oil prices finished lower for just the second time in 12 weeks this week, as a surprise crude inventory increase cut off a rally that had been underpinned by hope that the Biden stimulus plan would boost demand for fuel....after rising 12 cents or 0.2% to $52.36 a barrel last week as a weaker dollar and falling crude inventories supported prices, the contract price of US light sweet crude for February delivery opened lower on Tuesday after falling Monday in overseas markets on a stronger dollar and fears of soaring Covid 19 cases worldwide, but rallied off the early lows to close 62 cents higher at $52.98 a barrel on a weakening dollar and hopes that Biden's $1.9 trillion coronavirus relief plan would increase the demand for fuel...oil prices opened 15 cents higher Wednesday but dipped back toward $53 a barrel as pessimism over the short-term demand outlook in the world’s two largest economies was partially offset by more weakness in the dollar, but recovered to close 26 cents higher at $53.24 a barrel with prospects for further economic stimulus under Biden boosting the outlook for demand as trading in the February US oil contract expired...with the markets now quoting the contract price of US light sweet crude for March delivery, which had risen 33 cents to $53.31 on Wednesday, oil prices steadied on Thursday after industry data showed a surprise increase in U.S. crude inventories that revived pandemic-related fuel demand concerns as the March oil contract closed 18 cents lower at $53.13 a barrel...oil prices extended their losses on Friday after the EIA report surprisingly confirmed that US crude inventories had indeed risen for the first time this year, as the March oil contract fell 86 cents to $52.27 a barrel, weighed down by the oil inventory build and worries that new pandemic restrictions in China would curb fuel demand in the world’s biggest oil importer...oil price quotes thus finished the week 9 cents or 0.2% lower, while the March contract, which had ended last week priced at $52.42 a barrel, finished 15 cents or 0.3% lower...
natural gas prices, meanwhile, finished much lower, as the threat for an outbreak of polar weather, which had been supporting prices, petered out..after rising 1.4% to $2.737 per mmBTU last week as traders bet that a polar air mass would arrive in late January, the contract price of natural gas for February delivery opened 3% lower on Tuesday, after forecasts over the holiday weekend trended warmer for late January and early next month, and tumbled lower throughout the day to finish 19.1 cents or 7% lower at $2.546 per mmBTU in the largest one-day price drop this year...natural gas futures fell again on Wednesday as traders absorbed dwindling expectations for strong weather-driven demand, moderating LNG levels and a change in control in the nation’s capital, shedding seven-tenths of a cent to settle at $2.539 per mmBTU, and then fell another 4.8 cents on Thursday as both the domestic and the European weather models shifted even warmer...natural gas prices fell for a fourth-consecutive day to end the week, with weakened weather demand expectations and lower U.S. export levels overshadowing a government inventory report that showed the steepest withdrawal of the season, as the February contract settled lower 4.5 cents at $2.446 per mmBTU, thus finishng the week down more than 10.6% from the prior week's finish...
the natural gas storage report from the EIA for the week ending January 15th indicated that the amount of natural gas held in underground storage in the US fell by 187 billion cubic feet to 3,009 billion cubic feet by the end of the week, which left our gas supplies just 36 billion cubic feet, or 1.2% higher than the 3,045 billion cubic feet that were in storage on January 15th of last year, but still 198 billion cubic feet, or 7.0% above the five-year average of 2,811 billion cubic feet of natural gas that have been in storage as of the 15th of January in recent years....the 187 billion cubic feet that were drawn out of US natural gas storage this week was 10 billion cubic feet more than the average forecast of a 177 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and way more than the 97 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as more than the average withdrawal of 167 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 January 15th indicated that because of a large drop in our oil exports, we had surplus oil left to add to our stored commercial crude supplies for the 2nd time in the past nine weeks and for the 8th time in the past twenty-six weeks... our imports of crude oil fell by an average of 194,000 barrels per day to an average of 6,045,000 barrels per day, after rising by an average of 870,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 760,000 barrels per day to 2,251,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,794,000 barrels of per day during the week ending January 15th, 566,000 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 unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,794,000 barrels per day during this reporting week...
meanwhile, US oil refineries reported they were processing 14,760,000 barrels of crude per day during the week ending January 15th, 110,000 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 an average of 622,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at that data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 588,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+588,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed....moreover, since last week's line 13 balance sheet adjustment was (-42,000) barrels per day, indicating a week over week difference of 630,000 barrels per day in the fudge factor, the difference between those 'errors' also means any week over week comparisons of oil supply and demand figures reported here are pretty useless...still, since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them as published, just as they're watched & believed to be accurate by most everyone in the industry.....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,745,000 barrels per day last week, which was still 11.8% less than the 6,516,000 barrel per day average that we were importing over the same four-week period last year.....the 622,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 5,000 barrel per day decrease to 506,000 barrels per day in Alaska's oil production had no impact on the rounded national total....last year's US crude oil production for the week ending January 17th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 15.4% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 82.5% of their capacity while using those 14,760,000 barrels of crude per day during the week ending January 15th, up from 82.0% of capacity during the prior week, and the highest refinery utilization rate since March 20th....however, since US refinery utilization had averaged the lowest on record through 2020, the 14,760,000 barrels per day of oil that were refined this week were still 12.4% fewer barrels than the 16,857,000 barrels of crude that were being processed daily during the week ending January 17th of last year, when US refineries were operating at 90.5% of capacity...
with the increase in the amount of oil being refined, the gasoline output from our refineries was higher for the 3rd time in 9 weeks, increasing by a record 1,373,000 barrels per day to 8,885,000 barrels per day during the week ending January 15th, after our gasoline output had decreased by 1,679,000 barrels per day over the prior two weeks...but since our gasoline production was still recovering from a multi-year low in the wake of this Spring's covid-related lockdowns, that jump still left this week's gasoline output 6.8% lower than the 9,535,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 132,000 barrels per day to 4,529,000 barrels per day, after our distillates output had decreased by 124,000 barrels per day over the prior week....and since our distillates' production was also just coming off a three year low, that output was 8.6% less than the 4,954,000 barrels of distillates that were being produced daily during the week ending January 17th, 2020...
even with the big jump in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the third time in nine weeks, and for 17th time in 28 weeks, falling by a modest 259,000 barrels to 245,217,000 barrels during the week ending January 15th, after our gasoline inventories had increased by 4,395,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 580,000 barrels per day to 8,112,000 barrels per day, and because our exports of gasoline rose by 133,000 barrels per day to 731,000 barrels per day, while our imports of gasoline rose by 121,000 barrels per day to 504,000 barrels per day....after this week's inventory decrease, our gasoline supplies were 5.7% lower than last January 17th's gasoline inventories of 260,032,000 barrels, and about 3% 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 7th time in 8 weeks and for the 23rd time in the past year, rising by 457,000 barrels to 163,662,000 barrels during the week ending January 15th, after our distillates supplies had increased by 4,786,000 barrels during the prior week....our distillates supplies rose by less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 212,000 barrels per day to 3,821,000 barrels per day, and because our exports of distillates rose by 388,000 barrels per day to 1,102,000 barrels per day, while our imports of distillates rose by 114,000 barrels per day to 460,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 12.1% above the 146,036,000 barrels of distillates that we had in storage on January 17th, 2020, and about 8% above the five year average of distillates stocks for this time of the year...
finally, with the big decrease in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) rose for the 12th time in the past thirty-two weeks and for the 30th time in the past year, increasing by 4,352,000 barrels, from 482,211,000 barrels on January 8th to 486,563,000 barrels on January 15th...after that increase, our commercial crude oil inventories were about 9% above the five-year average of crude oil supplies for this time of year, and about 47.7% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the third weekend of January, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of January 15th were still 13.7% more than the 428,106,000 barrels of oil we had in commercial storage on January 17th of 2020, and also 9.3% above the 445,025,000 barrels of oil that we had in storage on January 18th of 2019, and 18.2% more than the 411,583,000 barrels of oil we had in commercial storage on January 19th of 2018...
This Week's Rig Count
The US rig count rose for the 18th time in the past nineteen weeks during the week ending January 22nd, but for just the 20th time in the past 45 weeks, and hence it is still down by 52.4% over that forty-four week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 5 to 378 rigs this past week, which was still down by 416 rigs from the 794 rigs that were in use as of the January 24th report of 2020, and was also still 26 fewer rigs than the all time low rig count prior to 2020, and 1,551 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 2 rigs to 289 oil rigs this week, after rising by 12 oil rigs the prior week, still leaving us with 389 fewer oil rigs than were running a year ago, and still less than a fifth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 3 to 88 natural gas rigs, which was still down by 27 natural gas rigs from the 115 natural gas rigs that were drilling a year ago, and still just 5.5% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil or gas, one rig classified as 'miscellaneous' continued to drill in Lake County, California this week, while a year ago there were three such "miscellaneous" rigs deployed...
The Gulf of Mexico rig count was unchanged at 16 rigs this week, with 15 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 5 fewer Gulf of Mexico rigs than the 21 rigs drilling in the Gulf a year ago, when 19 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figures are equal to the Gulf rig counts....however, in addition to those rigs drilling in the Gulf, 3 rigs continue to drill through inland bodies of water this week, one in Lafourche Parish, south of New Orleans, another in St Mary parish, farther west along the southern Louisiana coast, and another in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..
The count of active horizontal drilling rigs was up by 6 to 338 horizontal rigs this week, which was still 372 fewer horizontal rigs than the 710 horizontal rigs that were in use in the US on January 24th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the vertical rig count was down by one to 18 vertical rigs this week, and those were also also down by 19 from the 37 vertical rigs that were operating during the same week a year ago....meanwhile, the directional rig count was unchanged at 22 directional rigs this week, and those were still down by 25 from the 47 directional rigs that were in use on January 24th 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 January 22nd, the second column shows the change in the number of working rigs between last week's count (January 15th) and this week's (January 22nd) count, the third column shows last week's January 15th 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 24th of January, 2020..
the details on the rig changes that occurred this week aren't particularly evident at first glance...checking first for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that there were 4 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, while the rig counts in the other Texas Permian districts were unchanged, and hence the Permian basin in Texas saw an increase of 4 rigs this week...since the national Permian rig count was down by 1, that means that all five of the rigs that were pulled out in New Mexico must have come from the far west reaches of the Permian Delaware, to account for the national Permian basin rig decrease...elsewhere in Texas, there was a natural gas rig added in Texas Oil District 5, which would account for the rig increase in the Barnett shale, and another rig added in Texas Oil District 6, which should account for the natural gas rig increase in the Haynesville shale, and also account for the 6 rig increase in the state of Texas...other natural gas rig activity this week included a rig that was added in Ohio's Utica shale, a rig that was added in West Virginia's Marcellus, and a natural gas rig that was pulled out of the Marcellus in Pennsylvania...other oil rig additions this week were in North Dakota's Williston basin and two oil rigs added in Alaska, in a basin or basins that Baker Hughes doesn't name...
DUC well report for December
Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for January, which includes the EIA's December data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 18th time in the past twenty-two months in December, as completions of drilled wells and drilling of new wells both increased, but still remained relatively subued....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 145 wells, falling from 7,443 DUC wells in November to 7,298 DUC wells in December, which was also 9.5% fewer DUCs than the 8,067 wells that had been drilled but remained uncompleted as of the end of December of a year ago...this month's DUC decrease occurred as 373 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during December, up from the 334 wells that were drilled in November, while 518 wells were completed and brought into production by fracking, up from the 497 completions seen in November, but down by more than half from the 1,039 completions seen in December of last year....at the December completion rate, the 7,298 drilled but uncompleted wells left at the end of the month represents a 14.1 month backlog of wells that have been drilled but are not yet fracked, down from the 15.2 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 one-third of the previous norm...
both oil producing regions and natural gas producing regions saw DUC well decreases in November, and no basins reported DUC increases...the number of uncompleted wells remaining in the Niobrara chalk of the Rockies' front range fell by 38, decreasing from 480 at the end of November to 442 DUC wells at the end of December, as 32 wells were drilled into the Niobrara chalk during November, while 70 Niobrara wells were being fracked....at the same time, DUC wells in the Eagle Ford of south Texas decreased by 29, from 1,025 DUC wells at the end of November to 996 DUCs at the end of December, as 37 wells were drilled in the Eagle Ford during December, while 66 already drilled Eagle Ford wells were completed...meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 22, falling from 678 at the end of November to 656 DUC wells at the end of December, as just 15 wells were drilled into the Anadarko basin during December, while 37 Anadarko wells were being fracked....in addition, DUCs in the Permian basin of west Texas and New Mexico decreased by 21, from 3,545 DUC wells at the end of November to 3,524 DUCs at the end of December, as 169 new wells were drilled into the Permian, while 190 wells in the region were completed...and there was also a decrease of 17 DUC wells in the Bakken of North Dakota, where DUC wells fell from 795 at the end of November to 778 DUCs at the end of December, as 20 wells were drilled into the Bakken during December, while 37 of the drilled wells in that basin 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 12 wells, from 596 DUCs at the end of November to 584 DUCs at the end of December, as 61 wells were drilled into the Marcellus and Utica shales during the month, while 73 of the already drilled wells in the region were fracked....at the same time, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 6 to 318, as 39 wells were drilled into the Haynesville during December, while 45 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of December, 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 127 wells to 6,396 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 18 wells to 902 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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