oil prices set a new 32 monrh high for a fifth consecutive week, as negotiations to lift Iranian sanctions broke off and US crude supplies fell more than was expected for a fifth straight week....after rising 1% to $71.64 a barrel last week on rising demand and falling supplies, the contract price of US light sweet crude for July delivery opened lower on Monday on Fed comments late last week that they might start raising rates by 2023, but then jumped by the most in a month to finish $2.02 higher at a 32 month high of $73.66 a barrel as the US dollar fell from two month highs while US talks with Iran wrapped up without resolution, thus leaving Iranian oil supplies in doubt...however, oil prices fell slightly on Tuesday amid profit taking after Monday's price surge and settled 60 cents lower, as trading in the July oil contract expired with oil priced at $73.06 a barrel, while the more-actively traded August oil contract fell 27 cents to $72.85 a barrel on expectations that OPEC+ might decide to further boost crude production starting in August....but oil prices rebounded in after hours trading Tuesday after the American Petroleum Institute reported a much larger than expected withdrawal from crude inventories, and hence the contract price of US light sweet crude for August delivery opened higher on Wednesday, but failed to extend its overnight gains even though the EIA reported an equally large draw, and settled just 23 cents higher at $73.08 a barrel, as traders noted that technical indicators showed that oil was overbought...nonetheless, oil prices continued moving higher Thursday, closing in on their highest in almost three years, on the drawdowns in U.S. inventories and on accelerating German economic activity. and finished the session 22 cents higher at $73.30 a barrel, as positive sentiment over an infrastructure deal announced by the Biden administration overcame concerns about possible additional supply announcements at next week’s OPEC meeting...oil prices pulled back early Friday with all eyes on the OPEC, Russia and other producers meeting next week, but then rallied into the close to settle 75 cents higher at $74.05 a barrel on expectations that demand growth would outstrip supplies, which were continuing to tighten in the U.S. and China....oil prices thus posted their fifth straight weekly gain, the longest winning streak this year, in rising 3.4% to the highest level since early October 2018, while the August oil contract, which had closed at $71.29 a barrel last week, saw its price end this week 3.9% higher..
With oil prices now hitting new 2 1/2 + year highs five weeks in a row, we'll take a look at a longer term graph so you can get some perspective of where it's been..
the above is a screenshot of the interactive oil price chart from barchart.com, which i have set to show front month oil prices weekly over the past 5 years, which means you're seeing prices as they were quoted in the media...this same chart can be reset to show prices of front month or individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month for each...each bar in the graph represents the range of oil prices for the week, while the bars across the bottom show trading volume for the weeks in question, with down weeks indicated by red bars and up weeks indicated in green...although it's a bit hard to see with 5 years all squashed together, there were only two weeks on this graph when prices exceeded this week's; the week ending July 2nd, 2018, when oil hit a high of $75.27 a barrel. and the week ending October 1st, 20018, when oil prices briefly spurted to $76.90 a barrel....to find higher prices before that, we have to get back to early November 2014, before the Thanksgiving meeting at which OPEC began an attempt to flood the global markets, hoping to put US shale out of business...on the other hand, we can also see how prices briefly dropped to negative $40 during the 3rd week of April last year, when the OPEC agreement broke down during a squabble between Russia and the Saudis, and when oil was again dumped on a world in lockdown, with no place left to store the excess...
meanwhile, natural gas prices finished higher for the 10th time in twelve weeks in rising to a 29 month high, as exports rose and domestic inventories remained well below normal....after falling 2.5% to $3.215 per mmBTU last week as cooler weather was forecast and utilities began switching to cheaper coal, the contract price of natural gas for July delivery opened lower on Monday and slid 2.4 cents to $3.191 per mmBTU, as less heat was forecast to reach the lower 48 than had previously been expected...but natural gas prices rose 6.7 cents to $3.258 per mmBTU on Tuesday as gas prices in Europe and Asia both topped $10 per mmBTU, leading to expectations US LNG exports would be at record levels this summer...natural gas rallied again on Wednesday as export demand rose sharply following maintenance, and gas production dipped lower for the second straight day, and prices settled 7.5 cents higher at $3.333 natural gas prices were then up another 8.5 cents to $3.418 per mmBTU after opening lower on Thursday, as a very tight government inventory report sparked an initial price rebound, and forecast heat through the first full week of July sent futures surging later in the session....gas prices opened higher and continued rising on Friday before settling another 7.8 cents higher at $3.496 per mmBTU, as sweltering heat and revived export demand pointed to even tighter balances ahead of the peak summer cooling season, with natural gas thus finishing the week up 8.7% at a fresh 29 month high...
so with natural gas prices also hitting a multi-month high, we'll include a graph of those as well. to see what it shows..
like the oil chart above, this is a screenshot of the interactive natural gas price chart from barchart.com, again set to show front month natural gas prices weekly over the past 5 years, which again means you're seeing natural gas prices as they were quoted daily...again, this chart can also be reset to show prices of front month or individual monthly natural gas contracts over time periods ranging from 1 day to 30 years, and also to show natural gas prices by the minute, hour, day, week or month for each...while this week's natural gas prices were indeed the highest since January 2019, they come nowhere close to matching the $4.50 to $5 per mmBTU price range we saw in November 2018, when a brutally cold month resulted in an early drawdown of supplies, raising concerns of shortages going into that winter, which persisted until milder weather arrived in late December and January...
the natural gas storage report from the EIA for the week ending June 18th indicated that the amount of natural gas held in underground storage in the US rose by 55 billion cubic feet to 2,482 billion cubic feet by the end of the week, which thus left our gas supplies 513 billion cubic feet, or 17.1% below the 2,995 billion cubic feet that were in storage on June 18th of last year, and 154 billion cubic feet, or 5.8% below the five-year average of 2,636 billion cubic feet of natural gas that have been in storage as of the 18th of June in recent years... the 55 billion cubic feet increase in US natural gas in storage this week was below the average forecast of a 63 billion cubic foot addition from an S&P Global Platts survey of analysts, and was further below the average addition of 83 billion cubic feet of natural gas that have typically been injected into natural gas storage during the second week of June over the past 5 years, as well as far below the 115 billion cubic feet that were 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 June 18th showed that despite modest decreases in our oil exports and in our refinery throughput, we still needed to withdraw oil from our stored commercial crude supplies for the seventh time in the past eight weeks, and for the 21st time in the past thirty-two weeks….our imports of crude oil rose by an average of 179,000 barrels per day to an average of 6,943,000 barrels per day, after rising by an average of 108,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 233,000 barrels per day to an average of 3,651,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,292,000 barrels of per day during the week ending June 18th, 430,000 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 reportedly fell by 100,000 barrels per day to 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,392,000 barrels per day during this reporting week…
meanwhile, US oil refineries reported they were processing 16,112,000 barrels of crude per day during the week ending June 18th, 224,000 fewer 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 1,331,000 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 390,000 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 (+390,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed…..furthermore, since last week’s EIA fudge factor was at (+1,097,000) barrels per day, that means there was a 707,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, thus rendering the week over week supply and demand changes that we have just transcribed useless…. however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,489,000 barrels per day last week, which was 1.0% less than the 6,556,000 barrel per day average that we were importing over the same four-week period last year… the 1,331,000 barrel per day net withdrawal from our crude inventories included a 1,088,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 244,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commercial purposes…this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 10,700,000 barrels per day, while an 1,000 barrel per day decrease in Alaska’s oil production to 445,000 barrels per day had no impact on the rounded national total….US crude oil production was at a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 15.3% below that of our production peak, yet still 31.7% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…
meanwhile, US oil refineries were operating at 92.2% of their capacity while using those 16,112,000 barrels of crude per day during the week ending June 18th, down from 92.6% of capacity the prior week, and a shade below normal for summertime operations…while the 16,112,000 barrels per day of oil that were refined this week were 16.4% higher than the 13,840,000 barrels of crude that were being processed daily during the pandemic impacted week ending June 19th of last year, they were still 7.1% below the 17,337,000 barrels of crude that were being processed daily during the week ending June 21st, 2019, when US refineries were operating at a close to summertime normal 94.2% of capacity…
even with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was higher, increasing by 401,000 barrels per day to a 21 month high of 10,327,000 barrels per day during the week ending June 18th, after our gasoline output had increased by 495,000 barrels per day over the prior week…while this week’s gasoline production was 17.4% higher than the 8,794,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 1.8% lower than the gasoline production of 10,512.000 barrels per day during the week ending June 21st, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 56,000 barrels per day to 5,112,000 barrels per day, after our distillates output had increased by 135,000 barrels per day over the prior week…while this week’s distillates output was 12.1% more than the 4,561,000 barrels of distillates that were being produced daily during the week ending June 19th, 2020, it was still 3.6% below the 5,305,000 barrels of distillates that were being produced daily during the week ending June 21st, 2019..,…
even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the third time in twelve weeks, and for the ninth time in thirty-two weeks, falling by 2,930,000 barrels to 240,050,000 barrels during the week ending June 18th, after our gasoline inventories had increased by 7,046,000 barrels over the prior week...our gasoline supplies decreased this week because our imports of gasoline fell by 210,000 barrels per day to 840,000 barrels per day while our exports of gasoline rose by 60,000 barrels per day to 895,000 barrels per day, and because the amount of gasoline supplied to US users increased by 80,000 barrels per day to 9,440,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 6.0% lower than last June 19th’s gasoline inventories of 255,322,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year…
meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased for the third time in eleven weeks and for the 13th time in 27 weeks, rising by 1,754,000 barrels to 137,945,000 barrels during the week ending June 18th, after our distillates supplies had decreased by 1,023,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 389,000 barrels per day to 3,947,000 barrels per day, even as our imports of distillates fell by 95,000 barrels per day to 276,000 barrels per day while our exports of distillates fell by 47,000 barrels per day to 1,190,000 barrels per day….but with eight inventory decreases over the past eleven weeks, our distillate supplies at the end of the week were still 21.0% below the 174,720,000 barrels of distillates that we had in storage on June 19th, 2020, and about 4% below the five year average of distillates stocks for this time of the year…
finally, despite the decrease in our oil exports and the slowdown in our oil refining, our commercial supplies of crude oil in storage fell for tenth time in the past eightteen weeks and for the 27th time in the past year, decreasing by 7,614,000 barrels, from 466,674,000 barrels on June 11th to 459,060,000 barrels on June 18th, after our crude supplies had decreased by 7,355,000 barrels the prior week….with this week’s decrease, our commercial crude oil inventories fell to about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still about 31% above the average of our crude oil stocks as of the the third week of June over the 5 years at the beginning of the past 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 this June 18th were 15.1% less than the 540,722,000 barrels of oil we had in commercial storage on June 19th of 2020, and are now 2.2% less than the 469,576,000 barrels of oil that we had in storage on June 21st of 2019, but are still 10.2% more than the 416,636,000 barrels of oil we had in commercial storage on June 22nd of 2018…
This Week’s Rig Count
The US rig count was unchanged during the week ending June 25th, after rising 35 out of the prior 40 weeks, but it’s still down by 40.7% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US remained at 470 rigs this past week, which was still up by 205 rigs from the pandemic hit 265 rigs that were in use as of the June 27th report of 2020, but was still 1,459 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 down by 1 to 372 oil rigs this week, after rising by 8 oil rigs the prior week, but that’s still 184 more oil rigs than were running a year ago, while it’s still just 23.1% of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 1 to 98 natural gas rigs, which was also up by 23 natural gas rigs from the 75 natural gas rigs that were drilling during the same week a year ago, and 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 up by 1 to 14 rigs this week, with 13 of those rigs drilling for oil in Louisiana’s offshore waters and the new one drilling for oil offshore from Texas….that was three more than the 11 rigs that were drilling in the Gulf a year ago, when all 11 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 count… however, in addition to those rigs offshore, a new rig was set up to drill through inland waters in Terrebonne Parish, Louisiana, this week, which with the rig already drilling through an inland lake in St Mary parish, Louisiana, means there are now two inland water rigs running, whereas there were no such “inland waters” rigs running a year ago…
The count of active horizontal drilling rigs was down by 4 to 421 horizontal rigs this week, which was still up by 191 rigs from the 230 horizontal rigs that were in use in the US on June 26th of last year, but less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the vertical rig count was down by 1 to 19 vertical rigs this week, but those were also up by 4 from the 15 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was up by 5 to 30 directional rigs this week, and those were up by 10 from the 20 directional rigs that were in use on June 26th 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 June 25th, the second column shows the change in the number of working rigs between last week’s count (June 18th) and this week’s (June 25th) count, the third column shows last week’s June 18th 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 26th of June, 2020..
just looking at those tables, it appears there weren't many changes this week….checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that one oil rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, while two rigs were pulled out from Texas Oil District 8A, which encompasses the northern counties of the Permian Midland, which thus gives us a net decrease of one rig in the Texas Permian…elsewhere in Texas, we find that one rig was added in Texas Oil District 1, while a rig was pulled out of Texas Oil District 2 at the same time, which could have been offsetting rigs in the Eagle Ford shale, which shows no net change regardless....Texas also had an oil rig pulled out of Texas Oil District 5, which apparently had been in the Barnett shale, while a natural gas rig was added in the Haynesville shale in Texas Oil District 6...note that the Haynesville rig count remains unchanged, however, because the lone rig that was drilling for oil in that formation was pulled out in northern Louisiana... meanwhile, the Louisiana rig count remains unchanged because of the addition of the inland waters rig in the southern part of the state, while the Texas rig count remains unchanged because the rig that was added offshore offsets the net loss of one rig on land...at the same time, the Oklahoma rig count was unchanged despite the addition of two oil rigs in the Cana Woodford because offsetting oil rigs were pulled out of the Ardmore Woodford and another oil basin in the state that Baker Hughes doesn't track....Baker Hughes also doesn't track any basins in Alaska or California, which also saw offsetting changes this week...
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