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, September 19, 2021

US crude supplies at a 24 month low, gasoline supplies at a 22 month low, total supplies at a 42 month low; August global oil shortage was 2.77 million barrels per day

natural gas prices at 7 1/2 year high near a 12 year high before falling back; US crude supplies at a 24 month low, gasoline supplies at a 22 month low, total supplies of crude plus all products at a 42 month low; US exports of distillates at a 6 month low; global oil shortage at 2.77 million barrels per day in August as OPEC output falls short of quota by 684,000 barrels per day; vertical rig count at an 18 month high…

oil prices rose for a 4th consecutive week on ongoing hurricane impacts and tightening supplies of crude and fuel...after edging up 0.6% to $69.72 a barrel last week on falling US supplies of crude, gasoline, and distillates, the contract price for US light sweet crude for October delivery advanced in early trading Monday as traders monitored an intensifying storm in the Gulf that was projected to make landfall that night near the refining and oil export hub of Corpus Christi​,​ and settled 73 cents higher at a six week high of $70.45 a barrel, with U.S. supply concerns in the wake of Hurricane Ida still dominating trading...oil prices opened higher Tuesday, after tropical storm Nicholas made landfall south of Houston as a category one hurricane, but pulled back to settle just a penny higher at $70.46 a barrel as the storm spared critical energy infrastructure... oil prices advanced in early trading Wednesday, after preliminary data from the American Petroleum Institute showed domestic petroleum stocks posted a larger-than-expected draw for the second consecutive week​,​ and then jumped over $2 after the EIA reported an even larger than expected drawdown of US crude inventories​,​ and settled $2.15 higher at $72.61 a barrel after the International Energy Agency’s warned that oil supply lost from storms in the U.S. Gulf had offset what OPEC and other producers had added....oil prices edged lower early Thursday on profit taking after Wednesday's ​price ​surge, as the threat to Gulf crude production from Hurricane Nicholas receded, but recovered to finish the session unchanged as traders focused on adjusting their positions in U.S. crude options ahead of contract expirations...oil prices turned lower on Friday, as the storm-hit crude supply began to trickle back into the market, and settled down 64 cents at $71.97 a barrel on a stronger US dollar amid Russia’s plans to boost upcoming overseas oil sales, but still finished the week more than 3.2% higher, boosted by tightening supplies of crude and fuel...

natural gas prices also finished higher, but well off the week's highs, as a larger than expected inventory build and cooler forecasts heading into the weekend ameliorated fears of shortages this coming winter....after rising 4.8% to $4.938 per mmBTU last week as three-fourths of Gulf production still remained shut in, the contract price of natural gas for October delivery jumped almost 6% to a seven-year high of $5.231 per mmBTU on Monday on forecasts for higher demand than was previously expected, as air conditioning use remained strong in most parts of the country while heating demand started to pick up in other areas, while more than half of the natural gas produced in the Gulf before Ida remained offline as Nicholas approached...natural gas prices rose 2.9 cents to a fresh seven-year high of $5.260 per mmBTU on Tuesday on worries that Nicholas would delay the already slow return of production in the Gulf, and as record global gas prices ke​pt demand for U.S. exports high. and then jumped another 20.0 cents on a short squeeze on Wednesday to settle at $5.460 per mmBTU, just a half cent short of a 12 year closing high, as traders fixated on sparse supplies of gas in the US and in Europe ahead of winter...but October natural gas fell back 12.5 cents, or 2.3%, to settle at $5.335 per mmBTU on Thursday, pressured by a larger-than-expected storage build and forecasts for slightly cooler temperatures through next week...natural gas prices then gave up more than half the week's gains on Friday, falling 23.0 cents to $5.105 per mmBTU, as weather forecasts for the remainder of September shifted bearish again – after shedding several cooling degree days on Thursday – signaling the potential for solid increases to gas inventories in the coming weeks....even so, natural gas prices still rose 3.4% on the week, pulled higher by prices near $19 in Asia and $23 in Europe....

the EIA's natural gas storage report for the week ending September 10th indicated that the amount of working natural gas held in underground storage in the US rose by 83 billion cubic feet to 3,006 billion cubic feet by the end of the week, which left our gas supplies 595 billion cubic feet, or 16.5% below the 3,601 billion cubic feet that were in storage on September 10th of last year, and 231 billion cubic feet, or 7.1% below the five-year average of 3,237 billion cubic feet of natural gas that have been in storage as of the 10th of September in recent years...the 83 billion cubic foot increase in US natural gas in working storage this week was well above the median forecast for a 70 billion cubic foot addition forecast by a S&P Global Platts' survey of analysts, and a bit more than the average addition of 79 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 a bit less than the 86 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 September 10th indicated that our oilfield production, our refinery throughput, our oil imports and our oil exports all remained depressed in the wake of Hurricane Ida, and hence we needed to withdraw oil from our stored commercial crude supplies for the fifteenth time in seventeen weeks, and for the 31st time in the past forty-three weeks….our imports of crude oil fell by an average of 48,000 barrels per day to an average of 5,761,000 barrels per day, after falling by an average of 531,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 282,000 barrels per day to an average of 2,624,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,137,000 barrels of per day during the week ending September 10th, 330,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 10,100,000 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 13,237,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 14,387,000 barrels of crude per day during the week ending September 10th, 85,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net average of 993,000 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 157,000 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 (+157,000) 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…furthermore, since last week’s EIA fudge factor was at (+616,000) barrels per day, that means there was a 459,000 barrel per day difference in the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this report are also off by that much...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 6,017,000 barrels per day last week, which was still 13.3% more than the 5,312,000 barrel per day average that we were importing over the same four-week period last year…the 993,000 barrel per day net decrease in our crude inventories included 917​,​000 barrels per day that were pulled out of our commercially available stocks of crude oil, and 76,000 barrels per day of oil that had been stored in our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of Ida….this week’s crude oil production was reported to be 100,000 barrels per day higher at 10,100,000 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 9,700,000 barrels per day, while a 9,000 barrel per day increase in Alaska’s oil production to 421,000 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 23.1% below that of our pre-pandemic production peak, but 19.8% 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 82.1% of their capacity while using those 14,387,000 barrels of crude per day during the week ending September 10th, up from 81.9% of capacity the prior week, but well below normal utilization for early autumn refinery operations…while the 14,387,000 barrels per day of oil that were refined this week were actually 6.7% more barrels than the 13,488,000 barrels of crude that were being processed daily during the pandemic impacted week ending September 11th of last year, they were 13.9% below the 16,707,000 barrels of crude that were being processed daily during the week ending September 13th, 2019, when US refineries were operating at what was then a near normal 92.1% of capacity…

despite this week’s modest increase in the amount of oil being refined, the gasoline output from our refineries was much lower, decreasing by 851,000 barrels per day to 9,271,000 barrels per day during the week ending September 3rd, after our gasoline output had increased by 237,000 barrels per day over the prior week.…while this week’s gasoline production was still 5.1% higher than the 8,819,000 barrels of gasoline that were being produced daily over the same week of last year, it was 1.9% lower than the gasoline production of 9,451,000 barrels per day during the week ending September 13th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 29,000 barrels per day to 4,156,000 barrels per day, after our distillates output had decreased by 625,000 barrels per day over the prior week…after this week’s decrease, our distillates output was 5.6% less than the 4,403,000 barrels of distillates that were being produced daily during the week ending September 11th, 2020, and 18.7% below the 5,109,000 barrels of distillates that were being produced daily during the week ending September 13th, 2019..

with the big decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the fourteenth time in twenty-three weeks, and for the 28th time in forty-three weeks, falling by 1,857,000 to a twenty two month low of 218,142,000 barrels during the week ending September 10th, after our gasoline inventories had decreased by 7,215,000 barrels over the prior week...our gasoline supplies decreased this week even though the amount of gasoline supplied to US users fell by 716,000 barrels per day to 8,892,000 barrels per day, as our imports of gasoline fell by 261,000 barrels per day to 838,000 barrels per day while our exports of gasoline fell by 100,000 barrels per day to 634,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 5.8% lower than last September 11th's gasoline inventories of 231,524,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels also decreased for the fifteenth time in twenty-three weeks and for the 19th time in 39 weeks, falling by 1,689,000 barrels to 131,897,000 barrels during the week ending September 10th, after our distillates supplies had decreased by 3,141,000 barrels during the prior week….our distillates supplies fell the week as the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 110,000 barrels per day to 3,795,000 barrels per day, while our imports of distillates rose by 22,000 barrels per day to 164,000 barrels per day and even though our exports of distillates fell by 323,000 barrels per day to a 6 month low of 767,000 barrels per day…after fifteen inventory decreases over the past twenty-three weeks, our distillate supplies at the end of the week were 26.4% below the 179,306,000 barrels of distillates that we had in storage on September 11th, 2020, and about 13% below the five year average of distillates stocks for this time of the year…

finally, with all major supply and demand metrics remaining lower after Ida, our commercial supplies of crude oil in storage fell for the 20th time in the past thirty weeks and for the 36th time in the past year, decreasing by 6,422,000 barrels over the week, from 423,867,000 barrels on September 3rd to a 24 month low of 417,445,000 barrels on September 10th, after our commercial crude supplies had decreased by 1,528,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still more than 27% above the average of our crude oil stocks after the second week of September 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 for most of the year after that, our commercial crude oil supplies as of this September 10th were still 15.8% less than the 496,045,000 barrels of oil we had in commercial storage on September 11th of 2020, but still a bit more than the 417,126,000 barrels of oil that we had in storage on September 13th of 2019, and 5.9% more than the 394,137,000 barrels of oil we had in commercial storage on September 7th of 2018…

with crude inventory and ​oil ​products metrics all falling, we're also going to keep tabs on the total of all U.S. Ending Stocks of Crude Oil and Petroleum Products​....​we find that total inventories fell by 9,312,000 barrels this week, from 1,854,727,000 barrels on September 3rd to 1,845,415,000 barrels on September 10th; which is a 42 month low, and furthermore is on the cusp of a 6 1/2 year low, which we might see as soon as next week..

OPEC's Monthly Oil Market Report

Monday of this week saw the release of OPEC's September Oil Market Report, which covers OPEC & global oil data for August, and hence it gives us a picture of the global oil supply & demand situation in the first month after ​'​OPEC​+'​ agreed to increase their output by 400,000 barrels per day monthly from the previously agreed to July level, thus beginning the fifth production quota policy reset they've made over the past year and a half, 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 50 of this month's report (pdf page 60), 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...

August 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 151,000 barrels per day to 26,762,000 barrels per day during August, up from their revised July production total of 26,611,000 barrels per day...however, that July output figure was originally reported as 26,657,000 barrels per day, which therefore means that OPEC's July production was revised 46,000 barrels per day lower with this report, and hence OPEC's August production was, in effect, just a 105,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official July OPEC output figures as reported a month ago, before this month's revision)...

According to the agreement reached between OPEC and the other oil producers at their 19th OPEC and non-OPEC Ministerial Meeting on July 18th, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day in August, which would include an increase of roughly 250,000 barrels per day from the OPEC members listed above...however, as you can see, OPEC's increase of 151,000 barrels per day fell short of that...it's fairly evident that the production decrease of 114,000 barrels per day by Nigeria, due to their ongoing infrastructure problems and technical difficulties, was a major factor in OPEC's August output increase; without which OPEC's production increase would have been pretty close to the agreed to amount...

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 ​initial ​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 thus became the agreement that ​governed OPEC's output for the rest of 2020...the OPEC+ agreement for this 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 incrementally adjust their oil production higher each month over the next three months, taking the​ir agreement through July...August's production levels were to be determined by a July 1st meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over reference production levels​, and​ a subsequent attempt to restart th​at meeting on July 5th was called off​....so it wasn't until July 18th that a tentative compromise ​addressing August quotas ​was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day, and boosting reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022...

Unfortunately, it doesn't appear that OPEC has published a table with the new production levels (i've checked every OPEC press release since July 1st), so to determine if all the OPEC members continued to adhere to the production cuts they had committed to for August, we'll have to extrapolate the new quota values from the production adjustments table for May through July 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 ​adhere to ​output ​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 was 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, which thus set the July production quota for the "OPEC 10" at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by this agreement....for OPEC and the other producers to increase their output by 400,000 barrels per day from that July level, each producer would be allowed to increase their production by just over 1%...for the OPEC 10, that would mean their August output quota would be roughly 23,275,000 barrels per day...therefore, the 22,591,000 barrels those 10 OPEC members produced in August were 684,000 barrels per day short of what they were expected to produce...more than half of that shortfall was due to falling production in Nigeria, while Angola and the Saudis accounted for the rest​ of the shortfall​..

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 September 2019 to August 2021, and it comes from page 51 (pdf page 61) of OPEC's September 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....

August 2021 OPEC report global oil supply

Even with this month's 151,000 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 decreased by a rounded 30,000 barrels per day to average 95.69 million barrels per day in August, a reported increase which apparently came after July's total global output figure was revised up by 30,000 barrels per day from the 95.69 million barrels per day of global oil output that was estimated for July a month ago, as non-OPEC oil production fell by a rounded 180,000 barrels per day in August after that revision, with a 370,000 barrel per day drop in the oil output from North America due to Hurricane Ida responsible for the non-OPEC production decrease in August...

After that modest decrease in August's global output, the 95.69 million barrels of oil per day that were produced globally during the month were still 4.98 million barrels per day, or 5.5% more than the revised 90.71 million barrels of oil per day that were being produced globally in August a year ago, which was the initial month after OPEC and other producers agreed to reduce their output cuts from 9.7 million barrels per day to 7.7 million bpd (see the September 2020 OPEC report (online pdf) for the originally reported August 2020 details)...with this month's increase in OPEC's output, their August oil production of 26,762,000 barrels per day was at 28.0% of what was produced globally during the month, an increase of 0.2% from their revised 27.8% share of the global total in July....OPEC's August 2020 production was reported at 24,045,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,717,000 barrels per day, or 11.3% more barrels per day of oil this August than what they produced a year earlier, when they accounted for 26.6% of global output...

After the modest increase in OPEC's and modest decrease in 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..

August 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 August, 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 have been using an average of 98.46 million barrels of oil per day, which as you can see in the green ellipse​ above​, is a rounded 0.22 million upward revision from the 98.23 million they had estimated for the 3rd quarter a month ago, which still reflects a bit of coronavirus related demand destruction compared to 2019, when global demand averaged over 101 million barrels per day 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 August, which would imply that there was a shortage of around 2,770,000 barrels per day in global oil production in August when compared to the demand estimated for the month...

in addition to figuring that August oil shortage implied by this report, the upward revision of 30,000 barrels per day to July's global oil output that's implied in this report, combined with the 220,000 barrels per day upward revision to 3rd quarter demand that we've circled in green means that the 2,540,000 barrels per day global oil output shortage we had previously figured for July would now be revised to a shortage of 2,7​30,000 barrels per day....

Note that in green we've also circled an upward revision of 120,000 barrels per day to second quarter demand, a quarter when there was already a shortage of oil being produced globally....based on that upward revision to demand, our previous estimate that there was a shortage of 800,000 barrels per day in June would now be revised to a 920,000 barrels per day shortage, the oil shortage of 2,130,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 2,250,000 barrels per day, & the 2,480,000 barrels per day global oil output shortage we had previously figured for April would have to be revised to a shortage of 2,600,000 barrels per day... 

Also note that in green we have also circled a upward revision of 210,000 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 200,000 barrels per day... similarly, the upward revision to first quarter demand means that the 600,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 810,000 barrels per day, and that the global oil output surplus of 620,000 barrels per day we had previously figured for January would now be revised to a surplus of 410,000 barrels per day, in light of that 210,000 barrel per day upward revision to first quarter demand...

You might also note that we have also circled an 110,000 barrel per day upward revision to 2020's demand circled in orange....while we're not inclined to go back and recompute the figures for each month of last year in light of that revision, suffice it to say that the quantities of oil produced globally during the pandemic of 2020 averaged over 3 million barrels per day more than anyone wanted, and that an average 110,000 barrels per day upward revision to global demand during that period would be a drop in the bucket in comparison...

This Week's Rig Count

The number of drilling rigs active in the US increased for 44th time out of the past 52 weeks during the week ending September 17th, but they were still 35.4% lower than the pre-pandemic rig count.... Baker Hughes reported that the total count of rotary rigs running in the US increased by nine to 512 rigs this past week, which was also 257 more rigs the pandemic hit 255 rigs that were in use as of the September 18th report of 2020, but was still 1,417 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 10 to 411 oil rigs this week, after they had risen by 7 oil rigs the prior week, and there are now 232  more oil rigs active now than were running a year ago, while they're still just 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 fell by one to 100 natural gas rigs, which was still up by 27 natural gas rigs from the 73 natural gas rigs that were drilling during the same week a year ago, but still only 6.2% 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 three such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count remained unchanged at four rigs this week, after falling from 14 rigs the week before Hurricane Ida approached, with all four of those in Louisiana waters...hence, the Gulf rig count is still down by 10 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….however, there are still 2 rigs drilling for natural gas off the shore of the Kenai peninsula in Alaska this week, and hence the total national offshore rig count of 6 rigs is down by just 8 rigs from the 14 offshore rigs running a year ago, when there was no drilling off our other coasts...in addition to those rigs offshore, another rig started drilling for oil in Galveston Bay this week which Baker Hughes has classified as an inland waters rig, which matches the inland waters rig count of one from a year ago..

The count of active horizontal drilling rigs was up by 5 ro 466 horizontal rigs this week, which was more than double the 214 horizontal rigs that were in use in the US on September 18th of last year, but was just over 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 up by 3 to an 18 month high of 29 vertical rigs this week, and those were also up by 12 from the 17 vertical rigs that were operating during the same week a year ago…..in addition, the directional rig count was up by 1 to 17 directional rigs this week, but those were still down by 6 from the 23 directional rigs that were in use on September 18th 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 September 17th, the second column shows the change in the number of working rigs between last week’s count (September 10th) and this week’s (September 17th) count, the third column shows last week’s September 10th 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 18th of September, 2020...

September 17 2021 rig count summary

outside of the Gulf, this week's rig count changes are similar to those we've seen in other periods of rising oil prices...checking for the details on the Texas Permian in the Rigs by State file at Baker Hughes, we find that two rigs were added in Texas Oil District 8A, which includes the northern counties of the Permian Midland, and that another rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland...with the Texas Permian rig count up by three while the national Permian count increased by five, that means that the 2 rigs that were added in New Mexico had to have been started up in the western reaches of the Permian Delaware...elsewhere in Texas, we find that a rig was added in Texas Oil District 1, and another rig was added in Texas Oil District 2, which apparently account for this week's Eagle Ford shale additions, while a rig was pulled out of Texas Oil District 3, apparently targeting a basin Baker Hughes doesn't track...

other Texas changes include the oil rig that was set up in the Galveston Island area, and a natural gas rig that was pulled out of the Haynesville shale in Texas Oil District 6...the Eagle Ford shale also shed a natural gas rig this week, while adding three oil rigs, and hence the Eagle Ford deployment now includes 34 rigs drilling for oil and two targeting natural gas...​while Oklahoma saw three rigs this week, the one added in the Cana Woodford was the only one ​in a named basin; the other two were targeting a basin Baker Hughes doesn't track..

changes in natural gas drilling activity this week​ other than those mentioned for Texas​ include a rig that was added in Pennsylvania's Marcellus, another natural gas rig targeting the Marcellus in Cattaraugus County, New York, in the first drilling of any type in that state since April of 2017; at the same time, the rig that was pulled out of West Virginia had also been targeting Marcellus gas...another natural gas rig was added in Ohio's Utica, while Ohio's Utica had its only oil rig shut down at the same time...the national natural gas count was still negative, however, because a natural gas rig was pulled out of a basin that isn't being tracked by Baker Hughes..

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note: there’s more here

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