Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, August 29, 2021

oil prices jump most in 15 months; natgas prices at 32 mo hi; gasoline demand at 22 mo high, supplies at 42 week low

oil price percentage jump is most in 15 months; natural gas price jumps to 32 month high on biggest gain in 33 months; 4 week average of gasoline demand at a post pandemic high leaves gasoline supplies at a 42 week low

US oil prices rose more than 10% this week after Chinese virus cases fell to zero, an explosion knocked out a quarter of Mexico's oil production, domestic gasoline demand rose to pre pandemic levels, and an approaching hurricane disrupted US Gulf operations....after oil prices fell 8.9% last week as trading in the September contract on US light sweet oil expired priced at $62.32 a barrel, trading in the contract for US light sweet crude for October delivery, which had finished last week priced at $62.14, opened lower on Monday, but quickly rallied, supported by weakness in the US dollar, and by signs that China had the Delta variant controlled, easing fears of a prolonged setback for energy demand, and settled $3.50 or 5.6% higher at $65.64 a barrel, after weaker-than-expected economic data fueled speculation the Fed would delay tapering until later this year, leading to risk-on trading sentiment across the financial markets...oil prices jumped again on Tuesday, after a fire on a Mexican offshore oil rig killed five and cut the country's daily output by nearly a quarter and finished $1.90, or 3% higher at $67.54 a barrel, after China brought local virus cases down to zero and road traffic showed signs of recovery...oil prices extended their rally for a third day on Wednesday, after Reuters reported that fuel demand had climbed to its highest since the start of the COVID-19 pandemic, and settled 82 cents, or 1.2% higher at $68.36 per barrel as the EIA data also showed that crude and gasoline inventories dropped more than had been expected....however, oil's three day rally ended on Thursday on renewed concerns about demand due to rising COVID-19 infections, and as Mexico restored some of the oil production knocked out earlier in the week and prices settled 94 cents lower at $67.42 a barrel, as traders positioned ahead of coming data on domestic inflation, and potential signals for tapering from the Fed, as policymakers gathered for their annual summit in Jackson Hole, Wyoming...but oil prices moved higher again early on Friday on anticipation that Tropical Storm Ida would disrupt Gulf of Mexico oil production, with forecasts for the storm to strengthen into a Category 3 hurricane prior to its Louisiana landfall on Sunday, and finished trading $1.32 or 2% higher at 68.74 a barrel, with prices further supported by Fed Chairman Powell's speech saying they're still far from pulling interest rates off their record lows...oil prices thus posted the biggest weekly gain in more than a year, after the prior week had seen the greatest losses on over nine months.. 

With several news sites noting that this week's oil price gain was a nonspecific 'most in more than a year', i decided to determine exactly how much that 'more than a year' was by checking a graph of oil prices, which is included below..

August 28 2021 oil prices

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 oil prices as they were quoted by 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 above represents the range of oil prices for a single week, with weeks when prices rose indicated in green, and weeks when prices fell indicated in red, while the bars across the bottom show trading volume for the weeks in question, again with up weeks indicated by green bars and down weeks indicated in red...notice that the green price bar on the far right, representing this week's prices, is the largest green bar on the graph, which would indicate oil prices rose more this week than in any time in five years...while that's true, note that i have also highlighted the week ending May 4 2020 on the above graph, causing pricing details for that week to appear in a small box in the upper left...that box shows oil prices for the June 2020 crude light contract (CLN20) closed at $26.17 a barrel that week, up $6.38 on the week...while that nominal price gain is smaller than this week's $6.60 gain, percentage wise it is more than three times greater, which is why the media limited the headline gain to just "more than a year"...

natural gas prices also rose more than 10% as the approaching hurricane disrupted Gulf production, following an unexpectly small increase in supplies.. after slipping one cent to $3.851 per mmBTU last week as weather forecasts fluctuated and inventories rose more than had been expected, the contract price of natural gas for September delivery opened higher on Monday and rose 9.4 cents to a one-week high of $3.945 per mmBTU on forecasts​ that hot weather and high air conditioning demand​ would continue into early September...gas prices gave up some of that gain on Tuesday as traders focused on near term forecasts for lower demand in the current week and prices ended 4.9 cents lower at $3.896 per mmBTU....natural gas prices then jumped 10 cents early Wednesday before falling back to end just a tenth of a cent higher amid a decline in production and estimates for a relatively light storage increase, as well as an evolving weather picture...but gas prices soared over 7% to a 32-month high on Thursday on a much smaller than expected storage build during ​the ​hot weather of last week than had been expected, settling 28.7 cents higher at $4.184 per mmBTU...prices were up another 4% to another 32 month high ​at $4.370 per mmBTU ​on Friday, on forecasts​ that​ the weather will remain hotter than normal through mid-September, and on concerns Hurricane Ida would shut Gulf production when it hits Louisiana as a major storm early next week, ​with natural gas ​thus finishing the week 13.5% higher...and with that, we'll also include a five year graph of natural gas prices..

August 28 2021 natural gas prices

the above is a screenshot of the interactive natural gas price chart from barchart.com, which again i have set to show front month ​naural gas prices weekly over the past 5 years, which means we're seeing natural gas prices as they were quoted in the media...the bars and representations on this graph are the same as we outlined for the oil graph above...as you can see, while this week's natural gas prices were the highest since December, they're still short of 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...again, i've used my cursor to highlight natural gas prices for the week ending November 12, 2018, which shows that the price of the December 2018 ​natural ​gas contract (NGZ18) rose 55.3 cents ​during ​that week, more than this week's 51.9 cent gain,​ which was the largest ​one week ​gas price increase over the 5 years shown..

the natural gas storage report from the EIA for the week ending August 20th indicated that the amount of working natural gas held in underground storage in the US rose by 29 billion cubic feet to 2,851 billion cubic feet by the end of the week, which left our gas supplies 563 billion cubic feet, or 16.5% below the 3,414 billion cubic feet that were in storage on August 20th of last year, and 189 billion cubic feet, or 5.8% below the five-year average of 3,040 billion cubic feet of natural gas that have been in storage as of the 20th of August in recent years...the 29 billion cubic foot increase in US natural gas in working storage this week was less than the median forecast for a 37 billion cubic foot addition from a S&P Global Platts survey of analysts, and less than the average addition of 44 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, as well as less than the 45 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 August 20th indicated that despite a sizable decrease in our oil exports, we still needed to withdraw oil from our stored commercial crude supplies for the twelfth time in fourteen weeks, and for the 28th time in the past forty weeks….our imports of crude oil fell by an average of 193,000 barrels per day to an average of 6,157,000 barrels per day, after falling by an average of 34,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 619,000 barrels per day to an average of 2,812,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,345,000 barrels of per day during the week ending August 20th, 426,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,400,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 14,745,000 barrels per day during th​e cited reporting week…

meanwhile, US oil refineries reported they were processing 16,072,000 barrels of crude per day during the week ending August 20th, 66,000 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 average of 426,000 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 901,000 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 (+901,000) 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 omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…since last week’s EIA fudge factor was at (+1,225,0000) barrels per day, that means there was a 324,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus calling into question the week over week supply and demand changes indicated by this report...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 reasonably 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 6,334,000 barrels per day last week, which was still 8.8% more than the 5,819,000 barrel per day average that we were importing over the same four-week period last year…the 426,000 barrel per day net increase in our crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be unchanged at 11,400,000 barrels per day because the EIA"s rounded estimate of the output from wells in the lower 48 states was unchanged at 11,000,000 barrels per day, while a 5,000 barrel per day decrease in Alaska’s oil production to 423,000 barrels per day had no impact on the rounded national production total….US crude oil production had hit 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 13.0% below that of our pre-pandemic production peak, but 35.3% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 92.4% of their capacity while using those 16,072,000 barrels of crude per day during the week ending August 20th, up from 92.2% of capacity the prior week, but still somewhat below normal utilization for summertime refinery operations…while the 16,072,000 barrels per day of oil that were refined this week were 9.2% more barrels than the 14,712,000 barrels of crude that were being processed daily during the pandemic impacted week ending August 21st of last year, they were still 7.7% below the 17,408,000 barrels of crude that were being processed daily during the week ending August 23rd, 2019, when US refineries were operating at what was then a normal 95.2% of capacity…

with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was also higher, increasing by 249,000 barrels per day to 10,249,000 barrels per day during the week ending August 20th, after our gasoline output had increased by 39,000 barrels per day over the prior week.…while this week’s gasoline production was 7.7% higher than the 9,518,000 barrels of gasoline that were being produced daily over the same week of last year, it was 3.9% lower than the gasoline production of 10,660,000 barrels per day during the week ending August 23rd, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 140,000 barrels per day to 4,988,000 barrels per day, after our distillates output had decreased by 37,000 barrels per day over the prior week…even after that increase, this week’s distillates output was 2.6% less than the 5,122,000 barrels of distillates that were being produced daily during the week ending August 21st, 2020, and 3.9% below the 5,193,000 barrels of distillates that were being produced daily during the week ending August 23rd, 2019..

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the ninth time in twenty-one weeks, and for the 15th time in forty-one weeks, falling by 2,241,000 to a forty-two week low of 225,924,000 barrels during the week ending August 20th, after our gasoline inventories had increased by 696,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 239,000 barrels per day to 9,572,000 barrels per day, and because our exports of gasoline rose by 260,000 barrels per day to 911,000 barrels per day​,​ while our imports of gasoline rose by 333,000 barrels per day to 1,076,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 5.5% lower than last August 21st's gasoline inventories of 239,179,000 barrels, and about 3% 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 also increased for the eighth time in twenty weeks and for the 20h time in 36 weeks, rising by 645,000 barrels to 138,459,000 barrels during the week ending August 20th, after our distillates supplies had decreased by 2,697,000 barrels during the prior week….our distillates supplies rose week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 219,000 barrels per day to 4,104,000 barrels per day, and because our imports of distillates rose by 146,000 barrels per day to 288,000 barrels per day while our exports of distillates rose by 27,000 barrels per day to 1,079,000 barrels per day…but after twelve inventory decreases over the past twenty weeks, our distillate supplies at the end of the week were​ still​ 22.7% below the 179,195,000 barrels of distillates that we had in storage on August 21st, 2020, and about 8% below the five year average of distillates stocks for this time of the year…

finally, even with the decrease in our oil exports, our commercial supplies of crude oil in storage fell for the 17th time in the past twenty-seven weeks and for the 35th time in the past year, decreasing by 2,980,000 barrels over the week, from 435,544,000 barrels on August 13th to 432,564,000 barrels on August 20th, after our commercial crude supplies had decreased by 3,233,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still 30.2% above the average of our crude oil stocks after the third week of August 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 and remained elevated thereafter, our commercial crude oil supplies as of this August 20th were still 14.8% less than the 507,763,000 barrels of oil we had in commercial storage on August 21st of 2020, but still 1.1% more than the 427,751,000 barrels of oil that we had in storage on August 23rd of 2019, and 6.6% more than the 405,792,000 barrels of oil we had in commercial storage on August 24th of 2018…

This Week's Rig Count

The number of drilling rigs active in the US increased for the 42nd time out of the past 49 weeks during the week ending August 27th, but was still down by 35.9% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by five to 508 rigs this past week, which was double the pandemic hit 254 rigs that were in use as of the August 28th report of 2020, but was still 1,421 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a 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 5 to 410 oil rigs this week, after rising by 8 oil rigs the prior week, and that’s now 230 more oil rigs than were running a year ago, but it’s barely over a quarter 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 97 natural gas rigs, which was still up by 25 natural gas rigs from the 72 natural gas rigs that were drilling during the same week a year ago, but still only 6% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as "miscellaneous' is still drilling in Kern county California, while a year ago there were two such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count was unchanged at 14 rigs this week, with all 14 of those rigs now drilling for oil in Louisiana’s offshore waters….that was one more than the 13 rigs that were drilling in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters….in addition to those Gulf of Mexico rigs, we continue to have a rig drilling for natural gas off the shore of the Kenai peninsula in Alaska, and hence the national offshore rig count is now 15, up from 13 offshore rigs a year ago..

In addition to those rigs offshore, we also still have three rigs drilling through inland bodies of water in Louisiana this week. whereas there was only one such “inland waters” rigs running a year ago…the “inland waters” rig include a directional rig targeting oil near the mouth of the Mississippi in Plaquemines Parish, Louisiana; a horizontal rig drilling for oil in the Haynesville shale through a lake in DeSoto parish in the northwestern corner of the state, just south of Shreveport, and another directional rig drilling for oil through an inland body of water in Terrebonne Parish of southern Louisiana...

The count of active horizontal drilling rigs was up by 5 to 459 horizontal rigs this week, which was more than double the 221 horizontal rigs that were in use in the US on August 28th  of last year, but was roughly a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..in addition, the vertical rig count was up by 2 to 21 vertical rigs this week, and those were also up by 8 from the 13 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was down by 2 to 28 directional rigs this week, but those were still up by 8 from the 20 directional rigs that were in use on August 28th 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 August 27th, the second column shows the change in the number of working rigs between last week’s count (August 20th) and this week’s (August 27th) count, the third column shows last week’s August 20th 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 28th of August, 2020...

August 27 2021 rig count summary

the two rigs added in Wyoming were in a basin that Baker Hughes doesn't track, which means that two​ ​​rigs must have been shut down ​in an  ​untracked basin ​elsewhere, since the totals on our tables balance with the national count otherwise...checking the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that one rig was added in Texas Oil District 8, which is the core Permian Delaware, but that the rig counts in all other Permian districts were unchanged...hence, with the Texas Permian count up by one while national Permian count was up by two, that means that the rig that was added in New Mexico must have been set up to drill in the far west reaches of the Permian Delaware in that state...there were also no other changes elsewhere in Texas, so that means that the Granite Wash basin rig that was added had to been in Oklahoma, in one of the counties adjacent to the Texas panhandle...Oklahoma also has oil rig additions in the Ardmore Woodford and the Cana Woodford, but since the state rig total is only up by 1, that means there must have been two rig removals elsewhere in the state in basins that Baker Hughes doesn't track, offsetting those Wyoming rig additions we mentioned earlier..

Although there appears to have been no changes​ to​ natural gas rig​s​ this week, we found that a natural gas rig was shut down in Oklahoma's Arkoma Woodford this week, while an oil rig was started up in that basin at the same time...since the national natural gas rig count was unchanged, that means that there also had to have been a natural gas rig added somewhere ​i​n one of those basins that Baker Hughes doesn't track, possibly even offset by an oil rig addition in the same basin at the same time...

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note: there’s more here

Sunday, August 22, 2021

oil in longest losing streak since 2019; global oil shortage at 2,540,000 barrels per day; DUC well backlog at 7.1 months

oil prices fell every day this week and ended sharply lower, as previously oblivious oil traders realized that we have a pandemic going on...after inching up 16 cents to $68.44 a barrel last week as concerns about a Covid related slowdown were offset by the Senate passage of the infrastructure spending package, the contract price of US light sweet crude for September delivery retreated early Monday following a trio of weaker-than-expected economic reports from China, after earlier sliding more than 1% in Asian trading on concerns that the restrictive measures in place to curb Covid-19 outbreaks would dampen demand for fuel, but recovered from an intraday low of $65.73 to settle $1.15, or 1.7% lower at $67.29 a barrel after sources told Reuters that OPEC and its allies believe the markets do not need more oil than they already plan to produce in the coming months...after briefly moving higher early Tuesday, oil prices again tracked lower on a combination of concerns over slowing global demand growth stemming from sporadic COVID-19 outbreaks in China and elsewhere in southeast Asia leading to renewed restrictions on mobility and closure or reduced operations at key shipping ports, and signs of decelerating economic growth domestically, and finished down 70 cents, or off ​by ​another 1% at $66.59 a barrel​,​ as traders continued to fret over the outlook for demand due to the ongoing spread of the delta variant of Covid-19...oil prices extended their longest losing streak since March late Tuesday​ ​after the API reported a disappointingly small draw from curde supplies, but then pushed higher early Wednesday, as traders awaited the latest crude oil supply data from the US EIA later in the day...but oil prices turned lower even after that data showed there was a bigger-than-expected drawdown in U.S. crude inventories and finished down $1.13 at $65.46 a barrel, on a rising U.S. dollar, as traders remained worried about the outlook for fuel demand as Covid-19 cases surged worldwide....oil prices then opened more than $1 lower on Thursday after the Fed minutes signalled that it would scale back stimulus measures in the coming months and fell from there as the dollar rallied and as the spread of the Delta variant underlined worries about demand, and were down more than 4% at one point before clawing back to settle $1.70 or 2.7% lower at $63.69 a barrel, the lowest ​closing ​price since May and capping the longest losing streek in 18 months...after a higher opening, the relentless drop in oil prices continued on Friday, as traders sold futures in anticipation of weakened fuel demand worldwide due to a surge in Covid-19 cases, as trading in September crude expired with the contract down $1.37, or 2.2%, at $62.32 a barrel, thus finishing the week 8.9% lower in the midst of the longest losing streak since 2019...

meanwhile, natural gas prices were little changed this week as forecasts fluctuated and inventories rose more than had been expected...after falling 6.7% to a three week low of $3.861 per mmBTU last week as forecasts cooled and gas in storage rose more than had been expected, the contract price of natural gas for September delivery rebounded on Monday as forecasts projected hotter weather than had been previously expected and settled 8.5 cents higher at $3.946 mmBTU...but prices reversed on Tuesday and tumbled 10.9 cents to $3.837 per mmBTU, pressured by weaker power burns amid mostly comfortable temperatures in the ​populated ​eastern half of the country....natural gas prices recovered 1.5 cents to settle at $3.852 per mmBTU on Wednesday, boosted by a recovery in exports to Mexico, after trading in a narrow range as traders awaited Thursday's storage data,..prices fell sharply on Thursday following the report of a weekly inventory build that overshot the major surveys, but recovered most of the day's early losses to finish just 2.2 cents lower at $3.830 per mmBTU...September gas prices rebounded on Friday as the weather outlook turned slightly warmer, potentially boosting air conditioning demand, and settled 2.1 cents higher at $3.851 per mmBTU, but still finished the week a penny lower than the prior week's close..

the natural gas storage report from the EIA for the week ending August 13th indicated that the amount of working natural gas held in underground storage in the US rose by 46 billion cubic feet to 2,822 billion cubic feet by the end of the week, which still left our gas supplies 547 billion cubic feet, or 16.2% below the 3,369 billion cubic feet that were in storage on August 13th of last year, and 174 billion cubic feet, or 5.8% below the five-year average of 2,996 billion cubic feet of natural gas that have been in storage as of the 13th of August in recent years...the 46 billion cubic foot increase in US natural gas in working storage this week, which included a reclassification of 4 billion cubic feet of base gas to working gas, was more than the median forecast for a 35 billion cubic foot addition from a S&P Global Platts survey of analysts, and more than the average addition of 42 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, but​ was​ close to the 45 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 August 13th indicated that after another sizable increase in our oil exports, we needed to withdraw more oil from our stored commercial crude supplies for the eleventh time in thirteen weeks, and for the 27th time in the past thirty-nine weeks….our imports of crude oil fell by an average of 46,000 barrels per day to an average of 6,350,000 barrels per day, after falling by an average of 36,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 768,000 barrels per day to an average of 3,431,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,919,000 barrels of per day during the week ending August 13th, 813,000 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 reportedly increased by 100,000 barrels per day to 11,400,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 14,319,000 barrels per day during this reporting week…

meanwhile, US oil refineries reported they were processing 16,006,000 barrels of crude per day during the week ending August 13th, 191,000 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 average of 462,000 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 1,225,000 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 (+1,225,000) 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 omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…but 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 reasonably 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 6,421,000 barrels per day last week, which was still 14.1% more than the 5,627,000 barrel per day average that we were importing over the same four-week period last year…the 462,000 barrel per day net increase in our 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 11,400,000 barrels per day because the EIA"s rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,000,000 barrels per day, while a 33,000 barrel per day increase in Alaska’s oil production to 428,000 barrels per day had no impact on the rounded national production total….US crude oil production had hit 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 13.0% below that of our pre-pandemic production peak, but 35.3% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 92.2% of their capacity while using those 16,006,000 barrels of crude per day during the week ending August 13th, up from 91.8% of capacity the prior week, but still somewhat below normal utilization for summertime operations…while the 16,006,000 barrels per day of oil that were refined this week were 10.5% more barrels than the 14,487,000 barrels of crude that were being processed daily during the pandemic impacted week ending August 14th of last year, they were still 9.6% below the 17,702,000 barrels of crude that were being processed daily during the week ending August 16th, 2019, when US refineries were operating at what was then a normal 95.9% of capacity…

even with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was a bit higher, increasing by 39,000 barrels per day to 10,000,000 barrels per day during the week ending August 13th, after our gasoline output had decreased by 190,000 barrels per day over the prior week.…this week’s gasoline production was 6.4% higher than the 9,400,000 barrels of gasoline that were being produced daily over the same week of last year, and it was also 1.0% higher than the gasoline production of 9,897,000 barrels per day during the week ending August 16th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 37,000 barrels per day to 4,848,000 barrels per day, after our distillates output had increased by 8,000 barrels per day over the prior week…even after that decrease, this week’s distillates output was 2.2% more than the 4,742,000 barrels of distillates that were being produced daily during the week ending August 14th, 2020, but 9.2% below the 5,340,000 barrels of distillates that were being produced daily during the week ending August 16th, 2019..

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the twelfth time in twenty weeks, and for the 26th time in forty weeks, rising by 696,000 to 228,165,000 barrels during the week ending August 13th, after our gasoline inventories had decreased by 8,945,000 barrels over the prior 3 weeks...our gasoline supplies managed to increase this week because the amount of gasoline supplied to US users decreased by 97,000 barrels per day to 9,333,000 barrels per day, even as our imports of gasoline fell by 182,000 barrels per day to 743,000 barrels per day while our exports of gasoline fell by 95,000 barrels per day to 651,000 barrels per day…even after this week’s inventory increase, our gasoline supplies were 6.4% lower than last August 14th's gasoline inventories of 243,762,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels also decreased for the twelfth time in nineteen weeks and for the 16th time in 35 weeks, falling by 2,697,000 barrels to 137,814,000 barrels during the week ending August 13th, after our distillates supplies had increased by 1,767,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 589,000 barrels per day to 4,323,000 barrels per day, while our exports of distillates fell by 32,000 barrels per day to 1,052,000 barrels per day and our imports of distillates fell by 43,000 barrels per day to 142,000 barrels per day…after twelve inventory decreases over the past nineteen weeks, our distillate supplies at the end of the week were 22.5% below the 177,807,000 barrels of distillates that we had in storage on August 14th, 2020, and about 8% below the five year average of distillates stocks for this time of the year…

finally, with the big increase in our oil exports, our commercial supplies of crude oil in storage fell for the 16th time in the past twenty-six weeks and for the 35th time in the past year, decreasing by 3,233,000 barrels over the week, from 438,777,000 barrels on August 6th to  435,544,000 barrels on August 13th, after our commercial crude supplies had decreased by 448,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still around 29% above the average of our crude oil stocks after the second week of August 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 and remained elevated thereafter, our commercial crude oil supplies as of this August 13th were still 15.0% less than the 512,452,000 barrels of oil we had in commercial storage on August 14th of 2020, and 0.5% less than the 437,778,000 barrels of oil that we had in storage on August 16th of 2019, but still 6.7% more than the 408,358,000 barrels of oil we had in commercial storage on August 17th of 2018… 

OPEC's Monthly Oil Market Report

Thursday of last week saw the release of OPEC's August Oil Market Report, which covers OPEC & global oil data for July, and hence it gives us a picture of the global oil supply & demand situation for the third month of the modest output easing policy initiated by OPEC and other producers at their early April meeting, which was actually the fourth production quota policy reset they've made over the past year, all in response to the pandemic-related slowdown and subsequent recovery...but before we start in, we want to again caution that the oil demand estimates made by OPEC herein, while the course of the Covid-19 pandemic still remains uncertain in most countries around the globe, should 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 49 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 below 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...

July 2021 OPEC crude output via secondary sources

As we can see on the bottom line of the above table, OPEC's oil output increased by 637,000 barrels per day to 26,657,000 barrels per day during July, up from their revised June production total of 26,020,000 barrels per day...however, that June output figure was originally reported as 26,034,000 barrels per day,  which therefore means that OPEC's June production was revised 14,000 barrels per day lower with this report, and hence OPEC's July production was, in effect, a 623,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official June OPEC output figures as reported a month ago, before this month's revision)...

From the above table, we can see that a production increase of 497,000 barrels per day from the Saudis was the major factor in OPEC's July output increase; the reason for that increase is that the Saudis had unilaterally committed to cut their own production by a million barrels per day during February, March and then later during April of this year, and that they are now unwinding that voluntary output decrease, having previously increased their production by 345,000 barrrel per day in May and by 425,000 barrels per day in June... 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 of last year, but that agreement had been extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in July of last year, 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 and March and then April'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...then, during a difficult meeting on April 1st of this year, OPEC and the other oil producers that are aligned with them agreed to incrimentally adjust their oil production higher over the next three months, which is the agreement which governed OPEC's July's production that you see above...

Hence, to determine if all the OPEC members continued to adhere to the production cuts they had committed to during May, we'll include a copy of the production adjustments table that was provided as a downloadable attachment with the OPEC press release following their April 1st meeting with other oil producers...

May 2021 OPEC production quotas

the above table was included with the press release following the 15th OPEC and non-OPEC Ministerial Meeting on April 1st of this year, and it includes the reference production and expected production levels for the 10 members of OPEC that are expected to make cuts, as well as the same information for the other major oil producers who are party to what the press calls the "OPEC + agreement"....the first column in the above table shows the reference oil production baseline, in thousands of barrel per day, from which each of the oil producers was to cut their production from, a figure which is based on each of the oil 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 remaining columns show the adjustment, or cut, that each is expected to make from that reference production level, and then the oil output allowed for each producer under the April agreement for the months of May, June and July...

OPEC arrived at these figures by repeatedly adjusting the original 23%, or 9.7 million barrel per day cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was actually raised to an 8.2 million barrel per day reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during February, March, and then later during April of this year....under the prior agreement, OPEC's production cut in April was at 4,564,000 barrels per day from the October 2018 baseline; as you see above, their cut for July was lowered to 3,650,000 barrels per day from the baseline with the latest agreement...note that war torn Libya, and US sanctioned producers Iran and Venezuela, are exempt from the production cuts that the cartel imposes on its other members, and hence the 22,495,000 barrel per day production of the other ten members in July remained below the 23,033,000 barrel per day quota for July they set at the April 1st meeting. ...

the next graphic from this month's report that we'll highlight shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from August 2019 to July 2021, and it comes from page 50 (pdf page 60) of OPEC's July 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....

July 2021 OPEC report global oil supply

Including this month's reported 637,000 barrel per day increase in OPEC's production from what they produced a month earlier, OPEC's preliminary estimate indicates that total global liquids production increased by a rounded 970,000 barrels per day to average 95.69 million barrels per day in July, a reported increase which apparently came after June's total global output figure was revised up by 230,000 barrels per day from the 94.49 million barrels per day of global oil output that was estimated for June a month ago, as non-OPEC oil production rose by a rounded 330,000 barrels per day in July after that revision, with with increases in the oil output from the OECD countries accounting for most of the non-OPEC production increase in July...

After that increase in July's global output, the 95.69 million barrels of oil per day that were produced globally during the month were 6.94 million barrels per day, or 7.8% more than the revised 88.75 million barrels of oil per day that were being produced globally in July a year ago, which was third month of the OPEC + agreement to cut global output by 9.7 million barrels per day (see the August 2020 OPEC report (online pdf) for the originally reported July 2020 details)...with this month's increase in OPEC's output, their July oil production of 26,657,000 barrels per day was at 27.9% of what was produced globally during the month, an increase of 0.4% from their revised 27.5% share of the global total in June....OPEC's July 2020 production was reported at 23,172,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,485,000 barrels per day, or 15.0% more barrels per day of oil this July than what they produced a year earlier, when they accounted for 26.1% of global output...

However, even after the sizable increases in OPEC's and global oil output that we've seen in this report, the amount of oil being produced globally during the month fell far short of the expected global demand, as this next table from the OPEC report will show us..

July 2021 OPEC report global oil demand

the above table came from page 26 of the OPEC July Oil Market Report (pdf page 36), 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 fourth column, we've circled in blue the figure that's relevant for July, which is their estimate of global oil demand during the third quarter of 2021... OPEC is estimating that during the ​3rd quarter of this year, all oil consuming regions of the globe will be using an average of 98.23 million barrels of oil per day, which still reflects a bit of coronavirus related demand destruction compared to 2019, when global demand averaged 99.98 million barrels per day and higher during the summer....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 only producing 95.69 million barrels million barrels per day during Ju​ly, which would imply that there was a shortage of around 2,540,000 barrels per day in global oil production in July when compared to the demand estimated for the month...

Note that in green we have circled an upward revision of 200,000 barrels per day to OPEC's previous estimates of second quarter demand...so, in addition to figuring July's global oil supply shortfall that's evident in this report, that upward revision of 200,000 barrels per day to second quarter demand, combined with the 230,000 barrel per day upward revision to June's total global supply figure that's implied in this report, means that the 830,000 barrels per day global oil output shortage we had previously figured for June would now be revised to a shortage of 800,000 barrels per day.....in addition, the 1,930,000 barrels per day global oil output shortage we had previously figured for May, in light of the 200,000 barrels per day upward revision to second quarter demand, would now be revised to a shortage of 2,130,000 barrels per day...in like manner,  the 2,280,000 barrels per day global oil output shortage we had previously figured for April would now be revised to a shortage of 2,480,000 barrels per day....note, however, that despite this year's output shortfalls, the quantities of oil produced globally in 2020 still averaged well over 3 million barrels per day more than anyone wanted...

Also note that in green we have also circled a downward revision of 200,000 barrels per day to OPEC's previous estimates of first quarter demand....for March, that means that the global oil output surplus of 410,000 barrels per day we had previously figured for March would now be revised to a surplus of 610,000 barrels per day... similarly, the downward revision to first quarter demand means that the 800,000 barrels per day global oil output shortage we hadpreviously figured for February would now be revised to a shortage of 600,000 barrels per day, and that the global oil output surplus of 420,000 barrels per day​ ​we had previously figured for January would now be revised to a surplus of 620,000 barrels per day, in light of that 200,000 barrel per day downward revision to first quarter demand...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 41st time out of the past 48 weeks during the week ending August ​20th, but was still down by 36.5% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by three to 503 rigs this past week, which was also up by 249 rigs from the pandemic hit 254 rigs that were in use as of the August 21st report of 2020, but was still 1,426 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a 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 8 to 405 oil rigs this week, after rising by 10 oil rigs the prior week, and it’s now 222 more oil rigs than were running a year ago, but it’s barely over a quarter 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 was down by five to 97 natural gas rigs, which was still up by 28 natural gas rigs from the 69 natural gas rigs that were drilling during the same week a year ago, but still only 6% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as "miscellaneous' is still drilling in Kern county California, while a year ago there were no such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count was up by one to 14 rigs this week, with all 14 of those rigs now drilling for oil in Louisiana’s offshore waters….that was one more than the 13 rigs that were drilling in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters….in addition to those Gulf of Mexico rigs, this week we continue to have a rig drilling for natural gas off the shore of the Kenai peninsula in Alaska, and hence the national offshore rig count is now 15, up from 13 offshore rigs a year ago..

In addition to those rigs offshore, we now have three rigs drilling through inland bodies of water in Louisiana this week. whereas there was only such “inland waters” rigs running a year ago…the new “inland waters” startup is a directional rig targeting oil near the mouth of the Mississippi in Plaquemines Parish, Louisiana; we also continue to have a horizontal rig drilling for oil in the Haynesville shale through a lake in DeSoto parish in the northwestern corner of the state, just south of Shreveport, and another directional rig drilling for oil through an inland body of water in Terrebonne Parish of southern Louisiana...

The count of active horizontal drilling rigs was down by 2 to 454 horizontal rigs this week, which was more than double the 211 horizontal rigs that were in use in the US on August 21st of last year, but was less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….on the other hand, the vertical rig count was up by 2 to 19 vertical rigs this week, and those were also up by 6 from the 13 vertical rigs that were operating during the same week a year ago….in addition, the directional rig count was up by three to 30 directional rigs this week, and those were also up by 10 from the 20 directional rigs that that were in use on August 21st 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 August 20th, the second column shows the change in the number of working rigs between last week’s count (August 13th) and this week’s (August 20th) count, the third column shows last week’s August 13th 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 21st of August, 2020...

August 20 2021 rig count summary

With the addition of two rigs targeting offshore oil and another inland waters rig targeting oil in Plaquemines​ ​parish, the Louisiana rig count is only up by two because a Haynesville natural gas rig in the northern part of the state was shut down at the same time...an Eagle Ford rig that was shut down had also been targeting natural gas, as ​had been the Marcellus shale rig in West Virginia, and two other natural gas rigs that had been drilling in basins that Baker Hughes doesn't identify, thus accounting for this week's drop of 5 natural gas rigs...the Utica shale rig that was added in Ohio this week was targeting oil in Jefferson county...

meanwhile, the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes shows that one rig was added in Texas Oil District 8, which is the core Permian Delaware, but that ​the ​rig counts in all other Permian districts were unchanged...hence, with the Texas Permian count up by one while national Permian count was up by two, that means that the rig that was added in New Mexico must have been set up to drill in the far west reaches of the Permian Delaware in that state...elsewhere in Texas, we find one rig was added in Texas Oil District 1 and another rigs was added in Texas Oil District 3, while two rigs were pulled out of Texas Oil District 2, and another rig was pulled out of Texas Oil District 4, any or all of which could have been drilling in the Eagle Ford shale, which stretches in a narrow band through the southeastern part of the state...at least one of those removed would have ​been ​the Eagle Ford natural gas rig, while others might account for natural gas rig removals in basins that Baker Hughes doesn't name​, offset by oil rig additions in the same area​...the Texas rig count was still down by one, however, with the removal of a rig that had been drilling​ of oil​ in the state's offshore waters...

other changes nationally include the addition of a Williston basin oil rig in North Dakota, while an oil rig was pulled out of the Williston basin in Montana at the same time, the addition of another oil rig in the Uintah basin in Utah, and the removal of an oil rig from the Cana Woodford of Oklahoma...since Oklahoma's rig count was unchanged, we know there had to be a corresponding oil rig addition in the state in a basin that Baker Hughes doesn't identify...

DUC well report for July

Monday of this past week saw the release of the EIA's Drilling Productivity Report for August, which includes the EIA's July data for drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 14th month in a row, as both completions of drilled wells and drilling of new wells increased, but remained below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 258 wells, falling from 6,215 DUC wells in ​June to 5,957 DUC wells in July, which was also 33.3% fewer DUCs than the 8,933 wells that had been drilled but remained uncompleted as of the end of July of a year ago...this month's DUC decrease occurred as 577 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, up from the 549 wells that were drilled in June, while 835 wells were completed and brought into production by fracking, up from the 827 completions seen in June, and up from the pandemic hit 298 completions seen in July of last year, but down by 33.5% from the 1,256 completions of Ju​ly​ 2019....at the July completion rate, the 5,957 drilled but uncompleted wells left at the end of the month represents a 7.1 month backlog of wells that have been drilled but are not yet fracked, down from the 7.6 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 still a third below the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in July, while none of the major basins reported DUC well increases....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 130, from 2,419 DUC wells at the end of June to 2,289 DUCs at the end of July, as 263 new wells were drilled into the Permian during July, while 393 wells in the region were being fracked...in addition, DUCs in the Eagle Ford of south Texas decreased by 44, from 954 DUC wells at the end of June to 910 DUCs at the end of July, as 57 wells were drilled in the Eagle Ford during July, while 101 already drilled Eagle Ford wells were completed.... at the same time, there was also a decrease of 27 DUC wells in the Bakken of North Dakota, where DUC wells fell from 619 at the end of June to 592 DUCs at the end of July, as 32 wells were drilled into the Bakken during June, while 59 of the drilled wells in the Bakken were being fracked..... meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 20, falling from 856 at the end of June to 836  DUC wells at the end of July, as 30 wells were drilled into the Anadarko basin during July, while 50 Anadarko wells were ​completed​.....in addition, DUC wells in the Niobrara chalk of the Rockies' front range fell by 19, decreasing from 373 at the end of June to 354 DUC wells at the end of July, as 77 wells were drilled into the Niobrara chalk during July, while 96 Niobrara wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 16 wells, from 595 DUCs at the end of June to 579 DUCs at the end of July, as 69 wells were drilled into the Marcellus and Utica shales during the month, while 85 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by two to 397 DUCs, as 49 wells were drilled into the Haynesville during July, while 51 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of July, 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 252 wells to 4,981 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 18 wells to 976 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 even more here..

Sunday, August 15, 2021

gasoline supplies at a 42 month low; natural gas supplies still 16.5% lower than a year ago; offshore Alaska drilling resumes

oil prices ended little changed this week, as concerns about a Covid related slowdown were offset by the passage of the infrastructure spending package in Congress... after falling 7.7% to $68.28 per barrel last week as US crude inventories rose unexpectedly and rising Covid cases prompted global economic restrictions, the contract price of US light sweet crude for September delivery opened lower on Monday after a report on the damaging effects of climate change signalled “code red” for humanity, and extended its losses to over 3% on the back of a firmer U.S. dollar and concerns that new coronavirus-related restrictions in China could slow a global recovery in fuel demand​,​ before settling down $1.80 at $66.48 a barrel, the lowest level in 2½ months, as traders worried that travel restrictions and delayed office reopenings would limit fuel consumption...but oil prices reversed that drop completely on Tuesday, as traders appeared to shrug off worries about the spread of COVID-19​,​ and ​instead ​cheered Senate passage of a $1 trillion infrastructure package, with oil recovering all of Mondays losses to close $1.81 higher at $68.29 a barrel, boosted by an IEA forecast that U.S. fuel consumption would grow by 10% this year...oil prices slid early Wednesday after the EIA reported a smaller than expected draw on US crude supplies and a surprise increase in distillates inventories, and after Biden pushed OPEC to boost production faster than their current pace, but recovered to close 96 cents higher at $69.25 a barrel, as the dollar weakened, boosting prices of commodities priced in the currency, and consumer prices increased modestly, reducing concern about an unwinding of the Fed stimulus...​however, oil prices turned lower Thursday, after monthly reports from OPEC and the IEA both highlighted demand concerns, and settled 16 cents lower at $69.09 a barrel as both reports also increased their forecasts for 2nd half supplies...oil prices continued lower on Friday as the fast-spreading delta variant continued to cloud the short-term demand outlook, and settled 65 cents lower at $68.44 a barrel after a near record plunge in US consumer confidence readings, but still ended the week with a fractional gain after weathering concerns from banks and the International Energy Agency that the spread of coronavirus variants is slowing oil demand...

natural gas prices, on the other hand, finished lower as forecasts cooled and inventories rose more than had been expected...after rising 5.8% to $4.140 per mmBTU last week on forecasts for hotter weather and on low​ gas​ supplies for this time of year, the contract price of natural gas for September delivery opened higher on Monday but turned lower to close down 8.0 cents at $4.060 per mmBTU after long-range weather forecasts cooled while LNG demand remained well off recent highs... prices rebounded 2.9 cents on Tuesday on increasing heat in the forecast for the current week and modest changes to the supply/demand balance, but fell back 3.0 cents to $4.059 mmBTU on Wednesday as analysts looked for wind generation to curb the bullish effect of peak summer heat in the forecast for the week...natural gas prices fell again on Thursday after the latest EIA storage figure came in on the higher side of expectations, and as much cooler temperatures were expected this weekend...prices then fell 7.2 cents more on Friday as a series of storms was forecast to move in over the weekend, capping temperatures and lowering cooling demand, and thus finished the week off 6.7% at a three week low of $3.861 per mmBTU, despite expectations that LNG exports would rise as Gulf of Mexico plants boosted output after finishing maintenance work...

the natural gas storage report from the EIA for the week ending August 6th indicated that the amount of natural gas held in underground storage in the US rose by 49 billion cubic feet to 2,776 billion cubic feet by the end of the week, which​ still left our gas supplies 548 billion cubic feet, or 16.5% below the 3,324 billion cubic feet that were in storage on August 6th of last year, and 178 billion cubic feet, or 6.0% below the five-year average of 2,954 billion cubic feet of natural gas that have been in storage as of the 6th of August in recent years...the 49 billion cubic f​oot increase in US natural gas in storage this week was more than the median forecast for a 44 billion cubic foot addition from a S&P Global Platts survey of analysts, and more than the average addition of 42 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, but less than the 55 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 August 6th indicated that after a sizable increase in our oil exports and a modest increase in our oil refining, we needed to withdraw oil from our stored commercial crude supplies for the tenth time in twelve weeks, and for the 26th time in the past thirty-eight weeks….our imports of crude oil fell by an average of 36,000 barrels per day to an average of 6,396,000 barrels per day, after falling by an average of 75,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 759,000 barrels per day to an average of 2,663,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,732,000 barrels of per day during the week ending August 6th, 795,000 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 reportedly increased by 100,000 barrels per day to 11,300,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 15,032,000 barrels per day during this reporting week…

meanwhile, US oil refineries reported they were processing 16,197,000 barrels of crude per day during the week ending August 6th, 277,000 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 average of 64,000 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 and from oilfield production was 1,101,000 barrels per day less than 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 (+1,101,000) 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 omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed….since last week’s EIA fudge factor was at (+711,000) barrels per day, that means there was a 390,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes indicated by this report ​fairly ​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 reasonably 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 6,608,000 barrels per day last week, which was 16.3% more than the 5,680,000 barrel per day average that we were importing over the same four-week period last year…the 64,000 barrel per day net increase in our 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 11,300,000 barrels per day because the EIA"s rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 10.900,000 barrels per day, while a 24,000 barrel per day increase in Alaska’s oil production to 395,000 barrels per day had no impact on the rounded national production total….US crude oil production had hit 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 13.7% below that of our production peak, but 34.1% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 91.8% of their capacity while using those 16,197,000 barrels of crude per day during the week ending August 6th, up from 91.3% of capacity the prior week, but still somewhat below normal​ utilization​ for summertime operations…while the 16,197,000 barrels per day of oil that were refined this week were 10.5% higher than the 14,658,000 barrels of crude that were being processed daily during the pandemic impacted week ending August 7th of last year, they were still 6.4% below the 17,302,000 barrels of crude that were being processed daily during the week ending August 9th, 2019, when US refineries were operating at what was a seasonally normal 94.8% of capacity…

even with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was somewhat lower, decreasing by 190,000 barrels per day to 9.961,000 barrels per day during the week ending August 6th, after our gasoline output had increased by 1,011,000 barrels per day over the prior two weeks…while this week’s gasoline production was still 3.8% higher than the 9,600,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 2.8% lower than the gasoline production of 10,203,000 barrels per day during the week ending August 9th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 8,000 barrels per day to 4,885,000 barrels per day, after our distillates output had increased by 138,000 barrels per day over the prior week…with 5 straight decreases before those increases, this week’s distillates output was just 0.2% more than the 4,789,000 barrels of distillates that were being produced daily during the week ending August 7th, 2020, and 3.8% below the 5,077,000 barrels of distillates that were being produced daily during the week ending August 9th, 2019..

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the eighth time in nineteen weeks, and for the 18th time in thirty-nine weeks, falling by 1,401,000 barrels to a forty-two week low of 227,469,000 barrels during the week ending August 6th, after our gasoline inventories had decreased by 5,291,000 barrels over the prior week...our total gasoline supplies decreased by less this week because the amount of gasoline supplied to US users decreased by 345,000 barrels per day to 9,430,000 barrels per day, and because our imports of gasoline rose by 84,000 barrels per day to 925,000 barrels per day while our exports of gasoline rose by 121,000 barrels per day to 746,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 7.9% lower than last August 7th's gasoline inventories of 247,084,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

meanwhile, with the modest increase in our distillates production, our supplies of distillate fuels increased for the seventh time in eighteen weeks and for the 19th time in 34 weeks, rising by 1,767,000 barrels to 140,511,000 barrels during the week ending August 6th, after our distillates supplies had increased by 832,000 barrels during the prior week….our distillates supplies rose by more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose  by​ ​116,000 barrels per day to 3,734,000 barrels per day, because our exports of distillates fell by 218,000 barrels per day to 1,084,000 barrels per day, and because our imports of distillates rose by 23,000 barrels per day to 185,000 barrels per day…but after eleven inventory decreases over the past eighteen weeks, our distillate supplies at the end of the week were still 20.9% below the 177,655,000 barrels of distillates that we had in storage on August 7th, 2020, and about 6% below the five year average of distillates stocks for this time of the year…

finally, with the big​ increase in our oil exports​ and the pickup in refining​, our commercial supplies of crude oil in storage fell for the 15th time in the past twenty-five weeks and for the 27th time in the past year, decreasing by 448,000 barrels over the week, from 439,225,000 barrels on July 30th to 438,777,000 barrels on August 6th, after our commercial crude supplies had increased by 3,627,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were still about 6% below the most recent five-year average of crude oil supplies for this time of year, but were more than 30% above the average of our crude oil stocks after the first week of August 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 and remained elevated thereafter, our commercial crude oil supplies as of this August 6th were still 14.6% less than the 514,084,000 barrels of oil we had in commercial storage on August 7th of 2020, and a bit less than the 440,510,000 barrels of oil that we had in storage on August 9th of 2019, but still 5.9% more than the 414,194,000 barrels of oil we had in commercial storage on August 10th of 2018…

This Week's Rig Count

The number of drilling rigs active in the US increased for the 40th time out of the past 47 weeks during the week ending August 13th, but was still down by 36.9% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by nine to 500 rigs this past week, which was also up by 256 rigs from the pandemic hit 244 rigs that were in use as of the August 14th report of 2020, but was still 1,429 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, ​which was ​a 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 10 to 397 oil rigs this week, after rising by 2 oil rigs the prior week, and it’s now 225 more oil rigs than were running a year ago, while it’s less than a quarter 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 was down by one to 102 natural gas rigs, which was still up by 32 natural gas rigs from the 70 natural gas rigs that were drilling during the same week a year ago, but still just 6.4% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as "miscellaneous' is drilling in Kern county California, while a year ago there were no such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count was down by one to 13 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and one drilling for oil in the Alaminos Canyon offshore from Texas….that was the same number of rigs that were drilling in the Gulf a year ago, when ​10 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters….in addition to those Gulf of Mexico rigs, this week we also had a vertical rig start drilling for natural gas off the shore of the Kenai peninsula in Alaska, which is the first offshore Alaska drilling in almost two years; as a result, the national offshore rig count is now 14, up from 13 offshore rigs a year ago..

In addition to those rigs offshore, we now have two rigs drilling through inland bodies of water in Louisiana this week. whereas there were no such “inland waters” rigs running a year ago…the new “inland waters”​ ​startup is a rig drilling for oil in the Haynesville shale through a lake in DeSoto parish in the northwestern corner of the state, just south of Shreveport, while we also continue to have a rig drilling through an inland body of water in Terrebonne Parish of southern Louisiana...

The count of active horizontal drilling rigs was up by 7 to 456 horizontal rigs this week, which was more than double the 211 horizontal rigs that were in use in the US on August 14th of last year, but was less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..in addition, the vertical rig count was up by 2 to 17 vertical rigs this week, and those were also up by 4 from the 13 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was unchanged at 27 directional rigs this week, ​and those were still up by 3 from the 24 directional rigs that that were in use on August 14th 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 August 13th, the second column shows the change in the number of working rigs between last week’s count (August 6th) and this week’s (August 13th) count, the third column shows last week’s August 6th 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 14th of August, 2020...

August 13 2021 rig count summary

since we know there was an offshore natural gas rig startup in Alaska this week, for the state to show the loss of a rig means that two of the oil rigs that had been drilling on the North Slope were apparently shut down at the same time...similarly, since we know we have an inland water oil rig start up in the Haynesville shale this week, the net lost of 1 Haynesville rig means that two of the natural gas rigs that had been operating in that basin were concurrently shut down...since land rigs in northern Louisiana were only down by one, that means that the rig that was pulled out of ​adjacent ​Texas Oil District 6 had to have been operating in the Haynesville...but Louisiana's rig count is still down by one despite the offsetting Haynesville shale activity because the Gulf of Mexico rig that was shut down had been drilling in the state's offshore waters...

meanwhile, the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes shows that three rigs were pulled out of Texas Oil District 8, which is the core Permian Delaware, but that two oil rigs were added in Texas Oil District 8A, which encompasses the northern counties of the Permian Midland, while another oil rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland...hence, since the Texas Permian count is apparently unchanged, and since the national Permian count was up by two, that means that two of the rigs that were added in New Mexico must have been set up to drill in the far west reaches of the Permian Delaware in that state...

elsewhere in Texas, we find two rigs were added in Texas Oil District 1 and two more rigs were added in Texas Oil District 2, which together would account for the Eagle Ford shale increase, while at the same time a rig was pulled out of Texas Oil District 3, which had been drilling into a basin not tracked by Baker Hughes...finally, there was also a rig added in Texas Oil District 10, which could have been in the Granite Wash basin if one of the Granite Wash rigs recently added in nearby Oklahoma were shut down at the same time, certainly a possibility since the Oklahoma rig count is down one despite the addition of a Cana Woodford oil rig in the central part of th​at state...the only other change that shows up on our tables in the addition of four rigs in the Bakken shale of the Williston basin, which included two rigs in North Dakota and two in Montana, the first drilling in Montana since November of last year, and the first time two rigs were deployed in the state in 19 months...

meanwhile,  there were more natural gas rig changes than the aforementioned offshore gas rig added in Alaska and the two gas rigs pulled out of the Haynesville; first, one of this week's Eagle Ford rig additions was targeting natural gas, which means the Eagle Ford now has four natural gas rigs deployed in addition to 32 oil rigs drilling in that basin...meanwhile, there was also a natural gas rig startup in Oklahoma's Arkoma Woodford, which was offset by the shutdown of the lone oil rig in that basin at the same time...and lastly, two natural gas rigs were removed from "other basins" that Baker Hughes does not name​; which possibly could ​be ​the previously unidentifed rigs pulled from ​Oklahoma and from Texas Oil District 3​...

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