US oil exports rose to a record high, even with US oil supplies at a 20½ year low, the Strategic Petroleum Reserve at a new 38 year low, & total oil + oil products supplies at a 17½ year low..
US oil prices finished higher for the first time in three weeks as US oil & fuel inventories shrunk and our oil exports rose to a record high....after rising 0.5% to $85.05 a barrel last week (even as the quoted price of oil ended lower due to the expiration of the higher priced November contract), the contract price for the benchmark US light sweet crude for December delivery fell in Asian trading on Monday as traders feared weak oil demand and a global economic downturn after Chinese data showed a 2% drop in their oil imports, and slumped lower in New York as the bearish Chinese data was compounded when Xi Jinping was given a third five-year term, dashing hopes that Beijing would pivot away from Xi's demand-sapping zero-COVID policy, but partly recovered to settle 47 cents lower at $84.58 a barrel as traders tried to gauge what might happen to supply and demand after the US midterms, and whether U.S. and global economic recessions could be avoided...oil prices fell more than 1 percent again early on Tuesday, reflecting lingering concerns about the outlook for global demand, particularly in China, but then followed Wall Street prices higher, as the dollar tumbled and energized markets, while traders continued to evaluated the potential for slowing commodities demand against near-term supply tightness. and settled with a 74 cent gain at $85.32 a barrel after Saudi Energy Minister Abdulaziz bin Salman warned that using emergency oil supplies to manipulate oil prices now might be painful in the months to come....oil prices pushed even higher early Wednesday, finding additional support from acute and widening diesel shortages along the East Coast that are heightening concern over historically low inventory levels heading into the heating season, and then surged nearly 3% to settled $2.59 higher at $87.91 after the EIA reported record U.S. crude exports and that refiners operated at higher-than-usual levels for this time of year, with the dollar's weakness adding support....oil prices continued to rise in early Asian trade on Thursday, driven by record US crude exports and a weaker dollar, and then spiked after the BEA reported that U.S. gross domestic product had expanded more than expected in the third quarter, and hung on to settle $1.17 higher at a two week high of $89.08 a barrel, on the expectation that a US economic rebound would bolster demand for oil, even if the possibility of interest rate hikes weighed on other markets...however, oil prices turned lower in Asia on Friday, after Chinese cities had ramped up Covid-19 curbs late on Thursday, sealing up buildings and locking down districts in a scramble to halt widening outbreaks, and gave back all of Thursday's gains to settle $1.18 lower at $87.90 a barrel as China widened its Covid-19 curbs, though losses were limited by the strong rebound in U.S. and German economies...hence, US oil prices finished the week with a 3.35% gain, as US fuel stockpiles dropped and exports rose to a record high, signaling robust demand despite recent bearish economic trends...
meanwhile, natural gas prices also finished the week higher for the first time in 10 weeks, boosted by the shift of price quotes to the higher priced December contract....[NB: while oil contract prices are presently lower in the future months, natural gas contract prices are higher for the winter months...hence, recent contract expirations have been lowering oil price quotes, but raising natural gas price quotes] after falling 23.2% to a seven-month low at $4.959 per million BTU last week on mild weather forecasts, expectations of easing demand, and rapidly rising inventories, the contract price of US natural gas for November delivery slid to a fresh seven-month low early in the Monday session, but quickly reversed as traders found value in the oversold contract and pushed it 24.0 cents higher to settle at $5.199 per mmBTU, the first increase in 7 trading sessions, on a technical rebound and on expectations that demand would rise once LNG export plants finish maintenance in the coming weeks...natural gas prices advanced for a second straight session on Tuesday amid forecasts for colder weather patterns, production interruptions and the looming expiration of the November contract, and settled 41.1 cents higher at $5.613 per mmBTU....however, natural gas prices reversed lower in early trading Wednesday amid a continued lack of early winter heating demand, but steadied as traders balanced expectations that demand would rise once LNG export plants exit maintenance outages against forecasts that demand will remain low through at least early November, and settled just seven-tenths of a cent lower at $5.606 per mmBTU...natural gas prices then fell on Thursday after the weekly storage report came in below already modest market expectations, and trading in the November contract ended 42.0 cents lower on the day at $5.186 per mmBTU, while the December contract, which would be the front month on Friday, fell 24.4 cents to $5.875 per mmBTU...thus, with the contract price of US natural gas for December delivery being quoted on Friday, prices slid from that level and settled down 19.1 cents at $5.684 per mmBTU amid light demand, strong production and forecasts for large storage injections, but still ended 14.6% higher on the week, with most of that due to the contract shift, while the December contract, which had finished last week priced at $5.472 per mmBTU, finished just 3.9% higher...
The EIA's natural gas storage report for the week ending October 21st indicated that the amount of working natural gas held in underground storage in the US rose by 52 billion cubic feet to 3,394 billion cubic feet by the end of the week, which still left our gas supplies 142 billion cubic feet, or 4.0% below the 3,536 billion cubic feet that were in storage on October 21st of last year, and 197 billion cubic feet, or 5.5% below the five-year average of 3,591 billion cubic feet of natural gas that were in storage as of the 21st of October over the most recent five years....the 52 billion cubic foot injection into US natural gas working storage for the cited week was lower than the average forecast for an injection of 59 billion cubic feet from a Reuters poll of analysts, and was much less than the 88 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and also less than the average injection of 66 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 October 21st indicated that due to two and a quarter million barrels per day of extra US oil supplies that could not be accounted for, we had oil left to add to our stored commercial crude supplies for the 5th time time in 8 weeks, and for the 21st time in the past 48 weeks, despite record shipments of crude oil exports....Our imports of crude oil rose by an average of 273,000 barrels per day to average 6,180,000 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 991,000 barrels per day to a record of 5,129,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 1,051,000 barrels of oil per day during the week ending October 21st, 718,000 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 unchanged 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 averaged a total of 13,051,000 barrels per day during the October 21st 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...as you can see, the recent export spikes clearly beat the previous oil export highs by a large margin...
Meanwhile, US oil refineries reported they were processing an average of 15,436,000 barrels of crude per day during the week ending October 21st, an average of 114,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net average of 118,000 barrels of oil per day were being pulled out of the varied 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 October 21st appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 2,266,000 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 (+2,266,000) 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 (+1,025,000) barrels per day, that means there was a 1,241,000 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 to supply and demand from that week to this one that are indicated by this week's report are off by that much, rendering those comparisons complete nonsense...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 118,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 841,663,000 barrels at the end of the week, which was our lowest total oil inventory level since December 14th, 2001, and therefore at a 20 1/2 year low.….Our oil inventories decreased this week as an average of 370,000 barrels per day were being added to our commercially available stocks of crude oil, while 488,000 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 intended to supply 1,000,000 barrels of oil per day to commercial interests over a six month period from its inception to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising until that time, and has been fluctuating in recent weeks because the administration has been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; moreover, last week Biden announced a final 15,000,000 barrel release from the Strategic Petroleum Reserve while simultaneously announcing he'd buy crude to replenish the SPR if prices fall to or below the $67-72 a barrel range, effectively putting a floor under oil at that price.....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 251,014,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 27 months, and as a result the 401,718,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since May 25, 1984, or at a new 38 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. The total 180,000,000 barrel drawdown of the current release program, now scheduled to run through December, 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 6,025,000 barrels per day last week, which was 4.0% less than the 6,277,000 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 12,000,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,600,000 barrels per day, while Alaska’s oil production was 23,000 barrels per day higher at 431,000 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 88.9% of their capacity while using those 15,436,000 barrels of crude per day during the week ending October 21st, down from their 89.5% utilization rate during the prior week, but within the historical utilization rate range for mid October. The 15,436,000 barrels per day of oil that were refined this week were still 2.6% more than the 15,048,000 barrels of crude that were being processed daily during week ending October 22nd of 2021, but 3.5% less than the 15,998,000 barrels that were being refined during the prepandemic week ending October 25th, 2019, when our refinery utilization was at 87.7%, also within the normal range for mid October...
Even with the decrease in the amount of oil being refined this week, the gasoline output from our refineries was a bit higher, increasing by 58,000 barrels per day to 9,437,000 barrels per day during the week ending October 21st, after our gasoline output had increased by 213,000 barrels per day during the prior week. This week’s gasoline production was still 6.3% less than the 10,072,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.3% below the gasoline production of 10,184,000 barrels per day during the week ending October 25th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 45,000 barrels per day to 4,978,000 barrels per day, after our distillates output had increased by 160,000 barrels per day during the prior week. With that, our distillates output was 8.7% more than the 4,581,000 barrels of distillates that were being produced daily during the week ending October 22nd of 2021, and 0.2% more than the 4,970,000 barrels of distillates that were being produced daily during the week ending October 25th 2019...
Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the 9th time in 12 weeks; and for the 29th time out of the past thirty-eight weeks, decreasing by 1,478,000 barrels to 207,890,000 barrels during the week ending October 21st, after our gasoline inventories had decreased by 114,000 barrels during the prior week. Our gasoline supplies fell by more this week because the amount of gasoline supplied to US users rose by 252,000 barrels per day to 8,930,000 barrels per day, while our imports of gasoline rose by 180,000 barrels per day to 655,000 barrels per day, and while our exports of gasoline rose by 95,000 barrels per day to 876,000 barrels per day. And after 29 gasoline inventory drawdowns over the past 38 weeks, our gasoline supplies were 4.2% lower than last October 22nd's gasoline inventories of 9,323,000 barrels, and about 6% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with the decrease in our distillates production, our supplies of distillate fuels increased for the 14th time in 23 weeks and for the 23rd time in the past year, rising by 170,000 barrels to 106,357,000 barrels during the week ending October 21st, after our distillates supplies had increased by 124,000 barrels during the prior week. Our distillates supplies rose again this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 194,000 barrels per day to 3,878,000 barrels per day, while our exports of distillates rose by 171,000 barrels per day to 1,215,000 barrels per day, and while our imports of distillates rose by 28,000 barrels per day to 139,000 barrels per day.. But after fifty-one larger inventory withdrawals over the past seventy-nine weeks, our distillate supplies at the end of the week were were 14.9% below the 124,962,000 barrels of distillates that we had in storage on October 22nd of 2021, and about 20% below the five year average of distillates inventories for this time of the year...
Meanwhile, despite the increase in our oil exports, our commercial supplies of crude oil in storage rose for the 14th time in 27 weeks and for the 21st time in the past year, increasing by 2,588,000 barrels over the week, from 437,357,000 barrels on October 14th to 439,945,000 barrels on October 21st, after our commercial crude supplies had decreased by 1,725,000 barrels over the prior week. After this week's increase, our commercial crude oil inventories remained to 2% below the most recent five-year average of crude oil supplies for this time of year, but were over 30% more than the average of our crude oil stocks after three full weeks of October 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. And even though 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 October 21st were 2.1% more than the 430,812,000 barrels of oil we had in commercial storage on October 22nd of 2021, while 10.7% less than the 492,427,000 barrels of oil that we had in storage on October 23rd of 2020, and 0.2% more than the 438,853,000 barrels of oil we had in commercial storage on October 25th of 2019…
Finally, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows over the most recent months, we are also continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR. With the modest inventory decreases we've already noted for this week, 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 5,070,000 barrels this week, from 1,631,600,000 barrels on October 14th to 1,626,530,000 barrels on October 21st, after our total inventories had decreased by 6,097,000 barrels during the prior week. This week's decrease left our total liquids inventories down by 161,903,000 barrels over the first 42 weeks of this year, and at the lowest level since March 25th, 2005, or at a new 17 1/2 year low... ...
This Week's Rig Count
The number of drilling rigs running in the US fell for the seventh time in thirteenth weeks, and only for the 14th time over the past 109 weeks during the week ending October 28th, but even so, they're now 3.2% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US decreased by 2 rigs to 768 rigs this past week, which was still 224 more rigs than the 544 rigs that were in use as of the October 29th report of 2021, but was 1,161 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 decreased by 2 to 610 oil rigs during the past week, after the number of rigs targeting oil had increased by 2 during the prior week, while there are still 166 more oil rigs active now than were running a year ago, even as they amount to just 37.9% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 10.7% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations was down by one to 156 natural gas rigs, which was still up by 56 natural gas rigs from the 100 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.7% 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: one was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a vertical rig drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track....While we have seen no details on either of those, in the past we've identified various "miscellaneous" rigs as being exploratory, for carbon dioxide storage, and for utility scale geothermal projects...a year ago, there were were also two such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was down by 1 to 13 rigs this week, with 11 of this week's Gulf rigs drilling for oil in Louisiana's offshore waters, and two rigs drilling for oil offshore from Texas....the Gulf rig count is now unchanged from the 13 Gulf rigs running a year ago, when 12 of rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas...in addition to rigs drilling in the Gulf, we still have an offshore directional rig drilling to between 5,000 and 10,000 feet for natural gas in the Cook Inlet of Alaska, while a year ago, drilling offshore from Alaska had shut down for the winter...
In addition to rigs running offshore, there are still two water based rigs drilling through inland bodies of water this week; those include a directional rig drilling to between 10,000 and 15,000 feet, inland in St Mary Parish, Louisiana, and a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; the inland waters rig that had been drilling for oil in Cameron Parish, Louisiana was shut down this past week...a year ago, there were two rigs drilling on inland waters...
The count of active horizontal drilling rigs was down by 5 to 703 horizontal rigs this week, which was still 220 more rigs than the 483 horizontal rigs that were in use in the US on October 29th of last year, but just 51.2% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....on the other hand, the directional rig count was up by 2 to 43 directional rigs this week, and those were up by 11 from the 32 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 22 vertical rigs this week, which was down by 7 from the 29 vertical rigs that were in use on October 29th 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 October 21st, the second column shows the change in the number of working rigs between last week’s count (October 21st) and this week’s (October 28th) count, the third column shows last week’s October 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 29th of October, 2021...
we'll again start by checking the Rigs by State file at Baker Hughes for changes in Texas, where the count was down 3 rigs this week; first, there was a rig pulled out of Texas Oil District 1, which accounts for the decrease in the Eagle Ford shale; there was also a natural gas rig pulled out of Texas Oil District 8, which is the core Permian Delaware, but since that indicates a rig decrease in the Texas Permian, and since the national Permian basin count was unchanged, we can conclude that rig added in New Mexico was set up to drill in the far west Permian Delaware...however, since the Permian basin count for this week shows an increase of two, to 343, oil rigs and a decrease of two natural gas rigs to three, we can also conclude that the new New Mexico rig was targeting oil, and that in some other area of the Permian, a natural gas rig was pulled out while an oil rig was added that thus doesn't show up in our details...in addition, there was also a rig pulled out of Texas Oil District 10, which accounts for the decrease in the Granite Wash basin..
elsewhere, the Louisiana rig count was down by two with the removal of an oil rig from the adjacent Gulf of Mexico and the removal of the inland waters rig that had been drilling for oil in Cameron Parish; the North Dakota rig count was down by two with the removal of two oil rigs from the Williston basin, but the Williston basin was only down by one because an oil rig was added in the Williston in Montana, this time in Fallon county, at the same time...meanwhile, the rig added in Alaska was on the North Slope, where all Alaskan land drilling is now taking place, and even though the Oklahoma rig count was only up by 1, there were two oil rigs added in the state's Cana Woodford, and another oil rig added in the Arkoma Woodford; that means two rigs were removed from a basin or basins elsewhere in the state that Baker Hughes doesn't track...moreover, those basins that Baker Hughes doesn't track also account for the removal of four oil rigs and the addition of a natural gas rig, partly offsetting the Permian basin gas rig decrease...
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note: there’s more here…
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