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, January 31, 2022

oil price hits 7 year hi, natural gas hits 14 year hi on largest jump on record; total oil & products supplies at 7 1/2 year low

oil prices hit 7 year high, natural gas hits 14 year high on largest one day price jump on record; natural gas supplies see largest draw this winter; gasoline inventories up most in any 4 week period since Jan 1990 as gasoline demand, excluding worst Covid drops, is at a 10 year low; gasoline imports at a 87 week low; total inventories of oil & all products made from it are at 7 1/2 year low with Strategic Petroleum Reserve at a new 19 year low..

Oil prices rose for a sixth straight week and eclipsed the 7 year high hit last week on heightened tension over Ukraine, tight supplies, and perceptions of rising demand...after rising 2.2% to $85.14 a barrel last week on supply disruptions in the Middle East and on rising tensions between NATO and Russia, the contract price for US light sweet crude for March delivery opened lower on Monday​,​ but rallied to trade slightly higher amid fading Omicron fears and lingering concerns over tightening supplies​,​ on the back of geopolitical tensions in Eastern Europe and the Middle East, but tumbled 4% in afternoon trading amid a steep selloff in global financial markets and a rapidly strengthening U.S. dollar​,​ before partially recovering to finish $1.83 lower at $83.31 a barrel​, as the possibility of sooner than expected increases in interest rates had markets spooked...but oil prices opened 1% higher on Tuesday, supported by prospects of short-term supply scarcity on global oil markets due to OPEC+'s inability to quickly raise production and a  heightened geopolitical risk premium in the Middle East, and then further rallied in afternoon trade amid growing fears of a Russian invasion of Ukraine and a consequent tightening in supplies. before settling $2.29 higher at $85.60 a barrel​, ​on concerns ​that ​supplies could become tight due to Ukraine-Russia tensions, ​on ​threats to infrastructure in the United Arab Emirates​,​ and ​on ​struggles by OPEC+ to hit its targeted monthly output increase. as traders assessed growing risks of severe sanctions on Russian energy exports in response to the escalating tensions along the Ukrainian border and lower-than-expected inventory levels in the industrialized countries....oil began trading lower on Wednesday after the American Petroleum Institute reported a smaller than expected draw from US crude supplies, but spiked higher in late morning trading in a reaction to EIA inventory data showing total U.S. crude and petroleum product supplies declined​ more steeply,​ amid lower oil production and recovering demand for gasoline, while a large drawdown from Cushing stockpiles, the delivery point for WTI contracts, rallied ​March ​futures towards $88 barrel, before ​they ​settl​led $1.75 higher at a fresh seven year high of $87.45 a barrel, as traders fretted over Russia-Ukraine tensions...oil prices advanced again early on Thursday despite an offer of a "diplomatic path" out of the NATO/Russian crisis​, but turned lower under pressure from a rallying U.S. Dollar Index following a better-than-expected reading for U.S. fourth-quarter ​GDP and a hawkish inflation assessment from Fed, and finished with a 74 cent loss on the day at $86.61 a barrel as the market balanced concerns about tight worldwide supplies with expectations the Fed would soon tighten monetary policy....oil prices reversed higher in early morning trade Friday, with all petroleum ​related ​contracts heading for their sixth consecutive weekly advance, spurred by heightened geopolitical risk related to tensions along the Russian-Ukrainian border, and the threat of another missile attack on Gulf oil infrastructure from Iranian backed Houthis. and ​then ​reached a seven-year high intraday high of $88.84 a barrel early in the session, before falling back to settle just 21 cents higher at $86.82 per barrel​,​ amid concerns of tight supplies as major producers continue​d​ their policy of limited output increases amid rising fuel demand...oil prices thus posted their sixth straight weekly gain, ending 2% higher than last Friday's close, fueled by a combination of robust demand, constrained supplies and heightened geopolitical risks amid the tension between the West and Russia over Ukraine..

Meanwhile, natural gas prices settled higher for the fourth time in five weeks, after spiking as much as 72 percent to a 14 year high in the last hour of trading on Thursday, ​just before trading of the February ​gas ​contract expired....after falling 6.2% to $3.999 per mmBTU last week as key temperatures warmed and forecasts moderated​, the contract price of natural gas for February delivery moved up on soaring European prices Monday and settled 2.8 cents higher at $4.027 per mmBTU, as Texas natural gas output remained slow to recover from well freeze-offs earlier in January, and then rose another 2.6 cents to $4.053 per mmBTU on Tuesday, as frigid weather and high heating demand over the past week in the U.S. Northeast kept next-day power and spot gas prices in New York and New England at or near their highest levels since January 2018...natural gas prices jumped on Wednesday after one of the major weather models staged the largest reversal this winter, resulting in a huge jump in projected heating demand for the next two weeks, and settled 22.4 cents higher at $4.277 per mmBTU...the February natural gas contract hovered in a narrow range early Thursday, but began rallying after a bullish government inventory report and some usual buying into the contract's expiration, and then spiked nearly 70% on short-covering in the final hour of trading to a 14 year intraday high at $7.400 per mmBTU, before settling $1.988 higher​ on the session​ at $6.265 per mmBTU, the sharpest one-day climb for natural gas in exchange history, as no other trading day in the past decade featured a​ price​ move even half as large....with the February contract off the boards​ on Friday​, natural gas quotes referenced the contract price of natural gas for March delivery, which had risen 24.7 cents to $4.283 per mmBTU on Thursday, from where it rose another 35.6 cents to $4.639 per mmBTU, riding high on winter weather forecasts, light production, falling stockpiles and robust demand for U.S. exports....natural gas ​price ​quotes thus finished the week 16.0% higher, while the March gas contract, which had closed at $3.782 per mmBTU last Friday, added 85.7 cents or 22.7%...

With natural gas prices seeing their largest jump in history this week and hitting a 14 year high in the process, we'll add a graph here to show what that looked like...

The above is a screenshot of the interactive natural gas price chart for the February ​gas ​contract from barchart.com, which i have reset to show the price of February natural gas every half hour over its last five days of trading...this interactive graph can also be reset to show prices of front month or individual monthly natural gas contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of natural gas prices over 30 minutes, with periods when prices rose indicated in green, with the opening price of natural gas ​during that time ​at the bottom of the bar and the closing price at the top, and periods when prices fell indicated in red, with the opening price of natural gas at the top of the bar and the closing price at the bottom, while the small sticks above or below each half hour bar represent the extent of the price change above or below the opening and closing price during the period in question....meanwhile, the bars across the bottom show trading volume for the February contract for the periods in question, again with up periods indicated by green bars and down periods indicated in red...it's pretty clear from this graph that almost the entirely of Thursday's price jump came in the last hour, with most of that in the last half hour..

The EIA's natural gas storage report for the week ending January 21st indicated that the amount of working natural gas held in underground storage in the US fell by 219 billion cubic feet to 2,591 billion cubic feet by the end of the week, the largest gas storage withdrawal since February 19th of last year, which left our gas supplies 308 billion cubic feet, or 10.6% below the 2,899 billion cubic feet that were in storage on January 21st of last year, and 25 billion cubic feet, or 1.0% below the five-year average of 2,616 billion cubic feet of natural gas that have been in storage as of the 21st of January over the most recent five years....the 219 billion cubic foot withdrawal from US natural gas working storage for the cited week was a bit more than the average forecast for a 214 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, ​but was way more than the 137 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also quite a bit more than the average withdrawal of 161 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 21st indicated that despite a drop in our oil imports, a shift in unaccounted for crude from demand to supply and a moderate withdrawal of crude from our Strategic Petroleum Reserve meant we had enough oil left to add to our stored commercial crude supplies for the second time in 9 weeks and for the 12th time in the past thirty-five weeks….our imports of crude oil fell by an average of 509,000 barrels per day to an average of 6,236,000 barrels per day, after rising by an average of 675,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 186,000 barrels per day to an average of 2,796,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,440,000 barrels of per day during the week ending January 21st, 695,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day lower at 11,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,040,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,497,000 barrels of crude per day during the week ending January 21st, an average of 44,000 more barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 161,000 barrels of oil per day were being added to the supplies of oil stored in the US…so based on all that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 617,000 barrels per day less than what our oil refineries reported they used during the week plus what we added to storage 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 (+617,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...moreover, since last week’s EIA fudge factor was at (-501,000) barrels per day, that means there was a 1,118,000 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 week over week supply and demand changes indicated by this week's report are completely worthless.....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 161,000 barrel per day increase in our overall crude oil inventories left our total oil supplies at 1,006,972,000 barrels, just 1,845,000 barrel above a 10 year low...this week's oil inventory increase came as 340,000 barrels per day were being added to our commercially available stocks of crude oil, while 179,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, part of the first installment of Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers....including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 64,288,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil left in our Strategic Petroleum Reserve has fallen to the lowest since November 8th, 2002, or to another new 19 year low of 590,782,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies considerably over the past dozen years...based on an estimated prepandemic consumption level of around 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,233,000 barrels per day last week, which was still 9.8% more than the 5,679,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day lower at 11,600,000 barrels per day even though the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,300,000 barrels per day, because Alaska’s oil production was 6,000 barrels per day lower at 449,000 barrels per day and thus subtracted 100,000 barrels per day from rounded national production total (by the EIA's 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 11.5% below that of our pre-pandemic production peak, but 37.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 87.7% of their capacity while using those 15,497,000 barrels of crude per day during the week ending January 21st, down from a utilization rate of 88.1% the prior week, and lower than the historical utilization rate for mid-January refinery operations…the 15,497,000 barrels per day of oil that were refined this week were still 5.3% more barrels than the 14,721,000 barrels of crude that were being processed daily during the pandemic impacted week ending January 22nd of 2021, but 2.7% less than the 15,924,000 barrels of crude that were being processed daily during the week ending January 24th, 2020, when US refineries were operating at what was then also a below normal 87.2% of capacity...

With the increase in oil being refined this week, gasoline output from our refineries was again higher, increasing by 229,000 barrels per day to 8,917,000 barrels per day during the week ending January 21st, after our gasoline output had increased by 114,000 barrels per day over the prior week.…hence, this week’s gasoline production was 2.8% more than the 8,885,000 barrels of gasoline that were being produced daily over the same week of last year, but 2.4% less than the gasoline production of 9,158,000 barrels per day during the week ending January 24th, 2020.....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 28,000 barrels per day to 4,756,000 barrels per day, after our distillates output had decreased by 60,000 barrels per day over the prior week…after that modest increase, our distillates output was 5.2% more than the 4,518,000 barrels of distillates that were being produced daily during the week ending January 22nd of 2021, but 4.5% less than the 4,979,000 barrels of distillates that were being produced daily during the week ending January 24th, 2020...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the seventh time in nine weeks, after falling each week over the preceding six weeks, increasing by 1,297,000 barrels to 247,918,000 barrels during the week ending January 21st, after our gasoline inventories had increased by a record 23,962,000 barrels over the prior three weeks...our gasoline supplies increased by less this week because the amount of gasoline supplied to US users increased by 281,000 barrels per day to 8,505,000 barrels per day, while our imports of gasoline fell by 77,000 barrels per day to a 87 week low of 314,000 barrels per day and while our exports of gasoline rose by 19,000 barrels per day to 412,000 barrels per day…after four straight big inventory increases, our gasoline supplies are now fractionally higher than last January 22nd's gasoline inventories of 240,748,000 barrels, but still about 2% below the five year average of our gasoline supplies for this time of the year…

the four week average of our gasoline demand fell by 302,000 barrels to a 44 week low of 8,202,000 barrels per day this week...while that's 6.1% higher than gasoline demand low of 7,729,000 barrels per day during the Covid surge of last January 22nd, it's down by 3.9% from the gasoline demand of 8,537,000 barrels per day on Jan 24th 2019, which was the low for that year...except for other pandemic impacted weeks when our demand tanked, our gasoline demand during the last 4 weeks was the lowest in 10 years....meanwhile, the gasoline inventory increase of 25,259,000 barrels over the past 4 weeks was the largest for any four week period on record since 1990, when gasoline inventories jumped by 26,643,000 in the period ending February 9th, handily exceeding the 4 week inventory increase of 23,952,000 barrels that we saw at the outset of the pandemic lockdowns from mid-March to mid April of 2020...

On the other hand, with the recent decreases in our distillates production, our supplies of distillate fuels decreased for the fifteenth time in twenty-two weeks, falling by 2,798,000 barrels to 125,154,000 barrels during the week ending January 21st, after our distillates supplies had decreased by 1,431,000 barrels during the prior week….our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 198,000 barrels per day to 4,754,000 barrels per day, and as our imports of distillates fell by 80,000 barrels per day to 226,000 barrels per day, while our exports of distillates fell by 56,000 barrels per day to 627,000 barrels per day,....after twenty-eight inventory decreases over the past forty-two weeks, our distillate supplies at the end of the week were 23.1% below the 162,847,000 barrels of distillates that we had in storage on January 22nd of 2021, and about 17% below the five year average of distillates inventories for this time of the year…

Meanwhile, with the switch in unaccounted for crude from demand to supply and the withdrawal of crude from our Strategic Petroleum Reserve, our commercial  supplies of crude oil in storage rose for the 9th time in 25 weeks and for the 18th time in the past year, increasing by 2,377,000 barrels over the week, from 413,813,000 barrels on January 14th to 416,190,000 barrels on January 21st, after our commercial crude supplies had increased by 515,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories remained about 8% below the most recent five-year average of crude oil supplies for this time of year, but were still about 31% above the average of our crude oil stocks after the third week of January over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020 and remained elevated for most of the year after that, our commercial crude oil supplies as of this January 21st were 12.7% less than the 476,653,000 barrels of oil we had in commercial storage on January 22nd of 2021, and are now 3.9% less than the 431,654,000 barrels of oil that we had in storage on January 24th of 2020, and also 6.7% less than the 445,944,000 barrels of oil we had in commercial storage on January 25th of 2019…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 5,341,000 barrels this week, from 1,775,470,000 barrels on January 21st to 1,780,811,000 barrels on January 14th...that means our total supplies are now the lowest since June 13th, 2014, or at a seven and a half year low, which is somewhat amazing, in light of the near record increase in gasoline inventories..

This Week's Rig Count

The number of drilling rigs running in the US increased for the 60th time over the past 71 weeks during the week ending January 28th, but were still 23.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by six to 610 rigs this past week, which was also 226 more rigs than the pandemic hit 384 rigs that were in use as of the January 29th report of 2021, but was also still 1,319 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 was up by 4 to 495 oil rigs during this week, after they had decreased by 1 rig during the prior week, ​and there are now 200 more oil rigs active now than were running a year ago, even as they still amount to just 30.8% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 2 to 115 natural gas rigs, which was also up by 27 natural gas rigs from the 88 natural gas rigs that were drilling during the same week a year ago, but still only 7.2% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….​also​ note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at 18 rigs this week, with seventeen of this week's Gulf rigs drilling for oil in Louisiana waters and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's still two more Gulf rigs than the 16 rigs that were active in the Gulf a year ago, when 15 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is not any drilling off our other coasts at this time, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....

In addition to those rigs offshore, we also have 2 water based rigs drilling inland; one is a horizontal rig targeting oil at a depth of between 5000 and 10,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is a directional rig drilling for oil at a depth of over 15,000 feet in the Galveston Bay area...however, the inland waters rig count of two is still down from the three inland waters rigs that were drilling a year ago..

The count of active horizontal drilling rigs was up by 9 to 553 horizontal rigs this week, which was also 209 more rigs than the 344 horizontal rigs that were in use in the US on January 29th of last year, but still 59.8% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the directional rig count was down by 1 to 36 directional rigs this week, but those were still up by 18 from the 18 directional rigs that were operating during the same week a year ago….at the same time, the vertical rig count was down by 2 rigs to 22 vertical rigs this week, while those were also down by 1 from the 22 vertical rigs that were in use on January 29th 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 January 28th, the second column shows the change in the number of working rigs between last week’s count (January 21st) and this week’s (January 28th) count, the third column shows last week’s January 21st 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 29th of January, 2021...

this week we'll start by looking at the four rig increase in Texas​ ​drilling​ activity​...checking the Rigs by State file at Baker Hughes for changes in Texas, we find that two rigs were added in Texas Oil District 8, which encompasses the core Permian Delaware, but that rigs in the other Permian districts were unchanged...since the national Permian rig count was only up by one, that two rig increase in the Texas Permian means that the rig that was pulled out in New Mexico had ​to have ​been drilling in the westernmost Permian Delaware...elsewhere in Texas, we find that two rigs were added in Texas Oil District 5, which accounts for the increase of 2 oil rigs in the Dallas/Ft Worth area Barnett shale...then, while we had a one rig increase in Oklahoma, there was an oil rig pulled out of the Ardmore Woodford, which means that two rigs ​must have been added elsewhere in Oklahoma, in a basin that Baker Hughes doesn't track...finally, to address the two rig increase in natural gas rigs, we find one of those was added in Pennsylvania's Marcellus shale, while the other was added in the Haynesville shale of northwestern Louisiana...

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Note: there’s more here

Sunday, January 23, 2022

oil hits 7 year high as US supplies near 10 year low; 3 week gasoline supply increase is largest ever; global oil shortage at 1.24 mbpd; DUCs lowest since Feb 2014

oil prices hit a 7 year high as US oil supplies neared a 10 year low and Strategic Petroleum Reserve fell to another 19 year low; gasoline inventory increase over 3 weeks is largest on record, gasoline imports at a 53 week low, gasoline exports at an 82 week low; December global oil shortage was 1,240,000 barrels per day as OPEC output was 625,000 barrels per day short of quota; global oil shortage for 2021 was 1,446,300 barrels of oil per day…DUCs are lowest since February 2014; DUC backlog of 5.1 months is lowest since December 2014

Oil prices rose for a fifth consecutive week and hit a 7 year high in the process, on supply disruptions in the Middle East and on rising tensions between NATO and Russia...after rising 6.3% to $83.82 per barrel last week on a softening of Fed rhetoric and on a production shortfall by OPEC+, the contract price for US light sweet crude for February delivery opened 50 cents higher on Tuesday after the MLK holiday as rising geopolitical tensions in the Middle East and Europe threatened to disrupt supplies, and subsequently rose to a 7 year high on an upbeat demand forecast from OPEC that minimized the impact of the Omicron surge on global oil consumption, before settling $1.61 or nearly 2% higher at $85.43 a barrel, as robust domestic demand and strained supplies kept US markets running hot...oil prices jumped to another 7 year high early Wednesday after the International Energy Agency forecast that global oil demand would surpass pre-pandemic levels this year, supported by a robust recovery in jet fuel consumption, and approached $88 a barrel after a fire on a pipeline from Iraq to Turkey briefly stopped oil flow, before settling $1.53 higher at $86.96 a barrel, its highest settlement since Oct. 9, 2014, as demand for oil continued to prove resilient to omicron....oil prices eased early Thursday, as traders took profits after the weekly report from the American Petroleum Institute showed U.S. crude and gasoline stocks rose last week, but reversed to move higher in late morning trade despite weekly inventory data from the EIA showing U.S. commercial crude and gasoline inventories increased more than expected, as domestic refiners scaled back crude throughputs amid still sluggish demand for gasoline, but then softened near the close on the mixed inventory data and a stronger US dollar to settle 6 cents lower​,​ as trading in February oil expired with the contract priced at $86.90 a barrel...with oil quotes now referencing the lower priced contract for US light sweet crude for March delivery, which had closed Thursday down 25 cents at $85.55 a barrel, oil prices opened nearly $1 lower and tumbled more than $1 more in early trading on Friday as oil traders took profits after Thursday's inventory reports​,​ but reversed in afternoon trading to settle just 41 cents, or 0.5% lower, at $85.14 a barrel, as analysts said they expected the pressure on prices to be limited​,​ due to supply concerns and rising demand...​but even after falling Friday, oil prices still finished 1.6% higher on the week, with the contract price for US light sweet crude for March delivery finishing 2.2% higher, as geopolitical tensions threatened greater supply outages alongside stronger demand figures, despite the omicron variant...

With oil prices hitting a 7 year high this week, we'll put up a long term graph here and take a look..

The above is a screenshot of the current interactive oil price chart from barchart.com, which i have set to show front month oil prices monthly over the past 10 years, which means you're seeing the same range of oil prices that were quoted by the media over that stretch....this interactive chart can also be reset to show prices of front month or individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of oil prices for a single month, with months when prices rose indicated in green, with the opening price at the bottom of the bar and the closing price at the top, and months when prices fell indicated in red, with the opening price at the top of the bar and the closing price at the bottom, while the small sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the month in question....meanwhile, the bars across the bottom show trading volume for the front month oil contract for the months in question, again with up months indicated by green bars and down months indicated in red...you might note on this graph that th​is week's 7 year high came as we eclipsed the 7 year high established back in October...October prices of seven years ago, ​on the other hand, were in a period when oil prices were rapidly collapsing from above $100 a barrel to below $50 a barrel, so it is unlikely that we'll extend our interim price​ ​record ​beyond seven years anytime soon..

Natural gas prices, on the other hand, finished lower for the first time in four weeks, as key temperatures warmed and forecasts moderated as the week progressed...after rising 8.8% to $4.262 per mmBTU last week on an outbreak of polar air in the densely populated northeastern US, the contract price of natural gas for February delivery opened nearly 2% higher on Tuesday on forecasts for colder weather and higher heating demand over the next two weeks than had been forecast before the holiday weekend. but backtracked to settle just 2.1 cents higher at $4.283 per mmBTU, as prices pulled back sharply in the volatile Northeast amid a spell of moderate weather to start the week...prices then tumbled 25.2 cents, or nearly 6% to $4.031 per mmBTU on Wednesday after the latest forecasts pulled back modestly from earlier expectations for a bitter cold pattern over the northern and eastern US, and then fell another 22.9 cents or 5.6% to $3.802 on Thursday, as weather conditions warmed, eclipsing ​the impact of ​record export volumes, production threats and the biggest storage drawdown of the season...natural gas recovered most of that drop on Friday, rising 19.7 cents to $3.999 per mmBTU, amid updated forecasts for freezing conditions to extend into next month and amid expectations for stout withdrawals from storage, but still finished 6.2% lower for the week...

The EIA's natural gas storage report for the week ending January 14th indicated that the amount of working natural gas held in underground storage in the US fell by 206 billion cubic feet to 2,810 billion cubic feet by the end of the week, the largest gas storage withdrawal since February 19th of last year, which left our gas supplies 226 billion cubic feet, or 7.4% below the 3,036 billion cubic feet that were in storage on January 14th of last year, but still 33 billion cubic feet, or 1.2% above the five-year average of 2,777 billion cubic feet of natural gas that have been in storage as of the 14th of January over the most recent five years....the 206 billion cubic foot withdrawal from US natural gas working storage for the cited week was somewhat more than the average forecast for a 193 billion cubic foot withdrawal from a S&P Global Platts' survey of analysts, and was well more than the 179 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also quite a bit more than the average withdrawal of 167 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years…  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 14th indicated that due to a big jump in our oil imports, an ongoing refinery slowdown, and a moderate withdrawal of crude from our Strategic Petroleum Reserve, we had enough oil left to add to our stored commercial crude supplies for the first time in 8 weeks and for the 11th time in the past thirty-four weeks….our imports of crude oil rose by an average of 675,000 barrels per day to an average of 6,745,000 barrels per day, after rising by an average of 185,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 655,000 barrels per day to an average of 2,610,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 4,135,000 barrels of per day during the week ending January 14th, 20,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly unchanged at 11,700,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,835,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,453,000 barrels of crude per day during the week ending January 14th, an average of 120,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, when refinery throughput had fallen by 293,000 barrels per day, while over the same period the EIA’s surveys indicated that a net of 119,000 barrels of oil per day were being pulled out the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was a rounded 500,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-500,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed...since last week’s EIA fudge factor was at (-934,000) barrels per day, that means there was a 434,000 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 week over week supply and demand changes indicated by this week's report are pretty useless.....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 119,000 barrel per day decrease in our overall crude oil inventories left our total supplies at 1,005,847,000 barrels, the lowest level since January 20th 2012, or just days short of a 10 year low....this week's oil inventory decrease came as 74,000 barrels per day were being added to our commercially available stocks of crude oil, while 193,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, part of the first installment from Biden's plan to release 50 million barrels from the SPR, in order to incentive continued use of US gas guzzlers....including the drawdowns from the Strategic Petroleum Reserve under such politically motivated programs, a total of 64,107,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the amount of oil left in our Strategic Petroleum Reserve has fallen to the lowest since November 15th, 2002, or to another new 19 year low of 592,034,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs had already drained those supplies considerably over the past dozen years...based on an estimated prepandemic consumption level of 18 million barrels per day, the US will have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,433,000 barrels per day last week, which was still 4.7% more than the 6,142,000 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 11,700,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,300,000 barrels per day, while Alaska’s oil production was 6,000 barrels per day lower at 455,000 barrels per day but had no impact on the rounded national production 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 10.7% below that of our pre-pandemic production peak, but 38.8% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 88.1% of their capacity while using those 15,453,000 barrels of crude per day during the week ending January 14th, down from a utilization rate of 88.4% the prior week, and lower than the historical utilization rate for early January refinery operations…the 15,453,000 barrels per day of oil that were refined this week were still 4.7% more barrels than the 14,760,000 barrels of crude that were being processed daily during the pandemic impacted week ending January 15th of 2021, but 8.3% less than the 16,857,000 barrels of crude that were being processed daily during the week ending January 17th, 2020, when US refineries were operating at what was then a more seasonal 90.5% of capacity...

Even with the decrease in oil being refined this week, gasoline output from our refineries was again higher, increasing by 114,000 barrels per day to 8,688,000 barrels per day during the week ending January 14th, after our gasoline output had increased by 68,000 barrels per day over the prior week.…however, this week’s gasoline production was still 2.2% less than the 8,885,000 barrels of gasoline that were being produced daily over the same week of last year, and 8.9% less than the gasoline production of 9,535,000 barrels per day during the week ending January 17th, 2020.....on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 60,000 barrels per day to 4,728,000 barrels per day, after our distillates output had increased by 177,000 barrels per day over the prior week…even after those decreases, our distillates output was still 4.4% more than the 4,529,000 barrels of distillates that were being produced daily during the week ending January 15th of 2021, but 4.6% less than the 4,954,000 barrels of distillates that were being produced daily during the week ending January 17th, 2020...

Even with our gasoline production remaining at depressed levels, our supplies of gasoline in storage at the end of the week rose for the sixth time in eight weeks, after falling each week over the preceding six weeks, increasing by 5,873,000 barrels to 240,748,000 barrels during the week ending January 14th, after our gasoline inventories had increased by 19,089,000 barrels over the prior two weeks...our gasoline supplies increased by less this week because the amount of gasoline supplied to US users increased by 318,000 barrels per day to 8,224,000 barrels per day, after falling by 266,000 barrels per day to an eleven month low the prior week, while our imports of gasoline fell by 198,000 barrels per day to a 53 week low of 391,000 barrels per day and our exports of gasoline fell by 133,000 barrels per day to a 82 week low of 393,000 barrels per day…after three straight big inventory increases, our gasoline supplies are now 0.6% higher than last January 15th's gasoline inventories of 240,748,000 barrels, but still about 2% below the five year average of our gasoline supplies for this time of the year…the gasoline inventory increase of 23,962,000 barrels over the past 3 weeks was the largest in any three week period on record, and even exceeded the 4 week inventory increase of 23,952,000 barrels that we saw at the outset of the pandemic lockdowns from mid-March to mid April of 2020..

On the other hand, with the recent decreases in our distillates production, our supplies of distillate fuels decreased for the fourteenth time in twenty-one weeks, falling by 1,431,000 barrels to 127,952,000 barrels during the week ending January 14th, after our distillates supplies had increased by 2,537,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 807,000 barrels per day to 4,556,000 barrels per day, even as our exports of distillates fell by 209,000 barrels per day to 683,000 barrels per day, and as our imports of distillates rose by 90,000 barrels per day to 306,000 barrels per day....after twenty-seven inventory decreases over the past forty-one weeks, our distillate supplies at the end of the week were 21.8% below the 163,662,000 barrels of distillates that we had in storage on January 15th of 2021, and about 16% below the five year average of distillates inventories for this time of the year…

Meanwhile, with the refinery slowdown and the big jump in our oil imports, our commercial supplies of crude oil in storage rose for the 8th time in 24 weeks and for the 18th time in the past year, increasing by 515,000 barrels over the week, from 413,298,000 barrels on January 14th to 413,813,000 barrels on January 14th, after our commercial crude supplies had decreased by 4,553,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories remained about 8% below the most recent five-year average of crude oil supplies for this time of year, but were still 30.6% above the average of our crude oil stocks after the second week of January over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020 and remained elevated for most of the year after that, our commercial crude oil supplies as of this January 14th were 15.0% less than the 486,563,000 barrels of oil we had in commercial storage on January 15th of 2021, and are now 3.3% less than the 428,106,000 barrels of oil that we had in storage on January 17th of 2020, and also 7.0% less than the 445,025,000 barrels of oil we had in commercial storage on January 18th of 2019…

Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 2,840,000 barrels this week, from 1,783,651,000 barrels on January 7th to 1,780,811,000 barrels on January 14th...that left our total supplies less than a million barrels higher than the seven year low of 1,779,614,000 barrels of three weeks ago, or at the 2nd lowest level since August 29th, 2014.....

OPEC's January Oil Market Report

Tuesday of this week saw the release of OPEC's January Oil Market Report, which includes OPEC & global oil data for December, and hence it gives us a picture of the global oil supply & demand situation for the fifth month after 'OPEC+' agreed to increase their output by 400,000 barrels per day each month from the previously agreed to July level, which was in turn part of the fifth production quota policy reset that they've made over the past twenty months, all in response to the pandemic-related slowdown and subsequent irregular recovery...​.with Omicron cases increasing at the time of this report, ​we ​need to again caution that the oil demand estimates made by OPEC herein, while the eventual course of the Covid-19 pandemic still remains uncertain, should be considered as having a much larger margin of error than we'd expect from this report during stable and hence more predictable periods..

the first table from this monthly report that we'll review is from the page numbered 47 of this month's report (pdf page 57), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures...

As we can see on the bottom line of the above table, OPEC's oil output increased by​ 166,000 barrels per day to 27,​882,000 barrels per day during December, up from their revised November production total which averaged 27,715,000 barrels per day....however, that November output figure was originally reported as 27,717,000 barrels per day, which therefore means that OPEC's November production was revised 2,000 barrels per day lower with this report, and hence OPEC's December production was, in effect, a 164,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official November OPEC output figures as reported a month ago, before this month's revision)...

According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, 2021, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day each month through December, which would include an increase of 254,000 barrels per day from the OPEC members listed above...but as we can see from the above table, OPEC's increase of 166,000 barrels per day was quite a bit less than that...the apparent reasons for their production shortfall in December were the 83,000 barrel per day decrease in Libya's output, and the 43,000 barrel per day decrease in Nigeria's output,,,both of those countries saw production problems in December, which persist to this day, so expectations are increasing that they'll not be able to produce their quota any time soon...

Recall that last year's original oil producer's agreement was to cut oil production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June of last year, but that initial 9.7 million bpd production cut agreement had been extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in July of last year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August 2020 and subsequent months, which thus became the agreement that governed OPEC's output for the rest of 2020...the OPEC+ agreement for this January 2021 production, which was later extended to include February and March and then April's output, was to further ease their supply cuts by 500,000 barrels per day to a cut of 7.2 million barrels per day from that original baseline...then, during a difficult meeting on April 1st of last year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month by an uncomputed, pre-set amount over the following three months, thus extending their joint output cut agreement through July....production levels for August and the following months of this year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over the 2018 reference production levels, and a subsequent attempt to restart that meeting on July 5th was called off....so it wasn't until July 18th 2021 that a tentative compromise addressing August​'s output​ quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August, and again by that amount in each of the following months, and also boosting reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022....OPEC and other producers then agreed to increase their production in January 2022 by a further 400,000 barrels per day in a meeting concluded on the 2nd of December​, 2021​, and reaffirmed their intention to continue that policy with another 400,000 barrel per day increase in February at a meeting concluded January 4, 2022, a little over two weeks ago...

hence OPEC arrived at the production quotas for August through December of this year by repeatedly adjusting the original 23%, or 9.7 million barrel per day production cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day output reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was actually raised to an 8.2 million barrel per day oil output reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during February, March, and then later during April of last year....under the agreement prior to the current one, OPEC's production cut in April 2021 was at 4,564,000 barrels per day from the October 2018 baseline, which was lowered to a cut of 3,650,000 barrels per day from the baseline with the prior comprehensive agreement, which thus set the July production quota for the "OPEC 10" at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by thiat agreement....for OPEC and the other producers to increase their output by 400,000 barrels per day from that July 2021 level, each producer would be allowed to increase their production by just over 1% per month...for the ten members of OPEC who agreed to impose ​production ​cuts on themselves, that would mean their August output quota would be roughly 23,277,000 barrels per day, then 23,531,000 barrels per day in September, then roughly 23,786,000 barrels per day in October, then 24,041,000 barrels per day in November and finally 24,295,000 barrels per day in December....therefore, the 23,670,000 barrels those 10 OPEC members produced in December were 625,000 barrels per day short of what they were expected to produce during the month, with Nigeria, Angola, and the Saudis accounting for the most of this month's shortfall....

The next graphic from this month's report that we'll highlight shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from January 2020 to December 2021, and it comes from page 48 (pdf page ​58) of OPEC's January Monthly Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....

Including this month's 166,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate indicates that total global liquids production increased by a rounded 650,000 barrels per day to average 98.51 million barrels per day in December, a reported increase which came after November's total global output figure was apparently revised down by 420,000 barrels per day from the 98.28 million barrels per day of global oil output that was estimated for November a month ago, as non-OPEC oil production rose by a rounded 480,000 barrels per day in December after that downward revision, with 320,000 barrels per day of the increase coming from OECD countries, predominantly Canada and Norway, while non-OECD countries increased their output by 120,000 barrels per day, primarily driven by production increases from Brazil and Guyana...

After that increase in December's global output, the 98.51 million barrels of oil per day that were produced globally during the month were 5.82 million barrels per day, or 6.3% more than the revised 92.69 million barrels of oil per day that were being produced globally in December a year ago, which was the fifth month after OPEC and other producers agreed to reduce their output cuts from the original 9.7 million barrels per day to 7.7 million barrels per day (see the January 2021 OPEC report (online pdf) for the originally reported December 2020 details)...with this month's increase in OPEC's output, their December oil production of 27,882,000 barrels per day amounted to 28.3% of what was produced globally during the month, unchanged from their revised share of the global total in November....OPEC's December 2020 production was reported at 25,362,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,520,000 barrels per day, or 9.9% more barrels per day of oil this December than what they produced a year earlier, when they accounted for 27.3% of global output...

Even after the increases in OPEC's and global oil output that we've seen in this report, the amount of oil being produced globally during the month again fell short of the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 27 of the OPEC January Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2021 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for December, which is their estimate of global oil demand during the fourth quarter of 2021... OPEC has estimated that during the 4th quarter of last year, all oil consuming regions of the globe were using an average of 99.75 million barrels of oil per day, which ​was a 260,000 barrel per day upward revision from their estimate for the 4th quarter a month ago, still reflecting a bit of coronavirus related demand destruction compared to 2019, when global demand averaged over 101 million barrels per day during second half of the year....but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 98.51 million barrels per day during December, which would imply that there was a shortage of around 1,240,000 barrels per day in global oil production in December when compared to the demand estimated for the month...

in addition to figuring the December oil shortage that's indicated by this report, the upward revision of 260,000 barrels per day to 4th quarter demand we've circled in green above, combined with the downward revision of 420,000 barrels per day to November's global oil output that's implied in this report means that the 1,210,000 barrels per day global oil output shortage we had previously figured for November would now be revised to an oil shortage of 1,890,000 barrels per day...likewise, the upward revision of 260,000 barrels per day to 4th quarter demand noted above means that the 2,090,000 barrels per day global oil output shortage we had previously figured for October would now be revised to an oil shortage of 2,350,000 barrels per day...

However, note on the table above that we've also circled in green a downward revision of 240,000 barrels per day to the third quarter's demand....that means that the 1,840,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 1,600,000 barrels per day....in like manner, the 240,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 2,350,000 barrels per day we had previously figured for August would now be revised to a shortage of 2,110,000 barrels per day, and that the shortage of 1,930,000 barrels per day barrels per day we had previously figured for July would have to be revised to a shortage of 1,690,000 barrels per day...

At the same time, you can see in green that we've also circled a ​much ​more modest downward revision of 20,000 barrels per day to the second quarter's demand, a quarter when there was also a shortage of oil being produced globally....based on that downward revision to demand, our previous estimate that there was a shortage of 740,000 barrels per day in June would now be revised to a 720,000 barrels per day shortage, the oil shortage of 2,070,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 2,050,000 barrels per day, and that the 2,420,000 barrels per day global oil output shortage we should have figured for April would have to be revised to a shortage of 2,400,000 barrels per day...

Meanwhile, since there are no revisions that apply to the first quarter, the global oil output shortage of 810,000 barrels per day we had previously figured for March, the global oil output shortage of 1,820,000 barrels per day we had previously figured for February, and the global oil output surplus of 600,000 barrels per day we had previously figured for January would remain unchanged from our previous estimate...

With our estimates for all of the months of 2021 thus complete, we should be able to compute the global oil production shortfall for the year...based on the 12 monthly oil market reports that OPEC released over the past year, and the monthly revisions to the supply and demand figures therein, we find that the world was short 527,910,000 barrels of oil in 2021, which works out to a shortage of 1,446,300 barrels of oil per day....we're still far from running out, however, because the quantities of oil being produced globally during the pandemic of 2020 still averaged over 3 million barrels per day more than anyone wanted....

This Week's Rig Count

The number of drilling rigs running in the US increased for the 59th time over the past 70 weeks during the week ending January 21st, but were still 23.8% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by three to 604 rigs this past week, which was also 226 more rigs than the pandemic hit 378 rigs that were in use as of the January 22nd report of 2021, but was also still 1,325 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 was down by 1 to 491 oil rigs during this week, after they had increased by 11 during the prior week, but there are still 202 more oil rigs active now than were running a year ago, even as they still amount to just 30.5% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 4 to 113 natural gas rigs, which was also up by 25 natural gas rigs from the 88 natural gas rigs that were drilling during the same week a year ago, but still only 7.0% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….however, note that last year's rig count also included a rig that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at 18 rigs this week, with seventeen of this week's Gulf rigs drilling for oil in Louisiana waters and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's now two more Gulf rigs than the 16 rigs that were active in the Gulf a year ago, when 15 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is not any drilling off our other coasts at this time, nor was there a year ago, the Gulf rig counts are equal to the national offshore totals for both years....

In addition to those rigs offshore, we also have 2 water based rigs drilling inland; one is a horizontal rig targeting oil at a depth of between 5000 and 10,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is a directional rig drilling for oil at a depth of over 15,000 feet in the Galveston Bay area...however, the inland waters rig count of two is still down from the three inland waters rigs that were drilling a year ago..

The count of active horizontal drilling rigs was up by 3 to 544 horizontal rigs this week, which was also 206 more rigs than the 338 horizontal rigs that were in use in the US on January 22nd of last year, but still 60.0% less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by 2 to 37 directional rigs this week, and those were also up by 15 from the 22 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was down by 2 rigs to 23 vertical rigs this week, while those were still up by 5 from the 18 vertical rigs that were in use on January 22nd 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 January 21st, the second column shows the change in the number of working rigs between last week’s count (January 14th) and this week’s (January 21st) count, the third column shows last week’s January 14th 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 22nd of January, 2021...

since this week's rig increase was driven by the four rig increase in rigs targeting natural gas, we'll start ​by looking at those...three of them are pretty obvious​: two natural gas rigs were added in Pennsylvania's Marcellus, and one natural gas rig was added in northeast Louisiana's Haynesville shale...the last one is problematical, since Baker Hughes lists it as being in an "Other" basin, which they don't track...our first guess was that it might have been added in Utah, where both oil and natural gas are being targeted in the Uintah basin...but in checking the individual well records for Utah in the North America Rotary Rig Count Pivot Table (Feb 2011 - Current) at Baker Hughes, we f​ound that another oil rig was added in that state...since Oklahoma is the only other state showing a rig increase, and there are no Oklahoma basins showing an increase, we'll assume that last natural gas rig must have been added somewhere in that state...if you need to know for sure, feel free to compare the 50 Oklahoma drilling activity records for the week ending January 21st in that file to the 49 Oklahoma drilling activity records for the week ending January 14th​, in order​ to verify the difference..

similarly, the rig pulled out of Wyoming was not associated with any basin tracked by Baker Hughes, and we figure it to have been an oil rig, since the national oil rig count was down by one while we've already seen an oil rig addition in Utah...lastly, checking the Rigs by State file at Baker Hughes for changes in Texas, we find that two rigs were pulled out of Texas Oil District 8, which encompasses the core Permian Delaware, and that another rig was pulled out of Texas Oil District 7B, which includes the easternmost counties of the Permian Midland, but that two rigs were added in Texas Oil District 8A, which covers the southern counties in the Permian Midland....since those were the only changes in Texas this week, they thus account for both the rig count decreases in both the Permian and the state of Texas overall..

DUC well report for December

Monday of the past week saw the release of the EIA's Drilling Productivity Report for January, which includes the EIA's December data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 19th consecutive month in December, as both completions of drilled wells and drilling of new wells remained below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 214 wells, falling from 4,830 DUC wells in November to 4,616 DUC wells in December, which was the lowest number of US wells left uncompleted since February 2014, and also 40.0% fewer DUCs than the 7,737 wells that had been drilled but remained uncompleted as of the end of December of a year ago...this month's DUC decrease occurred as 686 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during December, up from the 659 wells that were drilled in November, while 900 wells were completed and brought into production by fracking, up from the 885 completions seen in November, and up from the pandemic hit 586 completions seen in December of last year....at the December completion rate, the 4,616 drilled but uncompleted wells left at the end of the month represents a 5.1 month backlog of wells that have been drilled but are not yet fracked, down from the 5.5 month DUC well backlog of a month ago, and the lowest backlog since December 2014, despite a completion rate that is almost 20% lower than the pre-pandemic norm...

once again, both oil producing regions and natural gas producing regions saw DUC well decreases in December, while none of the major basins​ covered here​ reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 91, from 1,537 DUC wells at the end of November to 1,446 DUCs at the end of December, as 315 new wells were drilled into the Permian during December, while 406 wells in the region were being fracked...at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 36, from 760 DUC wells at the end of November to a record low of 724 DUCs at the end of December, as 67 wells were drilled in the Eagle Ford during December, while 103 already drilled Eagle Ford wells were completed....in addition, there was also a decrease of 27 DUC wells in the Bakken of North Dakota, where DUC wells fell from 485 at the end of November to a record low of 458 DUCs at the end of December, as 46 wells were drilled into the Bakken during December, while 73 of the drilled wells in the Bakken were being fracked....meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 14, falling from 787 at the end of November to 773 DUC wells at the end of December, as 50 wells were drilled into the Anadarko basin during December, while 64 Anadarko wells were completed.....in addition, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 11, falling from 362 at the end of November to a record low of 351 DUC wells at the end of December, as 87 wells were drilled into the Niobrara chalk during December, while 98 Niobrara wells were being fracked...

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 27 wells, from 513 DUCs at the end of November to a record low of 486 DUCs at the end of December, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 98 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by eight wells to 378 DUCs, as 50 wells were drilled into the Haynesville during December, while 58 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of December, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 179 wells to 3,752 DUC wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 35 wells to 864 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….