Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, November 27, 2022

US oil supplies at a 21½ year low; highest November ​refinery ​utilization since 2004; DUCs rose first time in 28 months

US oil supplies at a 21½ year low, Strategic Petroleum Reserve at a 38½ year low; highest November ​refinery ​utilization rate since 2004; biggest jump in oil imports since February 2021; DUCs rise first time in 28 months​ 

US oil prices finished lower for the 3rd straight week this week as the Covid outbreak in China worsened and the G7 and EU failed to agree on a price cap for Russian exports.....after falling 10.0% to $80.08 a barrel last week as Covid cases in Beijing rose to record highs and the Fed signaled interest rates could go much higher, the contract price for the benchmark US light sweet crude for December delivery fell to near two-month lows in Asian markets on Monday, as supply fears receded while concerns over fuel demand from China and U.S. dollar strength weighed on prices, and then fell more than $5 to their lowest price level since early January after the Wall Street Journal reported an output increase of up to 500,000 barrels per day would be considered at the OPEC+ meeting on Dec. 4th, but reversed most of those losses after Saudi Energy Minister Abdulaziz bin Salman denied that the 23-nation oil producing alliance under his charge was working on any production hike for that meeting, and settled 35 cents lower at $79.73 a barrel as trading in the December oil contract expired, while the more active contract for US light sweet crude for January was down just 7 cents at $80.04 a barrel....with the January oil price now being quoted, oil prices rose in Asia on Tuesday after the Saudis reaffirmed that OPEC+ was sticking with output cuts and could take further steps to balance the market, outweighing global recession worries and concern about China’s rising COVID-19 case numbers. and settled 91 cents higher at $80.95 a barrel as traders awaited an expected announcement of a G7 price cap on Russian oil shipments that could potentially disrupt oil flows from Russian ports...oil prices edged higher in Asian trading on Wednesday after data from the American Petroleum Institute showed US crude stockpiles had dropped more sharply than expected last week, highlighting supply tightness ahead of a looming European Union ban and G7 price cap on Russian oil. but then fell more than 2% in early New York trading on indications that the European Union and G7 nations were softening the language dictating the looming price cap regulations on Russian oil exports in an apparent effort to cause minimal disruption to Russian oil trade this winter. and then extended those losses after the EIA reported big product inventory builds to finish the session $3.01 or 3.7% lower at $77.94 a barrel, as the G7 nations considered a price cap on Russian oil above the current market level and as gasoline inventories in the United States rose by more than analysts had expected...while US markets were closed for the Thanksgiving holiday, US oil contracts fell in Asian markets Thursday following indications that G7 nations were considering a price cap on Russian crude in the range of $65-70 per barrel, but settled 3 cents higher in Europe as EU diplomats remained locked in negotiations over how strict the Russian mechanism should be...oil prices rose in Asia on Friday as traders were encouraged by the declining US dollar, which makes dollar-indexed oil cheaper for them, while the worsening COVID epidemic in China dampened further price upticks, but turned lower in a thinly traded US session after China reported a new daily record for Covid-19 infections, and settled $1.66 or 2.1% lower at $76.28 a barrel as the European Union suspended talks over a Russian oil price cap amid disagreements between member states...oil price quotes thus finished 4.7% lower for the week, while the benchmark contract for US light sweet crude for January delivery finished the week 4.8% lower...

on the other hand, natural gas prices finished higher for the fourth time in five weeks, on colder forecasts and concerns about a possible rail strike... after rising 7.2% to at $6.303 per mmBTU last week on colder forecasts and an end to the storage injection season, the contract price of US natural gas for December delivery opened 14 cents higher at $6.443 per mmBTU on Monday as updated forecasts over the weekend called for a cold start to December and surged to settle 47.3 cents higher at $6.776 per mmBTU as traders mulled an updated restart timeline for the Freeport export facility, railroad union members considered a strike, and forecasts pointed to another round of wintry weather in early December...natural gas futures pared their gains in early trading Tuesday as updated forecasts showed less cold reaching the eastern Lower 48 in early December but recovered to end three-tenths of a cent higher at $6.779 per mmBTU, as worries about a possible rail strike offset the revised forecasts and as Gazprom warned it would reduce gas supplies to a Ukraine interconnection if they weren't reaching Moldova....natural gas prices jumped about 11% to a two-month high in early trading on Wednesday on festering worries about a railroad strike and revised forecasts for blasts of cold in the month ahead, but pulled back a bit to settle 52.9 cents or 7.8% higher at $7.308 per mmBTU after the EIA report showed last week's storage draw was slightly smaller than expected... however, natural gas prices fell 28.4 cents, or 3.9%, to settle at $7.024 per mmBTU on Friday on forecasts that the cold blast might not be as far reaching as originally feared, but still finished 11.4% higher on the week, while the contract for US natural gas for January delivery, which will be the front month contract next week, finished 9.1% higher at $7.330 per mmBTU...

The EIA's natural gas storage report for the week ending November 18th indicated that the amount of working natural gas held in underground storage in the US fell by 80 billion cubic feet to 3,564 billion cubic feet by the end of the week, which meant our gas supplies were 62 billion cubic feet, or 1.7% less than the 3,626 billion cubic feet that were in storage on November 18th of last year, and 39 billion cubic feet, or 1.1% below the five-year average of 3,603 billion cubic feet of natural gas that were in storage as of the 18th of November over the most recent five years....the 80 billion cubic foot injection into US natural gas working storage for the cited week was less than the average forecast for an 87 billion cubic feet withdrawal from storage by a Reuters poll of analysts, but it was much more than the 14 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021, and also more than the average 48 billion cubic feet of natural gas that have typically been withdrawn from 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 November 18th indicated that even after the biggest jump in our oil imports in a year and a half, we needed to pull oil out of our stored commercial crude supplies for the 9th time in 15 weeks, and for the 17th time in the past 31 weeks, mostly because of comparably modest increases in our oil exports and our refinery throughput....Our imports of crude oil rose by an average of 1,504,000 barrels per day to average 7,063,000 barrels per day, after falling by an average of 895,000 barrels per day during the prior week, while our exports of crude oil rose by 380,000 barrels per day to average 4,242,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 2,821,000 barrels of oil per day during the week ending November 18th, 1,124,000 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 averaged a total of 14,921,000 barrels per day during the November 18th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,410,000 barrels of crude per day during the week ending November 18th, an average of 258,000 more 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 756,000 barrels of oil per day were being pulled out of the various 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 November 18th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 733,000 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 (+733,000) 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 756​,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 822,183,000 barrels at the end of the week, which was our lowest total oil inventory level since March 16th, 2001, and therefore at a new 21 1/2 year low...Our oil inventories decreased this week as an average of 527,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 229,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR, (the smallest draw since February), was an extension of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was originally 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 over that time....The SPR withdrawals under that program have been fluctuating in recent weeks because the administration has since been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; furthermore, Biden recently announced another 15,000,000 barrel release from the Strategic Petroleum Reserve to run thru December, while simultaneously announcing he'd buy crude to replenish the SPR if oil 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 265,629,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 28 months, and as a result the 390,518,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since March 23, 1984, or at a new 38 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. 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 the current 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 6,327,000 barrels per day last week, which was 3.4% more than the 6,116,000 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 1,000 barrels per day lower at 448,000 barrels per day but had no impact on the rounded national total.   US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 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 93.9% of their capacity while using those 16,410,000 barrels of crude per day during the week ending November 18th, up from their 92.9% utilization rate during the prior week, and the highest November utilization rate since 2004.. The 16,410,000 barrels per day of oil that were refined this week were 4.9% more than the 15,640,000 barrels of crude that were being processed daily during week ending November 19th of 2021, and 0.5% more than the 16,334,000 barrels that were being refined during the prepandemic week ending November 22nd, 2019, when our refinery utilization was at 89.3%, within the normal utilization range for mid November...

Even with the increase in the amount of oil being refined this week, the gasoline output from our refineries was quite a bit lower, decreasing by 625,000 barrels per day to 9,164,000 barrels per day during the week ending November 18th, after our gasoline output had increased by 35,000 barrels per day during the prior week.This week’s gasoline production was also 9.2% less than the 10,099,000 barrels of gasoline that were being produced daily over the same week of last year, and 9.0% below the gasoline production of 10,065,000 barrels per day during the ​prepandemic ​week ending November 22nd, 2019. ON the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 14,000 barrels per day to 5,097,000 barrels per day, after our distillates output had decreased by 107,000 barrels per day during the prior week. ​And with that increase, our distillates output was 6.8% more than the 4,784,000 barrels of distillates that were being produced daily during the week ending November 19th of 2021, and 0.7% more than the 5,075,000 barrels of distillates that were being produced daily during the week ending November 22nd 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 15 weeks; and by the most since mid-July, increasing by 3,058,000 barrels to 210,998,000 barrels during the week ending November 18th, after our gasoline inventories had increased by 2,207,000 barrels during the prior week. Our gasoline supplies rose by more this week because the amount of gasoline supplied to US users fell by 415,000 barrels per day to 8,327000 barrels per day, and because our imports of gasoline rose by 13,000 barrels per day to 585,000 barrels per day, and because our exports of gasoline fell by 29,000 barrels per day to 898,000 barrels per day. But after 31 gasoline inventory drawdowns over the past 42 weeks, our gasoline supplies were ​still ​0.2% lower than last November 19th's gasoline inventories of 211,393,000 barrels, and about4% below the five year average of our gasoline supplies for this time of the year…

With the increase in our distillates production, our supplies of distillate fuels increased for the 11th time in 16 weeks and for the 25th time in the past year, rising by 1,718,000 barrels to 109,101,000 barrels during the week ending November 18th, after our distillates supplies had increased by 1,120,000 barrels during the prior week. Our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 17,000 barrels per day to 3,846,000 barrels per day, and because our exports of distillates fell by 41,000 barrels per day to 1,142,000 barrels per day, and because our imports of distillates rose by 13,000 barrels per day to 123,000 barrels per day.. But after fifty-two mostly larger inventory withdrawals over the past eighty-two weeks, our distillate supplies at the end of the week were were still 10.4% below the 121,717,000 barrels of distillates that we had in storage on November 12th of 2021, and about 13% below the five year average of distillates inventories for this time of the year...

Meanwhile, even after the big increase in our oil imports, our commercial supplies of crude oil in storage fell for the 11th time in 19 weeks and for the 32nd time in the past year, decreasing by 3,690,000 barrels over the week, from 435,355,000 barrels on November 11th to 431,665,000 barrels on November 18th, after our commercial crude supplies had decreased by 5,400,000 barrels over the prior week. After this week's decrease, our commercial crude oil inventories fell to around 5% below the most recent five-year average of crude oil supplies for this time of year, but were still 26​.7​% more than the average of our crude oil stocks as of the third weekend of November 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 after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this November 11th were 0.5% less  than the 434,020,000 barrels of oil we had in commercial storage on November 19th of 2021, and 11.7% less than the 488,721,000 barrels of oil that we had in storage on November 20th of 2020, and 4.5% less than the 451,952,000 barrels of oil we had in commercial storage on November 22nd 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.  Mostly because of the gasoline and distillates inventory increases 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, rose by 1,740,000 barrels this week, from 1,608,865,000 barrels on November 11th to 1,610,605,000 barrels on November 18th, after our total inventories had decreased by 10,640,000 barrels during the prior week. This week's increase still left our total liquids inventories down by 177,828,000 barrels over the first 46 weeks of this year, and just 0.1% from a new 18 year low...  

This Week's Rig Count

The number of drilling rigs active in the US increased for the 10th time in the past 17 weeks with this week's report, which only covers the five days ending Wednesday, November 23rd, due to the Thanksgiving holiday....But even after 91 weekly increases over the past 113 weeks, active rigs are still 1.1% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 2 rigs to 784 rigs over those five days, which was also 215 more rigs than the 569 rigs that were in use as of the November 24th report of 2021, but was 1,145 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 4 to 627 oil rigs during the past week, after the number of rigs targeting oil had increased by 1 during the prior week, and there are now 160 more oil rigs active now than were running a year ago, even as they amount to just 39.0% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 8.2% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 155 natural gas rigs, which was still up by 53 natural gas rigs from the 102 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 of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track....While we have​n't seen any 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 unchanged at 16 rigs this week, with 14 Gulf rigs drilling for oil in Louisiana's offshore waters, and two rigs drilling for oil offshore from Texas....the Gulf rig count is still up by 1 from the 15 Gulf rigs running a year ago, when 13 of the Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil offshore from Texas...​and ​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 already shut down for the winter...

In addition to rigs running offshore, there are still three water based rigs drilling 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 St Mary Parish, Louisiana, a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; and a directional rig drilling for oil to between 5,000 and 10,000 feet, inland in Lafourche Parish, Louisiana.....a year ago, there were two such rigs drilling on inland waters...

The count of active horizontal drilling rigs was unchanged at 714 horizontal rigs this week, which was still 201 more rigs than the 513 horizontal rigs that were in use in the US on November 24th of last year, but just 52.0% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....​in addition, the vertical rig count was also unchanged at 23 vertical rigs this week, which was still up by one from the 22 vertical rigs that were operating during the same week a year ago…on the other hand, the directional rig count was up by two to 47 directional rigs this week, and those were alsoup by 13 from the 34 directional rigs that were in use on November 24th 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 November 23rd, the second column shows the change in the number of working rigs between last week’s count (November 18th) and this week’s (November 23rd) count, the third column shows last week’s November 18th 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 24th of November, 2021...

checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there was just one oil rig added in Texas Oil District 7B, which includes two counties overlying the far eastern Permian Midland, while rigs in other districts in the Texas Permian were unchanged...since the national Permian basin count was up by three, we can thus conclude that both rigs added in New Mexico were set up to drill in the far western Permian Delaware, in the southwest corner of that state...elsewhere in Texas, there were three rigs pulled out of Texas Oil District 6, which appears to account for two natural gas rig removals from the Haynesville shale, since there was concurrently a Haynesville shale addition in northwestern Louisiana, and the removal of another rig targeting a basin that Baker Hughes doesn't track....there was also a rig pulled out of Texas Oil District 9, which would account for the oil rig removed from the Barnett shale...in Oklahoma, there was an oil rig addition in the Cana Woodford and an oil rig removal from the Arkoma Woodford, and since the state count is up by one, apparently the addition of a rig in a basin not tracked by Baker Hughes....likewise, the rig added in California was also in a basin not tracked by Baker Hughes..

DUC well report for October

Monday of last week saw the release of the EIA's Drilling Productivity Report for November, which included the EIA's October data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)....that data showed a​n​ increase in uncompleted wells nationally for the first time in 28 months, as both completions of drilled wells and drilling of new wells increased in October, but remained well below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 8 wells, rising from a revised 4,400 DUC wells in September to 4,408 DUC wells in October, which was still 17.3% fewer DUCs than the 5,333 wells that had been drilled but remained uncompleted as of the end of October of a year ago...this month's DUC increase occurred as 984 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, up by 27 from the revised 957 wells that were drilled in September, while 976 wells were completed and brought into production by fracking them, up by 7 from the 969 well completions seen in September, and up by 49 from the 927 completions seen in October of last year....at the October completion rate, the 4,408 drilled but uncompleted wells remaining at the end of the month represents a 4.5 month backlog of wells that have been drilled but are not yet fracked, matching the 4.5 month DUC well backlog of a month ago, and just above the 7 1/2 year low of 4.4 months, despite a completion rate that is still almost 15% below 2019's pre-pandemic average...

DUCs in the oil producing regions netted out to unchanged during October, while natural gas DUCs rose, since a DUC well decrease in natural gas producing Appalachian basins was more than offset by a ​bigger ​DUC well increase in Haynesville shale....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 13, from 1,097 DUC wells at the end of September to 1,084 DUCs at the end of October, as 421 new wells were drilled into the Permian basin during October, while 434 already drilled wells in the region were being fracked....in addition, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 5, falling from 723 at the end of September to 718 DUC wells at the end of October, as 68 wells were drilled into the Anadarko basin during October, while 73 Anadarko wells were completed....at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 3, from 582 DUC wells at the end of September to 579 DUCs at the end of October, as 109 wells were drilled in the Eagle Ford during October, while 112 already drilled Eagle Ford wells were fracked....meanwhile, DUC wells in the Bakken of North Dakota remained unchanged at 494 at the end of October, as 77 wells were drilled into the Bakken during September, while 77 of the drilled wells in the Bakken were being fracked....on the other hand, DUC wells in the Niobrara chalk of the Rockies' front range increased by 21, rising from 393 at the end of September to 414 DUC wells at the end of October, as 133 wells were drilled into the Niobrara chalk during October, while 112 Niobrara wells were completed....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, decreased by 3 wells, from 576 DUCs at the end of September to 552 DUCs at the end of October, as 100 new wells were drilled into the Marcellus and Utica shales during the month, while 103 of the already drilled wells in the region were fracked....on the other hand, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region rose by 11, from 535 DUCs in September to 546 DUCs by the end of October, as 76 wells were drilled into the Haynesville during October, while 65 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of October, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) were unchanged at 3,289 wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) was up by eight to 1,119 DUC wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

++

++

++     

Note: there’s more here…

 

 

Sunday, November 20, 2022

US natural gas supplies back to average on Freeport outage; global oil supply & demand balanced despite OPEC's 1,585,000 bpd shortfall

US natural gas supplies back to pre-winter average on Freeport outage; US oil supplies at a 21½ year low, Strategic Petroleum Reserve at a 38½ year low, oil + oil products supplies at an 18 year low; global oil supply & demand nearly balanced in October, even with OPEC's production 1,585,000 barrels per day short of quota..

US oil prices finished lower again this week as Covid cases in Beijing rose to record highs and the Fed signaled interest rates could go much higher, assuring a deeper recession... after falling 3.9% to $88.96 a barrel last week as a widening Covid outbreak in China and subsequent lockdowns drove global prices​ lower​,  the contract price for the benchmark US light sweet crude for December delivery fell more than $1 in Asian trade on Monday, dragged down by a firmer US dollar and a weekend surge in coronavirus cases in China, the world's largest crude importer, and then dropped 3.7% to a session-low $85.65 a barrel in New York after the dollar strengthened further following comments by several Fed officials that it's way too soon to claim any victory over inflation, before settling down $3.09 on the day at $85.87 a barrel, with prices further hit by reports suggesting Russian crude oil exports were holding steady ahead of a European embargo on seaborne oil shipments​,​ after OPEC​ had​ lowered its global demand forecast for this year and next...oil prices tumbled another 2% in overseas markets early Tuesday after the IEA also forecast weakening demand growth next year and as traders fretted about a weakening demand outlook. but then jumped following unconfirmed reports that Russian missiles had hit Poland overnight, and settled $1.05 higher at $86.92 a barrel after news broke that oil supplies to Hungary via the Druzhba pipeline had been temporarily suspended due to a fall in pressure...crude prices continued higher on Wednesday morning after a bomb-carrying drone struck an oil tanker owned by an Israeli billionaire off the Omani coast, but turned lower as Covid cases in China continued to climb, outweighing supply concerns, and settled $1.33 or 1.5% lower at $85.59 a barrel after Russian oil shipments via the Druzhba pipeline to Hungary restarted and as rising COVID-19 cases in China weighed on sentiment....oil prices fell for a second day in early Asian trade on Thursday, as concerns over geopolitical tensions eased and rising numbers of Covid-19 cases in China added to demand worries​,​ and then slid more than 4% ​to $81.64 a barrel​ ​during the US session as traders recalibrated their bets for a deeper recession next year after the dollar rallied when Fed officials signaled interest rates could go much higher than had been priced in by markets....oil prices moved lower again early Friday and w​ere trading at the lowest level since September after European Central Bank President Christine Lagarde said recession alone might not be enough to bring down consumer prices and finished the session down $1.56, or 1.9% at $80.08 a barrel, on concerns about weakened demand in China and further increases to U.S. interest rates, and thus finished the week 10.0% lower dropping the most in a week since April, as the full weight of languishing Chinese demand and more economic tightening radically shifted the market’s sentiment...

Natural gas prices, on the other hand, finished higher for the third time in four weeks, on colder forecasts and an end to the storage injection season.....after falling 8.1% to $5.879 per mmBTU last week after a Twitter spoof ​reporting a delay in Freeport LNG's reopening led to a 9% drop in prices on Friday, the contract price of US natural gas for December delivery jumped more than 5.5% to open at $6.277 per mmBTU on Monday after Freeport dismissed last week's twitter claims, but tumbled to show losses after Bloomberg reported that Freeport LNG had told customers that its reopening would be delayed, but recovered to close 5.4 cents higher at $5.933 per mmBTU as the weather shifted substantially colder, driving heating demand and offsetting festering concerns about Freeport's relaunch...natural gas prices moved up almost 2% on Tuesday to settle 10.1 cents higher at $6.034 per mmBTU, on forecasts for colder weather and more heating demand next week than previous estimates, even as doubts about the timing of the Freeport LNG export terminal’s return, which had been slated for this month, continued to simmer...but the December contract opened 17 cents lower on Wednesday, with warming forecasts and ​the ​delay of the Freeport LNG reopening contributing to the overnight retreat, but reversed on a colder midday forecast to settle 16.6 cents, or 2.8% higher at $6.200 per mmBTU....prices were up a fourth consecutive day on Thursday, rising 16.9 cents to $6.369 per mmBTU, on cold weather and mounting heating demand that pointed to steep storage withdrawals following what analysts expected was the last reported injection of the year...but natural gas prices tumbled more than 5% early Friday after Freeport LNG said it was​ now​ targeting a mid-December restart for its export plant, but recovered to finish just 6.6 cen​ts lower at $6.303 per mmBTU, as forecasts “held very strong national demand” leading up to Thanksgiving but pointed to a return to seasonal levels and “a little lighter-than-normal” demand for several days at the end of the month...but natural gas prices still finished 7.2% higher on the week, despite the delay of the Freeport export plant reopening, which would leave roughly 2% more natural gas for stateside domestic use until that time...

The EIA's natural gas storage report for the week ending November 11th indicated that the amount of working natural gas held in underground storage in the US rose by 64 billion cubic feet to 3,644 billion cubic feet by the end of the week, which means our gas supplies were​ now​ 4 billion cubic feet, or 0.1% more than the 3,640 billion cubic feet that were in storage on November 11th of last year, while still 7 billion cubic feet, or 0.2% below the five-year average of 3,656 billion cubic feet of natural gas that were in storage as of the 11th of November over the most recent five years....the ​64 billion cubic foot injection into US natural gas working storage for the cited week was close to the average forecast for an injection of 63 billion cubic feet from a Reuters poll of analysts, but it was much more than the 23 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and contrasts with the 5 billion cubic feet of natural gas that have typically been withdraw from our natural gas storage during the same week over the past 5 years... 

you might note that we're now heading into winter with our natural gas supplies close to the average pre-winter high, after concerns arose almost weekly since early summer that we might go into winter with inadequate supplies and possible spot shortages....to show how we recovered to normal levels so quickly, we'll include a copy of an interactive graphic from the EIA's natural gas storage dashboard below...

the above graphic shows, as a series of blue dots, the change in the amount of natural gas we had in storage each week since the beginning of this year, with weeks when we added natural gas to storage indicated by a blue dot above the zero line, and weeks when we pulled natural gas out of storage indicated by a blue dot below the zero line...shown in the background to that, there are dark grey diamonds indicating the 5 year average of the amount added or pulled out of storage in the same week, and in light grey bars behind that, the range of changes for each date over the prior five years...to illustrate what each entry shows, i have positioned my cursor over the current week, November 11, so that its data appears in a box on the graph...

as you can see​ on the graphic​, eight of the past nine weeks saw an addition of natural gas to storage that exceeded​ the​ 5​ prior​ years of historical data for each given week...two of those weeks, for September 30 and October 7th, represent 5 year highs for any date, and the largest autumn additions to storage on record...before that 9 week run of exceptional storage builds, we were reporting that our natural gas supplies were "354 billion cubic feet, or 11.3% below the five-year average of 3,125 billion cubic feet of natural gas that were in storage as of the 9th of September​"​ ​  so we have since eliminated ​347 billion cubic feet of our deficit to the 5 year average over that nine weeks, and we're now only 0.2% below ​that running 5 year average for this time of year...​.

​while ​our mild ​autumn ​weather certainly ​contributed to those ab​o​ve normal ​storage ​additions, ​as large parts of the country ​were ​experiencing weeks of weather without much demand for either heating or cooling, the largest single factor that allowed us to rebuild our natural gas inventories before winter was June 8​th​ fire and explosion and subsequent shutdown of the Freeport liquefaction and export facility in Texas...that ​LNG ​plant had been processing up to 2.1 billion cubic feet of gas a day for export​, and once it was shut down, that gas became available for domestic use, and that's what enabled us to rebuild our natural gas supplies before winter...if Freeport had been operating and exporting the LNG equivalent of 2.1 billion cubic feet of gas a day since June 8, it would have sent the equivalent of 349.5 billion cubic feet of natural gas overseas by now, and we'd be heading into winter with our supplies nearly 10% below normal...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending November 11th  indicated that after a big d​rop in our oil imports and a​ modest increase in our oil exports, we needed to pull oil out of our stored commercial crude supplies for the 8th time in 14 weeks, and for the 16th time in the past 30 weeks. despite another big release of oil from the Strategic Petroleum Reserve....Our imports of crude oil fell by an average of 895,000 barrels per day to average 5,559,000 barrels per day, after rising by an average of 249,000 barrels per day during the prior week, while our exports of crude oil rose by 341,000 barrels per day to 3,862,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 1,697,000 barrels of oil per day during the week ending November 11th, 1,236,000 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 12,100,000 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 averaged a total of 13,797,000 barrels per day during the November 11th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,152,000 barrels of crude per day during the week ending November 11th, an average of 63,000 more 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 1,357,000 barrels of oil per day were being pulled out of the various 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 November 11th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 997,000 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 (+997,000) 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 1,357,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 827,474,000 barrels at the end of the week, which was our lowest total oil inventory level since March 23rd, 2001, and therefore at a 21 1/2 year low...Our oil inventories decreased this week as an average of 771,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 586,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR was an extension of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was​ originally​ 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 ​over that time....The SPR withdrawals under that program have been fluctuating in recent weeks because the administration has ​since ​been attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis; furthermore, Biden recently announced another 15,000,000 barrel release from the Strategic Petroleum Reserve to run thru December, while simultaneously announcing he'd buy crude to replenish the SPR if oil 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 259,930,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 28 months, and as a result the 392,119,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since March 30, 1984, or at a new 38 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. 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 ​the current 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 6,100,000 barrels per day last week, which was 1.3% less than the 6,181,000 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 2,000 barrels per day higher at 448,000 barrels per day but had no impact on the rounded national total. US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was still 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 92.9% of their capacity while using those 16,152,000 barrels of crude per day during the week ending November11th, up from their 92.1% utilization rate during the prior week, and above their historical utilization rate range for this time of year... The 16,152,000 barrels per day of oil that were refined this week were 4.9% more than the 15,397,000 barrels of crude that were being processed daily during week ending November 12th of 2021, but 1.7% less than the 16,435,000 barrels that were being refined during the prepandemic week ending November 15th, 2019, when our refinery utilization was at 89.5%, within the normal range for mid November...

With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also a bit higher, increasing by 35,000 barrels per day to 9,789,000 barrels per day during the week ending November 11th, after our gasoline output had increased by 274,000 barrels per day during the prior week. But this week’s gasoline production was still 1.3% less than the 9,922,000 barrels of gasoline that were being produced daily over the same week of last year, and 2.6% below the gasoline production of 10,053,000 barrels per day during the week ending November 15th, 2019.   ON the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 107,000 barrels per day to 5,097,000 barrels per day, after our distillates output had increased by 87,000 barrels per day during the prior week. Even with that decrease, our distillates output was 5.3% more than the 4,842,000 barrels of distillates that were being produced daily during the week ending November 12th of 2021, and just 0.5% less than the 5,124,000 barrels of distillates that were being produced daily during the week ending November 15th 2019...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 4th time in 14 weeks; and by the most since mid-July, increasing by 2,207,000 barrels to 207,940,000 barrels during the week ending November 11th, after our gasoline inventories had decreased by 900,000 barrels to an 8 year low during the prior week. Our gasoline supplies rose this week because the amount of gasoline supplied to US users fell by 269,000 barrels per day to 8,742,000 barrels per day, and because our imports of gasoline rose by 83,000 barrels per day to 572,000 barrels per day, and because our exports of gasoline fell by 65,000 barrels per day to 927,000 barrels per day.  But after 31 gasoline inventory drawdowns over the past 41 weeks, our gasoline supplies were 1.9% lower than last November 12th's gasoline inventories of 211,996,000 barrels, and about 5% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 10th time in 15 weeks and for the 24th time in the past year, rising by 1,120,000 barrels to 107,383,000 barrels during the week ending November 11th, after our distillates supplies had decreased by 521,000 barrels during the prior week. Our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 298,000 barrels per day to 3,863,000 barrels per day,  and because our exports of distillates fell by 263,000 barrels per day to 1,183,000 barrels per day, while our imports of distillates fell by 218,000 barrels per day to 110,000 barrels per day.. But after fifty-two mostly larger inventory withdrawals over the past eighty-one weeks, our distillate supplies at the end of the week were were 13.2% below the 123,685,000 barrels of distillates that we had in storage on November 12th of 2021, and about 15% below the five year average of distillates inventories for this time of the year...

Meanwhile, after the decrease in our oil imports and the increase in our oil exports, our commercial supplies of crude oil in storage fell for the 10th time in 18 weeks and for the 31st time in the past year, decreasing by 5​,​400,000 barrels over the week, from 440,755,000 barrels on November 4th to 435,355,000 barrels on November 11th, after our commercial crude supplies had increased by 3,115,000 barrels over the prior week. After this week's decrease, our commercial crude oil inventories fell to around 4% below the most recent five-year average of crude oil supplies for this time of year, but were still almost 38% more than the average of our crude oil stocks as of the first weekend of November 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 after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this November 11th were 0.5% more than the 433,003,000 barrels of oil we had in commercial storage on November 12th of 2021, while 11.1% less than the 489,475,000 barrels of oil that we had in storage on November 13th of 2020, and 3.3% less than the 450,380,000 barrels of oil we had in commercial storage on November 15th 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. Despite the modest gasoline and distillates inventory increases 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 10,640,000 barrels  this week, from 1,619,505,000 barrels on November 4th to 1,608,865,000 barrels on November 11th, after our total inventories had decreased by 4,386,000 barrels during the prior week. This week's decrease left our total liquids inventories down by 179,548,000 barrels over the first 45 weeks of this year, and at the lowest level since June 25th, 2004, or at a new 18 year low... 

OPEC's Report on Global Oil for October

Monday of this past week saw the release of OPEC's November Oil Market Report, which includes the details on OPEC's & global oil data for October, and hence it gives us a picture of the global oil supply & demand situation during a period when oil supplies from Russia continued to be constrained by Western sanctions, while demand was constrained due to the zero-COVID-19 policy in China and ​due to ​a strong dollar, which made oil more expensive for other countries...October was also the second month after OPEC and aligned oil producers had completely unwound the production cuts put in place to offset the demand destruction caused by the Covid pandemic, and they agreed to decrease their monthly output by an inconsequential 100,000 barrels per day, reversing September's token increase, and leaving the OPEC+ quota back at the benchmark level on which all Covid production cuts were based....as of August's final Covid recovery production increase, the cartel's output should have been restored to the level it was at before the Covid-related production cuts began, but as we've noted in the past, they are still far short of their quota, and remained so with this report.....​also ​note that with the course and impact of the Ukraine war and the future course of the Covid pandemic largely unknown, the demand projections made in this report will have a much greater degree of uncertainty than they would have during normal, more stable times...

The first table from this month's report that we'll review is from the page numbered 47 of this month's report (pdf page 57), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC has used an average of production estimates by six or more "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures....since the June report, the consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy were also added to OPEC's secondary sources.....

As we can see on the bottom line of the above table, OPEC's oil output decreased by 210,000 barrels per day to 29,494,000 barrels per day during October, down from their revised September production total that averaged 29,704,000 barrels per day....however, that September output figure was originally reported as 29,767,000 barrels per day, which therefore means that OPEC's August production was revised 63,000 barrels per day lower with this report, and hence OPEC's October production was, in effect, 273,000 barrels per day lower than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official August OPEC output figures as reported a month ago, before this month's revision)...

while OPEC and other aligned oil producers had agreed to reduce production by 100,000 barrels per day during October, the 210,000 barrels per day we see above obviously exceeds that by quite a bit, and was largely due to to the 149,000 barrels per day drop in the the Saudis' oil production, without that, the 61,000 barrel per day decrease in production from the rest of the cartel come pretty close to their 64,000 barrel per day share of the 100,000 barrels per day output cut prescribed by their agreement with Russia and other producers...nonetheless, several other OPEC members also continued to be well short of what they were expected to produce, as we'll see in the next table...

The adjacent table was originally included as a downloadable attachment to the press release following the 32nd OPEC and non-OPEC Ministerial Meeting on September 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for October... since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers, they are not shown in this list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 26,689,000 barrels per day in October....therefore, the 25,104,000 barrels those 10 OPEC members actually produced in October were 1,585,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola accounting for a large part of this month's shortfall, while only the UAE and Gabon were able to produce what was expected of them...

+ + +

Recall that the original 2020 oil producer's agreement was to jointly cut their oil production by 23%, or by 9.7 million barrels per day, from an October 2018 baseline for just two months early in the pandemic, during May and June of 2020, but that initial 9.7 million bpd production cut agreement was extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020....then, in a subsequent meeting in early July of that year, OPEC and the other oil producers agreed to reduce their supply cuts by 2 million barrels per day to 7.7 million barrels per day for August 2020 and subsequent months, which thus became the agreement that governed OPEC's output for the rest of 2020...the OPEC+ agreement for their January 2021 production, which was later extended to include February, March and April's output, was to further ease their supply cuts by 500,000 barrels per day to a reduction of 7.2 million barrels per day from that original October 2018 baseline...then, during a meeting on April 1st of last year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month for the following three months by a pre-set amount for each country, thus extending their joint output cut agreement through July 2021....production levels for August and the following months of last year were to be determined by a July 1st OPEC meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over the 2018 reference production levels on which the cuts are based, and a subsequent attempt to restart that meeting on July 5th was called off....so it wasn't until July 18th 2021 that a tentative compromise addressing August 2021's output quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August, and again by that amount in each of the following months, and also to boost reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022, and which made the cartel's effective monthly production increase 432,000 barrels per day after that time....OPEC and other producers then agreed to increase their production in January 2022 by a further 400,000 barrels per day in a meeting concluded on the 2nd of December, 2021, and reaffirmed their intention to continue that policy with another 400,000 barrel per day increase in February at a meeting concluded January 4, 2022...subsequent monthly meetings from February through May served to step up their production by 400,000 barrels per day each month......however, in a meeting held on June 2nd, they agreed to bring forward the 432,000 barrel per day increase they had already scheduled for September, with that increase to be split evenly between July and August...hence, the production quota increase for both July and August was set at 648,000 barrels per day, which would have left each member's production back at the October 2018 baseline...hence, after September's 100,000 barrels per day increase from that level and October's 100,000 barrels per day decrease, OPEC's quota would be back at that October 2018 baseline, which had been their record month prior to the pandemic, and which still stands as the record, as they've been unable to match it since..

The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from November 2020 to October 2022, and it comes from page 48 (pdf page 58) of OPEC's November Oil Market Report....on this graph, the cerulean blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale....

Even with this month's 210,000 barrel per day decrease in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production still increased by a rounded 700,000 barrels per day to average 101.50 million barrels per day in October, a reported increase which came after September's total global output figure was apparently revised down by 680,000 barrels per day from the 101.48 million barrels per day of global oil output that was reported for September a month ago, as non-OPEC oil production rose by a rounded 900,000 barrels per day in October after that big downward revision, with most of October's production growth coming from Eurasia ex-Russia, Asia ex-China and India, and the OECD Europe, which w​ere partially offset by production declines in Latin America...

After that 700,000 barrel per day increase in October's global output, the 101.50 million barrels of oil per day that were produced globally during the month were 4.10 million barrels per day, or 4.2% more than the revised 97.40 million barrels per day that were being produced globally in October a year ago, which was the third month of the monthly 400 million barrel per day production increases that OPEC and their allied producers initiated as the fourth policy reset in response to the global demand recovery following the early pandemic lockdowns (see the November 2021 OPEC report (online pdf) for the originally reported October 2021 details)...since this month's decrease in OPEC's output contrasts to the global increase, their October oil production of 29,494,000 barrels per day amounted to 29.1% of what was produced globally during the month, down from their revised 29.5% share of the global total in September, which had originally been reported at 29.3%, before this month's large downward revision to global totals for that month....OPEC's October 2021 production was originally reported at 27,453,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,041,000 barrels per day, or 7..4% more barrels per day of oil this October than what they produced last October, when they accounted for 28.1% of a smaller global output total...

With the decrease in OPEC's output and the downward revision to global oil output that we've seen in this report, the amount of oil being produced globally during the month was a little short of the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 25 of the November Oil Market Report (pdf page 35), and it shows regional and total oil demand estimates in millions of barrels per day for 2021 in the first column, and then OPEC's estimate of oil demand by region and globally quarterly over 2022 over the rest of the table...on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for October, which is their estimate of global oil demand during the fourth quarter of 2022....OPEC is estimating that during the 3rd quarter of this year, all oil consuming regions of the globe will be using an average of 101.25 million barrels of oil per day, which is a rounded downward revision of 390,000 barrels per day from their estimate 101.64  million barrels per day for 4th quarter demand of a month ago (that revision is circled in green)...but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 101.50 million barrels per day during October, which would imply that there was a​n inconsequential​ shortage of around 140,000 barrels per day of global oil production in October, when compared to the demand estimated for the month...

in addition to figuring that October oil shortage implied by this report, the downward revision of 680,000 barrels per day to September's global oil output that's implied the data in this month's report, slightly offset by the 20,000 barrels per day downward revision to 3rd quarter demand that we've circled in green above, means that the 2,150,000 barrels per day global oil output surplus we had previously figured for September would now be revised to a surplus of 1,490,000 barrels per day....in like manner, the 20,000 barrels per day downward revision to 3rd quarter demand means that the surplus of 1,210,000 barrels per day we had previously figured for August would now be revised to a surplus of 1,230,000 barrels per day, and that the surplus of 660,000 barrels per day barrels per day we had previously figured for July would have to be revised to a surplus of 680,000 barrels per day...  

Note that in green we have also circled an upward revision of 20,000 barrels per day to OPEC's previous estimates of second quarter demand...based on that upward revision to demand, our previous estimate that there was a surplus of 570,000 barrels per day in June would now be revised to a 550,000 barrels per day surplus, while the oil shortage of 160,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 180,000 barrels per day, and finally, that the 560,000 barrels per day global oil output surplus we had previously figured for April would have to be revised to a surplus of 540,000 barrels per day...

This Week's Rig Count

The number of drilling rigs running in the US rose for the ninth time in sixteen weeks, and for the 90th time over the past 112 weeks during the week ending during the week ending November 18th, but they're still 1.4% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 3 rigs to 782 rigs this past week, which was also 219 more rigs than the 563 rigs that were in use as of the November 19th report of 2021, but was 1,147 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 1 to 623 oil rigs during the past week, after the number of rigs targeting oil had increased by 9 during the prior week, and there are now 162 more oil rigs active now than were running a year ago, even as they amount to just 38.7% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 8.8% 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 55 natural gas rigs from the 102 natural gas rigs that were drilling during the same week a year ago, even as they were 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: one of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California 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 unchanged at 16 rigs this week, with 14 Gulf rigs drilling for oil in Louisiana's offshore waters, and two rigs drilling for oil offshore from Texas....the Gulf rig count is up by 1 from the 15 Gulf rigs running a year ago, when 13 of the Gulf rigs were drilling for oil offshore from Louisiana and two were 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 already shut down for the winter...

In addition to rigs running offshore, there are still three water based rigs drilling 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 St Mary Parish, Louisiana, a directional rig drilling for oil at a depth greater than 15,000 feet in Terrebonne Parish, Louisiana; and a directional rig drilling for oil to between 5,000 and 10,000 feet, inland in Lafourche Parish, Louisiana....the directional rig that had been set up to drill for oil in the Haynesville shale at a depth greater than 15,000 feet from a lake in DeSoto Parish, Louisiana last week appears to have been shut down this week...a year ago, there were only two rigs drilling on inland waters...

The count of active horizontal drilling rigs was up by 3 to 714 horizontal rigs this week, which was also 208 more rigs than the 506 horizontal rigs that were in use in the US on November 19th of last year, but just 52.0% 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 one to 23 vertical rigs this week, which was also up by one from the 22 vertical rigs that were operating during the same week a year ago…on the other hand, the directional rig count was down by one to 45directional rigs this week, but those were still up by 10 from the 35 directional rigs that were in use on November 19th 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 November 18th, the second column shows the change in the number of working rigs between last week’s count (November 11th) and this week’s (November 18th) count, the third column shows last week’s November 11th 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 19th of November, 2021...

to determine what happened in New Mexico,.we start by checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian...there we find that there were three rigs added in Texas Oil District 8, which is the core Permian Delaware, but that there was a rig pulled out of Texas Oil District 8A, which includes the counties overlying the northern Permian Midland, thus netting a two rig increase in the Texas Permian...since the national Permian basin count was down by one, we can thus conclude that all three rigs pulled out of New Mexico had been drilling in the far western Permian Delaware, in the southwest corner of that state...meanwhile, one of those ​Texas ​District 8 additions was targeting natural gas, since the Permian basin gas rig count rose from three to four at the same time..

elsewhere in Texas, there were two rigs pulled out of Texas Oil District 1, but there was a rig added in Texas Oil District 2, and there was another rig added in Texas Oil District 4; those could have all been offsetting changes in the Eagle Ford shale, where the rig count and oil & gas mix remained unchanged...there was also a rig pulled out of Texas Oil District 6, which apparently was a rig removed from the Haynesville shale, since the inland waters oil rig that had been drilling in the Haynesville in DeSoto Parish Louisiana was replaced by a natural gas rig in the Haynesville shale in the same region of Louisiana, and since the Haynesville shale natural ​gas ​rig count was unchanged at 70.. ..there was also a rig added in Texas Oil District 10, which was most likely targeting a basin that Baker Hughes doesn't track, since the Granite Wash ​of that district ​shows a net decrease...on the other hand, if that Granite Wash rig had come out of Oklahoma, it would have also had to have been offset by a rig addition elsewhere in the state not shown by Baker Hughes, since the Oklahoma count was up by two after the oil rig additions in the Cana Woodford and the Mississippian ​shale ​and the oil rig removal from the Arkoma Woodford...meanwhile, the rig added in the Williston basin was in Montana, which now accounts for four of the Bakken rigs, while the rig added in Utah was targetting natural gas in the Uintah basin, which now has four natural gas rigs and nine oil rigs not tracked by and just listed as "other" by Baker Hughes...

+

+

+

note: there’s more here..