Masters Of War

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

Monday, December 6, 2021

natural gas prices fall by most in 8 years, maybe most ever; SPR at an 18 1/2 year low; 22 week low in gasoline demand

natural gas prices fall by the most in almost 8 years, maybe ​by the most ever; Strategic Petroleum Reserve ​is ​at an 18 1/2 year low; gasoline supplies rose by most in 22 weeks on a 22 week low in demand

oil prices fell for the sixth consecutive week​ this week​, as OPEC decided to increase production even as a Omicron surge loomed...after falling 10.4% to $68.15 a barrel last week after the discovery of a new Covid variant sent global markets tumbling, the contract price for US light sweet crude for January delivery opened 2% higher on Monday on bargain hunting by oil traders returning to the market following "black Friday's" 13% plunge, and rallied more than 5% to trade as high as $72.93​,​ before paring the day's gains to settle $1.80 higher at $69.95 a barrel, as traders turned their focus to the upcoming meeting among OPEC and Russia-led partners, and the possible delay of their planned production increase in light of renewed travel resections tied to the emergence omicron variant of ​Covid....but oil prices tumbled nearly 5 percent on Tuesday after Moderna’s ​CEO cast doubt on the efficacy of COVID-19 vaccines against the Omicron variant, spooking financial markets and adding to worries about oil demand, as oil ​settled $3.77 lower at $66.18 a barrel, thus ending November 20.8% lower, the biggest monthly drop in prices since March 2020....oil prices jumped more than 4% ahead of the OPEC meeting early Wednesday on speculation the producer's group might pause their supply hikes, but pared a portion of the gains late morning Wednesday after an inventory report from the EIA showed domestic crude oil production jumped to an 18-month high, and gasoline and distillate fuels supplies registered large builds, only to completely reverse the morning rally to fall 5% and settle 61 cents lower at $65.57 per barrel​,​ after the CDC announced the first US case of Omicron...oil prices whipsawed between 5% lower and 3% higher on Thursday, as traders reassessed near-term supply fundamentals after OPEC+ unexpectedly decided to proceed with a 400,000-barrel-per-day (bpd) production increase, a move that ​was expected to exacerbate a buildup in global oil inventories, and settled 93 cents higher at $66.50 a barrel, even as the alliance said in a statement that "the meeting remains in session," ​suggesting they c​ould "make immediate adjustments" should the current market conditions shift... oil prices continued higher early Friday, rising as much as 4% at one point, after the OPEC+ alliance said it could immediately revisit that 400,000 bpd increase if demand suffers in coming weeks, but again reversed and gave back all its gains, closing 24 cents lower at $66.26 a barrel, as a weaker-than-expected US jobs report and ​the ​rapidly spreading omicron variant added uncertainty to demand outlooks, and thus closed down for the sixth straight week, the longest stretch of weekly declines since 2018, and 2.8% lower than last Friday's close...

t​o illustrate how oil prices ran up to a 7 year high of $83.83 on October ​25th only to tumble back to a three month low this week, we'll include a graph below showing the trajectory of oil prices over the past 6 months..

The above is a screenshot of the current contract's interactive oil price chart from barchart.com, which i have set to show ​daily oil prices ​for the January 2022 oil contract over the past 6 months....th​at​ same chart can be reset to show prices of front month or individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of oil prices for ​one day, with days when prices rose indicated in green, with th​at ​day's ​opening price at the bottom of the bar and the​ day's​ closing price at the top, ​while ​days when prices fell ​are ​indicated in red, with the opening price at the top of the bar and the closing price at the bottom​...the small barely visible sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the ​day in question....​ ​likewise, the bars across the bottom show trading volume for the ​January oil contract for the ​days in question, again with up ​days indicated by green bars and down ​days indicated in red....​espectially noteworthy on the graph above is the 13.1% drop in prices on Friday of last week,​ the largest daily drop since April 2020 (when oil prices ​fell below $0)​, when global markets tanked with the discovery of the new Covid strain...​

meanwhile, ​this week's ​natural gas prices fell by the most in nearly 8 years ​due to a forecast​ for a​ warm December, increasing expectations that gas supplies would ​remain adequate for the rest of winter​....after the contract price of natural gas for December delivery rose 7.5% to expire at $5.447 per mmBTU last week on higher domestic heating demand and record global gas prices, this week's natural gas trading started with the contract price of natural gas for January delivery plummeting 62.3 cents or 11.4% to $4.854 per mmBTU, as forecasts shifted warmer through the middle of December, allaying concern about tight domestic supplies amid a global shortage of the fuel...natural gas prices continued tumbling Tuesday, shedding another 28.7 cents or nearly 6%​,​ to settle at a 3 month low of $4.567 per mmBTU, as traders looked past robust demand for U.S. exports and fixated on exceptionally light domestic heating demand expectations heading well into December, as natural gas contracts ended November down more than 15%, the biggest monthly percentage loss since January 2020....natural gas prices were down almost 7% again on Wednesday in falling 30.9 cents to ​another ​3 month low ​at $4.258 per mmBTU, on ongoing forecasts for mild winter weather, record gas production, and ample amounts of gas in storage, and then gave up early gains to fall another 20.2 cents, or 4.7% to ​$​4.056​ ​per mmBTU on Thurday, after the latest government storage data failed to generate any buzz in the market...natural gas prices finally managed to gain 7.6 cents or nearly 2% on Friday, on forecasts for slighly cooler weather, rising LNG exports and a small decline in output to finish the week at $4.132 per mmBTU, still down 24% from the prior week and the biggest weekly decline since February 2014...

​you'll note that i cited Reuters for that "biggest weekly decline since February 2014"; curious to see what happened back then, i brought up an interactive natural gas price graph, set it to show weekly prices changes, and scrolled back over recent natural gas​ ​price history​ to see what might have happened at that time....as it turned out, there was no weekly price decline of this week's magnitude shown during February 2014​; the worst down ​week that month was the week of February 24, when natural gas prices opened at $5.089 and closed at $4.609, and the week over week change was minus 40.3 cents...earlier that month, during the week ending February 3rd, 2014, there was more volatility, with a 99.8 cent difference between the high and low price, but at the end of the week prices were only down 16.8 cents...so whatever Reuters was looking at there, i didn't see it...in fact, i think this week's drop was the greatest on record, but that's a conclusion i've arrived at by manually searching for big price changes, which could be prone to error...

i'll include a natural price graph price graph here and describe the method i've used, in case anyone else wants to give it a shot...:

The above graph is a screenshot of the ​current ​interactive natural gas price chart from barchart.com, which i have set to show front month natural gas prices ​weekly over the past 20 years, which means you're seeing the range of natural gas prices over that time as they were quoted daily by the media...​again, ​this same chart can be reset to show prices of front month or individual monthly natural gas contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of natural gas prices for a single week, with weeks when prices rose indicated in green, and weeks when prices fell indicated in red, with the small barely visible sticks above or below each​ weekly bar representing the extent of the price change above or below the opening and closing price for the week​ ​in question....likewise, the bars across the bottom show trading volume for the weeks in question, again with up weeks indicated by green bars and down weeks indicated in red...

​you can see that on the 5 year graph above​, this week's $1.345, or 24% drop in natural gas prices shows up as a large red bar, clearly the largest red bar on the graph, hence telling us that this week's price drop was the largest over the 5 year span of the graph...the only other weekly red bar that's close is that of December 10, 2018, when natural gas prices opened at $4.590 and closed at $3.827, prices one can get directly from this interactive graph by hovering one's cursor over the date in question...thus it's just a simple matter of scrolling back through the prior years on the graph looking for a red bar the size of this week's and checking the data....so i went back past 10 years and found nothing close to a 24% drop; moreover, i didnt see a weekly drop in natural gas prices of any magnitude ultil after the 2008 price spike...while there were a couple occasions that year when nominal prices fell a bit more than this week's $1.345, that was when natural gas prices were over $10, so the percentage drop back then was much less than this week, not any more than 16%...

The EIA's natural gas storage report for the week ending November 26th indicated that the amount of working natural gas held in underground storage in the US fell by 59 billion cubic feet to 3,564 billion cubic feet by the end of the week, which left our gas supplies 375 billion cubic feet, or 9.5% below the 3,939 billion cubic feet that were in storage on November 26th of last year, and 86 billion cubic feet, or 2.4% below the five-year average of 3,650 billion cubic feet of natural gas that have been in storage as of the 26th of November over the most recent years...the 59 billion cubic foot withdrawal from US natural gas working storage this week was in line with the average forecast for a 58 billion cubic foot withdrawal from Reuters, Bloomberg and Natural Gas Intelligence's surveys of analysts, but it dwarfed the 4 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2020, and ​was ​almost double the average withdrawal of 31 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years… 

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 26th showed that after a switch of “unaccounted for crude oil” from the supply side to the demand side, we needed to pull oil out of our stored commercial crude supplies for the third time in ten weeks and for the twenty-third time in the past thirty-five weeks….our imports of crude oil rose by an average of 168,000 barrels per day to an average of 6,604,000 barrels per day, after rising by an average of 245,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 99,000 barrels per day to an average of 2,704,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,900,000 barrels of per day during the week ending November 26th, 69,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,500,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,631,000 barrels of crude per day during the week ending November 26th, an average of 9,000 fewer barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 408,000 barrels of oil per day were being pulled out 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 277,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plunked a (-277,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...and since last week’s EIA fudge factor was at (+220,000) barrels per day, that means there was a 497,000 barrel per day difference in the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are fairly useless...however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably 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)….

This week's 408,000 barrel per day net decrease in our crude oil inventories came as 130,000 barrels per day were pulled out of our commercially available stocks of crude oil, while 278,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, possibly still part of an emergency loan of oil to Exxon in the wake of hurricane Ida...including the drawdowns from the Strategic Petroleum Reserve under such emergency programs, a total of 51,920,000 barrels per day have been removed from the Strategic Petroleum Reserve for a series of other "emergencies" over the past 16 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 18 1/2 year low of 602,556,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs have already drained those supplies over the past dozen years...with the BIden administration's announcement last week that another 50 million barrels of oil will be released to incentivize continued use of American gas guzzlers, we have initiated weekly coverage of the SPR storage status on this blog...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,335,000 barrels per day last week, which was 18.5% more than the 5,345,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,600,000 barrels per day even though the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,100,000 barrels per day, because a 5,000 barrel per day increase in Alaska’s oil production to 454,000 barrels per day added 100,000 barrels per day to the reported rounded national production total (EIA mat​h​)​..​.US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 11.5% below that of our pre-pandemic production peak, but 37.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 88.​8% of their capacity while using those 15,631,000 barrels of crude per day during the week ending November 26th, up from 88.6% of capacity the prior week, but still a bit below normal utilization for late-autumn refinery operations…the 15,631,000 barrels per day of oil that were refined this week were 11.6% more barrels than the 14,012,000 barrels of crude that were being processed daily during the pandemic impacted week ending November 27th of last year, but 6.9% less than the 16,798,000 barrels of crude that were being processed daily during the week ending November 29th, 2019, when US refineries were operating at what was then a close to normal 91.9% of capacity...

Even with the amount of oil being refined little changed this week, the gasoline output from our refineries was quite a bit lower, decreasing by 450,000 barrels per day to 9,649,000 barrels per day during the week ending November 26th, after our gasoline output had increased by 177,000 barrels per day over the prior week.…this week’s gasoline production was still 12.4% more than the 8,584,000 barrels of gasoline that were being produced daily over the same week of last year, but 2.9% less than the gasoline production of 9,941,000 barrels per day during the week ending November 29th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 88,000 barrels per day to 4,872,000 barrels per day, after our distillates output had decreased by 58,000 barrels per day over the prior week…with that increase, our distillates output was 6.2% more than the 4,587,000 barrels of distillates that were being produced daily during the week ending November 27th, 2020, but 7.4% less than the 5,263,000 barrels of distillates that were being produced daily during the week ending November 29th, 2019..

Even with the big d​rop in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the first time in eight weeks, and for the thirteenth time in thirty-two weeks, rising by 4,029,000 to 215,422,000 barrels during the week ending November 26th, after our gasoline inventories had decreased by 603,000 barrels to a 48 month low over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 538,000 barrels per day to ​a 22 week low of ​8,796,000 barrels per day, and because our imports of gasoline rose by 160,000 barrels per day to 643,000 barrels per day, while our exports of gasoline rose by 279,000 barrels per day to 887,000 barrels per day…even after this week’s big inventory increase, our gasoline supplies were 7.8% lower than last November 27th's gasoline inventories of 233,638,000 barrels, and about 5% below the five year average of our gasoline supplies for this time of the year…

With the increase in our distillates production, our supplies of distillate fuels increased for the third time in fourteen weeks and for the 11th time in 34 weeks, rising by 2,160,000 barrels to 123,877,000 barrels during the week ending November 26th, after our distillates supplies had decreased by 1,968,000 barrels to a 23 month low during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 182,000 barrels per day to 4,209,000 barrels per day, and because our exports of distillates fell by 419,000 barrels per day to 588,000 barrels per day​,​ while our imports of distillates fell by 98,000 barrels per day to 234,000 barrels per day....but after twenty-three inventory decreases over the past thirty-four weeks, our distillate supplies at the end of the week were 15.1% below the 145,870,000 barrels of distillates that we had in storage on November 27th, 2020, and about 9% below the five year average of distillates stocks for this time of the year…

Meanwhile, in addtion to this week's withdrawal of oil from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage also fell for the 17th time in the past twenty-seven-weeks and for the 33rd time in the past year, decreasing by 909,000 barrels over the week, from 434,020,000 barrels on November 19th to 433,111,000 barrels on November 26th, after our commercial crude supplies had increased by 1,017,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories slipped to around 6% below the most recent five-year average of crude oil supplies for this time of year, but were still 24.9% above the average of our crude oil stocks as of the last weekend of November over the 5 years at the beginning of the past decade, 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 jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this November 26th were 11.3% less than the 488,042,000 barrels of oil we had in commercial storage on November 27th of 2020, and are now 3.1% less than the 447,096,000 barrels of oil that we had in storage on November 29th of 2019, and 2.3% less than the 443,162,000 barrels of oil we had in commercial storage on November 30th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all at or near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, rose by 2,319,000 barrels this week, from 1,822,392,000 barrels on November 19th to 1,824,711,000 barrels on November 26th, which is still the 2nd lowest level of total US inventories since January 23rd, 2015, just up fractionally from last week's a 82 month low...

This Week's Rig Count

The number of drilling rigs active in the US were unchanged in this week's report, which covers the nine days ending Friday, December 3rd, because last week's report was released 2 days early due to the Thanksgiving holiday....Baker Hughes reported that the total count of rotary rigs running in the US increased was unchanged at 569 rigs over that period, which was also 246 more rigs than the pandemic hit 323 rigs that were in use as of the December 4th report of 2020, but was also still 1,360 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was unchanged at 467 oil rigs during this period, after they had increased by 6 oil rigs the prior week, but there are now 221 more oil rigs active now than were running a year ago, even as they still amount to just 29.0% of the 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 was ​also ​unchanged at 102 natural gas rigs, which was still up by 27 natural gas rigs from the 75 natural gas rigs that were drilling during the same week a year ago, but still only 6.4% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition, last year's rig count also included 3 rigs that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was down by 2 rigs to 13 rigs this week, with ​eleven of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas...that equals the count of 13 rigs in the Gulf a year ago, when 1​2 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig count is equal to the national offshore totals..

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was unchanged at 513 horizontal rigs this week, which was still 77.5% more than the 289 horizontal rigs that were in use in the US on December 4th of last year, but was 62.7% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014...however, the directional rig count was down by three to 31 directional rigs this week, but those were still up by 13 from the 18 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was up by 3 to 25 vertical rigs this week, and those were up by 9 from the 16 vertical rigs that were in use on December 4th of 2020….

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 3rd, the second column shows the change in the number of working rigs between last week’s count (November 24th) and this week’s (December 3rd) count, the third column shows last week’s November 24th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 4th of December, 2020...

this week saw a five rig increase in New Mexico, which was offset by rig decreases elsewhere...to determine what happened in New Mexico, we first check the Rigs by State file at Baker Hughes for changes in the Texas Permian basin...there we find that one rig was pulled out of Texas Oil District 8, which is the core Permian Delaware, and that another rig was pulled out of Texas Oil District 8A, which covers the northernmost Permian Midland, thus indicating an overall two rig decrease in the Texas Permian...since the national Permian rig count was up by 3, that means that all five rigs that were added in New Mexico had to have been set up in the westernmost reaches of the Permian Delaware, to account for the national Permian basin increase... elsewhere, the two rigs removed from Louisiana had been drilling in the state's offshore waters; counts in all other regions of Louisiana were unchanged...the rig that was pulled out of California came from a basin that Baker Hughes doesn't track, while the rig that was removed from Oklahoma's Cana Woodford had to have been offset by a rig addition elsewhere in the state, also in a basin that Baker Hughes doesn't track, for the state's rig count to remain unchanged..

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Note: there’s more here

Monday, November 29, 2021

SPR at a 18 yr low, gasoline supplies at 48 mo low, distillate supplies at 23 mo low; total inventories at an 82 month low...

oil prices drop 13% on new Covid variant; Strategic Petroleum Reserve at a 18 year low as US plans further withdrawals; another 48 month low for gasoline inventories; a 23 month low for distillate inventories, and an 82 month low for total inventories...

oil prices fell nearly 10% this week, their fifth decrease in a row, as the discovery of a new Covid variant sent global equity and commodity markets tumbling on Friday....after the contract price for US light sweet crude for December delivery fell 5.6% to $76.10 a barrel last week on heavy profit-taking ahead of potential release of strategic oil reserves, trading in that oil contract expired, and this week's oil trading opened with the contract for US light sweet crude for January priced at $75.75, down 19 cents from last week's close, which then fell more than $1, as expanded C​ovid​-19 restrictions across European Union fueled demand fears...however, oil prices reversed course by midday on speculation that OPEC would respond to any coordinated oil reserves release to settle 81 cents higher at $76.75 a barrel on reports that OPEC+ would adjust plans to raise oil production if large consuming countries released crude from their reserves or if the coronavirus pandemic dampened demand (note that AP incorrectly reported "oil for January delivery rose 65 cents to $76.75 a barrel", referencing the increase from last week's closing price for December oil, and that error was widely repeated elsewhere)...oil prices erased early losses and jumped on Tuesday morning following the announcement from the U.S. that it would make available 50 million barrels of oil from the Strategic Petroleum Reserve and ended $1.75, or 2.5% higher at $78.50 a barrel as traders dismissed Biden's plan to lower prices and instead assessed the risks from the expect OPEC response...oil prices first softened in early trading on Wednesday after industry data from the American Petroleum Institute reported that U.S. commercial crude and gasoline inventories unexpectedly increased last week, but then edged higher following the release of EIA data showing domestic production rose to 11.5 million barrels per day (bpd), offsetting larger-than-expected drawdown from fuel supplies, only to fade near the close and settle 11 cents lower at $78.39 a barrel as the US dollar hit a 17 year high, and as traders awaited OPEC+’s response to the coordinated release of strategic reserves by several countries...oil prices slid more than 1% early Friday after the holiday on concerns that a global supply surplus could swell in the first quarter following that US led coordinated release of crude reserves and then tumbled more than $6 or nearly 9% midday, hitting a two-month low as a new COVID-19 variant spooked traders and added to concerns that a supply surplus could swell in the first quarter and settled down by $10.24, or more than 13% lower at $68.15 a barrel, the largest daily drop since April 2020 (when oil prices had fallen below $0) amid a broad sell-off in global markets, as the new Covid-19 strain sparked fears that demand would slow just as supply was to increase...that Friday selloff left oil prices down more than 10.4% on the week, while the January contract, which had ended last week priced at $75.94, finished almost 10.3% lower...

meanwhile, natural gas prices moved higher for the 11th time in 15 weeks on forecasts for higher domestic heating demand, as global gas​ ​prices also ​pushed higher....after rising 5.6% to $5.065 per mmBTU last week as global prices hit new highs and forecasts turned colder, the contract price of natural gas for December delivery opened more than 3% lower on Monday and tumbled to settle down 27.6 cents near an 11 week low​ of $4.789 per mmBTU,​ on forecasts for milder than normal weather over the next two weeks, near record U.S. output, and a decline in European gas prices....but US prices recovered quickly Tuesday and rallied to close 17.8 cents or 3.7% higher at $4.96.7 per mmBTU as a sharp increase in global gas prices kept demand for US LNG exports near record highs...prices completed the recovery of Monday's losses on Wednesday, rising 10.1 cents or 2% to $5.068  per mmBTU on forecasts for cooler weather and an increase in heating demand over the next two weeks, as the EIA reported the first withdrawal of natural gas from storage of the 2021-22 heating season...natural gas prices then soared 37.9 cents to $5.447 per mmBTU on Friday on forecasts for higher heating demand than was previously expected, thus finishing the week 7.5% higher, the largest weekly jump in almost 2 months, as trading in the December natural gas contract expired....

The EIA's natural gas storage report for the week ending November 19th indicated that the amount of working natural gas held in underground storage in the US fell by 21 billion cubic feet to 3,644 billion cubic feet by the end of the week, the first withdrawal of the season, which left our gas supplies 320 billion cubic feet, or 8.1% below the 3,943 billion cubic feet that were in storage on November 19th of last year, and 58 billion cubic feet, or 1.6% below the five-year average of 3,681 billion cubic feet of natural gas that have been in storage as of the 19th of November ​over the most recent years...the 21 billion cubic foot withdrawal from US natural gas working storage this week was just below the average forecast for a 23 billion cubic foot withdrawal from a S&P Global Platts survey of analysts, but it was almost double the 11 billion cubic feet ​​that were pulled from natural gas storage during the corresponding week of 2020, while it was less than half of the average withdrawal of 44 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…     

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 19th showed that a big drop in our oil exports, a modest increase in our oil imports, a modest withdrawal of oil from our Strategic Petroleum Reserve and incrementally higher oilfield production together meant we had a little surplus oil to add to our stored commercial crude supplies for the seventh time in nine weeks and for the twelfth time in the past thirty-four weeks….our imports of crude oil rose by an average of 245,000 barrels per day to an average of 6,436,000 barrels per day, after rising by an average of 83,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,021,000 barrels per day to an average of 2,605,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,831,000 barrels of per day during the week ending November 19th, 1,266,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,500,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,331,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,640,000 barrels of crude per day during the week ending November 19th, an average of 243,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 89,000 barrels of oil per day were being pulled out 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 220,000 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 plunked a (+220,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...and since last week’s EIA fudge factor was at (+668,000) barrels per day, that means there was a 448,000 barrel per day difference in the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are fairly useless...however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably 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)….

This week's 89,000 barrel per day net decrease in our crude oil inventories came as 145,000 barrels per day were added to our commercially available stocks of crude oil while 235,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, apparently still part of an emergency loan of oil to Exxon in the wake of hurricane Ida...including the 16,797,000 barrels per day drawdown from the Strategic Petroleum Reserve under that emergency program, a total of 51,642,000 barrels per day have been removed from the Strategic Petroleum Reserve for a series of other "emergencies" over the past 16 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 18 year low of 604,505,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs have already drained those supplies over the past dozen years...with the BIden administration's announcement this week that another 50 million barrels of oil will be released to incentivize continued use of American gas guzzlers, we will now initiate weekly coverage of the SPR storage status on this blog...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,227,000 barrels per day last week, which was 18.5% more than the 5,253,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,500,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,100,000 barrels per day, while a 5,000 barrel per day increase in Alaska’s oil production to 449,000 barrels per day had no impact on the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 12.2% below that of our pre-pandemic production peak, but 36.4% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016... 

US oil refineries were operating at 88.6% of their capacity while using those 15,640,000 barrels of crude per day during the week ending November 19th, up from 87.9% of capacity the prior week, but still a bit below normal utilization for late-autumn refinery operations…the 15,640,000 barrels per day of oil that were refined this week were 9.7% more barrels than the 14,263,000 barrels of crude that were being processed daily during the pandemic impacted week ending November 20th of last year, but 4.4% less than the 16,334,000 barrels of crude that were being processed daily during the week ending November 22nd, 2019, when US refineries were operating at what was then also a bit below normal 89.3% of capacity...

With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also higher, increasing by 177,000 barrels per day to 10,099,000 barrels per day during the week ending November 19th, after our gasoline output had decreased by 132,000 barrels per day over the prior week.…this week’s gasoline production was also 14.1% more than the 8,850,000 barrels of gasoline that were being produced daily over the same week of last year, and a bit more than the gasoline production of 10,065,000 barrels per day during the week ending November 22nd, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 58,000 barrels per day to 4,784,000 barrels per day, after our distillates output had decreased by 26,000 barrels per day over the prior week…despite the recent decreases, our distillates output was 4.3% more than the 4,587,000 barrels of distillates that were being produced daily during the week ending November 20th, 2020, but 5.7% less than the 5,075,000 barrels of distillates that were being produced daily during the week ending November 22nd, 2019..

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week decreased for the tenth time in thirteen weeks, and for the nineteenth time in thirty-one weeks, falling by 603,000 barrels to another 48 month low of 211,393,000 barrels during the week ending November 19th, after our gasoline inventories had decreased by 707,000 barrels to a 48 month low over the prior week...our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 93,000 barrels per day to 9,334,000 barrels per day, and because our imports of gasoline fell by 340,000 barrels per day to 843,000 barrels per day, while our exports of gasoline fell by 223,000 barrels per day to 608,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 8.1% lower than last November 20th's gasoline inventories of 230,147,000 barrels, and about 6% below the five year average of our gasoline supplies for this time of the year…

With the decrease in our distillates production, our supplies of distillate fuels decreased for the eleventh time in thirteen weeks and for the 23nd time in 33 weeks, falling by 1,968,000 barrels to a 23 month low of 121,717,000 barrels during the week ending November 19th, after our distillates supplies had decreased by 824,000 barrels to a 19 month low 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 41,000 barrels per day to 4,350,000 barrels per day, and because our exports of distillates rose by 151,000 barrels per day to 1,007,000 barrels per day while our imports of distillates rose by 93,000 barrels per day to 332,000 barrels per day....and after twenty-three inventory decreases over the past thirty-three weeks, our distillate supplies at the end of the week were 14.7% below the 142,632,000 barrels of distillates that we had in storage on November 13th, 2020, and about 8% below the five year average of distillates stocks for this time of the year…

Meanwhile, with this week's drop in our oil exports, the increase in our oil imports, and the withdrawal of oil from our Strategic Petroleum Reserve more than offsetting the increase in refinery demand, our commercial supplies of crude oil in storage rose for the tenth time in the past twenty-six weeks and for the 19th time in the past year, increasing by 1,017,000 barrels over the week, from 433,003,000 barrels on November 12th to 434,020,000 barrels on November 19th, after our commercial crude supplies had decreased by 2,101,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories remained around 7% below the most recent five-year average of crude oil supplies for this time of year, but were still about 27% above the average of our crude oil stocks as of the third weekend of November over the 5 years at the beginning of the past decade, 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 jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this November 19th were 11.2% less than the 488,721,000 barrels of oil we had in commercial storage on November 20th of 2020, and are now 4.0% less than the 451,952,000 barrels of oil that we had in storage on November 22nd of 2019, and 3.7% less than the 450,485,000 barrels of oil we had in commercial storage on November 23rd of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all at or near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by 7,620,000 barrels this week, from 1,830,012,000 barrels on November 12th to 1,822,392,000 barrels on November 19th, which is our lowest level of total US inventories since January 23rd, 2015, and are therefore at a 82 month low...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 53rd time during the past 62 weeks with this week's report, which only covers the five days ending Wednesday, November 24th, due to the Thanksgiving holiday....Baker Hughes reported that the total count of rotary rigs running in the US increased by six to 569 rigs over that period, which was also 249 more rigs than the pandemic hit 310 rigs that were in use as of the November 25th report of 2020, but was also still 1,360 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 6 to 467 oil rigs during this period, after they had increased by 7 oil rigs the prior week, and there are now 226 more oil rigs active now than were running a year ago, even as they still amount to just 29.0% of the 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 was unchanged at 102 natural gas rigs, which was still up by 25 natural gas rigs from the 77 natural gas rigs that were drilling during the same week a year ago, but still only 6.4% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….note that last year's rig count also included 3 rigs that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at fifteen rigs this week, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas....the Gulf rig count is still up by three rigs from the twelve rigs in the Gulf a year ago, when 11 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig count is equal to the national offshore totals..

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was up by 7 to 513 horizontal rigs this week, which was 81.3% more than the 283 horizontal rigs that were in use in the US on November 25th of last year, but was ​62.7%​ less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the directional rig count was down by one to 34 directional rigs this week, but those were still up by 12 from the 22 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was unchanged at 22 vertical rigs this week, and those were up by 7 from the 15 vertical rigs that were in use on November 25th of 2020….

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 24th, the second column shows the change in the number of working rigs between last week’s count (November 19th) and this week’s (November 24th) count, the third column shows last week’s November 19th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 25th of November, 2020...

as you can see, this week's change was driven by the four rig increase in North Dakota, which were all oil directed rigs targeting the Bakken shale in the Williston basin...however, the Williston count was only up by 3 because a Williston rig was removed from Montana at the same time...next, checking the Texas Permian basin in the Rigs by State file at Baker Hughes, we find that two rigs were added in Texas Oil District 8, which is the core Permian Delaware, and that rig counts in the other Texas Permian districts were unchanged, thus indicating the overall two rig increase in the Texas Permian, and matching the national count shown... elsewhere in Texas, we find that a rig was added in Texas Oil District 5, but that a rig was pulled out of Texas Oil District 6 at the same time...both of those rigs could have been targeting the Haynesville​ shale​, since that basin shows an increase of one oil rig and a decrease of two natural gas rigs, with no obvious activity in the Haynesville shale region of Louisiana...whatever the case, the natural gas rig count was still unchanged this week because a natural gas rig was added to the Marcellus in Pennsylvania, and another natural gas rig was added to a basin that Baker Hughes doesn't track...

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note: there’s more here

Monday, November 22, 2021

gasoline supplies at a 48 mo low, distillate supplies at a 19 mo low; total inventories at a 79 mo low; DUC backlog at 5.9 months as completions slip…

gasoline supplies at a 48 month low, distillate supplies at a 19 month low; total inventories of oil and all oil products at a 79 month low; DUC backlog at 5.9 months as completions slip; record low DUCs in Appalachia, the Bakken, the Eagle Ford, and the Niobrara chalk..

US oil prices fell for the fourth straight week this week, and have now retraced almost a third of their two month rally to a seven year high on October 26th...after falling 0.6% to $80.79 a barrel last week on forecasts of lower demand and as Biden threatened OPEC, the contract price for US light sweet crude for December delivery opened lower and fell more than 1.5% in early trading on Monday, as traders were spooked by a surge in Covid-19 infections across Europe that had prompted several governments in the region to bring back quarantine restrictions, but recovered to settle 9 cents higher at $80.88 a barrel, even as Brent, the international benchmark crude, lost 12 cents,as traders questioned whether crude supplies would increase and whether demand would be pressured by the recent surge in prices or rising COVID-19 cases...oil prices then pushed higher in early trading on Tuesday after the International Energy Agency (IEA) failed to lower its 2021 global oil demand outlook, projecting that "bourgeoning gasoline and jet fuel consumption underpinned by the reopening of international air travel would offset renewed quarantine measures", but turned lower to settle down 12 cents at $80.76 a barrel. as prospects of tight inventories worldwide were offset by forecasts of a production increase in coming months and concerns over rising coronavirus cases in Europe...oil prices fell right out of the gate on Wednesday on fears the US and China would jointly release oil stores from the strategic reserves of the two countries, with losses deepening by late morning despite an EIA report showing U.S. commercial crude oil inventories had unexpectedly decreased and that gasoline supplies had dropped, and settled $2.40 lower at $78.36 a barrel after the IEA and OPEC both warned of impending oversupply, and as COVID-19 cases in Europe increased the downside risks to demand, and as a Biden request that the Federal Trade Commission investigate oil companies for price manipulation further soured sentiment...however, oil prices rallied early Thursday as prices below $80 lured bargain hunters back into the market and drove December crude 65 cents higher to $79.01 a barrel, as traders assessed the potential impact of a coordinated release from OECD petroleum oil reserves, with the Biden administration reportedly calling for a joint action among oil-consuming countries to lower energy prices ahead of the winter months....but oil prices plunged by 3% again early on Friday as Europe dealt with rising Covid cases by returning to lockdowns and other restrictions, which traders feared would weigh on oil demand, and then tumbled again after a brief midday rally sputtered to finish $2.91 lower at $76.10 a barrel, as trading in December crude expired at a 7 week low, with that contract falling 5.8% this week alone...

natural gas prices, on the other hand, moved higher for the 10th time in 14 weeks, as global prices hit new highs and forecasts turned colder....after falling 13.1% to $4.791 per mmBTU last week on falling prices in Europe and on forecasts for mild weather heading into winter, the contract price of natural gas for December delivery opened more than 2% higher on Monday on forecasts for colder weather and higher heating demand over the next two weeks than had been expected and continued rising to settle 22.6 cents higher at $5.017 per mmBTU on lower domestic output and on strong demand for exports...gas prices continued rising Tuesday, adding 16.0 cents to settle at $5.177 per mmBTU, on soaring prices in Europe and strong demand for LNG, after a German regulator suspended its certification of Russia’s recently completed Nord Stream 2 pipeline...but US natural gas prices gave up most of the week's gain on Wednesday, despite record gas prices in Asia and a 27% jump in European prices over the prior three days, falling 36.1 cents or 7% to $4.816 per mmBTU, on an ongoing increase in natural gas production and on forecasts for a decline in heating demand over the coming week...natural gas prices edged back up 8.6 cents to $4.902 about 2% on Thursday as LNG exports climbed to near record highs as the sixth liquefaction train at Cheniere's Sabine Pass export plant in Louisiana continued to ramp up, and then rose 16.3 cents more to $5.065 on Friday, lifted by ongoing robust levels of U.S. exports and expectations for stronger weather-driven demand, to finish 5.7% higher on the week...

The EIA's natural gas storage report for the week ending November 12th indicated that the amount of working natural gas held in underground storage in the US rose by 26 billion cubic feet to 3,644 billion cubic feet by the end of the week, which still left our gas supplies 310 billion cubic feet, or 7.8% below the 3,954 billion cubic feet that were in storage on November 12th of last year, and 81 billion cubic feet, or 2.2% below the five-year average of 3,725 billion cubic feet of natural gas that have been in storage as of the 12th of November in recent years...the 26 billion cubic foot increase in US natural gas in working storage this week was more than the average forecast for a 22 billion cubic foot addition from a S&P Global Platts survey of analysts, and it was close to the 28 billion cubic feet that were added to natural gas storage during the corresponding week of 2020, but it contrasts with the average withdrawal of 12 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…    

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 12th showed that a big jump in our oil exports and a modest decrease in our oil prouduction meant we had to pull oll out out of our stored commercial crude supplies for the second time in eight weeks and for the twenty-second time in the past thirty-three weeks….our imports of crude oil rose by an average of 83,000 barrels per day to an average of 6,191,000 barrels per day, after falling by an average of 63,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 573,000 barrels per day to an average of 3,626,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 2,565,000 barrels of per day during the week ending November 12th, 490,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day lower at 11,400,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 13,965,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,397,000 barrels of crude per day during the week ending November 12th, an average of 32,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 764,000 barrels of oil per day were being pulled out 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 668,000 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 plunked a (+668,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably 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 6,181,000 barrels per day last week, which was 15.3% more than the 5,361,000 barrel per day average that we were importing over the same four-week period last year…the 764,000 barrel per day net decrease in our crude inventories came as 300,000 barrels per day were pulled out of our commercially available stocks of crude oil and 464,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, apparently still part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,400,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,000,000 barrels per day, while a 1,000 barrel per day increase in Alaska’s oil production to 443,000 barrels per day had no impact on the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 13.0% below that of our pre-pandemic production peak, but 35.3% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 87.9 of their capacity while using those 15,397,000 barrels of crude per day during the week ending November 12th, up from  86.7% of capacity the prior week, but still a little below normal utilization for mid-autumn refinery operations…the 15,397,000 barrels per day of oil that were refined this week were 11.4% more barrels than the 13,841,000 barrels of crude that were being processed daily during the pandemic impacted week ending November 13th of last year, but 6.3% less than the 16,435,000 barrels of crude that were being processed daily during the week ending November 15th, 2019, when US refineries were operating at what was then also a bit below normal 89.5% of capacity...

Despite the increase in the amount of oil being refined this week, the gasoline output from our refineries was somewhat lower, decreasing by 132,000 barrels per day to 9,922,000 barrels per day during the week ending November 12th, after our gasoline output had decreased by 122,000 barrels per day over the prior week.…this week’s gasoline production was still 9.4% more than the 9,064,000 barrels of gasoline that were being produced daily over the same week of last year, but 1.3% less than the gasoline production of 10,053,000 barrels per day during the week ending November 15th, 2019….similarly, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 26,000 barrels per day to 4,842,000 barrels per day, after our distillates output had increased by 35,000 barrels per day over the prior week…despite the week's decrease, our distillates output was 13.3% more than the 4,275,000 barrels of distillates that were being produced daily during the week ending November 13th, 2020, but 5.5% less than the 5,124,000 barrels of distillates that were being produced daily during the week ending November 15th, 2019..

With the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week decreased for the ninth time in twelve weeks, and for the eighteenth time in thirty weeks, falling by 707,000 barrels to a 48 month low of 211,996,000 barrels during the week ending November 12th, after our gasoline inventories had decreased by 1.555,000 barrels over the prior week...our gasoline supplies decreased by less this week because the amount of gasoline supplied to US users fell by 18,000 barrels per day to 9,241,000 barrels per day, and because our imports of gasoline rose by 236,000 barrels per day to 823,000 barrels per day, while our exports of gasoline fell by 2,000 barrels per day to 831,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 7.0% lower than last November 13th's gasoline inventories of 227,967,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

With the decrease in our distillates production, our supplies of distillate fuels decreased for the tenth time in twelve weeks and for the 22nd time in 32 weeks, falling by 824,000 barrels to a 19 month low of 123,685,000 barrels during the week ending November 5th, after our distillates supplies had decreased by 2,613,000 barrels during the prior week….our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 70,000 barrels per day to 4,350,000 barrels per day, because our exports of distillates fell by 390,000 barrels per day to 849,000 barrels per day while our imports of distillates fell by 39,000 barrels per day to 239,000 barrels per day....but after twenty-two inventory decreases over the past thirty-two weeks, our distillate supplies at the end of the week were 14.2% below the 144,073,000 barrels of distillates that we had in storage on November 13th, 2020, and about 5% below the five year average of distillates stocks for this time of the year…

Meanwhile, with this week's big increase in our oil exports, our commercial supplies of crude oil in storage fell for the sixteenth time in the past twenty-five weeks and for the 32nd time in the past year, decreasing by 2,101,000 barrels over the week, from 435,104,000 barrels on November 5th to 433,003,000 barrels on November 12th, after our commercial crude supplies had increased by 1,002,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories remained around 7% below the most recent five-year average of crude oil supplies for this time of year, but were still almost 27% above the average of our crude oil stocks as of the first weekend of November over the 5 years at the beginning of the past decade, 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 jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this November 12th were 11.5% less than the 489,475,000 barrels of oil we had in commercial storage on November 13th of 2020, and are now 3.9% less than the 450,380,000 barrels of oil that we had in storage on November 15th of 2019, and 3.1% less than the 446,908,000 barrels of oil we had in commercial storage on November 16th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil at multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by 12,121,000 barrels this week, from 1,842,133,000 barrels on November 5th to 1,830,012,000 barrels on November 12th, which is our lowest level of total US inventories since February 13th, 2015, and are therefore at a 79 month low...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 52nd time out of the past 61 weeks during the week ending November 19th, but they remained 29.0% below the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by seven to 563 rigs this past week, which was also 253 more rigs than the pandemic hit 310 rigs that were in use as of the November 13th report of 2020, but was also still 1,366 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 7 to 461 oil rigs this week, after they had increased by 4 oil rigs the prior week, and there are now 230 more oil rigs active now than were running a year ago, even as they still amount to just 28.7% of the 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 was unchanged at 102 natural gas rigs, which was still up by 26 natural gas rigs from the 76 natural gas rigs that were drilling during the same week a year ago, but still only 6.4% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….last year's rig count also included 3 rigs that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at fifteen rigs this week, but up from the 14 rigs that were deployed in the Gulf the week before Hurricane Ida approached, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas....the Gulf rig count is now up by three rigs from the twelve rigs in the Gulf a year ago, when 11 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig count is equal to the national offshore totals..

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was up by 7 to 508 horizontal rigs this week, which was 86.8% more than the 272 horizontal rigs that were in use in the US on November 20th of last year, but was just 37% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the directional rig count was unchanged at 35 directional rigs this week, and those were up by 15 from the 20 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was also unchanged at 22 vertical rigs this week, and those were up by 4 from the 18 vertical rigs that were in use on November 20th of 2020….

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 19th, the second column shows the change in the number of working rigs between last week’s count (November 12th) and this week’s (November 19th) count, the third column shows last week’s November 12th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 20th of November, 2020...

once again, this week's change was driven by the seven rig increase in Texas, so checking Texas first in the Rigs by State file at Baker Hughes, we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, and that rig counts in the other Texas Permian districts were unchanged, thus indicating a overall four rig increase in the Texas Permian...since the national Permian rig count was up by six, that means that both of the rigs that were added in New Mexico were set up to drill in the western Permian Delaware...elsewhere in Texas, we find that two rigs were pulled out of Texas Oil District 1, but that a rig was added in Texas Oil District 2, and three more rigs were added in Texas Oil District 4...since all those districts include part of the Eagle Ford shale, some combination of the changes shown there account for the decrease of one oil rig and the increase of two natural gas rigs in that basin, which now has 37 oil rigs and 5 natural gas rigs deployed....meanwhile, yet another rig was added in Texas Oil District 6, which accounts for the natural gas rig increase in the Haynesville shale, since the rig count in the Haynesville in adjacent Louisiana was unchanged...elsewhere, there was an oil rig removed from the DJ Niobrara chalk, which had been drilling in either Colorado or Wyoming, but since the rig counts in both of those states were unchanged, that means that an oil rig was concurrently added in whichever state the Niobrara rig was pulled from, in a basin not covered by Baker Hughes...meanwhile, for natural gas rigs, which ended the week unchanged, we have the two rigs added in the Eagle Ford, another added in the Haynesville shale, also in Texas, and one more in West Virginia, in the Marcellus...at the same time, two natural gas rigs were pulled out of Ohio's Utica shale, another was pulled out of the Permian basin, which saw a 7 oil rig increase, and yet another natural gas rig was removed from an "other" basin that Baker Hughes doesn't track...

DUC well report for October

Monday saw the release of the EIA's Drilling Productivity Report for November, which includes the EIA's October data for drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 17th month in a row, as both completions of drilled wells and drilling of new wells remained well below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 222 wells, falling from 5,326 DUC wells in September to 5,104 DUC wells in October, which was also 38.1% fewer DUCs than the 8,239 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 649 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 635 wells that were drilled in September, while 871 wells were completed and brought into production by fracking, down from the 879 completions seen in September, but up from the pandemic hit 609 completions seen in October of last year, but still down by 19.1% from the 1,076 completions of October 2019....at the October completion rate, the 5,104 drilled but uncompleted wells left at the end of the month represents a 5.9 month backlog of wells that have been drilled but are not yet fracked, down from the 6.1 month DUC well backlog of a month ago, a ratio that is now near that of the year prior to the pandemic, despite a completion rate that is still around a quarter below the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in October, and none of the major basins reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 107, from 1,812 DUC wells at the end of September to 1,705 DUCs at the end of October, as 295 new wells were drilled into the Permian during October, while 402 wells in the region were being fracked...at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 35, from 833 DUC wells at the end of September to a record low of 798 DUCs at the end of October, as 62 wells were drilled in the Eagle Ford during October, while 97 already drilled Eagle Ford wells were completed....in addition, there was also a decrease of 29 DUC wells in the Bakken of North Dakota, where DUC wells fell from 541 at the end of September to a record low of 512 DUCs at the end of October, as 42 wells were drilled into the Bakken during September, while 71 of the drilled wells in the Bakken were being fracked....meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 13, falling from 812 at the end of September to 799 DUC wells at the end of October, as 43 wells were drilled into the Anadarko basin during October, while 56 Anadarko wells were completed....in addition, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 87, falling from 375 at the end of September to a record low 368 DUC wells at the end of October, as 90 wells were drilled into the Niobrara chalk during August, while 97 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 24 wells, from 557 DUCs at the end of September to a record low of 533 DUCs at the end of October, as 69 wells were drilled into the Marcellus and Utica shales during the month, while 93 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by seven to 389 DUCs, as 48 wells were drilled into the Haynesville during October, while 55 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 191 wells to 4,182 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 31 wells to 922 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…