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 our 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...
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 thosehorizontal 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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