oil prices rose for the fourth week in five as strong US economic data fed optimism on the outlook for fuel demand.. after falling 2.7% to $63.58 a barrel last week on fears of a deal that would lift sanctions on Iranian crude, the contract price of US light sweet crude for July delivery opened higher on Monday, boosted by signs of continuing economic recovery from Covid-19 in the US and an improved outlook for fuel demand. and climbed $2.47, or 3.9%, to settle at $66.05 a barrel, after a U.S. official said there aren’t yet any signs that Iran would comply with the commitments required to lift US sanctions, casting doubts that Iran would soon be able to resume crude exports...however, oil prices eased on Tuesday after Iran and the U.N. nuclear watchdog said they were extending a recently expired monitoring agreement by a month, allowing more time for negotiations, but still finished 2 cents higher at $66.07 a barrel, as rising demand with the approach of the summer driving season and lifting of coronavirus restrictions supported prices...after slipping below $66 early Wednesday, oil prices rebounded after the EIA reported inventory draws from crude supllies and across all major product stores, and settled 14 cents higher at $66.21 a barrel on reinforced expectations of improving demand ahead of the peak summer driving season...oil prices moved lower early Thursday on demand concerns due to the COVID-19 crisis in Asia and on a potential increase in Iranian supplies, but rebounded to finish 64 cents or 1% higher at $66.85 a barrel, the highest daily close since October 2018, bolstered by strong U.S. economic data that offset traders' concerns about the potential for a rise in Iranian supplies...oil prices opened higher and rose more than 1% early Friday amid hopes that an ongoing economic recovery in the US would have a positive impact on oil demand. but slumped late in the session to finish the day down 53 cents at $66.32 a barrel as traders took profits while awaiting the outcome of next Tuesday’s OPEC+ meeting...nonetheless, oil prices ended with an increase of 4.3% for the week, the biggest weekly gain since the middle of April, and also ended the month of May 4.3% higher, based on front month contract closing prices...
natural gas prices also finished higher for the seventh time in eight weeks, on higher prices overseas and on a bullish shift the weather forecasts...after falling 1.9% to $2.906 per mmBTU last week as production rose and exports fell, the contract price of natural gas for June delivery opened lower and slumped more than 7 cents early on Monday as production increased and on forecasts for milder weather and less demand over the next two weeks than previously expected, but came back to settle just 2.0 cents lower at $2.886 per mmBTU, still the lowest close since April 27th...the rebound continued into Tuesday as gas prices rose 2.7 cents to $2.913 mmBTU on expectations that rising global prices would boost LNG exports back to record highs in the coming weeks...prices continued rising into Wednesday, the last day of trading for the June contract, as a favorable shift in the weather-demand outlook offset expectations for a triple-digit storage injection, with the EIA's inventory report pending Thursday, as June natural gas rolled off the board priced 7.1 cents higher at $2.984 per mmBTU, while the more actively traded July contract added 5.3 cents to settle at 3.027 per mmBTU...now quoting the contract price of natural gas for July delivery, prices tumbled more than 9 cents on Thursday after a bearish government inventory report, but recovered to end down 6.9 cents or 2.3% at $2.986 per mmBTU...however, natural gas futures rose again on Friday to their highest in more than a week, buoyed by forecasts for warmer weather in two weeks and a projected increase in liquefied natural gas (LNG) exports, and settled 2.8 cents higher at $2.986 per mmBTU, thus posting an apparent 2.8% increase for the week, even as the July natural gas contract, which had closed the prior week at $2.977 per mmBTU, only gained 0.3% on the week...
the natural gas storage report from the EIA for the week ending May 21st indicated that the amount of natural gas held in underground storage in the US rose by 115 billion cubic feet to 2,215 billion cubic feet by the end of the week, which still left our gas supplies 381 billion cubic feet, or 14.7% below the 2,596 billion cubic feet that were in storage on May 21st of last year, and 63 billion cubic feet, or 2.8% below the five-year average of 2,278 billion cubic feet of natural gas that have been in storage as of the 21st of May in recent years....the 115 billion cubic feet that were added to US natural gas storage this week was above the average forecast of a 107 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also above the average addition of 91 billion cubic feet of natural gas that have typically been injected into natural gas storage during the second week of May over the past 5 years, as well as above the 105 billion cubic feet added to natural gas storage during the corresponding week of 2020...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending May 21st showed that because of a modest increase in our oil exports, a modest increase in our oil refininng, and a modest decrease in our oil imports, we needed to withdraw oil from our stored commercial crude supplies for the sixth time in fourteen weeks and for the 28th time in the past forty-four weeks....our imports of crude oil fell by an average of 138,000 barrels per day to an average of 6,273,000 barrels per day, after rising by an average of 923,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 127,000 barrels per day to an average of 3,433,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,840,000 barrels of per day during the week ending May 21st, 265,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 13,840,000 barrels per day during this reporting week...
meanwhile, US oil refineries reported they were processing 15,239,000 barrels of crude per day during the week ending May 21st, 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 a net of 473,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US....so based on that reported & estimated data, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 927,000 barrels per day less than what our oil refineries reported they used during the week...to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+927,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting there must have been a error or errors of that magnitude in this week's oil supply & demand figures that we have just transcribed.....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them as they're published, just as they're watched & believed to be accurate by most everyone in the industry....(for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,905,000 barrels per day last week, which was 0.5% more than the 5,875,000 barrel per day average that we were importing over the same four-week period last year... the 473,000 barrel per day net withdrawal from our crude inventories included a 235,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commerical purposes, and a 237,000 barrel per day withdrawal from our designated commercially available stocks of crude oil....this week's crude oil production was reported to be unchanged at 11,000,000 barrels per day even though the rounded estimate of the output from wells in the lower 48 states rose by 100,000 barrels per day to 10,500,000 barrels per day, becuase an 8,000 barrel per day decrease in Alaska's oil production to 448,000 barrels per day caused the subtraction of 100,000 barrels per day from the rounded national total (by the EIA's math)....our prepandemic record high US crude oil production was at a rounded 13,100,000 barrels per day during the week ending March 13th 2020, so this week's reported oil production figure was 16.0% below that of our production peak, yet still 30.5% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 87.0% of their capacity while using those 15,238,000 barrels of crude per day during the week ending May 21st, up from 86.3% the prior week, and the highest refinery utilization since March 20th of last year...while the 15,239,000 barrels per day of oil that were refined this week were 17.3% higher than the 12,991,000 barrels of crude that were being processed daily during the pandemic impacted week ending May 22nd of last year, they were still 9.1% below the 16,767,000 barrels of crude that were being processed daily during the week ending May 24th, 2019, when US refineries were operating at a still low 91.2% of capacity...
even with this week's increase in the amount of oil being refined, the gasoline output from our refineries decreased by 5,000 barrels per day to 9,748,000 barrels per day during the week ending May 21st, after our gasoline output had increased by 165,000 barrels per day over the prior week...while this week's gasoline production was 35.9% higher than the 7,171,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 2.3% lower than the March 13th 2020 pre-pandemic high of 9,974,000 barrels per day, and 1.2% below the gasoline production of 9,863,000 barrels per day during the week ending May 10th, 2019....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 112,000 barrels per day to 4,665,000 barrels per day, after our distillates output had decreased by 102,000 barrels per day over the prior week...but since the pandemic pullback of last year didn't appear to impact distillates' production, this week's distillates output was still 2.4% lower than the 4,780,000 barrels of distillates that were being produced daily during the week ending May 22nd, 2020...
with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the second time in eight weeks, and for the eighth time in twenty-eight weeks, falling by 1,745,000 barrels to 232,481,000 barrels during the week ending May 21st, after our gasoline inventories had decreased by 1,963,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 255,000 barrels per day to a 14 month high of 9,479,000 barrels per day, even as our exports of gasoline fell by 100,000 barrels per day to 733,000 barrels per day while our imports of gasoline fell by 47,000 barrels per day to 1,034,000 barrels per day...after this week's inventory decrease, our gasoline supplies were 8.8% lower than last May 22nd's gasoline inventories of 255,000,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year...
meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the 13th time in 23 weeks and for the 27th time in thirty-nine weeks, falling by 3,013,000 barrels to 129,082,000 barrels during the week ending May 21st, after our distillates supplies had decreased by 2,324,000 barrels during the prior week....our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 403,000 barrels per day to 4,461,000 barrels per day, while our imports of distillates rose by 6,000 barrels per day to 273,000 barrels per day, and while our exports of distillates fell by 186,000 barrels per day to 908,000 barrels per day....after seven consecutive inventory decreases, our distillate supplies at the end of the week were 21.4% below the 164,327,000 barrels of distillates that we had in storage on May 22nd, 2020, and about 8% below the five year average of distillates stocks for this time of the year...
finally, with the increase in both our refining and in our oil exports, our commercial supplies of crude oil in storage fell for the 17th time in the past twenty-eight weeks and for the 26th time in the past year, decreasing by 1,662,000 barrels, from 486,011,000 barrels on May 14th to 484,349,000 barrels on May 21st, after our crude supplies had increased by 1,320,000 barrels the prior week....after this week's decrease, our commercial crude oil inventories were about 2% below the most recent five-year average of crude oil supplies for this time of year, but were still about 36% above the average of our crude oil stocks as of the the third week of May over the 5 years at the beginning of this decade, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring, our commercial crude oil supplies as of May 21st were 9.4% less than the 534,422,000 barrels of oil we had in commercial storage on May 22nd of 2020, but still 1.6% more than the 476,493,000 barrels of oil that we had in storage on May 24th of 2019, and also 11.5% more than the 434,512,000 barrels of oil we had in commercial storage on May 25th of 2018...
This Week's Rig Count
The US rig count rose for the 33rd time over the past 37 weeks during the week ending May 28th, but it's still down by 42.4% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was up by 2 to 457 rigs this past week, which was also up by 156 rigs from the pandemic hit 301 rigs that were in use as of the May 29th report of 2020, but was still 1,472 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 an attempt to put US shale out of business....
The number of rigs drilling for oil was up by 3 to 359 oil rigs this week, after rising by 4 oil rigs the prior week, now giving us 137 more oil rigs than were running a year ago, but still just 22.3% of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014....at the same time, the number of drilling rigs targeting natural gas bearing formations was down by 1 to 98 natural gas rigs, which was still up by 21 natural gas rigs from the 77 natural gas rigs that were drilling a year ago, but still just 6.1% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008....
The Gulf of Mexico rig count was unchanged at 14 rigs this week, with all 14 of those rigs drilling for oil in Louisiana's offshore waters....that was 2 more Gulf of Mexico rigs than the 12 rigs drilling in the Gulf a year ago, when again all 12 Gulf rigs were drilling for oil offshore from Louisiana....since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig totals are equal to the Gulf rig counts...however, in addition to those rigs offshore, a rig continued to drill through an inland lake in St Mary parish Louisiana, while there were no such "inland waters" rigs running a year ago...
The count of active horizontal drilling rigs was up by 3 to 415 horizontal rigs this week, which was also up by 144 rigs from the 271 horizontal rigs that were in use in the US on May 29th of last year, but 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 to 27 directional rigs this week, which was still up by 4 from the 23 directional rigs that were operating during the same week a year ago....meanwhile, the vertical rig count was unchanged at 15 vertical rigs this week, and those were also up by 8 from the7 vertical rigs that were in use on May 29th 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 May 28th, the second column shows the change in the number of working rigs between last week's count (May 21st) and this week's (May 28th) count, the third column shows last week's May 21st 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 29th of May, 2020..
it appears we have a few more changes than our totals would indicate....checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that four oil rigs were added in Texas Oil District 8, which is the core Permian Delaware, while a rig was pulled out from Texas Oil District 7C, which encompasses the southern counties of the Permian Midland, which gives us a net increase of three rigs in the Texas Permian...since the Permian basin only saw a two rig increase nationally, that means that the rig that was removed from New Mexico had to have been pulled out of the far west reaches of the Permian Delaware, to account for the national Permian basin change...elsewhere in Texas, we see that three rigs were removed from Texas Oil District 1, and that two rigs were added in Texas Oil District 2, that one rig was removed from Texas Oil District 3, and that three rigs were added in Texas Oil District 4, several combinations of which could have been targeting the Eagle Ford shale, which stretches in a narrow band across the southeast part of the state, to thus account for the one rig increase in that basin...meanwhile, it's evident that the rig pulled out of Colorado had been drilling in the Denver-Julesburg Niobrara chalk, but since we don't see evidence of an Oklahoma basin increase in the table above, we have to figure the two rig increase in that state was in basins that Baker Hughes doesn't track...lastly, we have the two natural gas rigs removed from the Pennsylvania Marcellus, which apparenly were partly offset by a natural gas rig addition in a basin that Baker Hughes doesn't track, which could have been one of those Oklahoma additions...
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note: there's more here...
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