natural gas supplies above average for first time since April; Strategic Petroleum Reserve at a 19 year low; total oil & products supplies near a 7 year low; total oil supply falls by most in 25 weeks; gasoline supplies jump most in 20 months; distillates demand falls by most in 5 years; DUC wells in four basins are lowest on record; DUC backlog at 5.5 months is below prepandemic norm..
oil prices rose for the 2nd time in the past nine weeks, rallying first on a force majeure declaration in Libya, then on the largest drawndown in US crude supplies in 5 monhs, and lastly on a refiney explosion in Texas....after falling 1.1% to $70.86 a barrel last week as the rapid spread of the Omicron virus variant began to impact oil demand, the contract price for US light sweet crude for January delivery opened more than 1% lower on Monday and slid to a two-week low of $66.04 a barrel in early trading, as global oil demand was seen to be further restrained amid increased travel restrictions in Europe amid spiking COVID cases, but recovered from the day's lows as the January contracted expired with a loss of $2.63 at $68.23 a barrel, after Biden’s $2 trillion spending package was derailed by Senator Joe Manchin...with oil price quotes now citing the contract price for US light sweet oil for February, which had fallen $2.11 to $68.61 a barrel on Monday, prices moved higher in early trading Tuesday, retracing a portion of Monday's selloff, as oil traders mulled over the effects of the omicron variant on global oil demand. and settled with a gain of $2.51 at $71.12 a barrel as traders' appetite for risk improved even as the fast-moving Omicron variant swept the world, throwing Christmas travel plans into chaos and unnerving financial markets...oil prices were little changed early Wednesday after a force majeure declaration by Libya's National Oil Company staved off a selloff sparked by increasing mobility restrictions in Europe, and then rallied again on the EIA's report of the largest oil inventory drawdown since July to close $1.64 higer at $72.76 a barrel...the rally continued into pre-holiday trading on Thursday morning, with gasoline and oil prices trading at one month highs following an explosion and fire at a gasoline unit at ExxonMobil's Baytown refinery near Houston. and settled $1.03, or 1.4%, higher at $73.79 a barrel as signs that the worst effects of the Omicron variant might be more containable than previously feared were countered by new COVID-19 restrictions amid surging infections...oil prices thus finished the week 4.1% higher at a one month high, while the February oil contract, which had closed the prior week at $70.72 a barrel, ended the week up more than 4.3%...
natural gas prices also finished the week higher for the first time in 4 weeks on signs of an impending polar air mass intrusion.....after falling 6% to $3.690 per mmBTU last week on continued mild temperature forecasts for December, the contract price of natural gas for January delivery opened lower on Monday but rebounded with a flurry, driven higher by surging demand for U.S. exports of LNG, and by domestic forecasts for colder weather in the month ahead. and settled 14.4 cents or nearly 4% higher at $3.834 per mmBTU....prices see-sawed higher on Tuesday, shrugging off forecasts for milder weather, and settled with a 3.5 cent gain at $3.869 per mmBTU, after gas prices in Europe jumped to an all-time high after Russian gas shipments to Germany through a major transit pipeline reversed direction and colder weather increased demand....natural gas prices shot even higher Wednesday, on the increasing likelihood that frigid air would finally descend into vast stretches of the US in early January, and settled with a 10.7 cents gain at $3.976 per mmBTU....however, natural gas prices gave up most of the week's gains on Thursday in tumbling 24.5 cents to $3.731 per mmBTU, as the weather forecast for the new year shifted milder and European gas prices slid from record-high levels, and thus finished the week with just a 1.1% gain...
The EIA's natural gas storage report for the week ending December 17th indicated that the amount of working natural gas held in underground storage in the US fell by 55 billion cubic feet to 3,362 billion cubic feet by the end of the week, which left our gas supplies 234 billion cubic feet, or 6.5% below the 3,596 billion cubic feet that were in storage on December 17th of last year, but 34 billion cubic feet, or 1.0% above the five-year average of 3,328 billion cubic feet of natural gas that have been in storage as of the 17th of December over the most recent years...the 55 billion cubic foot withdrawal from US natural gas working storage this week was slightly below the average forecast for a 57 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, but was much less than the 147 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2020, and was also much less than the average withdrawal of 153 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending December 17th showed that despite a drop in our oil exports, we needed to pull oil out of our stored commercial crude supplies for the sixth time in thirteen weeks and for the twenty-sixth time in the past thirty-eight weeks….our imports of crude oil fell by an average of 277,000 barrels per day to an average of 6,471,000 barrels per day, after falling by an average of 28,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 766,000 barrels per day to an average of 2,879,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,315,000 barrels of per day during the week ending December 17th, 489,000 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 100,000 barrels per day lower at 11,600,000 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 14,915,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,818,000 barrels of crude per day during the week ending December 17th, an average of 148,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,036,000 barrels of oil per day were being pulled out 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 133,000 barrels per day more 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 inserted a (-133,000) 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 oil wells, we’ll continue to report this data just as it's published, and just as it's 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)….
This week's 1,036,000 barrel per day decrease in our total crude oil inventories, the largest since July 2nd, came as 674,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 362,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers...however, most of that unrefined sour oil is expected to go to China and India, so how it could impact US gasoline prices is unclear...including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 57,594,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 19 year low of 596,381,000 barrels per day, or to the lowest since November 29, 2002, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete..
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,502,000 barrels per day last week, which was still 12.7% more than the 5,717,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,600,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day lower at 11,100,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day higher at 449,000 barrels per day and added 100,000 barrels per day from the reported rounded national production total (by the EIA's math)...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 11.4% below that of our pre-pandemic production peak, but still 37.6% 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 89.6% of their capacity while using those 15,818,000 barrels of crude per day during the week ending December 17th, down from a utilization rate of 89.8% the prior week, and lower than the historical utilization rate for mid December refinery operations… the 15,818,000 barrels per day of oil that were refined this week were 12.9% more barrels than the 14,183,000 barrels of crude that were being processed daily during the pandemic impacted week ending December 18th of last year, but 6.2% less than the 16,980,000 barrels of crude that were being processed daily during the week ending December 20th, 2019, when US refineries were operating at what was then also a bit less than seasonal 90.6% of capacity...
Even with the increase in oil being refined this week, the gasoline output from our refineries was somewhat lower, decreasing by 100,000 barrels per day to 9,942,000 barrels per day during the week ending December 10th, after our gasoline output had increased by 479,000 barrels per day over the prior week.…this week’s gasoline production was still 12.6% more than the 8,829,000 barrels of gasoline that were being produced daily over the same week of last year, but 3.2% less than the gasoline production of 10,269,000 barrels per day during the week ending December 20th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 40,000 barrels per day to 4,852,000 barrels per day, after our distillates output had decreased by 105,000 barrels per day over the prior week…after that increase, our distillates output was 5.7% more than the 4,590,000 barrels of distillates that were being produced daily during the week ending December 18th, 2020, but 10.0% less than the 5,394,000 barrels of distillates that were being produced daily during the week ending December 20th, 2019..
Even with the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the third time in eleven weeks, and for the twenty-first time in thirty-five weeks, increasing by 5,533,000 barrels to 218,585,000 barrels during the week ending December 17th, the largest jump in 20 months, after our gasoline inventories had decreased by 719,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 486,000 barrels per day to 8,986,000 barrels per day, and because our imports of gasoline rose by 189,000 barrels per day to 688,000 barrels per day, while our exports of gasoline rose by 200,000 barrels per day to 821,000 barrels per day…after this week’s big inventory increase, our gasoline supplies were still 5.7% lower than last December 18th's gasoline inventories of 238,879,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…
With the increase in our distillates production, our supplies of distillate fuels increased for the fourth time in seventeen weeks and for the 12th time in 37 weeks, rising by 396,000 barrels to 124,154,000 barrels during the week ending December 17th, after our distillates supplies had decreased by 2,852,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by a near record 1,074,000 barrels per day to 3,882,000 barrels per day, even as our exports of distillates rose by 403,000 barrels per day to 1,176,000 barrels per day, and as our imports of distillates fell by 247,000 barrels per day to 203,000 barrels per day....but after twenty-five inventory decreases over the past thirty-seven weeks, our distillate supplies at the end of the week were still 16.6% below the 148,934,000 barrels of distillates that we had in storage on December 18th, 2020, and about 8% below the five year average of distillates stocks for this time of the year…
Meanwhile, despite the drop in our oil exports and the big SPR release, our commercial supplies of crude oil in storage fell for the 20th time in the past thirty weeks and for the 34th time in the past year, and by the most in 15 weeks, decreasing by 4,715,000 barrels over the week, from 428,286,000 barrels on December 10th to 423,571,000 barrels on December 17th, after our commercial crude supplies had decreased by 4,584,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories slipped to around 8% below the most recent five-year average of crude oil supplies for this time of year, but were still about 23% above the average of our crude oil stocks as of the third weekend of December 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 December 17th were 15.2% less than the 499,534,000 barrels of oil we had in commercial storage on December 18th of 2020, and are now 4.0% less than the 441,359,000 barrels of oil that we had in storage on December 20th of 2019, and also 4.0% less than the 441,411,000 barrels of oil we had in commercial storage on December 21st of 2018…
Finally, with our inventory of crude oil and our supplies of all products made from oil all 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....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 9,525,000 barrels this week, from 1,809,406,000 barrels on December 10th to 1,799,881,000 barrels on December 17th, and is now at the lowest level since December 26th, 2014, or nearly at a 7 year low...
This Week's Rig Count
The number of drilling rigs active in the US increased for the 56th time during the past 66 weeks during the holiday shortened week ending December 23rd, but still remained 26.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by seven to 586 rigs this past week, which was also 238 more rigs than the pandemic hit 348 rigs that were in use as of the December 23rd report of 2020, but was still 1,343 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 increased by 5 to 480 oil rigs during this week, after they had increased by 4 rigs during the prior week, and there are now 218 more oil rigs active now than were running a year ago, even as they still amount to just 29.8% of the shale era 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 rose by 2 to 106 natural gas rigs, which was also up by 23 natural gas rigs from the 81 natural gas rigs that were drilling during the same week a year ago, but still only 6.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...
The Gulf of Mexico rig count was unchanged at 15 rigs this week, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas...that's now two less than the count of 17 rigs that were active in the Gulf a year ago, when 14 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters…most of those Gulf rigs appear to be directional rigs targeting oil at depths greater than 15,000 feet, and include five targeting the Mississippi Canyon and three targeting oil under the Green Canyon...since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....In addition to those rigs offshore, we continue to have one water based rig drilling for oil inland in the Galveston Bay area, and hence the inland waters rig count of one is now down from two a year ago..
The count of active horizontal drilling rigs was up by 7 to 528 horizontal rigs this week, which was also 219 more than the 309 horizontal rigs that were in use in the US on December 23rd of last year, but also 61.6% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was up by 1 to 27 vertical rigs this week, and those were up by 10 from the 17 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was down by one to 31 directional rigs this week, but those were still up by 9 from the 22 directional rigs that were in use on December 23rd 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 December 23rd, the second column shows the change in the number of working rigs between last week’s count (December 17th) and this week’s (December 23rd) count, the third column shows last week’s December 17th 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 23rd of December, 2020...
with the majority of this week's rig increase coming in the Permian basin, .we'll start by checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin...there we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, and that another rig was added in Texas Oil District 7C, which includes the northernmost counties in the Permian Midland, but that three rigs were pulled out of Texas Oil District 8A, which covers the southern counties in the Permian Midland....since the Texas Permian rig count was thus up by a net of two and the national Permian rig count was up by six, that means that the four rigs that were added in New Mexico were deployed in the western Permian Delaware...
elsewhere in Texas, three rigs were added in Texas Oil District 6, which encompasses the portion of the Haynesville shale in the state; at the same time, a Haynesville shale rig was pulled out of northern Louisiana....since the Haynesville shale rig count was only up by one nationally, we'll have to assume one of those district 6 additions was not targeting the Haynesville...note that Texas also saw a rig removed from Texas Oil District 3, but that rig was also not targeting one of the basins that Baker Hughes reports details on...
the only other change in the table above we've not accounted for is the two rig addition in Oklahoma's Cana Woodford...however, since the Oklahoma rig count was unchanged, we know that two other rigs were pulled out of Oklahoma, from a basin that Baker Hughes doesn't track...meanwhile, for natural gas rigs, we have the Haynesville shale addition, and another natural gas rig added in a basin that Baker Hughes lists as "other", which could have been anywhere, but which can be determined by tediously checking the individual well records in the North America Rotary Rig Count Pivot Table (Feb 2011 - Current), if anyone really needs to know..
DUC well report for November
Monday of last week saw the release of the EIA's Drilling Productivity Report for December, which includes the EIA's November data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 18th consecutive month, as both completions of drilled wells and drilling of new wells remained well below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 226 wells, falling from 5,081 DUC wells in October to 4,855 DUC wells in November, which was also 39.1% fewer DUCs than the 7,968 wells that had been drilled but remained uncompleted as of the end of November of a year ago...this month's DUC decrease occurred as 659 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during November, up from the 649 wells that were drilled in October, while 885 wells were completed and brought into production by fracking, up from the 876 completions seen in October, and up from the pandemic hit 589 completions seen in November of last year, but still down by 9.4% from the 979 completions of November 2019....at the November completion rate, the 4,885 drilled but uncompleted wells left at the end of the month represents a 5.5 month backlog of wells that have been drilled but are not yet fracked, down from the 5.9 month DUC well backlog of a month ago, a ratio that is now below that of the year prior to the pandemic, despite a completion rate that is still around 20% lower than the pre-pandemic norm...
both oil producing regions and natural gas producing regions saw DUC well decreases in November, while none of the major basins reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 105, from 1,669 DUC wells at the end of October to 1,564 DUCs at the end of November, as 300 new wells were drilled into the Permian during November, while 405 wells in the region were being fracked...at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 35, from 796 DUC wells at the end of October to a record low of 761 DUCs at the end of November, as 63 wells were drilled in the Eagle Ford during November, while 98 already drilled Eagle Ford wells were completed....in addition, there was also a decrease of 30 DUC wells in the Bakken of North Dakota, where DUC wells fell from 516 at the end of October to a record low of 486 DUCs at the end of November, as 43 wells were drilled into the Bakken during November, while 73 of the drilled wells in the Bakken were being fracked....meanwhile, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 11, falling from 372 at the end of October to a record low 361 DUC wells at the end of November, as 87 wells were drilled into the Niobrara chalk during November, while 98 Niobrara wells were being fracked...in addition, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 10, falling from 799 at the end of October to 789 DUC wells at the end of November, as 47 wells were drilled into the Anadarko basin during November, while 57 Anadarko wells were completed.....
among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 28 wells, from 537 DUCs at the end of October to a record low of 511 DUCs at the end of November, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 97 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by nine to 383 DUCs, as 48 wells were drilled into the Haynesville during November, while 57 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of November, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 191 wells to 3,961 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 35 wells to 894 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...
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note: there’s more here…
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