US oil price tops $100 for first time since July 2014; SPR at a new 19 year low; total oil + products supplies, including SPR, at a 7 3/4 year low; distillate supplies at 26 month low; natural gas drilling at a 26 month high
oil prices increased for the ninth time in ten weeks this week and hit a new 7 1/2 year high after the Russian police action in eastern Ukraine turned into a full scale invasion...after falling 2.2% to $91.07 a barrel last week as oil traders were disheartened by the possibility of a nuclear peace deal with Iran, the contract price for US light sweet crude for March delivery jumped more than 3% to as high as $96 a barrel in off-exchange trading Monday, as Russia moved troops into two breakaway regions of eastern Ukraine, and Putin announced he would recognize their independence....hence, oil prices opened higher and rallied more than 3% to a 7-1/2 year high shortly after NYMEX opened on Tuesday, reflecting concerns that Russia is a major exporter of oil to the US, and also supplies more than a third of Europe's natural gas, much of it via Russian pipelines through Ukraine, before they pulled back to settle $1.28 higher at $92.35 a barrel, after analysts determined new sanctions announced by the US and the EU would have just a limited impact on the Russian economy...at the same time, the benchmark contract for US crude for April delivery settled $1.70 higher at $91.91 a barrel, as trading in the March oil contract expired...with the price for April oil now being quoted by the media, oil prices drifted lower early Wednesday as traders weighed the impact of US-Iran talks, after it became clear the first wave of U.S. and European sanctions on Russia would not disrupt oil supplies, and later steadied below the 2014 highs with a 19 cent gain to $92.09 a barrel, as sanctions imposed by the US, the EU, Britain, Australia, Canada and Japan were focused on Russian banks and elites, and not on energy...however, oil prices opened higher and shot to above $100 a barrel on Thursday, with European oil prices topping $105, after Russia launched an all-out invasion of Ukraine by land, air and sea, but pulled back later after weekly inventory data released by the EIA showed a second consecutive build in domestic crude oil inventories to settle just 71 cents higher at $92.81 a barrel amid signs that the United States and European allies would not consider sanctioning Russia's oil and gas exports, in order to ensure adequate supplies on the global market, but would instead go after its financial, military and industrial sectors.....after rising sharply early in the Friday session on concern over the potential for global supply disruptions from sanctions on major crude exporter Russia, oil prices turned lower as oil traders were forced to grapple with a fluid market environment, and settled down $1.22 at $91.59 a barrel after the US, the EU, and the UK signaled they have prepared a third package of sanctions against Russia, including on Russian President Vladimir Putin...but even given the impact of the invasion, oil prices only finished 0.6% higher on the week, while the April contract for US crude, which had ended the prior week priced at $90.21, settled with a 1.5% gain...
natural gas prices also finished higher, despite a midweek switch to the lower priced April contract, on raging European gas prices and another spate of natural gas well freeze-offs... after rising 12.4% to $4.431 per mmBTU last week on forecasts for cold weather to persist into early March. the contract price of natural gas for March delivery opened more than 3% higher on Tuesday on forecasts for higher heating demand over the next two weeks, and on a 10% jump in European gas futures that could keep U.S. LNG exports near record highs, before settling 6.7 cents higher at $4.498 per mmBTU....gas prices then rose 12.5 cents or nearly 3% to $4.623 per mmBTU on Wednesday, as sub-freezing temperatures descended into the Lower 48 and resulted in a precipitous decline in production due to gas well freeze-offs, but pulled back and fell 5.5 cents to $4.568 per mmBTU on Thursday, despite a 60% jump in a key European natural gas benchmark, as trading in the US March natural gas contract expired with the end of winter weather in clear view and March forecasts far from threatening....with natural gas quotes now referencing the contract price of natural gas for April delivery, which had closed Thursday priced at $4.641 per mmBTU, natural gas fell 17.1 cents to $4.470 per mmBTU on Friday, weighed down by forecasts for lower demand over the next week and a sharp drop in European gas prices...natural gas still managed to end the week 0.9% higher, while the April contract, which had ended the prior week priced at $4.377 per mmBTU, finished with a 2.1% gain...
The EIA's natural gas storage report for the week ending February 18th indicated that the amount of working natural gas held in underground storage in the US fell by 129 billion cubic feet to 1,782 billion cubic feet by the end of the week, which left our gas supplies 209 billion cubic feet, or 10.5% below the 1,991 billion cubic feet that were in storage on February 18th of last year, and 214 billion cubic feet, or 10.7% below the five-year average of 1,996 billion cubic feet of natural gas that have been in storage as of the 18th of February over the most recent five years....the 129 billion cubic foot withdrawal from US natural gas working storage for the cited week was in line with the average forecast for a 128 billion cubic foot withdrawal expected by an S&P Global Platts survey of analysts, but it was dwarfed by the 324 billion cubic feet that were pulled from natural gas storage during "winter storm Uri" during the corresponding week of 2021, and was also much less than the average withdrawal of 166 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 February 18th indicated that after a big jump in our oil imports, we had oil left to add to our stored commercial crude supplies for the fourth time in 13 weeks and for the 14th time in the past thirty-nine weeks…our imports of crude oil rose by an average of 1,038,000 barrels per day to an average of 6,828,000 barrels per day, after falling by an average of 599,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 415,000 barrels per day to an average of 2,686,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 4,142,000 barrels of per day during the week ending February 18th, 623,000 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 11,600,000 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 15,742,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,246,000 barrels of crude per day during the week ending February 18th, an average of 344,000 more barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 296,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 200,000 barrels per day more than what was added to storage plus what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-200,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
This week's 296,000 barrel per day increase in our overall crude oil inventories came as 645,000 barrels per day were being added to our commercially available stocks of crude oil, while 349,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, part of the Biden' administration plan to release 50 million barrels from the SPR to incentivize US gasoline consumption....including other withdrawals from the Strategic Petroleum Reserve under similar recent programs, a total of 73,765,000 barrels have been removed from the Strategic Petroleum Reserve over the past 19 months, and as a result the 582,384,000 barrels of oil now left in our Strategic Petroleum Reserve is now the lowest since September 6th, 2002, or at yet another new 19 year low, as repeated tapping of our emergency supplies for non-emergencies has 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 would have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the initial Biden program is complete, not counting what else might yet be withdrawn in the wake of the Ukraine situation...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,523,000 barrels per day last week, which was 14.1% more than the 5,715,000 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 11,600,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,100,000 barrels per day, while Alaska’s oil production was 3,000 barrels per day lower at 458,000 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 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 87.4% of their capacity while using those 15,246,000 barrels of crude per day during the week ending February 18th, up from a utilization rate of 85.3% the prior week, but still lower than the historical utilization rate for mid February refinery operations…the 15,246,000 barrels per day of oil that were refined this week were 24.6% more barrels than the 12,230,000 barrels of crude that were being processed daily during the winter storm Uri impacted week ending February 19th of 2021, but 4.8% less than the 16,210,000 barrels of crude that were being processed daily during the week ending February 21st, 2020, when US refineries were operating at what was then also a lower than normal 87.9% of capacity...
With the big increase in oil being refined this week, gasoline output from our refineries was also much higher, increasing by 440,000 barrels per day to 9,270,000 barrels per day during the week ending February 18th, after our gasoline output had decreased by 560,000 barrels per day over the prior week.…this week’s gasoline production was 19.8% more than the 7,736,000 barrels of gasoline that were being produced daily over the same week of last year, but 5.4% less than the gasoline production of 9,797,000 barrels per day during the week ending February 21st, 2020....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 238,000 barrels per day to 4,693,000 barrels per day, after our distillates output had decreased by 244,000 barrels per day over the prior week…with that increase, our distillates output was 23.0% more than the 3,621,000 barrels of distillates that were being produced daily during the week ending February 19th of 2021, but 8.1% less than the 4,846,000 barrels of distillates that were being produced daily during the week ending February 21st, 2020...
Even with the big decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the fifth time in the past 13 weeks, decreasing by 582,000 barrels to 246,479,000 barrels during the week ending February 18th, after our gasoline inventories had decreased by 1,332,000 barrels over the prior week....our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 83,000 barrels per day to 8,657,000 barrels per day, and because our imports of gasoline fell by 139,000 barrels per day to 416,000 barrels per day, and because our exports of gasoline rose by 246,000 barrels per day to 685,000 barrels per day…after this week's decrease, our gasoline supplies were 4.1% lower than last February 19th's gasoline inventories of 257,096,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, even with this week's sizable increase in our distillates production, our supplies of distillate fuels decreased for the eighteenth time in twenty-five weeks, falling by 584,000 barrels to a twenty six month low of 119,678,000 barrels during the week ending February 11th, after our distillates supplies had decreased by 1,552,000 barrels during the prior week….our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 82,000 barrels per day to 4,233,000 barrels per day, because our exports of distillates rose by 166,000 barrels per day to 960,000 barrels per day while our imports of distillates fell by 21,000 barrels per day to 416,000 barrels per day....after thirty-two inventory decreases over the past forty-six weeks, our distillate supplies at the end of the week were 21.6% below the 152,715,000 barrels of distillates that we had in storage on February 19th of 2021, and about 19% below the five year average of distillates inventories for this time of the year…
Meanwhile, after the jump in our oil imports, our commercial supplies of crude oil in storage rose for the 11th time in 29 weeks and for the 19th time in the past year, increasing by 4,514,000 barrels over the week, from 411,508,000 barrels on February 11th to 416,022,000 barrels on February 18th, the biggest jump in commercial crude since October 10th, after our commercial crude supplies had increased by 1,121,000 barrels over the prior week…with this week’s increase, our commercial crude oil inventories increased to about 9% below the most recent five-year average of crude oil supplies for this time of year, and rose to almost 30% above the average of our crude oil stocks as of third weekend of February 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 a year after that, our commercial crude oil supplies as of this February 18th were still 10.2% less than the 463,042,000 barrels of oil we had in commercial storage on February 19th of 2021, and also 6.1% less than the 443,335,000 barrels of oil that we had in storage on February 21st of 2020, and also 6.6% less than the 445,865,000 barrels of oil we had in commercial storage on February 22nd 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 thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 4,273,000 barrels this week, from 1,745,787,000 barrels on February 11th to 1,741,514,000 barrels on February 18th...that left our total supplies of oil & its products now at the lowest since April 25th, 2014, or at a new seven and a half year low, despite this week's big increase in commercial crude inventories.;..
This Week's Rig Count
The number of drilling rigs running in the US increased for the 64th time over the past 75 weeks during the week ending February 25th, but were still 18.0% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by five to 650 rigs this past week, which was also 248 more rigs than the pandemic hit 402 rigs that were in use as of the February 26th report of 2021, but was still 1,279 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 2 to 520 oil rigs during this week, after oil rigs had increased by 4 during the prior week, and there are now 213 more oil rigs active than were running a year ago, even as they still amount to just 32.3% 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 increased by 3 rigs to 127 natural gas rigs, which was the most natural gas rigs since December 13th, 2019, also up by 35 natural gas rigs from the 92 natural gas rigs that were drilling during the same week a year ago, but still only 7.9% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition, Baker Hughes continues to list a rig drilling vertically for a well intended to store CO2 emissions in Mercer county, North Dakota, as 'miscellaneous', which thus matches the 'miscellaneous' rig count of one of a year ago
The offshore rig count in the Gulf of Mexico was unchanged at twelve rigs this week, with eleven of those Gulf rigs still drilling for oil in Louisiana waters, and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's down by 5 from the 17 offshore rigs that were active in the Gulf a year ago, when 15 Gulf rigs were drilling for oil offshore from Louisiana and two were 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, those Gulf of Mexico rig counts are equal to the national offshore totals for both years....
In addition to those rigs offshore, we now have 3 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, another is a directional rig drilling for oil at a depth of over 15,000 feet in the Galveston Bay area, while the third inland waters rig is a directional rig targeting oil at a depth of between 10,000 and 15,000 feet in St. Mary Parish, Louisiana... During the same week a year ago, there were no inland waters rigs deployed..
The count of active horizontal drilling rigs was up by 4 to 593 horizontal rigs this week, which was also 234 more rigs than the 359 horizontal rigs that were in use in the US on February 26th of last year, but still 56.8% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the vertical rig count was up by 1 rig to 26 vertical rigs this week, which was also up by 1 from the 25 vertical rigs that were operating during the same week a year ago…meanwhile, the directional rig count was unchanged at 31 directional rigs this week, and those were still up by 13 from the 18 directional rigs that were in use on February 26th 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 February 25th, the second column shows the change in the number of working rigs between last week’s count (February 18th) and this week’s (February 25th) count, the third column shows last week’s February 18th 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 26th of February, 2021...
with the four rig increase in Texas and the three rig increase in the Permian basin, we'll start by checking the Rigs by State file at Baker Hughes for the changes in that basin...there we find that four rigs were added in Texas Oil District 8, which encompasses the core Permian Delaware, while two rigs were pulled out of Texas Oil District 7C, which includes the Texas counties in the southern part of the Permian Midland...with the net increase in Texas Permian thus accounting for just two of the three rig increase in that basin, we have to figure that the rig added in New Mexico was in the far western Permian Delaware, in the southeast corner of that state...
elsewhere in Texas, there were also two rigs added in Texas Oil District 6, which accounts for two of the natural gas rig additions in the Haynesville shale, with the other Haynesville addition being in northwest Louisiana, thus accounting for that state's rig increase this week...outside of the Permian and the Haynesville, the only other rig addition this week was an oil rig in the Mississippian limestone in Kansas, in the first drilling in that state since the sporadic drilling in 2019; while there has been other Mississippi lime activity since, it has all been in Oklahoma...meanwhile, the two rigs that were removed from the Granite Wash basin had been deployed in Oklahoma, in the area of that state just east of the Texas Panhandle..
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note:there's more here...
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