US oil imports at a 2 year high; distillates exports at all time high, US oil supplies at an 18 year low, Strategic Petroleum Reserve at a 37 year low; oil rigs fall by most in 25 months, natural gas rigs at a 35 month high..
oil prices fell for the fifth time in six weeks on weak economic reports from China and Europe and lower US demand for fuel...after rising 4.1% to $98.62 a barrel last week on falling Russian oil exports and on a larger than expected drop in U.S. crude inventories, the contract price for the benchmark US light sweet crude for September delivery fell in Asian trading early on Monday as a surprise contraction in Chinese factory data added to concerns that a global slowdown might sap demand, while an increase in Libyan output eased supply concerns, and then tumbled more than 4% in New York trading to settle down $4.73 at $93.89 a barrel after European manufacturing data indicated a deeper contraction at the start of the third quarter, with Germany, France, Italy, and Spain all recording sub-50 readings in their respective PMIs...oil prices dropped again in early trading on Tuesday as traders absorbed the bleak outlook for fuel demand amid data pointing to a global manufacturing downturn, but recovered to settle 53 cents higher at $94.42 a barrel ahead of an OPEC+ producers meeting wherein a further boost in crude supply was uncertain amid concerns that a possible global recession could limit energy demand...oil prices dipped in overnight trading after the American Petroleum Institute reported a surprise build of crude inventories against analysts' predictions of a modest draw, but rallied early Wednesday despite the API data after OPEC+ ministers signaled the coalition might raise oil production in September, despite signs of decelerating demand growth in Asia and European Union, before turning lower after the EIA confirmed that US crude and gasoline stockpiles had unexpectedly surged higher last week, and after OPEC+ said it would raise its oil output target by only 100,000 barrels per day in September, and settled $3.76 or nearly 4% lower at a six month low of $90.66 a barrel, as the EIA data also showed an unseasonal drop in gasoline consumption, underscoring concerns that spiking fuel prices had undermined usually strong summer driving demand...oil prices steadied above those levels early Thursday, as traders weighed tight supply against demand fears, but then dropped to their lowest levels since the Ukrainian war began, as traders fretted over the possibility that an economic recession later this year could torpedo energy demand, settling $2.12 lower at $88.54 a barrel as traders refocused on global recession fears, rising inflation, and building crude oil inventories in the US...oil prices eroded further in overnight trading into Friday as traders awaited the release of July employment data in the United States, which was expected to show a slowing pace of new hires amid softer economic growth and tightening monetary policy, but reversed to settle 47 cents higher at $89.01 a barrel, after a surprisingly strong U.S. jobs report painted a picture of a U.S. economy that was not slowing down...nonetheless, oil prices still finished 9.7% lower on the week, the biggest weekly decline since early April, amid growing signs that a global economic slowdown was curbing demand....
meanwhile, natural gas prices also finished lower for the week, on milder forecasts and on an inventory increase that exceeded expectations....after rising 0.4% to $8.229 per mmBTU last week, but closing 0.8% lower than the prior week's July contract closing price, the contract price of natural gas for September delivery retreated in early trading Monday as weekend weather models had moderated, but bounced off the bottom to finish 5.4 cents higher at $8.283 per mmBTU, after midday weather models showed more heat on the East Coast...however, natural gas prices dropped about 7% to a two-week low on Tuesday on record output from US wells and on forecasts for less demand over the next two weeks than was previously expected, and settled 57.7 cents lower at $7.706 per mmBTU....but that drop almost was completely reversed on Wednesday, when prices rose 56.0 cents or 7% to $8.266 per mmBTU, after Freeport LNG said that its LNG export plant in Texas remained on track to return to service in early October...natural gas prices then slid on Thursday after the storage report showed a bigger-than-expected injection into storage, and on forecasts for cooler weather that could reduce air-conditioning demand but partially recovered from steeper losses to settle 14.4 cents, or 1.7% lower, at $8.122 per mmBTU...natural gas prices gave up another 5.8 cents on Friday to settle at $8.064 per mmBTU, as gas output from wells neared record highs and forecasts for hot weather were revised slightly lower and thus finished 2.0% lower on the week...
The EIA's natural gas storage report for the week ending July 29th indicated that the amount of working natural gas held in underground storage in the US rose by 41 billion cubic feet to 2,457 billion cubic feet by the end of the week, which left our gas supplies 268 billion cubic feet, or 9.8% below the 2,725 billion cubic feet that were in storage on July 29th of last year, and 337 billion cubic feet, or 12.1% below the five-year average of 2,794 billion cubic feet of natural gas that have been in storage as of the 29th of July over the most recent five years....the 41 billion cubic foot injection into US natural gas working storage for the cited week topped even the highest of estimates ahead of the report, and was quite a bit more than the 16 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and also more than the average injection of 33 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 29th indicated that after a jump in our oil imports, a drop in our oil exports, and another big withdrawal of crude from the SPR, we were able to add oil to our stored commercial crude supplies for the 3rd time in 7 weeks, and for the 15th time in the past 36 weeks. Our imports of crude oil rose by an average of 1,178,000 barrels per day to a 2 year high of 7,342,000 barrels per day, after falling by an average of 355,000 barrels per day during the prior week, while our exports of crude oil fell by 1,036,000 barrels per day to 3,512,000 barrels per day, which meant that our trade in oil worked out to a net import average of 3,830,000 barrels of oil per day during the week ending July 29th, 2,214,000 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 unchanged 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 15,930,000 barrels per day during the July 29th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,853,000 barrels of crude per day during the week ending July 29th, an average of 174,000 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 32,000 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 29th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 109,000 barrels per day more than what our oil refineries reported they used during the week. To account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-109,000) 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 (+864,000) barrels per day, that means there was a 973,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the week over week supply and demand changes indicated by this week's report are completely worthless....however, since most everyone treats these weekly EIA reports as gospel, and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
This week's modest 32,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 896,408,000 barrels at the end of the week, which was again 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 even as 638,000 barrels per day were being added to our commercially available stocks of crude oil, because 670,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time.. This week's 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 186,292,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 24 months, and as a result the 469,855,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since May 24th, 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 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 rose to an average of 6,675,000 barrels per day last week, which was 1.7% more than the 6,564,000 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 12,100,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,700,000 barrels per day, while Alaska’s oil production was 3,000 barrels per day higher at 438,000 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 91.0% of their capacity while using those 15,853,000 barrels of crude per day during the week ending July 29th, down from their 92.2% utilization rate during the prior week, and a refinery utilization rate that's below normal for mid summer. The 15,853,027,000 barrels per day of oil that were refined this week were 0.4% less than the 15,920,000 barrels of crude that were being processed daily during week ending July 30th of 2021, and 10.8% less than the 17,777,000 barrels that were being refined during the prepandemic week ending August 2nd, 2019, when our refinery utilization was at 96.4%, the highest of that summer...
With the decrease in the amount of oil being refined this week, gasoline output from our refineries was also lower, decreasing by 366,000 barrels per day to 9,292,000 barrels per day during the week ending July 29th, after our gasoline output had increased by 290,000 barrels per day during the prior week. This week’s gasoline production was also 8.5% less than the 10,151,000 barrels of gasoline that were being produced daily over the same week of last year, and 10.8% less than our gasoline production of 10,421,000 barrels per day during the week ending August 2nd, 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 76,000 barrels per day to 4,933,000 barrels per day, after our distillates output had decreased by 22,000 barrels per day during the prior week. But even after those decreases, our distillates output was still 1.1% more than the 4,877,000 barrels of distillates that were being produced daily during the week ending July 30th of 2021, while 6.3% less than the 5,286,000 barrels of distillates that were being produced daily during the week ending August 2nd 2019...
Even with the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 5th time in seven weeks; but for just the 6th time out of the past twenty-six weeks, increasing by 163,000 barrels to 225,294,000 barrels during the week ending July 29th, after our gasoline inventories had decreased by 3,304,000 barrels during the prior week. Our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 704,000 barrels per day to 8,541,000 barrels per day, while our imports of gasoline rose by 10,000 barrels per day to 609,000 barrels per day, and while our exports of gasoline rose by 72,000 barrels per day to 768,000 barrels per day. But after 20 inventory drawdowns over the past 26 weeks, our gasoline supplies were 1.6% lower than last July 30th's gasoline inventories of 228,870,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…
Following a series of decreases in our distillates production, our supplies of distillate fuels decreased for the 4th time in 5 weeks and for the 30th time in forty-eight weeks, falling by 2,400,000 barrels to 109,324,000 barrels during the week ending July 29th, after our distillates supplies had decreased by 784,000 barrels during the prior week. Our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 127,000 barrels per day to 3,750,000 barrels per day, and because our exports of distillates rose by 139,000 barrels per day to 1,634,000 barrels per day, while our imports of distillates rose by 110,000 barrels per day to 234,000 barrels per day.. But after forty-six inventory withdrawals over the past sixty-eight weeks, our distillate supplies at the end of the week were 21.2% below the 138,744,000 barrels of distillates that we had in storage on July 30th of 2021, and about 25% below the five year average of distillates inventories for this time of the year…
For imports and exports, citing the four week average gives us a better picture of the trend, since it ameliorates the weekly volatility inherent in the different sizes of vessels and the timing of the ship loadings and unloadings from week to week...With this week's increase in our exports of distillates, the four week average of our distillates exports rose from last week's 47 month high of 1,485,000 barrels per day to an all time high of 1,573,000 barrels per day....with that record topping earlier highs in 2017 and 2019, we'll include a chart below to show you what it looks like...
Meanwhile, with this week's big increase in our oil imports and decrease in our exports, our commercial supplies of crude oil in storage rose for the 5th time in 12 weeks and for the 21st time in the past year, increasing by 4,467,000 barrels over the week, from 422,086,000 barrels on July 22nd to 426,553,000 barrels on July 29th, after our commercial crude supplies had decreased by 4,523,000 barrels over the prior week. After this week's increase, our commercial crude oil inventories were still about 7% below the most recent five-year average of crude oil supplies for this time of year, but roughly 26% above the average of our crude oil stocks as of the end 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 29th were still 2.9% less than the 439,225,000 barrels of oil we had in commercial storage on July 30th of 2021, and were 17.7% less than the 518,596,000 barrels of oil that we had in storage on July 31st of 2020, and 2.8% less than the 438,930,000 barrels of oil we had in commercial storage on August 2nd 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 1,164,000 barrels this week, from 1,679,939,000 barrels on July 22nd to 1,678,775,000 barrels on July 29th, after our total inventories had fallen by 8,857,000 barrels during the prior week. That left our total liquids inventories down by 109,658,000 barrels over the first 29 weeks of this year, and only one 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 decreased for only the 8th time over the previous 97 weeks during the week ending August 5th, but were still 3.7% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by 3 to 764 rigs this past week, which was still 273 more rigs than the 491 rigs that were in use as of the August 6th report of 2021, and was 1,165 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 fell by 7 to 598 oil rigs during the past week, the biggest oil rig drop in 25 months, after the number of rigs targeting oil had increased by 6 during the prior week, but there are still 211 more oil rigs active now than were running a year ago, even as they now amount to just 37.2% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are also down 12.4% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 4 to 161 natural gas rigs, the most natural gas rig activity since August 30, 2019, which was also up by 58 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 10.0% 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 natural gas, Baker Hughes is still reporting five "miscellaneous" rigs active; those 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 to 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, a vertical rig drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track, and another vertical rig, targeting the Marcellus shale at a depth of between 5,000 and 10,000 feet in Tompkins County, New York...that one might be a exploratory geothermal well now being drilled on the Cornell University campus....a year ago, there were was only one such "miscellaneous" rig running...
The offshore rig count in the Gulf of Mexico was down by 1 to 14 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana's offshore waters....that now matches the number of 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 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 no offshore rigs other than those deployed in the Gulf of Mexico....
in addition to rigs running offshore, there are still 2 water based rigs drilling through inland bodies of water...one is a directional rig targeting oil at at a depth greater than 15,000 feet drilling through a lake on Grand Isle, Louisiana, and the other is directional rig drilling for oil in Terrebonne Parish, Louisiana, also at a depth greater than 15,000 feet...the other inland waters rig that had been drilling in Terrebonne Parish, and the one drilling in Cameron parish, Louisiana, were shut down this week, while 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 one to 698 horizontal rigs this week, which was also 255 more rigs than the 442 horizontal rigs that were in use in the US on August 6th of last year, but still just over half of 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 3 to 29 vertical rigs this week, but those were still up by 14 from the 15 vertical rigs that were operating during the same week a year ago…at the same time, the directional rig count was down by 1 to 37 directional rigs this week, while those were still up by 10 from the 27 directional rigs that were in use on August 6th 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 5th, the second column shows the change in the number of working rigs between last week’s count (July 29th) and this week’s (August 5th) count, the third column shows last week’s July 29th 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 6th of August, 2021...
checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find there were 3 oil rigs added in Texas Oil District 8, which covers the core Permian Delaware, and there was another oil rig added in Texas Oil District 8A, which includes the northernmost counties over the Permian Midland, but that there were two oil rigs pulled out of Texas Oil District 8A, which includes the southern counties of the Permian Midland...since that indicates that the Texas Permian rig count increased by 2, we have to conclude that all 6 of the rigs that were pulled out of New Mexico had been drilling in the far west Permian Delaware, in order for the national Permian rig count to have fallen by four...& since there were no other changes apparent in Texas, that Texas Permian increase also accounts for the Texas increase...
elsewhere, the three rig decrease in Louisiana included the oil rig pulled out of the state's offshore waters, and the two inland waters oil rigs that were shut down in the southern tier of the state at the same time...meanwhile, the two rigs added in Colorado include one in the DJ Niobrara chalk and one in a basin that Baker Hughes doesn't track, the rig added in North Dakota was in the Williston basin, and the rig added in Wyoming was in a basin that Baker Hughes doesn't track...in Oklahoma, an oil rig was pulled out of the Cana Woodford, while oil rigs were added in the Ardmore Woodford and the Granite Wash at the same time...since the Oklahoma rig count was unchanged, that means there was at least one rig pulled out of an Oklahoma basin that Baker Hughes doesn't track..i say "at least" because most of this week's net changes occured in basins that Baker Hughes doesn't track, including the increase of 4 natural gas rigs and the decrease of six oil rigs...since i see no other changes in the state totals to account for those rigs, most of them must have occurred in states like Oklahoma that host both oil and natural gas rigs, such that the loss of one and the gain of the other wouldn't show up in the state totals...if you really need to know where those changes occured, 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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