oil prices fell for the 3rd time in 4 weeks last week as coronavirus related demand concerns outweighed supply disruptions and falling inventories...after rising more than 10% to $41.11 a barrel last week after hurricane Sally cut output, US oil supplies fell, and the Saudis pressured their OPEC partners to cut production, the contract price of US light sweet crude for October delivery opened lower on Monday of this week as rising COVID-19 infection rates in Europe and elsewhere prompted renewed lockdown measures, casting doubt on the economic recovery, and continued to tumble to end $1.80 lower at $39.31 a barrel on expectations that crude from war torn Libya would soon return to the market...oil prices rebounded nearly 2% early Tuesday, briefly regaining $40 a barrel, as the latest tropical storm in the Gulf of Mexico lost strength, but then drifted lower to settle with a gain of 29 cents at $39.60 a barrel as oil traders "struggled to assess the uncertainty of U.S. production during the last two months of hurricane season and how bad the demand outlook will get following the winter wave of the coronavirus” as trading in the October oil contract expired...with Wednesday's market reports quoting US light sweet crude for November delivery, which had risen 26 cents to $39.80 a barrel on Tuesday after falling $1.78 on Monday, oil prices rose 13 cents to $39.93 a barrel as the EIA reported that US crude inventories had decreased, but by less than was expected while they also reported larger than expected drawdowns of gasoline and distillate supplies...oil prices then opened lower and slid nearly 2% early Thursday, as a renewed wave of COVID-19 cases in Europe led to reimposed travel restrictions in several countries, but recovered late to end 38 cens higher at $40.31 a barrel buoyed by signs of tighter supplies despite persistent concerns that rising cases of COVID-19 would lead to weaker energy demand...but mounting Covid cases in the US and globally and related demand concerns cast pall over oil markets on Friday as oil prices stuggled to stay positive, ultimately settling down 6 cents at $40.25 a barrel...oil prices thus finshed 2.1% lower this week, with the November contract price falling 2.6%, amid growing concerns that another wave of the coronavirus pandemic would spark tighter lockdown measures and further stifle crude demand....
natural gas prices, on the other hand, finished higher for the first time in 4 weeks, after crashing to a seven week low early this week...after falling 9% to $2.048 per mmBTU last week as a bigger than expected injection into storage put gas supplies on track to go into winter at a record level, the contract price of natural gas for October delivery opened nearly 3% lower on Monday and tumbled more than 10% to a seven week low of $1.835 per mmBTU on forecasts for less demand over coming weeks than was expected due to a decline in LNG exports on storm and maintenance issues....prices fell another tenth of a cent to another 7 week low on Tuesday as an expected drop in output to its lowest in two years offset a forecast decrease in LNG exports, but then rallied to rise 29.1 cents or nearly 16%, to $2.125 per mmBTU on Wednesday on storm related flooding in Texas and signs of stronger demand...natural gas prices then rose another 12.3 cents or 6% to $2.248 on Thursday on a smaller-than-expected weekly storage build, a continued decline in gas output and an increase in LNG exports, before falling 10.9 cents or 5% to $2.139 on Friday despite a drop in daily output to a 25 month low, because cash trades continued to be priced much lower than the quoted NYMEX contract price, and on forecasts for less demand over the next two weeks than was previously expected, but still finished this obviously volatile week 4.4% higher than the prior week's close...
the natural gas storage report from the EIA for the week ending September 18th indicated that the quantity of natural gas held in underground storage in the US increased by 66 billion cubic feet to 3,680 billion cubic feet by the end of the week, which left our gas supplies 504 billion cubic feet, or 15.9% greater than the 3,176 billion cubic feet that were in storage on September 18th of last year, and 407 billion cubic feet, or 12.4% above the five-year average of 3,273 billion cubic feet of natural gas that have been in storage as of the 18th of September in recent years....the 66 billion cubic feet that were added to US natural gas storage this week was somewhat lower than the forecast of a 77 billion cubic foot increase from an S&P Global Platts'' survey of analysts, and it was also much lower than the 97 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and well below the average of 80 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 September 18th showed that because of an increase in our oil exports and an decrease in our production, we needed to withdraw oil from our stored supplies for the 8th time out of the past nine weeks and for the 13th time in thirty-six weeks...our imports of crude oil rose by an average of 160,000 barrels per day to an average of 5,168,000 barrels per day, after falling by an average of 416,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 427,000 barrels per day to an average of 3,022,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,146,000 barrels of per day during the week ending September 18th, 267,000 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 200,000 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 12,846,000 barrels per day during this reporting week...
meanwhile, US oil refineries reported they were processing 13,370,000 barrels of crude per day during the week ending September 18th, 119,000 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 total of 346,000 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 178,000 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 (+178,000) 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 there must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...since last week's fudge factor was -755,000, indicating a week over week difference of 933,000 barrels per day in the line 13 balance sheet adjustment, we have to figure that our week over week comparisons of crude oil supply and demand are off by that much...but since most everyone treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them as published, just as they're watched & believed to be accurate by most everyone in the industry... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,125,000 barrels per day last week, which was 24.2% less than the 6,764,000 barrel per day average that we were importing over the same four-week period last year....the 346,000 barrel per day net withdrawal from our total crude inventories was as 234,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 112,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is now being leased for commercial use, and hence the recent SPR additions and withdrawals should really be included in our commercial supplies....this week's crude oil production was reported to be 200,000 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 100,000 barrels per day to 10,300,000 barrels per day, while Alaska's oil production fell by 53,000 barrrels per day to 408,000 barrels per day and subtracted another 100,000 barrels per day from the rounded national total (EIA's math)....last year's US crude oil production for the week ending September 20th was rounded to 12,500,000 barrels per day, so this reporting week's rounded oil production figure was 14.4% 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 74.8% of their capacity while using 13,370,000 barrels of crude per day during the week ending September 18th, down from 75.8% of capacity during the prior week, and excluding the 2005 and 2008 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the last thirty years...hence, the 13,370,000 barrels per day of oil that were refined this week were 19.0% fewer barrels than the 16,513,000 barrels of crude that were being processed daily during the week ending September 20th of last year, when US refineries were operating at 89.8% of capacity....
even with the decrease in the amount of oil being refined, gasoline output from our refineries was much higher, increasing by 496,000 barrels per day to 9,315,000 barrels per day during the week ending September 18th, after our refineries' gasoline output had decreased by 111,000 barrels per day over the prior week (when refinery throughput had increased by 709,000 barrels per day)... since our gasoline production is still recovering from a multi-year low in the wake of this Spring's covid lockdown, this week's gasoline output was 9.0% less than the 10,240,000 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 67,000 barrels per day to 4,470,000 barrels per day, after our distillates output had increased by 5,000 barrels per day to 4,398,000 barrels per day over the prior week...but even after this week's increase in distillates output, our distillates' production was still 10.6% less than the 4,470,000 barrels of distillates per day that were being produced during the week ending September 20th, 2019....
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 10th time in 12 weeks and for the 25th time in 34 weeks, falling by 4,025,000 barrels to 231,524,000 barrels during the week ending September 18th, after our gasoline supplies had decreased by 381,000 barrels over the prior week...our gasoline supplies decreased by more this week because the amount of gasoline supplied to US markets increased by 37,000 barrels per day to 8,515,000 barrels per day and because our imports of gasoline fell by 126,000 barrels per day to 474,000 barrels per day and because our exports of gasoline rose by 240,000 barrels per day to 746,000 barrels per day....after the big gasoline inventory drawdowns of recent weeks, our gasoline supplies were 1.2% lower than last September 20th's gasoline inventories of 230,204,000 barrels, but still roughly 1% above the five year average of our gasoline supplies for this time of the year...
meanwhile, with our distillates production still near a three year low, our supplies of distillate fuels decreased for the 7th time in 25 weeks and for the 28th time in 50 weeks, falling by 3,364,000 barrels to 175,942,000 barrels during the week ending September 18th, after our distillates supplies had increased by 1,675,000 barrels during 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 1,150,000 barrels per day to 6 month high of 3,959,000 barrels per day, even as our exports of distillates fell by 84,000 barrels per day to 1,128,000 barrels per day, while our imports of distillates rose by 24,000 barrels per day to 136,000 barrels per day...even after this week's inventory decrease, our distillate supplies at the end of the week were still 31.6% above the 133,685,000 barrels of distillates that we had in storage on September 20th, 2019, and about 21% above the five year average of distillates stocks for this time of the year...
finally, with the increase in our oil exports and the decrease in our oil production, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) fell for the 10th time in the past sixteeen weeks and for the 17th time in the past year, decreasing by 1,639,000 barrels, from 496,045,000 barrels on September 11th to 494,406,000 barrels on September 18th...but even after that decrease, our commercial crude oil inventories were still around 13% above the five-year average of crude oil supplies for this time of year, and 49.9% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the third weekend of September, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories have generally been rising over the past two years, except for during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of September 18th were 17.8% above the 419,538,000 barrels of oil we had in commercial storage on September 20th of 2019, 24.9% more than the 395,989,000 barrels of oil that we had in storage on September 21st of 2018, and 4.6% above the 472,832,000 barrels of oil we had in commercial storage on September 15th of 2017...
This Week's Rig Count
the US rig count rose for the 3rd time in the past 4 weeks during the week ending September 25th, but for just the 4th time in 29 weeks, and hence it is still down by 67.1% over that twenty-nine week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 6 to 261 rigs this past week, which was still down by 599 rigs from the 860 rigs that were in use as of the September 27th report of 2019, and was also 143 fewer rigs than the all time low prior to this year, and 1,668 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 4 rigs to 183 oil rigs this week, after decreasing by 1 oil rig the prior week, leaving us with 540 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 two to 75 natural gas rigs, which was still down by 71 natural gas rigs from the 146 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Sonoma County, California, and one in the Permian basin in Eddy County, New Mexico...a year ago, there only one such "miscellaneous" rig deployed...
The Gulf of Mexico rig count remained unchanged at 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and two drilling for oil offshore from Texas...that was 8 fewer Gulf rigs than the 22 rigs drilling in the Gulf a year ago, when all 22 Gulf rigs were drilling offshore from Louisiana...while there are no rigs operating off of 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 10 from the national offshore rig count of 24 a year ago...also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling on inland waters..
The count of active horizontal drilling rigs was up by 9 to 224 horizontal rigs this week, which was still 528 fewer horizontal rigs than the 752 horizontal rigs that were in use in the US on September 27th 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 2 to 21 directional rigs this week, and those were also down by 36 from the 57 directional rigs that were operating during the same week of last year....at the same time, the vertical rig count fell by 1 to 16 vertical rigs this week, and those were also down by 35 from the 51 vertical rigs that were in use on September 27th 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 September 25th, the second column shows the change in the number of working rigs between last week's count (September 18th) and this week's (September 25th) count, the third column shows last week's September 18th 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 27th of September, 2019...
as you can see from those tables, most of this week's changes were concentrated in the basins around Texas...checking the rig counts in the Texas part of Permian basin, we find that 3 rigs were added in Texas Oil District 8, which is largely the core Permian Delaware, and two more rigs were added in Texas Oil District 8A, which corresponds to the northern Permian Midland, while 1 rig was pulled out of Texas Oil District 7C, which roughly aligns with the southern part of the Permian Midland, thus leaving the rig count in the Texas Permian up by four...since the national Permian basin rig count was up by two, that means that the two rigs that were pulled out of New Mexico must have been drilling in the far western Permian Delaware, in order to balance the national rig count on that basin...elsewhere in Texas, one rig was added in Texas Oil District 1, one rig was pulled out of Texas Oil District 2, and three rigs were added in Texas Oil District 4, which together account for the 3 rig increase in the Eagle Ford, a formation which stretches in a relatively narrow band across 4 Texas Oil Districts in the southeastern part of the state....one of those Eagle Ford rig additions was targetting natural gas, as were the rig addtions in Ohio's Utica and Pennsylvania's Marcellus, while at the same time a vertical natural gas rig was pulled out of a moderately shallow well in Kanawha county, West Virginia, which had not been targetting the Marcellus...
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Note: there's more here...
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