*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 the decreases 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...
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...
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