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, April 25, 2022

US oil supplies at a 14 year low after record jump in oil exports; oil+products exports at a record high; oil+products inventories at an 8 year low

natural gas hits $8, a 13½ year high, before retreating; SPR at a new 20 year low, total oil supplies at a 14 year low after record jump in oil exports; distillates supplies at a 14 year low, total oil + products exports at a record high; total oil + products inventories at an 8 year low; natural gas ​rigs at a 30 month high​; ​DUC backlog at 4.6 months as DUCs fall to a record low

oil prices fell for the third time in four weeks after the International Monetary Fund (IMF) cut its global economic growth forecast and as Covid-related lockdowns in China continued to impact demand... after rising 8.8% to $106.95 a barrel last week after Ukrainian peace talks failed and the EU considered a ban on Russian oil imports, the contract price for US light sweet crude for May delivery opened higher on Monday after protesters closed down the Sharara field in western Libya, adding to Russia related supply problems, but reversed those overnight gains to trade lower as traders reacted to a sharp decline in China's consumption tied to Covid-19 shutdowns of major cities, before rallying late to close $1.26 higher at $108.21 a barrel as the outages in Libya deepened concern over tight global supplies amid the Ukraine crisis....but oil prices moved lower in tandem with softening equities on Tuesday as traders refocused on a slowing economy in China and a downgraded global economic growth forecast from the World Bank, and then accelerated their decline after the International Monetary Fund (IMF) cut its global economic growth forecast by nearly a full percentage point, and warned of higher inflation. to settle $5.65, or 5.22% lower at $102.56 a barrel....but oil prices advanced in pre-inventory trading early Wednesday after preliminary data from the American Petroleum Institute showed a surprise drop in U.S. commercial crude oil inventories, along with a larger-than-expected drawdown from distillate stocks, and then rose to over $104 a barrel after the EIA confirmed the API report, but backed off to close just 19 cents higher at $102.75 a barrel as the positive U.S inventory data was overshadowed by Covid-related deaths in China, which raised questions about near-term demand in the world’s No.2 oil importer. as trading in the May oil contract came to an end...with oil price quotes now referencing the contract price for US light sweet crude for June delivery, which had closed Wednesday 14 cents higher at 102.19 a barrel, oil prices moved higher on Thursday, as those who sold crude down in the prior two sessions covered their shorts amid a return of the supply issues that had fueled much of the year’s energy rally, as oil settled $1.60 higher at $103.79 a barrel, supported by concerns over a potential EU ban on Russian oil imports and the supplies already lost to the ongoing disruption in Libya, where violent protests had shut-in more than 500,000 barrels (bbl) in daily output, leading to a declaration of force majeure on exports....however, oil prices unwound those gains on Friday, falling 1.72 to $102.07 a barrel, after Bloomberg reported that China’s demand for gasoline, diesel and aviation fuel in April was expected to slide 20% from a year earlier, and thus finished with a weekly loss of nearly 5%, on the prospect of weaker global growth, higher interest rates and the COVID-19 lockdowns in China, while the June oil contract, which had closed last week priced at $106.38 a barrel, ended just over 4% lower, as a strengthening U.S. dollar index in the aftermath of comments from Federal Reserve officials indicating an aggressive pivot towards interest rate hikes further pressured U.S. crude benchmark...

Meanwhile, natural gas prices fell for the first time in six weeks, but not before hitting a new 13 year high, as an early Spring cold spell gave way to more seasonable temperatures...after rising 16.3% to $7.300 per mmBTU last week as the heating season ended with natural gas supplies at a 3 year low, the contract price of natural gas for May delivery opened 2% higher on Monday and rallied 10% to trade as high as $8.06 per mmBTU, the highest price since September 2008, before settling 52.0 cents higher at $7.820 per mmBTU, fueled by stronger weather-led demand gains, recovering LNG feed gas deliveries and storage adequacy concerns...however, natural gas prices completely reversed Monday's gain in falling over 11% on Tuesday, before rebounding to settled 8.24% lower at $7.176 per mmBTU, as traders took profits after weather models backed off the prior forecast of cooling in the eastern half of the nation at the end of April and early May...after the bouncing back to a $7.410 intraday high on Wednesday, the May gas contract price fell more than 3% to settle 23.9 cents lower at $6.937 per mmBTU, as forecasts indicated a turn to slightly warmer weather and heating degree day projections over the next two weeks moved closer to normal for this time of year....after falling another 3% early Thursday on the EIA report of a bigger-than-expected inventory increase, natural gas prices steadied to settle 2.0 cents higher at $6.957 per mmBTU...however, prices tumbled 42.3 cents to $6.534 per mmBTU on Friday, with the pullback from the 13-year high hit earlier in the week hastened by the larger-than-expected weekly storage build, and thus finished 10.5% lower on the week...

The EIA's natural gas storage report for the week ending April 15th showed that the amount of working natural gas held in underground storage in the US rose by 53 billion cubic feet to 1,450 billion cubic feet by the end of the week, which still left our gas supplies 428 billion cubic feet, or 22.8% below the 1,878 billion cubic feet that were in storage on April 15th of last year, and 392 billion cubic feet, or 16.8% below the five-year average of 1,742 billion cubic feet of natural gas that have been in storage as of the 15th of April over the most recent five years....the 53 billion cubic foot injection into US natural gas working storage for the cited week was considerably more than the average forecast for a 31 billion cubic foot injection from an S&P Global Platts survey of analysts, and it was also more than the average injection of 42 billion cubic feet of natural gas that have typically been added to our natural gas storage during the same week over the past 5 years, and more than the 42 billion cubic feet that were added to natural gas storage during the corresponding week of 2021... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 15th indicated that because of a record increase in our oil exports, we had to withdraw oil out of our stored commercial crude supplies for the 14th time in 21 weeks and for the 30th time in the past forty-six weeks…our imports of crude oil fell by an average of 159,000 barrels per day to an average of 5,837,000 barrels per day, after falling by an average of 305,000 barrels per day during the prior week, while our exports of crude oil rose by a record 2,090,000 barrels per day to 4,270,000 barrels per day during the week, after our exports had fallen by an average of 705,000 barrels per day during the prior week...applying our oil exports to offset oil supplies from imports to determine our effective trade in oil, we find there was a net import average of 1,567,000 barrels of oil per day during the week ending April 15th, 2,249,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,900,000 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 13,467,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,717,000 barrels of crude per day during the week ending April 15th, an average of 194,000 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 1,817,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 433,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+433,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed.....however, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

This week's 1,817,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 969,713,000 barrels at the end of the week, our lowest oil inventory level since January 11th, 2008, and thus a 14 year low….this week's oil inventory decrease came as 1,146,000 barrels per day were being pulled our commercially available stocks of crude oil, while 672,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time....that draw on the SPR included a withdrawal under the initial 30,000,000 million barrel release from the SPR to address Russian supply related shortfalls, as well as an earlier ongoing withdrawal under the administration's 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 100,169,000 barrels have now been removed from the Strategic Petroleum Reserve over the past 21 months, and as a result the 555,980,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since February 1st, 2002, or at a 20 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs has already drained those supplies considerably over the past dozen years...with Biden's recent "Plan to Respond to Putin’s Price Hike at the Pump", an additional and unprecedented 1,000,000 barrels per day will be released from the SPR daily starting in May and running up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further up until that time....that total 180,000,000 barrel drawdown over six months will remove almost a third of what remains in the SPR at this time, as the following graph illustrates...

The above graph comes from a post by oil and gas researcher Rory Johnston at Substack, wherein he discusses the implications of the planned SPR release, and it shows the historical quantity of oil held in our Strategic Petroleum Reserve, beginning from its inception following the Arab Oil Embargo of 1973-74 to the present day...the graph is further annotated to indicate the reasons for major additions to and withdrawals from the SPR, most of which were due to disruptions to oil supplies following hurricanes in the Gulf (you can get a better view of that by clicking on the graph, or even better yet, the enlarged version at substack.com....on the far right, Rory has projected where the strategic petroleum Reserve will end up after the Biden withdrawals are complete, which will take the SPR back to its level of 1983, while it was still being filled...based on an estimated average daily US oil consumption of 18,000,000 barrels per day, the US will have roughly 18 1/2 days of oil supply left in the Strategic Petroleum Reserve this November, after all three of the Biden administration's SPR withdrawal programs have run their course ...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,098,000 barrels per day last week, which was still 3.1% more than the 5,916,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,900,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,500,000 barrels per day, while Alaska’s oil production fell by 16,000 barrels per day to 428,000 barrels per day but had no impact on the final rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 9.1% below that of our pre-pandemic production peak, but was 41.2% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...

US oil refineries were operating at 91.0% of their capacity while using those 15,717,000 barrels of crude per day during the week ending April 15th, up from the 90.0% utilization rate of the prior week, and close to the historical utilization rate for mid April refinery operations…the 15,717,000 barrels per day of oil that were refined this week were 6.4% more barrels than the 14,765,000 barrels of crude that were being processed daily during week ending April 16th of 2021, when refineries were still recovering from winter storm Uri, and 26.1 more than the 12,456,000 barrels of crude that were being processed daily during the week ending April 17th, 2020, when US refineries were operating at what was then a much lower than normal 67.6% of capacity at the onset of the pandemic, but 5.2% less than the 16,583,000 barrels that were being refined during the week ending April 19th 2019, when refinery utilization was at a modest 90.1% for the same week of April...

With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 335,000 barrels per day to 9,836,000 barrels per day during the week ending April 15th, after our gasoline output had increased by 377,000 barrels per day over the prior week.… this week’s gasoline production was 4.8% more than the 9,386,000 barrels of gasoline that were being produced daily over the same week of last year, and fractionally above the gasoline production of 9,781,000 barrels per day during the week ending April 19th, 2019, ie, the year before the pandemic impacted gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 162,000 barrels per day to 4,816,000 barrels per day, after our distillates output had decreased by 388,000 barrels per day over the prior week…with that increase, our distillates output was 5.7% more than the 4,555,000 barrels of distillates that were being produced daily during the week ending April 16th of 2021, but 4.9% less that the 5,064,000 barrels of distillates that were being produced daily during the week ending April 19th, 2019...

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the tenth time in eleven weeks, decreasing by 761,000 barrels to 232,378,000 barrels during the week ending April 15th, after our gasoline inventories had decreased by 3,648,000 barrels over the prior week....our gasoline supplies decreased by less this week even though the amount of gasoline supplied to US users increased by 132,000 barrels per day to 8,868,000 barrels per day, because our imports of gasoline rose by 158,000 barrels per day to 597,000 barrels per day while our exports of gasoline rose by 32,000 barrels per day to 918,000 barrels per day...and even with 10 inventory drawdowns over the past 11 weeks, our gasoline supplies were still only 1.1% lower than last April 16th's gasoline inventories of 234,982,000 barrels, and 3% below the five year average of our gasoline supplies for this time of the year…

Likewise, even with this week's increase in our distillates production, our supplies of distillate fuels decreased for the eleventh time in fourteen weeks and for the 23rd time in thirty-three weeks, falling by 2,642,000 barrels to a fourteen year low of 108,735,000 barrels during the week ending April 15th, after our distillates supplies had decreased by 2,902,000 barrels during the prior week…our distillates supplies fell again this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 338,000 barrels per day to 3,822,000 barrels per day, even as our exports of distillates fell by 261,000 barrels per day to 1,478,000 barrels per day, and while our imports of distillates fell by 50,000 barrels per day to 104,000 barrels per day.....after thirty-six inventory decreases over the past fifty-two weeks, our distillate supplies at the end of the week were 23.6% below the 143,464,000 barrels of distillates that we had in storage on April 9th of 2021, and about 20% below the five year average of distillates inventories for this time of the year…

The depressed level of our distillate supplies has led to diesel fuel and heat oil prices that are often $1 per gallon more than the already elevated price of gasoline...supplies of diesel and pricing of it are also elevated in Europe and globally, leading to economic restrictions ​and power outages ​in countries that cant afford it, such as Sri Lanka and Pakistan...although those diesel shortages had developed over time, the loss of Russian oil has exacerbated the situation, ​because refineries get more diesel per barrel oil out of a heavy crude than they do from a light one, and most Russian oil exports are medium heavy sour crudes....that global shortage of diesel also explains ​the thinking behind ​the 1 million barrel per day SPR release better than the administration's political messaging around gasoline prices...for US Gulf Coast and European refineries that were built to use a medium heavy crude like Russian Urals, ​they need to find an equivalent grade ​of crude ​to replace it, or do some expensive blending of other grades to match it…remember that the administration’s first frantic moves ​after the Russian oil ban ​were to try to get Venezuelan oil and even Iranian oil back on the market to ​replace it?…the US Strategic Petroleum Reserve is 60% heavier grades of crude, so it appears tha​t they’re pulling it out​ to replace embargoed Russian oil​…most oil we get from shale ​is light​ and sweet​, typically more expensive, but worthless when one is trying to replace Russian oil losses...and th​ose losses also explain our rising exports to Europe..

The big jump in our oil exports, combined with elevated exports of distillates and most other petroleum products, also meant that our total exports of crude oil and all the products made from it were at a record high of 10,600,000 barrels during the week ending April 15th, an increase of 17.9% from our total exports of 8,987,000 the prior week, and 60.1% higher than our total exports during the first four weeks of this year, before European demand was impacted by Russian troop movements...thiose record ​exports are quite evident in the chart below...

Meanwhile, with th​is week's record jump in our oil exports, our commercial supplies of crude oil in storage fell for the 24th time in 38 weeks and for the 33rd time in the past year, decreasing by 8,020,000 barrels over the week, from 421,753,000 barrels on April 8th to 413,733,000 barrels on April 15th, after our commercial crude supplies had increased by 9,382,000 barrels over the prior week…with this week’s decrease, our commercial crude oil inventories slipped to about 15% below the most recent five-year average of crude oil supplies for this time of year, but were still 18.7% above the average of our crude oil stocks as of the third weekend of April 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 then jumped again after last year's winter storm Uri froze off Gulf Coast refining, our commercial crude oil supplies as of this April 15th were 16.1% less than the 493,017,000 barrels of oil we had in commercial storage on April 16th of 2021, and were also 20.2% less than the 518,640,000 barrels of oil that we had in storage on April 17th of 2020, and 10.2% less than the 460,633,000 barrels of oil we had in commercial storage on April 19th of 2019…

The big jump in our oil exports, combined with elevated exports of distillates and most other petroleum products, meant that our total exports of crude oil and all the products made from it were at a record high of 10,600,000 barrels during the week ending April 15th, an increase of 17.9% from our total exports of 8,987,000 the prior week, and 60.1% higher than our total exports during the first four weeks of this year, before demand was impacted by Russian troop movements...

Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are ​also ​continuing to keep track of 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 12,795,000 barrels this week, from 1,711,881,000 barrels on April 8th to 1,699,086,000 barrels on April 15th, after our total supplies are down b by 89 347,000 barrels over the first fifteen weeks of this year...this week was also the first time our total inventories have been below 1.7 billion barrels since March 14th, 2014, and hence our total inventories of oil & its products are at an eight year low, as the graph below shows...

This Week's Rig Count

The number of drilling rigs running in the US rose for the 70th time over the prior 82 weeks during the period ending April 22nd, but it still remained 12.4% below the prepandemic rig count (note: this week's tally includes 8 days, because last week's report was out a day early due to Good Friday)......Baker Hughes reported that the total count of rotary rigs drilling in the US increased by two to 695 rigs this past week, which was also 257 more rigs than the pandemic hit 438 rigs that were in use as of the April 23rd report of 2021, but was still 1,234 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 1 to 549 oil rigs during this week, after rigs targeting oil had increased by 2 during the prior week, and there are now 206 more oil rigs active now than were running a year ago, even as they still amount to just 34.1% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 19.6% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations was also up by 1 to 144 natural gas rigs, the most since October 11th, 2019, and up by 50 natural gas rigs from the 94 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.0% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two "miscellaneous" rigs active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...

The offshore rig count in the Gulf of Mexico was unchanged at twelve this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's one more than the number of offshore rigs that were active in the Gulf a year ago, when ten Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…​and ​in addition to rigs drilling in the Gulf, this week also saw the startup of an offshore rig in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet...a year ago, there were no rigs offshore other than those in the Gulf....however, last year did have an inland water based rig active, while this week the last "inland waters" rig that was active has been shut down...

The count of active horizontal drilling rigs was up by 3 to 639 horizontal rigs this week, which was also 242 more rigs than the 398 horizontal rigs that were in use in the US on April 23rd of last year, but still 53.5% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014....on the other hand, the directional rig count was down by one to 31 directional rigs this week, but those were still up by 12 from the 19 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, while those were still up by 3 from the 22 vertical rigs  that were in use on April 23rd of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of April 22nd, the second column shows the change in the number of working rigs between last week’s count (April 14th) and this week’s (April 22nd) count, the third column shows last week’s April 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 23rd of April, 2021...

As you can see, there weren't many changes this week; there were two oil rigs added in North Dakota's Williston basin, another rig was added in Oklahoma's Cana Woodford, and yet another oil rig was added to Oklahoma's Ardomore Woodford at the same time....however, since the Oklahoma rig count was unchanged, and since the national oil rig count was only up by one, we can figure that two oil rigs had to have been shut down elsewhere in Oklahoma, in a basin or basins that Baker Hughes doesn't track... checking the Rigs by State file at Baker Hughes for the changes in the Eagle Ford region, we find that two rigs were added in Texas Oil District 1, but that a rig was pulled out of Texas Oil District 2; one of those rig additions accounts for the addition of a 10th natural gas rig in the Eagle Ford; the other addition was offset by the rig removal in District 2 and could have been targeting oil or gas (the North America Rotary Rig Count Pivot Table (XLS) provides county level details, should you want to know exactly what and where those changes were)...since the Alaska rig addition was also targeting natural gas in the Cook inlet, and since the national gas rig count was only up by one, that means there had to have been a natural gas rig removed elsewhere that had been drilling for natural gas... checking the aforementioned North America Rotary Rig Count Pivot Table, we find the rig that was removed from Wyoming was a horizontal rig that had been targetting naturual gas at a depth of more than 15,000 feet in the Green River Basin in Sublette County, which is a basin that Baker Hughes doesn't track...

DUC well report for March

Monday of this week saw the release of the EIA's Drilling Productivity Report for April, which included the EIA's March data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (shown under the report's tab 3)....that data showed a decrease in uncompleted wells nationally for the 22nd consecutive month in March, as both completions of drilled wells and drilling of new wells increased in March, but remained well below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 114  wells, falling from 4,387 DUC wells in February to 4,273 DUC wells in March, which was the lowest number of US wells left uncompleted on record, and also 38.1% fewer DUCs than the 6,905 wells that had been drilled but remained uncompleted as of the end of March of a year ago...this month's DUC decrease occurred as 823 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, up from the 779 wells that were drilled in February, while 937 wells were completed and brought into production by fracking them, up by 9 from the 928 well completions seen in February, and up by 387 from the 854 completions seen in March of last year....at the March completion rate, the 4,273 drilled but uncompleted wells remaining at the end of the month represents a 4.6 month backlog of wells that have been drilled but are not yet fracked, down from the 4.7 month DUC well backlog of a month ago, and the lowest backlog since December 2014, despite a completion rate that is still more than 20% below 2019's pre-pandemic average...

only the oil producing regions saw a net DUC well decrease during March, since the natural gas producing Haynesville shale saw an increase in DUCs that was greater than the Appalachian DUC decrease....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 71, from 1,380 DUC wells at the end of February to 1,309 DUCs at the end of March, as 362 new wells were drilled into the Permian basin during March, while 433 already drilled wells in the region were being fracked....in addition, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 14, falling from 331 at the end of February to a record low of 317 DUC wells at the end of March, as 90 wells were drilled into the Niobrara chalk during March, while 104 Niobrara wells were completed....meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 13, falling from 753 at the end of February to 740 DUC wells at the end of March, as 55 wells were drilled into the Anadarko basin during March, while 68 Anadarko wells were completed....at the same time, there was a decrease of 11 DUC wells in the Bakken of North Dakota, where DUC wells fell from 426 at the end of February to a record low of 415 DUCs at the end of March, as 65 wells were drilled into the Bakken during March, while 76 of the drilled wells in the Bakken were being fracked.....in addition, DUCs in the Eagle Ford shale of south Texas also decreased by 11, from 653 DUC wells at the end of February to a record low of 642 DUCs at the end of March, as 90 wells were drilled in the Eagle Ford during March, while 101 already drilled Eagle Ford 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 6 wells, from 473 DUCs at the end of February to a record low of 467 DUCs at the end of March, as 89 wells were drilled into the Marcellus and Utica shales during the month, while 95 of the already drilled wells in the region were fracked....on the other hand, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 12, from 371 DUCs in Februrary to 383 DUCs by the end of March, as 72 wells were drilled into the Haynesville during February, while 60 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of March, 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 120 wells to 3,423 DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) increased by net of 6 wells to 850 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas... 

 

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Note: there's more here...

Monday, April 18, 2022

natural gas price at a 13 year high; distillates supplies at an 8 year low; oil product exports highest ever

natural gas prices at a new 13 year high as heating season ends with supplies lowest in 3 years; Strategic Petroleum Reserve at a 20 year low; US distillates exports at a 45 month high leaves domestic distillates supplies at an 8 year low; oil product exports at an all time high; global oil surplus hits 710,000 barrels per day in March despite 821,000 barrel per day OPEC shortfall; natural gas drilling at a 30 month high

oil prices recovered from early losses to end higher for the first time in three weeks after Ukrainian peace talks failed and the EU considered a ban on Russian oil imports...after falling more than 1% to $98.26 a barrel last week after the IEA countries joined the US in an unprecedented release of emergency oil reserves, the contract price for US light sweet crude for May delivery tumbled 3% in mid-morning trading on Monday on growing concerns over China's Covid-19 surge and the big oil reserve release from consuming nations and never recovered, settling $3.97 or 4% lower at $94.29 a barrel, with sharp losses spearheaded by tightening lockdowns of China's largest cities as the World Bank slashed China's 2022 growth forecast on the back of their largest Covid-19 outbreak since beginning of the pandemic....but oil prices rebounded on Tuesday, as Shanghai eased lockdown restrictions in some areas and OPEC told the European Union it wouldn’t be possible to replace the Russian supply loss, and then rallied in afternoon trading after both OPEC and the EIA downgraded the global supply outlook through 2023, driven by sharp downward revisions to Russian oil production, which had​ already​ been hammered by Western sanctions, and finished $6.31 higher at $100.60 a barrel....oil prices extended their gains in midmorning trading on Wednesday, after Moscow said peace talks with Ukraine had reached a dead end, feeding worries about tight supplies, and closed $3.65 higher at $104.25 a barrel, even after the EIA reported that U.S. crude stocks rose by more than 9 million barrels in the most recent week....but oil prices slid more than 2% early Thursday as Chinese refiners appeared ​ready to cut crude throughput this month by about 6%, a pullback​ not seen​since the early days of the pandemic, but bounced back as traders covered short positions ahead of the long weekend on news that the European Union might phase in a ban on Russian oil imports, with US May oil closing $2.70 higher at $106.95 a barrel, thus finishing the week 8.8% higher, as traders weighed a global supply deficit, a potential ban on Russian oil from the European Union, and and China’s latest virus lockdowns

Meanwhile, natural gas prices rose for the eighth time in nine weeks and set a new thirteen year high each day this week, as the heating season ended with natural gas supplies at a 3 year low, 24% below the​ir​ year earlier level....after rising 9.8% to $6.278 per mmBTU last week on falling US gas output and on a bigger than expected decline in gas inventories, the contract price of natural gas for May delivery opened 2% higher on Monday and rallied to gain 36.5 cents to $6.643 per mmBTU, as a bump in production did little to assuage growing concerns about dwindling supplies, especially in light of chilly forecasts for most of this month...prices edged higher again on Tuesday on expectations that ​a ​freezing ​air mass in Canada would boost heating demand as it moved into the US next week. and settled 3.7 cents higher at $6.680 per mmBTU, and then surged 31.7 cents to $6.997 on Wednesday, on forecasts for unusual cold in the Upper Midwest and unusual heat in the Mid-Atlantic states....finally, natural gas prices finished off the short holiday week with another big jump​ on Thursday​, after the latest EIA inventory data confirmed a sluggish start to the injection season, and on expectations that freezing weather in Canada would boost heating demand as it moves into the United States next week. and settled 30.3 cents higher at $7.300 per mmBTU, thus finishing with a 16.3% increase for the week..

the above is a screenshot of the interactive natural gas price chart from barchart.com, which i have set to show front month natural gas prices monthly over the past 10 years, which means you're seeing the range of natural gas prices over that time as they were quoted by the media...this same chart can be reset to show prices of front month or individual monthly natural gas ​futures ​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 for a single month, with months when prices rose indicated in green, and months when prices fell indicated in red, with the small sticks above or below each monthly bar representing the extent of the price change above or below the opening and closing price for the month in question....likewise, the bars across the bottom show trading volume for the months in question, again with up months indicated by green bars and down ​months indicated in red...what's noteworthy in this monthly price view is that natural gas prices have already risen more in the first 15 days of April than they did over any full month in the previous ten years, ​something you can easily tell from the length of the green bar representing the current month.. 

The EIA's natural gas storage report for the week ending April 8th showed that the amount of working natural gas held in underground storage in the US rose by 15 billion cubic feet to 1,382 billion cubic feet by the end of the week, which still left our gas supplies 439 billion cubic feet, or 23.9% below the 1,836 billion cubic feet that were in storage on April 8th of last year, and 303 billion cubic feet, or 17.8% below the five-year average of 1,700 billion cubic feet of natural gas that have been in storage as of the 8th of April over the most recent five years....the 15 billion cubic foot injection into US natural gas working storage for the cited week was more than the average forecast for a 10 billion cubic foot injection from an S&P Global Platts survey of analysts, but it was less than the average injection of 33 billion cubic feet of natural gas that have typically been added to our natural gas storage during the same week over the past 5 years, and far kess than the 55 billion cubic feet that were added to natural gas storage during the corresponding week of 2021... assuming there will be no further withdrawals from storage until fall, the 1,382 billion cubic feet we ended this year's heating season with would have been the lowest natural gas inventory level since ​April ​2019...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 8th indicated that after a near record decrease in our oil exports, we were able to add surplus oil to our stored commercial crude supplies for the 7th time in 20 weeks and for the 16th time in the past forty-five weeks…our imports of crude oil fell by an average of 305,000 barrels per day to an average of 5,995,000 barrels per day, after rising by an average of 41,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,513,000 barrels per day to 2,180,000 barrels per day during the week, after our exports had risen by an average of 705,000 barrels per day during the prior week...applying our oil exports to offset oil supplies from imports to get our effective trade in oil, we find there was a net import average of 3,815,000 barrels of per day during the week ending April 8th, 1,208,000 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 11,800,000 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 15,615,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,523,000 barrels of crude per day during the week ending April 8th, an average of 424,000 fewer 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 783,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, 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 691,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+691,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an 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 (+1,352,000) barrels per day, that means there was a 661,000 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 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 783,000 barrel per day increase in our overall crude oil inventories came as 1,340,000 barrels per day were being added to commercially available stocks of crude oil, while 557,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time....that draw on the SPR included a withdrawal under the initial 30,000,000 million barrel release from the SPR to address Russian supply related shortfalls, as well as an earlier ongoing withdrawal under the administration's 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 95,468,000 barrels have now been removed from the Strategic Petroleum Reserve over the past 21 months, and as a result the 560,681,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since March 8th, 2002, or at a 20 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs has already drained those supplies considerably over the past dozen years...with Biden's recent announcement, an additional and unprecedented million barrels per day will be released from the SPR daily starting in May and running up to the midterm elections in November, in the hope of keeping gasoline and diesel prices lower up until that time....that total 180,000,000 barrel drawdown will remove almost a third of what remains in the SPR at this time, as the following graph illustrates...

The above graph comes from a post by oil and gas researcher Rory Johnston at Substack, wherein he discusses the implications of the planned SPR release, and it shows the historical quantity of oil held in our Strategic Petroleum Reserve, beginning from its inception following the Arab Oil Embargo of 1973-74 to the present day...the graph is further annotated to indicate the reasons for major additions to and withdrawals from the SPR, most of which were due to disruptions to oil supplies following hurricanes in the Gulf (you can get a better view of that by clicking on the graph, or even better yet, the enlarged version at substack.com....on the far right, Rory has projected where the strategic petroleum Reserve will end up after the Biden withdrawals are complete, which will take the SPR back to its level of 1983, while it was still being filled...based on an estimated average daily US oil consumption of 18,000,000 barrels per day, the US will have roughly 18 1/2 days of oil supply left in the Strategic Petroleum Reserve this November, after all three of the Biden administration's SPR withdrawal programs have run their course ...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,260,000 barrels per day last week, which was still 4.9% more than the 5,971,000 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 11,800,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,400,000 barrels per day, while Alaska’s oil production fell by 5,000 barrels per day to 443,000 barrels per day but had no impact on the final rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 9.9% below that of our pre-pandemic production peak, but 40.0% 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 90.0% of their capacity while using those 15,523,000 barrels of crude per day during the week ending April 8th, down from the 92.1% utilization rate of the prior week, but still close to the historical utilization rate for early April refinery operations, when spring refinery maintenance programs have just about finished up…the 15,523,000 barrels per day of oil that were refined this week were 3.1% more barrels than the 15,051,000 barrels of crude that were being processed daily during week ending April 9th of 2021, when refineries were still recovering from winter storm Uri, and 22.6% more than the 12,665,000 barrels of crude that were being processed daily during the week ending April 10th, 2020, when US refineries were operating at what was then a much lower than normal 69.1% of capacity at the onset of the pandemic, but 3.5% less than the 16,078,000 barrels that were being refined during the week ending April 12th 2019, when refinery utilization had slipped to an 8 year low of 87.7% for the same week of April...

Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was still higher, increasing by 377,000 barrels per day to 9,501,000 barrels per day during the week ending April 8th, after our gasoline output had increased by 70,000 barrels per day over the prior week.…but this week’s gasoline production was still 1.2% less than the 9,615,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.2% less than the gasoline production of 9,917,000 barrels per day during the week ending April 12th, 2019, ie, the year before the pandemic impacted output....on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 388,000 barrels per day to 4,654,000 barrels per day, after our distillates output had decreased by 49,000 barrels per day over the prior week…even with those decreases, our distillates output was 10.1% more than the 4,228,000 barrels of distillates that were being produced daily during the week ending April 9th of 2021, but 3.5% less that the 5,038,000 barrels of distillates that were being produced daily during the week ending April 12th, 2019...

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the ninth time in ten weeks, decreasing by 3,648,000 barrels to 233,139,000 barrels during the week ending April 8th, after our gasoline inventories had decreased by 2,041,000 barrels over the prior week....our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 174,000 barrels per day to 8,736,000 barrels per day, and because our imports of gasoline fell by 45,000 barrels per day to 439,000 barrels per day while our exports of gasoline fell by 94,000 barrels per day to 886,000 barrels per day,.…and even with 9 inventory drawdowns over the past 10 weeks, our gasoline supplies were still only 0.7% lower than last April 9th's gasoline inventories of 234,897,000 barrels, and 3% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, with this week's big decrease in our distillates production, our supplies of distillate fuels decreased for the tenth time in thirteen weeks and for the 22nd time in thirty-two weeks, falling by 2,902,000 barrels to an eight year low of 111,399,000 barrels during the week ending April 8th, after our distillates supplies had increased by 771,000 barrels during the prior week…our distillates supplies fell this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 163,000 barrels per day to 3,484,000 barrels per day, because our exports of distillates rose by 366,000 barrels per day to a 45 month high of 1,739,000 barrels per day, while our imports of distillates rose by 66,000 barrels per day to 154,000 barrels per day.....after thirty-six inventory decreases over the past fifty-two weeks, our distillate supplies at the end of the week were 22.3% below the 143,464,000 barrels of distillates that we had in storage on April 9th of 2021, and about 17% below the five year average of distillates inventories for this time of the year…

This week's spike in distillates exports, combined with elevated exports of other petroleum products, meant that our total exports of all such refinery products were at an all time high, rising from 5,938,000 barrels per day during the week ending April 1st to 6,807,000 barrels per day during the week ending April 8th, easily topping the prior export record of 6,432000 barrels per day set last August 6th; that record export total includes everything our refineries produce, from gasoline and distillates to kerosene type jet fuels, residual fuels, and propane/propylene...

Meanwhile, with the near record drop in our oil exports, our commercial supplies of crude oil in storage rose for the 14th time in 37 weeks and for the 20th time in the past year, increasing by 9,382,000 barrels over the week, from 412,371,000 barrels on April 1st to 421,753,000 barrels on April 8th, after our commercial crude supplies had increased by 2,421,000 barrels over the prior week…with this week’s increase, our commercial crude oil inventories were about 13% below the most recent five-year average of crude oil supplies for this time of year, but were nearly 30% above the average of our crude oil stocks as of the second weekend of April 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 then jumped again after last year's winter storm Uri froze off Gulf Coast refining, our commercial crude oil supplies as of this April 8th were 14.4% less than the 492,423,000 barrels of oil we had in commercial storage on April 9th of 2021, and were also 16.3% less than the 503,618,000 barrels of oil that we had in storage on April 10th of 2020, and 7.3% less than the 455,154,000 barrels of oil we had in commercial storage on April 12th of 2019…

Finally, with our inventory of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of 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, rose by 3,465,000 barrels this week, from 1,708,416,000 barrels on April 1st to 1,711,881,000 barrels on April 8th, the second increase after our total supplies had decreased by 81,461,000 barrels over the first twelve weeks of this year...hence that increase still left our total supplies of oil & its products less than 5 million barrels higher than what would be an 8 year low dating back to April 4th, 2​014.

OPEC's Report on Global Oil for March​s Report on Global Oil for March

​Tuesday of the past week saw the release of OPEC's April Oil Market Report, which includes details on OPEC & global oil data for March, and hence it gives us a picture of the global oil supply & demand situation after OPEC​ and aligned oil producers agreed to increase their output by 400,000 barrels per day for ​an eighth consecutive month​, ie​ from the previously agreed to July 2021 level, which was in turn part of the fifth production quota policy reset that they've made over the past twenty​-two​ months, all in response to the pandemic-related slowdown and subsequent irregular recovery....note that ​now ​with the course and impact of the Ukraine war uncertain, we consider the demand projections made herein, which are only modestly lower than in the prior report, to be purely speculative, and hence will not address any projections beyond the March estimates..

The first table from this monthly report that we'll review is from the page numbered 45 of this month's report (pdf page 55), 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 production estimates by 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 57,000 barrels per day to 28,557,000 barrels per day during March, up from their revised February production total of an average of 28,500,000 barrels per day....however, that February output figure was originally reported as 28,473,000 barrels per day, which therefore means that OPEC's January production was revised 27,000 barrels per day higher with this report, and hence OPEC's February production was, in effect, 84,000 barrels per day higher than the previously reported OPEC production figure (for your reference, here is the table of the official January 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 2021, which was subsequently renewed to include further monthly 400,000 barrel per day production increases in January, February, March and April 2022, and which would indicate an increase of 25​4,000 barrels per day each month from the OPEC members listed above, with the rest supplied by other producers. including Russia..but as we can see from the above table, OPEC's increase of 57,000 barrels per day fell far short of that...the production decreases in Nigeria, which has ongoing pipeline theft and leakage problems, and Libya, with their repeated bouts of civil strife, are obviously part of the reason for the March shortfall, but even Saudi Arabia fell 50,000 barrels per day short of what they were expected to produce, as we'll see in the next table...

The adjacent table was originally included as a downloadable attachment to the press release following the 25th OPEC and non-OPEC Ministerial Meeting on February 2nd, 2022, which set OPEC's and other aligned producers production quotas for March... since war torn Libya and US sanctioned producers Iran and Venezuela are exempt from the production cuts imposed by the joint agreement that governs the output of the other OPEC producers, they are not shown here, and OPEC's quota is aggregated under the total listed for the 'OPEC 10', which you can see was to be at 25,061,000 barrels per day in March....therefore, the 24,240,000 barrels those 10 OPEC members actually produced in March were 821,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for most of this month's shortfall, while only Kuwait and the UAE ​were ​able to produce what was expected of them.....

* * *

Recall that the original 2020 oil producer's agreement was to jointly cut their oil production by 23%, or 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 2020, but that initial 9.7 million bpd production cut agreement was 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 that 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 their 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 2018 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 a pre-set amount for each country over the following three months, thus extending their joint output cut agreement through July....production levels for August and the following months of last 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 2021'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 to boost 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, and then agreed to stick to that 400,000 bpd oil output increase in March, despite pressure from the US to raise output more quickly, at a meeting on February 2nd....then, at a meeting on March 2nd, OPEC and its oil-producing allies, which included Russia, decided to hold their production increase at that level thru April in an OPEC+ meeting that only lasted 13 minutes, their shortest meeting ever...finally, on March 31, OPEC and aligned producers agreed to reaffirm the decisions of the prior Ministerial meetings and again limit their production increase to 400,000 barrels per day, because "the current [oil market] volatility is not caused by fundamentals, but by ongoing geopolitical developments"

Hence OPEC arrived at the production quotas for August 2021 through April of this year by repeatedly readjusting 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 subsequently 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 the Covid surge of February, March, and then later during April of last year....under the agreement prior to the current one affecting this month, OPEC's production cut in April 2021 was set at 4,564,000 barrels per day below 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 initially increase their production by just over 1% per month since that time...for OPEC alone, a 25​4,000 barrel per day increase each month since, begining with the July 2021 quota of 23,033,000 barrels per day, is how they arrived at the 25,061,000 barrels per day quota for OPEC for March that you see on the table above..

The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from April 2020 to March 2022, and it comes from page 46 (pdf page 56) of OPEC's April 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 57,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production increased by a rounded 370,000 barrels per day to average 99.66 million barrels per day in March, a reported increase which came after February's total global output figure was apparently revised down by 210,000 barrels per day from the 99.50 million barrels per day of global oil output that was estimated for February a month ago, as non-OPEC oil production rose by a rounded 320,000 barrels per day in March after that downward revision, with 260,000 barrels per day of the increase coming from the US and Norway, due to the ​resolution of weather related outages and a shale oil production increase in March...

After that increase in March's global output, the 99.66 million barrels of oil per day that were produced globally during the month were 6.45 million barrels per day, or 6.9% more than the revised 93.21 million barrels of oil per day that were being produced globally in March a year ago, which was the third month that OPEC and their allied producers had reduced their output cuts by 500,000 barrels per day from the 7.7 million barrels per day production cut that they applied to the last 5 months of 2020, but also the second month that the Saudis had unilaterally decreased their own production by a million barrels per day in response to the pandemic's hit to demand (see the April 2021 OPEC report (online pdf) for the originally reported March 2021 details)...with this month's modest increase in OPEC's output, their March oil production of 28,557,000 barrels per day amounted to 28.7% of what was produced globally during the month, down from their revised 28.8% share of the global total in February....OPEC's March 2021 production was reported at 25,042,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,515,000 barrels per day, or 14.0% more barrels per day of oil this March than what they produced a year earlier, when they accounted for 26.9% of global output...

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 was a bit more than the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 26 of the April Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 over the rest of the table...on the "Total world" line in the second column, we've circled in blue the figure that's relevant for March, which is their estimate of global oil demand during the first quarter of 2022....OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe were using an average of 98.95 million barrels of oil per day, which is a downward revision of 19,000 barrels per day from their estimate for 1st quarter demand of a month ago (that revision is circled in green)...but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were producing 99.66 million barrels million barrels per day during March, which would imply that there was a surplus of around 710,000 barrels per day of global oil production in March, when compared to the demand estimated for the month...

In addition to figuring the March global oil supply shortfall that's evident in this report, the downward revision of 210,000 barrels per day to February's global oil output that's implied in this report, which is mostly offset the 190,000 barrels per day downward revision to first quarter demand noted above, means that the 360,000 barrels per day global oil output surplus we had previously figured for February would now be revised to a surplus of 340,000 barrels per day...similarly, the oil shortage of 600,000 barrels per day we had previously figured for January would be revised to a shortage of 410,000 barrels per day in light of the 190,000 barrel per day downward revision to first quarter demand...

Also note that in orange we've also circled an upward revision of 70,000 barrels per day to 2021's demand, which also means that the supply shortfalls that we previously reported for last year would have to be revised....a separate table on page 25 of the March Oil Market Report (pdf page 35) indicates the revisions to 2021 demand included an an upward revision of 20,000 barrels per day to 4th quarter demand, an upward revision of 90,000 barrels per day to 3rd quarter demand, an upward revision of 80,000 barrels per day to 2nd quarter demand. and an upward revision of 140,000 barrels per day to 1st quarter demand...we're not inclined to go back and recompute the shortages for each month of 2021, but we do have adequate totals for the year from our prior reports such that we can estimate an aggregate revision...

With the release of OPEC's January Oil Market Report three months ago, we had complete and revised data for all of 2021, and found that the world was short 527,910,000 barrels of oil during the year, which worked out to a shortage of 1,446,300 barrels of oil per day....OPEC's February Oil Market Report then revised aggregate global demand for 2021 higher by 10,000 barrels per day, OPEC's March Oil Market Report revised 2021 demand higher by 90,000 barrels per day, and now this month's report has revised that demand higher by another 70,000 barrels per day....that means our original estimate of 2021's oil shortage now needs to be revised a total 170,000 barrels per day higher, or to 1,616,300 barrels per day...that would th​erefore revise the total shortage total shortage of oil for last year up to 534,115,000 barrels....we're still far from running out, however, because the quantities of oil being produced globally during the pandemic of 2020 still averaged over 1.1 trillion barrels, or over 3 million barrels per day more than anyone wanted...

This Week's Rig Count

The number of drilling rigs running in the US rose for the 69th time over the prior 81 weeks during the period ending April 14th, but it still remained 12.6% below the prepandemic rig count​ (note that this week's tally only counts 6 days due to Good Friday​).​.....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by four to 693 rigs this past week, which was also 254 more rigs than the pandemic hit 439 rigs that were in use as of the April 16th report of 2021, but was still 1,236 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 548 oil rigs during this week, after rigs targeting oil had increased by 13 during the prior week, and there are now 204 more oil rigs active now than were running a year ago, even as they still amount to just 34.1% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 19.8% from the prepandemic oil rig count….meanwhile, the number of drilling rigs targeting natural gas bearing formations was up by 2 to 143 natural gas rigs, the most since October 11th, 2019, and up by 49 natural gas rigs from the 94 natural gas rigs that were drilling during the same week a year ago, even as they were still only 8.9% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two active "miscellaneous" rigs; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...

The offshore rig count in the Gulf of Mexico was unchanged at twelve offshore rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's the same number of offshore rigs that were active in the Gulf a year ago, when ten 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 continue to have a water based directional rig, drilling for oil at a depth of over 15,000 feet, inland in the Galveston Bay area, while during the same week of a year ago, there were no such "inland waters" rigs deployed..

The count of active horizontal drilling rigs was up by 5 to 636 horizontal rigs this week, which was also 238 more rigs than the 398 horizontal rigs that were in use in the US on April 16th of last year, but still 53.7% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014....on the other hand, the vertical rig count was down by one to 26 vertical rigs this week, while those were still up by 4 from the 21 vertical rigs that were operating during the same week a year ago…meanwhile, the directional rig count was unchanged at 32 directional rigs this week, and those were still up by 12 from the 20 directional rig that were in use on April 16th 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 April 14th, the second column shows the change in the number of working rigs between last week’s count (April 8th) and this week’s ( April 14th) count, the third column shows last week’s April 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 16th of April, 2021...

​We'll again​ ​start by checking the Rigs by State file at Baker Hughes for the Texas changes in the Permian basin...there we find that three rigs were added to those in Texas Oil District 8, which encompasses the core Permian Delaware, and that two more rigs started drilling in Texas Oil District 8A, which includes the Texas counties in the northern part of the Permian Midland, but that two rigs were removed from Texas Oil District 7C, which encompasses those Texas counties in the southern part of the Permian Midland, at the same time, thus indicating a net increase of three rigs in the Texas Permian...since there was just a two rig increase in the Permian basin nationally, that means that the rig that was pulled out from New Mexico had been drilling in the western Permian Delaware in the southeast corner of that state,... 

Elsewhere in Texas, we find that a rig was added in Texas Oil District 2, but that a rig was pulled out of Texas Oil District 3, in the only evidence of activity in the Eagle Ford districts (1 thru 4) in that state...but since the Eagle Ford shale rig count was up by three oil rigs, that means there were at least two other rigs pulled out of those four districts targeting other basins that Baker Hughes doesn't track, to offset and thus mask evidence of those Eagle Ford increases...the North America Rotary Rig Count Pivot Table (XLS) provides county level details, should you want to know exactly what those changes were... meanwhile, another rig was added in Texas Oil District 5, which accounts for the natural gas rig increase in the Barnett Shale near Dallas-FtWorth...

In other rig changes around the country, there was an oil rig added to Oklahoma's Cana Woodford, and an oil rig increase on Alaska's North Slope (as indicated by the Pivot Table), while the inland waters rig that had been targeting oil at a depth of between 10,000 and 15,000 feet in St. Mary Parish, Louisiana was removed...for rigs targeting natural gas formations, there was a natural gas rig addition in the Haynesville shale, offset by the removal of a Haynesville shale oil rig, thus netting no net change in the Haynesville count, while at the same time two rigs targeting natural gas were added in West Virginia's Marcellus, which were offset by the removal of two natural gas rigs from Pennsylvania's Marcellus, thus also netting no net change in the Marcellus...

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