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 22nd 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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