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

Sunday, November 29, 2020

oil & natural gas rally on vaccine developments

oil prices rose for a 4th consecutive week in a rally sustained by the belief that one or more of the new vaccines would soon end the pandemic...after rising 5% to $42.42 a barrel last week on the promise of a Covid-19 vaccine and hopes that OPEC would extend their production cuts, the contract price of US light sweet crude for January delivery opened higher on Monday on news of further progress towards developing Covid-19 vaccines and finished 64 cents higher at $43.06 a barrel, the highest settlement since August, after the Saudis confirmed that Houthi rebels from Yemen had targeted one of their oil facilities in northern Jeddah province...the vaccine rally continued on Tuesday as oil prices rose $1.85​,​ or more than 4%​,​ to $44.91 a barrel, an eight month high, as a third promising coronavirus vaccine raised hope for a fuel-demand recovery and as the start of the U.S. presidential transition infused optimism across markets...​but ​oil prices dipped in after hours trading late Tuesday after the API reported a surprise build of US crude supplies and opened lower on Wednesday, but then rallied further on vaccine optimism despite the inventory rise before jumping 80 cents to a new 8 month high of $45.71 a barrel on a weaker dollar and on EIA data that showed a surprise drop in U.S. crude inventories...oil prices were mixed ​in light post holiday trading ​on Friday ahead of an OPEC+ meeting early next week​,​ on scuttlebutt that OPEC's allies including Russia are leaning towards delaying next year’s planned increase in oil output​,​ as US prices closed 18 cents lower at $45.53 a barrel, but still posted a 7.3% gain for the week for the 4th straight weekly gain and its largest one-week gain since Oct. 9th...

natural gas prices also moved higher this week on vaccine optimism and on record LNG exports...after falling 11.5% to $2.650 per mmBTU last week as a cold weather outbreak dissipated and gas inventories grew at a near record pace for the season, the contract price of natural gas for December delivery opened 2% higher on Monday and settled with a gain of 6.1 cents at $2.711 per mmBTU, as LNG export levels held strong, heating forecasts increased slightly and continued positive news on Covid vaccines bolstered confidence across markets...the price of the December gas contract moved up another 6.4 cents on Tuesday on forecasts for cooler weather and more heating demand during the first week of December than was previously expected and then rose 12.1 cents to expire at a one week high of $2.896 per mmBTU on Wednesday​,​ despite a smaller-than-usual weekly decline in gas supplies, as LNG exports hit a new record high...however, after the holiday, the contract price of natural gas for January delivery, which had finished Wednesday priced at 2.961 peer mmBTU, opened lower on Friday and tumbled 11.8 cents in holiday shortened trading to finish the week at $2.843 per mmBTU, cutting the week's gain on that contract to 2.6%...

the natural gas storage report from the EIA for the week ending November 20th indicated that the quantity of natural gas held in underground storage in the US decreased by 18 billion cubic feet to 3,940 billion cubic feet by the end of the week, which left our gas supplies 322 billion cubic feet, or 8.9% ​higher than the 3,618 billion cubic feet that were in storage on November 20th of last year, and 250 billion cubic feet, or 6.8% above the five-year average of 3,690 billion cubic feet of natural gas that have been in storage as of the 20th of November in recent years....the 18 billion cubic feet that were drawn out of US natural gas storage this week was less than the ​average ​forecast from an S&P Global Platts survey of analysts who called for a 25 billion cubic foot withdrawal, and was also much less that the average withdrawal of 37 billion cubic feet of natural gas that are typically pulled out of natural gas storage during the same week over the past 5 years, and the 47 billion cubic feet withdrawal from 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 November 20th indicated that because of a big increase in refinery use of crude oil this week, we had to withdraw oil from ou​r stored commercial supplies for the 12th time in the past eightteen weeks and for the 18th time in the past forty-five weeks....our imports of crude oil fell by an average of 26,000 barrels per day to an average of 5,228,000 barrels per day, after falling by an average of 245,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 83,000 barrels per day to an average of 2,831,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,397,000 barrels of per day during the week ending November 20th, 109,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 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 13,397,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 14,263,000 barrels of crude per day during the week ending November 20th, 422,000 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 124,000 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 743,000 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 (+743,000) 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 balance sheet 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...(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 5,253,000 barrels per day last week, which was 12.4% less than the 5,997,000 barrel per day average that we were importing over the same four-week period last year....the 124,000 barrel per day net withdrawal from our total crude inventories included 108,000 barrels per day that were withdrawn from our commercially available stocks of crude oil and 16,000 barrels per day were 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 inventories.....this week's crude oil production was reported to be 100,000 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 was 100,000 barrels per day higher at 10,500,000 barrels per day, while a 19,000 barrels per day decrease to 495,000 barrels per day in Alaska's oil production still added the same rounded 500,000 barrels per day to the rounded national total...last year's US crude oil production for the week ending November 22nd was rounded to 12,900,000 barrels per day, so this reporting week's rounded oil production figure was 14.7% 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 78.7% of their capacity while using 14,263,000 barrels of crude per day during the week ending November 20th, up from 77.4% of capacity during the prior week, but excluding the 2005, 2008, and 2017 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the past twenty-eight years...hence, the 14,263,000 barrels per day of oil that were refined this week were 12.7% fewer barrels than the 16,334,000 barrels of crude that were being processed daily during the week ending November 22nd of last year, when US refineries were operating at 89.3% of capacity...

even with the increase in the amount of oil being refined, gasoline output from our refineries was ​again lower, decreasing by 214,000 barrels per day to 8,850,000 barrels per day during the week ending November 20th, after our refineries' gasoline output had decreased by 255,000 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 also 12.1% less than the 10,065,000 barrels of gasoline that were being produced daily over the same week of last year....but at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 333,000 barrels per day to 4,608,000 barrels per day, after our distillates output had increased by 38,000 barrels per day over the prior week....but since it's just coming off a three year low, our distillates' production was still 9.3% less than the 5,075,000 barrels of distillates per day that were being produced during the week ending November 22nd, 2019...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 7th time in 21 weeks and for the 14th time in 43 weeks, rising by 2,180,000 barrels to 230,147,000 barrels during the week ending November 20th, after our gasoline supplies had increased by 2,611,000 barrels over the prior week...our gasoline supplies increased again this week because the amount of gasoline supplied to US markets decreased by 129,000 barrels per day to 8,129,000 barrels per day, while our imports of gasoline fell by 89,000 barrels per day to 441,000 barrels per day, while our exports of gasoline rose by 70,000 barrels per day to 760,000 barrels per day....so despite the gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 1.8% higher than last November 22nd's gasoline inventories of 225,978,000 barrels, and about 4% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the 10th week in a row, for the 16th time in 34 weeks and for the 30th time in the past year, falling by 1,441,000 barrels to 142,632,000 barrels during the week ending November 20th, after our distillates supplies had decreased by 5,216,000 barrels during the prior week....our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 50,000 barrels per day to 4,175,000 barrels per day, and because our exports of distillates fell by 255,000 barrels per day to 825,000 barrels per day while our imports of distillates fell by 99,000 barrels per day to 186,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 22.5% above the 116,406,000 barrels of distillates that we had in storage on November 22nd, 2019, and about 8% above the five year average of distillates stocks for this time of the year...

finally, with the big increase in our refinery throughput and a modest increase in our exports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) fell for the 14th time in the past twenty-four weeks and for the 20th time in the past year, decreasing by 754,000 barrels, from 489,475,000 barrels on November 13th to 488,721,000 barrels on November 20th ...after that modest decrease, our commercial crude oil inventories were still around 6% above the five-year average of crude oil supplies for this time of year, and about 42% above the prior 5 year (2010 - 2014) average of our crude oil stocks after three weeks of of November, 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 this autumn 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 November 20th were 8.1% above the 451,952,000 barrels of oil we had in commercial storage on November 22nd of 2019, 8.5% more than the 450,485,000 barrels of oil that we had in storage on November 23rd of 2018, and 7.7% above the 453,713,000 barrels of oil we had in commercial storage on November 24th of 2017...    

This Week's Rig Count

note: this week's rig count was released on Wednesday ahead of the Thanksgiving holiday, and hence only covers five days...nonetheless, the US rig count rose for the 10th time in eleven weeks during the period ending November 25th, but for just the 12th time in the past 37 weeks, and hence it is still down by 59.6% over that thirty-seven week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 10 to 320 rigs this past week, which was still by ​down ​482 rigs from the 802 rigs that were in use as of the November 29th report of 2019, and was also 84 fewer rigs than the all time low prior to this year, and 1,609 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 10 rigs to 241 oil rigs this week, after oil rigs fell by 5 the prior week, leaving us with 427 fewer oil rigs than were running a year ago, and less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 1 to 77 natural gas rigs, which was still down by 54 natural gas rigs from the 131 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week​;​ one in Lake County, California, and one in the Permian basin in Eddy County, New Mexico...a year ago, there were three such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was unchanged at 12 rigs this week, with 11 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 10 fewer Gulf rigs than the 22 rigs drilling in the Gulf a year ago, when all 22 Gulf rigs were drilling offshore from Louisiana...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure are equal to the Gulf rig counts....meanwhile, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary county in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there were no such rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 11 to 283 horizontal rigs this week, which was still 418 fewer horizontal rigs than the 701 horizontal rigs that were in use in the US on November 29th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by 2 to 22 directional rigs this week, but those were also down by 31 from the 53 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was down by three to 15 vertical rigs this week, and those were also down by 33 from the 48 vertical rigs that were in use on November 29th 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 November 25th, the second column shows the change in the number of working rigs between last week's count (November 20th) and this week's (November 25th) count, the third column shows last week's November 20th 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 29th of November, 2019...    

November 25 2020 rig count summary

the state totals add up to 11 because a miscellaneous rig that had been drilling on the big island of Hawaii for the past several months was shut down this week, while the basin count comes up short because two horizontal rigs were added in basins that Baker Hughes doesn't track...checking the North America Rotary Rig Count Pivot Table (xls), we find those​horizontal rigs weren't the 3 rigs added in California, because all of California's active rigs are either directional or vertical, in Kern and Los Angeles counties...next, checking for the details on the Permian basin in Texas, we find that one rig was added in Texas Oil District 7C, which roughly corresponds to the southern part of the Permian Midland, and another rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, which thus means that Permian rigs in Texas were up by a total of two...since the Permian basin rig count was up by five rigs nationally, that means that the three rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national increase...elsewhere in Texas, we find that three rigs were added in Texas Oil District 1, which would account for Eagle Ford basin increase, while one rig was pulled out of Texas Oil District 2, which apparently came from a basin that Baker Hughes doesn't track, while another rig was pulled out of Texas Oil District 6, which would have been a Haynesville natural gas rig, because a Haynesville gas rig was added in northern Louisiana at the same time, thus accounting for the "zero change" on Haynesville rigs we see above...meanwhile, the natural gas rig addition of this week was added in a basin that Baker Hughes doesn't track, and it's not apparent where that was, since the DJ Niobrara rig added in Colorado​, the 3 rigs added in California​, and every other rig we've mentioned today​ were all oil rigs...

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Note: there's more here...

Sunday, November 22, 2020

largest mid-November natural gas injection in 19 years; DUCs fall on subdued drilling; completions still down 69% YoY

largest mid-November addition of natural gas to storage in 19 years; DUC wells down on subdued drilling; well completions remain 69% lower than a year ago..

oil prices rose for a third consecutive week on the continued promise of a Covid-19 vaccine and hopes that OPEC would extend their production cuts into the new year... after rising 8.1% to $40.13 a barrel last week on hopes that a new vaccine would soon end the pandemic, the contract price of US light sweet crude for December delivery opened higher on Monday on data showing a rebound in China and Japan, the world's second and third largest economies, and never looked back, closing $1.21 higher at $41.34 a barrel, as news of another promising vaccine helped to ease concerns about Covid-19 lockdowns that would lower energy demand....oil prices edged higher again early Tuesday on expectations OPEC and its allies would extend oil production cuts for at least three months but ended mixed as traders awaited weekly data on crude supplies from the American Petroleum Institute that evening and the EIA the next day, with US crude finishing up 9 cents at $41.43 a barrel...oil prices then edged lower in post-settlement trade on Tuesday after the API reported a bigger build of U.S. crude stockpiles than had been expected, and thus opened lower on Wednesday, but recovered to close 39 cents higher at an eleven week high of $41.82 a barrel on hopes that OPEC+ would delay a planned increase in oil output while the EIA reported a smaller-than-expected increase in U.S. crude stockpiles...however, oil prices moved sharply lower Thursday after U.S. jobless claims rose for the first time in five weeks and as virus restrictions mounted, before recovering to close just 8 cents lower at $41.74 a barrel, as the dollar slipped late in the trading session, boosting prices of commodities priced in dollars...oil prices then rose 41 cents, or almost 1% on Friday, buoyed by successful Covid-19 vaccine trials, to settle at $42.15 a barrel, as trading in the US crude contract for December expired with a gain of 5% on the week, while US crude for January, which will be quoted as the price of oil next week, closed 52 cents higher at $42.42 a barrel, also up 5% on the week...

meanwhile, natural gas prices fell for the 2nd time in seven weeks, as the cold weather outbreak disappated and inventories grew at a near record pace for this time of year....after rising 3.7% to $2.995 per mmBTU last week as a winter weather outbreak in the Northern Plains pushed eastward, the contract price of natural gas for December delivery opened 4% lower on Monday and tumbled 10% to a near one-month low of $2.697 per mmBTU on forecasts for milder weather and lower heating demand, and on a steady rise in natural gas output...natural gas prices flipped between slight gains and losses during Tuesday’s session and ultimately settled at $2.692/MMBtu, down a half-cent on the day, as traders weighed weak weather-driven demand and rising production against continued strength in exports...while gas prices rose 2 cents on Wednesday as cold air moved out of the Upper Midwest, they then slid 12 cents, or 4.4%, to $2.592 per mmBTU on Thursday as U.S. forecasts shifted warmer through early December and EIA data showed an unusually big gain in stockpiles for this time of year...but prices bounced back 5.8 cents to close at a $2.650 per mmBTU on Friday, buoyed by record-high liquefied natural gas (LNG) exports and forecasts for cooler weather and higher heating demand in early December, but still ended the week 11.5% lower than the previous Friday close...

the natural gas storage report from the EIA for the week ending November 13th indicated that the quantity of natural gas held in underground storage in the US increased by 31 billion cubic feet to 3,958 billion cubic feet by the end of the week, which left our gas supplies 293 billion cubic feet, or 8.0% more than the 3,665 billion cubic feet that were in storage on November 13th of last year, and 231 billion cubic feet, or 6.2% above the five-year average of 3,727 billion cubic feet of natural gas that have been in storage as of the 13th of November in recent years....the 31 billion cubic feet that were added to US natural gas storage this week were​ well​ above the average forecast for a 22 billion cubic foot addition by analysts polled by S&P Global Platts, while the injection ​into storage ​contrasted with the average withdrawal of 24 billion cubic feet of natural gas that are typically pulled out of natural gas storage during the same week over the past 5 years, and the 66 billion cubic feet withdrawal from natural gas storage during the corresponding week of 2019....that 31 billion cubic feet that w​as added​ ​was also the largest addition of natural gas to storage for the 2nd week of November since 33 billion cubic feet were added during the week ending November 16, 2001, ​and ​dramatically contrast​ed with thelargest October natural gas storage withddrawal on record that we reported just two weeks ago..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending November 13th indicated that because this week's increase in refinery use of crude oil just about matched the increase in our production while our imports decreased just modestly, we still had a surplus of oil to add to our stored commercial supplies for a second consecutive week and for the 6th time in the past seventeen weeks...our imports of crude oil fell by an average of 245,000 barrels per day to an average of 5,254,000 barrels per day, after rising by an average of 470,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 17,000 barrels per day to an average of 2,748,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,506,000 barrels of per day during the week ending November 13th, 228,000 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 400,000 barrels per day higher at 10,900,000 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 13,406,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,841,000 barrels of crude per day during the week ending November 13th, 395,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 52,000 barrels of oil per day were being added to 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 and from oilfield production was 488,000 barrels per day less than what our oil refineries reported they used during the week plus what was added to storage....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+488,000) 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​ balance sheet​ 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...(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 5,361,000 barrels per day last week, which was still 12.5% less than the 6,124,000 barrel per day average that we were importing over the same four-week period last year....the 52,000 barrel per day net addition to our total crude inventories was as 110,000 barrels per day were added to our commercially available stocks of crude oil, which was partly offset by the 58,000 barrels per day that was 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 inventories.....this week's crude oil production was reported to be 400,000 barrels per day higher at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 400,000 barrels per day higher at 10,400,000 barrels per day, while a 5,000 barrels per day decrease to 514,000 barrels per day in Alaska's oil production still added the same rounded 500,000 barrels per day to the rounded national total...last year's US crude oil production for the week ending November 15th was rounded to 12,800,000 barrels per day, so this reporting week's rounded oil production figure was 14.8% below that of a year ago, yet still 29.3% 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 77.4% of their capacity while using 13,841,000 barrels of crude per day during the week ending November 13th, up from 74.5% 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 past thirty years...hence, the 13,841,000 barrels per day of oil that were refined this week were 15.8% fewer barrels than the 16,435,000 barrels of crude that were being processed daily during the week ending November 15th of last year, when US refineries were operating at 89.5% of capacity...

even with the increase in the amount of oil being refined, gasoline output from our refineries was quite a bit lower, decreasing by 255,000 barrels per day to 9,064,000 barrels per day during the week ending November 13th, after our refineries' gasoline output had increased by 247,000 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 also 9.0% less than the 10,053,000 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 38,000 barrels per day to 4,237,000 barrels per day, after our distillates output had decreased by 38,000 barrels per day over the prior week....but since it's still near a three year low, our distillates' production was 16.6% less than the 5,124,000 barrels of distillates per day that were being produced during the week ending November 15th, 2019...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 6th time in 20 weeks and for the 13th time in 42 weeks, rising by 2,611,000 barrels to 227,967,000 barrels during the week ending November 13th, after our gasoline supplies had decreased by 2,309,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US markets decreased by 504,000 barrels per day to 8,2582,000 barrels per day, and because our imports of gasoline rose by 80,000 barrels per day to 530,000 barrels per day, while our exports of gasoline fell by 20,000 barrels per day to 690,000 barrels per day....so despite the gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 3.2% higher than last November 15th's gasoline inventories of 220,846,000 barrels, and about 4% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with our distillates production remaining well below normal for this time of year, our supplies of distillate fuels decreased for the 9th week in a row, for the 15th time in 33 weeks and for the 31st time in 52 weeks, falling by 5,216,000 barrels to 144,073,000 barrels during the week ending November 13th, after our distillates supplies had decreased by 5,355,000 barrels during the prior week....our distillates supplies fell again this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 171,000 barrels per day to 4,225,000 barrels per day, while our imports of distillates rose by 154,000 barrels per day to 285,000 barrels per day, and while our exports of distillates rose by 1,000 barrels per day to 1,080,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 24.5% above the 115,681,000 barrels of distillates that we had in storage on November 15th, 2019, and about 11% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our refinery throughput equalled by the increase in our field production, our commercial supplies of crude oil in storage (not including​ the​ commercial oil in the SPR) rose for the 10th time in the past twenty-three weeks and for the 33rd time in the past year, increasing by 769,000 barrels, from 488,706,000 barrels on November 6th to 489,475,000 barrels on November 13th....after that modest increase, our commercial crude oil inventories were still around 6% above the five-year average of crude oil supplies for this time of year, and about 43% above the prior 5 year (2010 - 2014) average of our crude oil stocks after two weeks of of November, 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​ this autumn 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 November 13th were 8.7% above the 450,380,000 barrels of oil we had in commercial storage on November 15th of 2019, 9.5% more than the 446,908,000 barrels of oil that we had in storage on November 16th of 2018, and 7.1% above the 457,142,000 barrels of oil we had in commercial storage on November 17th of 2017...   

This Week's Rig Count This Week's Rig Count

the US rig count fell for the 1st time in ten weeks during the week ending November 20th, but for the 23rd time in the past 36 weeks, and hence it is down by 60.4% over that thirty-six week period....Baker Hughes reported that the total count of rotary rigs running in the US fell by 2 to 310 rigs this past week, which was also down by 493 rigs from the 803 rigs that were in use as of the November 22nd report of 2019, and was also 94 fewer rigs than the all time low prior to this year, and 1,619 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business....

The number of rigs drilling for oil decreased by 5 rigs to 231 oil rigs this week, after increasing by 10 oil rigs the prior week, leaving us with 440 fewer oil rigs than were running a year ago, and less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 3 to 76 natural gas rigs, which was still down by 53 natural gas rigs from the 129 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 were no such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was down by one to 12 rigs this week, with 11 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 10 fewer Gulf rigs than the 22 rigs drilling in the Gulf a year ago, when all 22 Gulf rigs were drilling offshore from Louisiana...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure are equal to the Gulf rig counts....​meanwhile,​ in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary's county in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there were no such rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 5 to 272 horizontal rigs this week, which was still 427 fewer horizontal rigs than the 702 horizontal rigs that were in use in the US on November 15th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by three to 20 directional rigs this week, and those were also down by 34 from the 54 directional rigs that were operating during the same week of last year....at the same time, the vertical rig count was down by four to 18 vertical rigs this week, and those were also down by 32 from the 50 vertical rigs that were in use on November 15th 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 November 20th, the second column shows the change in the number of working rigs between last week's count (November 13th) and this week's (November 20th) count, the third column shows last week's November 13th 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 22nd of November, 2019...    

November 20 2020 rig count summary

it doesn't look like there were many changes this week, ​but ​we know there had to be, with the directional and vertical rig removals​ we've noted,​ which wouldn't show up in ​the horizontally accessed basin​s shown​ here....checking first for the details on the Permian basin in Texas, we find that one rig was added in Texas Oil District 7C, which roughly corresponds to the southern part of the Permian Midland, while a rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, which thus means that Permian rigs in Texas were on net unchanged...since the Permian basin rig count was up by two rigs nationally, that means that the two rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national increase...elsewhere in Texas, we find that one rig was pulled out of Texas Oil District 1, and another rig was pulled out of Texas Oil District 2, both of which seem to have come from basins that Baker Hughes doesn't track, while a rig was added in Texas Oil District 6, which accounts for one of the Haynesville natural gas rig additions...the other Haynesville additions came in northern Louisiana, and as a rig in Texas Oil District 6 was either switched with one targetting the Haynesville, or reassigned to the Haynesville from previously being marked as an "other"...meanwhile Louisiana's ​rig ​count remained unchanged as a Gulf rig was removed from the state's waters at the same time...elsewhere, the rig removals from the Cana Woodford account for the Oklahoma reductition, while the rig that was removed from the Williston basin came out of Montana, as the rig count in North Dakota remained unchanged...

DUC well report for October

Monday of this past week saw the release of the EIA's Drilling Productivity Report for November, which includes the EIA's October 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 16th time in the past twenty months in October, as completions of drilled wells and drilling of new wells both remained subued....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 86 wells, falling from 7,644 DUC wells in September to 7,558 DUC wells in October, which was also 7.3% fewer DUCs than the 8,156 wells that had been drilled but remained uncompleted as of the end of October of a year ago...this month's DUC decrease occurred as 316 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, up from the 294 wells that were drilled in September, while 402 wells were completed and brought into production by fracking, up from the 394 completions seen in September, but down by 69.2% from the 1,307 completions seen in October of last year....at the October completion rate, the 7,558 drilled but uncompleted wells left at the end of the month represents a 18.8 month backlog of wells that have been drilled but are not yet fracked, down from the 20.4 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 October, with no basins reporting a DUC increase...the number of uncompleted wells remaining in Oklahoma​'s​ Anadarko decreased by 22, falling from 683 at the end of September to 661 DUC wells at the end of October, as just 13 wells were drilled into the Anadarko basin during October, while 35 Anadarko wells were being fracked....at the same time, DUCs in the Permian basin of west Texas and New Mexico decreased by 15, from 3,580 DUC wells at the end of September to 3,565 DUCs at the end of October, as 141 new wells were drilled into the Permian, while 156 wells in the region were completed...in addition, DUC wells in the Eagle Ford of south Texas decreased by 13, from 1,152 DUC wells at the end of September to 1,139 DUCs at the end of October, as 24 wells were drilled in the Eagle Ford during October, while 37 already drilled Eagle Ford wells were completed... there was also a decrease of 13 DUC wells in the Bakken of North Dakota, where DUC wells fell from 864 at the end of September to 851 DUCs at the end of October, as 19 wells were drilled into the Bakken in October, while 32 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 fell by 12 to 461, as 22 new Niobrara wells were drilled in October while 34 already 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 10 wells, from 571 DUCs at the end of September to 561 DUCs at the end of October, as 61 wells were drilled into the Marcellus and Utica shales during the month, while 71 of the already drilled wells in the region were fracked....at the same time, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 1 to 320, as 36 wells were drilled into the Haynesville during October, while 37 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of October, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 75 wells to 6,677 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 11 wells to 881 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, November 15, 2020

global oil supply is 2.5 million barrels per day short in October, despite rising production

oil prices rose for a second straight week on hopes that a new vaccine would end the pandemic and thereby boost demand...after rising 3.6% to $37.14 a barrel last week on falling ​oil ​inventories and hopes for a grid-locked government, the contract price of US light sweet crude for December delivery opened higher and quickly jumped ​11% on Monday after Pfizer said its vaccine was more than 90% effective in preventing Covid-19, ​before settl​ing​ $3.15 higher at $40.29 a barrel, with ​prices also boosted by ​a ​Saudi suggestion that oil producers could adjust their supply-cut pact to take more barrels off the market if demand slumps this winter...optimism over the vaccine carried the rally into a second day on Tuesday, as oil prices rose $1.07 to $41.36 a barrel even as the negative impact that renewed lockdowns in Europe was having on fuel demand and as rising Libyan production kept prices in check...oil prices opened 1% higher on Wednesday after the Tuesday evening API report showed U.S. crude inventories fell more than expected and hung on to close 9 cents higher at $41.45 a barrel as hopes of an effective COVID-19 vaccine continued to bolster sentiment despite European lockdowns...oil prices opend higher again on Thursday, but quickly turned south when equity markets stumbled and settled 33 cents lower at $41.12 a barrel, after the EIA reported a surprise inventory build and the Fed warned that a vaccine might not be enough to get the economy back on track....oil prices continued lower on Friday, pressured by swelling output from Libya and fears that rising coronavirus infections would slow the recovery in fuel demand, and ended down 99 cents at $40.13 a barrel, but still managed to score an 8.1% gain on the week as optimism from the news of a potential Covid-19 vaccine breakthrough had jolted markets earlier in the week...

natural gas prices also ended higher for the fifth time in 6 weeks as a winter weather outbreak in the Northern Plains gradually pushed eastward, portending greater demand for heating...after falling 14% to $2.888 per mmBTU last week as natural gas inventories fell at a record pace and traders digested the election results, the contract price of natural gas for December delivery opened lower on Monday and slid 2.9 cents or 1% as forecasts for milder weather and lower heating demand overshadowed optimism around a potential Covid-19 vaccine....but gas prices rebounded Tuesday as forecasts for colder temperatures in the Mountain West and the Northern Plains countered warmth elsewhere, and natural gas prices ended 9 cents higher at $2.949 per mmBTU​, their first increase in 7 days...gas prices rallied for a second day on Wednesday and finished 8.2 cents higher at $3.031 per mmBTU as a blast of snow and cold moved into the Upper Midwest and​ national​ forecasts shifted slightly cooler, but they then fell 5.5 cents on Thursday as traders awaited the holiday delayed EIA gas storage report...December gas prices opened lower on Friday​,​ but ​then ​jumped ten cents in morning trading before fading to finish with a gain of 1.9 cents at $2.995 per mmBTU, as weather-driven demand expectations and continued strength in exports offset a bearish storage report and left natural gas prices with a 3.7% increase on the week...

the natural gas storage report from the EIA for the week ending November 6th indicated that the quantity of natural gas held in underground storage in the US increased by 8 billion cubic feet to 3,927 billion cubic feet by the end of the week, which left our gas supplies 196 billion cubic feet, or 5.3% ​more than the 3,731 billion cubic feet that were in storage on November 6th of last year, and 201 billion cubic feet, or 4.7% above the five-year average of 3,751 billion cubic feet of natural gas that have been in storage as of the 6th of November in recent years....the 8 billion cubic feet that were added to US natural gas storage this week contrasted with the average forecast for a 4 billion cubic foot withdrawal from analysts polled by S&P Global Platts, while it was much less than the average of 33 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 also less than the 12 billion cubic feet that were 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 November 6th indicated that because of an increase in our "unaccounted for crude oil", we had a surplus of oil to add to our stored commercial supplies for the 5th time in the past sixteen weeks and for the 26th time in forty-three weeks...our imports of crude oil rose by an average of 470,000 barrels per day to an average of 5,499,000 barrels per day, after falling by an average of 643,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 500,000 barrels per day to an average of 2,765,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,734,000 barrels of per day during the week ending November 6th, 30,000 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 unchanged 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 13,234,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,447,000 barrels of crude per day during the week ending November 6th, 105,000 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 531,000 barrels of oil per day were being added to 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 and from oilfield production was 743,000 barrels per day less than what our oil refineries reported they used during the week plus what was added to storage....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+743,000) 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 -877,000 barrels per day, indicating a week over week difference of 1,620,000 barrels per day in the line 13 balance sheet adjustments, 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 5,327,000 barrels per day last week, which was 12.6% less than the 6,095,000 barrel per day average that we were importing over the same four-week period last year....the 531,000 barrel per day net addition to our total crude inventories included 611,000 barrels per day that were added to our commercially available stocks of crude oil, which was partly offset by the 81,000 barrels per day that was 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 inventories.....this week's crude oil production was reported to be unchanged at 10,500,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,000,000 barrels per day, while a 51,000 barrels per day ​increase to 518,000 barrels per day in Alaska's oil production still added the same 500,000 more barrels per day to the rounded national total...last year's US crude oil production for the week ending November 8th was rounded to 12,800,000 barrels per day, so this reporting week's rounded oil production figure was 18.0% 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 74.5% of their capacity while using 13,447,000 barrels of crude per day during the week ending November 6th, down from 75.3% 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 13,447,000 barrels per day of oil that were refined this week were 15.5% fewer barrels than the 15,916,000 barrels of crude that were being processed daily during the week ending November 8th of last year, when US refineries were operating at 87.8% of capacity...

even with the decrease in the amount of oil being refined, gasoline output from our refineries was quite a bit higher, increasing by 247,000 barrels per day to 9,319,000 barrels per day during the week ending November 6th, after our refineries' gasoline output had decreased by 23,000 barrels per day over the prior week...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 8.4% less than the 10,173,000 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 38,000 barrels per day to 4,237,000 barrels per day, after our distillates output had increased by 149,000 barrels per day over the prior week....since it's still near a three year low, our distillates' production was 15.9% less than the 5,039,000 barrels of distillates per day that were being produced during the week ending November 8th, 2019...

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 14th time in 19 weeks and for the 29th time in 41 weeks, falling by 2,309,000 barrels to 225,356,000 barrels during the week ending November 6th, after our gasoline supplies had increased by 1,541,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 326,000 barrels per day to 8,762,000 barrels per day, and because our imports of gasoline fell by 180,000 barrels per day to 450,000 barrels per day, while our exports of gasoline fell by 6,000 barrels per day to 710,000 barrels per day....but despite the gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 2.9% higher than last November 8th's gasoline inventories of 219,090,000 barrels, and about 3% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with our distillates production remaining well below normal for this time of year, our supplies of distillate fuels decreased for the 8th week in a row, for the 14th time in 32 weeks and for the 31st time in 52 weeks, falling by 5,355,000 barrels to 149,289,000 barrels during the week ending November 6th, after our distillates supplies had decreased by 1,584,000 barrels during the prior week....our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 292,000 barrels per day to 4,054,000 barrels per day, and because our imports of distillates fell by 201,000 barrels per day to 131,000 barrels per day, while our exports of distillates rose by 8,000 barrels per day to 1,079,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 28.0% above the 116,655,000 barrels of distillates that we had in storage on November 8th, 2019, and about 15% above the five year average of distillates stocks for this time of the year...

finally, for reasons not evident in this week's ​reported ​data, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) rose for the 9th time in the past twenty-two weeks and for the 33rd time in the past year, increasing by 4,277,000 barrels, from 484,429,000 barrels on October 30th to 488,706,000 barrels on November 6th...after that increase, our commercial crude oil inventories were still around 6% above the five-year average of crude oil supplies for this time of year, and 42.9% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the first weekend of November, 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 over the recent weeks 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 November 6th were 8.8% above the 449,001,000 barrels of oil we had in commercial storage on November 8th of 2019, 10.6% more than the 442,057,000 barrels of oil that we had in storage on November 9th of 2018, and 6.5% above the 458,997,000 barrels of oil we had in commercial storage on November 10th of 2017...   

OPEC's Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC's November Oil Market Report, which covers OPEC & global oil data for October, and hence it gives us a picture of the global oil supply & demand situation over the third month of the extended agreement between OPEC, the Russians, and other oil producers, wherein they have agreed to cut production by 7.7 million barrels a day from the 2018 peak, reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July....before we look at what this month's report shows, we should again caution that estimating oil demand while the course of the Covid-19 pandemic remains uncertain 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 check is from the page numbered 50 of this month's report (pdf page 59), 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...

October  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 up by 322,000 barrels per day to 24,386,000 barrels per day during October, from their revised September production total of 24,064,000 barrels per day...however that September output figure was originally reported as 24,106,000 barrels per day, which means that OPEC's September production was revised 42,000 barrels per day lower with this report, and hence October's production was, in effect, a rounded 280,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official September OPEC output figures as reported a month ago, before this month's revisions)...

from the above table, we can also see that the Lybian production increase of 299,000 barrels per day was the major reason for OPEC's October output increase, while the increase of 148,000 barrels per day in Iraq's output was mostly offset by decreases of 75,000 barrels per day by the Emirates and 54,000 barrels per day by Angola....recall that th​is year's 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, US sanctioned OPEC members Iran and Venezuela and war-torn Libya were exempt from the cuts imposed by that agreement, and with the recent suspension of Libya's civil war, their production is once again coming back online... 

since there has never seemed to be a published 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've been including the table that 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...from the following table, we can easily compute the production quotas that each of the OPEC members was expected to hold to in October:

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, and coincidently the highest production of the era for most of the producers party to these cuts; the second column shows how much each participant had originally committed to cut during May and June 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​, October​ and subsequent months amends the above such that each member would be allowed to increase their production cut 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 new 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 ​October...offhand, by comparing this table's allocation +20% to the initial OPEC production table above, it appears that the Congo, Gabon, and Iraq have slightly exceeded their production quota for October, but none of them by any consequential amount...

the next graphic from this month's report that we'll highlight shows us both OPEC and world oil production monthly on the same graph, over the period from November 2018 to October 2020, and it comes from page 51 (pdf page 60) 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.... 

October 2020 OPEC report global oil supply

after the reported 322,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global oil production increased by a rounded 0.58 million barrels per day to average 91.17 million barrels per day in October, a reported increase which apparently came after September's total global output figure was revised down by 120,000 barrels per day from the 90.71 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 250,000 barrels per day in October after that revision, with oil production increases by Canada, Norway and the UK more than offseting decreases from other non-OPEC producers in October...after that increase in October's global output, the 91.17 million barrels of oil per day that were produced globally in October were 9.25 million barrels per day, or 9.2% less than the revised 100.42 million barrels of oil per day that were being produced globally in October a year ago, the 10th month of OPECs first round of production cuts (see the November 2019 OPEC report (online pdf) for the originally reported October 2019 details)...with this month's increase in OPEC's output, their October oil production of 24,386,000 barrels per day was at 26.7% of what was produced globally during the month, up from their 26.6% share of the global total in August and September....OPEC's October 2019 production, which included 448,000 barrels per day from former OPEC member Ecuador, was reported at 29,650,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 4,816,000, or 16.5% fewer barrels per day of oil this October than what they produced a year ago, when they accounted for 29.8% of global output... 

However, even after the increase 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...   

October 2020 OPEC report global oil demand

the above table came from page 27 of the September OPEC Monthly Oil Market Report (pdf page 36), 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 fifth column, we've circled in blue the figure that's relevant for October, which is their estimate of global oil demand during the fourth quarter of 2020...

OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe will be using an average of 93.67 million barrels of oil per day, which is a 1,190,000 barrels per day downward revision from the 94,86 million barrels of oil per day they were estimating for the 4th quarter a month ago (note we have encircled revisions in green), reflecting quite a bit of coronavirus related demand destruction compared to 2019, when 4th quarter global demand averaged 100.95 million barrels per day....but as OPEC show​ed 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 91.17 million barrels million barrels per day during October, which would imply that there was a shortage of around 2,500,000 barrels per day in global oil production in October when compared to the demand estimated for the month...

in addition to figuring October's global oil supply shortfall that's evident in this report, the downward revision of 120,000 barrels per day to September global oil output that's implied in this report means that the 280,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 440,000 barrels per day....meanwhile, with no revisions impacting previously published July and August figures, the 2,890,000 barrels per day global oil output shortage we had previously figured for July and the 1,570,000 barrels per day global oil output shortage we had previously figured for August would remain unchanged from what we reported a month ago.

However, note that in green we've also circled an upward revision of 20,000 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 upward revision to demand, our previous estimate that there was a surplus of 4,890,000 barrels per day in June would now be revised down to a 4,870,000 barrels per day surplus, the oil surplus of 7,670,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 7,650,000 barrels per day, and the 16,420,000 barrels per day that we had previously figured for April would have to be revised to a surplus of 16,400,000 barrels per day...  

Note there was also an upward revision of 30,000 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 17,780,000 barrels per day we had previously figured for March would have to be revised to a still record global oil surplus of 17,750,000 barrels per day, that the 1,900,000 barrel per day global oil production surplus we had figured for February would now be a 1,870,000 barrel per day global oil output surplus, and that the 930,000 barrel per day global oil output surplus we last had for January would now be revised to a 900,000 barrel per day oil output surplus.. so despite the shortage of oil that has developed in the second half of this year, it's obvious the world's oil producers had produced a lot of oil earlier this year that no one wanted...  

This Week's Rig Count

the US rig count rose for the 9th week in a row during the week ending November 13th, but for just the 11th time in the past 35 weeks, and hence it is still down by 60.1% over that thirty-five week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 12 to 312 rigs this past week, which was still down by 494 rigs from the 806 rigs that were in use as of the November 15th report of 2019, and was also 92 fewer rigs than the all time low prior to this year, and 1,617 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 10 rigs to 236 oil rigs this week, after increasing by 5 oil rigs the prior week, still leaving us with 438 fewer oil rigs than were running a year ago, and less than a sixth 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 2 to 73 natural gas rigs, which was still down by 56 natural gas rigs from the 129 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 were no such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was up by one to 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 9 fewer Gulf rigs than the 22 rigs drilling in the Gulf a year ago, when all 22 Gulf rigs were drilling offshore from Louisiana...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figure are equal to the Gulf rig counts....​however, in addition to those rigs offshore, there are now two rigs drilling through an inland bodies of water this week, one in St Mary's county in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there were no such rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 8 to 267 horizontal rigs this week, which was still 435 fewer horizontal rigs than the 702 horizontal rigs that were in use in the US on November 15th 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 directional rig count was up by four to 23 directional rigs this week, but those were also down by 31 from the 54 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was unchanged at 22 vertical rigs this week, and those were still down by 28 from the 50 vertical rigsthat were in use on November 15th 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 November 13th, the second column shows the change in the number of working rigs between last week's count (November 6th) and this week's (November 13th) count, the third column shows last week's November 6th 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 15th of November, 2019...    

November 13 2020 rig count summary

as you can see, rig increases ​were ​more widespread than in recent weeks, when activity was more subdued...checkin​g ​first for the details on the Permian in Texas, we find that five rigs were added in Texas Oil District 8, which roughly corresponds to the core Permian Delaware, while a rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland...that means that the Texas Permian saw a net four rig increase...since the Permian basin rig count was up by seven rigs nationally, that means that the three rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national increase...elsewhere in Texas, we find that one rig was added in Texas Oil District 2, and another rig was added in Texas Oil District 4, while a rig was pulled out of Texas Oil District 3, which could be two rigs added in the Eagle Ford while one was pulled out, or one rig added in the Eagle Ford while rigs were added and removed from other unnamed basins..in addition, another rig was added in Texas Oil District 6, which also​ ​appears to be targetting an unnamed basin, thus bringing the Texas count up to 6...elsewhere, the rig increase in the Cana Woodford accounts for the Oklahoma addition, while the Louisiana rig increase is the rig that was added in the Gulf of Mexico...for natural gas rigs, we had the rig that was added in the Eagle Ford, and two rigs that were added in the Marcellus in Pennsylvania, while one natural gas rig was removed from Ohio's Utica shale at the same time..

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note: there's more here...