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

Monday, October 18, 2021

US oil price at a 7 year high; largest US oil inventory build in 7 months; global oil shortage at 2,400,000 barrels per day​

oil prices at a 7 year high; largest US oil inventory build in 7 months; gasoline imports at an 8 month low; global oil shortage at 2,400,000 barrels per day​ as OPEC output is ​375,000 barrels per day short of​ quota​

Oil prices rose for an 8th straight week as global shortages of coal and natural gas were expected to lead to increased demand for oil....after rising 4.6% to $79.35 a barrel last week after OPEC decided to only add the minimum to global supplies in the coming months, the contract price for US light sweet crude for November delivery rallied in early trading Monday, initially jumping by more than 3% to trade at a seven-year high of $82.18 a barrel, driven by concerns over deepening fuel shortages across major global economies, as accelerated gas-to-oil switching in power generation boosted the outlook for oil demand, before giving up more than half of the early gains to settle $1.17 higher at $80.52 a barrel, still the first close above $80 since October 2014, as a growing power crisis from Europe to Asia boosted demand for oil ahead of winter...oil prices moved higher again early Tuesday, propelled by concerns over a quickly tightening global oil market, as OPEC and Russia-led partners stuck with their agreement to only gradually roll back their production cuts next month, even as global stockpiles of coal and natural gas were running low before winter. but pulled back after the International Monetary Fund trimmed their global economic growth forecast, and settled with just a 12 cent gain for the day at $80.64 a barrel, as a tight market brought about by robust demand and limited supply continued to lend buoyancy to oil prices...oil prices pulled back further in early trading Wednesday, after data from the EU showed their industrial production fell sharply at the end of the third quarter, pressured by supply-chain bottlenecks and a record run in electricity prices, and settled 20 cents lower at $80.64 a barrel, as traders assessed OPEC’s skepticism around the strength of crude demand even after oil prices had hit their highest since 2014....oil prices then moved higher again early Thursday after a mixed inventory report from the American Petroleum Institute, but pared their gains following EIA data that showed US oil inventories had increased more than expected and that refiners had sharply scaled back run rates amid softer demand for both gasoline and distillate fuels, but rallied again in afternoon trading to close 87 cents higher at $81.31 a barrel after Saudi Arabia dismissed calls for additional OPEC+ supply and the International Energy Agency warned that shortages of natural gas in Europe and Asia were boosting demand for oil, deepening what was already a sizable supply deficit in crude markets...the oil rally continued into Friday on global shortages of natural gas and coal supplies that were expected to add 500,000 barrels per day (bpd) to global oil demand over the coming months, and never looked back to finish 97 cents higher at a 7 year high of $82.28 a barrel, boosted by forecasts of an oil supply deficit over the next few months, as the easing of coronavirus-related travel restrictions spurred additional demand. thus logging a 3.7% gain on the week, with the global benchmark price for Brent crude scoring longest streak of weekly gains since 1999....

Since oil prices appear to be pretty close to a 7 year high, we'll again put up a long term graph and take a look..

October 16 2021 oil prices

The above is a screenshot of the current interactive oil price chart from barchart.com, which i have again set to show front month oil prices monthly over the past 10 years, which means you're seeing the same oil prices that were quoted by the media....this interactive chart can also 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 month, with months when prices rose indicated in green, with the opening price at the bottom of the bar and the closing price at the top, and months when prices fell indicated in red, with the opening price at the top of the bar and the closing price at the bottom, while the small sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the month in question....meanwhile, the bars across the bottom show trading volume for the front month oil contract, for the months in question, again with up months indicated by green bars and down months indicated in red...

it's pretty clear and has been widely cited that this weeks oil prices were the highest since October 2014....to find out when in October, we converted that interactive oil graph to show daily prices, and then tediously scrolled the daily price graph back to 2014...looking for a daily closing price higher than this week's $82.28 a barrel, we arrived at October 21st, 2014, when the November 2014 oil contract opened at $81.86 a barrel and closed at $82.49....the next day, oil closed at $80.52 and was below $80 by the end of the month, where it remained until last week...so this week's closing price is actually 6 days short of a seven year high, and though it has traded higher off-market since (it's now at $83.09), it's closing prices in New York trading on which price records are based..

meanwhile, natural gas prices fell for a second week, following their seven week surge to a twelve year high, as mild weather lowered demand and allowed for surplus gas to be stored before winter...after falling 1% to $5.565 per mmBTU last week on the largest increase in US natural gas inventories in 16 months, the contract price of natural gas for November delivery opened higher on Monday on cooler-trending weather models, but reversed course once the trading session got underway to settle 22.0 cents or 4% lower at a two-week low of $5.345 per mmBTU, on rising gas output and on forecasts that milder than normal weather would continue through late October, allowing utilities inject more gas into storage than usual ahead of the winter...after trading lower early Tuesday, the November contract turned higher after the midday forecast called for cooler weather, and the Cove Point LNG export plant returned from a maintenance outage, boosting the amount of gas that our LNG export plants consumed, and settled with a gain of 16.0 cents at 5.505 per mmBTU....another cooler turn in the latest weather models lifted natural gas prices again on Wednesday, as prices settled 8.5 cents higher at $5.590, and then rose 9.7 cents to $5.687 per mmBTU during Thursday's session, on a smaller-than-expected storage build, lower gas output, rising LNG exports, higher global gas prices, and a report that La Nina conditions had developed, portending a cold and wet winter for the US....but US natural gas prices turned lower and fell almost 5% on Friday, following a 9% drop in global gas prices, on forecasts the weather in the US would remain mostly mild through the end of October, setting down 27.7 cents at $5.410 per mmBTU and thus ending 2.8% lower for the week...

The EIA's natural gas storage report for the week ending October 8th indicated that the amount of working natural gas held in underground storage in the US rose by 81 billion cubic feet to 3,369 billion cubic feet by the end of the week, which still left our gas supplies 501 billion cubic feet, or 12.9% below the 3,870 billion cubic feet that were in storage on October 8th of last year, and 174 billion cubic feet, or 4.9% below the five-year average of 3,543 billion cubic feet of natural gas that have been in storage as of the 8th of October in recent years...the 81 billion cubic foot increase in US natural gas in working storage this week was lower than the forecast for a 89 billion cubic foot addition from a survey of analysts queried by S&P Global Platts, but close to 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 still well above the the 75 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 8th indicated that even after a decrease in our oil imports and an increase in our oil exports, a concurrent ​​​drop in our oil refining​ and a jump in our unaccounted for oil​ meant we had surplus oil to add oil to our stored commercial crude supplies for the third time in ten weeks and for the fourteenth time in the past forty-seven weeks….our imports of crude oil fell by an average of 1,041,000 barrels per day to an average of 5,994,000 barrels per day, after rising by an average of 483,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 400,000 barrels per day to an average of 2,514,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,480,000 barrels of per day during the week ending October 8th, 1,441,000 fewer 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 100,000 barrels per day higher 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 have totaled an average of 14,841,000 barrels per day during the cited reporting week… 

meanwhile, US oil refineries reported they were processing an average of 15,061,000 barrels of crude per day during the week ending October 8th, 684,000 fewer  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 755,000 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 936,000 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 (+936,000) 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...moreover, since last week’s unaccounted for oil was at (-273,000) barrels per day, there was an 1,209,000 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 nonsense….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 6,512,000 barrels per day last week, which was 22.2% more than the 5,327,000 barrel per day average that we were importing over the same four-week period last year…the rounded 755,000 barrel per day net increase in our crude inventories came as 870,000 barrels per day were added to our commercially available stocks of crude oil, while 114,000 barrels per day were pulled out from 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 100,000 barrels per day higher at 11.400,000 barrels per day even though the EIA"s rounded estimate of the output from wells in the lower 48 states was unchanged at 10,900,000 barrels per day because a 4,000 barrel per day increase in Alaska’s oil production to 452,000 barrels per day added 100,000 barrels per day to 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 13.0% below that of our pre-pandemic production peak, but 35.2% 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 86.7% of their capacity while using those 15,061,000 barrels of crude per day during the week ending October 8th, down from 89.6% of capacity the prior week, and below normal utilization for early autumn refinery operations…the 15,061,000 barrels per day of oil that were refined this week were still 10.9% more barrels than the 13,577,000 barrels of crude that were being processed daily during the pandemic impacted week ending October 9th of last year, but 2.4% less than the 15,436,000 barrels of crude that were being processed daily during the week ending October 11th, 2019, when US refineries were operating at what was then also a below normal 83.1% of capacity, due to flooding in the wake tropical storm Imelda…

even with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was higher, increasing by 239,000 barrels per day to 9,605,000 barrels per day during the week ending October 8th, after our gasoline output had decreased by 523,000 barrels per day over the prior week.…this week’s gasoline production was 4.0% more than the 9,240,000 barrels of gasoline that were being produced daily over the same week of last year, but 3.9% lower than the gasoline production of 9,998,000 barrels per day during the week ending October 11th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 72,000 barrels per day to 4,706,000 barrels per day, after our distillates output had increased by 130,000 barrels per day over the prior week…after this week’s decrease, our distillates output was still 10.2% more than the 4,269,000 barrels of distillates that were being produced daily during the week ending October 9th, 2020, and fractionally more than the 4,688,000 barrels of distillates that were being produced daily during the week ending October 11th, 2019..

despite the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the first time in four weeks, and for fifteenth time in twenty-seven weeks, and for the 26th time in forty-six weeks, falling by 1,958,000 barrels to 223,107,000 barrels during the week ending October 8th, after our gasoline inventories had increased by 3,256,000 barrels over the prior week...our gasoline supplies decreased this week even though the  amount of gasoline supplied to US users fell by 241,000 barrels per day to 9,186,000 barrels per day because our imports of gasoline fell by 545,000 barrels per day to an eight month low of 542,000 barrels per day, and because our exports of gasoline rose by 295,000 barrels per day to 699,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 0.9% lower than last October 9th's gasoline inventories of 225,121,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year…

with the decrease in our distillates production, our supplies of distillate fuels also decreased for the seventh time in nine weeks and for the 18th time in 27 weeks, falling by 24,000 barrels to 129,307,000 barrels during the week ending October 8th, after our distillates supplies had decreased by 396,000 barrels during the prior week….our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 433,000 barrels per day to 3,932,000 barrels per day, because our imports of distillates fell by 108,000 barrels per day to 190,000 barrels per day, and because our exports of distillates rose by 200,000 barrels per day to 968,000 barrels per day...after eighteen inventory decreases over the past twenty-seven weeks, our distillate supplies at the end of the week were 21.4% below the 164,551,000 barrels of distillates that we had in storage on October 9th, 2020, and about 9% below the five year average of distillates stocks for this time of the year…

meanwhile, even with the decrease in our oil imports and the increase in our oil exports, our commercial supplies of crude oil in storage rose for the eighth time in the past twenty-nine  weeks and for the 18th time in the past year, increasing by 6,088,000 barrels over the week, from 420,887,000 barrels on October 1st to 426,975,000 barrels on October 8th, after our commercial crude supplies had increased by 2,345,000 barrels over the prior week…even after this week’s increase, which was the largest in seven months, 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 about 28% above the average of our crude oil stocks at the second 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 8th were 12.7% less than the 489,109,000 barrels of oil we had in commercial storage on October 9th of 2020, and are now 1.8% less than the 434,850,000 barrels of oil that we had in storage on October 11th of 2019, but still 2.5% more than the 416,441,000 barrels of oil we had in commercial storage on October 12th of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil still near multi year lows, we'll continue to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, rose by 4120,000 barrels this week, from 1,851,562,000 barrels on October 1st to 1,855,682,000 barrels on October 8th, and they are now up by 14,055,000 barrels from the six year low of three weeks earlier...

OPEC's October Oil Market Report

Wednesday of this week saw the release of OPEC's October Oil Market Report, which covers OPEC & global oil data for September, and hence it gives us a picture of the global oil supply & demand situation in the second month after 'OPEC+' agreed to increase their output by 400,000 barrels per day monthly from the previously agreed to July level, which was part of 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...we again want to 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...

September 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 486,000 barrels per day to 27,328,000 barrels per day during September, up from their revised August production total of 26,842,000 barrels per day...however, that August output figure was originally reported as 26,762,000 barrels per day, which therefore means that OPEC's August production was revised 80,000 barrels per day higher with this report, and hence OPEC's September production was, in effect, a 566,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official August 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 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 September, which would include an increase of roughly 250,000 barrels per day from the OPEC members listed above...however, as you can see from the above table, OPEC's increase of 486,000 barrels per day was far more than that....we can also see that production increases of 156,000 barrels per day from the Saudis, 139,000 barrels per day from the Saudis, and 84,000 barrels per day from Iraq were the major factors in OPEC's September output increase....however, most of Nigeria's output increase is just a recovery from August, when their production fell by 89,000 barrels per day, and when OPEC's output was already 684,000 barrels per day short of what they were expected to produce...hence the excessive increase in OPEC's September output still leaves the cartel more than 110% in compliance with the agreement they made with Russia and other producers...

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 their agreement through July....production levels for August and the following months 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 that 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 in August and later months, and boosting reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022...

OPEC arrived at the production quotas for August and September of this year 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, which 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% per month...for the ten members of OPEC who agreed to impose cuts on themselves, that would mean their August output quota would be roughly 23,275,000 barrels per day, and then roughly 23,525,000 barrels per day in September....therefore, the 23,150,000 barrels those 10 OPEC members produced in September were 375,000 barrels per day short of what they were expected to produce, with Nigeria, Angola and the Saudis accounting for the most 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 October 2019 to September 2021, and it comes from page 51 (pdf page 61) of OPEC's October 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....

September 2021 OPEC report global oil supply

Including this month's 486,000 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 610,000 barrels per day to average 95.93 million barrels per day in September, a reported increase which apparently came after August's total global output figure was revised down by 370,000 barrels per day from the 95.69 million barrels per day of global oil output that was estimated for August a month ago, as non-OPEC oil production rose by a rounded 120,000 barrels per day in September after that revision, driven by increases in production in non-OECD countries, particularly Russia, while output in the OECD countries decreased by 430,000 barrels per day​, with drop in the oil output from North America due to Hurricane Ida largely responsible for the non-OPEC production decrease in September...

After that increase in September's global output, the 95.93 million barrels of oil per day that were produced globally during the month were 5.34 million barrels per day, or 5.9% more than the revised 90.59 million barrels of oil per day that were being produced globally in September a year ago, which was the second 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 October 2020 OPEC report (online pdf) for the originally reported September 2020 details)...with this month's relatively large increase in OPEC's output, their September oil production of 27,328,000 barrels per day rose to 28.5% of what was produced globally during the month, an increase of 0.3% from their revised 28.2% share of the global total in August, which itself was revised up from 28.0%, on this month's upward revision to OPEC's August output and downward revision to global totals....OPEC's September 2020 production was reported at 24,106,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,222,000 barrels per day, or 13.4% more barrels per day of oil this September than what they produced a year earlier, when they accounted for 26.6% of global output...

Even after the 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..

September 2021 OPEC report global oil demand

The above table came from page 26 of the OPEC October 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 September, which is their estimate of global oil demand during the third quarter of 2021... OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe were using an average of 98.33 million barrels of oil per day, which as you can see in the green ellipse above, is a rounded 0.13 million barrels per day downward revision from the 98.46 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 months....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 95.93 million barrels million barrels per day during September, which would imply that there was a shortage of around 2,400,000 barrels per day in global oil production in September when compared to the demand estimated for the month...

in addition to figuring that September oil shortage implied by this report, the downward revision of 370,000 barrels per day to August's global oil output that's implied in this report, combined with the 130,000 barrels per day downward revision to 3rd quarter demand that we've circled in green, means that the 2,770,000 barrels per day global oil output shortage we had previously figured for August would now be revised to a shortage of 3,020,000 barrels per day....similarly, the 130,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 2,730,000 barrels per day we had previously figured for July would have to be revised to a shortage of 2,600,000 barrels per day...

Note that in green we've also circled a downward revision of 260,000 barrels per day to second quarter demand, a quarter when there was also a shortage of oil being produced globally.... but based on that downward revision to demand, our previous estimate that there was a shortage of 920,000 barrels per day in June would now be revised to a 660,000 barrels per day shortage, the oil shortage of 2,250,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 1,990,000 barrels per day, & the 2,600,000 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 modest downward revision of 40,000 barrels per day to OPEC's previous estimate of first quarter demand....for March, that means that the global oil output surplus of 200,000 barrels per day we had previously figured for March would now be revised to a surplus of 240,000 barrels per day... similarly, the downward revision to first quarter demand means that the 810,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 770,000 barrels per day, and that the global oil output surplus of 410,000 barrels per day we had previously figured for January would now be revised to a surplus of 450,000 barrels per day, in light of that 40,000 barrel per day downward revision to first quarter demand...

You might also note that we have also circled a 60,000 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 6,000 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 48th time out of the past 56 weeks during the week ending October 15th, but they were still 31.5% below the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by ten to 543 rigs this past week, which was also 261 more rigs the pandemic hit 282 rigs that were in use as of the October 16th report of 2020, but was still 1,386 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 12 to 445 oil rigs this week, after they had risen by 5 oil rigs the prior week, and there are now 240 more oil rigs active now than were running a year ago, while they still amount to just 27.7% 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 down by 1 to 98 natural gas rigs, which was still up by 2​4 natural gas rigs from the 7​4 natural gas rigs that were drilling during the same week a year ago, but still only 6.1% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….meanwhile, the Kern county California horizontal rig that Baker Hughes had classified as "miscellaneous' was shut down this week, and no other such "miscellaneous' rigs are currently deployed, wh​ich cntrasts to a year ago​, when​ there were three such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count was up by two rigs to twelve rigs this week, which is still short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with eleven 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 also ​still ​down by 2 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….in addition, the last rig that had been drilling for natural gas off the shore of the Kenai peninsula in Alaska was shut down this week, and there is no drilling off our other coasts, and hence the national rig count of 12 is down from 14 a year ago, when there was also no drilling off Alaska or off our other coasts...

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 down by 2 to 481 horizontal rigs this week, which was still more than double the 240 horizontal rigs that were in use in the US on October 1​6th of last year, but was just 35.0% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the vertical rig count was up by 2 to 30 vertical rigs this week, and those were also up by ​9 from the ​2​1 vertical rigs that were operating during the same week a year ago….at the same time, the directional rig count was up by 10 at 32 directional rigs this week, and those are now up by ​11 from the 21 directional rigs that were in use on October ​16th 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 15th, the second column shows the change in the number of working rigs between last week’s count (October 8th) and this week’s (October 15th) count, the third column shows last week’s October 8th 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 16th of October, 2020...

October 15 2021 rig count summary

the increase of 10 directional rigs is a surprise, but the only way i know of we'd be able to find out where they were would be to dig through the individual well records in the North America Rotary Rig Count Pivot Table (Feb 2011 - Current) (xls); Baker Hughes doesn't aggregate trajectory data by basin....so ​today ​we'll again start by checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin, ​where ​we find that two rigs were added in Texas Oil District 8, which is the core Permian Delaware, and one rig was added in Texas Oil District 7C, which includes the southern counties in the Permian Midland, while one rig was removed from Texas Oil District 8A, which includes the northern counties of the Permian Midland, thus netting out to a two rig increase in the Texas Permian​...since the national Permian basin rig count was only up by one, that means that the rig that had been drilling in New Mexico was pulled out of the westernmost Permian Delaware....

elsewhere in Texas, there were two rigs added in Texas Oil District 2, which would account for this week's Eagle Ford shale increase, while one rig was removed from Texas Oil District 1, which also could have been an Eagle Ford rig, if both of the District 2 additions were targeting that basin...there was also rig was added in Texas Oil District 7B, which could have been targeting a far eastern Permian Delaware county if one of the other rigs wasn't, while a rig was pulled out of Texas Oil District 6, which would account for the Haynesville shale decrease..

elsewhere, the two rigs added in the Cana Woodford account for the Oklahoma rig increase, while the 2 rigs added in the Gulf account for the Louisiana increase; the state's land based rigs were unchanged...meanwhile, the two rigs added in California were deployed in a basin that Baker Hughes doesn't track, but they likely account for two of directional rigs added this week, given the state's folded geology, and we know that two land based rigs were also added in Alaska, given the ​Alaskan ​offshore rig that was shut down...

this week's changes to natural gas rigs include the rig pulled out the Haynesville in Texas, a ​gas ​rig pulled out of Ohio's Utica shale, and a natural gas rig pulled out of Oklahoma's Arkoma Woodford, where the basin count remained unchanged because an oil rig was added ​there ​at the same time... natural gas rigs were only down one nationally because two new natural gas rigs were deployed in a basin ​or basins ​that Baker Hughes doesn't track...

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note: there’s more here

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