distillate inventories at a 38 year high even as refinery utilization stays near 30 year low...

oil prices ended 1.7% higher this past week on hopes for a virus vaccine and on economic reports that suggested the demand recovery was intact.... after rising 4 cents, or 0.1% to $40.59 per barrel last week as big drop in US crude supplies was offset by OPEC's announcement that they'd increase production, the contract price of US light sweet crude for August delivery opened lower on Monday, weighed down by reports of an increase in the rate of new coronavirus infections, but rebounded to close 22 cents higher at $40.81 a barrel after reports of safe human clinical trials of a new Covid-19 vaccine....oil prices then jumped nearly 3% on Tuesday, buoyed by positive news about vaccine trials and the completion of an new EU economic stimulus deal, with trading in the August US oil contract expiring $1.15 higher at $41.96 a barrel, while the new front month September oil contract rose $1.00 to close at $41.92 a barrel....with reports now quoting the contract price of US light sweet crude for September delivery, oil prices slipped lower overnight after a surprisingly large crude inventory build was reported by the API, but recovered to finish just 2 cents lower at $41.90 a barrel despite the EIA's confirmation of that surprise build in U.S. oil supplies....concerns over rising supplies of crude and products and alarming growth in US coronavirus cases weighed on prices Thursday, and September oil ended down 83 cents at $41.07 a barrel as new claims for unemployment benefits unexpectedly rose for the first time in nearly four months...oil prices initially moved lower on rising US / China tensions Friday, but later rallied on strong economic data in Europe and the US to settle 22 cents higher at $41.29 a barrel, thus posting its third positive week in four on demand recovery hopes...

natural-gas also ended the week higher, supported by a widespread heatwave and a tropical storm in the Gulf of Mexico that threatened to disrupt offfshore production in the region....after falling 4.8% to $1.718 per mmBTU on moderating temperature forecasts and rising natural gas output last week, the contract price of natural gas for August delivery opened lower on Monday and tumbled 7.7 cents or 4.5% to a three week low of $1.641 per mmBTU, as natural gas output increased even as gas stockpiles remained about 16% over the five-year average....but gas prices regained 3.4 cents of that loss on Tuesday as power generators burned record amounts of gas as the heat wave blanketing much of the country intensified...however, gas prices only rose six-tenths of a cent on Wednesday even after forecasts that the heat wave would continue through early August...but prices spiked on Thursday as Tropical Storm Hanna strengthened, threatening natural gas production in the western Gulf, and the August gas contract finished 10.4 cents higher a $1.785 per mmBTU ...prices extended that rally by 2.3 cents on Friday, after signs of an improving liquefied natural gas (LNG) export environment and as Hanna was forecast to become a hurricane as it moved westward toward the Texas coast...natural gas prices thus finished the week with a 5.2% gain at a two week high of $1.808 per mmBTU, as forecasts continued to call for hotter weather and higher-than-expected air conditioning demand over the next two weeks.

the natural gas storage report from the EIA for the week ending July 17th indicated that the quantity of natural gas held in underground storage in the US rose by 37 billion cubic feet to 3,215 billion cubic feet by the end of the week, which left our gas supplies 656 billion cubic feet, or 25.6% greater than the 2,559 billion cubic feet that were in storage on July 17th of last year, and 436 billion cubic feet, or 15.7% above the five-year average of 2,779 billion cubic feet of natural gas that have been in storage as of the 17th of July in recent years....the 37 billion cubic feet that were added to US natural gas storage this week was more than the average 33 billion cubic feet increase that was forecast by analysts polled by S&P Global Platts, but it was less than the 45 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and it matched the average of 37 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 17th indicated a large addition to our stored commercial supplies of crude oil for the 5th week of the past seven, following a large withdrawal from supplies last week, despite little net change in the other metrics that effect oil supplies....our imports of crude oil rose by an average of 373,000 barrels per day to an average of 5,567,000 barrels per day, after falling by an average of 1,827,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 450,000 barrels per day to an average of 2,993,000 barrels per day during the week, which mean​s that our effective trade in oil worked out to a net import average of 2,948,000 barrels of per day during the week ending July 17th, 77,000 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 reportedly rose 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 14,048,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,206,000 barrels of crude per day during the week ending July 17th, 103,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 699,000 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 857,000 barrels per day less 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 (+857,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil"....that followed the insertion of a (-768,000) barrel per day figure into last week's oil balance sheet, when there was a supply surplus of 768,000 barrels per day, and hence from last week to this week the the EIA's fudge factor swung by a total of 1,625,000 barrels per day, thus rendering the week over week oil supply & demand comparisons statistical nonsense....however, since the media usually treats these weekly EIA figures as gospel and since these numbers often 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 6,218,000 barrels per day last week, which was 13.5% less than the 7,187,000 barrel per day average that we were importing over the same four-week period last year....the 699,000 barrel per day net addition to our total crude inventories came as 699,000 barrels per day were being added to our commercially available stocks of crude oil while the supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day higher at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 100,000 barrels per day to 10,600,000 barrels per day while a 4,000 barrel per day increase in Alaska's oil production to 461,000 barrels per day wasn't enough to impact the rounded national total....last year's US crude oil production for the week ending July 19th, which was impacted by a Gulf storm, was rounded to 11,300,000 barrels per day, so this reporting week's rounded oil production figure was about 1.8% 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 77.9% of their capacity while using 14,206,000 barrels of crude per day during the week ending July 17th, down from from 78.1% of capacity during the prior week, but excluding the 2005, 2008, and 2017 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years...hence, the 14,206,000 barrels per day of oil that were refined this week were still 16.6% fewer barrels than the 17,034,000 barrels of crude that were being processed daily during the week ending July 19th, 2019, when US refineries were operating at 93.1% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 16,000 barrels per day to 8,079,000 barrels per day during the week ending July 10th, after our refineries' gasoline output had increased by 50,000 barrels per day over the prior week... with our gasoline production still recovering from a multi-year low, this week's gasoline output was 10.0% lower than the 10,089,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 97,000 barrels per day to 4,763,000 barrels per day, after our distillates output had increased by 104,000 barrels per day over the prior week... after this week's decrease in distillates output, our distillates' production was 8.7% less than the 5,219,000 barrels of distillates per day that were being produced during the week ending July 19th, 2019....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 9th time in 13 weeks and for the 17th time in 25 weeks, falling by 1,802,000 barrels to 246,733,000 barrels during the week ending July 17th, after our gasoline supplies had decreased by 3,147,000 barrels over the prior week...our gasoline supplies decreased by less this week because the amount of gasoline supplied to US markets decreased by 98,000 barrels per day to 8,550,000 barrels per day and because our imports of gasoline rose by 49,000 barrels per day to 542,000 barrels per day and because our exports of gasoline fell by 122,000 barrels per day to 479,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were still 6.1% higher than last July 19th's gasoline inventories of 232,526,000 barrels, and roughly 7% above the five year average of our gasoline supplies for this time of the year...  

however, even with the decrease in our distillates production, our supplies of distillate fuels increased for the thirteenth time in 27 weeks and for the 18th time in 42 weeks, rising by 1,047,000 barrels to a 38 year high of 177,883,000 barrels during the week ending July 17th, after our distillates supplies had decreased by 453,000 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 469,000 barrels per day to 3,223,000 barrels per day, even while our exports of distillates rose by 107,000 barrels per day to 1,439,000 barrels per day and while our imports of distillates fell by 47,000 barrels per day to 52,000 barrels per day....after this week's inventory decrease, our distillate supplies at the end of the week were 30.0% above the 136,816,000 barrels of distillates that we had in storage on July 19th, 2019, and about 27% above the five year average of distillates stocks for this time of the year...

with distillate inventories now at a 38 year high, we'll include a graph of their historical levels and explain why that's particularly remarkable for this time of year​..​

the above graph, which originally came from Bloomberg, was copied from the Zero Hedge coverage of this week's EIA report, and it shows US distillate supplies in millions of barrels, from mid-1982 to this week...while it's difficult to decipher from that graph, if you check out the EIA's interactive graph of distillate inventories and the accompanying spreadsheet, you'd find that the fluctuation we see in that graph is an annual pattern, with the yearly high in ​distillate ​supplies most often occurring when heat oil is being stockpiled just before midwinter, while the annual lows most often occur in late spring after cold winters have depleted the heat oil stockpile, or in mid-summer, when diesel fuel consumption is strongest...hence, that this week's 38 year high in distillate inventories should occur during the normally depleted summertime makes this week's record all the more remarkable...

finally, with the increase in unaccounted for oil, our commercial supplies of crude oil in storage rose for the 21st time in twenty-six weeks and for the 36th time in the past year, increasing by 4,892,000 barrels, from 531,688,000 barrels on July 10th to 536,580,000 barrels on July 17th....after that increase, our our commercial crude oil inventories were around 19% above the five-year average of crude oil supplies for this time of year, and about 59% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the ​third weekend of July, 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 of 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 July 17th were 20.6% above the 445,041,000 barrels of oil we had in commercial storage on July 19th of 2019, 32.5% more than the 404,937,000 barrels of oil that we had in storage on July 20th of 2018, and 11.0% above the 483,415,000 barrels of oil we had in commercial storage on July 21st of 2017...    

This Week's Rig Count

the US rig count fell for the 20th week in a row during the week ending July 24th, and is now down by 68.3% over that​ twenty week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 2 rigs to 251 rigs this past week, which again was the fewest active rigs in Baker Hughes records going back to 1940 and 153 fewer rigs than the all time low prior to this year​...it was also down by 695 rigs from the 946 rigs that were in use as of the July ​26th report of 2019, and 1,678 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

the number of rigs drilling for oil increased by 1 rig to 181 oil rigs this week, after falling by 1 oil rig the prior week, which was still 595 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 rigs to 68 natural gas rigs, which was the least natural gas rigs running in at least 80 years, and down by 101 natural gas rigs from the 169 natural gas rigs that were drilling a year ago, and was less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Sonoma County, California... a year ago, there was just one such "miscellaneous" rig deployed...

the Gulf of Mexico rig count was unchanged at 12 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and two of them drilling for oil offshore from Texas...that was 11 fewer rigs than the 23 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and one rig was operating in Texas waters...while there are no rigs operating off other US shores at this time, a year ago there were two rigs deployed offshore from Alaska, so this week's national offshore count is down by 13 from the national offshore rig count of 25 a year ago

the count of active horizontal drilling rigs was unchanged at 215 horizontal rigs this week, which matches the fewest horizontal rigs drilling in the US since November 18th, 2005, and was also 608 fewer horizontal rigs than the 823 horizontal rigs that were in use in the US on July 26th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the vertical rig count was down by one to 14 vertical rigs this week, and those were also down by 42 from the 56 vertical rigs that were operating during the same week of last year....in addition, the directional rig count also fell by 1 rig to 22 directional rigs this week, and those were also down by 45 from the 67 directional rigs that were in use on July 26th 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 July 24th, the second column shows the change in the number of working rigs between last week's count (July 17th) and this week's (July 24th) count, the third column shows last week's July 17th 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 26th of July, 2019...    

there continued to be more changes in drilling activity this week, even as it remains subdued vis-a-vis the norm...checking the rig counts in the Texas part of Permian basin, we find that two rigs were added in Texas Oil District 8, or the core Permian Delaware, and another rig was added in Texas Oil District 7C or the southern Permian Midland, while a rig was shut down in Texas Oil District 8A or the northern Permian Midland, and another rig was shut down in Texas Oil District 7B, which includes a few counties in the far eastern Permian Midland...since the national Permian basin rig count was up by 2 rigs, that ​strongly ​suggests that the rig that was added in New Mexico would have been set up to drill in the western Permian Delaware, to account for the national increase...elsewhere in Texas, there was a rig added in Texas Oil District 2, but there were also three rigs shut down in Texas Oil District 3, which are both part of the region we ​normally ​associate with activity in the Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and touches on four Oil Districts...since the Eagle Ford shows an increase of one rig, that would suggest that the three rigs shut down in Texas Oil District 3 were not targeting the Eagle Ford, but rather some basin that Baker Hughes does not track...however, checking the breakout for the Eagle Ford basin, we find that one natural gas rig was shut down in that basin, while two oil rigs were added at the same time...that could have occured ​with any number of combinations of offsetting start-ups and shutdowns in those disticts that wouldn't show up in the district totals...in addition, since the panhandle Texas Oil District 10 currently shows no activity, that means that the oil rig that was added in the Granite Wash was across the state line in south central Oklahoma...however, Oklahoma shows no net change because a rig drilling for oil in the Cana Woodford was shut down at the same time...lasly, for the three rig decrease in natural gas rigs, we first have the natural gas rig that was removed from the Eagle Ford, and then the two rigs that were removed from the Marcellus, one each of which had been drilling in Pennsylvania and West Virginia...

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4,340,000 barrels per day of unwanted oil produced in June; drilling of new wells and completions of drilled wells lowest on record

oil prices again ended little changed this week after trading in a fairly narrow range, as a big drop in US crude supplies was offset by an OPEC announcement that they'd begin increasing production in August...after slipping 0.3% to $40.55 a barrel as improving economic data was offset by rising coronavirus cases last week, the contract price of US light sweet crude for August delivery opened 20 cents lower on Monday on a Sunday WHO report of a record daily increase in global coronavirus cases and drifted lower to end down 45 cents at $40.10 a barrel as traders awaited an OPEC meeting that was expected to recommend an increase in oil output...oil prices were down another 2% in early trading on Tuesday on worries that new clampdowns on businesses to stem surging coronavirus cases would threaten the nascent recovery in fuel demand, but recovered to end 19 cents higher at $40.29 a barrel as a report showed that OPEC and its allies had cut production by more than they had agreed to in June...oil prices were expected to plunge on Wednesday as the OPEC+ alliance was poised to boost their oil output by 2 million barrels per day, but instead rose more than 2% on a surprise draw from U.S. crude and product inventories, and then jumped to a four-month high after Trump moved to diffuse building tensions with China, ending 91 cents higher at $41.20 a barrel...but the finalization of the OPEC+ agreement to begin unwinding their deep production cuts hit prices on Thursday, as they fell 45 cents to $40.75 a barrel as the Saudi energy minister said the kingdom was fed up of volunteering and taking on others’ burdens...oil prices slipped another 16 cents to settle at $40.59 per barrel on Friday, as the US had reported a new daily record of new COVID-19 cases on Thursday and as Spain and Australia reported their steepest daily jumps in months, but still managed to hang on to a gain of 4 cents, or barely 0.1% for the week....

natural gas prices, on the other hand, moved lower this week on moderating temperature forecasts and rising natural gas output...after riising 4.1% to $1.805 per mmBTU last week on forecasts for much warmer than normal weather through the end of July, the contract price of natural gas for August delivery fell 6.6 cents, or 3.7% on Monday on rising natural gas output and forecasts for lower air conditioning demand over the next two weeks than had been previously expected...but prices recovered seven-tenths of a cent on a return of hot weather on Tuesday, and then rose 3.2 cents to $1.778 per mmBTU on wednesday as an increase in pipeline exports to Canada and Mexico and increased AC demand kept the amount of gas going into storage lower than usual for this time of year....but natural gas prices still fell 5.5 cents or over 3% to a two-week low despite a bullish storage report on Thursday as gas output rose slowly while LNG exports held near the lowest level since early 2018...gas prices slipped another half-cent on Friday to end the week at $1.718 per mmBTU on forecasts for less hot weather over the next two weeks than had been expected and thus ended the week 4.8% lower than the prior Friday's close..

the natural gas storage report from the EIA for the week ending July 10th indicated that the quantity of natural gas held in underground storage in the US rose by 45 billion cubic feet to 3,178 billion cubic feet by the end of the week, which left our gas supplies 663 billion cubic feet, or 26.4% greater than the 2,515 billion cubic feet that were in storage on July 10th of last year, and 436 billion cubic feet, or 15.9% above the five-year average of 2,742 billion cubic feet of natural gas that has been in storage as of the 10th of July in recent years....the 45 billion cubic feet that were added to US natural gas storage this week was less than the average 50 billion cubic feet increase that was forecast by analysts polled by S&P Global Platts, and it was well less than the 67 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and ​it​ was also less than the average of 63 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years...

US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 10th indicated that because of a near record drop in our oil imports, we had to pull oil out of our stored commercial supplies of crude oil for the 2nd time in six weeks, and for the 13th time in the past forty-four weeks....our imports of crude oil fell by an average of 1,827,000 barrels per day to an average of 5,567,000 barrels per day, after rising by an average of 1,425,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 156,000 barrels per day to an average of 2,543,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,024,000 barrels of per day during the week ending July 10th, 1,983,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,024,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,309,000 barrels of crude per day during the week ending July 10th, 36,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 1,052,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US.....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 768,000 barrels per day more than what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-768,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a 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 numbers often 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 6,368,000 barrels per day last week, which was 10.2% less than the 7,094,000 barrel per day average that we were importing over the same four-week period last year....the 1,052,000 barrel per day net reduction of our total crude inventories came as 1,070,000 barrels per day were being pulled out of our commercially available stocks of crude oil​ while 18,000 barrels per day were ​being ​added to our Strategic Petroleum Reserve....this week's crude oil production was reported to be unchanged at 11,000,000 barrels per day even though the rounded estimate of the output from wells in the lower 48 states fell by 100,000 barrels per day to 10,500,000 barrels per day because a 59,000 barrel per day increase in Alaska's oil production to 457,000 barrels per day was enough to add ​100,000 barrels per day to the rounded national total....last year's US crude oil production for the week ending July 12th was rounded to 12,000,000 barrels per day, so this reporting week's rounded oil production figure was about 8.3% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 78.1% of their capacity while using 14,309,000 barrels of crude per day during the week ending July 10th, up from 77.5% of capacity during the prior week, but excluding the 2005, 2008, and 2017 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years...hence, the 14,309,000 barrels per day of oil that were refined this week were still 17.1% fewer barrels than the 17,267,000 barrels of crude that were being processed daily during the week ending July 12th, 2019, when US refineries were operating at 94.4% of capacity....

even with the small decrease in the amount of oil being refined, gasoline output from our refineries was still higher, increasing by 50,000 barrels per day to 8,095,000 barrels per day during the week ending July 10th, after our refineries' gasoline output had increased by 140,000 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 7.7% lower than the 9,855,000 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 104,000 barrels per day to 4,860,000 barrels per day, after our distillates output had increased by 122,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production was still 9.3% less than the 5,361,000 barrels of distillates per day that were being produced during the week ending July 12th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 8th time in 12 weeks and for the 16th time in 24 weeks, falling by 3,147,000 barrels to 248,535,000 barrels during the week ending July 10th, after our gasoline supplies had decreased by 4,839,000 barrels over the prior week...our gasoline supplies decreased this week even though the amount of gasoline supplied to US markets decreased by 118,000 barrels per day to 8,648,000 barrels per day because our imports of gasoline fell by 236,000 barrels per day to 493,000 barrels per day and because our exports of gasoline rose by 77,000 barrels per day to 601,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were still 6.8% higher than last July 12th's gasoline inventories of 232,752,000 barrels, and roughly 7% above the five year average of our gasoline supplies for this time of the year...  

likewise, even with the increase in our distillates production, our supplies of distillate fuels decreased for the fourteenth time in 26 weeks and for the 24th time in 41 weeks, falling by 453,000 barrels to 176,809,000 barrels during the week ending July 10th, after our distillates supplies had increased by 3,135,000 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 673,000 barrels per day to 3,692,000 barrels per day, even as our exports of distillates fell by 28,000 barrels per day to 1,332,000 barrels per day and our imports of distillates rose by 27,000 barrels per day to 99,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 29.8% above the 136,203,000 barrels of distillates that we had in storage on July 12th, 2019, and about 26% above the five year average of distillates stocks for this time of the year...

finally, with the big drop in our oil imports, our commercial supplies of crude oil in storage fell for the 5th time in twenty-five weeks and for the 17th time in the past year, decreasing by 7,493,000 barrels, from 539,181,000 barrels on July 3rd to 531,688,000 barrels on July 10th....but even after that decrease, our our commercial crude oil inventories were around 17% above the five-year average of crude oil supplies for this time of year, and more than 57% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the second weekend of July, 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 of 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 July 10th were 16.6% above the 455,876,000 barrels of oil we had in commercial storage on July 12th of 2019, 29.3% more than the 411,084,000 barrels of oil that we had in storage on July 13th of 2018, and 8.4% above the 490,623,000 barrels of oil we had in commercial storage on July 14th of 2017...  

OPEC's Monthly Oil Market Report

Tuesday of this past week saw the release of OPEC's July Oil Market Report, which covers OPEC & global oil data for June, and hence it gives us a picture of the global oil supply & demand situation during the second 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....again​,​ we should caution that estimating oil demand while many countries were just 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 again 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 49 of this month's report (pdf page 58), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to 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 was cut by 1,893,000 barrels per day to 22,271,000 barrels per day during June, from their revised May production total of 24,164,000 barrels per day...however that May output figure was originally reported as 24,195,000 barrels per day, which means that OPEC's May production was revised 31,000 barrels per day lower with this report, and hence June's production was, in effect, a 1,924,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official May 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 923,000 barrels per day from the Saudis, 449,000 barrels per day from Iraq, 199,000 barrels per day from Venezuela, and 129,000 barrels per day from the Emirates accounted for the lion's share of the May decrease, even as several other OPEC producers also made further production cuts...to facilitate understanding how each of the OPEC members have been adhering to their latest 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....

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 last quarter's output cuts took effect; the second column shows how much each participant has committed to 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...note that sanctioned OPEC members Iran and Venezuela and war-torn Libya are exempt from these cuts...

with a net 8,224,000 barrels per day decrease in their production since April, it appears that OPEC has far exceeded the 6,084,000 barrels per day they had committed to cut...however, the baseline for the agreed to May and June 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 above their target level...for instance, Iraq had committed to cut their production by 1,061,000 barrels per day from their October 2018 level and only produce 3,592,000 barrels per day in June, but they've only cut their production by 789,000 barrels per day over May and June, and thus produced 3,716,000 barrels per day, 124,000 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 July 2018 to June 2020, and it comes from page 50 (pdf page 59) of the July 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....

including the 1,893,000 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 2.95 million barrels per day to average 86.29 million barrels per day in June, a reported decrease which apparently came after May's total global output figure was revised higher by 350,000 barrels per day from the 89.89 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 1,060,000 barrels per day in June after that revision, with lower oil production from the OECD oil producers accounting for 880,000 barrels per day of the non-OPEC output decrease in June...with the decrease in June's global output, the 86.29 million barrels of oil per day produced globally in June were 12.19 million barrels per day, or 12.4% less than the revised 98.48 million barrels of oil per day that were being produced globally in May a year ago, the 6th month of OPECs first round of production cuts (see the July 2019 OPEC report (online pdf) for the originally reported May 2019 details)...with this month's drop in OPEC's output, their June oil production of 22,271,000 barrels per day fell to 25.8% of what was produced globally during the month, down from their 27.1% share in May, and the 30.5% share ​they contributed in April...OPEC's June 2019 production, which included 515,000 barrels per day from former OPEC member Ecuador, was reported at 29,855,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 7,069,000, or 24.1% fewer barrels per day of oil in June 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...    

the above table came from page 26 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 June, 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 have been using an average of 81.95 million barrels of oil per day, which is a 650,000 barrels per day upward revision from the 81.30 million barrels of oil per day they were estimating for the 2nd 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 still producing 86.29 million barrels per day during June, which would imply that there was a surplus of around 4,340,000 barrels per day in global oil production in June, still 5.3% greater than the demand estimated for the month... 

in addition to figuring the June surplus, the upward revision of 350,000 barrels per day to May's global output that's implied in this report, combined with the 650,000 barrels per day upward revision to 2nd quarter demand that we've circled in green means that the 8,590,000 barrels per day global oil output surplus we had figured for May would now have to be revised to a surplus of 8,290,000 barrels per day....at the same time, the surplus of 17,690,000 barrels per day that we had previously figured for April, in light of that 650,000 barrels per day upward revision to 2nd quarter demand, would have to be revised to a surplus of 17,040,000 barrels per day...

Also note that in green we've also circled an upward revision of 20,000 barrels per day to first quarter demand....that means that the record global oil surplus of 18,068,000 barrels per day we had previously figured for March would have to be revised to a global oil surplus of 18,048,000 barrels per day...similarly, the 2,180,000 barrel per day global oil production surplus we had for February would now be a 2,160,000 barrel per day global oil output surplus, and the  1,210,000 barrel per day global oil output surplus we had for January would be revised to a 1,190,000 barrel per day oil output surplus.. but even after those revisions, it's obvious the world's oil producers​ have​ produced a lot of oil this year that no one wanted..

This Week's Rig Count

the US rig count fell for the 19th week in a row during the week ending July 17th, and is now down by 68.1% over that nineteen week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 5 rigs to 253 rigs this past week, which again was the fewest active rigs in Baker Hughes records going back to 1940 and 151 fewer rigs than the all time low prior to this year, and was also down by 701 rigs from the 954 rigs that were in use as of the July 19th report of 2019, and 1,676 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 180 oil rigs this week, after falling by 4 oil rigs the prior week, leaving oil rig activity at its lowest since June 5th, 2009, which was also 599 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 4 rig to 71 natural gas rigs, which was the least natural gas rigs running in at least 80 years, and down by 103 natural gas rigs from the 174 natural gas rigs that were drilling a year ago, and was less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Sonoma County, California... a year ago, there was just one such "miscellaneous" rigs deployed...

the Gulf of Mexico rig count was unchanged at 12 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and two of them drilling for oil offshore from Texas...that was 13 fewer rigs than the 25 rigs drilling in the Gulf a year ago, when 24 rigs were drilling offshore from Louisiana and one rig was operating in Texas waters...while there are no rigs operating off other US shores at this time, a year ago there was also a rig deployed in the Cook Inlet offshore from Alaska, ​so ​this week's national offshore count is down​ by 14​ from the national offshore rig count of 26 a year ago

the count of active horizontal drilling rigs decreased by 5 rigs to 215 horizontal rigs this week, which was the fewest horizontal rigs ​drilling in the US since November 18th, 2005, and hence is a new 14 1/2 year low for horizontal drilling...it was also 614 fewer horizontal rigs than the 829 horizontal rigs that were in use in the US on July 19th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the vertical rig count was down by four to 15 vertical rigs this week, and those were also down by 41 from the 56 vertical rigs that were operating during the same week of last year...on the other hand, the directional rig count rose by 4 rigs to 23 directional rigs this week, but those were also still down by 46 from the 69 directional rigs that were in use on July 19th 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 July 17th, the second column shows the change in the number of working rigs between last week's count (July 10th) and this week's (July 17th) count, the third column shows last week's July 10th 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 19th of July, 2019...    

there were a few more changes in drilling activity this week​ when compared with the near stagnation of recent weeks, but wtih just three additions, it continues to suggest that prices are still not high enough to encourage the addition of many new rigs to the field...checking the rig counts in the Texas part of Permian basin, we find that one rig was shut down in Texas Oil District 8, or the core Permian Delaware, and ​another rig was shut down in Texas Oil District 7C or the southern Permian Midland...since the overall Permian basin rig count was down by just 1 rig nationally, that means that the rig that was added in New Mexico would have been​ set up to​ drill in the western Permian Delaware, offset​ting​ the Texas decrease...elsewhere in Texas, there was a rig added in Texas Oil District 1, but there was ​also ​a rig shut down in Texas Oil District 3, which are both part of the region we associate with activity in the Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and touches on four Oil Districts...since the Eagle Ford shows an increase of two rigs, that means that at least one more Eagle Ford rig was added in one of those districts, while a rig that wasn't targetting the Eagle Ford was shut down at the same time...in addition, a rig was also shut down in Texas Oil District 7B, which would account for the rig r​pulled out of the Barnett shale in the area south of Dallas-Ft Worth....that rig stacked in the Barnett shale had been targeting natural gas, as was the rig that was shut down in Louisiana's Haynesville, and the two rigs that were stacked in Ohio's Utica shale, thus accounting for the decrease of four natural gas rigs nationally...at the same time, ​the shutdown of a natural rig that had been drilling in Pennsylvania's Marcellus was offset by the addition of a natural rig in West Virginia's Marcellus, leaving the total Marcellus shale count unchanged...

DUC well report for June

Monday of this past week saw the release of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....for the 2nd time in the past sixteen months, this report showed an increase in uncompleted wells nationally in June, as both the drilling of new wells and completions of drilled wells decreased, but completions decreased by ​almost twice as much.....for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 35 wells, rising from 7,624 DUC wells in May to 7,659 DUC wells in June, which was still 10.2% fewer DUCs than the 8,530 wells that had been drilled but remained uncompleted as of the end of June of a year ago...this month's DUC decrease occurred as 326 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during June, down by 89 from the 417 wells that were drilled in May and the lowest number of wells drilled in the history of this report, while 291 wells were completed and brought into production by fracking, a decrease of 170 well completions from the 461 completions seen in May, and down by 78.2% from the 1,346 completions seen in June of last year, and also the lowest number of completions in one month since completions have been reported by the EIA....at the June completion rate, the 7,659 drilled but uncompleted wells left at the end of the month represents a 26.3 month backlog of wells that have been drilled but are not yet fracked, up from the 16.5 month DUC well backlog of a month ago, with a recognition that this normally indicative backlog ratio is being skewed by record low completions...

oil producing regions saw a net DUC well increase in June, while natural gas producing regions still saw a modest net DUC well decrease, even as some basins went against that trend....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico increased by 49, from 3,439 DUC wells at the end of May to 3,488 DUCs at the end of June, as 150 new wells were drilled into the Permian, while 101 wells in the region were being fracked....at the same time, DUC wells in the Bakken of North Dakota increased by 7, from 875 DUC wells at the end of May to 882 DUCs at the end of June, as 20 wells were drilled into the Bakken in June, while 13 of the drilled wells in that basin were being fracked...in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range increased by 2 to 452, as 23 Niobrara wells were drilled in June while 21 Niobrara wells were completed... on the other hand, there was a decrease of 6 DUC wells in the Eagle Ford of south Texas, from 1,301 DUC wells at the end of May to 1,295 DUCs at the end of June, as 35 wells were drilled in the Eagle Ford during June, while 41 already drilled Eagle Ford wells were completed...similarly, DUCs in the Oklahoma Anadarko decreased by 7, falling from 717 at the end of Ma​y to 710 DUC wells at the end of June, as 10 wells were drilled into the Anadarko basin during June, while 17 Anadarko wells were being fracked.... 

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 11 wells, from 579 DUCs at the end of May to 568 DUCs at the end of June, as 59 wells were drilled into the Marcellus and Utica shales during the month, while 70 of the already drilled wells in the region were fracked....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 264, as 29 wells were drilled into the Haynesville during June, while 28 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of June, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 45 wells to 6,827 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 10 wells to 832 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...

low prices driving drillers to abandon horizontal drilling for cheaper vertical wells

US oil prices were little changed this week, as better than expected economic reports were offset by the threat of rising coronavirus cases....after rising 5% to $40.65 a barrel last week on improving economic data and on falling US crude inventories, the contract price of US light sweet crude for August delivery opened lower on Monday on concerns that a spike in coronavirus cases could curb US oil demand, but steadied on reports that U.S. services industry activity had rebounded sharply in June and that China’s capital markets were attracting money to end the session just 2 cents lower at $40.63 a barrel...the same dynamic played out in oil markets Tuesday, with prices falling as oil traders eyed rising coronavirus cases but steadying as improving economic data overshadowed the coronavirus worries, as August oil ended down a penny at $40.62 a barrel...a larger than expected build in US crude inventories hit prices early Wednesday, but prices recovered and ended 28 cents higher at $40.90 because the EIA report also showed rising demand for and falling inventories of gasoline...but oil prices tanked on Thursday after Wednesday's coronavirus data showed the largest increase in US cases ever reported by any country in a single day, renewing fears that new lockdowns would again sink fuel consumption, as oil prices settled $1.28 lower at $39.62 a barrel...August oil then opened lower on Friday and fell more than $1 on ongoing virus fears, but prices got a late boost after the International Energy Agency bumped up its 2020 forecast for global oil demand, and the ensuing rally carried the August contract to a 93 cent gain on the day, settling at $40.55 a barrel...nonetheless, oil prices still ended with a 0.3% loss on the week as the risk of spiking coronavirus counts outweighed the bevy of better economic news...

on the other hand, natural gas prices ended the week modestly higher, as forecasts through the end of July called for much warmer than normal temperatures....after rising 12.3% to $1.734 per mmBTU on rising air conditioning demand last week, the contract price of natural gas for August delivery jumped to a five-week high on Monday on forecasts calling for hotter weather and higher air conditioning demand than had previously been expected, with natural gas prices settling 9.6 cents higher at $1.830 per mmBTU...with July heating up at a record pace, front month contract prices rose another 4.6 cents on Tuesday after an unplanned pipeline shutdown in West Virginia, but then fell back 5.2 cents on Wednesday on a continued drop in LNG exports and a smaller than expected drop in output due to unplanned pipeline work...natural gas prices fell another 4.5 cents along with the oil ​price ​drop on Thursday on worries about ongoing coronavirus demand destruction, despite a bullish​ gas​ storage report that was in line with expectations...natural gas prices then regained 2.6 cents on Friday on forecasts hotter-than-normal weather through late July to end the week at $1.805 per mmBTU, an increase of 4.1% over the week...

the natural gas storage report from the EIA for the week ending July 3rd indicated that the quantity of natural gas held in underground storage in the US rose by 56 billion cubic feet to 3,133  billion cubic feet by the end of the week, which left our gas supplies 685 billion cubic feet, or 28.0% greater than the 2,448 billion cubic feet that were in storage on July 3rd of last year, and 454 billion cubic feet, or 16.9% above the five-year average of 2,679 billion cubic feet of natural gas that has been in storage as of the 3rd of July in recent years....the 56 billion cubic feet that were added to US natural gas storage this week was in line with the average increase of 55 billion forecast by analysts polled by S&P Global Platts, but it was less than the 92 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and was also less than the average of 68 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending July 3rd indicated that because of a big jump in our oil imports and a sizable drop in our oil exports, we were left with quie a bit of surplus oil to add to our stored commercial supplies of crude oil for the 4th week of the past five, and for the 31st time in the past forty-three weeks....our imports of crude oil rose by an average of 1,425,000 barrels per day to an average of 7,394,000 barrels per day, after falling by an average of 571,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 705,000 barrels per day to an average of 2,387,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,007,000 barrels of per day during the week ending July 3rd, 2,130,000 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 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 16,007,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,347,000 barrels of crude per day during the week ending July 3rd, 315,000 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 895,000 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 765,000 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 (-765,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a 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 numbers often 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 rose to an average of 6,636,000 barrels per day last week, which was still 8.5% less than the 7,253,000 barrel per day average that we were importing over the same four-week period last year....the 895,000 barrel per day net addition to our total crude inventories included 87,000 barrels per day that were added to our Strategic Petroleum Reserve, and 808,000 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 unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,600,000 barrels per day, while a 36,000 barrel per day increase in Alaska's oil production to 399,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending July 5th was rounded to 12,300,000 barrels per day, so this reporting week's rounded oil production figure was about 10.7% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 77.5% of their capacity while using 14,347,000 barrels of crude per day during the week ending July 3rd, up from 75.5% 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 14,347,000 barrels per day of oil that were refined this week were still 17.7% fewer barrels than the 17,438,000 barrels of crude that were being processed daily during the week ending July 5th, 2019, when US refineries were operating at 94.7% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 140,000 barrels per day to 8,045,000 barrels per day during the week ending July 3rd, after our refineries' gasoline output had increased by 111,000 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 13.2% lower than the 10,418,000 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 122,000 barrels per day to 4,756,000 barrels per day, after our distillates output had increased by 63,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production was still 11.2% less than the 5,358,000 barrels of distillates per day that were being produced during the week ending July 5th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 7th time in 11 weeks and for the 15th time in 23 weeks, falling by 4,839,000 barrels to 251,682,000 barrels during the week ending July 3rd, after our gasoline supplies had increased by 1,199,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 205,000 barrels per day to 8,766,000 barrels per day, and because our imports of gasoline fell by 282,000 barrels per day to 729,000 barrels per day while our exports of gasoline rose 41,000 barrels per day to 524,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were ​still ​9.8% higher than last July 5th's gasoline inventories of 229,187,000 barrels, and roughly 8% 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 twelfth time in 25 weeks and for the 17th time in 40 weeks, rising by 3,135,000 barrels to 177,262,000 barrels during the week ending July 3rd, after our distillates supplies had decreased by 593,000 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 759,000 barrels per day to 3,019,000 barrels per day, even as our exports of distillates rose by 294,000 barrels per day to 1,360,000 barrels per day while our imports of distillates fell by 63,000 barrels per day to 72,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 35.8% above the 130,517,000 barrels of distillates that we had stored on July 5th, 2019, and about 27% above the five year average of distillates stocks for this time of the year...

finally, with the jump in our oil imports and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the 20th time in twenty-four weeks and for the 35th time in the past 52 weeks, increasing by 5,654,000 barrels, from 533,527,000 barrels on June 26th to 539,181,000 barrels on July 3rd...after that increase, our our commercial crude oil inventories were around 18% above the five-year average of crude oil supplies for this time of year, and 58.5% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the first weekend of July, 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 of 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 July 3rd were 17.5% above the 458,992,000 barrels of oil we had in commercial storage on July 5th of 2019, 33.0% above the 405,248,000 barrels of oil that we had in storage on July 6th of 2018, and 8.8% above the 495,350,000 barrels of oil we had in commercial storage on July 7th of 2017...  

​moreover, ​with the big jump in our crude inventories and the increase in our distillate fuel supplies, the total of our commercial oil supplies and the commercial stockpiles of all the refined product made from oil have again increased by 9,841,000 barrels this week to yet another record high of 1,461,620,000 barrels, 12.5% more than the 1,298,926,000 barrel total of the same week a year ago...     

This Week's Rig Count

the US rig count fell for the 18th week in a row during the week ending July 10th, leaving the rig count down by 67.5% over that eighteen week period...(note that this week's report covers 8 days after last week's was released on Thursday ahead of the July 4th weekend)...Baker Hughes reported that the total count of rotary rigs running in the US decreased by 5 rigs to 258 rigs this past week, which again was the fewest active rigs in Baker Hughes records going back to 1940 and 146 fewer rigs than the all time low prior to this year, and was also down by 700 rigs from the 958 rigs that were in use as of the July 12th report of 2019, and 1,671  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 4 rigs to 181 oil rigs this week, after falling by 3 oil rigs the prior week, leaving oil rig activity at its lowest since June 5th, 2009, which was also 603 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 1 rig to 75 natural gas rigs, which matches the least natural gas rigs running in at least 80 years, and was down by 97 natural gas rigs from the 172 natural gas rigs that were drilling a year ago, and was​ ​less than a twentieth of ​the​ modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Sonoma County, California... a year ago, there were no such "miscellaneous" rigs deployed...

the Gulf of Mexico rig count was unchanged at 12 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and two of them drilling for oil offshore from Texas...that was 14 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...meanwhile, 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 offshore​ ​rig count, just as it has been since the onset of last winter...

the count of active horizontal drilling rigs decreased by 6 rigs to 220 horizontal rigs this week, which was the fewest horizontal rigs active since December 9th, 2005, and hence is a new 14 1/2 year low for horizontal drilling...it was also 611 fewer horizontal rigs than the 831 horizontal rigs that were in use in the US on July 12th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was down by one to 19 directional rigs this week, and those were also down by 51 from the 70 directional rigs that were operating during the same week of last year...on the other hand, the vertical rig count rose by 2 rigs to 19 vertical rigs this week, but those were also still down by 38 from the 57 vertical rigs that were in use on July 12th of 2019....

with low prices for oil & natural gas, it appears there has been an ongoing shift from the​ complex and expensive horizontal drilling technique to the ​simpler and cheaper conventional vertical drilling...recall that in the Dallas Fed energy survey of a couple months ago, of the 157 oil executives responding, none could profitably drill a new horizontal well in any US shale basin at an oil price below $30 a barrel, but at least one company thought they could profit even with oil as low as $15 a barrel by drilling a vertical well....on June 5th, there were 253 horizontal rigs, 24 directional rigs, and 7 vertical rigs deployed; but as we have just reported, by July 10th, horizontal rigs had fallen by 33 to 220 rigs, directional rigs had fallen by 5 to 19 rigs, but vertical rig activity had increased by 12 rigs to 19 vertical rigs...my sense is that some of this switch is taking place in the Permian basin, as horizontal rigs are being shut down in Permian Delaware, while vertical rigs are starting up in the Permian Midland, but to establish th​e degree to which that is happening, one would have to locate each of the individual well records on the North America Rotary Rig Count Pivot Table, and i haven't yet had the patience for that tedious endeavor...

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 July 10th, the second column shows the change in the number of working rigs between last week's count (July 2nd) and this week's (July 10th) count, the third column shows last week's July 2nd 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 July, 2019...    

again there were few changes in drilling activity this week, with just a handful of rig removals and only two additions, which suggests 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 that one rig was shut down in Texas Oil District 8, or the core Permian Delaware, and one rig was shut down in Texas Oil District 7C or the southern Permian Midland...since the overall Permian basin rig count was down by just 1 rig nationally, that means that the rig that was added in New Mexico would have been drilling in the western Permian Delaware, to offset the Texas decrease...elsewhere in Texas, there were two rigs shut down in Texas Oil District 2, another rig shut down in Texas Oil District 3, while a new rig was added in Texas Oil District 4, all of which most likely would represent changes in activity in the Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and touches on all three of those Oil Districts...in addition, a rig was shut down in Texas Oil District 9, which would account for the rig reduction in the Barnett shale in the area around Dallas-Ft Worth....that rig stacked in the Barnett shale had been targeting natural gas, as was the rig that was shut down in West Virginia's Marcellus, while at the same time a rig began drilling for natural gas in a basin not tracked separately by Baker Hughes​, thus netting out to this week's one natural gas rig decrease nationally​...

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+ note: there's more here....