oil prices slipped slightly this week for the first time in ten weeks on higher domestic supplies and on prospects for Iranian crude exports, but still posted new seven year highs intraday on Monday and at Tuesday's close...after rising 2.5% to a 7 year high of $83.76 per barrel last week following across the board withdrawals from US oil & product inventories, the contract price for US light sweet crude for November delivery opened the week higher and rose to a 7 year intraday high of $85.41 a barrel early Monday, its highest level since October 2018, after Goldman Sach said that natural gas to fuel oil switching would add at least 1 million barrels per day to oil demand this year, but retreated in the afternoon to close unchanged as traders focused on talks between Iran and the European Union, which could lead to a return of Iranian supplies to global markets...oil prices drifted sideways early Tuesday, as traders balanced concerns over slowing economic growth undermined by rising inflation and flare-ups in COVID-19 infections in Asia and the European Union against prospects of a tightened global oil market in the fourth quarter. but then rallied in the afternoon to settle 89 cents higher at $84.65 a barrel, their highest close since October 2014, supported by a global supply shortage and strong demand in the US, the world's biggest consumer...oil prices dipped in off-market trading late Tuesday following an American Petroleum Institute report of a surprise build of crude inventories, and then fell sharply in early trading on Wednesday, as the API also reported across-the-board builds in domestic crude and petroleum product supplies last week, and ultimately settled down $1.99, or 2.4%, at $82.66 a barrel after the EIA showed U.S. crude oil stockpiles grew even more than API had reported, even as fuel inventories dropped and tanks at the nation’s largest storage hub neared empty...oil prices extended those losses into early trade Thursday, with December crude trading below $82 per barrel, amid prospects for the potential return of Iranian crude oil exports, after Tehran agreed to restart nuclear talks with Western powers next month, but recovered to end trading 15 cents higher at $82.81 a barrel after the OPEC+ Joint Technical Committee forecast an even tighter global oil market through the fourth quarter...that recovery extended into Friday's trading as oil opened up and traded nearly $1 higher, supported by expectations that Opec+ would maintain production cuts when they meet next week, before settling with a gain of 76 cents at $83.57 a barrel, with US traders more concerned about the large rundown in available stocks at the Cushing distribution hub...nonetheless, December crude still ended the week 0.2% lower, ending a streak of nine consecutive weekly gains -- the longest on record -- as rising domestic crude inventories, the potential for revived Iran nuclear talks, and a retreat by natural-gas futures dragged crude prices further away from multiyear highs, even as October's trading ended with crude priced 11% higher than the prior month..
meanwhile, natural gas prices finished higher for the first time in four weeks on increasingly cooler forecasts...after falling 2.4% to $5.280 per mmBTU last week as warm weather persisted over most of the US and kept demand for heating low, the contract price of natural gas for November delivery opened more than 2% higher on Monday and soared 61.8 cents, or nearly 12%, to $5.898 per mmBTU, on short covering following an initial rally on forecasts calling for cooler weather than had been expected....but prices fell back 5% early Tuesday as a wave of profit taking set in, before recovering to end just 1.6 cents lower at $5.882 per mmBTU, on midday forecasts calling for colder weather and higher heating demand over the next two weeks than was previously expected....after again sliding early on Wednesday, prices again rallied and ended 32.0 cents, or more than 5% higher, on an increasingly bullish weather forecast, as lows of teens to 30s were expected to increase in coverage over the northern US and down the Plains, while trading in the November natural gas contract expired at a three week high of $6.202 per mmBTU...with media coverage now referencing the contract price of natural gas for December delivery, which had closed Wednesday priced at $6.198 per mmBTU, Thursday saw natural gas prices tumble 41.6 cents, or nearly 7% to $5.782 per mmBTU, first on a drop in European gas prices amid reports that Russia would begin increasing gas supplies to the continent in November , and then on a storage report than came in a bit below expectations....natual gas prices shed another 35.6 cents on Friday to end the week at $5.426 per mmBTU, as European natural gas prices again fell more than 11%, and as a mid-November warm-up was forecast for the Lower 48 following a bout of early-month cold...nonetheless, natural gas prices had already posted larger gains earlier, and hence ended 2.8% higher on the week, while the December gas contract, which had ended last week priced at $5.461 per mmBTU, actually ended 0.6% lower...
The EIA's natural gas storage report for the week ending October 22nd indicated that the amount of working natural gas held in underground storage in the US rose by 87 billion cubic feet to 3,548 billion cubic feet by the end of the week, which still left our gas supplies 403 billion cubic feet, or 10.2% below the 3,951 billion cubic feet that were in storage on October 22nd of last year, and 126 billion cubic feet, or 3.4% below the five-year average of 3,674 billion cubic feet of natural gas that have been in storage as of the 22nd of October in recent years...the 87 billion cubic foot increase in US natural gas in working storage this week was a bit less than the average forecast for a 90 billion cubic foot addition from a S&P Global Platts survey of analysts, but well more than the average addition of 62 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, and far more than the 32 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 October 22nd indicated that after a modest increase in our oil imports and a modest decrease in our oil exports, we had surplus oil to add to our stored commercial crude supplies for the fourth time in five weeks and for the for the ninth time in the past thirty weeks….our imports of crude oil rose by an average of 430,000 barrels per day to an average of 6,254,000 barrels per day, after falling by an average of 169,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 273,000 barrels per day to an average of 2,787,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,467,000 barrels of per day during the week ending October 22nd, 703,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly unchanged at 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 have totaled an average of 14,767,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,048,000 barrels of crude per day during the week ending October 22nd, 58,000 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 of 454,000 barrels of oil per day were being added to 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 734,000 barrels per day less than what was added to storage plus 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 (+734,000) 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 balance sheet 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....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 6,277,000 barrels per day last week, which was still 15.2% more than the 5,450,000 barrel per day average that we were importing over the same four-week period last year…the rounded the 454,000 barrel per day net increase in our crude inventories came as 610,000 barrels per day were added to our commercially available stocks of crude oil, which in turn was partly offset by a 156,000 barrels per day withdrawal of oil that had been stored in our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be unchanged at 11.300,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 10,900,000 barrels per day, while an 11,000 barrel per day increase in Alaska’s oil production to 442,000 barrels per day had no impact on the reported 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 pre-pandemic 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...
US oil refineries were operating at 85.1% of their capacity while using those 15,048,000 barrels of crude per day during the week ending October 22nd, up from 84.7% of capacity the prior week, but below normal utilization for early autumn refinery operations…the 15,048,000 barrels per day of oil that were refined this week were still 12.4% more barrels than the 13,388,000 barrels of crude that were being processed daily during the pandemic impacted week ending October 23rd of last year, but 5.9% less than the 15,998,000 barrels of crude that were being processed daily during the week ending October 25th, 2019, when US refineries were operating at what was then also a below normal 87.7% of capacity...
With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also a bit higher, increasing by 12,000 barrels per day to 10,072,000 barrels per day during the week ending October 22nd, after our gasoline output had increased by 455,000 barrels per day over the prior week.…this week’s gasoline production was also 10.7% more than the 9,095,000 barrels of gasoline that were being produced daily over the same week of last year, but still 1.1% less than the gasoline production of 10,184,000 barrels per day during the week ending October 25th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 164,000 barrels per day to 4,581,000 barrels per day, after our distillates output had decreased by 289,000 barrels per day over the prior week…after this week’s increase, our distillates output was 11.0% more than the 4,126,000 barrels of distillates that were being produced daily during the week ending October 23rd, 2020, but 7.8% less than the 4,970,000 barrels of distillates that were being produced daily during the week ending October 25th, 2019..
Despite the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the fifth time in eight weeks, and for fifteenth time in twenty-seven weeks, falling by 1,993,000 barrels to a 47 month low of 215,746,000 barrels during the week ending October 22nd, after our gasoline inventories had decreased by 5,368,000 barrels over the prior week...our gasoline supplies decreased this week even though the amount of gasoline supplied to US users fell by 311,000 barrels per day to 9,323,000 barrels per day because our imports of gasoline fell by 113,000 barrels per day to 493,000 barrels per day, and because our exports of gasoline rose by 280,000 barrels per day to 813,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 4.6% lower than last October 23rd's gasoline inventories of 226,124,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…
Even with the increase in our distillates production, our supplies of distillate fuels decreased for the eighth time in nine weeks and for the 20th time in 29 weeks, falling by 432,000 barrels to an 18 month low of 124,962,000 barrels during the week ending October 22nd, after our distillates supplies had decreased by 1,913,000 barrels during the prior week….our distillates supplies fell by less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 409,000 barrels per day to 3,869,000 barrels per day, while our imports of distillates rose by 123,000 barrels per day to 325,000 barrels per day, and while our exports of distillates rose by 199,000 barrels per day to 1,099,000 barrels per day...after twenty inventory decreases over the past twenty-nine weeks, our distillate supplies at the end of the week were 20.0% below the 156,228,000 barrels of distillates that we had in storage on October 23rd, 2020, and about 8% below the five year average of distillates stocks for this time of the year…
Meanwhile, after the increase in our oil imports and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the sixth time in the past twenty-two weeks and for the 18th time in the past year, increasing by 4,268,000 barrels over the week, from 426,544,000 barrels on October 15th to 430,812,000 barrels on October 22nd, after our commercial crude supplies had decreased by 431,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories remained about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still more than 28% above the average of our crude oil stocks at the fourth weekend of October 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 October 22nd were 12.5% less than the 492,427,000 barrels of oil we had in commercial storage on October 23rd of 2020, and are now 1.8% less than the 438,853,000 barrels of oil that we had in storage on October 25th of 2019, but are still 1.1% more than the 426,004,000 barrels of oil we had in commercial storage on October 26th of 2018…
Finally, with our inventory of crude oil and our supplies of all products made from oil still near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....we find that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, rose by 3,269,000 barrels this week, from 1,844,183,000 barrels on October 15th to 1,847,479,000 barrels on October 8th, and they are now 5,852,000 barrels higher than the six year low of five weeks earlier...
This Week's Rig Count
The number of drilling rigs active in the US increased for the 49th time out of the past 58 weeks during the week ending October 29th, but they remained 31.4% below the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by two to 544 rigs this past week, which was also 248 more rigs than the pandemic hit 296 rigs that were in use as of the October 30th report of 2020, but was also still 1,385 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 1 to 444 oil rigs this week, after they had fallen by 2 oil rigs the prior week, but there are still 223 more oil rigs active now than were running a year ago, even as they still amount to just 27.6% of the high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 1 to 100 natural gas rigs, which was still up by 28 natural gas rigs from the 72 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….last year's rig count also included 3 rigs that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs running this week...
The Gulf of Mexico rig count was unchanged at thirteen rigs this week, which is still short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with twelve of this week's Gulf rigs drilling for oil in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas....the Gulf rig count is still equal to that of a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…and since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig count is equal to the national totals..
In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..
The count of active horizontal drilling rigs was up by one to 483 horizontal rigs this week, which was nearly double the 254 horizontal rigs that were in use in the US on October 30th of last year, but was just 35.2% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…at the same time, the vertical rig count was also up by 1 to 39 vertical rigs this week, and those were also up by 9 from the 20 vertical rigs that were operating during the same week a year ago….meanwhile, the directional rig count was unchanged at 32 directional rigs this week, and those are still up by 10 from the 22 directional rigs that were in use on October 30th 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 October 29th, the second column shows the change in the number of working rigs between last week’s count (October 22nd) and this week’s (October 29th) count, the third column shows last week’s October 22nd 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 30th of October, 2020...
as you can see, not much changed this week; the Colorado rig addition was an oil rig in the Niobrara chalk of the Rockies' front range, and the North Dakota rig addition was an oil rig in the Williston basin's Bakken shale... the Rigs by State file at Baker Hughes reveals that two rigs were added in Texas Oil District 8, which is the core Permian Delaware, while two rigs were out of Texas Oil District 7C, which would be the southern counties of the Permian Midland, and hence there was no net change in the Texas Permian...there was a natural gas rig added in the Haynesville shale in Texas Oil District 6, but there was also a rig pulled out of the Haynesville shale in northwest Louisiana, so there was no net change in the Haynesville shale either...meanwhile, this week's natural gas rig increase came as a natural gas rig was added somewhere in the Permian, while an oil rig was pulled out at the same time...
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note: there’s more here…
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