natural gas prices hit 14 year high; oil exports at a record high; oil supplies at an 18 year low, SPR at a 37 year low

natural gas prices hit a 14 year high but closed lower; US oil exports were at a record high; US oil supplies were at new 18 year low, Strategic Petroleum Reserve was at a 37 year low; 4 week average of distillate exports hit a 47 month high

oil prices rose for the first time in four weeks due to falling Russian oil exports and a larger than expected drop in U.S. crude inventories,....after oil prices fell 3% to $94.70 a barrel last week following the expiration of the higher priced August oil contract, the contract price for the benchmark US light sweet crude for September delivery fell in Asian trading early on Monday on concerns that the expected Fed interest rate hike would impact fuel demand, but opened higher in New York in step with rebounding equity markets, as US traders anticipated the Fed hike, and then rallied to close $2.00 higher at $96.70 a barrel on reports that Russian crude oil exports fell by more than 13% over the past month, a sign that global oil supplies were too tight to ignore....oil prices moved higher for a second day on Tuesday after Russia cut gas supplies to Europe through a major pipeline, but turned lower after the EIA lowered its oil price forecasts for 2022 and 2023 in its latest short term energy outlook and settled down $1.72 at $94.98 a barrel after consumer confidence data showed Americans were more pessimistic about the economy than at any point in the last 18 months, and after International Monetary Fund cut its global growth projections for this year by 0.4%...oil prices moved modestly higher overnight after the American Petroleum Institute reported a larger-than-expected drawdown in U.S. crude inventories, and then steadied early Wednesday as concerns about weaker demand offset the bullish API inventory data, but rose again after the EIA report showed demand for US crude was rising globally amid an oil supply crunch, and settled $2.28 higher at $97.26 a barrel, as the EIA report of lower inventories and cuts in Russian gas flows to Europe offset concern about weaker demand and the 0.75% Fed interest rate hike....oil prices edged up in Asian trading on Thursday, buoyed by lower crude inventories and higher gasoline demand in the US, but then reversed a gain of more than 2% early in the New York session after data from the US Bureau of Economic Analysis showed the U.S. economy shrunk for the second consecutive quarter in ending June, entering into what many economists call a technical recession, and settled 84 cents lower at $96.42 a barrel as concerns about a potential global recession that would hit energy demand offset lower U.S. crude inventories and a rebound in gasoline consumption...oil prices moved higher in mid-morning Asian trade on Friday, as traders continued to weigh signs of macroeconomic weakness against a tight physical market, and then jumped more than $4 a barrel in New York trading as the market's attention turned to next week’s OPEC+ meeting, and the dimming expectations that the cartel would boost supplies, before settling for a $2.20 gain at $98.62 a barrel on the day, as traders shrugged off recession fears to focus on the tight supply situation that currently exists worldwide... oil thus finished 4.1% higher on the week, but still ended July 7.4% lower, after it had fallen 7.2% in June...

Meanwhile, natural gas prices finished a bit lower for the first time in four weeks, but not before hitting a 14 year high mid-week...after rising 15.5% to $8.299 per mmBTU last week on record power demand and on forecasts for further records, the contract price of natural gas for August delivery moved higher early Monday as traders weighed ongoing strong summer cooling demand against the coming Wednesday expiration of the contract, and rallied to settle 42.8 cents higher at $8.727 per mmBTU, as a persistent heat wave drove up demand for gas-powered electricity for air conditioning....natural gas prices then surged more than 11% to a 14 year high early Tuesday, after Russia's Gazprom said it would reduce gas flows to Europe to 20% through the key Nord Stream 1 pipeline, but backed off that high to settle just 26.6 cents, or 3.0% higher at $8.993 per mmBTU....with trading in the August natural gas contract expiring, prices retreated a further 30.6 cents to $8.687 per mmBTU on Wednesday on record gas output and forecasts for less demand next week than had been expected, while the contract price of natural gas for September delivery, which would be the quoted front month the next day, fell 27.1 cents to $8.554 per mmBTU...now quoting the September contract, natural gas prices fell 42.0 cents, or nearly 5%, to $8.134 on Thursday, on forecasts for less hot weather through mid-August than previously forecast, and on an increase in output to near-record levels...natural gas prices finished the week with a modest gain of 9.5 cents to $8.229 per mmBTU on Friday, but still finished the week 0.8% lower, while the September contract, which had finished last week priced at $8.195, actually finished 0.4% higher...

The EIA's natural gas storage report for the week ending July 22nd indicated that the amount of working natural gas held in underground storage in the US rose by 15 billion cubic feet to 2,416 billion cubic feet by the end of the week, which left our gas supplies 293 billion cubic feet, or 10.8% below the 2,709 billion cubic feet that were in storage on July 22nd of last year, and 345 billion cubic feet, or 12.5% below the five-year average of 2,761 billion cubic feet of natural gas that have been in storage as of the 22nd of July over the most recent five years....the 15 billion cubic foot injection into US natural gas working storage for the cited week was below the average forecast by an S&P Global Platts survey of analysts for a 25 billion cubic foot injection, and much less than the 38 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and also well below the average injection of 32 billion cubic feet of natural gas that has 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 July 22nd indicated that despite another large oil withdrawal from the SPR, increased production from our wells, and a refinery slowdown, we still needed to withdraw oil from our stored commercial crude supplies for the 4th time in 6 weeks, and for the 21st time over the past 35 weeks, mostly because of another big increase in our oil exports.  Our imports of crude oil fell by an average of 355,000 barrels per day to an average of 6,164,000 barrels per day, after falling by an average of 156,000 barrels per day during the prior week, while our exports of crude oil rose by 789,000 barrels per day to a record high of 4,548,000 barrels per day, which meant that our trade in oil worked out to a net import average of 1,616,000 barrels of oil per day during the week ending July 22nd, 1,144,000 fewer barrels per day than the net of our imports minus our exports during the prior week Over the same period, production of crude from US wells was reportedly 200,000 barrels per day lower at 12,100,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 13,716,000 barrels per day during the July 22nd reporting week…

With our oil exports at a record high, we'll include a historical graph of them below, where you can see that prior to the end of 2014, US oil exports, except for those allowed under NAFTA, had been negligible because they had been banned 40 years earlier, in the wake of the Arab oil embargo. The ban on US oil exports was lifted in a spending bill that Congress passed during the last week of 2015, part of a compromise that Obama agreed to in order to avoid a government shutdown...

Meanwhile, US oil refineries reported they were processing an average of 16,027,000 barrels of crude per day during the week ending July 22nd, an average of 292,000 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 1,447,000 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 July 22nd appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 864,000 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 (+864,000) 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... 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 1,447,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 896,631,000 barrels at the end of the week, which is our lowest total oil inventory level since February 6th, 2004, and therefore at a new 18 year low (see graph below)….our oil inventories decreased this week as 646,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 801,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. The draw on the SPR was part 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 further at least up until that time. The administration's previous 30,000,000 million barrel release from the SPR to address Russian supply related shortfalls wrapped up in June, and his earlier release of 50 million barrels from the SPR to incentivize US gasoline consumption was completed in May.  Including those, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 181,602,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 24 months, and as a result the 474,545,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since June 14th, 1985, or at a new 37 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 over 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 rose to an average of 6,550,000 barrels per day last week, which was 1.9% more than the 6,425,000 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 200,000 barrels per day higher at 12,100,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 11,700,000 barrels per day, while Alaska’s oil production was 2,000 barrels per day lower at 435,000 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 7.6% below that of our pre-pandemic production peak, but was 24.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...

US oil refineries were operating at 92.2% of their capacity while using those 16,027,000 barrels of crude per day during the week ending July 22nd, down from their 93.7% utilization rate during the prior week, and a refinery utilization rate that's below normal for mid summer.  The 16,027,000 barrels per day of oil that were refined this week were 1.0% more than the 15,875,000 barrels of crude that were being processed daily during week ending July 23rd of 2021, but 5.7% less than the 16,991,000 barrels that were being refined during the prepandemic week ending July 26th, 2019, when our refinery utilization was at 93.0%, a rate also slightly below normal for mid-July...

Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was still higher, increasing by 290,000 barrels per day to 9,658,000 barrels per day during the week ending July 22nd, after our gasoline output had increased by 447,000 barrels per day during the prior week.  However, this week’s gasoline production was still 1.2% less than the 9,779,000 barrels of gasoline that were being produced daily over the same week of last year, while 7.3% less than our gasoline production of 10,416,000 barrels per day during the week ending July 26th, 2019, ie, a comparable week during the year before the pandemic impacted US gasoline output. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 22,000 barrels per day to 5,009,000 barrels per day, after our distillates output had decreased by 102,000 barrels per day during the prior week.  But even after those decreases, our distillates output was still 5.7% more than the 4,739,000 barrels of distillates that were being produced daily during the week ending July 23rd of 2021, while 3.0% less than the 5,164,000 barrels of distillates that were being produced daily during the week ending July 26th, 2019...

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the 2nd time in six weeks; but for 20th time out of the past twenty-five weeks, decreasing by 3,304,000 barrels to 225,131,000 barrels during the week ending July 22nd, after our gasoline inventories had increased by 3,489,000 barrels during the prior week. Our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 724,000 barrels per day to 9,245,000 barrels per day, and because our imports of gasoline fell by 266,000 barrels per day to 599,000 barrels per day, while our exports of gasoline fell by 38,000 barrels per day to 768,000 barrels per day.  After 20 inventory drawdowns over the past 25 weeks, our gasoline supplies were 3.9% lower than last July 23rd's gasoline inventories of 234,161,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

Following the recent decreases in our distillates production, our supplies of distillate fuels decreased for the 4th time in eleven weeks and for the 29th time in forty-seven weeks, falling by 784,000 barrels to 111,724,000 barrels during the week ending July 22nd, after our distillates supplies had decreased by 1,295,000 barrels during the prior week.  Our distillates supplies fell again this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 53,000 barrels per day to 3,750,000 barrels per day, and even though our exports of distillates fell by 147,000 barrels per day to 1,495,000 barrels per day, while our imports of distillates rose by 2,000 barrels per day to 124,000 barrels per day..  But after forty-five inventory withdrawals over the past sixty-seven weeks, our distillate supplies at the end of the week were 19.0% below the 137,912,000 barrels of distillates that we had in storage on July 23rd of 2021, and about 23% below the five year average of distillates inventories for this time of the year…

Meanwhile, with this week's increase in our oil exports and decrease in our imports, our commercial supplies of crude oil in storage fell for the 7th time in 11 weeks and for the 31st time in the past year, decreasing by 4,523,000 barrels over the week, from 426,609,000 barrels on July 15th to 422,086,000 barrels on July 22nd, after our commercial crude supplies had decreased by 445,000 barrels over the prior week. After that decrease, our commercial crude oil inventories were 9.1% below the most recent five-year average of crude oil supplies for this time of year, but 24.8% above the average of our crude oil stocks as of the fourth weekend of July 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 July 22nd were still 3.1% less than the 435,598,000 barrels of oil we had in commercial storage on July 23rd of 2021, and were 19.7% less than the 525,969,000 barrels of oil that we had in storage on July 24th of 2020, and 3.3% less than the 436,545,000 barrels of oil we had in commercial storage on July 26th of 2019…

Finally, 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 8,857,000 barrels this week, from 1,688,796,000 barrels on July 15th to 1,679,939,000 barrels on July 22nd, after our total inventories had fallen by 3,862,000 barrels during the prior week. That left our total liquids inventories down by 108,494,000 barrels over the first 28 weeks of this year, and only 2.1 million barrels from hitting a new 13 1/2 year low...  

This Week's Rig Count

The number of drilling rigs running in the US increased for the 81st time over the prior 96 weeks during the week ending July 29th, but still remained 3.3% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 9 to 767 rigs this past week, which was also 279 more rigs than the 488 rigs that were in use as of the July 30th report of 2021, but was still 1,162 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 rose by 6 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 220 more oil rigs active now than were running a year ago, even as they still 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 still down 11.4% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 to 157 natural gas rigs, which was also up by 54 natural gas rigs from the 103 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…

In addition to rigs targeting oil and natural gas, Baker Hughes is now reporting five "miscellaneous" rigs active; the legacy miscellaneous rigs include a horizontal rig drilling ​to​ between 5,000 ​and 10,000 feet into the Permian basin in Dawson county Texas, a directional rig drilling between 5,000 ​and 10,000 feet on the big island of Hawaii, a rig drilling vertically to between 10,000 and 15,000 feet for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and another vertical rig, drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...the new miscellaneous rig is also a vertical rig, targeting the Marcellus shale at a depth of between 5,000 ​and 10,000 feet in Tompkins County, New York; that might be a exploratory geothermal well now being drilled on the Cornell ​University ​campus....a year ago, there were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was up by 1 to 15 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana's offshore waters....that's now 1 more than the 14 offshore rigs that were active in the Gulf a year ago, when 13 Gulf rigs were drilling for oil offshore from Louisiana and one​ rig was deployed for oil offshore from Texas.…in addition to rigs drilling in the Gulf, we also 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 no offshore rigs other than those deployed in the Gulf of Mexico....

in addition to rigs running offshore, there are now 4 water based rigs drilling through inland bodies of water....one is a directional rig targeting oil at a depth of 10,000 to 15,000 feet in Cameron parish, Louisiana; others include a directional rig targeting oil at a depth greater than 15,000 feet on Grand Isle, Louisiana, and two directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown ​to be ​drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there was just one such "inland waters" rig deployed...

The count of active horizontal drilling rigs was up by ten to 697 horizontal rigs this week, which was also 255 more rigs than the 442 horizontal rigs that were in use in the US on July 30th of last year, but just over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the vertical rig count was up by 1 to 32 vertical rigs this week, and those were also up by 15 from the 17 vertical rigs that were operating during the same week a year ago…on the other hand, the directional rig count was down by 2 to 38 directional rigs this week, but those were still up by 9 from the 29 directional rigs that were in use on July 30th 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 July 29th, the second column shows the change in the number of working rigs between last week’s count (July 22nd) and this week’s (July 29th) count, the third column shows last week’s July 22nd 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 30th of July, 2021...

checking the Rigs by State file at Baker Hughes for the changes in Texas, we find that there were 2 rigs pulled out of Texas Oil District 1, but that there was a rig was added in Texas Oil District 2, there were 2 rigs added in Texas Oil District 3, and there were 3 rigs added Texas Oil District 4 at the same time; two of those rig additions account for the two oil rigs that were added in the Eagle Ford shale, and it's likely two more were​ also​ in the Eagle Ford, offsetting the two rig​s​ shut down in District 1​....that would still mean 2 rigs were added in a basin in the same area that Baker Hughes doesn't track...in ​Texas's Permian basin districts, there was an oil rig added in Texas Oil District 8, which covers the core Permian Delaware, and no changes elsewhere; hence with the Texas Permian rig count up by just 1, the rig that was added in New Mexico had to be in the far western  Permian Delaware for the national Permian count to be up by 2 rigs...Texas also saw a natural gas rig added in Texas Oil District 6, which accounts for the addition in the Haynesville shale...

in Oklahoma, 5 oil rigs were pulled out of the Cana Woodford, while one oil rig and one natural gas rig were added in the Arkoma Woodford, which now has four natural gas rigs and three oil rigs deployed...since the Oklahoma rig count was up by one, that means there were 4 rigs added in Oklahoma in a basin or basins that Baker Hughes doesn't track...meanwhile, the rig count increase in Louisiana came by way of the oil rig added in the state's offshore waters...while a natural gas rig was added in Pennsylvania's Marcellus, two natural gas rigs were pulled out of West Virginia's Marcellus at the same time....the Marcellus count remained unchanged, however, because the miscellaneous rig added in New York state ​is considered to be targeting the Marcellus...since the loss of a Marcellus natural gas rig brings our identified natural gas rig increase down to one, we have to figure one of those aforementioned rigs added to basins that Baker Hughes doesn't track was a natural gas rig, which bears out as Baker Hughes shows the "other" natural gas rigs up by one to 25...

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note: there's more here...