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, December 26, 2022

US oil supplies at a 36½ year low; oil + oil products supplies at an 18½ year low; DUCs rise first time in 29 months

US oil supplies are at a 36½ year low, Strategic Petroleum Reserve is at a 39 year low; oil + oil products supplies are at an 18½ year low; DUCs rose in November for the first time in 29 months

Oil prices finished higher for a second straight week and recovered all of the losses​ that​ follow​ed the December 5th EU ban on seaborne imports of Russian crude and the G7 price cap on Russian oil, as China's ​Covid ​reopening continued, US oil inventories dropped, and Russia threatened to cut its crude output...after rising 4.6% to $74.29 a barrel last week after an oil leak shut down the Keystone pipeline supplying diluted Canadian bitumen, a replacement for Russian oil, to US refineries, the contract price for the benchmark US light sweet crude for January delivery rose more than 1% in Asian trading on Monday, as optimism for a recovery of the Chinese economy outweighed concern over a global recession, and settled Monday's weak New York trading session 90 cents or 1.2% higher at $75,19 a barrel​,​ as ​oil ​traders saw President Xi Jinping’s pledge to focus on the economy as supporting energy demand, even as Chinese Covid cases surged...oil prices rose again in early trade on Tuesday, shored up by a weaker dollar and a U.S. plan to restock its Strategic Petroleum Reserve, and again settled  90 cents higher at $76.09 a barrel after paring earlier stronger gains, as a worsening outlook for a major U.S. winter storm sparked fears that millions of Americans might curb travel plans during the holidays, while the more-active US benchmark crude-oil contract for February delivery finished 85 cents or 1.1% higher at $76.23 a barrel, helped by a weaker dollar that made overseas purchases of dollar-denominated crude more attractive to foreign buyers...with trading in January oil closed, the price of February oil extended its gains in after ​hous trading Tuesday​ evening​, after the American Petroleum Institute reported a surprise draw from US crude supplies, and then rose in early trading on Wednesday due to an uptick in demand, after EIA data had revealed that US crude stockpiles had fallen more than anticipated last week, and finished $2.06 or 2.7% higher at ​$​78​.29​ a barrel, boosted by hopes that China would further relax Covid-19 curbs after no new COVID-19 deaths were reported....oil prices rose for a fourth straight day in early trad​ing on Thursday, with U.S. crude, heating oil and jet fuel supplies all seen tight just as a chilly blast ​were hitting the US and travel was set to soar for the holiday​s​​​​​, but then turned lower and fell by around $1 a barrel in volatile trade as the impact of tighter U.S. crude stocks due to ​the winter storm was outweighed by fears that Federal Reserve interest rate hikes and China's rising COVID-19 cases would dent demand. before settling the session 80 cents lower at $77.49 a barrel amid risk-off sentiment in broader markets as Wall Street stocks sold off and the U.S. dollar strengthened in afternoon trading....however, oil prices reversed and rose ​$1 in Asian trading Friday, in expectation of a fall in supply of Russian crude. which helped to assuage fears of a hit to demand in the US due to the Arctic storm, and then rallied in pre-holiday trade to settled $2.07 higher at $79.56 a barrel after Moscow said it might cut crude output in response to the G7 price cap on Russian exports...oil prices thus finished the week 7.1% higher, while the contract price for US light sweet crude for February delivery, which had finished last week at $74.46 a barrel, ended 6.8% higher...

On the other hand, natural gas prices finished lower for the third time in four weeks, as traders looked past the Christmas cold s​pell to forecasts for warming weather to start the new year...after rising 5.7% to $6.600 per mmBTU last week on the potential for much colder weather for the rest of December, the contract price of US natural gas for January delivery opened at $6.111/mmBTU, down more than 7% from Friday’s closing price, as weekend forecasts turned unseasonably warm after the Christmas holiday, and continued falling to settle 74.9 cents, of more than 11% lower at $5.851 per mmBTU, as the weather outlook for later this month and early next pointed to milder conditions and easing demand...natural gas prices continued to tumble on Tuesday, falling another 52.5 cents or 9% to a seven week low of $5.326 per mmBTU, as traders looked past bitter cold and blizzards this week and fixated on forecasts for unseasonably mild conditions to close out 2022 and to start the new year...natural gas prices eked out a tiny gain on Wednesday, amid worries that a fierce and widespread winter freeze could force production interruptions, and ended the three-day run of steep losses by rising six-tenths of a cent to $5.332 per mmBTU...natural gas prices turned lower again on Thursday after the EIA reported a smaller-than-expected draw from gas storage last week and settled down 33.3 cents at a two month low of $4.999 per mmBTU...nat​ural gas prices finally turned higher on Friday, as extreme cold boosted spot prices to their highest ​level ​in years across much of the US​,​ and cut gas output to a nine-month low by freezing oil and gas wells in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere, as prices ​​finished 8.0 cents higher at $5.079​ ​per mmBTU, but still ​ended ​23.0% lower for the week...

The EIA's natural gas storage report for the week ending December 16th indicated that the amount of working natural gas held in underground storage in the US fell by 87 billion cubic feet to 3,325 billion cubic feet by the end of the week, which meant our gas supplies were 45 billion cubic feet, or 1.3% less than the 3,370 billion cubic feet that were in storage on December 16th of last year, but 22 billion cubic feet, or 0.7% ​more than the five-year average of 3,303 billion cubic feet of natural gas that were in storage as of the 16th of December over the most recent five years....the 87 billion cubic foot withdrawal from US natural gas working storage for the cited week was less than the average forecast for a 93 billion cubic feet withdrawal by a Reuters poll of analysts, but much more than the 60 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, but still much less than the average 124 billion cubic feet of natural gas that have typically been withdrawn from our natural gas storage during the same winter 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 16th indicated that after a big drop in our oil imports and a decrease in the amount of ​those mysterious ​oil supplies that could not be accounted for, we needed to pull oil out of our stored commercial crude supplies for the 5th time in 6 weeks, and for the 16th time in the past 35 weeks, despite another sizable release of oil from the SPR....Our imports of crude oil fell by an average of 1,048,000 barrels per day to average 5,819,000 barrels per day, after rising by an average of 855,000 barrels per day during the prior week, while our exports of crude oil rose by 44,000 barrels per day to average 4,360,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 1,459,000 barrels of oil per day during the week ending December 16th, 1,092,000 fewer barrels per day than the net of our imports minus our exports during the prior week.. Over the same period, production of crude from US wells was reportedly unchanged at 12,100,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have averaged a total of 13,559,000 barrels per day during the December 16th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,976,000 barrels of crude per day during the week ending December 16th, an average of 150,000 fewer 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 average of 1,363,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US.  So, based on that reported & estimated data, the crude oil figures from the EIA for the week ending December 16th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 1,054,000 barrels per day less than what our oil refineries reported they used during the week. To account for that ​obvious ​disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+1,054,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed....moreover, since last week’s  “unaccounted for crude oil” was at (+2,259,000) barrels per day, that means there was a 1,204,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, thus rendering those comparisons virtually meaningless....​​ 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 1,363,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 796,858,000 barrels at the end of the week, which was our lowest total oil inventory level since January 17th, 1986, and therefore at a new 36 1/2 year low....Our oil inventories decreased this week as an average of 842,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 521,000 more barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR was an extension of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was originally intended to supply 1,000,000 barrels of oil per day to commercial interests over a six month period from its inception to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising over that time....The SPR withdrawals under that program ​began fluctuating ​during the summer because the administration ha​d also been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; furthermore, Biden recently announced another 15,000,000 barrel release from the Strategic Petroleum Reserve to run thru December, while simultaneously announcing he'd buy crude to replenish the SPR if oil prices fall to or below the $67-72 a barrel range, effectively putting a floor under oil at that price.....Including the administration's initial 50,000,000 million barrel SPR release earlier this year, their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 277,523,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 29 months, and as a result the 378,624,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since December 30th, 1983, or nearly ​at ​a 39 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases. The total 180,000,000 barrel drawdown of the​ current​ ​Biden release program, still scheduled to run through December, will ​have released almost a third of what remained in the SPR when the program started, and leave​s​ us with what ​is less than a 20 day supply of oil at the current consumption rate...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,184,000 barrels per day last week, which was 4.0% less than the 6,442,000 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 unchanged at 12,100,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,700,000 barrels per day, while Alaska’s oil production was 6,000 barrels per day lower at 450,000 barrels per day but had no impact on the rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 7.6% below that of our pre-pandemic production peak, but was 24.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...

US oil refineries were operating at 90.2% of their capacity while using those 15,976,000 barrels of crude per day during the week ending December 16th, down from their 92.2% utilization rate during the prior week, a normal utilization rate for mid December...The 15,976,000 barrels per day of oil that were refined this week were still 1.0% more than the 15,818,000 barrels of crude that were being processed daily during week ending December 17th of 2021, while 5.9% less than the 16,980,000 barrels that were being refined during the prepandemic week ending December 20th, 2019, when our refinery utilization was at 93.3%, as refinery utilization typically rises in late December ...

Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was quite a bit higher, increasing by 358,000 barrels per day to 9,552,000 barrels per day during the week ending December 16th, after our gasoline output had increased by 129,000 barrels per day during the prior week. This week’s gasoline production was still 3.9% less than the 9,942,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.0% below the gasoline production of 10,269,000 barrels per day during the prepandemic week ending December 20th, 2019.  On the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 66,000 barrels per day to 5,102,000 barrels per day, after our distillates output had decreased by 164,000 barrels per day during the prior week.  But even with those decreases, our distillates output was still 5.2% more than the 4,852,000 barrels of distillates that were being produced daily during the week ending December 17th of 2021, while 6.3% less than the 5,444,000 barrels of distillates that were being produced daily during the week ending December 20th 2019...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 6th week in a row and for the 9th time in 19 weeks, increasing by 2,530,000 barrels to 213,768,000 barrels during the week ending December 16th, after our gasoline inventories had increased by 4,496,000 barrels during the prior week. Our gasoline supplies rose by less this week because the amount of gasoline supplied to US users rose by 459,000 barrels per day to 8,714,000 barrels per day, while our exports of gasoline fell by 316,000 barrels per day to 887,000 barrels per day, and while our imports of gasoline fell by 239,000 barrels per day to 551,000 barrels per day.   After 6 consecutive gasoline inventory increases, our gasoline supplies were 0.9% more than last December 17th's gasoline inventories of 224,118,000 barrels, but still 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 decreased for the 6th time in 20 weeks, and for the 27th time over the past year, falling by 242,000 barrels to 119,929,000 barrels during the week ending December 16th, after our distillates supplies had increased by 1,364,000 barrels during the prior week. Our distillates supplies also fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 247,000 barrels per day to 4,015,000 barrels per day, and because our imports of distillates fell by 99,000 barrels per day to 188,000 barrels per day, while our exports of distillates fell by 173,000 barrels per day to 1,310,000 barrels per day... After fifty-two inventory withdrawals over the past eighty-six weeks, our distillate supplies at the end of the week were were still 3.4% below the 124,154,000 barrels of distillates that we had in storage on December 17th of 2021, and about 7% below the five year average of distillates inventories for this time of the year...

Meanwhile, after a big drop in our oil imports and a big drop in our “unaccounted for crude oil”, our commercial supplies of crude oil in storage fell for the 12th time in 19 weeks and for the 31st time in the past year, decreasing by 5,895,000 barrels over the week, from 424,129,000 barrels on December 9th to 418,234,000 barrels on December 16th, after our commercial crude supplies had increased by 10,231,000 barrels over the prior week. After this week's decrease, our commercial crude oil inventories slipped to around 7% below the most recent five-year average of crude oil supplies for this time of year, but were still around 24% more than 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. And after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this December 16th were 1.3% less than the 423,571,000 barrels of oil we had in commercial storage on December 17th of 2021, and 16.3% less than the 499,534,000 barrels of oil that we had in storage on December 18th of 2020, and 5.2% less than the 441,359,000 barrels of oil we had in commercial storage on December 20th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows over the most recent months, we are also continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....after the big crude decreases we've already noted for this week, the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 15,203,000 barrels this week, from 1,613,439,000 barrels on December 9th to 1,598,236,000 barrels on December 16th, after our total inventories had increased by 9,231,000 barrels during the prior week. This week's decrease left our total petroleum liquids inventories down by 190,197,000 barrels over the first 50 weeks of this year, and at the lowest since June 11th, 2004, or at a new 18 1/2 year low..

This Week's Rig Count

The number of drilling rigs active in the US increased for the 12th time in the past 21 weeks with this week's report, which only covers the six days ending Thursday, December 22nd, due to the Christmas holiday....But even with 93 weekly increases over the past 117 weeks, active rigs are still 1.8% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 3 rigs to 779 rigs over the past week, which was still 193 more rigs than the 586 rigs that were in use as of the December 23rd report of 2021, but was 1,150 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil increased by 2 to 622 oil rigs during the past week, after the number of rigs targeting oil had decreased by 5 during the prior week, but there are still 142 more oil rigs active now than were running a year ago, even as they amount to just 38.7% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 8.9% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 1 to 155 natural gas rigs, which was also up by 49 natural gas rigs from the 106 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.7% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

Other than those rigs targeting oil and natural gas, Baker Hughes reports that two "miscellaneous" rigs continued drilling this week: one of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track....While we haven't seen any details on either of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration, for carbon dioxide storage, and for utility scale geothermal projects...a year ago, there were were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was unchanged at 15 rigs this week, with 14 rigs still drilling in Louisiana's offshore waters, and only one rig still drilling for oil offshore from Texas....that Gulf rig count equals the 15 Gulf rigs running a year ago, when 13 of the Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil offshore from Texas...since there are not any rigs drilling off our other coasts, the Gulf rig count equals the national offshore count..

In addition to rigs running offshore, there are still two water based rigs drilling through inland bodies of water this week; those include a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; and a directional rig drilling for oil to between 5,000 and 10,000 feet, inland in Lafourche Parish, Louisiana ...a year ago, there was just one such rig drilling on inland waters...

The count of active horizontal drilling rigs was up by 3 to 710 horizontal rigs this week, which was also 182 more rigs than the 528 horizontal rigs that were in use in the US on December 23rd of last year, but just 51.7% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....in addition, the vertical rig count was up by one to 27 vertical rigs this week, which was unchanged from the 27 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 42  directional rigs this week, while those were still up by 11 from the 31 directional rigs that were in use on December 23rd of 2021….

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 22nd, the second column shows the change in the number of working rigs between last week’s count (December 16th) and this week’s (December 22nd ) count, the third column shows last week’s December 16th active rig count, the 4th column shows the change between the number of rigs running on Thursday and the number running on the Thursday 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, 2021...

checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there were 5 rigs added in Texas Oil District 8, which overlies the core Permian Delaware, and that there was another rig added in Texas Oil District 7C, which covers the southernmost counties in the Permian Midland....since the Texas Permian count was thus up by six while the national Permian basin count was only up by two, we can thus conclude that the four rigs that were pulled out of New Mexico had been drilling in the far western Permian Delaware, in the southwest corner of that state....elsewhere in Texas, there was also a rig added in Texas Oil District 6, but since the rig count in the Haynesville shale was unchanged and there was also no change in adjacent Louisiana, we have to figure that rig was targeting a basin not tracked by Baker Hughes...

in other states, the two rigs added in North Dakota were targeting the Bakken shale of the Williston basin, but the Williston rig count is only up by one because a Bakken rig was removed from Montana at the same time...meanwhile, the rig pulled out of Wyoming most likely came from the DJ Niobrara chalk, because the Colorado rig count was unchanged....the rigs added in the Granite Wash and the Mississippian shale were most likely in Oklahoma, since rigs in corresponding regions of Texas and Kansas were unchanged, and since the the Oklahoma rig count was also unchanged, that means that two rigs were pulled out of Oklahoma that had been drilling in a basin or basins not tracked by Baker Hughes, in addition to the rig pulled out of the Cana Woodford...finally, since the natural gas rig addition was also in a basin not tracked by Baker Hughes, we'd have to figure that was the rig added in Texas District 6...

DUC well report for November

Monday of last week saw the release of the EIA's Drilling Productivity Report for December, which included the EIA's November data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)....after revisions that left October DUCs lower, that data showed an increase in uncompleted wells nationally for the first time in 29 months, as completions slowed while drilling of new wells increased in November, but remained well below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 22 wells, rising from a revised 4,421 DUC wells in October to 4,443 DUC wells in November, which was still 13.9% fewer DUCs than the 5,163 wells that had been drilled but remained uncompleted as of the end of November of a year ago...this month's DUC increase occurred as 1005 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during November, up by 22 from the revised 983 wells that were drilled in October, while 983 wells were completed and brought into production by fracking them, down by 7 from the 990 well completions seen in October, but up by 193 from the 790 completions seen in November of last year....at the November completion rate, the 4,443 drilled but uncompleted wells remaining at the end of the month represents a 4.5 month backlog of wells that have been drilled but are not yet fracked, matching the 4.5 month DUC well backlog of a month ago, and just above the 7 1/2 year low of 4.4 months, despite a completion rate that is still nearly 14% below 2019's pre-pandemic average...

Both oil producing DUCS and natural gas DUCs rose during November, even as only two basins saw DUCs increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 8, from 1,051 DUC wells at the end of October to 1,043 DUCs at the end of  November, as 427 new wells were drilled into the Permian basin during November, while 435 already drilled wells in the region were being fracked...at the same time, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 3, falling from 710 at the end of October to 707 DUC wells at the end of November, as 72 wells were drilled into the Anadarko basin during November, while 75 Anadarko wells were completed....in addition, DUCs in the Eagle Ford shale of south Texas also decreased by 3, from 561 DUC wells at the end of October to 558 DUCs at the end of November, as 109 wells were drilled in the Eagle Ford during November, while 112 already drilled Eagle Ford wells were fracked....meanwhile, DUC wells in the Bakken of North Dakota were down by 2 to 499 at the end of October, as 79 wells were drilled into the Bakken during November, while 81 of the drilled wells in the Bakken were being fracked....on the other hand, DUC wells in the Niobrara chalk of the Rockies' front range increased by 31, rising from 443 at the end of October to 474 DUC wells at the end of November, as 143 wells were drilled into the Niobrara chalk during November, while 112 Niobrara wells were completed....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, decreased by 3 wells, from 597 DUCs at the end of October to 594 DUCs at the end of November, as 100 new wells were drilled into the Marcellus and Utica shales during the month, while 103 of the already drilled wells in the region were fracked....on the other hand, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 10, from 558 DUCs in October to 568 DUCs by the end of November, as 75 wells were drilled into the Haynesville during November, while 65 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) increased by fifteen to 3,281 wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) was up by seven to 1,162 DUC 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..



Monday, December 19, 2022

global oil surplus at 390,000 barrels per day​ in November​, in spite of OPEC’s ​938,000 barrel per day shortfall

global oil production​ exceeded demand by​ 390,000 barrels per day​ in November​; despite OPEC production that  was ​938,000 barrels per day short ​of their ​​reduced quota

oil prices partly recovered from last week's drop to a 12 month low after an oil leak shut down the Keystone pipeline supplying diluted Canadian bitumen​, a replacement for Russian Urals,​ to US refineries...after falling 11.2% to $71.02 a barrel last week after the EU banned seaborne imports of Russian crude and a G7 price cap on Russian oil kicked in, the contract price for the benchmark US light sweet crude for January delivery rose more than 1% in early Asian trade on Monday as the Keystone pipeline bringing Canadian crude to remained closed while Russian President Putin threatened to cut production in response to the G7 price cap on Russian oil, but slipped in early trading on the NYMEX as traders balanced concerns over the health of the global economy in the coming year against falling supplies from OPEC+ nations, before rallying to close $2​.​15 or 3% higher at $73.17 a barrel​,​ as traders swooped in to buy oil at the lowest price of th​e year....oil prices rose sharply early Tuesday to extend Monday's gains amid signs of further easing of China's COVID restrictions, and continued to rally on a steep drop in the US dollar following a CPI report that showed US consumer prices in November rose at the slowest pace since December 2021, solidifying the case for less-aggressive interest rate increases from the Fed, and settled $2​.22 higher at a one week high of $75.39 a barrel as the Keystone pipeline remained shut amid what could potentially be one of the coldest of cold snaps in decades...however, oil prices slid after the market closed ​Tuesday ​after the API reported a surprisingly big build in crude supplies and opened lower Wednesday, and ​then ​tumbled further in early trading after the EPI reported an even more massive crude build, but then reversed and rallied to their highest level in just over a week, supported by the International Energy Agency’s forecasts for stronger demand growth this year and next, and settled $1.89 higher at $77.28 a barrrel, as traders looked beyond the big weekly build in U.S. crude inventories to focus instead on the shutdown of ​the ​Keystone pipeline, which is vital to refiners on the country’s coasts...oil prices steadied on Thursday, after TC Energy restarted a section of the Keystone pipeline and the dollar advanced, and then slid about 2% as traders worried about the fuel demand outlook due to a stronger dollar and further interest rate hikes by global central banks and settled ​$​1​.17 lower at $76.11 a barrel after softer-than-expected economic data in the United States, China, and Eurozone brought demand concerns back into focus, while traders weighed the impacts of higher borrowing costs next year....oil prices moved lower in early trading on Friday as a bumpy reopening out of China saw the Omicron virus burning through its large cities, with hospital capacity in Beijing and Hong Kong unable to handle the developing crisis, and erased the gains from earlier in the week in sliding by more than 3% as central bankers said much more need​ed to be done to curb inflation​, despite the less aggressive hike rates this week​​​​​​, but trimmed those losses after U.S. Department of Energy announced it would start repurchasing crude oil for the Strategic Petroleum Reserve​, in order​ to replenish our emergency stockpiles, and settled the Friday session $1.82 lower at $74.29 a barrel, but still held on to a gain of 4.6% on the week, even as oil’s comeback rally after its worst week since March had been snuffed out by renewed fears of recession and higher-for-longer interest rates in the U.S. and Europe...

Meanwhile, natural gas prices finished higher for the first time in 3 weeks after a​ quite​ volatile week of trading, on the potential for much colder weather for the rest of December... after ending 0.6% lower at $6.245 per mmBTU last week on a delay in the restart of the Freeport ​LNG ​export terminal, the contract price of US natural gas for January delivery opened 63 cents or 10% higher on Monday, on colder December forecasts that included the possibility of even more frigid air moving in from Canada, but pulled back as the day drew on and settled 34.2 cents higher at $6.587 per mmBTU, supported by a jump in European gas prices that should keep U.S. LNG exports near record highs.....natural gas prices jumped another 5% on the late December cold forecasts Tuesday, and reached an intraday high at $7.105 per mmBTU, but again pulled back to settle ​just ​34.8 cents higher at $6.935/MMBtu, as warmer trends in the weather models took a hatchet to the early gains...natural gas prices opened 30 cents lower on those weaker weather forecasts Wednesday, and finished down 50.5 cents or 7.3% at $6.430 per mmBTU on expectations for less chilly weather than had been anticipated come late December...however, natural gas prices reversed and jumped 54.0 cents, or 8.4%, to settle at a two-week high of $6.970 per mmBTU on Thursday, on a bigger than expected storage draw, an increase in gas flows to LNG export plants, and a drop in output as extreme cold from North Dakota to Texas caused oil and gas wells to freeze....natural gas futures floundered on Friday amid hints in weather models that Arctic cold blasts, while intense, might not endure as long as earlier forecasts suggested, and settled 37.0 cents lower at $6.600 per mmBTU on the day, but still finished 5.7% higher on the week...

The EIA's natural gas storage report for the week ending December 9th indicated that the amount of working natural gas held in underground storage in the US fell by 50 billion cubic feet to 3,412 billion cubic feet by the end of the week, which meant our gas supplies were 18 billion cubic feet, or ​​0.5% less than the 3,430 billion cubic feet that were in storage on December 9th of last year, and 15 billion cubic feet, or ​just ​0.4% below the five-year average of 3,427 billion cubic feet of natural gas that were in storage as of the 9th of December over the most recent five years....the 50 billion cubic foot withdrawal from US natural gas working storage for the cited week was more than the average forecast for an 45 billion cubic feet withdrawal by a Reuters poll of analysts, but much less than the 83 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also much less than the average 93 billion cubic feet of natural gas that have typically been withdrawn from our natural gas storage during the same ​winter ​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 9th indicated that after a sizable increase in our oil imports, an increase in the amount of oil released from the SPR, a drop in the amount of oil we were refining, and a near record increase in the amount of oil supplies that could not be accounted for, we had oil left to add to our stored commercial crude supplies for the first time in five weeks and for the 15th time in the past 34 weeks, despite a big increase in our oil exports....Our imports of crude oil rose by an average of 855,000 barrels per day to average 6,867,000 barrels per day, after falling by an average of 24,000 barrels per day during the prior week, while our exports of crude oil rose by 886,000 barrels per day to average 4,316,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 2,551,000 barrels of oil per day during the week ending December 9th, 31,000 fewer barrels per day than the net of our imports minus our exports during the prior week.. Over the same period, production of crude from US wells was reported​ as being 100,000 barrels per day lower at 12,100,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have averaged a total of 14,651,000 barrels per day during the December 9th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,126,000 barrels of crude per day during the week ending December 9th, an average of 459,000 fewer 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 average of 783,000 barrels of oil per day were being added to the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures from the EIA for the week ending December 9th appear to indicate that our total working supply of oil from net imports and from oilfield production was 2,259,000 barrels per day less than what was added to storage plus our oil refineries reported they used during the week. To account for that big, inexplicable disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+2,259,000) barrel per day figure onto line 13  of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed....moreover, since last week’s EIA fudge factor was at (+762,000) barrels per day, that means there was a 1,497,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, rendering those comparisons completely meaningless....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 ​7​83 ,000 barrel per day ​increase in our overall crude oil inventories came as an average of 1,462,000 barrels per day were being added to our commercially available stocks of crude oil, while 678,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve.  That draw on the SPR, the largest since October 7th, was an extension of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was originally intended to supply 1,000,000 barrels of oil per day to commercial interests over a six month period from its inception to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising over that time....The SPR withdrawals under that program had been fluctuating in recent weeks because the administration has also been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; furthermore, Biden recently announced another 15,000,000 barrel release from the Strategic Petroleum Reserve to run thru December, while simultaneously announcing he'd buy crude to replenish the SPR if oil prices fall to or below the $67-72 a barrel range, effectively putting a floor under oil at that price.....Including the administration's initial 50,000,000 million barrel SPR release earlier this year, their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 273,878,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 28 months, and as a result the 382,271,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since January 6th, 1984, or nearly a 39 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases. The total 180,000,000 barrel drawdown of the current release program, now scheduled to run through December, will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at the current consumption rate...

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,​495​,000 barrels per day last week, which was ​0.1% less than the 6,​502​,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 12,100,000 barrels per day​,​ even though the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,700,000 barrels per day​,​ because Alaska’s oil production was 7,000 barrels per day lower at 443,000 barrels per day and subtracted 100,000 barrels per day from the rounded national total​ ​​(EIA math).​ US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 7.6% below that of our pre-pandemic production peak, but was 24.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...

US oil refineries were operating at 92.2% of their capacity while using those 16,126,000 barrels of crude per day during the week ending December 9th, down from their 95.5% utilization rate during the prior week, but still on the high side of normal utilization ​in ​earl​y​ December...The 16,126,000 barrels per day of oil that were refined this week were still 2.9% more than the 15,670,000 barrels of crude that were being processed daily during week ending December 10th of 2021, while 2.6% less than the 16,562,000 barrels that were being refined during the prepandemic week ending December 13th, 2019, when our refinery utilization was at 90.6%, within the normal utilization range for early December ...

Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was somewhat higher, increasing by 129,000 barrels per day to 9,194,000 barrels per day during the week ending  December 2nd, after our gasoline output had decreased by 295,000 barrels per day during the prior week. This week’s gasoline production was still 8.4% less than the 10,042,000 barrels of gasoline that were being produced daily over the same week of last year, and 6.6% below the gasoline production of 9,840,000 barrels per day during the prepandemic week ending December 13th, 2019.  On the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 164,000 barrels per day to 5,168,000 barrels per day, after our distillates output had increased by 21,000 barrels per day during the prior week.  But even with that decrease, our distillates output was still 7.4% more than the 4,812,000 barrels of distillates that were being produced daily during the week ending December 10th of 2021, and 1.9% more than the 5,072,000 barrels of distillates that were being produced daily during the week ending December 13th 2019...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 5th week in a row and for the 8th time in 18 weeks, increasing by 4,496,000 barrels to 213,768,000 barrels during the week ending December 9th, after our gasoline inventories had increased by 5,319,000 barrels during the prior week. Our gasoline supplies rose again this week as the amount of gasoline supplied to US users fell by 103,000 barrels per day to 8,255,000 barrels per day, and as our exports of gasoline rose by 191,000 barrels per day to 1,203,000 barrels per day​,​ while our imports of gasoline rose by 271,000 barrels per day to 790,000 barrels per day.   After 31 gasoline inventory drawdowns over the past 45 weeks, our gasoline supplies were still 2.3% more than last December 10th's gasoline inventories of 218,585,000 barrels, but about 3% below the five year average of our gasoline supplies for this time of the year…

Even with the decrease in our distillates production, our supplies of distillate fuels increased for the 14th time in 19 weeks, and for the 26th time over the past year, rising by 1,364,000 barrels to 120,171,000 barrels during the week ending December 9th, after our distillates supplies had increased by 6,159,000 barrels during the prior week. Our distillates supplies rose by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 218,000 barrels per day to 3,768,000 barrels per day, and because our imports of distillates fell by 95,000 barrels per day to 277,000 barrels per day, and because our exports of distillates rose by 209,000 barrels per day to 1,483,000 barrels per day... But after fifty-two inventory withdrawals over the past eighty-five weeks, our distillate supplies at the end of the week were were still 2.9% below the 123,758,000 barrels of distillates that we had in storage on December 10th of 2021, and about 8% below the five year average of distillates inventories for this time of the year...

Meanwhile, after a big increase in our oil imports, a big release from the SPR, and a slowdown in refining, our commercial supplies of crude oil in storage rose for the 7th time in 18 weeks and for the 21st time in the past year, increasing by 10,231,000 barrels over the week, from 413,898,000 barrels on December 2nd to 424,129,000 barrels on December 9th, after our commercial crude supplies had decreased by 5,194,000 barrels over the prior week. After this week's increase, our commercial crude oil inventories rose to around 6% below the most recent five-year average of crude oil supplies for this time of year, and were around 26% more than the average of our crude oil stocks as of the second 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. And after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this December 2nd were 1.0% less than the 428,286,000 barrels of oil we had in commercial storage on December 10th of 2021, and 15.2% less than the 500,096,000 barrels of oil that we had in storage on December 11th of 2020, and 5.1% less than the 446,833,000 barrels of oil we had in commercial storage on December 13th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows over the most recent months, we are also continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....after the big crude, gasoline, distillates inventory increases we've already noted for this week, the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, rose by 9,231,000 barrels this week, from 1,604,208,000 barrels on December 2nd to 1,613,439,000 barrels on December 9th, after our total inventories had increased by 3,776,000 barrels during the prior week. This week's increase still left our total petroleum liquids inventories down by 174,225,000 barrels over the first 49 weeks of this year, and about 0.8% from a new 18 year low...

OPEC's Report on Global Oil for November

Tuesday of this past week saw the release of OPEC's December Oil Market Report, which includes the details on OPEC's & global oil data for November, and hence it gives us a picture of the global oil supply & demand situation during a period when demand for oil was constrained by lockdowns in Beijing and other ​big ​cities in China, while oil supplies from Russia continued to be constrained by Western sanctions, even as some buyers of Russian crude ​had ​stepped up their purchases in advance of December's European Union ban of Russian oil imports by sea and the G7 price caps....November was also the first month after OPEC and aligned oil producers had imposed a new 2 million barrel per day production cut on the cartel, taking roughly 2% of global oil supply off the market... note that with the course and impact of the Ukraine war and the future course of the Covid pandemic largely unknown, the demand projections made in this report will have a much greater degree of uncertainty than they would have during normal, more stable times...

The first table from this month's report that we'll review is from the page numbered 48 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 has used an average of production estimates by six or more "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....since the June report, the consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy were also added to OPEC's secondary sources.....

As we can see on the bottom line of the above table, OPEC's oil output decreased by 744,000 barrels per day to 28,826,000 barrels per day during November, down from their revised October production total that averaged 29,570,000 barrels per day....however, that October output figure was originally reported as 29,494,000 barrels per day, which therefore means that OPEC's October production was revised 76,000 barrels per day higher with this report, and hence OPEC's November production was, in effect, only 668,000 barrels per day lower than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official October OPEC output figures as reported a month ago, before this month's revision)...

while OPEC and other aligned oil producers agreed to reduce production by 2,000,000 barrels per day during November, and while the 744,000 barrels per day production cut we see above obviously is short of that, OPEC's production was already running 1,585,000 barrels per day short of what they were expected to produce during October, so the November production cut​ still​ leaves them far short of what they were expected to produce during the month, as we'll see in the next table...

The above table was originally included as a downloadable attachment to the press release following the 32nd OPEC and non-OPEC Ministerial Meeting on October 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for November​ and the following months through 2023​.. since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers, they are not shown in this list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,416,000 barrels per day in November...therefore, the 24,478,000 barrels those 10 OPEC members actually produced in November were 938,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for the majority of this month's shortfall...

The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from December 2020 to  November 2022, and it comes from page 49 (pdf page 61) of OPEC's December 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....

Even with this month's 744,000 barrel per day decrease in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production still increased by 43,000 barrels per day to average 101.50 million barrels per day in November, a reported increase which came after October's total global output figure was apparently revised down by 43,000 barrels per day from the 101.50 million barrels per day of global oil output that was reported for October a month ago, as non-OPEC oil production rose by a rounded 800,000 barrels per day in October after that downward revision, with most of ​November's production growth coming from Eurasia ex-Russia, Asia ex-China and India, and the OECD Europe, which were partially offset by production declines in Latin America...

After that 43,000 barrel per day increase in November's global output, the 101.50 million barrels of oil per day that were produced globally during the month were 3.64 million barrels per day, or 3.7% more than the revised 97.86 million barrels per day that were being produced globally in November a year ago, which was the fourth month of the monthly 400 million barrel per day production increases that OPEC and their allied producers initiated as the fourth policy reset in response to the global demand recovery following the early pandemic lockdowns (see the December 2021 OPEC report (online pdf) for the originally reported November 2021 details)...since this month's ​bg ​decrease in OPEC's output contrasts to the ​modest ​global increase, their November oil production of 28,826,000 barrels per day amounted to 28.4% of what was produced globally during the month, down from their 29.1% share of the global total in October....OPEC's November 2021 production was originally reported at 27,717,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year ​still ​produced 1,109,000 barrels per day, or 4.0% more barrels per day of oil this November than what they produced last November, when they accounted for 28.2% of a smaller global output total...

Even with the big decrease in OPEC's output and the ​small ​increase​ in other global oil output that we've seen in this report, the amount of oil being produced globally during the month was ​still in excess of  the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 26 of the November Oil Market Report (pdf page 38), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for ​November, which is their estimate of global oil demand during the fourth quarter of 2022....OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe have been using an average of 101.11 million barrels of oil per day, which is a rounded downward revision of 140,000 barrels per day from their estimate 101.25  million barrels per day for 4th quarter demand of a month ago (revisions are circled in green)...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 producing 101.50 million barrels per day during ​November, which would imply that there was surplus of around 390,000 barrels per day of global oil production in November, when compared to the demand estimated for the month...

in addition to figuring th​e November oil s​urplus implied by this report, the downward revision of 43,000 barrels per day to October's global oil output that's implied in this report​, ​combined with the 140,000 barrel per day downward revision to 4th quarter demand, means that the 250,000 barrels per day global oil output surplus we had previously figured for October would now be revised to surplus of ​347,000 barrels per day....

Note on the table above that we've highlighted in green an upward revision of 220,000 barrels per day to the third quarter's demand....that means that the 1,490,000 barrels per day global oil output surplus we had previously figured for September would now be revised to a surplus of 1,270,000 barrels per day....in like manner, 220,000 barrels per day upward revision to 3rd quarter demand means that the surplus of 1,230,000 barrels per day we had previously figured for August would now be revised to a surplus of 1,010,000 barrels per day, and that the surplus of 680,000 barrels per day barrels per day we had previously figured for July would have to be revised to a surplus of 460,000 barrels per day... 

Note that in green we have also circled a downward revision of 140,000 barrels per day to OPEC's previous estimates of second quarter demand...based on that downward revision to demand, our previous estimate that there was a surplus of 550,000 barrels per day in June would now be revised to a 690,000 barrels per day surplus, while the oil shortage of 180,000 barrels per day that we had previously figured for May would have to be revised to a shortage of ​just ​40,000 barrels per day, and finally, that the 540,000 barrels per day global oil output surplus we had previously figured for April would have to be revised to a surplus of 680,000 barrels per day...

Also note that in green that we have circled a small downward revision of 10,000 barrels per day to OPEC's previous estimate of first quarter demand, during a period when supply and demand seemed to be closer to being in balance.....​so ​for March, that means that the global oil output surplus of 140,000 barrels per day we had previously figured for March would be revised to a surplus of 150,000 barrels per day, and that the 80,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 70,000 barrels per day, and that the global oil output shortage of 830,000 barrels per day we had previously figured for January would now be revised to a shortage of 820,000 barrels per day, in light of that 10,000 barrel per day downward revision to first quarter demand...

You might also note that we have also circled a 20,000 barrel per day downward revision to 2021'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, we do have an adequate running total for last year ​supply shortfall ​from our prior reports such that we can estimate an aggregate revision for the year​ as a whole​...as of the September revision to 2021's demand, we had figured there had an oil shortage for last year of 577,915,000 barrels, or an average of 1,583,329 barrels per day​, (computed to an accuracy far greater than the data availble allows)​....thus the 20,000 barrel per day downward revision to 2021 demand still leaves an oil shortage for last year of 570,615,085 barrels, or an average of 1,563,329 barrels per day...​.​we were never close to running out, however, because the quantities of oil being produced globally during the pandemic of 2020 still averaged over 1.1 trillion barrels, or over 3 million barrels per day more than anyone wanted...

This Week's Rig Count

The number of drilling rigs active in the US decreased for the 9th time over the past 20 weeks during the week ending December 16th, but even ​with 92 weekly increases over the past 116 weeks, active rigs are still 2.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by 4 rigs to 776 rigs over the past week, which was still 197 more rigs than the 579 rigs that were in use as of the December 17th report of 2021, but was 1,153 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil decreased by 5 to 620 oil rigs during the past week, after the number of rigs targeting oil had decreased by 2 during the prior week, but there are still 145 more oil rigs active now than were running a year ago, even as they amount to just 38.5% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 9.2% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 1 to 154 natural gas rigs, which was also up by 50 natural gas rigs from the 104 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

Other than those rigs targeting oil and natural gas, Baker Hughes also reports that two "miscellaneous" rigs continued drilling this week: one of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track....While we haven't seen any details on either of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration, for carbon dioxide storage, and for utility scale geothermal projects...a year ago, there were were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was down by 3 to 15 rigs this week, with 14 rigs still drilling in Louisiana's offshore waters, and only one rig still drilling for oil offshore from Texas....the Gulf rig count now matches the 15 Gulf rigs running a year ago, when 13 of the Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil offshore from Texas...since there are not any rigs drilling off our other coasts, the Gulf rig count equals the national offshore count..

In addition to rigs running offshore, there are still two water based rigs drilling through inland bodies of water this week; those include a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; and a directional rig drilling for oil to between 5,000 and 10,000 feet, inland in Lafourche Parish, Louisiana ...a year ago, there was just one such rig drilling on inland waters...

The count of active horizontal drilling rigs was down by 1 to 707 horizontal rigs this week, which was still 186 more rigs than the 521 horizontal rigs that were in use in the US on December 17th of last year, but just over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....in addition, the directional rig count was down by three to 43 directional rigs this week, while those were still up by 11 from the 32 directional rigs that were operating during the same week a year ago…on the other hand, the vertical rig count was unchanged at 26 vertical rigs this week, which was also unchanged from the 26 vertical rigs that were in use on December 17th of 2021….

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 16th, the second column shows the change in the number of working rigs between last week’s count (December 9th) and this week’s (December 16th) count, the third column shows last week’s December 9th 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 17th of December, 2021...

checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there was a rig pulled out of Texas Oil District 8, which overlies the core Permian Delaware, while rig counts in other districts in the Texas Permian were unchanged...since the national Permian basin count was unchanged, we can thus conclude that the rig added in New Mexico was set up to drill in the far western Permian Delaware, in the southwest corner of that state...that switch also facilitated the reduction of the Permian natural gas rig count to three, all of which are in Texas​, and an increase to 347 Permian oil rigs​...elsewhere in Texas, there was a rig pulled out of Texas Oil District 1, which would account for the Eagle Ford oil rig decrease, while there were was a rig added in Texas Oil District 3, apparently in a basin that Baker Hughes doesn't track.... there was also a rig pulled out of Texas Oil District 6, which had been drilling for natural gas in the Haynesville shale, and there was also a rig removed from the state's offshore waters....more than offsetting that Texas Haynesville shale loss, there were four natural gas rigs added in the Haynesville in northwest Louisiana, while Louisiana​ ​saw two rigs removed from the state's offshore waters​ at the same time​...

elsewhere, the rig removed from Colorado had been drilling in the DJ Niobrara chalk, the rig pulled out of North Dakota had been drilling in the Bakken shale of the Williston basin, the rig removed from Oklahoma apparently had been drilling in a basin not tracked by Baker Hughes​, and the two rigs pulled out of Wyoming ​also ​had been drilling in a basin or basins not tracked by Baker Hughes....since our other data shows three natural gas rigs added in the Haynesville and one pulled out of the Permian, it appears one of those rigs that had been drilling in a basin not tracked by Baker Hughes ​had been drilling for natural gas...lastly, the​ oil​ rig added in Alaska was added to the eight that already had been drilling on the North Slope...

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Note: there’s more here…



Sunday, December 11, 2022

US oil supplies at 36½ year low, refinery utilization at 40 month high; biggest build of distillates supplies in 29 months

US oil supplies now at a 36½ year low, Strategic Petroleum Reserve at a 38½ year low; highest refinery utilization rate in 40 months, biggest build of distillates supplies in 29 months

oil prices fell every day this past week and ended near a 12 month low after a G7 price cap on Russian oil exports kicked in as ​global ​recession fears mounted...after rising to a three week high above $83 last week before settling at $79.98 a barrel on the potential for a further output cut by the OPEC+ group, Covid-19 lockdown easing in China, a large inventory draw, an expected halt to SPR releases, and a weaker U.S. dollar, the contract price for the benchmark US light sweet crude for January delivery climbed as much as 3% in early trading on Monday after China signaled a broader relaxation of Covid curbs, OPEC+ announced its decision not to change oil production targets, and a price cap on Russian oil took effect, but then followed equity markets lower in afternoon trading and tumbled to close $3.05 lower at $76.93 a barrel after a U.S. service sector survey raised fears that the Fed would continue its aggressive tightening and eventually steer the U.S. economy into recession....oil prices edged higher in Asian trading on Tuesday after ​the G7 price cap on Russian seaborne oil came into force on Monday on top of a European Union embargo on imports of Russian crude by sea, but again tumbled in US trading, falling $2.68 to $74.25 a barrel, the lowest price in nearly a year, after the International Energy Agency (IEA) said the Omicron coronavirus variant ​was set to dent global demand recovery....oil prices held their 11 month low in overnight trading, in spite of an American Petroleum Institute Report of another huge draw from US crude supplies, and then fell further on Wednesday, as recession worries gripped financial markets after top U.S. banks warned of a recession in 2023 and China reported weak trade balance figures for November​,​ ​and settled $2.24 lower at a twelve month low of $72.01​ a barrel​after the weekly EIA inventory report showed continued soft demand and growing stocks of refined fuels, feeding concerns of a weakening economy....oil prices bounced off the 12 month lows in early trading Thursday on prospects of a broader reopening in China that could boost global oil demand next year, but resumed the​ir​ slide in afternoon trading to settle 55 cents lower at $71.46 a barrel, as traders focused on concerns that global economic slowdowns would slash fuel demand, while an oil leak that led to a shutdown of the Keystone Pipeline and talk of a potential buyback of oil to refill U.S. reserves helped to limit price losses...oil priices bounced again in Asian trading Friday on news that the closure of the Canada-to-U.S. Keystone pipeline had disrupted US supplies, but again turned lower in US trading to settle down 44 cents at $71.02 a barrel, as growing recession fears negated any supply woes after weak economic data from China, Europe and the United States...oil prices thus finished the week off 11.2%, their biggest weekly drop since March and ended trading at their lowest level since December 21, 2021

meanwhile, natural gas prices finished lower for ​a ​second straight week, despite colder forecasts for the rest of December... after falling 14.3% to a two week low of $6.281 per mmBTU last week on milder forecasts and a delay in the restart of the Freeport export terminal, which will leave more gas available for domestic use, the contract price of US natural gas for January delivery opened 45 cents lower and extended last week's selloff by more than 11% on Monday in falling 70.4 cents to $5.577 per mmBTU, as forecasts for milder weather cast a shadow on the demand outlook, already hurt by the delayed restart of the Freeport export plant....natural gas prices slid 10.8 cents, or almost 2% to a fresh five-week low of $5.469 per mmBTU on Tuesday, as natural gas prices followed crude prices lower after forecasts for milder weather next week than was previously expected....but a revision in the forecasts for colder weather over the next two weeks and profit taking by short sellers led to a reversal of natural gas prices on Wednesday​,​ as January gas rose 25.4 cents to $5.723 per mmBTU, a rally which extended into Thursday, when \as prices rose 23.9 cents to $5.962 per MMBTU, as a polar plunge forecast for next week continued to drive prices, despite an EIA report showing a smaller-than-expected decline in inventories last week...colder forecasts through late December brought another near 5% price gain of 28.3 cents to $6.245 per mmBTU in Friday's trading, but prices still finished 0.6% lower on the week...

The EIA's natural gas storage report for the week ending December 2nd indicated that the amount of working natural gas held in underground storage in the US fell by 21 billion cubic feet to 3,462 billion cubic feet by the end of the week, which meant our gas supplies were still 51 billion cubic feet, or 1.5% less than the 3,513 billion cubic feet that were in storage on December 2nd of last year, and 58 billion cubic feet, or 1.6% below the five-year average of 3,520 billion cubic feet of natural gas that were in storage as of the 2nd of December over the most recent five years....the 21 billion cubic foot withdrawal from US natural gas working storage for the cited week was less than the average forecast for an 31 billion cubic feet withdrawal  by a Reuters poll of analysts, and much less than the 59 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also much less than the average 49 billion cubic feet of natural gas that have typically been withdrawn from our 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 2nd indicated that even after a near record drop in our oil exports and an incremental increase in our oil production, we needed to pull oil out of our stored commercial crude supplies for the 11th time in 17 weeks, and for the 19th time in the past 33 weeks, despite the ongoing releases of oil from the SPR.....Our imports of crude oil fell by an average of 24,000 barrels per day to average 6,012,000 barrels per day, after falling by an average of 1,027,000 barrels per day during the prior week, while our exports of crude oil fell by 1,518,000 barrels per day to average 3,430,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 2,582,000 barrels of oil per day during the week ending December 2nd, 1,494,000 more barrels per day than the net of our imports minus our exports during the prior week.. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day higher at 12,200,000 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 averaged a total of 14,782,000 barrels per day during the December 2nd reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,585,000 barrels of crude per day during the week ending December 2nd, an average of 53,000 fewer 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 average of 1,041,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US.  So, based on that reported & estimated data, the crude oil figures from the EIA for the week ending December 2nd appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 762,000 barrels per day less than what our oil refineries reported they used during the week. To account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+762,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed....moreover, since last week’s EIA fudge factor was at (+1,452,000) barrels per day, that means there was a 690,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, rendering those comparisons complete​ly​ ​meaningless....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 1,041,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 800,917,000 barrels at the end of the week, which was our lowest total oil inventory level since January 31st, 1986, and therefore at a new 36 1/2 year low....Our oil inventories decreased this week as an average of 741,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 300,000 ​more ​barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR was an extension of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was originally intended to supply 1,000,000 barrels of oil per day to commercial interests over a six month period from its inception to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising over that time....The SPR withdrawals under that program had been fluctuating in recent weeks because the administration has ​alsoo ​been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; furthermore, Biden recently announced another 15,000,000 barrel release from the Strategic Petroleum Reserve to run thru December, while simultaneously announcing he'd buy crude to replenish the SPR if oil prices fall to or below the $67-72 a barrel range, effectively putting a floor under oil at that price.....Including the administration's initial 50,000,000 million barrel SPR release earlier this year, their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 269,122,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 28 months, and as a result the 387,019,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since February 24th, 1984, or at a new 38 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases. The total 180,000,000 barrel drawdown of the current release program, now scheduled to run through December, will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at the current consumption rate...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,168,000 barrels per day last week, which was 4.1% less than the 6,432,000 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 higher at 12,200,000 barrels per day even though the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,700,000 barrels per day because Alaska’s oil production was 6,000 barrels per day lower at 450,000 barrels per day and added 100,000 barrels per day to the rounded national total. US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 6.8% below that of our pre-pandemic production peak, but was 25.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...

US oil refineries were operating at 95.5% of their capacity while using those 16,585,000 barrels of crude per day during the week ending December 2nd, up from their 95.2% utilization rate during the prior week, and the highest utilization rate since August 2nd 2019....The 16,585,000 barrels per day of oil that were refined this week were 5.1% more than the 15,785,000 barrels of crude that were being processed daily during week ending December 3rd of 2021, and nearly matched the 16,597,000 barrels that were being refined during the prepandemic week ending  December 6th, 2019, when our refinery utilization was at 90.6%, within the normal utilization range for early December ...

With the decrease in the amount of oil being refined this week, gasoline output from our refineries was also lower, decreasing by 295,000 barrels per day to 9,065,000 barrels per day during the week ending  December 2nd, after our gasoline output had increased by 196,000 barrels per day during the prior week. This week’s gasoline production was also 5.2% less than the 9,563,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.1% below the gasoline production of 9,753,000 barrels per day during the prepandemic week ending December 6th, 2019.  At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 21,000 barrels per day to 5,332,000 barrels per day, after our distillates output had increased by 200,000 barrels per day during the prior week. And with those increases, our distillates output was 9.0% more than the 4,872,000 barrels of distillates that were being produced daily during the week ending December 3rd of 2021, and 0.9% more than the 5,263,000 barrels of distillates that were being produced daily during the week ending December th 2019...

Even with the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 7th time in 17 weeks, and by the most since July 8th, increasing by 5,319,000 barrels to 213,768,000 barrels during the week ending  December 2nd, after our gasoline inventories had increased by  2,770,000 barrels during the prior week. Our gasoline supplies rose by more this week even as the amount of gasoline supplied to US users rose by 41,000 barrels per day to 8,358,000 barrels per day, in part because our exports of gasoline fell by 116,000 barrels per day to 1,012,000 barrels per day while our imports of gasoline fell by 16,000 barrels per day to 519,000 barrels per day.   But after 31 gasoline inventory drawdowns over the past 44 weeks, our gasoline supplies were still 0.1% lower than last December 3rd's gasoline inventories of 219,304,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

With the elevated level of our distillates production, our supplies of distillate fuels increased for the 13th time in 18 weeks, and by the most since May 29th, 2020, rising by 6,159,000 barrels to 118,807,000 barrels during the week ending  December 2nd, after our distillates supplies had increased by 3,547,000 barrels during the prior week. Our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 106,000 barrels per day to 3,550,000 barrels per day, and because our imports of distillates rose by 220,000 barrels per day to 372,000 barrels per day, and because our exports of distillates fell by 26,000 barrels per day to 1,274,000 barrels per day... But after fifty-two inventory withdrawals over the past eighty-four weeks, our distillate supplies at the end of the week were were still 6.2% below the 126,610,000 barrels of distillates that we had in storage on December 3rd of 2021, and about 9% below the five year average of distillates inventories for this time of the year...

Meanwhile, even after the big decrease in our oil exports, our commercial supplies of crude oil in storage fell for the 13th time in 21 weeks and for the 32nd time in the past year, decreasing by 5,194,000 barrels over the week, from 419,084,000 barrels on November 25th to 413,898,000 barrels on December 2nd, after our commercial crude supplies had decreased by 12,581,000 barrels over the prior week. After this week's decrease, our commercial crude oil inventories fell to around 9% below the most recent five-year average of crude oil supplies for this time of year, but were still almost 23% more than the average of our crude oil stocks as of the first 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. And after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this December 2nd were 4.4% less than the 432,870,000 barrels of oil we had in commercial storage on December 3rd of 2021, and 17.8% less than the 503,231,000 barrels of oil that we had in storage on December 4th of 2020, and 7.6% less than the 447,918,000 barrels of oil we had in commercial storage on December 6th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows over the most recent months, we are also continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR.​...​after the big gasoline and distillates inventory increases we've already noted for this week, the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, rose by 3,776,000 barrels this week, from 1,600,432,000 barrels on November 25th to 1,604,208,000 barrels on December 2nd, after our total inventories had decreased by 10,173,000 barrels during the prior week. This week's increase still left our total petroleum liquids inventories down by 184,225,000 barrels over the first 48 weeks of this year, and less than 0.3% from a new 18 year low...

This Week's Rig Count

The number of drilling rigs active in the US decreased for the 8th time in the past 19 weeks during the week ending December 9th, ​but even after 92 weekly increases over the past 115 weeks, active rigs are still 1.6% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by 4 rigs to 780 rigs over the past week, which was still 205 more rigs than the 576 rigs that were in use as of the December 10th report of 2021, but was 1,149 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil decreased by 2 to 625 oil rigs during the past week, after the number of rigs targeting oil had been unchanged during the prior week, but there are still 154 more oil rigs active now than were running a year ago, even as they amount to just 38.9% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 8.5% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 153 natural gas rigs, which was still up by 48 natural gas rigs from the 105 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.5% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

Other than those rigs targeting oil and natural gas, Baker Hughes also reports that two "miscellaneous" rigs continued drilling this week: one of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track....While we haven't seen any details on either of those​ wells​, in the past we've identified various "miscellaneous" rig​ activity as being ​for ​explorat​ion, for carbon dioxide storage, and for utility scale geothermal projects...a year ago, there were were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was up by 1 to 18 rigs this week, with 16 Gulf rigs drilling in Louisiana's offshore waters, and two rigs drilling ​for oil ​offshore from Texas....the Gulf rig count is now up by 4 from the 14 Gulf rigs running a year ago, when 12 of the Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil offshore from Texas...the directional rig ​that had been ​drilling to between 5,000 and 10,000 feet for natural gas in the Cook Inlet of Alaska was shut down this week, at least for the winter​, so the national offshore rig count remained at 18​..

In addition to rigs running offshore, there are now two water based rigs drilling through inland bodies of water this week; those include a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; and a directional rig drilling for oil to between 5,000 and 10,000 feet, inland in Lafourche Parish, Louisiana; the directional rig drilling for oil on water inland in St Mary Parish, Louisiana was shut down this week....a year ago, there were two such rigs drilling on inland waters...

The count of active horizontal drilling rigs was down by 3 to 708 horizontal rigs this week, which was still 187 more rigs than the 521 horizontal rigs that were in use in the US on December 10th of last year, but just over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....in addition, the directional rig count was down by two to 46 directional rigs this week, while those were still up by 15 from the 31 directional rigs that were operating during the same week a year ago…on the other hand, ​t​he vertical rig count was up by 1 to 26 vertical rigs this week, which was also up by two from the 24 vertical rigs that were in use on December 10th of 2021….

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 9th, the second column shows the change in the number of working rigs between last week’s count (December 2nd) and this week’s (December 9th) count, the third column shows last week’s December 2nd 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 10th of December, 2021...

checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there was one rig ​pulled out of ​Texas Oil District 8, which overlies the core Permian Delaware, while rig​ count​s in other districts in the Texas Permian were unchanged...since the national Permian basin count was unchanged, we can thus conclude that at least one of the rigs added in New Mexico w​as set up to drill in the far western Permian Delaware, in the southwest corner of that state, while it's possible another could have been, were there offsetting changes in one of the other Texas Permian districts that don't show up in the totals...elsewhere in Texas, there was a rig added in Texas Oil District 1, which would account for the Eagle Ford increase, while there were two rigs pulled out of Texas Oil District 3, apparently from a basin that Baker Hughes doesn't track.... there was also a rig added in Texas Oil District 10, which would account for one of the Granite Wash rig additions, with the other being in Oklahoma....the rig addition in the Barnett shale, underlying Dallas Ft Worth, does not show up in a corresponding district total, so we assume it was offset by a ​rig ​removal nearby from a basin that Baker Hughes doesn't track...

elsewhere in Oklahoma, rig were removed from the Cana Woodford, from the Ardmore Woodford, and from the Mississippian shale....rigs removed from Alaska include the directional rig that had been drilling for natural gas in the Cook Inlet, and an oil rig that had been drilling on the North Slope...meanwhile, the rig pulled out of Wyoming had been drilling in a basin not tracked by Baker Hughes..​..unfortunately, ​we can't ​report more detail on any of those rigs, and especially which ​of them ​had been drilling for natural gas, because the Baker Hughes ​file ​that should link to this week's data ​only provides us with a duplicate copy of this week's Pivot Table.....

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note: there’s more here…