oil prices rose for a 4th consecutive week as most US offshore production was shut down by two hurricanes in the Gulf of Mexico...after rising 3 cents or less than 0.1% to $42.34 a barrel last week as bullish news of rising demand and falling supplies was mostly offset by fears of pandemic impacts, the contract price of US light sweet crude for October delivery opened higher on Monday as half of US offshore oil production was shut down as two storms approaching the Gulf Coast, but then traded in a narrow range and settled 28 cents higher at $42.62 a barrel as the threat of back-to-back storms hitting the Gulf Coast was offset by a coronavirus resurgence in parts of Asia and Europe...the virus worries persisted early Tuesday, but as producers closed down more production when Laura's forecast was upgraded to a category 3 storm, prices began rising and ended 73 cents higher at a five month high of $43.35 a barrel as reports estimated that 84.3% of Gulf oil production, or about 1.6 million barrels of oil a day, had been shut in, along with nearly 61% of natural gas production...but oil prices held fast on Wednesday even as Laura strengthened and the EIA reported a large withdrawal of crude from storage and settled just 4 cents higher at $43.39 a barrel, pressured by concerns of the coronavirus's impact on demand...prices then slid early Thursday as Laura slammed into the rural Louisiana coast, with the worst of the storm missing the major refinery complexes of nearby Texas, and ended down 35 cents at $43.04 a barrel as refinery shutdowns reduced the demand for crude oil, just about offsetting the loss of Gulf of Mexico production...with refineries having missed the worst of the storm's impact, oil prices continued lower on Friday and ended down 7 cents at $42.97 a barrel, failing to react to a weaker dollar, which usually boosts commodity prices...but for the week, oil prices still managed to post a 1.5% increase, representing their fourth weekly rise in a row...
natural gas prices also finished higher for a fourth consecutive week as Gulf production of natural gas was also shut in ahead of the storms....after rising 3.9% to $2.448 per mmBTU last week on hot weather ahead of the storms, the contract price of natural gas for September delivery jumped as much as 10 cents to start the week, supported by a steep drop in Gulf gas production ahead of two tropical systems moving through the Gulf at the time and finished Monday 6.5 cents higher at $2.513 per mmBTU... but natural gas prices backed off 2.4 cents on Tuesday as LNG tankers steered clear of the U.S.export terminals as Hurricane Laura bore down on them and then fell another 2.8 cents to $2.461 per mmBTU on Wednesday as US Gulf LNG exports collapsed to an 18 month low ahead of the storm...but on Thursday, the last day of trading for September natural gas, the price of that contract jumped to 9-month high of $2.579 per mmBTU because Laura also shut down Louisiana's natural gas production, while the contract price of natural gas for October delivery, the new front month gas contract, finished 13.6 cents higher at $2.710 per mmBTU as the EIA reported the weekly injection of gas into storage was a hair short of some expectations...however, prices for October natural gas fell 5.3 cents $2.657 per mmBTU on Friday, even as Reuters reported it as a new 9 month high on the contract roll, as US natual gas exports began to rebound slowly from their pre-storm lows...while natural gas quotes thus finished 20.9 cents or 8.5% higher on the week, the October contract price only managed an 8.4 cent or 3.3% gain, as the sustained heat was enough to lift prices across the board for the week...
the natural gas storage report from the EIA for the week ending August 21st indicated that the quantity of natural gas held in underground storage in the US rose by 45 billion cubic feet to 3,420 billion cubic feet by the end of the week, which left our gas supplies 580 billion cubic feet, or 20.4% greater than the 2,840 billion cubic feet that were in storage on August 21st of last year, and 438 billion cubic feet, or 14.7% above the five-year average of 2,982 billion cubic feet of natural gas that have been in storage as of the 21st of August in recent years....the 45 billion cubic feet that were added to US natural gas storage this week matched an S&P Global Platts' survey of analysts who forecast a 45 billion cubic foot increase, while it was less than the 60 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and also less than the average of 49 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 August 21st showed that because of a big jump in our oil exports, we needed to withdraw oil from our stored supplies for the fifth week in a row and for the 7th time in the past twelve weeks...our imports of crude oil rose by an average of 185,000 barrels per day to an average of 5,916,000 barrels per day, after rising by an average of 109,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 1,226,000 barrels per day to an average of 3,363,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,553,000 barrels of per day during the week ending August 21st, 1,041,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 10,800,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,353,000 barrels per day during this reporting week..
meanwhile, US oil refineries reported they were processing 14,712,000 barrels of crude per day during the week ending August 21st, 225,000 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 922,000 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 438,000 barrels per day less than what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+438,000) 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....with last week's fudge factor at -421,000, that means our week over week comparisons on oil supply & demand changes are off by almost twice as much, even as we continue to report them as an indicator of what most oil traders and analysts believe happened, since that's what affects their behavior... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,819,000 barrels per day last week, which was still 16.9% less than the 7,002,000 barrel per day average that we were importing over the same four-week period last year....the 922,000 barrel per day net withdrawal from our total crude inventories came as 670,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 252,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is also being leased for commercial use....this week's crude oil production was reported to be 100,000 barrels per day higher at 10,800,000 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 10,300,000 barrels per day, while Alaska's oil production rose by 3,000 barrrels per day to 442,000 barrels per day but had no impact on the rounded national total....last year's US crude oil production for the week ending August 23rd was rounded to 12,500,000 barrels per day, so this reporting week's rounded oil production figure was 13.6% below that of a year ago, yet still 28.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 82.0% of their capacity while using 14,712,000 barrels of crude per day during the week ending August 21st, up from 80.9% of capacity during the prior week, but excluding great recession slowdown and the 2005, 2008, and 2017 hurricane-related refinery interruptions, still among the lowest refinery utilization rates of the last twenty-eight years...hence, the 14,712,000 barrels per day of oil that were refined this week were still 15.5% fewer barrels than the 17,408,000 barrels of crude that were being processed daily during the week ending August 23rd of last year, when US refineries were operating at 95.2% of capacity....
with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 118,000 barrels per day to 9,518,000 barrels per day during the week ending August 21st, after our refineries' gasoline output had decreased by 200,000 barrels per day over the prior week...but with our gasoline production still recovering from a multi-year low, this week's gasoline output was still 10.7% less than the 10,660,000 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 380,000 barrels per day to 5,122,000 barrels per day, after our distillates output had decreased by 47,000 barrels per day over the prior week... but even after this week's big increase in distillates output, our distillates' production was still 1,4% less than the 5,193,000 barrels of distillates per day that were being produced during the week ending August 23rd, 2019....
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 6th time in 8 weeks and for the 21st time in 30 weeks, falling by 4,583,000 barrels to 239,179,000 barrels during the week ending August 21st, after our gasoline supplies had decreased by 3,322,000 barrels over the prior week...our gasoline supplies decreased by more this week because the amount of gasoline supplied to US markets increased by 531,000 barrels per day to 9,161,000 barrels per day, while our imports of gasoline fell by 18,000 barrels per day to 539,000 barrels per day and while our exports of gasoline fell by 189,000 barrels per day to 620,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were still 3.1% higher than last August 23rd's gasoline inventories of 231,982,000 barrels, and roughly 5% above the five year average of our gasoline supplies for this time of the year...
meanwhile, with the big increase in our distillates production, our supplies of distillate fuels increased for the seventeenth time in 32 weeks and for the 22nd time in 47 weeks, rising by 1,388,000 barrels to 177,195,000 barrels during the week ending August 21st, after our distillates supplies had increased by 152,000 barrels during the prior week....our distillates supplies rose this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 705,000 barrels per day to 3,958,000 barrels per day, because our exports of distillates fell by 421,000 barrels per day to 1,094,000 barrels per day, while while our imports of distillates rose by 81,000 barrels per day to 129,000 barrels per day...after this week's inventory increase, our distillate supplies at the end of the week were 31.7% above the 136,060,000 barrels of distillates that we had in storage on August 23rd, 2019, and about 24% above the five year average of distillates stocks for this time of the year...
finally, because of the big jump in our oil exports, our commercial supplies of crude oil in storage fell for the 10th time in thirty-two weeks and for the 16th time in the past year, decreasing by 4,689,000 barrels, from 512,452,000 barrels on August 14th to 507,763,000 barrels on August 21st....but even after that decrease, our commercial crude oil inventories were still around 15% above the five-year average of crude oil supplies for this time of year, and 54% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the third weekend of August, 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 the summers, after generally falling until then through most of the prior year and a half, our crude oil supplies as of August 21st were 18.7% above the 427,751,000 barrels of oil we had in commercial storage on August 23rd of 2019, 25.1% more than the 405,792,000 barrels of oil that we had in storage on August 24th of 2018, and 10.9% above the 457,773,000 barrels of oil we had in commercial storage on August 25th of 2017...
This Week's Rig Count
the US rig count was unchanged during the week ending August 28th, after rising for the first time in 24 weeks the prior week, but it is still down by 68.1% over that twenty-five week period....Baker Hughes reported that the total count of rotary rigs running in the US remained at 254 rigs this past week, which was still 150 fewer rigs than the all time low prior to this year...that was also down by 662 rigs from the 916 rigs that were in use as of the August 30th report of 2019, and 1,675 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 3 rigs to 180 oil rigs this week, after increasing by 11 oil rigs the prior week, leaving us with 562 fewer oil rigs than were running a year ago, and less than a 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 increased by 3 rigs to 72 natural gas rigs, which was still down by 90 natural gas rigs from the 162 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, 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 13 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and three drilling for oil offshore from Texas...that was 13 fewer Gulf rigs than the 26 rigs drilling in the Gulf a year ago, when 25 Gulf rigs were drilling offshore from Louisiana and one was deployed in Texas waters...while there are no rigs operating off other US shores at this time, a year ago there were also two rigs deployed offshore from Alaska, so this week's national offshore count is down by 15 from the national offshore rig count of 28 a year ago...also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in southern Louisiana this week, while a year ago there were no rigs drilling in inland waters..
The count of active horizontal drilling rigs was unchanged at 221 horizontal rigs this week, which was still 563 fewer horizontal rigs than the 784 horizontal rigs that were in use in the US on August 30th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was was also unchanged at 20 directional rigs this week, and those were also down by 50 from the 70 directional rigs that were operating during the same week of last year....in addition, the vertical rig count was also unchanged at 13 vertical rigs this week, and those were still down by 37 from the 50 vertical rigs that were in use on August 30th 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 August 28th, the second column shows the change in the number of working rigs between last week's count (August 21st) and this week's (August 28th) count, the third column shows last week's August 21st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 30th of August, 2019...
as has been the case most of the summer, there were only a few changes in drilling activity again this week, with only three rig removals and just three rig additions, suggesting that prices are currently high enough that drillers are no longer trying 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 just one rig was shut down Texas Oil District 8, which is the core Permian Delaware, while rigs in other Texas Permian basin districts were unchanged....since the national Permian basin rig count was down by 2 rigs, that means that the rig that was shut down in New Mexico had been drilling in the far western Permian Delaware, to fully account for the national Permian decrease...elsewhere in Texas, a rig was removed from Texas Oil District 4, which doesn't correspond to a major basin, while one rig was added in Texas Oil District 6, which corresponds to one of the Haynesville shale natural gas rig additions....the other two Haynesville shale natural gas rig additions were across the state line in Lousiana, thus accounting for all the rig changes seen this week, which was probably the least changes in one week we've seen in years...
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