oil & natural gas prices rose as storms shut down offshore Gulf production (in an otherwise slow news week)

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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a record low for drilling of new wells and completions of drilled wells in July, but active rigs jumped by 10 this week

July’s well completions were down 80% from last July to a record low; new wells drilled also at a record low, but drilling rigs were up by 10 this week; distillate imports were at a 60 week low.

oil prices inched higher for a third consecutive week this week, as early gains on rising demand and falling supplies were largely reversed on fears of potential pandemic impacts....after rising 1.9% to $42.01 a barrel last week on falling US oil and fuel inventories, the contract price of US light sweet crude for September delivery opened higher on Monday on news that China planned to import large volumes of U.S. crude this month and next and finished the session up 88 cents at $42.89 a barrel on a media report that OPEC+ members were complying with the alliance’s production cuts and as a weaker dollar spurred a broad commodities rally...but oil prices slid early Tuesday on demand fears as the coronavirus pandemic showed no signs of letting up but recovered to close the day unchanged as traders awaited the American Petroleum Institute report Tuesday evening and the EIA report the next day, both of which were expected to show that oil and fuel inventories had fallen...US oil contracts traded lower early Wednesday on headlines of a crude inventory draw that was weaker than had been expected, but recovered to close 4 cents higher at $42.93 a barrel as a big drop in gasoline inventories alleviated coronavirus demand fears as the driving season shifted into its final weeks...however, oil prices fell more than 3% early Thursday after Reuters reported that OPEC needed to address a daily oversupply of more than 2 million barrels, and after U.S. unemployment claims rose unexpectedly, signalling a pause in the economic recovery, but then moved higher before the close as trading in the September contract expired 35 cents lower at $42.58 a barrel while the more actively traded October oil contract ended down 29 cents at $42.82 a barrel...now quoting the contract price of US crude for October delivery as the price of oil, prices resumed sliding on Friday under pressure from demand concerns as the Covid-19 pandemic continued to undermine economic growth and ended down 48 cents, or 1.1%, to finish at $42.34 a barrel as the economic recovery worldwide ran into stumbling blocks due to renewed coronavirus lockdowns, thus giving up most of its gains for the week with the October contract price finishing just 3 cents or less than 0.1% higher than the prior Friday's close...

natural gas prices also finished higher for the third straight week as record-high temperatures on the West Coast and typical August heat and humidity in the South and Southeast drove demand higher...after rising 5.3% to an eight month high of $2.356 per mmBTU last week on hot weather and on rising LNG exports, the contract price of natural gas for September delivery backed off 1.7 cents on Monday on forecasts for milder weather and lower air conditioning demand than had previously been expected...but gas prices climbed 7.8 cents to a new eight month high on Tuesday on a decline in natural gas output and an increase in LNG exports and then added nine-tenths of a cent to another eight month high on Wednesday, as LNG exports continued rising and as temperature forecasts again trended toward warmer...but natural gas prices gave up all the week's gains on Thursday in tumbling 7.4 cents to $2.352 per mmBTU as a big storage build showed that the hot weather of last week was not enough to cut the week's inventory increase to below normal levels...but that lesson was lost on traders Friday as they pushed natural gas prices 9.6 cents higher to a new 8 month high of $2.448 per mmBTU and a 3.9% gain on the week, as hot weather returned and two major storms moved towards the Gulf Coast, threatening production, LNG exports and domestic demand in the coming week....

the natural gas storage report from the EIA for the week ending August 14th indicated that the quantity of natural gas held in underground storage in the US rose by 43 billion cubic feet to 3,375 billion cubic feet by the end of the week, which left our gas supplies 595 billion cubic feet, or 21.4% greater than the 2,780 billion cubic feet that were in storage on August 14th of last year, and 442 billion cubic feet, or 15.1% above the five-year average of 2,933 billion cubic feet of natural gas that have been in storage as of the 14th of August in recent years....the 43 billion cubic feet that were added to US natural gas storage this week was more than the average 39 billion cubic feet increase that was forecast by analysts polled by S&P Global Platts, but it was less than the 56 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, while it was close to the average of 44 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 14th indicated that despite a big drop in our oil exports, we still needed to withdraw oil from our stored supplies for the fourth week in a row and for the 6th time in the past eleven weeks...our imports of crude oil rose by an average of 109,000 barrels per day to an average of 5,730,000 barrels per day, after falling by an average of 389,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,006,000 barrels per day to an average of 2,137,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,593,000 barrels of per day during the week ending August 14th, 1,115,000 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 reportedly unchanged at 10,700,000 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 14,293,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,487,000 barrels of crude per day during the week ending August 14th, 171,000 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 615,000 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 421,000 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 (-421,000) 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....and with last week's fudge factor at +515,000, that means our week over week comparisons on oil supply & demand changes are off by more than 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 fell to an average of 5,627,000 barrels per day last week, which was 21.7% less than the 7,186,000 barrel per day average that we were importing over the same four-week period last year....the 615,000 barrel per day net withdrawal from our total crude inventories came as 233,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 382,000 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 unchanged at 10,700,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,300,000 barrels per day, while Alaska's oil production rose by 7,000 barrrels per day to 439,000 barrels per day but had no impact on the rounded national total....last year's US crude oil production for the week ending August 16th was rounded to 12,300,000 barrels per day, so this reporting week's rounded oil production figure was about 13.0% below that of a year ago, yet still 27.0% 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 80.9% of their capacity while using 14,487,000 barrels of crude per day during the week ending August 14th, down from 81.0% of capacity during the prior week, and excluding the 2005, 2008, and 2017 hurricane-related refinery interruptions, still among the lowest refinery utilization rates of the last twenty-eight years...hence, the 14,487,000 barrels per day of oil that were refined this week were still 18.2% fewer barrels than the 17,702,000 barrels of crude that were being processed daily during the week ending August 16th, 2019, when US refineries were operating at 95.9% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 200,000 barrels per day to 9,400,000 barrels per day during the week ending August 14th, after our refineries' gasoline output had increased by 300,000 barrels per day over the prior week...with our gasoline production still recovering from a multi-year low, this week's gasoline output was 5.0% less than the 9,897,000 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 47,000 barrels per day to 4,742,000 barrels per day, after our distillates output had decreased by 120,000 barrels per day over the prior week... after this week's decrease in distillates output, our distillates' production was 11.2% less than the 5,340,000 barrels of distillates per day that were being produced during the week ending August 16th, 2019....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 5th time in 7 weeks and for the 20th time in 29 weeks, falling by 3,322,000 barrels to 243,762,000 barrels during the week ending August 14th, after our gasoline supplies had decreased by 722,000 barrels over the prior week...our gasoline supplies decreased by more this week even though the amount of gasoline supplied to US markets decreased by 253,000 barrels per day to 8,630,000 barrels per day because our imports of gasoline fell by 466,000 barrels per day to 557,000 barrels per day while our exports of gasoline rose by 15,000 barrels per day to 809,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were still 4.1% higher than last August 16th's gasoline inventories of 234,072,000 barrels, and roughly 7% above the five year average of our gasoline supplies for this time of the year...  

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels increased for the sixteenth time in 31 weeks and for the 21st time in 46 weeks, rising by 152,000 barrels to 177,807,000 barrels during the week ending August 14th, after our distillates supplies had decreased by 2,322,000 barrels during 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 609,000 barrels per day to 3,253,000 barrels per day, while our exports of distillates rose by 108,000 barrels per day to 1,515,000 barrels per day, and while our imports of distillates fell by 100,000 barrels per day to a 60 week low of 48,000 barrels per day...after this week's inventory increase, our distillate supplies at the end of the week were still 28.7% above the 138,123,000 barrels of distillates that we had in storage on August 16th, 2019, and about 24% above the five year average of distillates stocks for this time of the year...

finally, even with the big drop in our oil exports, our commercial supplies of crude oil in storage fell for the 9th time in thirty-one weeks and for the 16th time in the past year, decreasing by 1,632,000 barrels, from 514,084,000 barrels on August 7th to 512,452,000 barrels on August 14th....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 54.4% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the second 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 last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of August 14th were 17.1% above the 437,778,000 barrels of oil we had in commercial storage on August 16th of 2019, 25.5% more than the 408,358,000 barrels of oil that we had in storage on August 17th of 2018, and 10.6% above the 463,165,000 barrels of oil we had in commercial storage on August 18th of 2017...    

This Week's Rig Count

the US rig count was up for the 1st time in 24 weeks during the week ending August 21st, but is still down by 68.1% over that twenty-four week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 10 rigs to 254 rigs this past week, which was still 150 fewer rigs than the all time low prior to this year...it was also down by 662 rigs from the 916 rigs that were in use as of the August 23rd 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 increased by 11 rigs to 183 oil rigs this week, after decreasing by 4 oil rigs the prior week, still leaving us with 571 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 decreased by 1 rig to 69 natural gas rigs, which was also down by 93 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 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 up by 14 to 221 horizontal rigs this week, which was still 576 fewer horizontal rigs than the 797 horizontal rigs that were in use in the US on August 23rd 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 directional rig count was down by 4 to 20 directional rigs this week, and those were also down by 49 from the 69 directional rigs that were operating during the same week of last year....meanwhile, the vertical rig count was unchanged at 13 vertical rigs this week, but those were still down by 37 from the 50 vertical rigs that were in use on August 23rd 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 21st, the second column shows the change in the number of working rigs between last week's count (August 14th) and this week's (August 21st) count, the third column shows last week's August 14th 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 23rd of August, 2019...    

while we have more changes in drilling activity this week than in week's past, the Permian basin by itself accounts for this week's change, while activiy in other basins remains relatively subdued ...checking the rig counts in the Texas part of Permian basin, we find that seven rigs were added in Texas Oil District 8, which is the core Permian Delaware, and another rig was added in Texas Oil District 7C, which corresponds to the southern Permian Midland....since the Texas Permian count has thus increased by 8 rigs while the national Permian basin rig count was up by 10 rigs, that almost certainly means that the 2 rigs that were added in New Mexico would have set up to drill in the far western Permian Delaware, to fully account for the national Permian increase...elsewhere in Texas, a rig was removed from Texas Oil District 1 while one rig was added in Texas Oil District 3, so to get to the 2 rig loss in the Eagle Ford shale we would have had to see two rigs added in one of those districts that weren't targeting the Eagle Ford, while two Eagle Ford rigs were being removed at the same time...in other states, the rig pulled out of the Williston basin had been drilling in North Dakota's Bakken, but the rig increase in northern Louisiana did not register as an increase in the Haynesville, where the other 20 rigs in that area are drilling...​among natural gas rig​ change​s, one was removed from Ohio's Utica shale and two were pulled out of Pennsylvania's Marcellus, while at the same time three natural gas rigs were added in West Virginia's Marcellus, resulting in the one rig increase in the Marcellus that you see above...the national natural gas rig count was stil down by one, however, because one of the rigs pulled from the Eagle Ford had been targeting natural gas, leaving the Eagle Ford with just 9 rigs, all targeting oil...

DUC well report for July

Monday of this past week saw the release of the EIA's Drilling Productivity Report for August, which includes the EIA's July data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....for the 3rd time in the past seventeen months, this report showed an increase in uncompleted wells nationally in July, as both the drilling of new wells and completions of drilled wells decreased by similar amounts....for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 30 wells, rising from 7,655 DUC wells in June to 7,685 DUC wells in July, which was still 8.8% fewer DUCs than the 8,429 wells that had been drilled but remained uncompleted as of the end of July of a year ago...this month's DUC ​increase occurred as 292 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down by 32 from the 324 wells that were drilled in June and the lowest number of wells drilled in any mont​h​ in the history of this report, while 262 wells were completed and brought into production by fracking, a decrease of 29 well completions from the 291 completions seen in June, and down by 80.1% from the 1,315 completions seen in July of last year, and also the lowest number of completions in one month since completions have been reported by the EIA....at the July completion rate, the 7,685 drilled but uncompleted wells left at the end of the month represents a 29.3 month backlog of wells that have been drilled but are not yet fracked, up from the 26.3 month DUC well backlog of a month ago, recogniizing that this normally indicative backlog ratio is being skewed by record low completions...

oil producing regions saw a net DUC well increase in July, while natural gas producing regions still saw a modest net DUC well decrease, even as some basins went against that overall trend....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico increased by 40, from 3,480 DUC wells at the end of June to 3,520 DUCs at the end of July, as 138 new wells were drilled into the Permian, while 98 wells in the region were being fracked....at the same time, DUC wells in the Bakken of North Dakota increased by 6, from 896 DUC wells at the end of June to 902 DUCs at the end of July, as 19 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 1 to 484, as 16 Niobrara wells were drilled in July while 15 Niobrara wells were completed... on the other hand, there was a decrease of 6 DUC wells in the Eagle Ford of south Texas, from 1,224 DUC wells at the end of June to 1,218 DUCs at the end of July, as 24 wells were drilled in the Eagle Ford during July, while 30 already drilled Eagle Ford wells were completed...similarly, DUCs in the Oklahoma Anadarko also decreased by 6, falling from 705 at the end of June to 699 DUC wells at the end of July, as 9 wells were drilled into the Anadarko basin during July, while 15 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 6 wells, from 574 DUCs at the end of June to 568 DUCs at the end of July, as 57 wells were drilled into the Marcellus and Utica shales during the month, while 63 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 294, as 29 wells were drilled into the Haynesville during July, while 28 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of July, 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 35 wells to 6,823 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 5 wells to 862 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...

global oil supplies were 3.35 million barrels per day short in July; US gasoline imports rose to a 53 week high

oil prices finished higher again this week after the EIA raised its price forecast and US oil and fuel inventories fell....after rising 2.4% to $41.22 a barrel last week on a drop in US oil inventories and fears of instability in the Mideast, the contract price of US light sweet crude for September delivery opened higher on Monday, buoyed by a rally in Asian markets, and finished with a gain of 74 cents at $41.94 a barrel on reports of progress in U.S. stimulus talks after Trump had signed executive orders to unilaterally extend parts of coronavirus relief package...oil prices continued rising early Tuesday and were up more than 2% on stimulus hopes before reversing and finishing 33 cents lower at $41.61 a barrel, as hopes dimmed for a quick stimulus passage and as coronavirus cases increased globally...but oil prices rose again Wednesday after the EIA raised its 2020 average spot price forecasts for both US and global crude prices and then rallied to end $1.06, or 2.6%, higher at $42.67 a barrel after the EIA's weekly data showed U.S. oil and product inventories had fallen across the board...but oil prices turned lower Thursday after the International Energy Agency lowered its 2020 oil demand forecast due to unprecedented virus-related travel restrictions and finished down 43 cents at $42.24 a barrel as resilience in equities markets and a weak dollar limited the slide...oil prices edged down again on Friday on worries that demand would recover from the virus impacts more slowly than expected and finished 23 cents lower at $42.01 a barrel as rising supply from OPEC overshadowed optimism over falling US crude and fuel inventories, but still finshed the week 1.9% higher as strong US economic reports provided some bright spots in the economic outlook...

natural gas prices also rose this week on continued hot weather across the continental US and on rising LNG exports...after jumping 24% to a seven month high of $2.238 per mmBTU last week as weather forecasts turned hotter and gas prices in Europe rose, the contract price of natural gas for August delivery tumbled 8.5 cents or nearly 4% on Monday on forecasts for slightly cooler temperatures than was originally forecast and a slow increase in gas production in response to higher prices...gas prices steadied on Tuesday and then rose 1.8 cents on forecasts for hotter weather through late August, a reduction in gas output, and an increase in LNG exports. but that increase was more than reversed on Wednesday when prices fell 1.9 cents to $2.152 per mmBTU as traders realized that demand for AC would decline now that the hottest part of the summer is past....but natural gas prices reversed again and rose 3.0 cents on Thursday despite a larger than normal increase in storage inventories on forecasts for the air conditioning demand to remain high over the next two weeks, a further slowdown in gas output, and an increase in LNG exports...natural gas prices then soared 17.4 cents, or 8.0%, to settle at $2.356 per mmBTU on Friday to their highest level since December on rising LNG exports and forecasts for air conditioning demand to remain high through the end of August and thus ended the week 5.3% above the the prior Friday's close...

the natural gas storage report from the EIA for the week ending August 7th indicated that the quantity of natural gas held in underground storage in the US rose by 58 billion cubic feet to 3,332 billion cubic feet by the end of the week, which left our gas supplies 608 billion cubic feet, or 22.3% greater than the 2,724 billion cubic feet that were in storage on August 7th of last year, and 443 billion cubic feet, or 15.3% above the five-year average of 2,889 billion cubic feet of natural gas that have been in storage as of the 7th of August in recent years....the 58 billion cubic feet that were added to US natural gas storage this week was more than the average 51 billion cubic feet increase that was forecast by analysts polled by S&P Global Platts, and was also more than the 51 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and it was well above the average of 44 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 7th showed that because of a decrease in our oil imports, an increase in our oil exports, and a drop in our oil production, we needed to withdraw oil from our stored supplies for a third week in a row and for the 5th time in the past ten weeks...our imports of crude oil fell by an average of 389,000 barrels per day to an average of 5,621,000 barrels per day, after rising by an average of 864,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 324,000 barrels per day to an average of 3,143,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,478,000 barrels of per day during the week ending August 7th, 713,000 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 300,000 barrels per day lower at 10,700,000 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 13,178,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 14,658,000 barrels of crude per day during the week ending August 7th, 21,000 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 965,000 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 still 515,000 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 (+515,000) 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 -609,000, that means our week over week comparisons on oil supply & demand changes are off by even more... (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 5,680,000 barrels per day last week, which was still 20.4% less than the 7,138,000 barrel per day average that we were importing over the same four-week period last year....the 965,000 barrel per day net withdrawal from our total crude inventories came as 645,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 320,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve....this week's crude oil production was reported to be 300,000 barrels per day lower at 10,700,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states fell by 300,000 barrels per day to 10,300,000 barrels per day, while Alaska's oil production was unchanged at 433,000 barrels per day....last year's US crude oil production for the week ending August 9th was rounded to 12,300,000 barrels per day, so this reporting week's rounded oil production figure was about 13.0% below that of a year ago, yet still 27.0% 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 81.0% of their capacity while using 14,658,000 barrels of crude per day during the week ending August 7th, up from 79.6% 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 twenty-eight years...hence, the 14,658,000 barrels per day of oil that were refined this week were still 15.3% fewer barrels than the 17,302,000 barrels of crude that were being processed daily during the week ending August 9th, 2019, when US refineries were operating at 94.8% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 300,000 barrels per day to 9,600,000 barrels per day during the week ending August 7th, after our refineries' gasoline output had increased by 142,000 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 5.9% less than the 10,203,000 barrels of gasoline that were being produced daily over the same week of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 120,000 barrels per day to 4,789,000 barrels per day, after our distillates output had increased by 126,000 barrels per day over the prior week... after this week's decrease in distillates output, our distillates' production was 5.7% less than the 5,077,000 barrels of distillates per day that were being produced during the week ending August 9th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 4th time in 6 weeks and for the 19th time in 28 weeks, falling by 722,000 barrels to 247,084,000 barrels during the week ending August 7th, after our gasoline supplies had increased by 419,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 266,000 barrels per day to 8,883,000 barrels per day, even as our imports of gasoline rose by 366,000 barrels per day to 1,023,000 barrels per day and as our exports of gasoline rose by 24,000 barrels per day to 794,000 barrels per day....but even after this week's inventory decrease, our gasoline supplies were 5.7% higher than last August 9th's gasoline inventories of 233,760,000 barrels, and roughly 8% above the five year average of our gasoline supplies for this time of the year...  

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels decreased for the fifteenth time in 30 weeks and for the 25th time in 45 weeks, falling by 2,322,000 barrels to 177,655,000 barrels during the week ending August 7th, after our distillates supplies had increased by 1,591,000 barrels to a 38 year high 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 162,000 barrels per day to 3,862,000 barrels per day and because our exports of distillates rose by 294,000 barrels per day to 1,407,000 barrels per day, while our imports of distillates rose by 17,000 barrels per day to 148,000 barrels per day...but even after this week's inventory decrease, our distillate supplies at the end of the week were still 31.1% above the 135,513,000 barrels of distillates that we had in storage on August 9th, 2019, and about 24% above the five year average of distillates stocks for this time of the year...

finally, with the drop in our oil imports and our oil production and the increase in our oil exports, our commercial supplies of crude oil in storage fell for the 8th time in thirty weeks and for the 16th time in the past year, decreasing by 4,512,000 barrels, from 518,596,000 barrels on July 31st to 514,084,000 barrels on August 7th....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 around 53% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the first 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 last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of August 7th were 16.7% above the 440,510,000 barrels of oil we had in commercial storage on August 9th of 2019, 24.1% more than the 414,194,000 barrels of oil that we had in storage on August 10th of 2018, and 10.2% above the 466,492,000 barrels of oil we had in commercial storage on August 11th of 2017...    

OPEC's Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC's August Oil Market Report, which covers OPEC & global oil data for July, and hence it gives us a picture of the global oil supply & demand situation during the third month of the agreement between OPEC, 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 most countries are still trying to recover from a Covid-19 induced recession 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 expect from this report during normal, more predictable periods.. 

the first table from this monthly report that we'll review is from the page numbered 50 of this month's report (pdf page 60), 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 up by 980,000 barrels per day to 23,172,000 barrels per day during July, from their revised June production total of 22,193,000 barrels per day...however that June output figure was originally reported as 22,271,000 barrels per day, which means that OPEC's June production was revised 78,000 barrels per day lower with this report, and hence July's production was, in effect, a 902,000 barrel per day increase from the previously reported OPEC production figures (for your reference, here is the table of the official June OPEC output figures as reported a month ago, before this month's revisions)...

from the above table, we can also see that production increases of 866,000 barrels per day from the Saudis, 98,000 barrels per day from the Emirates, 73,000 barrels per day from the Kuwait accounted for the June increase, even as several other OPEC producers continued to make further production cuts...the original oil producer's agreement was to severely cut production for just two months, during May and June, but that agreement was extended to include July at a meeting between OPEC and other producers on June 6th, so the big July increase in Saudi output creates the appearance that they increased production in violation of the agreement...however, what actually happened was that due to large ongoing surplus in May, the Saudis unilaterally took it on themselves to cut their production by an extra million barrels per day in June, a cut we saw in last month's OPEC report, so this month's 866,000 barrel per day Saudi production increase was simply an unwinding of most of that extra voluntary June cut...

to facilitate understanding how each of the OPEC members have been adhering to the production cut agreement that covers July, 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 from 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...

since OPEC is reporting a net 7,322,000 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 for the current cuts is OPEC's production of October 2018, and the 7,322,000 barrels per day drop in their recent production represents the output change since April 2020, 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 during the production cut agreement period, but their July production was only down by 740,000 barrels per day since April, and thus the 3,752,000 barrels per day they produced in July was 160,000 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 August 2018 to July 2020, and it comes from page 51 (pdf page 61) of the August 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 980,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global oil production increased by a rounded 1.29 million barrels per day to average 88.75 million barrels per day in July, a reported increase which apparently came after June's total global output figure was revised higher by 1,170,000 barrels per day from the 86.29 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 310,000 barrels per day in July after that revision, with oil production from Canada, Norway and other OECD oil producers accounting for a 400,000 barrels per day increase in July...even with the increase in July's global output, the 88.75 million barrels of oil per day produced globally in July were 9.96 million barrels per day, or 10.1% less than the revised 98.71 million barrels of oil per day that were being produced globally in July a year ago, the 7th month of OPECs first round of production cuts (see the August 2019 OPEC report (online pdf) for the originally reported July 2019 details)...with this month's increase in OPEC's output, their July' oil production of 23,172,000 barrels per day rose to 26.1% of what was produced globally during the month, up from their revised 25.4% share in June, but down from the 27.1% share they contributed to global output in May...OPEC's July 2019 production, which included 520,000 barrels per day from former OPEC member Ecuador, was reported at 29,609,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 6,437,000, or 21.7% fewer barrels per day of oil in July' than what they produced a year ago, when they accounted for 30.0% of global output...

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

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

OPEC is estimating that during the 3rd quarter of this year, all oil consuming regions of the globe will be using an average of 92.10 million barrels of oil per day, which is a 120,000 barrels per day downward revision from the 92.22 million barrels of oil per day they were estimating for the 3rd quarter a month ago (circled in green), still reflecting quite a bit of coronavirus related demand destruction compared to 2019, when summertime demand exceeded 100 million barrels per day....however, 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 only producing 88.75 million barrels per day during July, which would imply that there was a shortage of around 3,350,000 barrels per day in global oil production in July when compared to the demand estimated for the month... 

in addition to figuring the July shortage implied by this report, the upward revision of 1,170,000 barrels per day to June's global oil output that's implied in this report, combined with the 100,000 barrels per day downward revision to 2nd quarter demand that we've circled in green means that the 4,340,000 barrel per day global oil output surplus we had previously figured for June would now be revised to a surplus of 5,610,000 barrels per day....at the same time, the surplus of 8,290,000 barrels per day that we had previously figured for May, in light of that 100,000 barrels per day downward revision to 2nd quarter demand, would have to be revised to a surplus of 8,390,000 barrels per day...& similarly, the 17,040,000 barrels per day that we had previously figured for April would have to be revised to a surplus of 17,140,000 barrels per day... 

Note that in green we've also circled an upward revision of 260,000 barrels per day to first quarter demand....that means that the record global oil surplus of 18,048,000 barrels per day we had previously figured for March would have to be revised downward to a global oil surplus of 17,788,000 barrels per day...similarly, the 2,160,000 barrel per day global oil production surplus we had figured for February would now be a 1,900,000 barrel per day global oil output surplus, and the 1,190,000 barrel per day global oil output surplus we last had for January would now be revised to a 930,000 barrel per day oil output surplus.. so despite the shortage of oil that has developed in July, it's obvious the world's oil producers had produced a lot of oil earlier this year that no one wanted..

Finally, notice that in orange we have circled an upward revision of 20,000 barrels per day to 2019's oil demand...the last time OPEC revised their demand figures for 2019 was in March, and at that time we simply revised our aggregate oil shortage for 2019 from a total of 284,090,000 barrels to a revised total of 254,890,000 barrels for the entirely of the year...thus an upward revision of 20,000 barrels per day to 2019's oil demand would increase 2019's oil shortage by 7,300,000 barrels to 262,190,000 barrels, resulting in a shortage that was the equivalent of more than two and a half days of global oil production at the December 2019 production rate...

This Week's Rig Count

the US rig count was down for the 22nd time in 23 weeks during the week ending August 14th, and is now down by 69.3% over that twenty-three week period....Baker Hughes reported that the total count of rotary rigs running in the US fell by 3 rigs to 244 rigs this past week, which was the fewest active rigs in Baker Hughes records going back to 1940, and 160 fewer rigs than the all time low prior to this year...it was also down by 691 rigs from the 935 rigs that were in use as of the August 16th report of 2019, and 1,685 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 172 oil rigs this week, after decreasing by 4 oil rigs the prior week, leaving us with the lowest oil rig count since July 15th, 2005... that was also 598 fewer oil rigs than were running a year ago, and less than a ninth 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 1 rig to 70 natural gas rigs, which was still down by 95 natural gas rigs from the 165 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 up by one to 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 12 fewer rigs than the 25 rigs drilling in the Gulf a year ago, when all 25 Gulf rigs were drilling offshore from Louisiana...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 14 from the national offshore rig count of 27 a year ago...​also ​note that in addition to those rigs offshore, a ​platform was also set up to drill through an inland body of water in southern Louisiana this week, the first such inland water rig deployed since January; a year ago, there were no rigs drilling in inland waters..

The count of active horizontal drilling rigs was down by 4 to 207 horizontal rigs this week, which was the least horizontal rigs deployed since November 4th, 2005, and also 608 fewer horizontal rigs than the 815 horizontal rigs that were in use in the US on August 16th 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 up by one to 13 vertical rigs this week, but those were still down by 38 from the 52 vertical rigs that were operating during the same week of last year....meanwhile, the directional rig count was unchanged at 24 directional rigs this week, and those were also down by 44 from the 68 directional rigs that were in use on August 16th 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 14th, the second column shows the change in the number of working rigs between last week's count (August 7th) and this week's (August 14th) count, the third column shows last week's August 7th 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 16th of August, 2019...    

as you can see, there were again only a few changes in drilling activity this week, with just a handful of rig removals and just a few rig additions, which suggests that prices are currently high enough that drillers are no longer pushing 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 three rigs were pulled out of Texas Oil District 8, which is the core Permian Delaware, and another rig was removed from Texas Oil District 7C, which corresponds to the southern Permian Midland....since the Texas Permian count has thus decreased by 4 ​rigs ​while the national Permian basin rig count was down by 5 rigs, that almost certainly means that the rig that was removed from New Mexico would have been drilling in the western Permian Delaware, to fully account for the national Permian decrease...meanwhile, there were no changes elsewhere in Texas, and few anywhere else for that matter...we've already accounted for the two rig increase for Louisiana, with the addition of the oil rig offshore in the Gulf of Mexico, and the other oil rig addition on Louisiana inland waters, so all that's left to cover is the addition of a natural gas rig in Oklahoma's Arkoma Woodford and the removal of an oil rig from Oklahoma's Ardmore Woodford, thus bringing our oil & gas totals in line with the national count and leaving Oklahoma's rig count unchanged....

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note: there’s more here…