Masters Of War

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

Sunday, April 18, 2021

gasoline output at 56 week high; refineries at 55 week high, oil supply close to demand, DUC well backlog at 10.8 months

oil prices finished higher this week on strong US economic data after OPEC and the IEA had already revised their oil demand forecasts higher...after falling 3.5% to $59.32 a barrel last week on rising ​oil ​supplies and fears of falling demand, the contract price of US light sweet crude for May delivery slipped in thin trading early on Monday as rising Covid-19 case numbers globally kept a lid on prices, but recovered to close 38 cents higher at $59.70 per barrel on optimism over the pace of coronavirus vaccinations in the United States​,​ and after the Yemeni Houthis said they fired missiles at Saudi oil sites...oil prices moved almost a dollar higher early Tuesday on the release of strong Chinese import data, but settled just 48 cents higher after the FDA halted use of Johnson & Johnson's COVID-19 vaccine over blood clot concerns...oil prices then jumped on Wednesday after the EIA reported a much larger draw from crude inventories than had been expected, and then finished $2.97 or nearly 5% higher at $63.15 a barrel on a report from the International Energy Agency that predicted global oil demand and supply would rebalance in the second half​,​ and that producers might then need to pump an additional 2 million barrels per day to meet demand...oil prices moved lower early Thursday following th​at sharp rise on Wednesday, but rallied again on a big jump in US retail sales as Americans spent their pandemic relief checks​,​ and as COVID-19 vaccinations allowed broader economic re-engagement, and closed 31 cents higher at a four week high of $63.46 per barrel...oil prices moved higher again early Friday after China reported their first-quarter GDP had jumped 18.3% year on year, but then drifted lower to close down 33 cents at $63.13 a barrel on concerns about rising Covid-19 infections in other major economies, but still managed to log a 6.1% gain on the week, with both US and global oil contracts posting their best weekly gains since the week ended March 5th...

natural gas prices also finished higher this week on stronger LNG exports and on an unexpected temperature drop...after falling 4.3% to $2.526 per mmBTU last week as it appeared the heating season had ended on warming April weather, the contract price of natural gas for May delivery opened fractionally higher on Monday and went on to gain 3.5 cents as a bout of chilly spring weather was forecast to sweep across large swaths of the Lower 48, likely providing a boost for gas demand and cash prices...natural gas prices rose another 5.8 cents to $2.619 per mmBTU on Tuesday as robust liquefied natural gas (LNG) levels fueled demand optimism and a dose of chilly weather also bolstered cash prices...natural gas continued higher on colder weather Wednesday, but faded as traders took profits late in the session prior to Thursday’s EIA inventory report​,​ and ended a tenth of a cent lower at $2.618 per mmBTU...natural gas prices rebounded Thursday as the government’s weekly inventory report proved bullish, and both weather forecasts and demand for U.S. exports remained favorable​,​ and closed 4.0 cents higher at $2.658 per mmBTU...the momentum continued into Friday as gas prices moved up another 2.2 cents on near-record LNG and pipeline exports, and on forecasts that power generators would burn more gas next week, to finish th​is week at a five-week high of $2.680 per mmBTU, also a 6.1% gain on the prior Friday's close...

the natural gas storage report from the EIA for the week ending April 9th indicated that the amount of natural gas held in underground storage in the US rose by 61 billion cubic feet to 1,845 billion cubic feet by the end of the week, which left our gas supplies 242 billion cubic feet, or 11.6% below the 2,087 billion cubic feet that were in storage on April 9th of last year, but now 11 billion cubic feet, or 0.6% above the five-year average of 1,834 billion cubic feet of natural gas that have been in storage as of the 9th of April in recent years....the 61 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 65 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also less than the 68 billion cubic feet added to natural gas storage during the corresponding week of​ 2020, but it far surpassed the average addition of 26 billion cubic feet of natural gas that have typically been injected into 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 April 9th indicated that despite an increase in our oil production and a decrease in our oil exports, we needed to withdraw oil from our stored commercial crude supplies for the third time in eight weeks and for the 25th time in the past thirty-eight weeks....our imports of crude oil fell by an average of 4​11,000 barrels per day to an average of 5,852,000 barrels per day, after rising by an average of 119,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 855,000 barrels per day to an average of 2,579,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,273,000 barrels of per day during the week ending April 9th, 444,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,273,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 15,051,000 barrels of crude per day during the week ending April 9th, 7,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 999,000 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 a rounded 222,000 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 plugged a (-222,000) 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 fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting there must have been a error or errors of that magnitude in this week's oil supply & demand figures that we have just transcribed.....furthermore, since last week's fudge factor was at +811,000 barrels per day, there was a 1,033,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, which renders the week over week supply and demand changes we have just transcribed meaningless....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 wells, we'll continue to report them as they're published, just as they're watched & believed to be accurate by most everyone in the industry....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,971,000 barrels per day last week, which was 0.7% more than the 5,929,000 barrel per day average that we were importing over the same four-week period last year... the 999,000 barrel per day net withdrawal from our crude inventories included an 841,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 153,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commerical purposes....this week's crude oil production was reported to be 100,000 barrels per day higher at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 10,500,000 barrels per day, while Alaska's oil production at 457,000 barrels per day added 500,000 barrels per day the rounded national total (EIA's math)....our prepandemic record high US crude oil production during the week ending March 13th 2020 was at a rounded 13,100,000 barrels per day, so this reporting week's rounded oil production figure was 16.0% below that of our production peak, yet still 30.5% above 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 85.0% of their capacity while using those 15,051,000 barrels of crude per day during the week ending April 9th, up from 84.0% of capacity during the prior week, and the highest refinery utilization in 55 weeks, reflecting the utilization level during the last week before the Covid related slowdown...while the 15,051,000 barrels per day of oil that were refined this week were 18.8% higher than the 12,665,000 barrels of crude that were being processed daily during the week ending April 10th of last year, they were still 6.4% below the 16,078,000 barrels of crude that were being processed daily during the week ending April 12th, 2019, when US refineries were operating at a​n unusually low 87.7% of capacity...

with the ongoing increase in the amount of oil being refined, the gasoline output from our refineries increased by 336,000 barrels per day to a fifty-six week high of 9,615,000 barrels per day during the week ending April 9th, after our gasoline output had decreased by 60,000 barrels per day over the prior week...while this week's gasoline production was 62.6% higher than the 5,915,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 3.6% lower than the March 13th 2020 pre-pandemic high of 9,974,000 barrels per day, and 3.0% below the gasoline production of 9,917,000 barrels per day during the week ending April 12th, 2019....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 4,000 barrels per day to 4,643,000 barrels per day, after our distillates output had decreased by 99,000 barrels per day over the prior week... but since the onset of the pandemic didn't appear to impact distillates' production, this week's distillates output was still 5.8% lower than the 4,927,000 barrels of distillates that were being produced daily during the week ending April 10th, 2020...

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the sixteenth time in twenty-two weeks, and for 20th time in 39 weeks, but only rose by 309,000 barrels to 234,897,000 barrels during the week ending April 9th, after our gasoline inventories had increased by 4,044,000 barrels over the prior week...our gasoline supplies increased by less this week because our imports of gasoline fell by 458,000 barrels per day to 839,000 barrels per day while our exports of gasoline fell by 129,000 barrels per day to 663,000 barrels per day, and because the amount of gasoline supplied to US users increased by 163,000 barrels per day to 8,944,000 barrels per day...but even after two inventory increases, our gasoline supplies were 10.4% lower than last April 10th's gasoline inventories of 262,217,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the insignificant increase in our distillates production, our supplies of distillate fuels decreased for the 7th time in 11 weeks and for the 21st time in thirty-three weeks, falling by 2,083,000 barrels to 143,464,000 barrels during the week ending April 9th, after our distillates supplies had increased by 1,452,000 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 464,000 barrels per day to 4,128,000 barrels per day, and because our imports of distillates fell by 64,000 barrels per day to a 25 week low of 261,000 barrels per day, while our exports of distillates fell by 18,000 barrels per day to 1,074,000 barrels per day....even after this week's inventory decrease, our distillate supplies at the end of the week were still 11.2% above the 129,004,000 barrels of distillates that we had in storage on April 10th, 2020, and about 4% above the five year average of distillates stocks for this time of the year...

finally, despite the drop in our oil exports, our commercial supplies of crude oil in storage fell for the 13th time in the past twenty-two weeks and for the 26th time in the past year, decreasing by 5,890,000 barrels, from 498,313,000 barrels on April 2nd to 492,423,000 barrels on April 9th...after this week's decrease, our commercial crude oil inventories​ slipped to just 1% above the most recent five-year average of crude oil supplies for this time of year, and to about 43% above the average of our crude oil stocks as of the first weekend of April over the 5 years at the beginning of this 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 spring lockdowns of last year, our commercial crude oil supplies as of April 9th are now 2.2% less than the 503,618,000 barrels of oil we had in commercial storage on April 10th of 2020, but still 8.2% more than the 455,154,000 barrels of oil that we had in storage on April 12th of 2019, and also 15.2% more than the 427,567,000 barrels of oil we had in commercial storage on April 13th of 2018...   

OPEC's Monthly Oil Market Report

Tuesday of this past week saw the release of OPEC's April Oil Market Report, which covers OPEC & global oil data for March, and hence it gives us a picture of the global oil supply & demand situation for the 3rd month after OPEC, the Russians, and other oil producers agreed to increase their oil production by 500,000 barrels per day starting January, from their prior commitment to cut production by 7.7 million barrels a day from an October 2018 peak, which had been earlier reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July of 2020, and after the Saudis unilaterally decided to cut their own production by a million barrels per day during February and March of this year...before we start, we want to again caution that the oil demand estimates made herein, while the course of the Covid-19 pandemic still remains uncertain, should be considered as having a much larger margin of error than we'd expect from this report during stable and hence more predictable periods.. 

the first table from this monthly report that we'll check is from the page numbered 48 of this month's report (pdf page 58), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures...

March 2021 OPEC crude output via secondary sources

as we can see from the above table of their oil production data, OPEC's oil output increased by a rounded 201,000 barrels per day to 25,042,000 barrels per day during March, up from their revised February production total of 24,842,000 barrels per day...however, that February output figure was originally reported as 24,848,000 barrels per day, which therefore means that OPEC's February production was revised 6,000 barrels per day lower with this report, and hence OPEC's March production was, in effect, a rounded 195,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official February OPEC output figures as reported a month ago, before this month's revision)...

from the above table, we can see that a 137,000 barrels per day increase in Iran's production, an increase of 40,000 barrels per day in Angola's output, and a production increase of 26,000 barrels per day from Libya were the major factors in OPEC's March output increase; however, both Iran and Libya were exempt from quotas during March, and Angola's output increase is largely a reversal of their February production decrease, so OPEC's adherence to the negotiated production cuts appears to be intact...recall that last year's original oil producer's agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June, but that agreement had been extended to include July at a meeting between OPEC and other producers on June 6th....then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August and subsequent months, which was thus the agreement that covered OPEC's output for the rest of 2020...the OPEC+ agreement for January's production, which was later extended to include February and March output, was to further ease their supply cuts by 500,000 barrels per day to 7.2 million barrels per day from that original baseline...however,  war torn Libya and US sanctioned OPEC members Iran and Venezuela have been exempt from the production cuts imposed by these agreements, and as we can see above, they all posted production increases this month...

for those OPEC members that do fall under the output quotas imposed by that series of revised agreements, we finally have a revised table of the output levels they are "voluntarily" required to adhere to:

March 2021 OPEC   production quotas

the above table was provided as a downloadable attachment to the press release following the press release following the 13th OPEC and non-OPEC Ministerial Meeting on January 5th of this year; it includes the reference production and expected production levels for the 10 members of OPEC that are expected to make cuts and for the other major oil producers who are party to what the press calls the "OPEC + agreement"....the first column in the above table shows the reference oil production baseline, in thousands of barrel per day from which each of the oil producers was to cut from, a figure which is based on each of the producer's October 2018 oil output, ie., a date before last year's and the prior year's output cuts took effect, and coincidently the highest monthly production of the era for most of the producers who are party to these cuts...the remaining columns show the adjustment, or cut, from that reference production level and then the oil output allowed for each producer under the agreement for the months of January, February and March...OPEC arrived at these figures by adjusting the 23% cut from the October 2018 baseline originally agreed to for May and June 2020 for subsequent agreements to "ease" that 23% cut by agreed to fractions, and it applied to all participants except for Mexico, who already had their oil production hedged to profit from lower prices...the OPEC member output quota is identical for each of the three months covered above; however, the ongoing agreements from theOPEC and non-OPEC Ministerial Meetings have allowed Russia and Kazakhstan to incrementally increase their oil output over February and March to meet seasonal increases in domestic demand...for March, Iraq, with an oil output of 3,914,000 per day, was the only OPEC member producing significantly more than their quota, which was more than covered by the Saudis unilaterally keeping their production a million barrels per day below their quota...

the next graphic from this month's report that we'll highlight shows us both OPEC and world oil production monthly on the same graph, over the period from April 2019 to March 2021, and it comes from page 49 (pdf page 59) of OPEC's April Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale.... 

March 2021 OPEC report global oil supply

after this month's reported 201,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global liquids production increased by a rounded 1,220,000 barrels per day to average 93.23 million barrels per day in March, a reported increase which apparently came after February's total global output figure was revised down by 270,000 barrels per day from the 92.28 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 1,020,000 barrels per day in March after that revision, with an increase of 930,000 barrels per day from the US alone accounting for most of the non-OPEC production increase in March, as US production rebounded from the February freeze... 

after that increase in March's global output, the 93.23 million barrels of oil per day that were produced globally in March were still 7.22 million barrels per day, or 7.6% less than the revised 100.45 million barrels of oil per day that were being produced globally in March a year ago, which was the second month of additional production cuts of 500,000 barrels per day in an attempt to support prices (see the April 2020 OPEC report (online pdf) for the originally reported March  2020 details)...with this month's increase in OPEC's output, their March oil production of 25,042,000 barrels per day was at 26.9% of what was produced globally during the month, a decrease of 0.1% from their revised 27.0% share of the global total in February....OPEC's March 2020 production was reported at 28,612,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,570,000, or 12.5% fewer barrels per day of oil in March 2021 than what they produced a year earlier, when they accounted for 28.7% of global output...  

Even after the increases in both OPEC's and global oil output that we've seen in this report, the amount of oil being produced globally during the month still fell a bit short of the expected demand, as this next table from the OPEC report will show us...   

March 2021 OPEC report global oil demand copy

the above table came from page 27 of the April Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2021 over the rest of the table...on the "Total world" line in the second column, we've circled in blue the figure that's relevant for March, which is their estimate of global oil demand during the first quarter of 2021... OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe have used an average of 93.43 million barrels of oil per day, which is a rounded 400,000 barrels per day upward revision from the 93.04 million barrels of oil per day of demand they were estimating for the first quarter a month ago (note that we have encircled this month's revisions in green), which still reflects quite a bit of coronavirus related demand destruction compared to 2019, when global demand averaged 99.98 million barrels per day....but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 93.23 million barrels million barrels per day during March, which would imply that there was a shortage of around 200,000 barrels per day in global oil production in March when compared to the demand estimated for the month..

In addition to figuring the March global oil supply shortfall that's evident in this report, the downward revision of 270,000 barrels per day to February's global oil output that's implied in this report, combined with the 400,000 barrels per day upward revision to first quarter demand noted above, means that the 760,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 1,430,000 barrels per day...similarly, the oil surplus of 190,000 barrels per day we had previously figured for January would be revised to a shortage of 210,000 barrels per day in light of the 400,000 barrel per day upward revision to first quarter demand...

Note that in green we've also circled an upward revision of 120,000 barrels per day to 2020's demand, which also means that the supply shortfalls or surpluses that we previously reported for last year's months would need to be revised....a separate table on page 27 of the April Oil Market Report (pdf page 37) indicates the revisions to 2020 demand included an an upward revision of 80,000 barrels per day to 4th quarter demand, and an upward revision of 400,000 barrels per day to 1st quarter 2020 demand...

based on OPEC revisions of a month ago, we revised the oil shortages we had previously computed for the 4th quarter months to 1,180,000 barrels per day for December, 1,780,000 barrels per day for November, and 3,080,000 barrels per day for October...the upward revision of 80,000 barrels per day to 4th quarter demand will now mean those shortages would be revised to 1,260,000 barrels per day for December, 1,860,000 barrels per day for November, and 3,160,000 barrels per day for October...there was also an oil supply shortfall in the third quarter months, but it was somewhat smaller...however, since global demand was still depressed in the second quarter of 2020 due to the initial Covid surge, surpluses of oil averaging around 9.5 million barrels per day were being produced over those three months...meanwhile, the last time we revised estimates for 1st quarter 2020 oil surpluses, we had a record surplus of 17,550,000 barrels per day in March, a 1,670,000 barrel per day global oil output surplus in February, and a 700,000 barrel per day oil output surplus in January...;.with OPEC's new upward revision of 400,000 barrels per day to 1st quarter 2020 demand, those surpluses would be reduced to 17,150,000 barrels per day in March, a 1,270,000 barrel per day surplus in February, and a 300,000 barrel per day oil surplus in January of last year....so despite the upward revision to 2020's demand and OPEC's deep production cuts beginning in May of last year, the quanities of oil produced globally in 2020 still averaged well over 3 million barrels per day more than anyone wanted...by maintaining their production cuts despite current month shortages, OPEC obviously knows that, they just aren't talking about it publicly...

This Week's Rig Count

The US rig count rose for the 28th time over the past 31 weeks during the week ending April 16th, but it still remains down by 44.6% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was up by 7 to 439 rigs this past week, which was still down by 90 rigs from the pandemic hit 529 rigs that were in use as of the April 17th report of 2020, and was 1,490 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 was up by 7 to 338 oil rigs this week, after being unchanged the prior week, leaving us with 94 fewer oil rigs than were running a year ago, and at 21.0% 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 was up by one to 94 natural gas rigs, which was up by 5 natural gas rigs from the 89 natural gas rigs that were drilling a year ago, but still just 5.9% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...meanwhile, the rig classified as 'miscellaneous' that had been drilling in the middle of the Permian basin in MIdland county Texas was shut down this week, leaving just one 'miscellaneous' rig, in Lake County, California, while a year ago there were two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was up by 1 to 12 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and now 2 rigs drilling for oil in Alaminos Canyon offshore from Texas...that was 5 fewer Gulf of Mexico rigs than the 17 rigs drilling in the Gulf a year ago, when 16 Gulf rigs were drilling for oil offshore from Louisiana and one rig was drilling for oil in Texas waters...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 totals are equal to the Gulf rig counts...in addition to those offshore, this week a platform was set up to drill through an inland lake in St Mary parish Louisiana, while a year ago there were no rigs deployed on inland waters...

The count of active horizontal drilling rigs was up by 4 to 398 horizontal rigs this week, which was still down by 85 rigs from the 483 horizontal rigs that were in use in the US on April 17th of last year, and less than a third 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 two rigs to 20  directional rigs this week, but those were still down by 8 from the 28 directional rigs that were operating during the same week a year ago....meanwhile, the vertical rig count was up by one to 21 vertical rigs this week, and those were up by 3 from the 18 vertical rigs that were in use on April 17th 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 April 16th, the second column shows the change in the number of working rigs between last week's count (April 9th) and this week's (April 16th) count, the third column shows last week's April 9th 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 17th of April, 2020..    

April 16 2021 rig count summary

it appears that most of this week's changes were pretty straightforward...checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that one rig was added in Texas Oil District 8, which includes the core Permian Delaware, and  one rig was added in Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, and yet another rig was added in in Texas Oil District 8A, which includes the northern counties of the Permian Midland basin, which thus means the rig count in the Texas Permian was up by 3 this week, accounting for the national change.....elsewhere in Texas, there were two rigs added in Texas Oil District 1, while two rigs were pulled out from Texas Oil District 2, which all could have been in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state, still leaving no net change in that basin...the Texas rig count was up by 5, however, because an offshore platform was added in the state's waters, and there was also a rig added in Texas Oil District 10, which accounts for one of the rigs added in the Granite Wash, which thus means the other Granite Wash addition was in Oklahoma, accounting for that state's increase...elsewhere, the rig addition in Louisiana was the previously mentioned inland waters rig in St Mary parish, and another oil rig was added in North Dakota's Williston basin....meanwhile, the natural gas rig count was up by one despite the loss of one in Pennsylvania's Marcellus because the inland waters rig in Louisiana was a gas rig and one of the Permian rigs added this week was also targetting natural gas...

DUC well report for March

Monday of this past week saw the release of the EIA's Drilling Productivity Report for April, which includes the EIA's March 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 10th month in a row, as both completions of drilled wells and drilling of new wells both increased, but remained far below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 177 wells, falling from 7,089 DUC wells in February to 6,912 DUC wells in March, which was also 17.5% fewer DUCs than the 8,379 wells that had been drilled but remained uncompleted as of the end of March of a year ago...this month's DUC decrease occurred as 464 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, up from the 396 wells that were drilled in February, while 641 wells were completed and brought into production by fracking, up from the 490 completions seen in February, but still down by 42.5% from the 1,115 completions seen in March of last year....at the March completion rate, the 6,912 drilled but uncompleted wells left at the end of the month represents a 10.8 month backlog of wells that have been drilled but are not yet fracked, down from the 14.7 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by a completion rate that is roughly half of the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in March, as no basins ​were ​report​ed with DUC increases....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 56, from 3,219 DUC wells at the end of February to 3,163 DUCs at the end of March, as 214 new wells were drilled into the Permian during March, while 270 wells in the region were completed...at the same time, DUC wells in the Niobrara chalk of the Rockies' front range fell by 39, decreasing from 520 at the end of February to 481 DUC wells at the end of March, as 43 wells were drilled into the Niobrara chalk during March, while 82 Niobrara wells were being fracked....in addition, DUCs in the Eagle Ford of south Texas decreased by 28, from 1,037 DUC wells at the end of February to 1,009 DUCs at the end of March, as 44 wells were drilled in the Eagle Ford during March, while 72 already drilled Eagle Ford wells were completed...at the same time, there was also a decrease of 22 DUC wells in the Bakken of North Dakota, where DUC wells fell from 669 at the end of February to 677 DUCs at the end of March, as 25 wells were drilled into the Bakken during March, while 47 of the drilled wells in that basin were being fracked...meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 20, falling from 760 at the end of February to 740 DUC wells at the end of March, as 19 wells were drilled into the Anadarko basin during March, while 39 Anadarko wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 11 wells, from 559 DUCs at the end of February to 548 DUCs at the end of March, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 82 of the already drilled wells in the region were fracked....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 1 to 324, as 48 wells were drilled into the Haynesville during March, while 49 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of March, 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 165 wells to 6,040 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 12 wells to 872 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...   

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note: there's more here...

Sunday, April 11, 2021

gasoline imports at a 98 week high despite highest refinery utilization in 54 weeks

oil prices fell for the fourth week in five this week, on rising oil supplies and on the prospect of pandemic related falling demand...after rising 0.8% to $61.45 a barrel last week on expectations that the Biden infrastructure plan would increase demand for oil, the contract price of US light sweet crude for May delivery opened 5 cents higher on Monday but tumbled nearly 5% from there on the likelihood of a increase in oil supplies, from both OPEC's planned production hikes and as a result of the possible easing of US sanctions on Iran, as oil prices closed down $2.80 at $58.65 a barrel...oil prices rose early on Tuesday as a drop in the U.S. dollar made crude a more attractive buy, and hung on to close 68 cents, or 1.2%, higher at $59.33 a barrel on strong economic reports from the US and China and on a stronger global growth forecast from the IMF...oil prices fell in after hours trading Tuesday after the API surprised traders with big product inventory increases and then opened lower on Wednesday, but reversed to climb marginally as traders looked past the EIA's rising gasoline and distillate supplies and turned their attention to the second successive weekly crude stockpile withdrawal, and settled 44 cents higher at $59.77 a barrel on an improving global economic outlook, even as gains were capped by rising gasoline inventories and fears that new coronavirus outbreaks would weaken a global recovery in fuel demand...the brief rally faded on Thursday, however, with oil prices pressured as rising cases of COVID-19 threatened to slow global economies, but recovered to end down just 17 cents at $59.60 a barrel as a falling dollar and rising stock markets offset earlier declines caused by the big increase in gasoline stockpiles and subdued demand compared to pre-pandemic levels...oil prices edged up in early Asian trading on Friday, supported by a weaker dollar, as traders weighed rising supplies and the impact on fuel demand from the COVID-19 pandemic, but turned lower in rangebound US trading on Friday, on rising supplies from major producers and on concerns over a mixed picture on the pandemic’s impact on fuel demand, and finished the session 28 cents lower at $59.32 a barrel, thus ending the week down 3.5%, the biggest weekly loss since mid-March....

natural gas prices also finished lower this week as the heating season appeared to be ending on warming April weather....after rising 0.8% to $2.639 per mmBTU last week on record LNG exports and on a bullish weekly storage report, the contract price of natural gas for May delivery opened 4.6 cents lower on Monday and tumbled 4.9% to a 12.8 cent loss at $2.511 per mmBTU, as weather forecasts shifted much warmer for the next couple of weeks, reducing both heating and power demand through mid-April...natural gas prices rebounded early Tuesday on a cooler revision to the latest weather forecast but failed to hold the gains, closing down another 5.5 cents at 2.456 per mmBTU...natural gas rebounded again on Wednesday, as weather models aligned to forecast a colder trend for mid-April, and this time held onto a 6.4 cent gain at $2.520 per mmBTU...however, gas prices waffled around that price on Thursday as the weekly storage data failed to offer any surprises and weather models maintained a warm pattern for the near term and the May contract price ultimately settled two-tenths of a cent higher at $2.522 per mmBTU...a similar rangebound natural gas trade unfolded on Friday and prices barely moved before adding on another four-tenths of a cent, and thus finished the week at $2.526 per mmBTU, still 4.3% lower than the prior week's close...

the natural gas storage report from the EIA for the week ending April 2nd indicated that the amount of natural gas held in underground storage in the US rose by 20 billion cubic feet to 1,784 billion cubic feet by the end of the week, which left our gas supplies 235 billion cubic feet, or 11.6% below the 2,019 billion cubic feet that were in storage on April 2nd of last year, and 36 billion cubic feet, or 1.3% below the five-year average of 1,808 billion cubic feet of natural gas that have been in storage as of the 2nd of April in recent years....the 20 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 27 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also less than the 30 billion cubic feet added to natural gas storage during the corresponding week of a year earlier, but was well more than the average addition of 8 billion cubic feet of natural gas that have typically been injected into 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 April 2nd indicated that because of a decrease in our oil production and modest increases in our oil exports and our oil refining, we needed to withdraw oil from our stored commercial crude supplies for the second time in seven weeks and for the 24th time in the past thirty-seven weeks....our imports of crude oil rose by an average of 119,000 barrels per day to an average of 6,264,000 barrels per day, after rising by an average of 523,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 260,000 barrels per day to an average of 3,434,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,830,000 barrels of per day during the week ending April 2nd, 141,000 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 200,000 barrels per day lower at 10,900,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 13,730,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 15,044,000 barrels of crude per day during the week ending April 2nd, 103,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 503,000 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 811,000 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 plugged a (+811,000) 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 fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting there must have been a error or errors 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 wells, we'll continue to report them as they're published, just as they're watched & believed to be accurate by most everyone in the industry....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,838,000 barrels per day last week, which was 5.0% less than the 6,144,000 barrel per day average that we were importing over the same four-week period last year... the 503,000 barrel per day net withdrawal from our crude inventories was due to a 503,000 barrel 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 200,000 barrels per day lower at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 300,000 barrels per day lower at 10,400,000 barrels per day, while a 13,000 barrel per day increase to 458,000 barrels per day in Alaska's oil production added 100,000 barrels per day the rounded national total (EIA's math)....our record high US crude oil production during the week ending March 13th 2020 was at a rounded 13,100,000 barrels per day, so this reporting week's rounded oil production figure was 16.8% below that of our production peak, yet still 29.3% above 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 84.0% of their capacity while using those 15,044,000 barrels of crude per day during the week ending April 2nd, up from 83.9% of capacity during the prior week, and the highest refinery utilization in 54 weeks, reflecting the utilization level during the last week before the Covid slowdown...while the 15,044,000 barrels per day of oil that were refined this week were 10.3% higher than the 13,634,000 barrels of crude that were being processed daily during the week ending April 3rd of last year, they were still 6.6% below the 16,100,000 barrels of crude that were being processed daily during the week ending April 5th, 2019, when US refineries were operating at a still low 87.5% of capacity...

even with the increase in the amount of oil being refined, the gasoline output from our refineries decreased by 60,000 barrels per day to 9,279,000 barrels per day during the week ending April 2nd, after our gasoline output had increased by 762,000 barrels per day over the prior week...while this week's gasoline production was 59.5% higher than the 5,818,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 6.9% lower than the March 13th 2020 pre-pandemic high of 9,972,000 barrels per day....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 99,000 barrels per day to 4,639,000 barrels per day, after our distillates output had increased by 137,000 barrels per day over the prior week... but since the onset of the pandemic didn't appear to impact distillates' production, this week's distillates output was still 6.9% lower than the 4,982,000 barrels of distillates that were being produced daily during the week ending April 3rd, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the fifteenth time in twenty-one weeks, and for 19th time in 38 weeks, rising by 4,044,000 barrels to 234,588,000 barrels during the week ending April 2nd, after our gasoline inventories had decreased by 1,735,000 barrels over the prior week...our gasoline supplies increased this week because our imports of gasoline rose by 678,000 barrels per day to a 98 week high of 1,297,000 barrels per day while our exports of gasoline rose by 251,000 barrels per day to 792,000 barrels per day, and because the amount of gasoline supplied to US users decreased by 101,000 barrels per day to 8,891,000 barrels per day...but even after this week's inventory increase, our gasoline supplies were 8.8% lower than last April 3rd's gasoline inventories of 257,303,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 4th time in 10 weeks and for the 12th time in thirty-two weeks, rising by 1,452,000 barrels to 145,547,000 barrels during the week ending April 2nd, after our distillates supplies had increased by 2,542,000 barrels during the prior week....our distillates supplies rose by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 449,000 barrels per day to 3,664,000 barrels per day, because our exports of distillates rose by 398,000 barrels per day to 1,092,000 barrels per day, and because our imports of distillates fell by 116,000 barrels per day to 325,000 barrels per day...after this week's inventory increase, our distillate supplies at the end of the week were 18.6% above the 122,724,000 barrels of distillates that we had in storage on April 3rd, 2020, and rose to about 5% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil exports and the recovery in our refinery throughput, our commercial supplies of crude oil in storage fell for the 13th time in the past twenty-one weeks and for the 25th time in the past year, decreasing by 3,522,000 barrels, from 501,835,000 barrels on March 26th to 498,313,000 barrels on April 2nd...after this week's decrease, our commercial crude oil inventories fell to 3% above the most recent five-year average of crude oil supplies for this time of year, and to 44.6% above the average of our crude oil stocks as of the first weekend of April over the 5 years at the beginning of this 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 spring lockdowns of last year, after generally rising over the past two and a half years, except for summers and during the 10 weeks prior to the Texas freeze, after generally falling from a record high over the year and a half prior to September of 2018, our commercial crude oil supplies as of April 2nd were 2.9% more than the 484,370,000 barrels of oil we had in commercial storage on April 3rd of 2020, and 9.1% more than the 456,550,000 barrels of oil that we had in storage on April 5th of 2019, and also 16.3% more than the 428,638,000 barrels of oil we had in commercial storage on April 6th of 2018...      

This Week's Rig Count

Note: this week's rig count includes 8 days, since last week's report was released on Thursday in advance of the Good Friday...nonetheless, the rig count rose for the 27th time over the past 30 weeks during the week ending April 9th, but it still remains down by 45.5% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was up by 2 to 432 rigs this past week, which was still down by 170 rigs from the 602 rigs that were in use as of the April 10th report of 2020, and was 1,497 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 was unchanged at 331 oil rigs this week, after rising by 13 oil rigs the prior week, leaving us with 167 fewer oil rigs than were running a year ago, and 20.6% 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 was up by two to 93 natural gas rigs, which was only down by 3 natural gas rigs from the 96 natural gas rigs that were drilling a year ago, but still just 5.8% 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, two rigs classified as 'miscellaneous' continued to drill this week, one in the middle of the Permian basin in MIdland county Texas, and the other in Lake County, California, while a year ago there were also two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was down by 3 to 11 rigs this week, with 10 of those rigs drilling for oil in Louisiana's offshore waters and 1 continuing to drill for oil in Alaminos Canyon offshore from Texas...that was 7 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when all 18 Gulf rigs were drilling for oil offshore from Louisiana...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig totals are equal to the Gulf rig counts....

The count of active horizontal drilling rigs was up by 3 to 394 horizontal rigs this week, which was still down by 151 rigs from the 545 horizontal rigs that were in use in the US on April 10th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the directional rig count was down by one rig to 18 directional rigs this week, and those were also down by 17 from the 35 directional rigs that were operating during the same week a year ago....at the same time, the vertical rig count was unchanged at 20 vertical rigs this week, and those were down by 2 from the 22 vertical rigs that were in use on April 10th 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 April 9th, the second column shows the change in the number of working rigs between last week's count (April 1st) and this week's (April 9th) count, the third column shows last week's April 1st 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 10th of April, 2020..    

April 9 2021 rig count summary

as you can see, there were ​just a few changes this week, after widespread new activity last week...checking for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we do find that that one rig was added in Texas Oil District 8, which includes the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which thus leaves us with no change in the rig count in the Texas Permian this week.....elsewhere in Texas, there was one rig added in Texas Oil District 1, while a rig was pulled out from Texas Oil District 4, which both could have been in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state, still leaving no net change in that basin either...at the same time, there was also a rig added in Texas Oil District 6, which must have been targeting that region's Haynesville shale, since the Haynesville shale count was unchanged in northern Louisiana....the Texas count is still unchanged, however, because an offshore platform in the state's waters was shut down at the same time, while the Louisiana is only down one despite the loss of two offshore rigs because there was a land rig startup in an unnamed basin in the southern part of the state...elsewhere, two more oil rigs were added in a Utah basin not tracked by Baker Hughes, more than likely the Uinta, and another oil rig was added in Oklahoma, also in a basin not tracked by Baker Hughes, while an oil rig was shut down in Wyoming, which could have been operating in any one of three basins in that state Baker Hughes doesn't track..for this week's two additions of natural gas rigs, we have the rig that was added in the Haynesville shale, and another rig that was added in Ohio's Utica shale at the same time...

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Note: there's more here...

Sunday, April 4, 2021

US refinery utilization at a 53 week high, gasoline production at a 25 week high

oil prices rose for the first time in four weeks, despite an OPEC decision to increase output, as the new US infrastructure plan is expected to increase demand for oil...after falling 0.7% to $61.42 a barrel last week as new Covid infections and lockdowns increased worldwide, the contract price of US light sweet crude for May delivery opened lower on Monday on news that the container ship that had blocked oil traffic for nearly a week in the Suez Canal had been refloated, but reversed to finish 59 cents or 1% higher at $61.56 a barrel after Reuters reported that Russia would support stable oil output ahead of a meeting with the OPEC later in the week...but oil prices fell on Tuesday as the Suez Canal was cleared and traders focused on the upcoming OPEC+ meeting and the impact of Covid-19 on oil demand in Europe, and finished $1.01 or 1.6% lower at $60.55 a barrel, as near-term risks to the demand recovery story emerged with setbacks to economic reopening plans worldwide...oil prices opened lower on Wednesday after the American Petroleum Institute reported surprisingly large crude inventory build, but reversed to show a 1% gain by midday after the EIA reported a modest inventory withdrawal, before reversing again to tank 2% before the close after France announced it would start a month-long lockdown in the face of another Covid surge, as oil prices ended $1.39 lower on the day at $59.16 a barrel....however, oil prices jumped at the open and moved sharply higher on Thursday, despite the news that OPEC+ had reached a deal to gradually ease production cuts from May, as traders took heart in their incremental increases over three months and reacted to the announcement Biden's vast infrastructure plan that includes investments in roads, railways, and clean energy that would all take copius quantites of oil and asphalt to build, as oil closed $2.29 higher at $61.45 a barrel, and with the markets closed on Good Friday, thus finished the week's trading with a modest 0.8% gain...

natural gas prices also rose fractionally this week as LNG exports remained at record levels and the weekly storage report showed a smaller inventory build than had been expeccted...after rising 0.9% to $2.557 per mmBTU last week on strong LNG exports and a bullish storage report, the contract price of natural gas for April delivery opened fractionally higher on its last day of trading on Monday and continued rising to finish trading 2.9 cents higher at $2.586 per mmBTU, on record LNG exports and on forecasts for slightly higher heating demand over the coming week...with the contract price of natural gas for May delivery moving to the top of the board on Tuesday, natural gas quotes fell 3.0 cents to $2.623 per mmBTU, even as exports climbed higher, as a weakening weather outlook and the anticipation of an inventory increase kept natural gas prices in check...natural gas futures fell again on Wednesday, slipping 1.5 cents to $2.608 per mmBTU, as traders mulled domestic demand weakness and the potential for a bearish government inventory report on the next day... however, when Thursday's natural gas storage report came in a bit below market expectations, natural gas prices bounced 2% and went on to settle 3.1 cents higher at $2.639 per mmBTU, as the initial price momentum faded as traders struggled to make sense of the accompanying revision....thus the daily natural gas quotes saw a 3.2% gain on the week as the front month shifted from April to May, while the May contract itself ended the week 0.8% higher, having closed last week at $2.619 per mmBTU...

the natural gas storage report from the EIA for the week ending March 26th indicated that the amount of natural gas held in underground storage in the US rose by 14 billion cubic feet to 1,764 billion cubic feet by the end of the week, after gas in storage for the week ending March 19th was revised 4 billion cubic feet higher to 1750 billion cubic feet...that left our gas supplies 225 billion cubic feet, or 11.3% below the 1,989 billion cubic feet that were in storage on March 26th of last year, and 36 billion cubic feet, or 2​.​0% below the five-year average of 1,800 billion cubic feet of natural gas that have been in storage as of the 26th of March in recent years....the 14 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 19 billion cubic foot addition from an S&P Global Platts survey of analysts, while it contrasted with the 20 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 24 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... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 26th indicated that after a big increase in our oil exports and another big increase in our oil refining, we finally need to withdraw oil from our stored commercial crude supplies for the first time in six weeks and for the 23rd time in the past thirty-six weeks....our imports of crude oil rose by an average of 523,000 barrels per day to an average of 6,145,000 barrels per day, after rising by an average of 299,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 693,000 barrels per day to an average of 3,174,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,971,000 barrels of per day during the week ending March 26th, 170,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,071,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,941,000 barrels of crude per day during the week ending March 26th, 552,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that a net of 125,000 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 745,000 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 plugged a (+745,000) 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 fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting there must have been a error or errors of that magnitude in this week's oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them as they're published, just as they're watched & believed to be accurate by most everyone in the industry....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,686,000 barrels per day last week, which was 9.4% less than the 6,279,000 barrel per day average that we were importing over the same four-week period last year... the 125,000 barrel per day net withdrawal from our crude inventories was due to a 125,000 barrel 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 100,000 barrels per day higher at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,700,000 barrels per day, while a 10,000 barrel per day decrease to 445,000 barrels per day in Alaska's oil production subtracted 100,000 barrels per day the rounded national total (EIA's math)....last year's US crude oil production for the week ending March 27th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 14.6% below that of a year ago, yet still 31.7% above 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 83.9% of their capacity while using those 14,941,000 barrels of crude per day during the week ending March 26th, up from 81.6% of capacity during the prior week, and the highest refinery utilization in 53 weeks, which appears to reflect utilization​ during ​the last week before the Covid slowdown...however, the 14,941,000 barrels per day of oil that were refined this week were just fractionally higher than the 14,898,000 barrels of crude that were being processed daily during the week ending March 27th of last year, when US refineries were operating at a seasonal low 82.3% of capacity...

with the increase in the amount of oil being refined, the gasoline output from our refineries was higher for the 8th time in 20 weeks, increasing by 762,000 barrels per day to a twenty-five week high of 9,339,000 barrels per day during the week ending March 26th, after our gasoline output had decreased by 300,000 barrels per day over the prior week...as a result, this week's gasoline production was 25.3% higher than the 7,456,000 barrels of gasoline that were being produced daily over the same week of last year, but still 6.3% lower than the March 13 2020 pre-pandemic high of 9.972,000 barrels per day ....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 137,000 barrels per day to 4,738,000 barrels per day, after our distillates output had increased by 1,703,000 barrels per day from a twenty-six year low of 2,898,000 barrels per day over the prior three weeks...but even after that four week rebound in our distillates' production, this week's distillates output was still 4.6% lower than the 4,966,000 barrels of distillates that were being produced daily during the week ending March 27th, 2020...

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the sixth time in twenty weeks, and for 19th time in 37 weeks, falling by 1,735,000 barrels to 230,544,000 barrels during the week ending March 26th, after our gasoline inventories had increased by 204,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 275,000 barrels per day to 8,891,000 barrels per day, and because our exports of gasoline rose by 108,000 barrels per day to 541,000 barrels per day, and because our imports of gasoline fell by 320,000 barrels per day to 619,000 barrels per day...after this week's inventory decrease, our gasoline supplies were 6.6% lower than last March 27th's gasoline inventories of 246,806,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the recovery in our distillates production, our supplies of distillate fuels increased for the 3rd time in 10 weeks and for the 11th time in thirty-one weeks, rising by 2,542,000 barrels to 144,095,000 barrels during the week ending March 26th, after our distillates supplies had increased by 3,806,000 barrels during the prior week....our distillates supplies managed to rise this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 521,000 barrels per day to 4,113,000 barrels per day, because our exports of distillates fell by 426,000 barrels per day to 703,000 barrels per day, while our imports of distillates fell by 223,000 barrels per day to 664,000 barrels per day...after this week's inventory increase, our distillate supplies at the end of the week were 17.9% above the 122,248,000 barrels of distillates that we had in storage on March 27th, 2020, and rose to about 4% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil exports and the recovery in our refinery throughput, our commercial supplies of crude oil in storage fell for the 12th time in the past twenty weeks and for the 24th time in the past year, decreasing by 876,000 barrels, from 502,711,000 barrels on March 19th to 501,835,000 barrels on March 26th...after this week's modest decrease, our commercial crude oil inventories remained 6% above the most recent five-year average of crude oil supplies for this time of year, and w​as still nearly 49% above the average of our crude oil stocks as of the fourth week of March ​over the 5 years ​at the beginning of th​is 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 spring lockdowns of last year, after generally rising over the​ past two ​and a half ​years​,​ except for ​summers and ​during the 10 weeks prior to the Texas freeze, after generally falling from a record high over the year and a half prior to September of 2018, our commercial crude oil supplies as of March 26th were 7.0% more than the 469,193,000 barrels of oil we had in commercial storage on March 27th of 2020, 11.6% more than the 449,521,000 barrels of oil that we had in storage on March 29th of 2019, and also 18.0% more than the 425,332,000 barrels of oil we had in commercial storage on March 16th of 2018...       

This Week's Rig Count

Note: this week's rig count was released on Thursday in advance of the Good Friday market holiday, so it only covers 6 days...nonetheless, the rig count rose for the 26th time over the past 29 weeks​,​ and by the most since January 15th​,​ during the week ending April 1st, but it still remains down by 47.3% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was up by 13 to 430 rigs this past week, which was still down by 234 rigs from the 664 rigs that were in use as of the April 3rd report of 2020, and was 1,499 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 13 rigs to 331 oil rigs this week, after rising by 9 oil rigs the prior week, ​still ​leaving us with 225 fewer oil rigs than were running a year ago, and 20.6% 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 was down by one to 91 natural gas rigs, which was also down by 9 natural gas rigs from the 100 natural gas rigs that were drilling a year ago, and just 5.7% 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, there are now two rig​s​ classified as 'miscellaneous' drilling this week, one in the ​middle of the ​Permian basin in MIdland county Texas, and the other in Lake County, California, while a year ago there were also two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was up by 2 to 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and 2 continuing to drill for oil in Alaminos Canyon offshore from Texas...that was 4 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, and one rig was drilling for natural gas in the West Delta field, also offshore from Louisiana...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig totals are equal to the Gulf rig counts....

The count of active horizontal drilling rigs was up by 11 to 391 horizontal rigs this week, which was still down by 202 rigs from the 593 horizontal rigs that were in use in the US on April 3rd of last year, and less than a third 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 4 rigs to 19 directional rigs this week, but those were still down by 22 from the 41 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was down by 2 to 20 vertical rigs this week, and those were down by 10 from the 30 vertical rigs that were in use on April 3rd 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 April 1st, the second column shows the change in the number of working rigs between last week's count (March 26th) and this week's (April 1st) count, the third column shows last week's March 26th 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 3rd of April, 2020..    

April 1 2021 rig count summary

this is the first week in a while where the new activty has been so widespread, rather than ​largelu limited to the Permian...checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that one rig was added in Texas Oil District 8A, which encompasses the northernmost counties of the Permian Midland basin, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which thus means there was no change in the rig count in the Texas Permian this week...since the national Permian rig count was up by 3, that means that all three rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian increase....elsewhere in Texas, there was one rig added in Texas Oil District 1, another rig added in Texas Oil District 2, and yet another a rig added in Texas Oil District 3, any two of which could have been the rigs added in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state...at the same time, there was also a rig added in Texas Oil District 6, which doesn't appear to have been targeting that region's Haynesville shale, since the Haynesvile was down by ​the​ single​ rig pulled out in northern Lousiana...Louisiana's rig count is still up by one, however, because of the two oil rigs added in th​at state's offshore waters...elsewhere, two oil rigs were added in Oklahoma, including one in the Granite Wash, two more oil rigs were added in a Utah basin not named by Baker Hughes, more than likely the Uinta, and an oil rig was added in Colorado, which apparently wasn't targeting the state's DJ Niobrara chalk...for ​changes in ​natural gas rigs, we have the rig that was removed from Louisiana's Haynesville shale, and another rig that was pulled out of West Virginia's Marcellus, while a rig was added in Pennsylvania's Marcellus at the same time...

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note: there's more here...