Suez Canal shutdown cuts Persian Gulf exports; US gasoline exports at a 41 week low...

oil prices fell for the third week in a row, after rising 80% over the prior 18 weeks, as new Covid infections and lockdowns increased worldwide...after falling 6.4% to $61.42 a barrel last week on rising tension between Biden and Putin, and on a new wave of Covid infections across Europe, the contract price of US light sweet crude for April delivery opened higher on Monday as hopes for a pick-up in demand later this year helped arrest last week's broad sell-off​,​ and hung on to finish with a 13 cent gain as traders continued to weigh the prospects for energy demand after problems with the AstraZeneca vaccine and renewed lockdowns in Europe, as trading in the April US oil contract expired ​with it priced ​at $61.55 a barrel...with oil quotes now referencing the price of US light sweet crude for May delivery, which had risen 12 cents to $61.56 a barrel on Monday, oil prices​ ​tumbled from the opening bell on Tuesday as European coronavirus curbs pointed to another hit to demand, and ended ​the day ​down $3.80​​ or more than 6%​ ​at $57.76 a barrel, as hope for an economic recovery was dampened by setbacks in vaccine rollouts in parts of Europe and Southern Asia, with prices​ then​ falling even lower in post-settlement trade after the American Petroleum Institute reported U.S. crude oil inventories unexpectedly rose over the most recent week...prices thus opened lower on Wednesday, but edged higher as investors looked for bargains following the previous day's plunge, and then jumped nearly 6% to close $3.42 higher at $61.18 a barrel after a ​big ​ship ran aground in the Suez Canal, provoking concern that the incident would tie up crude shipments and drive prices higher...but oil prices opened lower again on Thursday as coronavirus lockdown concerns outweighed the Suez Canal disruptions and slid to a 4% loss, with May crude settling $2.62 lower at $58.56 a barrel, as the U.S. reported the most new Covid cases since Feb. 12 and the U.S. dollar strengthened, reducing the appeal of commodities priced in the currency...however, oil prices bounced back on Friday, on fears that the ship stuck in the Suez Canal might block shipping for weeks, squeezing supply, with oil closing $2.41 higher at $60.97 a barrel after Yemen’s Houthis said they had attacked several of Saudi Aramco’s facilities with drones and ballistic missiles...oil prices thus finished their most volatile week in 11 months with a loss of just 0.7%, while the May oil contract also saw a statically identical decline...

meanwhile, natural gas prices finished slightly higher for the first time in 6 weeks after the closure of the Suez Canal, cutting off LNG exports from the Persian Gulf and Australia....after falling 2.5% to $2.535 per mmBTU last week as weather forecasts suggested little demand for heating thru the remainder of the season, the contract price of natural gas for April delivery opened 1% lower on Monday but quickly reversed ​course ​on continued robust liquefied natural gas output and settled up 4.7 cents on the day​ ​at $2.582 per mmBTU​.​...but continuing forecasts for weak weather related demand overshadowed LNG growth on Tuesday and prices ​reversed to fall 7.4 cents to $2.508 per mmBTU, which was followed by a penny price rebound on Wednesday amid concern about delayed LNG export deliveries after the grounded container ship blocked the Suez Canal...natural gas prices then rallied on Thursday after a bullish government inventory report and on consistently solid demand for U.S. LNG exports​,​ and climbed 5.2 cents to settled at $2.570 per mmBTU...however, despite strong exports and signs of stronger Gulf Coast industrial demand, natural gas futures drifted lower on Friday, finishing down 1.3 cents at $2.557 per mmBTU on the day, but still​ managed to​ log a 0.9% increase on the week...

the natural gas storage report from the EIA for the week ending March 19th indicated that the amount of natural gas held in underground storage in the US fell by 36 billion cubic feet to 1,746  billion cubic feet by the end of the week, which left our gas supplies 263 billion cubic feet, or 13.1% below the 2,009 billion cubic feet that were in storage on March 19th of last year, and 78 billion cubic feet, or 4.3% below the five-year average of 1,824 billion cubic feet of natural gas that have been in storage as of the 19th of March in recent years....the 36 billion cubic feet that were drawn out of US natural gas storage this week was more than the average forecast of a 21 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was also more than 26 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, but it was less than the average withdrawal of 51 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 19th indicated that even after another big increase in our oil refining, we still had a modest surplus of oil left to add to our stored commercial crude supplies, which increased for the 5th week in a row and for the 13th time in the past thirty-five weeks....our imports of crude oil rose by an average of 299,000 barrels per day to an average of 5,622,000 barrels per day, after falling by an average of 332,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 39,000 barrels per day to 2,481,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,141,000 barrels of per day during the week ending March 19th, 338,000 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 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 14,141,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,389,000 barrels of crude per day during the week ending March 19th, 957,000 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 273,000 barrels of oil per day were being added to the supplies of oil stored in the US....comparing those totals, 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 522,000 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 plugged a (+522,000) 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 rose to an average of 5,723,000 barrels per day last week, which was 9.5% less than the 6,326,000 barrel per day average that we were importing over the same four-week period last year.....the 273,000 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 100,000 barrels per day higher at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 10,500,000 barrels per day, while a 5,000 barrel per day decrease to 454,000 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 March 20th 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% 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 81.6% of their capacity while using those 14,389,000 barrels of crude per day during the week ending March 19th, up from 76.1% of capacity during the prior week, but still a historically low figure, even for this time of year, when refineries are typically undergoing seasonal maintenance...hence, the 14,389,000 barrels per day of oil that were refined this week were still 9.2% fewer barrels than the 15,838,000 barrels of crude that were being processed daily during the week ending March 20th of last year, when US refineries were operating at a seasonal slow 87.9% of capacity...

even with the increase in the amount of oil being refined, the gasoline output from our refineries was lower for the 12th time in 19 weeks, decreasing by 300,000 barrels per day to 8,577,000 barrels per day during the week ending March 19th, after our gasoline output had decreased by 128,000 barrels per day over the prior week...as a result, this week's gasoline production​ ​was 4.3% lower than the 8,958,000 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) increased by 373,000 barrels per day to 4,601,000 barrels per day, after our distillates output had increased by 1,330,000 barrels per day from a twenty-six year low of 2,898,000 barrels per day over the prior two weeks...but even after that three week rebound in our distillates' production, this week's distillates​ ​output was still 4.9% lower than the 4,838,000 barrels of distillates that were being produced daily during the week ending March 20th, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the fourteenth time in nineteen weeks, and for 18th time in 36 weeks, rising by a modest 204,000 barrels to 232,279,000 barrels during the week ending March 19th, after our gasoline inventories had increased by 472,000 barrels over the prior week...our gasoline supplies managed to increase this week even though the amount of gasoline supplied to US users increased by 174,000 barrels per day to 8,616,000 barrels per day because our exports of gasoline fell by 247,000 barrels per day to a nine month low of 433,000 barrels per day, and because our imports of gasoline rose by 29,000 barrels per day to 939,000 barrels per day...but even after this week's inventory increase, our gasoline supplies were 2.9% lower than last March 20th's gasoline inventories of 239,282,000 barrels, and about 3% 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 2nd time in 9 weeks and for the 10th time in thirty weeks, rising by 3,806,000 barrels to 141,553,000 barrels during the week ending March 19th, after our distillates supplies had increased by 255,000 barrels during the prior week....our distillates supplies rose this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 436,000 barrels per day to 3,592,000 barrels per day, while our exports of distillates rose by 441,000 barrels per day to 1,129,000 barrels per day​, and​ while our imports of distillates rose by 140,000 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 13.8% above the 124,442,000 barrels of distillates that we had in storage on March 20th, 2020, and rose to about 1% above the five year average of distillates stocks for this time of the year...

finally, even with the recovery in our refinery throughput, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) ended the week higher for the eighth time in the past nineteen weeks and for the 29th time in the past year, increasing by 1,​912,000 barrels, from 500,799,000 barrels on March 12th to 502,711,000 barrels on March 19th...after this week's modest increase, our commercial crude oil inventories remained 6% above the most recent five-year average of crude oil supplies for this time of year, and were still nearly 49% above the 5 year average of our crude oil stocks as of the third week of March at the beginning of the 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 prior two years except for during the 10 weeks prior to the Texas freeze​,​ and except for during the past two summers, 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 19th were 10.4% more than the 455,360,000 barrels of oil we had in commercial storage on March 20th of 2020, 13.7% more than the 442,283,000 barrels of oil that we had in storage on March 22​nd of 2019, and also 17.4% more than the 428,306,000 barrels of oil we had in commercial storage on March 16th of 2018...      

This Week's Rig Count

The US rig count rose for the 25th time over the past 28 weeks during the week ending March 26th, 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 6 to 417 rigs this past week, which was still down by 311 rigs from the 728 rigs that were in use as of the March 27th report of 2020, and was 1,512 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 9 rigs to 318 oil rigs this week, after rising by 9 oil rigs the prior week, leaving us with 300 fewer oil rigs than were running a year ago, and 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 was unchanged at 92 natural gas rigs for the 5th week in row, which was still down by 10 natural gas rigs from the 102 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, one rig classified as 'miscellaneous' continued to drill in Lake County, California this week, while a year ago there were two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was down by one to twelve rigs this week, with 10 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 6 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 8 to 380 horizontal rigs this week, which was still down by 273 rigs from the 653 horizontal rigs that were in use in the US on March 27th 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 ​1 rig to 15 directional rigs this week, but those were also down by 32 from the 47 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was down by 3 to 22 vertical rigs this week, and those were down by 6 from the 28 vertical rigs that were in use on March 27th 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 March 26th, the second column shows the change in the number of working rigs between last week's count (March 19th) and this week's (March 26th) count, the third column shows last week's March 19th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 27th of March, 2020..    

once again, it appears that most of this week's new activity was in the Permian basin... so checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that there were 6 rigs new rigs set up in Texas Oil District 8, which corresponds to 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 together means there was a net increase of 5 rigs in the Texas Permian, thus accounting for this week's Permian basin change.....elsewhere in Texas, there were 2 rigs pulled out of Texas Oil District 1, while there was a rig added in Texas Oil District 4, which all could have been 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 pulled out of Texas Oil District 10 in the Texas panhandle, which doesn't appear to have been targeting that region's Granite Wash basin....other rig additions were in Colorado, but not in the state's Niobrara chalk, in Oklahoma's Cana Woodford, in North Dakota's Williston basin, and in a Utah basin not named by Baker Hughes​, more than likely the Uinta​...other than those, the only other change evident this week ​was ​the oil rig that was removed from Louisiana's offshore waters ​that we alluded to previously... 

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oil drops most in 5 months; DUC backlog rises to 14.7 months as completions fall for the first time in 9 months

oil prices tumbled by the most in 5 months this week on rising tension between Biden and Putin, and on a new wave of Covid infections across Europe...after slipping 0.7% to $65.61 a barrel last week in an inevitable correction of an 80% runup over 18 weeks, the contract price of US light sweet crude for April delivery opened slightly lower on Monday as the dollar strengthened and weighed on commodities priced in the currency, then rallied into positive territory by midday on strong Chinese economic news and ongoing supply restraint from major oil producers before fading to close 22 cents lower at $65.39 a barrel, pressured by expectations that ongoing damage from the freeze off in Texas would continue to boost crude inventories....oil prices continued lower on Tuesday as traders awaited signs of further recovery in consumption and closed down 59 cents at $64.80 a barrel as Germany, France and other European states suspended the use of the AstraZeneca coronavirus vaccine, threatening the recovery of fuel demand...oil prices jumped back above $65 late Tuesday after the API reported that US crude inventories had unexpectedly dropped, but fell back after the market opened on Wednesday and settled 20 cents lower at $64.80 a barrel after government data showed a weekly build in crude, gasoline and distillate supplies...oil prices opened lower on Thursday and tumbled throughout the day to a 10% loss by midafternoon on concern over rising tensions between the U.S. and Russia and a slowdown in the European vaccine rollout​,​ but recovered to post ​just ​a 7% loss at $60.00 a barrel, still the steepest drop in 6 months, with a sharp rise in the value of the dollar after a Fed meeting where no action was taken also driving the selloff...however, oil prices rebounded after opening lower again on Friday after investment banks from Goldman Sachs to Morgan Stanley said the Thursday sell-off was excessive and offered an opportunity to buy, and rallied to close $1.42 or 2.4% higher at $61.42 a barrel, ​on reports of an attack on an oil facility in Saudi Arabia​, ​but still finished the week 6.4% lower, oil's worst week since October, as a new wave of coronavirus infections across Europe dampened hopes that fuel demand would recover anytime soon...

natural gas prices also fell this week, albeit not as precipitously, as weather forecasts suggested little demand for heating thru the remainder of the season...after falling 3.7% to $2.600 per mmBTU last week as ​the ​weather continued to moderate ​with the end of the heating season approach​ing, the contract price of natural gas for April delivery opened more than 4 cents lower on Monday and tumbled to an 11.6 cent loss at $2.484 per mmBTU as forecasts called for spring weather and less heating needs over the remainder of this month and into April...gas prices recovered 7.8 cents of that loss on Tuesday, as signs of sustained strength in LNG demand offset forecasts for mild weather and light heating demand, but fell back 3.4 cents to $2.528 per mmBTU on Wednesday as traders mulled forecasts for mild spring weather and expectations for only a modest storage withdrawal report the next day....natural gas prices fell another 4.7 cents to $2.481 per mmBTU on Thursday — the 10th decline in 12 trading sessions — after a bearish storage report and forecasts that ​indicated further moderating heating demand...however, gas prices reversed the slide on Friday as LNG output reached record levels​,​ and a brightening economic outlook offset festering worry about weak weather-driven demand and gas prices settled 5.4 cents higher at $2.535 per mmBTU, but still finished 2.5% lower on the week...

the natural gas storage report from the EIA for the week ending March 12th indicated that the amount of natural gas held in underground storage in the US fell by 11 billion cubic feet to 1,782 billion cubic feet by the end of the week, which left our gas supplies 253 billion cubic feet, or 12.4% below the 2,035 billion cubic feet that were in storage on March 12th of last year, and 93 billion cubic feet, or 5.0% below the five-year average of 1,875 billion cubic feet of natural gas that have been in storage as of the 12th of March in recent years....the 11 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast of a 17 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was also less than 15 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, and far less than the average withdrawal of 59 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 12th indicated that even after another big increase in our oil refining and a decrease in our oil imports, we still had a modest surplus of oil left to add to our stored commercial crude supplies, which increased for the 4th week in a row and for the 12th time in the past thirty-four weeks....our imports of crude oil fell by an average of 332,000 barrels per day to an average of 5,323,000 barrels per day, after falling by an average of 636,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 113,000 barrels per day to 2,520,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,803,000 barrels of per day during the week ending March 12th, 219,000 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 unchanged 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 13,703,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 13,433,000 barrels of crude per day during the week ending March 12th, 1,123,000 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 342,000 barrels of oil per day were being added to the supplies of oil stored in the US....totalling th​ose amounts, 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 72,000 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 plugged a (+72,000) 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 was a small error or errors in this week's oil supply & demand figures we have just transcribed....(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 5,467,000 barrels per day last week, which was 13.9% less than the 6,351,000 barrel per day average that we were importing over the same four-week period last year.....the 342,000 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 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,400,000 barrels per day, while a 1,000 barrel per day decrease to 460,000 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 March 13th was rounded to 13,100,000 barrels per day, so this reporting week's rounded oil production figure was 16.8% below that of a year ago, 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 76.1% of their capacity while using those 13,433,000 barrels of crude per day during the week ending March 12th, up from 69.0% of capacity during the prior week, but except for the pandemic impacted months of 2020, still one of the lowest refinery utilization rates of the last 30 years...hence, the 13,433,000 barrels per day of oil that were refined this week were still 15.1% fewer barrels than the 15,820,000 barrels of crude that were being processed daily during the week ending March 13th of last year, when US refineries were operating at a seasonal low 86.4% of capacity...

even with the jump in the amount of oil being refined, the gasoline output from our refineries was lower for the 11th time in 18 weeks, decreasing by 128,000 barrels per day to 8,877,000 barrels per day during the week ending March 12th, after our gasoline output had increased by 704,000 barrels per day over the prior week...with our gasoline production remaining depressed, this week's gasoline output was still 11.0% lower than the 9,974,000 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) increased by 524,000 barrels per day to 4,228,000 barrels per day, after our distillates output had increased by 806,000 barrels per day ​from a twenty-six year low of 2,898,000 barrels per day over the prior week...but even after that two week rebound in our distillates' production, this week's output was still 9.8% less than the 4,686,000 barrels of distillates that were being produced daily during the week ending March 13th, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the thirteenth time in eighteen weeks, and for 17th time in 35 weeks, rising ​by 472,000 barrels to 232,075,000 barrels during the week ending March 12th, after our gasoline inventories had decreased by a record 25,493,000 barrels over the prior two weeks...our gasoline supplies managed to increase this week despite the production drop because the amount of gasoline supplied to US users decreased by 284,000 barrels per day to 8,442,000 barrels per day, and because our imports of gasoline rose by 333,000 barrels per day to 910,000 barrels per day, and because our exports of gasoline fell by 97,000 barrels per day to 580,000 barrels per day...even after this week's inventory increase, our gasoline supplies were 3.6% lower than last March 13th's gasoline inventories of 240,819,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with modest recovery in our distillates production, our supplies of distillate fuels increased for the 1st time in 8 weeks and for the 9th time in twenty nine-weeks, rising by 255,000 barrels to 137,747,000 barrels during the week ending March 12th, after our distillates supplies had decreased by 5,504,000 barrels during the prior week....our distillates supplies also rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 459,000 barrels per day to 4,028,000 barrels per day, while our exports of distillates rose by 213,000 barrels per day to 688,000 barrels per day, and while our imports of distillates rose by 52,000 barrels per day to 524,000 barrels per day...and after this week's inventory increase, our distillate supplies at the end of the week were 10.1% above the 125,120,000 barrels of distillates that we had in storage on March 13th, 2020, even as they remained about 2% below the five year average of distillates stocks for this time of the year...

finally, even with the recovery in our refinery throughput and the decrease in oil imports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) ended the week higher for the seventh time in the past eightteen weeks and for the 29th time in the past year, increasing by 2,369,000 barrels, from 498,403,000 barrels on March 5th to 500,799,000 barrels on March 12th, after our commercial oil inventories had increased by a record 35,361,000 barrels over the prior two weeks...after this week's modest increase, our commercial crude oil inventories remained 6% above the​ most recent​ five-year average of crude oil supplies for this time of year, and were still 49.6% above the 5 year average of our crude oil stocks as of the second week of March at the beginning of the 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 prior two years except for during the 10 weeks prior to the Texas freeze and except for 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 March 12th were 10.4% more than the 453,737,000 barrels of oil we had in commercial storage on March 13th of 2020, 14.0% more than the 439,483,000 barrels of oil that we had in storage on March 15th of 2019, and also 16.2% more than the 430,928,000 barrels of oil we had in commercial storage on March 9th of 2018...     

This Week's Rig Count

The US rig count rose for the 24th time over the past 27 weeks during the week ending March 19th, but it still remains down by 46.8% from what it was a year ago....Baker Hughes reported that the total count of rotary rigs running in the US was up by 9 to 411 rigs this past week, which was still down by 361 rigs from the 772 rigs that were in use as of the March 20th report of 2020, and was 1,518 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 9 rigs to 318 oil rigs this week, after falling by 1 oil rig the prior week, still leaving us with 346 fewer oil rigs than were running a year ago, and 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 was unchanged at 92 natural gas rigs for the 4th week in row, which was still down by 14 natural gas rigs from the 106 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, one rig classified as 'miscellaneous' continued to drill in Lake County, California this week, while a year ago there were two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was unchanged at 13 rigs this week, with 11 of those rigs drilling for oil in Louisiana's offshore waters and 2 drilling for oil in Alaminos Canyon offshore from Texas...that was 6 fewer Gulf of Mexico rigs than the 19 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the West Delta field 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 totals are equal to the Gulf rig counts....

The count of active horizontal drilling rigs was up by 10 to 372 horizontal rigs this week, which was still down by 324 rigs from the 696 horizontal rigs that were in use in the US on March 20th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by 1 rigs to 14 directional rigs this week, and those were also down by 35 from the 49 directional rigs that were operating during the same week a year ago....meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, and those were down by 2 from the 27 vertical rigs that were in use on March 6th 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 March 19th, the second column shows the change in the number of working rigs between last week's count (March 12th) and this week's (March 19th) count, the third column shows last week's March 12th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 20th of March, 2020..    

after several weeks of Permian ​basin oil ​rigs moving from New Mexico to Texas, this week it appears they were moving in the opposite direction....checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that there were 2 rigs pulled out of Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 7B, which includes the easternmost extent of the Permian Midland basin, which together means there was a net decrease of 3 rigs in the Texas Permian....however, since the national Permian rig count was up by ​4, that means that the 7 rigs that were added in New Mexico must have been set up in the farthest west reaches of the Permian Delaware, to balance the national Permian total....elsewhere in Texas, there were 2 rigs added in Texas Oil District 1, another rig added in Texas Oil District 3, and yet another rig added in Texas Oil District 4, any three of which could account for the three rig increase in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state...at the same time, there were also 2 rigs pulled out of Texas Oil District 6, which had been drilling for natural gas in the western part of the Haynesville shale...the Haynesville shale shows no net change, however, because two natural gas rigs were set up to target tha​t formation in northwestern Louisiana at the same time..​.​other than that, the only other change evident this week was the oil rig that was pulled out of North Dakota's Williston basin at the same time...

DUC well report for February

Monday of this past week saw the release of the EIA's Drilling Productivity Report for March, which includes the EIA's February 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 9th month in a row, as both completions of drilled wells and drilling of new wells both decreased and remained far below the pre-pandemic levels, with wells drilled down for the first time since July and completions down for the first time since May....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 102 wells, falling from 7,188 DUC wells in January to 7,086 DUC wells in February, which was also 15.9% fewer DUCs than the 8,426 wells that had been drilled but remained uncompleted as of the end of February of a year ago...this month's DUC decrease occurred as 380 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during February, down from the 417 wells that were drilled in January, while 482 wells were completed and brought into production by fracking, down from the 606 completions seen in January, and down by more than half from the 1,137 completions seen in February of last year....at the February completion rate, the 7,086 drilled but uncompleted wells left at the end of the month represents a 14.7 month backlog of wells that have been drilled but are not yet fracked, up from the 12.5 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 ​now ​one-third of the previous norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in February, as only the Haynesville shale reported a single DUC increase...the number of uncompleted wells remaining in the Niobrara chalk of the Rockies' front range fell by 30, decreasing from 503 at the end of January to 467 DUC wells at the end of February, as 39 wells were drilled into the Niobrara chalk during February, while 69 Niobrara wells were being fracked....in addition, DUCs in the Eagle Ford of south Texas decreased by 22, from 1,033 DUC wells at the end of January to 1,011  DUCs at the end of February, as 35 wells were drilled in the Eagle Ford during February, while 57 already drilled Eagle Ford wells were completed...there was also a decrease of 22 DUC wells in the Bakken of North Dakota, where DUC wells fell from 702 at the end of January to 680 DUCs at the end of February, as 17 wells were drilled into the Bakken during February, while 39 of the drilled wells in that basin were being fracked...at the same time, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 13, falling from 764 at the end of January to 751 DUC wells at the end of February, as 18 wells were drilled into the Anadarko basin during February, while 31 Anadarko wells were being fracked....meanwhile, DUC wells in the Permian basin of west Texas and New Mexico decreased by 2, from 3,275 DUC wells at the end of January to 3,273 DUCs at the end of February, as 167 new wells were drilled into the Permian, while 169 wells in the region were completed...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 14  wells, from 564 DUCs at the end of December to 550 DUCs at the end of February, as 66 wells were drilled into the Marcellus and Utica shales during the month, while 80 of the already drilled wells in the region were fracked....however, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 1 to 314, as 38 wells were drilled into the Haynesville during February, while just 37 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of February, 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 89 wells to 6,222 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 13 wells to 864 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…

record jump in oil refining; distillate exports at 11 year low; Saudi cut and Texas freeze leave oil supply short of demand

refinery throughput was 5th lowest in 32 years even after a record increase in refinery throughput; distillate exports at 11 year low, domestic distillate demand at a 16 month high; OPEC report shows February oil supplies fell short of demand after the Saudi's cut and the Texas freeze-off..

oil prices corrected slightly this week after running up more than 80% over the prior eighteen weeks....after jumping 7.5% to a 22 month high at $66.09 a barrel last week after OPEC and other producers committed to holding their oil output steady through the end of April, the contract price of US light sweet crude for April delivery opened higher on Monday, after Saudi Arabia said its oil facilities had been targeted by missiles and drones on Sunday, and a Houthi military spokesman claimed responsibility for the attacks, with the international benchmark trading as high at $71.38 per barrel, before turning lower after the Saudis said their largest oil export terminal at Ras Tanura was unscathed and tumbling to close down $1.04 at $65.05 a barrel, with a stronger dollar serving to further cool prices....oil prices continued sliding in a choppy session on Tuesday, as fears of a supply disruption in Saudi Arabia receded, countering a pause in the dollar’s rally and prospects for tighter supply due to OPEC+ output curbs. and ended down another $1.04 at $64.01 a barrel as analysts suggested that such a price correction was perhaps inevitable...oil prices continued falling in aftermarket trading Tuesday and opened lower on Wednesday after the API reported a huge oil inventory increase, but reversed to settle 43 cents higher at $64.44 per barrel after the Organisation for Economic Cooperation and Development (OECD) projected the global economy was set to rebound with 5.6% growth this year and expand by 4% more next year...oil prices rose again on Thursday as vaccine rollouts bolstered the economic outlook and U.S. fuel supplies fell sharply and finished $1.58 higher at $66.02 a barrel, as the US dollar fell for a third straight day to its lowest level in a week against a basket of other currencies...April oil traded in a narrow range on Friday, supported by production cuts by major oil producers and optimism about a demand recovery in the second half of the year and settled 41 cents lower at $65.61 a barrel, thus contributing to a 0.7% loss on the week, with oil prices held in check by the presence of substantial global oil inventory that would cushion any short-term imbalances...

natural gas prices also finished lower this week as weather continued to moderate with the end of the heating season approaching....after falling 2.5% to a 5 week low of $2.701 mmBTU last week on the report that natural gas inventories fell much less than had been expected, the contract price of natural gas for April delivery opened lower on Monday and slid to a 3.7 cent loss at $2.664 per mmBTU amid mild weather, demand uncertainty and steady gas production... prices barely budged all day Tuesday, closing two-tenths of a cent lower at $2.664 per mmBTU, as generally mild March temperatures continued to offer little support for prices...despite continued mild weather and light heating demand, natural gas prices moved 3 cents higher on Wednesday, but gave most of that up in falling back 2.4 cents to $2.668 per mmBTU on Thursday as the EIA's inventory report disappointed for a second straight week, and forecasts called for easing weather demand...gas traders finally appeared to capitulate on Friday as spring weather appeared to have arrived a few weeks early and natural gas prices fell 6.8 cents to $2.600 per mmBTU, thus ending down 3.7% for the week...

the natural gas storage report from the EIA for the week ending March 5th indicated that the amount of natural gas held in underground storage in the US fell by 52 billion cubic feet to 1,793 billion cubic feet by the end of the week, which left our gas supplies 257 billion cubic feet, or 12.5% below the 2,050 billion cubic feet that were in storage on March 5th of last year, and 141 billion cubic feet, or 7.3% below the five-year average of 1,934 billion cubic feet of natural gas that have been in storage as of the 5th of March in recent years....the 52 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast of a 65 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was also less than 72  billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, and less than the average withdrawal of 89 billion cubic feet of natural gas that have 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 5th showed that despite a big rebound in our oil refining, we again had a large surplus of oil on record left to add to our stored commercial crude supplies, which increased for the fifth time in the past sixteen weeks and for the 14th time in the past thirty-eight weeks....our imports of crude oil fell by an average of 636,000 barrels per day to an average of 5,655,000 barrels per day, after jumping by an average of 1,692,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 282,000 barrels per day to 2,633,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,022,000 barrels of per day during the week ending March 5th, 918,000 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 increased by 900,000 barrels per day to 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 13,922,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 12,310,000 barrels of crude per day during the week ending March 5th, a record 2,407,000 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 1,971,000 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 359,000 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 plugged a (+359,000) 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 an error or errors of that magnitude in the oil supply & demand figures we have just transcribed.... moreover, since last week's fudge factor was at (-957,000) barrels per day, there was a 1,316,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, which means the week over week supply and demand changes we have just transcribed are nonsense...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 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 5,611,000 barrels per day last week, which was 11.7% less than the 6,354,000 barrel per day average that we were importing over the same four-week period last year.....the 1,971,000 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 900,000 barrels per day higher at 19,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 900,000 barrels per day higher at 10,400,000 barrels per day, while a 6,000 barrel per day decrease to 459,000 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 March 6th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 17.2% below that of a year ago, 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 69.0% of their capacity while using those 12,310,000 barrels of crude per day during the week ending March 5th, up from the record low 56.0% of capacity during the prior week, but still one of the lowest refinery utilization rates of the last 30 years...hence, the 12,310,000 barrels per day of oil that were refined this week were also among the lowest in thirty years, 21.6% fewer barrels than the 15,701,000 barrels of crude that were being processed daily during the week ending March 6th of last year, when US refineries were operating at a seasonal low 86.4% of capacity...

with the jump in the amount of oil being refined, the gasoline output from our refineries was higher for the 7th time in 17 weeks, increasing by 704,000 barrels per day to 9,005,000 barrels per day during the week ending March 5th, after our gasoline output had increased by 565,000 barrels per day over the prior week...but even with that two week rebound in gasoline production, this week's gasoline output was still 9.6% lower than the 9,956,000 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) increased by 806,000 barrels per day to 3,704,000 barrels per day, after our distillates output had decreased by 723,000 barrels per day to an twenty-six year low of 2,898,000 barrels per day over the prior week...with our distillates' production thus depressed, this week's output was still 21.3% less than the 4,705,000 barrels of distillates that were being produced daily during the week ending March 6th, 2020...

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the fifth time in seventeen weeks, and for 18th time in 34 weeks, falling by 11,869,000 barrels to 231,603,000 barrels during the week ending March 5th, after our gasoline inventories had decreased by a record 13,624,000 barrels over the prior week...our gasoline supplies decreased again this week despite the production jump because the amount of gasoline supplied to US users increased by 578,000 barrels per day to 8,726,000 barrels per day, and because our imports of gasoline fell by 28,000 barrels per day to 577,000 barrels per day, and because our exports of gasoline rose by 184,000 barrels per day to 677,000 barrels per day...after this week's big inventory decrease, our gasoline supplies were 6.2% lower than last March 6th's gasoline inventories of 246,999,000 barrels, and about 6% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with only a partial recovery in our distillates production, our supplies of distillate fuels decreased for the 20th time in 28 weeks and for the 29th time in the past year, falling by a 5,504,000 barrels to 137,492,000 barrels during the week ending March 5th, after our distillates supplies had decreased by a near record 9,719,000 barrels during the prior week....our distillates supplies fell again this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, jumped by 699,000 barrels per day to a 16 month high of 4,487,000 barrels per day, while our exports of distillates fell by 345,000 barrels per day to an eleven year low of 475,000 barrels per day, and while our imports of distillates rose by 151,000 barrels per day to 472,000 barrels per day...but even after this week's big inventory decrease, our distillate supplies at the end of the week were still 7.4% above the 128,060,000 barrels of distillates that we had in storage on March 6th, 2020, even as they fell to about 4% below the five year average of distillates stocks for this time of the year...

finally, even with the recovery in our refinery throughput, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) ended the week higher for the 11th time in the past thirty-three weeks, and for the 29th time in the past year, increasing by 13,798,000 barrels, from 484,605,000 barrels on February 26th to 498,403,000 barrels on March 5th, after our commercial oil inventories had increased by a record 21,563,000 the prior week...after that two week record increase, our commercial crude oil inventories rose to 6% above the five-year average of crude oil supplies for this time of year, and to about 44% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the first week of March, 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 prior two years, except for during the 10 weeks prior to the Texas freeze and except for 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 March 5th were 10.3% more than the 451,783,000 barrels of oil we had in commercial storage on March 6th of 2020, 11.0% more than the 449,072,000 barrels of oil that we had in storage on March 8th of 2019, and also 15.7%  more than the 430,928,000 barrels of oil we had in commercial storage on March 9th of 2018...    

OPEC's Monthly Oil Market Report

Thursday of this past week saw the release of OPEC's March Oil Market Report, which covers OPEC & global oil data for February, and hence it gives us a picture of the global oil supply & demand situation for the 2nd 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, and after the Saudis unilaterally decided to cut their own production by a million barrels per day during February and March....once again, before we look at what this month's report shows us, we want to caution that estimating oil demand while the course of the Covid-19 pandemic remains uncertain is pretty speculative, and hence the demand estimates we'll be reporting this month should again 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 4​9 of this month's report (pdf page 59), 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 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...

as we can see from the above table of their oil production data, OPEC's oil output decreased by 647,000 barrels per day to 24.848,000 barrels per day during February, down from their revised but unchanged January production total of 25,496,000 barrels per day...from that table we can also see that a 930,000 barrels per day decrease in the Saudi's production was the major factor in OPEC's output decrease, and that most of the OPEC members increased their output in February, led by the Nigerian's 161,000 barrel per day production increase, not surprising since several OPEC members had failed to take advantage of the new agreement to increase production in January...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's 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, note that 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...

since there had never seemed to be a published table or listing available of how much each OPEC member was expected to produce under the eased production cuts of August through December, or the new ones ​starting January​ 2021​, we had been including the table that shows the original October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to during May, June, and July...we'll include that table once again now, though with two modifications to that agreement since, it becomes more difficult to compute the production quotas that each of the OPEC members was expected to hold to in February:

the first column in the above table shows the 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 second column shows how much each participant had originally committed to cut during May and June 2020 in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, who had their production hedged to profit from lower prices, while the last column shows the production level each participant had agreed to after that cut...the producer's agreement for August through December of last year amended the figures shown above such that each member would be allowed to reduce their production cut shown above (ie, the "voluntary adjustment" shown above) by 20%...for example, Algeria's "cut" was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period...under the agreement for August through December of last year, Algeria would reduce their "cut" by 20%, or to 193,000 barrels per day, thus allowing them to produce 864,000 barrels per day during those months...with the agreement for January and February, which was recently extended, Algeria would be able to reduce their production cut by another 5% from the "voluntary adjustment" figure shown above, or to 181,000 barrels per day, thus allowing them to produce 876,000 barrels per day during February....offhand, by comparing the above table's voluntary allocation less 25% from the initial OPEC production cut, it appears that Iraq, Gabon and Kuwait all exceeded their revised allocation during February, but that with the Saudi's additional cuts, the group as a whole still remained below the quota they would have been allowed to produce for the month...

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 March 2019 to February 2021, and it comes from page 50 (pdf page 60) of OPEC's March 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.... 

after the reported 647,000 barrel per day decrease in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global liquids production decreased by a rounded 1,310,000 barrels per day to average 92.28 million barrels per day in February, a reported decrease which apparently came after January's total global output figure was revised up by 470,000 barrels per day from the 93.12 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 670,000 barrels per day in February after that revision, with a freeze-related oil production decrease of 600,000 barrels per day in the US alone accounting for most of the non-OPEC production decrease in February... 

after that decrease in February's global output, the 92.28 million barrels of oil per day that were produced globally in February were 7.62 million barrels per day, or 7.6% less than the revised 99.90 million barrels of oil per day that were being produced globally in February 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 March 2020 OPEC report (online pdf) for the originally reported February 2020 details)...with this month's increase in OPEC's output, their February oil production of 24,848,000 barrels per day was at 26.9% of what was produced globally during the month, a decrease of 0.3% from their revised 27.2% share of the global total in January....OPEC's February 2020 production was reported at 27,772,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,924,000, or 10.5% fewer barrels per day of oil in February 2021 than what they produced a year earlier, when they accounted for 27.8% of global output...  

After the decreases 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 fell short of the expected demand, as this next table from the OPEC report will show us...   

the above table came from page 27 of the March 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 ​February, which is their estimate of global oil demand during the first quarter of 2020... OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe will be using an average of 93.04 million barrels of oil per day, which is a 180,000 barrels per day downward revision from the 93.22 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), still reflecting 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 producing 92.28 million barrels million barrels per day during February, which would imply that there was a shortage of around 760,000 barrels per day in global oil production in February when compared to the demand estimated for the month..

In addition to figuring February's global oil supply shortfall that's evident in this report, the upward revision of 470,000 barrels per day to January's global oil output that's implied in this report, partly offset by the 180,000 barrels per day downward revision to first quarter demand noted above, means that the 100,000 barrels per day global oil output shortage we had previously figured for January would now be revised to a surplus of 190,000 barrels per day...

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 26 of the March Oil Market Report (pdf page 36) indicates the revisions to 2020 demand included an an upward revision of 240,000 barrels per day to 4th quarter demand, an upward revision of 20,000 barrels per day to 3rd quarter demand, and an upward revision of 250,000 barrels per day to 2nd quarter demand...

a month ago we estimated a revised global shortfall of around 940,000 barrels per day in global oil production during December, a global shortfall of around 1,540,000 barrels per day during November, and a global shortfall of around 2,840,000 barrels per day during October, based on the figures that were published at that time...hence, the upward revision of 240,000 barrels per day to 4th quarter demand would revise those estimated oil shortfalls 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...then, in like manner, the global oil supply shortfalls we had previously estimated for the each of the third quarter months would have to be revised higher by 20,000 barrels per day, while the large global oil surpluses we had previously estimated for the second quarter months would have to be revised lower by 250,000 barrels per day....however, despite the upward revision to 2020's demand and OPEC's deep production cuts beginning in May, the quanities of oil produced globally in 2020 still averaged well over 3 million barrels per day more than anyone wanted​...​

This Week's Rig Count

The US rig count fell for just the 2nd time over the past 26 weeks during the week ending March 12th, but it still remains down by 49.2% from what it was a year ago....Baker Hughes reported that the total count of rotary rigs running in the US was down by 1 to 402 rigs this past week, which was still down by 390 rigs from the 792 rigs that were in use as of the March 13th report of 2020, and was also still two fewer rigs than the all time low rig count prior to 2020, and 1,527 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 decreased by 1 rig to 309 oil rigs this week, after rising by 1 oil rig the prior week, leaving us with 374 fewer oil rigs than were running a year ago, and 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 was unchanged at 92 natural gas rigs, which was still down by 15 natural gas rigs from the 107 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, one rig classified as 'miscellaneous' continued to drill in Lake County, California this week, while a year ago there were two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count decreased by 1 to 13 rigs this week, with 11 of those rigs now drilling for oil in Louisiana's offshore waters and 2 drilling for oil in Alaminos Canyon offshore from Texas...that was 6 fewer Gulf of Mexico rigs than the 19 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the West Delta field 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 totals are equal to the Gulf rig counts.....

The count of active horizontal drilling rigs was unchanged at 362 horizontal rigs this week, which was still down by 351 rigs from the 713 horizontal rigs that were in use in the US on March 13th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by 1 rigs to 15 directional rigs this week, and those were also down by 33 from the 48 directional rigs that were operating during the same week a year ago....meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, and those were also down by 6 from the 31 vertical rigs that were in use on March 6th 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 March 12th, the second column shows the change in the number of working rigs between last week's count (March 5th) and this week's (March 12th) count, the third column shows last week's March 5th 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 13th of March, 2020..    

obviously, there was a bit more activity this week than the decrease ​of ​one rig nationally would account for....checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that there were 2 new rigs added in Texas Oil District 7C, which includes the southern counties of the Permian Midland basin, and another rig added in in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 8A, which includes the northern counties of the Permian Midland basin, which together means there was a net increase of 2 rigs in the Texas Permian....since the national Permian rig count was only up by 1, that means that the rig that was removed in New Mexico must have been pulled out of the farthest west reaches of the Permian Delaware, to balance the national Permian total....elsewhere in Texas, there was a rig pulled out of Texas Oil District 1 while there was a rig added in Texas Oil District 2, which could have been offsetting changes in the Eagle Ford shale that would net to no change and ​hence ​not show up in the table above...there was also a rig pulled out of Texas Oil District 6, which ​had been drilling for natural gas in the western part of the Haynesville shale....outside of Texas, there were two oil rigs added in Oklahoma's Cana Woodford, while an oil rig was pulled out of North Dakota's Williston basin at the same time...for rigs targetting natural gas, we had two rigs added in Ohio's Utica shale, and another rig added in West Virginia's Marcellus, which were in turn offset by the removal of two natural gas rigs from Pennsylvania's Marcellus and the natural gas rig removed from the Texas Haynesville shale which we mentioned previously...

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