts on Monday, but reversed to end $1.38 lower at $38.19 a barrel as the Saudis, the Emirates and Kuwait rescinded the additional voluntary cuts they had undertaken in the wake of the collapse of May oil prices... however, optimism that the announced supply cuts would more than offset demand weakness returned on Tuesday as oil prices regained 75 cents of their Monday loss to close at $38.94 a barrel...oil prices opened lower Wednesday on an API report of crude inventory build, and then tumbled to as low as $37.73 a barrel after the EIA confirmed a big build in U.S. crude oil inventories, as well as an increase in fuel inventories, but then rallied to close 66 cents higher at $39.60 per barrel on a weak dollar and the Fed's plans to keep interest rates at near zero through 2022...​however, the bottom dropped out of oil prices on Thursday, as they tumbled more than 10% at one point amid a broader market selloff as fears over second wave of coronavirus cases hit the market and finished $3.26, or 8% lower at $36.34 a barrel after Reuters reported U.S. coronavirus cases had surpassed 2 million, renewing concerns about a new wave of demand destruction...prices continued falling on Friday and were down more than 5% to $34.48 early in the session, but staged a gradual recovery the remainder of the day to finish just 8 cents lower at $36.26 a barrel....still, for the week, prices were down more than 8%, posting their worst week since the week ending April 24th...

natural gas prices also finished lower this week, largely on milder weather that reduced demand for air conditioning....after falling 3.6% lower to $1.782 per mmBTU on lower LNG exports last week, the contract price of natural gas for July delivery edged up seven-tenths of a cent on Monday as a slowdown in natural gas output offset forecasts for lower air conditioning demand and a drop in LNG exports...milder weather and lower LNG exports pushed prices 2.2 cents lower Tuesday, but they moved back up 1.3 cents on Wednesday despite those lower demand concerns on another report of slowing output.... natural gas prices climbed another 3.3 cents to $1.813 mmBTU on Thursday as the weekly natural gas storage report met traders expectations, but then fell 8.2 cents, or 4.5% on Friday to a two-week low of $1.731 per mmBTU, on forecasts for milder weather and weaker cooling demand, and declining LNG exports, thus ending the week 2.9% below the prior Friday's close..

the natural gas storage report from the EIA for the week ending June 5th indicated that the quantity of natural gas held in underground storage in the US rose by 93 billion cubic feet to 2,807 billion cubic feet by the end of the week, which left our gas supplies 748 billion cubic feet, or 36.3% higher than the 2,059 billion cubic feet that were in storage on June 5th of last year, and 421 billion cubic feet, or 17.6% above the five-year average of 2,386 billion cubic feet of natural gas that has been in storage as of the 5th of June in recent years....the 93 billion cubic feet that were added to US natural gas storage this week was just below the consensus forecast from S&P Global Platts' survey of analysts calling for a 95 billion cubic feet increase, while it was ​near the average of 94 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, but ​it ​was well below the 107 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 June 5th showed that due to an increase our oil imports and a decrease in our oil exports, we ​had​ surplus oil to ​add to ​our stored commercial supplies of crude oil for the 2nd time in five weeks, and for the 28th time in the past thirty-nine weeks....our imports of crude oil rose by an average of 685,000 barrels per day to an average of 6,864,000 barrels per day, after falling by an average of 1,021,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 355,000 barrels per day to an average of 2,439,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,425,000 barrels of per day during the week ending June 5th, 1,040,000 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 100,000 barrels per day to 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,525,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,484,000 barrels of crude per day during the week ending June 5th, 178,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 1,134,000 barrels of oil per day were being added to the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 906,000 barrels per day more than 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 (-906,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the average daily 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 usually treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill for oil, we'll continue to report them​ as is​, 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 rose to an average of 6,630,000 barrels per day last week, which was still 13.3% less than the 7,336,000 barrel per day average that we were importing over the same four-week period last year....the 1,134,000 barrel per day net addition to our total crude inventories included 317,000 barrels per day that were added to our Strategic Petroleum Reserve, and 817,000 barrels per day that were being added to our commercially available stocks of crude oil ....this week's crude oil production was reported to be down by 100,000 barrels per day to 11,100,000 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 10,700,000 barrels per day, while a 20,000 barrel per day decrease in Alaska's oil production to 360,000 barrels per day was not enough to have an impact on the rounded national total....last year's US crude oil production for the week ending June 7th was rounded to 12,300,000 barrels per day, so this reporting week's rounded oil production figure was about 9.8% below that of a year ago, yet still 31.7% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 73.1% of their capacity while using 13,484,000 barrels of crude per day during the week ending June 5th, up from 71.8% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years...hence, the 13,484,000 barrels per day of oil that were refined this week were still 21.0% fewer barrels than the 17,064,000 barrels of crude that were being processed daily during the week ending June 7th, 2019, when US refineries were operating at 93.2% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was ​also higher, increasing by 360,000 barrels per day to 8,139,000 barrels per day during the week ending June 5th, after our refineries' gasoline output had increased by 608,000 barrels per day over the prior week... however, since our gasoline production is still rebounding from a multi-year low, this week's gasoline output was still 20.8% lower than the 10,276,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 48,000 barrels per day to 4,762,000 barrels per day, after our distillates output had decreased by 66,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production was still 9.1% less than the 5,239,000 barrels of distillates per day that were being produced during the week ending June 7th, 2019....

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 3rd time in 7 weeks and for the 7th time in 19 weeks, rising by 866,000 barrels to 258,661,000 barrels during the week ending June 5th, after our gasoline supplies had increased by 2,795,000 barrels over the prior week...our gasoline supplies increased by less this week than last because the amount of gasoline supplied to US markets increased by 351,000 barrels per day to 7,900,000 barrels per day, and because our imports of gasoline fell by 153,000 barrels per day to 629,000 barrels per day, while our exports of gasoline rose by 45,000 barrels per day to 308,000 barrels per day....with this week's inventory increase, our gasoline supplies were 10.1% higher than last June 7th's gasoline inventories of 234,913,000 barrels, and roughly 11% 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 tenth time in 21 weeks and for the 15th time in 36 weeks, rising by 1,568,000 barrels to 175,829,000 barrels during the week ending June 5th, after our distillates supplies had increased by 9,934,000 barrels over the prior week....our distillates supplies rose by much less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 584,000 barrels per day to 3,302,000 barrels per day, and because our exports of distillates rose by 673,000 barrels per day to 1,413,000 barrels per day, while our imports of distillates rose by 14,000 barrels per day to 177,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 37.0% above the 128,372,000 barrels of distillates that we had stored on June 7th, 2019, and about 29% above the five year average of distillates stocks for this time of the year...

finally, with the jump in our oil imports and the drop in our exports, our commercial supplies of crude oil in storage rose for the 17th time in twenty weeks and for the 32nd time in the past 52 weeks, increasing by 5,720,000 barrels, from 532,345,000 barrels on May 29th to an all time high of 538,065,000 barrels on June 5th...that meant our our commercial crude oil inventories were around 14% above the five-year average of crude oil supplies for this time of year, and 52.3% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the first week of June, 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 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 June 5th were 10.8% above the 485,470,000 barrels of oil we had in commercial storage on June 7th of 2019, 24.4% above the 432,441,000 barrels of oil that we had in storage on June 8th of 2018, and 5.2% above the 511,546,000 barrels of oil we had in commercial storage on June 9th of 2017...  

furthermore, if we check the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 9,709,000 barrels ​this week ​to a record high of 1,439,638,000 barrels, 9.7% more than the 1,312,314,000 barrel total of the same week a year ago... 

This Week's Rig Count

the US rig count fell for the 14th week in a row during the week ending June 12th, and is now down by 64.8% over that fourteen week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by ​5 rigs to 279 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940 and 125 fewer rigs than the prior all time low, also down by 690 rigs from the 969  rigs that were in use as of the June 14th report of 2019, and 1,640 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

the number of rigs drilling for oil decreased by 7 rigs to 199 oil rigs this week, after falling by 16 oil rigs the prior week, leaving oil rig activity at its lowest since June 19, 2009, which was also 589 fewer oil rigs than were running a year ago, and less than an eighth 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 rose by 2 to 78 natural gas rigs, which was still down by 103 natural gas rigs from the 181 natural gas rigs that were drilling a year ago, and still less than a twentieth of 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 13 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana's offshore waters...that's now 11 fewer rigs than the 24 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters...there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of this past winter...

the count of active horizontal drilling rigs decreased by 7 rigs to 246 horizontal rigs this week, which was the fewest horizontal rigs active since February 10th, 2006, and hence is a new 14 year low for horizontal drilling...it was also 606 fewer horizontal rigs than the 852 horizontal rigs that were in use in the US on June 14th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count decreased by 2 to 22 directional rigs this week, and those were also down by 46 from the 68 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count rose by 4 rigs to 11 vertical rigs this week, but those were still down by 38 from the 49 vertical rigs that were in use on June 14th 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 June 12th, the second column shows the change in the number of working rigs between last week's count (June 5th) and this week's (June 12th) count, the third column shows last week's June 5th 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 14th of June, 2019...    

June 12 2020 rig count summary

the net of the basin totals shown above is a decrease of 4 rigs, so to have had 7 horizontal rigs removed nationally this week, 3 more horizontal rigs would have had to have been shut down in other basins not tracked separately by Baker Hughes....checking the rig counts in the Texas part of Permian basin, we find that 4 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while a rig was added in Texas Oil District 7C, or the southern Permian Midland, at the same time...since the overall Permian rig total was down by 4 rigs, that means that one rigs that was shut down in New Mexico would have been drilling in the western Permian Delaware, and the other had likely been drillng in one of those "other" New Mexico basins not tracked by Baker Hughes, such as the San Juan....elsewhere in Texas, one rig was pulled out of Texas Oil District 1, while a rig was added in Texas Oil District 2, which could represent activity in​ the Eagle Ford shale​​, which stretches in a relatively narrow band through the southeastern part of the state and touches on both of those Oil Districts...in addition, two rigs started drilling in Texas Oil District 6, which accounts for the 2 rig increase in the Haynesville shale, since the northern Louisiana rig count remained unchanged at 21, while a rig was pulled out of Texas Oil District 10, which would account for the Granite Wash removal...elsewhere, the rig pulled out of North Dakota was the Williston basin rig, but the Oklahoma rig reduction is not accounted for in the basin table and hence it must have been operating in one of those "other basins" not tracked separately by Baker Hughes...the 2 rigs added in the Haynesville this week account for the week's natural gas rig increase, and while two natural gas rigs were also added in Pennsylania's Marcellus, they were offset the removal of two natural gas rigs from West Virginia's Marcellus at the same time...

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note: there’s more here