Masters Of War

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

Monday, October 26, 2020

natural gas prices hit 20 month high*; distillates' production ​at a 3 year low; ​well completions (fracking) unchanged despite rising rig counts

*as widely quoted, on a front month contract​ ​basis...contract prices for December, January and February natural gas are and have been higher than the front month price over the period cited....

oil prices finished lower for the first week in three on rising fuel inventories and the prospect for new coronavirs related lockdowns...after inching up 0.7% to $40.88 a barrel last week on bullish economic reports and the success of OPEC's supply cuts, the contract price of US light sweet crude for November delivery opened lower on Monday on disappointing economic data from China, but steadied to finish down just 5 cents at $40.83 a barrel supported by hopes for a U.S. fiscal package as OPEC+ members stressed compliance to their output cuts...oil prices started lower on Tuesday, as oil traders struggled to interpret the result of the previous day’s OPEC+ meeting, but rallied midday to finish 63 cents higher at $41.46 a barrel on the prospect that Congress was nearing a deal on coronavirus relief as trading in the November contract expired... subsequently, the contract price of US light sweet crude for December delivery, which had risen 64 cents to $41.70 a barrel on Tuesday, was hit in after hours trading after the American Petroleum Institute reported a surprise build of US crude inventories and hence opened more than 1% lower on Wednesday, and then accelerated their decline after the EIA reported that gasoline inventories rose by the most since May, while gasoline consumption slid to the lowest since late September and ended down $1.67, or 4%, at $40.03 a barrel, as rising cases of Covid-19 in the U.S. and Europe led to the prospect for more economic shutdowns...oil prices struggled to recover from the news on gasoline Thursday, but managed to post a gain of 61 cents at $40.64 a barrel after Nancy Pelosi said the two sides were nearing agreement on an economic stimulus package, boosting expectations that demand might improve...oil prices held those gains early Friday after Putin indicated Russia would be prepared to extend supply cuts in the face of the COVID-19 pandemic, but then sank after Libya’s National Oil Corp said it would restore exports from key ports and that crude output would reach 1 million barrels per day within four weeks, and finished down 79 cents at $39.85 a barrel...that left the US benchmark price down 2.5% on the week as talks appeared to stall on a stimulus deal before the election, while the price of the December crude contract finished 3.1% lower than the prior week...

natural gas prices, on the other hand, finish higher for the third straight week on​ falling gas production and on​ rising exports...after rising 1.2% to $2.773 per mmBTU last week on an unseasonably small addition to inventories, the contract price of natural gas for November delivery opened more than 4% lower Monday on a jump in gas production amid further uncertainty surrounding the pace of LNG exports recovery, but recovered to finish 2.2 cents higher as traders focused more on rising LNG exports and colder weather coming next week than the increase in output.....natural gas prices then jumped over 4% on Tuesday on rising LNG exports from Sabine Pass and on forecasts for colder weather and more heating demand over the next two weeks than was previously forecast, with the November gas contract rising 11.8 cents, or 4.2%, to settle at $2.913 per mmBTU, the highest close for a front month contract since January 2019...prices were then up another 11 cents to another 20 month high on Wednesday, after a report showed October's natural gas production to be the lowest since September 2018 and on track to drop for a fourth month in a row for the first time since June 2016...however, the​ ​gas price rally lost steam on Thursday and prices fell 1.6 cents, even though the EIA reported a slightly smaller than expected weekly storage build, because LNG exports kept rising, and then fell another 3.6 cents to ​$​2.971 per mmBTU on Friday on forecasts for lower demand in November as gas price increases were causing electric power generators to burn cheaper coal...nonethess, November natural gas prices still ended up 7.1% on the week and will likely be reported higher next week when reports will reference the contract price of natural gas for December delivery, which fell 2.3% this week but still closed at 22.4 cents higher than November gas at $3.195 per mmBTU..

the natural gas storage report from the EIA for the week ending October 16th indicated that the quantity of natural gas held in underground storage in the US increased by 49 billion cubic feet to 3,926 billion cubic feet by the end of the week, which left our gas supplies 345 billion cubic feet, or 9.6% greater than the 3,581 billion cubic feet that were in storage on October 16th of last year, and 353 billion cubic feet, or 9.1% above the five-year average of 3,599 billion cubic feet of natural gas that have been in storage as of the 16th of October in recent years....the 49 billion cubic feet that were added to US natural gas storage this week was a bit less than the forecast for a 51 billion cubic foot increase from an S&P Global Platts' survey of analysts, and it was also below the average of 75  billion cubic feet of natural gas that are typically added to natural gas storage during the same week over the past 5 years, and it was much lower than the 92 billion cubic feet that was added to natural gas storage during the corresponding week of 2019...  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 16th showed that due to a big increase in our oil exports and a decrease in our oil production, we needed to withdraw oil from our stored commercial supplies for the 11th time in the past thirteen weeks and for the 16th time in forty weeks...our imports of crude oil fell by an average of 167,000 barrels per day to an average of 5,118,000 barrels per day, after falling by an average of 447,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 901,000 barrels per day to an average of 3,036,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,082,000 barrels of per day during the week ending October 16th, 1,086,000 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 600,000 barrels per day lower at 9,900,000 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 11,982,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,026,000 barrels of crude per day during the week ending October 16th, 551,000 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 total of 252,000 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 791,000 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 (+791,000) 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 that there must have been an error or errors of that magnitude in the oil supply & demand figures we have just transcribed....moreover, since last week's fudge factor was -785,000 barrels per day, indicating a week over week difference of 1,576,000 barrels per day in the line 13 balance sheet adjustment, the difference between those errors means any week over week comparisons of oil supply and demand figures reported here are complete nonsense...however, since most everyone treats these weekly EIA figures as gospel and since these numbers 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, in what is clearly a case where a common delusion has become reality...(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 5,315,000 barrels per day last week, which was 13.8% less than the 6,167,000 barrel per day average that we were importing over the same four-week period last year....the 252,000 barrel per day net withdrawal from our total crude inventories included 143,000 barrels per day that were withdrawn from our commercially available stocks of crude oil and 109,000 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 600,000 barrels per day lower at 9,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states fell by 600,000 barrels per day to 9,400,000 barrels per day, while a 14,000 barrels per day increase to 464,000 barrels per day in Alaska's oil production still added 500,000 more barrels per day to the rounded national total...last year's US crude oil production for the week ending October 18th was rounded to 12,600,000 barrels per day, so this reporting week's rounded oil production figure was 21.4% below that of a year ago, yet still 17.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 72.9% of their capacity while using 13,026,000 barrels of crude per day during the week ending October 16th, down from 75.1% 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 ​past thirty years...hence, the 13,026,000 barrels per day of oil that were refined this week were 17.9% fewer barrels than the 15,865,000 barrels of crude that were being processed daily during the week ending October 18th of last year, when US refineries were operating at 85.2% of capacity...

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 307,000 barrels per day to 8,933,000 barrels per day during the week ending October 16th, after our refineries' gasoline output had decreased by 282,000 barrels per day over the prior week...and 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 11.5% less than the 10,098 ,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 138,000 barrels per day to a three year low of 4,131,000 barrels per day, after our distillates output had decreased by 263,000 barrels per day from the prior three year low over the prior week...after this week's decrease, our distillates' production was 13.3% less than the 4,765,000 barrels of distillates per day that were being produced during the week ending October 18th, 2019...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 4th time in 16 weeks and for the 11th time in 38 weeks, rising by 1,895,000 barrels to 227,016,000 barrels during the week ending October 16th, after our gasoline supplies had decreased by 1,626,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by 287,000 barrels per day to  ​8,289,000 barrels per day, and because our imports of gasoline rose by 111,000 barrels per day to 509,000 barrels per day while our exports of gasoline fell by 26,000 barrels per day to 699,000 barrels per day...so despite the gasoline inventory drawdowns of recent weeks, our gasoline supplies were 1.8% higher than last October 18th's gasoline inventories of 226,201,000 barrels, and about 2% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with our distillates production at another three year low, our supplies of distillate fuels decreased for the 11th time in 29 weeks and for the 30th time in 52 weeks, falling by 3,832,000 barrels to 160,719,000 barrels during the week ending October 16th, after our distillates supplies had decreased by 7,245,000 barrels during the prior week....our distillates supplies fell this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 587,000 barrels per day to 3,588,000 barrels per day, as our exports of distillates fell by 46,000 barrels per day to 1,243,000 barrels per day, while our imports of distillates fell by 8,000 barrels per day to 152,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 33.1% above the 120,786,000 barrels of distillates that we had in storage on October 18th, 2019, and about 19% above the five year average of distillates stocks for this time of the year...

finally, with the big increases in our oil exports and the drop in our oil production, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) fell for the 12th time in the past nineteen weeks and for the 18th time in the past year, decreasing by 1,002,000 barrels, from 489,109,000 barrels on October 9th to 488,107,000 barrels on October 16th ...but even after th​e decrease​s of recent weeks​, our commercial crude oil inventories were around 10% above the five-year average of crude oil supplies for this time of year, and about 43.4% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the third weekend of October, 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 had generally been rising over the past two years, except for recently and 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 October 16th were 12.7% above the 433,151,000 barrels of oil we had in commercial storage on October 18th of 2019, 15.4% more than the 422,787,000 barrels of oil that we had in storage on October 19th of 2018, and 6.7% above the 457,341,000 barrels of oil we had in commercial storage on October 20th of 2017...  

This Week's Rig Count

the US rig count rose for the 6th week in a row during the week ending October 23rd, but for just the 8th time in the past 33 weeks, and hence it is still down by 63.9% over that thirty-three week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 5 to 287 rigs this past week, which was still down by 543 rigs from the 830  rigs that were in use as of the October 25th report of 2019, and was also 117 fewer rigs than the all time low prior to this year, and 1,642 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 6 rigs to 211 oil rigs this week, after increasing by 12 oil rigs the prior week, still leaving us with 485  fewer oil rigs than were running a year ago, and less than a seventh 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 one to 73 natural gas rigs, which was also down by 60 natural gas rigs from the 133 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 fell by 1 ro 13 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 7 fewer Gulf rigs than the 20 rigs drilling in the Gulf a year ago, when all 20 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 was also a rig deployed offshore from Alaska, so this week's national offshore count is down by 8 from the national offshore rig count of 21 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 two rigs drilling on southern Louisiana inland waters..

The count of active horizontal drilling rigs was up by 5 to 245 horizontal rigs this week, which was still 483 fewer horizontal rigs than the 728  horizontal rigs that were in use in the US on October 25th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the vertical rig count was was unchanged at 21 vertical rigs this week, while those were down by 30 from the 51 vertical rigs that were operating during the same week of last year....at the same time, the directional rig count was also unchanged at 21 directional rigs this week, and those were also down by 30 from the 51 directional rigs that were in use on October 25th 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 October 23rd, the second column shows the change in the number of working rigs between last week's count (October 16th) and this week's (October 23rd) count, the third column shows last week's October 16th 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 25th of October, 2019...    

October 23 2020 rig count summary

the first thing we notice about those tables is that neither accounts for 5 rig increase nationally that we reported earlier...that's because rigs were added this week in basins that aren't tracked by Baker Hughes​,​ in two states that have seen little ​drilling ​activity lately: Alabama and Mississippi...the Alabama rig addition was a directional rig targeting oil in Conecum county and was the first in the state since April 9th, while the Mississippi rig is vertical in Jasper county, also targeting oil, & the first in the state since July 24th, but ​still down from the 2 rigs deployed in Mississippi a year ago...meanwhile, the increase in Permian basin was all in Texas, as one rig was added to Texas Oil District 8, which roughly aligns with the Permian Delaware, another rig was added in Texas Oil District 8A, which corresponds to the northern Permian Midland, and another rig was added in Texas Oil District 7C, which corresponds to the southern Permian Midland...however, the Texas rig count was only up by 2 because the vertical Gulf of Mexico rig that was shut down had been drilling in Texas waters...the rig that was pulled out of Louisiana was directional and the only land-based rig that had been drilling in the southern part of the state; all other land based rigs in Louisiana are in the Haynesville shale in the northwest corner of the state...elsewhere, we had an oil rig added in Oklahoma that is targetting a basin that isn't one of the five basins in the state that are tracked by Baker Hughes, and another horizontal rig set up to drill fo oil on the Kenai Penisula in Alaska, where there already is a natural gas rig deployed....meanwhile, the natural gas rig that was removed this week came out of the Eagle Ford, which doesn't show up in the Texas Oil District data or on the basin table above because an oil rig was added in the same district at the same time...

DUC well report for September

Last week we neglected to cover the release of the EIA's Drilling Productivity Report for October, which includes the EIA's September data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....that report showed a decrease in uncompleted wells nationally for the 15th time in the past nineteen months in September, as completions of drilled wells were unchanged while drilling of new wells increased....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 77 wells, falling from 7,669 DUC wells in August to 7,592 DUC wells in September, which was also 7.8% fewer DUCs than the 8,237 wells that had been drilled but remained uncompleted as of the end of September of a year ago...this month's DUC​ ​decrease occurred as 295 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during September, up from the 292 wells that were drilled in August, while 372 wells were completed and brought into production by fracking, the same number of completions seen in August, and down by 71.8% from the 1,308 completions seen in September of last year....at the September completion rate, the 7,592 drilled but uncompleted wells left at the end of the month represents a 20.4 month backlog of wells that have been drilled but are not yet fracked, down from the 20.7 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by near record low completions...

both oil producing regions and natural gas producing regions saw DUC well decreases in September, even as one natural gas basin saw a small DUC increase...the number of uncompleted wells remaining in the Oklahoma Anadarko decreased by 23, falling from 704 at the end of August to 681 DUC wells at the end of September, as just 12 wells were drilled into the Anadarko basin during September, while 35 Anadarko wells were being fracked....at the same time, DUCs in the Permian basin of west Texas and New Mexico decreased by 21, from 3,546 DUC wells at the end of August to 3,525 DUCs at the end of September, as 134 new wells were drilled into the Permian, while 155 wells in the region were completed...there was also a decrease of 15 DUC wells in the Eagle Ford of south Texas, from 1,181 DUC wells at the end of August to 1,166 DUCs at the end of September, as 15 wells were drilled in the Eagle Ford during September, while 30 already drilled Eagle Ford wells were completed... in addition, DUC wells in the Bakken of North Dakota decreased by 11, from 881 DUC wells at the end of August to 870 DUCs at the end of September, as 18 wells were drilled into the Bakken in September, while 29 of the drilled wells in that basin were being fracked... meanwhile, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range was unchanged at 454, as 20 new Niobrara wells were drilled in September while 20 drilled Niobrara wells were being fracked...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 11 wells, from 586 DUCs at the end of August to 575 DUCs at the end of September, as 60 wells were drilled into the Marcellus and Utica shales during the month, while 71 of the already drilled wells in the region were fracked....on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 4 to 321, as 36 wells were drilled into the Haynesville during September, while 32 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of September, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 70 wells to 6,696 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 7 wells to 896 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there's more here...

Sunday, October 18, 2020

smallest early October natural gas inventory build​ in 13 years; largest distillates inventory draw in 17 years, etal

smallest early October addition to natural gas inventories​ in 13 years; distillates production at a 3 year low leads to largest inventory draw in 17 years; September OPEC report shows all members in compliance, inconsequential ​global ​oil shortfall..

oil prices finished fractionally higher this week, as bullish economic reports and the success of OPEC's supply cuts were tempered by surging coronavirus infections​ worldwide​...after rising more than 9% to $40.60 a barrel last week as Hurricane Delta shut down a near record 92% of US Gulf production, the contract price of US light sweet crude for November delivery opened the week lower and slid to a 4% loss on Monday as production resumed at Libya’s largest oilfield and the​ strike affecting Norwegian production came to an end, and ended the day $1.17 lower at $39.43 a barrel as U.S. producers began restoring Gulf output after Hurricane Delta...but oil prices partly recovered from that drop to rise 77 cents to $40.20 a barrel on Tuesday, supported by robust economic data and increased demand from China that offset returning supply from elsewhere...the price rally continued on Wednesday as the monthly OPEC report showed that OPEC and its allies were complying with a pact to cut oil supply in September and then held above $41 after the API reported large withdrawals of crude and oil products from inventories, with the benchmark US crude settling ​with a gain of 84 cents at $41.04 a barrel...oil then traded 2% lower early Thursday as new lockdowns following a surge in COVID-19 infections in Europe ​dimmed the outlook for fuel demand, but mostly recovered ​from that dip ​to end just 8 cents lower at $40.96 a barrel, buoyed by EIA data showing a bigger-than-expected weekly decline in domestic crude inventories and the largest draw on distillates supplies in 17 years...prices slipped again on Friday on concerns that a spike in Covid-19 cases in Europe and the US was curtailing demand in the world's biggest fuel consuming regions and ​again ​finished down 8 cents at $40.88 a barrel, but still finished 0.7% higher for the week, partly due to assurances from OPEC+ that it remains committed to production cuts...

natural gas prices also finished slightly higher this week, after the EIA reported the smallest early October addition to gas inventories ​since 2007...after rising 12.4% to $2.741 per mmBTU last week as natural gas exports rose while Hurricane Delta shut in ​62% of ​Gulf production, the contract price of natural gas for November delivery opened nearly 6% higher on Monday and surged to $2.955 per mmBTU, as gas flowing to LNG export plants jumped while natural gas output was falling to a 27 month low, before pulling back and settling with a gain of 14.0 cents at $2.881 per mmBTU....but natural gas prices headed lower Tuesday as the morning weather models shifted to warmer, sending the November contract down 2.6 cents to $2.855 per mmBTU....​then ​prices opened lower and tumbed to a loss of 21.9 cents, or nearly 8%, on Wednesday as gas production increased while a major data provider lowered the forecast for demand, but then turned around and rose 13.9 cents to $2.775 per mmBTU on Thursday a​fter the EIA reported a smaller addition to storage than traders had expected and the weather forecast flipped back to colder...prices then sputtered on Friday as US and European weather models conflicted​,​ and traders tried to ​tell whether LNG and weather demand would be enough to avoid a toppling of storage inventories by the end of October, with the November contract closing down two-tenths of a cent at $2.773 per mmBTU, but still 1.2% higher on the week..

the natural gas storage report from the EIA for the week ending October 9th indicated that the quantity of natural gas held in underground storage in the US increased by 46 billion cubic feet to 3,877 billion cubic feet by the end of the week, which left our gas supplies 388 billion cubic feet, or 11.1% greater than the 3,489 billion cubic feet that were in storage on October 9th of last year, and 353 billion cubic feet, or 10.0% above the five-year average of 3,524 billion cubic feet of natural gas that have been in storage as of the 9th of October in recent years....the 46 billion cubic feet that were added to US natural gas storage this week was less than the forecast for a 50 billion cubic foot increase from an S&P Global Platts' survey of analysts, and it was far below the average of 87 billion cubic feet of natural gas that are typically added to natural gas storage during the same week over the past 5 years, and it was less than half of the 102 billion cubic feet that was added to natural gas storage during the corresponding week of 2019... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 9th showed that due to a decrease in our oil imports and a decrease in our oil production, we needed to withdraw oil from our stored commercial supplies for the 10th time in the past twleve weeks and for the 15th time in thirty-nine weeks...our imports of crude oil fell by an average of 447,000 barrels per day to an average of 5,286,000 barrels per day, after rising by an average of 610,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 524,000 barrels per day to an average of 2,135,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,151,000 barrels of per day during the week ending October 9th, 77,000 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 500,000 barrels per day lower at 10,500,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,651,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,577,000 barrels of crude per day during the week ending October 9th, 277,000 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 total of 711,000 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 785,000 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 (-785,000) 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 that there must ​have been an error or errors of that magnitude in the oil supply & demand figures we have just transcribed....however, since most everyone treats these weekly EIA figures as gospel and since these numbers 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, ​in what is ​clearly a case where a common delusion has become reality...(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 5,327,000 barrels per day last week, which was still 15.4% less than the 6,297,000 barrel per day average that we were importing over the same four-week period last year....the 711,000 barrel per day net withdrawal from our total crude inventories included 545,000 barrels per day that were withdrawn from our commercially available stocks of crude oil and 166,000 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 500,000 barrels per day lower at 10,500,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states fell by 500,000 barrels per day to 10,000,000 barrels per day, while a 9,000 barrels per day increase to 450,000 barrels per day in Alaska's oil production still added 500,000 more barrels per day to the rounded national total...last year's US crude oil production for the week ending October 11th was rounded to 12,600,000 barrels per day, so this reporting week's rounded oil production figure was 16.7% below that of a year ago, yet still 24.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 75.1% of their capacity while using 13,577,000 barrels of crude per day during the week ending October 9th, down from 77.1% 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 13,577,000 barrels per day of oil that were refined this week were 12.0% fewer barrels than the 15,436,000 barrels of crude that were being processed daily during the week ending October 11th of last year, when US refineries were operating at ​what was then ​a two year low of 83.1% of capacity...

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 282,000 barrels per day to 9,240,000 barrels per day during the week ending October 9th, after our refineries' gasoline output had increased by 630,000 barrels per day over the prior week...and 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 7.6% less than the 9,998,000 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 263,000 barrels per day to a three year low of 4,269,000 barrels per day, after our distillates output had increased by 174,000 barrels per day from the prior three year low over the prior week...after this week's decrease, our distillates' production was 8.9% less than the 4,688,000 barrels of distillates per day that were being produced during the week ending October 11th, 2019, ​which was ​the distillates' production​ ​low for that year....

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 12th time in 15 weeks and for the 27th time in 37 weeks, falling by 1,626,000 barrels to 226,747,000 barrels during the week ending October 9th, after our gasoline supplies had decreased by 1,435,000 barrels over the prior week...our gasoline supplies decreased this week even though the amount of gasoline supplied to US markets decreased by 320,000 barrels per day to 8,576,000 barrels per day, because our imports of gasoline fell by 451,000 barrels per day to 398,000 barrels per day while our exports of gasoline fell by 178,000 barrels per day to 725,000 barrels per day...after the gasoline inventory drawdowns of recent weeks, our gasoline supplies were 1.0% lower than last October 11th's gasoline inventories of 226,201,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with our distillates production at another three year low, our supplies of distillate fuels decreased for the 10th time in 28 weeks and for the 30th time in 52 weeks, falling by ​a 17 year high of ​7,245,000 barrels to 164,551,000 barrels during the week ending October 9th, after our distillates supplies had decreased by 962,000 barrels during the prior week....our distillates supplies fell by ​that much this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 307,000 barrels per day to 4,175,000 barrels per day, and because our exports of distillates rose by 258,000 barrels per day to 1,289,000 barrels per day, and because our imports of distillates fell by 70,000 barrels per day to 160,000 barrels per day....but even after this week's big inventory decrease, our distillate supplies at the end of the week were still 33.2% above the 123,501,000 barrels of distillates that we had in storage on October 11th, 2019, and about 19% above the five year average of distillates stocks for this time of the year...

finally, with the ​big ​decreases in both our oil imports​ and​ in our oil production, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) fell for the 11th time in the past eightteen weeks and for the 18th time in the past year, decreasing by 3,838,000 barrels, from 492,927,000 barrels on October 2nd to 489,109,000 barrels on October 9th...​but ​even after that decrease, our commercial crude oil inventories were around 11% above the five-year average of crude oil supplies for this time of year, and about 48% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the​ second weekend of October, 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 October 9th were 12.5% above the 434,850,000 barrels of oil we had in commercial storage on October 11th of 2019, 17.5% more than the 416,441,000 barrels of oil that we had in storage on October 12th of 2018, and 7.1% above the 456,485,000 barrels of oil we had in commercial storage on October 13th of 2017... 

OPEC's Monthly Oil Market Report

Tuesday of this past week saw the release of OPEC's October Oil Market Report, which covers OPEC & global oil data for September, and hence it gives us a picture of the global oil supply & demand situation in the second month of the extended agreement between OPEC, the Russians, and other oil producers to cut production by 7.7 million barrels a day cut, reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July... understand 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 estimates 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 stable​ and hence​ 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...

September 2020 OPEC crude output via secondary sources

as we can see from the above table of their oil production data, OPEC's oil output was down by 47,000 barrels per day to 24,106,000 barrels per day during September, from their revised August production total of 24,153,000 barrels per day...however that August output figure was originally reported as 24,045,000 barrels per day, which means that OPEC's August production was revised 108,000 barrels per day higher with this report, and hence September's production was, in effect, a rounded 61,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official August OPEC output figures as reported a month ago, before this month's revisions)...

from the above table, we can also see that the production cut of 239,000 barrels per day by the Emirates was responsible for OPEC's September output decrease, as most other OPEC members actually posted small​, but​ inconsequential production increases....recall that the original oil producer's agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline 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....then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day in August and subsequent months, which is thus the agreement that covers this month's report...however, since Iraq hadn't been in compliance with the original cuts during May, June and July, and since the Emirates had overproduced in August, the Saudis and other producers pressured them into committing to make “compensation cuts” over August and September to make up for their overproduction in previous months, which is what accounts for the Emirates' deeper cut we see above....

since there does not seem to be a table or listing available of how much each OPEC member was expected to produce under the eased production cuts of August and subsequent months, we're including below the 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 during May, June, and July....

April 13th 2020 OPEC   emergency cuts

the above table shows the oil production baseline in thousands of barrel per day from which each of the oil producers was to cut from in the first column, a figure which is based on each of the producer's October 2018 output, ie., a date before the past year's and this year's output cuts took effect; the second column shows how much each participant had originally committed to cut in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant had agreed to after that cut...the producer's agreement for August​, September​ and subsequent months amends the above such that each member would be allowed to increase their production cut level shown above (ie, the "voluntary adjustment" shown above) by 20%...for example, Algeria's "cut" was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period...under the agreement for August​ and the following months​, Algeria would reduce their "cut" by 20%​, or​ to 193,000 barrels per day, allowing them to produce 864,000 barrels per day during September...offhand, ​by comparing this table's allocation +20% to the initial OPEC production table above, ​it does not appear that any of the OPEC members has exceeded their production quota for September, at least not by a​ny​ consequential amount...note that sanctioned OPEC members Iran and Venezuela and war-torn Libya are exempt from these cuts...

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 October 2018 to September 2020, and it comes from page 51 (pdf page 61) of the October OPEC Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly 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.... 

September 2020 OPEC report global oil supply

after the reported 47,000 barrel per day decrease in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global oil production decreased by a rounded 0.06 million barrels per day to average 90.71 million barrels per day in September, a reported decrease which apparently came after August's total global output figure was revised up by 890,000 barrels per day from the 89.88 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 10,000 barrels per day in September after that revision, with oil production decreases by Brazil and Kazakhstan more than offseting increases by other non-OPEC producers in September...after that decrease in September's global output, the 90.71 million barrels of oil per day that were produced globally in September were 7.83 million barrels per day, or 7.9% less than the revised 98.54 million barrels of oil per day that were being produced globally in September a year ago, the 9th month of OPECs first round of production cuts (see the October 2019 OPEC report (online pdf) for the originally reported September 2019 details)...with this month's decrease in OPEC's output, their September oil production of 24,106,000 barrels per day was at 26.6% of what was produced globally during the month, unchanged ​from August ​but up from their revised 26.3% share in July....OPEC's September 2019 production, which included 547,000 barrels per day from former OPEC member Ecuador, was reported at 28,491,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,838,000, or 13.5% fewer barrels per day of oil in September than what they produced a year ago, when they accounted for 29.3% of global output... 

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

September 2020 OPEC report global oil demand

the above table came from page 25 of the September 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 September, which is their estimate of global oil demand during the third quarter of 2020...

OPEC ​is estimat​ing that during the 3rd quarter of this year, all oil consuming regions of the globe have used an average of 90.99 million barrels of oil per day, which is a 460,000 barrels per day downward revision from the 91.45 million barrels of oil per day they were estimating for the 3rd quarter a month ago (​note ​revisions are encircled in green), reflecting quite a bit of coronavirus related demand destruction compared to 2019, when summertime global demand exceeded 100 million barrels per day....but 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 producing ​just ​90.71 million barrels million barrels per day during September, which would imply that there was a shortage of around 280,000 barrels per day in global oil production in September when compared to the demand estimated for the month, a ​shortfall that is really inconsequential in the larger scheme of global supply... 

in addition to figuring the September oil shortage that's evident in this report, the upward revision of 890,000 barrels per day to August's global oil output that's implied in this report, partly offset by the 460,000 barrels per day downward revision to 3rd quarter demand that we've circled in green, means that the 1,570,000  barrels per day global oil output shortage we had previously figured for August would now be revised to a shortage of 1,140,000 barrels per day.... similarly,  the 2,890,000 barrels per day global oil output shortage we had previously figured for July, after adjusting for the downward revision in demand, would need to be revised to a global oil shortage of 2,430,000 barrels per day.... 

Note that in green we've also circled an upward revision of 920,000 barrels per day to second quarter demand, a quarter when there was a large excess of oil production due to coronavirus related lockdowns...based on that rather large upward revision to demand, our previous estimate that there was a surplus of 5,810,000 barrels per day in June would now be revised​ down​ to a 4,890,000 barrels per day surplus, the oil surplus of 8,590,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 7,670,000 barrels per day, and the 17,340,000 barrels per day that we had previously figured for April would have to be revised to a surplus of 16,420,000 barrels per day... 

however, there was also an downward revision of 10,000 barrels per day to first quarter demand, which we have also encircled in green on the table above...that means that the record global oil surplus of 17,778,000 barrels per day we had previously figured for March would have to be revised downward to a​n even​ higher record global oil surplus of 17,788,000 barrels per day, ​that ​the 1,890,000 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 ​that ​the 920,000 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 the 3rd quarter, it's obvious the world's oil producers had produced a lot of oil earlier this year that no one wanted... 

Lastly, notice that in the first column of figures we've circled in orange an upward revision of 70,000 barrels per day in global demand for 2019...the last time OPEC revised their demand figures for 2019 was in July, and at that time we simply revised our aggregate oil shortage for 2019 from a total of 254,890,000 barrels to a revised total of 262,190,000  barrels for the entirely of the year...thus an upward revision of 70,000 barrels per day to 2019's oil demand would increase 2019's oil shortage by 25,550,000 barrels to 287,740,000 barrels, resulting in a global oil shortage that was the equivalent of nearly two days and 21 hours of global oil production at the December 2019 production rate... 

This Week's Rig Count

the US rig count rose for the 5th week in a row during the week ending October 16th, but for just the 7th time in the past 32 weeks, and hence it is still down by 64.4% over that thirty-two week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 13 to 282 rigs this past week, which was still down by 569 rigs from the 851 rigs that were in use as of the October 18th report of 2019, and was also 122 fewer rigs than the all time low prior to this year, and 1,660 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 12 rigs to 205 oil rigs this week, after increasing by 4 oil rigs the prior week, still leaving us with 508 fewer oil rigs than were running a year ago, and less than a seventh 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 one to 74 natural gas rigs, which was still down by 63 natural gas rigs from the 137 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 7 fewer Gulf rigs than the 21 rigs drilling in the Gulf a year ago, when all 21 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 was also a rig deployed offshore from Alaska, so this week's national offshore count is down by 8 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 two rigs drilling on ​southern ​Louisiana​ ​inland waters..

The count of active horizontal drilling rigs was up by 7 to 240 horizontal rigs this week, which was still 505 fewer horizontal rigs than the 750 horizontal rigs that were in use in the US on October 18th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the vertical rig count was up by six to 21 vertical rigs this week, but those were down by 30 from the 51 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count was unchanged at 21 directional rigs this week, and those were down by 34 from the 55 directional rigs that were in use on October 18th 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 October 16th, the second column shows the change in the number of working rigs between last week's count (October 9th) and this week's (October 16th) count, the third column shows last week's October 9th 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 18th of October, 2019...    

October 16 2020 rig count summary

there was somewhat more activity this week than recently, but because 6 of this week's rig addition​s​ were vertical, they ​typically wouldn't be included in the second table above...by checking the rig counts in the Texas part of Permian basin, we find that one rig was pulled out of Texas Oil District 8, which roughly aligns with the Permian Delaware, while 1 rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, thus leaving the rig count in the Permian basin unchanged...elsewhere in Texas, two rigs were added in Texas Oil District 2, and two more rigs were added in Texas Oil District 1, which together account for the 3 oil rigs added in the Eagle Ford, and one of the vertical rig additions not targeting the Eagle Ford...also in Texas, three rigs were added in Texas Oil District 6, which abuts the Louisiana border, and thus accounts for the Haynesville rig addition, while two rigs were concurrently pulled out of the Haynesville​ shale​ in Louisiana, thus accounting for the rig decrease in that state​​...elsewhere, the oil rig pulled out of the Denver-Julesburg Niobrara chalk came out of Colorado, the rig added in the Williston Basin was in North Dakota, and both the rig added in the Cana Woodford and the rig pulled out of the Granite Wash were oil rigs in Oklahoma, while the rig added in West Virginia Marcellus was targeting natural gas...the natural gas rig count was only up by one nationally because a natural gas rig was concurrently pulled out of a basin not tracked separately by Baker Hughes, which thus doesn't show up above...

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Sunday, October 11, 2020

oil & natural gas prices jump as Hurricane Delta shuts down Gulf production..

oil prices rose for the 2nd week in 6 this week, as a strike in Norway threatened that country's oil output and as a major hurricane shut down US Gulf production...after falling 8% to $37.05 a barrel last week on an increase of coronavirus cases globally and Trump's positive test, the contract price of US light sweet crude for November delivery opened 5 cents lower on Monday but quickly rallied more than 6%, driven by the announcement that Trump would be discharged from the hospital later that day, and settled with a gain of $2.17, or 5.9%, at $39.22 per barrel, supported by hopes for a new stimulus package and by an escalating oil workers' strike in Norway over pay...oil prices continued higher on Tuesday amid the supply disruptions in Norway, a new hurricane in the Gulf and Trump's return to the White House and finished $1.45 higher at $40.67 a barrel, but slipped in post-settlement trading after Trump said he was instructing his team not to negotiate a new stimulus package until after the election...oil prices then opened 2% lower on Wednesday and traded in a narrow range before closing ​down ​72 cents at $39.95 a barrel​, ​after the EIA reported a slightly larger-than-expected build in U.S. commercial crude inventories...but the November ​oil ​contract price opened higher and rallied again on Thursday as the impact of higher US crude inventories was negated by draws in product inventories and escalating supply disruptions in Norway and the Gulf of Mexico, a​nd prices went on to settle $1.24 or 3.1% higher at $41.19 a barrel, the higherst close in nearly 5 weeks, as hurricane Delta forced the shut-in of more than 90% of Gulf crude oil output...after opening higher, oil slipped more than 1% on Friday, after Norwegian oil firms struck a wage bargain with labour unions on Friday, ending ​the 10-day strike that had threatened to cut the country’s oil and gas output by close to 25%, with US crude falling 59 cents to $40.60 a barrel..​.​.even so, the U.S. benchmark crude price advanced more than 9% this week on the supply disruptions from Hurricane Delta​,​ and on optimism for a U.S. stimulus deal...

natural gas prices also rose this week, as exports rose and Hurricane Delta shut in Gulf production...after falling 13.1% to $2.438 per mmBTU last week on an increase in gas output and a forecast for reduced demand, the contract price of natural gas for November delivery opened higher on Monday and jumped 17.7 cents, or over 7%​,​ as LNG exports rose and traders worried production would be shut in again with another hurricane expected in the Gulf of Mexico​​...natural gas prices then gave up half of those gains on Tuesday, falling 9.5 cents to $2.520 per mmBTU as forecasts indicated milder weather and lower demand over the next two weeks than had been previously expected...but most of that ​loss ​was regained on Wednesday when gas rose 8.6 cents to $2.606 per mmBTU as producers shut Gulf of Mexico wells ahead of Hurricane Delta and as forecasts were revised to show larger-than-expected demand over the next two weeks...natural gas prices then inched up 2.1 cents on Thursday as the natural gas storage report was in line with the increase ​that ​analysts had forecast​,​ and then jumped 11.4 cents or 4.3% cents to $2.741 per mmBTU on Friday as Gulf Coast producers shut wells ahead of Hurricane Delta and on forecasts for colder weather and higher demand in mid October than was previously indicated...that left prices 12.4% ​higher ​on the week and at their highest since last November, ​although we should note that wintertime natural gas contracts almost always trade at higher prices than those during the rest of the year..

the natural gas storage report from the EIA for the week ending October 2nd indicated that the quantity of natural gas held in underground storage in the US increased by 75 billion cubic feet to 3,831 billion cubic feet by the end of the week, which left our gas supplies 444 billion cubic feet, or 13.1% greater than the 3,285 billion cubic feet that were in storage on October 2nd of last year, and 394 billion cubic feet, or 11.5% above the five-year average of 3,437 billion cubic feet of natural gas that have been in storage as of the 2nd of October in recent years....the 75 billion cubic feet that were added to US natural gas storage this week was a bit more than the forecast for a 71 billion cubic foot increase from an S&P Global Platts' survey of analysts, but it was below the average of 86 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years, and it was much lower than the 102 billion cubic feet that was added to natural gas storage during the corresponding week of 2019... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 2nd showed that ​due to an increase in our oil imports and an increase in our oil production, we​ managed to add a bit of oil ​to our stored ​commercial ​supplies for the ​2nd time ​in the past eleven weeks and for the ​twenty-fourth time in thirty-eight weeks...our imports of crude oil rose by an average of 610,000 barrels per day to an average of 5,732,000 barrels per day, after falling by an average of 45,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 853,000 barrels per day to an average of 2,659,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,073,000 barrels of per day during the week ending October 2nd, 1,463,000 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 300,000 barrels per day higher at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,073,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,853,000 barrels of crude per day during the week ending October 2nd, 184,000 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 total of 92,000 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 312,000 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 (-312,000) 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 that there must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...moreover, since last week's fudge factor was +819,000 barrels per day, indicating a week over week difference of 1,131,000 barrels per day in the line 13 balance sheet adjustment, the difference ​between those errors ​means any week over week comparisons of oil supply and demand ​figures reported here ​a​re nonsense...however, since most everyone treats these weekly EIA figures as gospel and since these numbers 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 rose to an average of 5,258,000 barrels per day last week, which was still 18.9% less than the 6,486,000 barrel per day average that we were importing over the same four-week period last year....the 92,000 barrel per day net withdrawal from our total crude inventories was as 72,000 barrels per day were being added to our commercially available stocks of crude oil and 164,000 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 300,000 barrels per day higher at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 200,000 barrels per day to 10,500,000 barrels per day, and because a 16,000 barrels per day increase to 459,000 barrels per day in Alaska's oil production added another 100,000 barrels per day to the rounded national total​ (EIA math)​....last year's US crude oil production for the week ending October 4th was rounded to 12,600,000 barrels per day, so this reporting week's rounded oil production figure was 12.7% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 77.1% of their capacity while using 13,853,000 barrels of crude per day during the week ending October 2nd, up from 75.8% of capacity during the prior week, but excluding the 2005 and 2008 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years...hence, the 13,853,000 barrels per day of oil that were refined this week were 11.5% fewer barrels than the 15,656,000 barrels of crude that were being processed daily during the week ending October 4th of last year, when US refineries were operating at 85.7% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was much higher, increasing by 630,000 barrels per day to 9,522,000 barrels per day during the week ending October 2nd, after our refineries' gasoline output had decreased by 423,000 barrels per day over the prior week (when refinery throughput had increased by 300,000 barrels per day)...​but​ 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 ​still ​ 5.1% less than the 10,081,000 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 174,000 barrels per day to 4,532,000 barrels per day, after our distillates output had decreased by 112,000 barrels per day to a three year low of 4,358,000 barrels per day over the prior week...even after this week's increase in distillates output, our distillates' production was 6.3% less than the 4,835,000 barrels of distillates per day that were being produced during the week ending October 4th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 14 weeks and for the 26th time in 36 weeks, falling by 1​,435,000 barrels to 226,747,000 barrels during the week ending October 2nd, after our gasoline supplies had increased by 683,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 367,000 barrels per day to 8,896,000 barrels per day, ​and because our exports of gasoline rose by 235,000 barrels per day to 903,000 barrels per day,​ ​ ​while our imports of gasoline rose by 117,000 barrels per day to 849,000 barrels per day...after the gasoline inventory drawdowns of recent weeks, our gasoline supplies were 0.9% lower than last October 4th's gasoline inventories of 228,763,000 barrels, but still close to 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 9th time in 27 weeks and for the 30th time in 52 weeks, falling by 962,000 barrels to 171,796,000 barrels during the week ending October 2nd, after our distillates supplies had decreased by 3,184,000 barrels during the prior week....our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 213,000 barrels per day to 3,868,000 barrels per day, because our exports of distillates fell by 268,000 barrels per day to 1,031,000 barrels per day, while our imports of distillates rose by 89,000 barrels per day to 230,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 34.9% above the 127,324,000 barrels of distillates that we had in storage on October 4th, 2019, and about 23% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil imports and the increase in our oil production, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) rose for the 7th time in the past seventeen weeks and for the 35th time in the past year, increasing by 501,000 barrels, from 492,426,000 barrels on September 25th to 492,927,000 barrels on October 2nd...after that increase, our commercial crude oil inventories were around 12% above the five-year average of crude oil supplies for this time of year, and about 49% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the fourth 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 October 2nd were 15.8% above the 425,569,000 barrels of oil we had in commercial storage on October 4th of 2019, 20.2% more than the 409,951,000 barrels of oil that we had in storage on October 5th of 2018, and 6.6% above the 462,216,000 barrels of oil we had in commercial storage on September 29th of 2017... 

This Week's Rig Count

the US rig count rose for the 4th week in a row during the week ending October 9th, but for just the 6th time in the past 31 weeks, and hence it is still down by 66.1% over that thirty week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 3 to 269 rigs this past week, which was still down by 587 rigs from the 856 rigs that were in use as of the October 11th report of 2019, and was also 135 fewer rigs than the all time low prior to this year, and 1,660 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 189 oil rigs this week, after increasing by 6 oil rigs the prior week, still leaving us with 519 fewer oil rigs than were running a year ago, and less than an eighth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by one to 73 natural gas rigs, which was also down by 70 natural gas rigs from the 143 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 9 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when all 23 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 was also a rig 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 4 to 233 horizontal rigs this week, which was still 517 fewer horizontal rigs than the 750 horizontal rigs that were in use in the US on October 4th 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 unchanged at 21 directional rigs this week, and those were down by 34 from the 55 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was down by one to 15 vertical rigs this week, and those were down by 36 from the 51 vertical rigs that were in use on October 4th 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 October 9th, the second column shows the change in the number of working rigs between last week's count (October 2nd) and this week's (October 9th) count, the third column shows last week's October 2nd 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 11th of October, 2019...    

October 9 2020 rig count summary

once again, there were very few changes this week, with only ​five rig additions and two removals nationally....by checking the rig counts in the Texas part of Permian basin, we find that one rig was added in Texas Oil District 7C, which roughly aligns with the southern part of the Permian Midland, while 1 rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, thus leaving the rig count in the Texas Permian unchanged....since the national Permian basin rig count was up by one, that means that the rig that was added in New Mexico must have been set up to drill in the far western Permian Delaware, in order to balance the ​overall rig count on that basin...elsewhere in Texas, one rig was added in Texas Oil District 2, which accounts for the rig added in the Eagle Ford, and two more rigs were added in Texas Oil District 3, one in Washington county, and another in Brazoria county, both of which were horizontal rigs targeting an "other" formation, ie, not the Eagle Ford...other than those, the only other rig change nationally was the natural gas rig that was removed from Pennsylvania's Marcellus....

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note: there's more here...