oil prices fell for the first time in 8 weeks this week, as a mutant strain of the coronavirus spreading in the UK prompted a severe lockdown there and new travel restrictions world-wide...after rising more than 5% to $49.10 a barrel last week on a lower dollar and optimism about the vaccine rollouts, the contract price of US light sweet crude for January delivery fell in early trading on Monday as a new, fast-spreading mutant strain of coronavirus in the UK raised concerns that tighter restrictions there and elsewhere would stall the recovery in the need for fuel, and was down nearly $3 or 6% before recovering to close $1.36 lower at $47.74 a barrel despite the rollout of a new vaccine in the US, a congressional deal for a $900 billion coronavirus aid package, and European approval for the use of the COVID-19 vaccine developed by Pfizer, as trading in the January US oil contract expired...now quoting the contract price of US crude for February delivery, which had fallen $1.27 to $47.97 a barrel on Monday, oil prices continued sliding on Tuesday, following new travel bans and lockdowns in Europe and the U.S. to combat the fast-spreading variant of the disease, as February crude settled 95 cents lower at $47.02 a barrel, with losses limited after France's Europe minister said his country would restart freight to the UK by the next day...US oil prices then drifted lower in overseas trading after the American Petroleum Institute reported a surprise gain of 2.7 million barrels in US crude supplies, and then opened lower in New York on Wednesday and were down nearly 2% before the EIA reported withdrawals from U.S. inventories of crude, gasoline and distillate fuels, sparking a turnaround in oil prices which then settled 2.34%, or $1.10, higher at $48.12 per barrel...oil prices again moved higher on Thursday on news that Britain and the European Union had signed a post-Brexit trade deal and finished the shortened pre-holiday session 11 cents higher at $48.24 per barrel, but still finished the week 2.1% lower as traders fretted that a resurgence in the Covid-19 pandemic in the U.S. and Europe would hurt demand for energy, without a sufficient bailout from governments to promote consumer and business activity...
natural gas prices also ended lower this week, as the weather turned milder and inventory withdrawals failed to meet expectations...after rising 4.2% to $2.700 per mmBTU last week as major winter storms moved through the eastern US population centers, the contract price of natural gas for January delivery opened more than 1% higher on Monday as surging LNG exports and forecasts for colder weather in late December outweighed concerns over the new coronavirus strain, but slid from the initial spurt to close just a half cent higher at $2.705 per mmBTU as new UK travel restrictions were imposed by several European countries and Canada...natural gas prices then jumped on Tuesday on forecasts for colder weather and expectations of a large withdrawal of gas from storage and held on to settle 7.5 cents higher at $2.780 per mmBTU....however, natural gas futures plummeted on Wednesday as weather models continued to seesaw, gas production increased, export cargoes were cancelled, and the awaited inventory report fell short of market expectations, and finished 17.2 cents, or over 6% lower, at $2.608 per mmBTU...natural gas prices continued to sink in light Christmas eve trading amid mild temperatures and light heating demand across much of the Lower 48 and settled another 9.0 cents lower at $2.518 per mmBTU, thus closing with a 6.7% loss on the week..
the natural gas storage report from the EIA for the week ending December 18th indicated that the quantity of natural gas held in underground storage in the US decreased by 152 billion cubic feet to 3,574 billion cubic feet by the end of the week, which still left our gas supplies 278 billion cubic feet, or 8.4% higher than the 3,296 billion cubic feet that were in storage on December 18th of last year, and 218 billion cubic feet, or 6.8% above the five-year average of 3,356 billion cubic feet of natural gas that have been in storage as of the 18th of December in recent years....the 152 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 had expected a 154 billion cubic foot withdrawal, but was higher than the average withdrawal of 127 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and more than the 146 billion cubic feet withdrawal from natural gas storage seen 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 December 18th indicated that because of another big increase in our oil exports, we had to withdraw oil from our stored commercial supplies for the 15th time in the past twenty-two weeks and for the 21st time in the past forty-nine weeks ...our imports of crude oil rose by an average of 140,000 barrels per day to an average of 5,564,000 barrels per day, after falling by an average of 1,055,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 472,000 barrels per day to an average of 3,099,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,465,000 barrels of per day during the week ending December 18th, 322,000 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 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 13,465,000 barrels per day during this reporting week...
meanwhile, US oil refineries reported they were processing 14,014,000 barrels of crude per day during the week ending December 18th, 169,000 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 of 80,000 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 469,000 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 (+469,000) 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 size in the oil supply & demand figures that we have just transcribed....furthermore, since last week's fudge factor was at -61,000 barrels per day, there was a 530,000 barrel per day balance sheet difference from a week ago, which renders the week over week supply and demand changes we have just transcribed unreliable...(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 5,717,000 barrels per day last week, which was still 12.9% less than the 6,566,000 barrel per day average that we were importing over the same four-week period last year.....the 80,000 barrel per day net withdrawal from our crude inventories was due to a 80,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 13,000 barrels per day increase to 514,000 barrels per day in Alaska's oil production had no impact on the rounded national total...last year's US crude oil production for the week ending December 20th 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 78.0% of their capacity while using 14,014,000 barrels of crude per day during the week ending December 18th, down from 79.1% of capacity during the prior week, and excluding earlier this year and the 2005, 2008, and 2017 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the past twenty-eight years....hence, the 14,014,000 barrels per day of oil that were refined this week were still 17.5% fewer barrels than the 16,980,000 barrels of crude that were being processed daily during the week ending December 20th of last year, when US refineries were operating at 93.3% of capacity...
even with the decrease in the amount of oil being refined, gasoline output from our refineries was higher for the 2nd time in six weeks, increasing by 307,000 barrels per day to 8,829,000 barrels per day during the week ending December 18th, after our refineries' gasoline output had increased by 182,000 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 14.0% less than the 10,269,000 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 14,000 barrels per day to 4,590,000 barrels per day, after our distillates output had decreased by 67,000 barrels per day over the prior week....since it's also just coming off a three year low, our distillates' production was 14.9% less than the 5,394,000 barrels of distillates per day that were being produced during the week ending December 20th, 2019...
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the first time in six weeks and for 15th time in 25 weeks, falling by 1,125,000 barrels to 237,754,000 barrels during the week ending December 18th, after our gasoline inventories had increased by 1,020,000 barrels over the prior week...our gasoline supplies decreased this week because this week's adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components was at +103,000 barrels per day vs last week's -370,000 barrels per day, and because the amount of gasoline supplied to US markets increased by 47,000 barrels per day to 8,022,000 barrels per day, and because our imports of gasoline fell by 40,000 barrels per day to 571,000 barrels per day while our exports of gasoline fell by 27,000 barrels per day to 757,000 barrels per day....after this week's decrease, our gasoline supplies were 0.6% lower than last December 20th's gasoline inventories of 239,260,000 barrels, but still about 4% above the five year average of our gasoline supplies for this time of the year...
meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels decreased for the 11th time in 14 weeks, and for the 30th time in the past year, falling by 2,325,000 barrels to 148,934,000 barrels during the week ending December 18th, after our distillates supplies had increased by 167,000 barrels during the prior week....our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 172,000 barrels per day to 4,174,000 barrels per day, and because our exports of distillates rose by 123,000 barrels per day to 1,193,000 barrels per day, and because our imports of distillates fell by 48,000 barrels per day to 444,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were 19.2% above the 124,944,000 barrels of distillates that we had in storage on December 20th, 2019, and about 10% above the five year average of distillates stocks for this time of the year...
finally, with the increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) fell for the 17th time in the past twenty-eight weeks and for the 20th time in the past year, decreasing by 562,000 barrels, from 500,096,000 barrels on December 11th to 499,534,000 barrels on December 18th....but even after that modest decrease, our commercial crude oil inventories rose to 11% above the five-year average of crude oil supplies for this time of year, and rose to 50.8% above the prior 5 year (2010 - 2014) average of our crude oil stocks as of the third weekend of December, 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 December 18th were 13.2% above the 441,359,000 barrels of oil we had in commercial storage on December 20th of 2019, also 13.2% more than the 441,411,000 barrels of oil that we had in storage on December 21st of 2018, and 14.4% above the 436,491,000 barrels of oil we had in commercial storage on December 15th of 2017...
This Week's Rig Count
note: this week's rig count was released on Wednesday ahead of the Christmas holiday, and hence only covers five days...nonetheless, the US rig count rose for the 14th time in the past fifteen weeks during the period ending December 23rd, but for just the 16th time in the past 41 weeks, and hence it is still down by 56.1% over that thirty-eight week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 2 to 348 rigs this past week, which was still down by 457 rigs from the 805 rigs that were in use as of the December 27th report of 2019, and was also still 56 fewer rigs than the all time low rig count prior to this year, and 1,581 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 1 rig to 264 oil rigs this week, after rising by 5 oil rigs the prior week, leaving us with 413 fewer oil rigs than were running a year ago, and still 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 85 natural gas rigs, which was still down by 42 natural gas rigs from the 125 natural gas rigs that were drilling a year ago, and just 5.3% 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 or gas, one rig classified as 'miscellaneous' continue to drill in Lake County, California this week, while a year ago there were three such "miscellaneous" rigs deployed...
The Gulf of Mexico rig count increased by 1 to 17 rigs this week, with 14 of those rigs drilling for oil in Louisiana's offshore waters and three drilling for oil offshore from Texas...that was still 6 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when 21 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas...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 figures are equal to the Gulf rig counts....however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..
The count of active horizontal drilling rigs was up by 1 to 309 horizontal rigs this week, which was still 394 fewer horizontal rigs than the 703 horizontal rigs that were in use in the US on December 27th 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 1 to 22 directional rigs this week, but those were also still down by 31 from the 53 directional rigs that were operating during the same week of last year....meanwhile, the vertical rig count was unchanged at 17 vertical rigs this week, and those were still down by 32 from the 49 vertical rigs that were in use on December 27th of 2019....
The details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of December 23rd, the second column shows the change in the number of working rigs between last week's count (December 18th) and this week's (December 23rd) count, the third column shows last week's December 18th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 27th of December, 2019...
note that this week saw the first decrease in the Permian basin rig count since September 11th....so, first checking for the details on the Permian in Texas, we find that one rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which roughly corresponds to the southern portion of the Permian Midland, which thus means that the net Permian rig count in Texas was unchanged...since the Permian basin rig count was down by 1 rig nationally, that means that the rig that was shut down in New Mexico must have been pulled out of the farthest west reaches of the Permian Delaware, to account for the national Permian decrease...elsewhere in Texas, we have a rig added in Texas Oil District 6, which accounts for one of this week's Haynesville shale rig additions. while the other two Haynesville rigs were added in adjacent northwestern Louisiana....those two Haynesville gas rigs and the oil rig that was added offshore account for Louisiana's 3 rig increase...at the same time, in Oklahoma we had a rig added in the Cana-Woodford while there was a two rig increase in the state, which means that an Oklahoma rig was added in an "other" basin that Baker Hughes does not track...on the other hand, the rig count is down by one in Colorado because there was a rig pulled out of the Denver-Julesburg Niobrara chalk....meanwhile, for rigs targeting natural gas, we have the three rigs that were added in the Haynesville shale, while a natural gas rig was pulled out of West Virginia's Marcellus at the same time..
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note: there's more here....
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