US natural gas touches $10 as European price hits $90; US oil supplies at a 19 year low; SPR at a 37½ year low after record withdrawal; total oil + oil products supplies at a new 13½ year low
oil prices rose for the second time in three weeks after the Saudis warned that OPEC would cut their output if the US reached a deal with Iran...after falling 1.4% to $90.77 a barrel last week on fears of a global slowdown and the possibility of a nuclear accord with Iran, the contract price for the benchmark US light sweet crude for September delivery slid in early Asian trading Monday, as oil traders considered the prospect of more Iranian oil supplies flooding the market in coming weeks, and then turned mixed in early New York trading after Gazprom's plans to temporarily shut a key natural gas pipeline to the EU sent European gas prices to record highs, but then tumbled more than 4% on fears that aggressive US interest rate hikes would lead to a global economic slowdown and dent fuel demand, before paring those deep losses to settle 54 cents lower at $90.23 a barrel after Saudi Arabia's oil minister warned that OPEC+ production could cut output in the event a nuclear deal returned sanctioned Iranian oil to the market, as trading in the September oil contract expired and the contract price for US light sweet crude for October delivery settled off 9 cents at $90.36 a barrel ...with US oil quotes now referencing the October contract price, prices rallied on Tuesday after Saudi Arabia warned that OPEC could cut output to correct the recent oil price decline, and settled $3.38 higher at $93.74 a barrel, as an unexpected shutdown of the Caspian Pipeline that delivers Kazakhstan's oil to Europe also lent additional support to prices...oil prices held onto those gains in afterhours trading Tuesday after the American Petroleum Institute reported the 2nd consecutive big drop in commercial crude supplies, but then slipped in Asian trading Wednesday on easing fears of an imminent cut in output by OPEC before rallying again in New York to close $1.15 higher $94.89 a barrel following the EIA's report of lower oil production, a sharp drop in commercial crude inventories and a record surge in fuel exports from the Gulf Coast, while soaring natural gas and power prices across the EU lent further support to the complex....oil prices eased in volatile early trading on Thursday as traders braced for the possible return of sanctioned Iranian oil exports to the market, and on worries that rising U.S. interest rates would weaken fuel demand. and then tumbled after the White House said that an Iran nuclear deal that’s good for the US would be good for the Biden administration, and finished $2.37 lower at $92.52 a barrel following hawkish comments from several Fed officials suggested that a 75-basis point rate increase was more likely at the September 21-22nd meeting than a half point hike...oil prices edged lower in see-saw trading early Friday as traders digested warnings from Fed Chairman Powell that there was no quick fix for inflation, and that we'd need tight monetary policy "for some time" before inflation is under control, which would mean slower growth, a weaker job market and "some pain" for households and businesses, but recovered to end 54 cents higher at $93.06 a barrel, boosted by signals from Saudi Arabia and the Emirates that OPEC could again cut oil output...oil prices thus posted a 2.5% gain on the week, while the October oil contract, which had finshed last week at $90.45 a barrel, ended 2.9% higher, as Saudi Arabia’s warning that oil supply cuts might be warranted overshadowed several bearish developments...
meanwhile, US natural gas prices finished lower for the 1st time in 3 weeks, after first touching a new a 14 year high over $10, following a postponement of the expected restart date for Freeport LNG exports...after rising 6.5% to a 14-year high of $9.336 per mmBTU last week after prices in Europe and Asia set new all time records, the contract price of US natural gas for September delivery opened at $9.863 per mmBTU on Monday, fifty-three cents above Friday’s closing price, after European gas prices had jumped more than 15% to an intraday high of $85.95, but fell back after failing to breach $10 to settle 34.4 cents, or 3.7% higher at $9.680 per mmBTU, with gains also driven by a strong demand outlook and concerns over availability of the fuel... however, after surging to a $10.028 per mmBTU intraday high early on Tuesday, natural gas prices plunged nearly $1 before settling down 48.7 cents on the day at $9.193 per mmBTU on news of a further delay in the resumption of operations at the Freeport LNG export plant in Texas...but US natural gas prices firmed on Wednesday, buoyed by elevated global gas prices, which offset pressure from the Freeport delay, and settled 13.7 cents higher at $9.330 per mmBTU...natural gas prices remained rangebound on Thursday after the EIA storage report showed a weekly inventory build somewhat above expectations, and settled 4.5 cents higher at $9.375 per mmBTU, and then seesawed around that price level on Friday, as traders weighed soaring global prices and the specter of light supplies for the coming winter against relatively benign near-term weather patterns and ultimately settled at $9.296 per mmBTU, down 7.9 cents on the day and 0.7% lower on the week...
The EIA's natural gas storage report for the week ending August 19th indicated that the amount of working natural gas held in underground storage in the US rose by 60 billion cubic feet to 2,579 billion cubic feet by the end of the week, which left our gas supplies 268 billion cubic feet, or 9.4% below the 2,847 billion cubic feet that were in storage on August 19th of last year, and 353 billion cubic feet, or 12.0% below the five-year average of 2,932 billion cubic feet of natural gas that were in storage as of the 19th of August over the most recent five years....the 60 billion cubic foot injection into US natural gas working storage for the cited week was 9 bcf more than the average 51 billion cubic foot injection forecast by an S&P Global Platts' survey of analysts, and was nearly double the 32 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and was also much more than the average injection of 46 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years....
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending August 19th showed that despite a record withdrawal of crude from the SPR, a drop in our oil exports, and a decrease in our refining, we had to pull oil out of our stored commercial crude supplies for the 4th time in 6 weeks, and for the 23rd time in the past 39 weeks, in part due to a big decrease in oil supplies that could not be accounted for....Our imports of crude oil rose by an average of 40,000 barrels per day to average 6,171,000 barrels per day, after falling by 39,000 barrels per day during the prior week, while our exports of crude oil fell by 823,000 barrels per day to average 4,177,000 barrels per day, which meant that our trade in oil worked out to a net import average of 1.994,000 barrels of oil per day during the week ending August 19th, 863,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day lower at 12,000,000 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 13,994,000 barrels per day during the August 19th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,255,000 barrels of crude per day during the week ending August 19th, an average of 168,000 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 average of 1,625,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures from the EIA for the week ending August 19th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 636,000 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 (+636,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed....moreover, since last week’s EIA fudge factor was at (+1,697,000) barrels per day, that means there was a 1,061,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes in supply and demand from that week to this that are indicated by this week's report are similarly erroneous... 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 1,625,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 874,737,000 barrels at the end of the week, which is our lowest total oil inventory level since July 25th, 2003, and therefore at a 19 year low.….Our oil inventories decreased this week as 469,000 barrels per day were being pulled out of our commercially available stocks of crude oil and a record 1,156,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR was another installment of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was expected to supply 1,000,000 barrels of oil per day to commercial interests over a six month period up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising, at least up until then....Including the administration's initial 50,000,000 million barrel SPR release earlier this year, their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 203,082,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 25 months, and as a result the 453,065,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since January 11, 1985, or at a 37 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's SPR releases. Now the total 180,000,000 barrel drawdown expected during the current six month release program to November will remove almost a third of what remained in the SPR when the program started, and leave us with what would be less than a 20 day supply of oil at today's consumption rate...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,454,000 barrels per day last week, which was still 1.9% more than the 6,334,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be 100,000 barrels per day lower at 12,000,000 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 lower at 11,600,000 barrels per day, while Alaska’s oil production was 6,000 barrels per day lower at 409,000 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 8.4% below that of our pre-pandemic production peak, but was 23.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...
US oil refineries were operating at 93.8% of their capacity while using those 16,255,000 barrels of crude per day during the week ending August 19th, up from their 93.5% utilization rate during the prior week, and a refinery utilization rate that's within the normal range for mid summer. The 16,255,000 barrels per day of oil that were refined this week were 1.1% more than the 16,072,000 barrels of crude that were being processed daily during week ending August 20th of 2021, but 6.6% less than the 17,408,000 barrels that were being refined during the prepandemic week ending August 23rd, 2019, when our refinery utilization was at 95.2%, also within the normal range for mid summer...
With the decrease in the amount of oil being refined this week, gasoline output from our refineries was also lower, decreasing by 536,000 barrels per day to 9,429,000 barrels per day during the week ending August 19th, after our gasoline output had decreased by 185,000 barrels per day during the prior week. This week’s gasoline production was 8.0% less than the 10,249,000 barrels of gasoline that were being produced daily over the same week of last year, and 11.5% less than our gasoline production of 10,660,000 barrels per day during the week ending August 23rd, 2019, ie, during the year before the pandemic impacted US gasoline output. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 22,000 barrels per day to 5,200,000 barrels per day, after our distillates output had increased by 56,000 barrels per day during the prior week. With those and prior increases, our distillates output was 4.2% more than the 4,988,000 barrels of distillates that were being produced daily during the week ending August 20th of 2021, and fractionally more than the 5,193,000 barrels of distillates that were being produced daily during the week ending August 23rd 2019...
With the big decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the 5th time in 8 weeks; and for the 23rd time out of the past twenty-nine weeks, but only decreased by 28,000 barrels to 215,647,000 barrels during the week ending August 19th, after our gasoline inventories had decreased by 4,462,000 barrels during the prior week. Our gasoline supplies held relatively steady this week because the amount of gasoline supplied to US users decreased by 914,000 barrels per day to 8,434,000 barrels per day, while our exports of gasoline rose by 18,000 barrels per day to 920,000 barrels per day, and while our imports of gasoline fell by 99,000 barrels per day to 615,000 barrels per day. After 23 gasoline inventory drawdowns over the past 29 weeks, our gasoline supplies were 4.5% lower than last August 20th's gasoline inventories of 225,924,000 barrels, and about 7% below the five year average of our gasoline supplies for this time of the year…
Even after the increase in our distillates production, our supplies of distillate fuels decreased for the 5th time in 8 weeks and for the 33rd time in the past year, falling by 662,000 barrels to 111,490,000 barrels during the week ending August 19th, after our distillates supplies had increased by 766,000 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, decreased by 37,000 barrels per day to 3,888,000 barrels per day, because our exports of distillates rose by 271,000 barrels per day to 1,579,000 barrels per day while our imports of distillates rose by just 9,000 barrels per day to 173,000 barrels per day.. After forty-eight inventory withdrawals over the past seventy-one weeks, our distillate supplies at the end of the week were 19.4% below the 138,459,000 barrels of distillates that we had in storage on August 20th of 2021, and about 24% below the five year average of distillates inventories for this time of the year...
Meanwhile, despite a record withdrawal of crude from the SPR, a drop in our oil exports, and a decrease in our oil refining, our commercial supplies of crude oil in storage fell for the 9th time in 15 weeks and for the 30th time in the past year, decreasing by 3,282,000 barrels over the week, from 424,954,000 barrels on August 12th to 421,672,000 barrels on August 19th, after our commercial crude supplies had decreased by 7,056,000 barrels over the prior week. After those decreases, our commercial crude oil inventories were about 6% below the most recent five-year average of crude oil supplies for this time of year, but still roughly 22% above the average of our crude oil stocks as of the third week of August 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 commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this August 19th were still 2.5% less than the 432,564,000 barrels of oil we had in commercial storage on August 20th of 2021, and were 17.0% less than the 507,763,000 barrels of oil that we had in storage on August 21st of 2020, and 3.7% less than the 437,778,000 barrels of oil we had in commercial storage on August 23rd of 2019…
Lasty, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows in recent months, 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, fell by 12,561,000 barrels this week, from 1,673,923,000 barrels on August 12th to 1,667,196,000 barrels on August 19th, after our total inventories had fallen by 12,561,000 barrels during the prior week. That left our total liquids inventories down by 121,237,000 barrels over the first 32 weeks of this year, and at the lowest level since October 10th, 2008, and thus at a 13 1/2 year low...
This Week's Rig Count
The number of drilling rigs running in the US rose for the first time in four weeks and for the 82nd time over the prior 100 weeks during the week ending August 26th, but they're still 3.5% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 3 to 765 rigs this past week, which was still 257 more rigs than the 508 rigs that were in use as of the August 27th report of 2021, and was 1,164 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business….
The number of rigs drilling for oil increased by 3 to 605 oil rigs during the past week, after the number of rigs targeting oil had been unchanged during the prior week, and there are now 195 more oil rigs active now than were running a year ago, even as they just amount to just 37.6% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are down 11.4% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 158 natural gas rigs, which was still up by 61 natural gas rigs from the 97 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.8% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….other than those rigs targeting oil and natural gas, Baker Hughes also reports that two "miscellaneous" rigs continued drilling this week, including a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, and a vertical rig drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track....a year ago, there were was only one such "miscellaneous" rig running...
The offshore rig count in the Gulf of Mexico was unchanged at 16 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana's offshore waters....that's two more than the number of offshore rigs that were active in the Gulf a year ago, when all 14 Gulf rigs were also drilling for oil offshore from Louisiana...in addition to rigs drilling in the Gulf, we still have two offshore directional rigs drilling for natural gas in the Cook Inlet of Alaska; one is indicated to be drilling to between 10,000 and 15,000 feet, while the other one is indicated to be drilling to between 5,000 and 10,000 feet...a year ago, there were was only one rig drilling offshore from Alaska...
In addition to rigs running offshore, 3 water based rigs continue to drill through inland bodies of water this week...those include a directional rig drilling for oil to between 10,000 and 15,000 feet, inland in Galveston Bay. Texas; a directional rig targeting oil at a depth greater than 15,000 feet drilling through a lake on Grand Isle, Louisiana, and a directional rig drilling for oil in Terrebonne Parish, Louisiana, also at a depth greater than 15,000 feet...
The count of active horizontal drilling rigs was unchanged at 694 horizontal rigs this week, which was 235 more rigs than the 459 horizontal rigs that were in use in the US on August 27th of last year, but barely over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....however, the vertical rig count was up by 2 to 31 vertical rigs this week, and those were also up by 10 from the 21 vertical rigs that were operating during the same week a year ago…meanwhile, the directional rig count was up by 1 to 40 directional rigs this week, while those were also up by 12 from the 28 directional rigs that were in use on August 27th 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 August 26th, the second column shows the change in the number of working rigs between last week’s count (August 19th) and this week’s (August 26th) count, the third column shows last week’s August 19th 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 27th of August, 2021...
it appears that all of this week's changes were in Texas and two adjoining states...checking the Rigs by State file at Baker Hughes for the changes in Texas Permian, we find that there were four rigs added in Texas Oil District 8, which covers the core Permian Delaware, which would have included a natural gas rig, but that there was an oil rig pulled out of Texas Oil District 7C, which includes the southern counties of the Permian Midland, which combined accounts for the 3 rig increase in the Permain basin, which now has 4 natural gas rigs in addition to 344 oil rigs....elsewhere in Texas, there were two natural gas rigs pulled out of Texas Oil District 2, which accounts for the change in the Eagle Ford shale, which still has 7 natural gas rigs and 63 oil rigs active, and there was a natural gas rig added in Texas Oil District 6, which accounts for the increase in the Haynesville shale, which now has 69 natural gas rigs and 1 oil rig...
meanwhile, Oklahoma saw the removal of two oil rig from the Cana Woodford, but the addition of two oil rigs in the Ardmore Woodford, so the Oklahoma rig count remained unchanged....the rig addition in Louisiana was in a basin that Baker Hughes doesn't track in the southern part of the state, while there was also a natural gas rig pulled out of a basin that Baker Hughes doesn't track somewhere, but we can't easily tell where because there was likewise an oil rig added in the same basin at the same time, leaving totals for whatever basin & state that was in unchanged...if you really need to know where those changes occurred, Baker Hughes offers the North America Rotary Rig Count Pivot Table (xls) which shows the individual well drilling records by state and county since February 2011, including all those in basins that Baker Hughes doesn't track in their other summaries..
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note: there’s more here…
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