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

Monday, September 18, 2023

US oil imports at a 4 year high, oil production at a 41 month high; global oil shortage at 1,360,000 bpd in August

US oil imports at a 4 year high, oil production at a 41 month high; global oil supply was 1,360,000 barrels per day short of global demand in August as OPEC's output was 816,000 barrels per day below the level they said they'd cut to.

US oil prices rose for the 10th time in eleven weeks and ended the week 3.7% higher at $90.77 a barrel, topping $90 for the first time in 10 months, propelled by forecasts from the IEA and OPEC for increased demand and tighter supplies for the rest of this year and into the next....meanwhile, natural gas contracts traded mostly sideways during the week but managed to finish 1.5% higher at ​$2.644 per mmBTU, rallying on short term disruptions to global and domestic gas production...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 8th indicated that after a big increase in our oil imports and a major drop in our oil exports, we had surplus oil to add to our stored commercial crude supplies for the ​second time in ​n​ine weeks, and for ​t​he twentieth time in the past 3​8 weeks, even after a big drop in oil supplies that the EIA could not account for....Our imports of crude oil rose by an average of 812,000 barrels per day to a four year high of 7,582,000 barrels per day, after rising by an average of 154,000 barrels per day the prior week, while our exports of crude oil fell by 1,842,000 barrels per day to average 3,090,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 4,492,000 barrels of oil per day during the week ending September 8th, 2,654,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day higher at a forty-one month high of 12,900,000 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 17,392,000 barrels per day during the September 8th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,800,000 barrels of crude per day during the week ending September 8th, an average of 177,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 606,000 barrels of oil per day were being added to the supplies of oil stored in the US.  So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending September 8th appear to indicate that our total working supply of oil from net imports and from oilfield production was 15,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week. To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +15,000 ] 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 was a discrepancy in the week’s oil supply & demand figures that we have just transcribed.... However, since last week’s “unaccounted for crude oil” figure was at [+1,198,000] barrels per day, that means there was a 1,183,000 barrel per day difference between this week's ​modest oil balance sheet error and the EIA's ​much larger 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, and therefore useless...But since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 606,000 barrel per day increase in our overall crude oil inventories came as an average of 565,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 41,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the sixth consecutive increase in the SPR after three years of withdrawals.  Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports jumped to an average of 6,976,000 barrels per day last week, which was 13.0% more than the 6,174,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be 100,000 barrels per day higher at a forty-one month high of 12,900,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a forty-one month high of 12,500,000 barrels per day, while Alaska’s oil production was 19,000 barrels per day higher at 420,000 barrels per day but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 1.5% below that of our pre-pandemic production peak, but was 33.0% 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 93.7% of their capacity while processing those 16,800,000 barrels of crude per day during the week ending September 8th, up from their 93.1% utilization rate during the prior week, a utilization rate that is in the normal range for late summer... The 16,800,000 barrels per day of oil that were refined this week were 4.9% more than the 16,022,000 barrels of crude that were being processed daily during week ending September 9th of 2022, but 4.0% less than the 17,495,000 barrels that were being refined during the prepandemic week ending September 6th, 2019, when our refinery utilization rate was at 95.1%, also within the normal range for this time of year...

Even with an increase in the amount of oil being refined this week, the gasoline output from our refineries was seasonally lower, decreasing by 576,000 barrels per day to 9,212,000 barrels per day during the week ending September 8th, after our refineries' gasoline output had decreased by 217,000 barrels per day during the prior week. This week’s gasoline production was 2.5% less than the 9,453,000 barrels of gasoline that were being produced daily over the same week of last year, and 11.1% less than the gasoline production of 10,360,000 barrels per day during the prepandemic week ending September 6th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 6,000 barrels per day to 5,017,000 barrels per day, after our distillates output had decreased by 6,000 barrels per day during the prior week. With those minor decreases, our distillates output was fractionally less than the 5,019,000 barrels of distillates that were being produced daily during the week ending September 9th of 2022, and  6.1% less than the 5,341,000 barrels of distillates that were being produced daily during the week ending September 6th, 2019...

Even with this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the ninth time in thirty weeks, increasing by 5,561,000 barrels to 220,307,000 barrels during the week ending September 8th, after our gasoline inventories had decreased by 2,666,000 barrels to a nine month low during the prior week. Our gasoline supplies rose this week because the amount of gasoline supplied to US users crashed by 1.014,000 barrels per day to 8,307,000 barrels per day, and because our exports of gasoline fell by 92,000 barrels per day to 911,000 barrels per day, while our imports of gasoline fell by 83,000 barrels per day to 899,000 barrels per day, ....Even after twenty-one gasoline inventory decreases over the past thirty weeks, our gasoline supplies were 3.4% more than last September 9th's gasoline inventories of 213,040,000 barrels, while about 2% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, with our distillates production essentially unchanged, our supplies of distillate fuels increased for the fourteenth time in twenty-seven weeks, rising by 3,931,000 barrels to 122,533,000 barrels during the week ending September 8th, after our distillates supplies had increased by 679,000 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, fell by 288,000 barrels per day to 3,578,000 barrels per day, and because our imports of distillates rose by 55,000 barrels per day to 185,000 barrels per day, and because our exports of distillates fell by 128,000 barrels per day to 1,056,000 barrels per day....With 39 inventory increases over the past sixty-nine weeks, our distillates supplies at the end of the week were 5.6% above the 116,020,000 barrels of distillates that we had in storage on September 9th of 2022, but were still about 13% below the five year average of our distillates inventories for this time of the year...

Finally, with our oil imports much higher and our oil exports much lower, our commercial supplies of crude oil in storage rose for 8th time in twenty-three weeks and for the 26th time in the past year, increasing by 3,955,000 barrels over the week, from a nine month low of 416,637,000 barrels on September 1st to 420,592,000 barrels by September 8th, after our commercial crude supplies had decreased by 6,307,000 barrels over the prior week. With this week's increase, our commercial crude oil inventories rose to about 2% below the most recent five-year average of commercial oil supplies for this time of year, and to about 27% above the average of our available crude oil stocks as of the second weekend of September over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this September 8th were 2.1% less than the 429,633,000 barrels of oil we had in commercial storage on September 9th of 2022, but were 0.8% more than the 417,445,000 barrels of oil that we still had in storage on September 10th of 2021, while 15.2% less than the 496,045,000 barrels of oil we had in commercial storage on September 11th of 2020, after early pandemic precautions had left a lot of oil unused…

OPEC's Report on Global Oil for August

Tuesday of this past week saw the release of OPEC's September Oil Market Report, which includes the details on OPEC's & global oil data for August, and hence it gives us a picture of the global oil supply & demand situation as Chinese demand remained depressed for a second month after after a first half recovery from the country's Covid policy, while oil supplies were impacted by an additional million barrel per day unilateral production cut by the Saudis and an ongoing 500,000 million barrel per day supply cut by Russia...August was also the eighth month that OPEC and aligned oil producers were operating under a 2 million barrel per day production cut, meant to take roughly 2% of global oil supplies off the market, in response to a perceived global surplus and related lower prices, and the fourth month of a Saudi led cut of an additional 1.16 million barrels per day, which, when combined with the unilateral Russian cut, was intended to take an additional 1.66 million barrels per day off the market for the rest of this year...all told, then, the members of the cartel have committed to holding 4.66 million barrels per day off the market, or roughly 4.6% of global supplies...

The first table from this month's report that we'll review is from the page numbered 49 of the report (pdf page 59), 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 as many as eight "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), the industry newsletter Petroleum Intelligence Weekly, the energy consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy, 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…

As we can see in the bottom right hand corner of the above table, OPEC's oil output increased by 113,000 barrels per day to 27,310,000 barrels per day during August, up from their revised June production total that averaged 27,336,000 barrels per day....however, that July OPEC output figure was originally reported as 27,310,000 barrels per day, which therefore means that OPEC's June production was revised 26,000 barrels per day higher with this report, and hence OPEC's August production was, in effect, 139,000 barrels per day more than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official July OPEC output figures as reported a month ago, before this month's revision)...

the additional million barrel per day output cut the Saudis first implemented in July was the latest in a series of oil supply cuts imposed by the OPEC+ cartel over the past year, beginning with a 2 million barrel per day production cut that the joint agreement imposed on all producers in October...following that, six OPEC oil producers, led by the Saudis, and two other oil producers aligned with OPEC+, came to an agreement at the beginning of April to further reduce their combined production by an additional 1.16 million barrels per day beginning in May, over and above the formal OPEC cuts...in addition, Russia agreed to extend their ongoing 500,000 barrels per day cut for the rest of the year for a total cut of 1.66 million barrels per day from those nine producers...production cuts for OPEC members under that agreement included 500,000 barrels per day (bpd) from the Saudis, 211,000 bpd from Iraq, 140,000 bpd from the Emirates, 128,000 bpd from Kuwait, 48,000 barrels per day from Algeria, and 8,000 barrels per day from Gabon...three months ago, our assessment was that only the Saudis managed to hit the additional production cut target in May, and only Algeria joined them in June, indeed, most of the others increased their production in June and July, rather than cutting it, and it appears that's also been the case in August....hence, the net production reduction remains less than half of what had been committed to by the parties to that April 2nd agreement..

furthermore, OPEC and other aligned oil producers had previously agreed to reduce production by 2,000,000 barrels per day beginning in November, so the net 1,207,000 barrels per day OPEC ex-Saudi Arabia has cut since then is also short of that...however, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce when that policy was initiated in October, so the 27,449,000 barrels per day OPEC produced in August still leaves them far short of what they were expected to produce during the month, as we'll see in the next table...

The above table was originally included as a downloadable attachment to the press release following the 33rd OPEC and non-OPEC Ministerial Meeting on October 5th, 2022, which set OPEC's and other aligned oil producers' production quotas for November and the following months through the end of 2023, and the quotas shown above were reaffirmed by the cartel for 2023 in during the 34th OPEC and non-OPEC Ministerial Meeting on December 4th, 2022....the first column above, labeled "August 2022 required production", actually matches the October 2018 baseline production level on which OPEC and aligned producers have based all of their quotas since the onset of the pandemic, and the "Voluntary adjustment" is the production cut each country is expected to make from that benchmark level to achieve a 2 million barrel per day cut for the cartel as a whole, leaving each country with a "Voluntary Production" level they're expected to hit each month during 2023, whether they've produced that much recently or not....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 since May 2020, they are not shown on the above 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 25,416,000 barrels per day from November 2022 through December 2023...

with the April 2nd agreement, six members of OPEC agreed to further reduce their production by 1,035.000 starting in May and through the end of the year....thus the voluntary production level for the OPEC 10 would have been reduced to 24,381,000 through December....subtracting the million barrel per day cut from the Saudi's production initiated in July leaves OPEC's voluntary production level at 23,381,000 barrels in August....therefore, the 22,565,000 barrels those 10 OPEC members actually produced in August were 816,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of this month's production shortfall...

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 September 2021 thru August 2023, and it comes from page 50 (pdf page 60) of OPEC's September Oil Market Report....on this graph, the sky 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....

After this month's 113,000 barrel per day increase in OPEC's production from their revised production of a month earlier, OPEC's preliminary estimate is that total global liquids production was essentially unchanged at an average of 100.7 million barrels per day in August, as non-OPEC oil production fell by a rounded 100,000 barrels per day in August, with most of August’s non-OPEC production decrease due to less oil output from Russia, which more than offset greater production from China and from "other Eurasian" countries...

With little change in global oil output in August, the amount of oil being produced globally during the month fell short of the expected global demand, as this next table from the OPEC report will show us...

The above table came from page 26 of the September Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2022 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2023 over the rest of the table…on the "Total world" line in the fourth column, we've circled in blue the figure that's relevant for August, which is their estimate of global oil demand during the third quarter of 2023….OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe have been using an average of 102.06 million barrels of oil per day, which was revised a rounded 90,000 barrels of oil per day higher from the 101.96 million barrels per day estimated for the third quarter a month ago (we've circled this month's revisions 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 100.70 million barrels per day during August, which would imply that there was a shortage of around 1,360,000 barrels per day of global oil production in August, when compared to the demand estimated for the month...

In addition to figuring that August oil shortage implied by this report, the upward revision of 900,000 barrels per day to 3rd quarter demand that we've circled in green means that the 1,260,000 barrels per day global oil output surplus we had previously figured for July would now be revised to a 1,360,000 barrels per day (after allowing for rounding)....

Note that in green we have circled an upward revision of 80,000 barrels per day to OPEC's previous estimate for second quarter demand...so, based on that upward revision to demand, our previous estimate of a shortage of 280,000 barrels per day in June would now be revised to a shortage of 360,000 barrels per day...in addition, the 580,000 barrels per day global oil output shortage we had previously figured for May would now be revised to a shortage of 660,000 barrels per day...meanwhile, the global surplus of 40,000 barrels per day we had previously figured for April would now be reversed to a shortage of 40,000 barrels per day, in light of that 80,000 barrel per upward revision to 2nd quarter demand....

Note that in green we have also circled an upward revision of 80,000 barrels per day to OPEC's previous estimates of first quarter demand...for March, that means that the 130,000 barrels per day global oil output surplus we had previously figured for March would be revised to a surplus of just 50,000 barrels per day.. similarly, the upward revision to first quarter demand means that the global oil surplus of 430,000 barrels per day we had previously figured for February would now be revised to a surplus of 350,000 barrels per day, but that the 320,000 barrels per day global oil output shortage we had previously figured for January would be revised to a shortage of 400,000 barrels per day, in light of the 80,000 barrel per day upward revision to first quarter demand...

This Week's Rig Count

in lieu of our usual rig count coverage, we are again just including below a screenshot of the rig count summary pdf from Baker Hughes...in the table below, the first column shows the active rig count as of September 15th, the second column shows the change in the number of working rigs between last week’s count (September 8th) and this week’s (September 15th) count, the third column shows last week’s September 8th 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 16th of September, 2022...

natural gas rig increases came as three oil rigs in the Eagle Ford shale were switched to target gas, while five natural gas rigs were added to basins not tracked by Baker Hughes

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Note:  there’s more here..

Sunday, September 10, 2023

US commercial oil supplies​ and gasoline supplies both at ​nine month low​s; total US oil supplies at a ​new 38 year low​

oil price hits 10 month high; US commercial oil supplies​ and gasoline supplies both at ​nine month low​s; total domestic oil supplies, including SPR, at a ​new 38 year low​

US oil prices rose 2.3% over the past week and settled at $87.51 a barrel, just short of the 10 month high close of $87.54 on Wednesday, as profit-taking interrupted a nine day string of price increases on Thursday​, and Friday's recovery fell short of a new high....the ostensible reason for the run-up in prices was an unexpected agreement between Russia and the Saudis to continue hold an additional 1.3 million barrels of oil off the market until the end of the year, which will further tighten already tight global supplies...a factor not often cited was that US refineries have pulled a quantity of oil roughly equal to 7% of our supplies out of storage over the past 4 weeks, driving commercial inventories to a nine month low, and leaving total US oil supplies at a 38 year low, even as the later ​point is not being widely reported, if at all..

natural gas prices, meanwhile, fell 5.8% to $2.605 per mmBTU​,​ as the prospects for further ​significant air-conditioning demand diminished and utilities headed into winter with gas in storage roughly 8% above normal for the date and 17% more than on the same date a year ago...the combination of higher oil prices and unprofitable natural gas prices will likely pressure Utica shale exploiters to move their operations north and west, out of the​ major dry gas areas in the counties bordering the Ohio river​,and into those ​areas ​w​here the shale bears a higher concentration of oil and natural gas liquids...

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 1st indicated that after another increase in our oil exports, we had to pull oil out of our stored commercial crude supplies for the seventh time in eight weeks, and for 18th time in the past 37 weeks, even after a big jump in oil supplies that the EIA could not accounted for....Our imports of crude oil rose by an average of 154,000 barrels per day to 6,770,000 barrels per day, after falling by an average of 316,000 barrels per day the prior week, while our exports of crude oil rose by 404,000 barrels per day to average 4,932,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 1,838,000 barrels of oil per day during the week ending September 1st, 250,000 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 a forty month high of 12,800,000 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 14,638,000 barrels per day during the September 1st reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,623,000 barrels of crude per day during the week ending September 1st, an average of 20,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 787,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending September 1st appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 1,198,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +1,198,000 ] 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 was an error of that magnitude in the week’s oil supply & demand figures that we have just transcribed.... Moreover, since last week’s “unaccounted for crude oil” figure was at [+287,000] barrels per day, that means there was a 911,000 barrel per day difference between this week's oil 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, and therefore useless...However, since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 787,000 barrel per day decrease in our overall crude oil inventories left our domestic oil supplies, including those in the SPR, at 766,977,000 barrels, the lowest since April 12, 1985, and came as an average of 901,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 114,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the fifth consecutive increase in the SPR after three years of withdrawals. 

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 6,484,000 barrels per day last week, which was still 2.0% more than the 6,356,000 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 a forty month high of 12,800,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 12,400,000 barrels per day, while Alaska’s oil production was unchanged at 402,000 barrels per day and added the same 400,000 barrels per day to the rounded national total as it did last week...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 2.3% below that of our pre-pandemic production peak, but was 32.0% 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 93.1% of their capacity while using those 16,623,000 barrels of crude per day during the week ending September 1st, down from their 93.3% utilization rate during the prior week, a utilization rate that is in the normal range for late summer... The 16,623,000 barrels per day of oil that were refined this week were 4.4% more than the 15,929,000 barrels of crude that were being processed daily during week ending September 2nd of 2022, but 4.4% less than the 17,381,000 barrels that were being refined during the prepandemic week ending August 30th, 2019, when our refinery utilization rate was at 94.8%, also within the normal range for this time of year...

Even with a small increase in the amount of oil being refined this week, the gasoline output from our refineries was lower, decreasing by 217,000 barrels per day to 9,788,000 barrels per day during the week ending September 1st, after our refineries' gasoline output had increased by 290,000 barrels per day during the prior week. This week’s gasoline production was 0.6% less than the 9,852,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.7% less than the gasoline production of 10,272,000 barrels per day during the prepandemic week ending August 30th, 2019.   At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 6,000 barrels per day to 5,017,000 barrels per day, after our distillates output had decreased by 43,000 barrels per day during the prior week.  With those decreases, our distillates output was 0.3% less than the 5,031,000 barrels of distillates that were being produced daily during the week ending September 2nd of 2022, and 2.7% less than the 5,154,000 barrels of distillates that were being produced daily during the week ending August 30th, 2019...

With this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the twenty-first time in twenty-nine weeks, decreasing by 2,666,000 barrels to a nine month low of 214,746,000 barrels during the week ending September 1st, after our gasoline inventories had decreased by 214,000 barrels during the prior week. Our gasoline supplies fell by more this week because the amount of gasoline supplied to US users rose by 253,000 barrels per day to 9,321,000 barrels per day, and because our exports of gasoline rose by 149,000 barrels per day to 1,003,000 barrels per day, while our imports of gasoline rose by 134,000 barrels per day to 982,000 barrels per day, ....Even after twenty-one gasoline inventory decreases over the past twenty-nine weeks, our gasoline supplies were virtually unchanged from last September 2nd’s gasoline inventories of 214,808,000 barrels, while about 5% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, even with this week's decrease in our distillates production, our supplies of distillate fuels increased for the thirteenth time in twenty-six weeks, rising by 679,000 barrels to 118,602,000 barrels during the week ending September 1st, after our distillates supplies had increased by 1,235,000 barrels during the prior week. Our distillates supplies rose by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 164,000 barrels per day to 3,866,000 barrels per day, and as our imports of distillates fell by 33,000 barrels per day to 130,000 barrels per day, and even as our exports of distillates fell by 124,000 barrels per day to 1,184,000 barrels per day....With 38 inventory increases over the past sixty-eight weeks, our distillates supplies at the end of the week were 6.1% above the 111,801,000 barrels of distillates that we had in storage on September 2nd of 2022, but were still about 14% below the five year average of our distillates inventories for this time of the year...

Finally, with our oil imports lower and our oil exports higher, our commercial supplies of crude oil in storage fell for 15th time in twenty-two weeks and for the 26th time in the past year, decreasing by 6,307,000 barrels over the week, from 422,944,000 barrels on August 25th to a nine month low of 416,637,000 barrels on September 1st, after our commercial crude supplies had decreased by 10,584,000 barrels over the prior week. With this week's decrease, our commercial crude oil inventories slipped to about 4% below the most recent five-year average of commercial oil supplies for this time of year, but were about 26% above the average of our available crude oil stocks as of the first weekend of September over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this September 1st were 2.5% less than the 427,191,000 barrels of oil we had in commercial storage on September 2nd of 2022, and were 1.7% less than the 423,867,000 barrels of oil that we still had in storage on September 3rd of 2021, and were 16.7% less than the 500,434,000 barrels of oil we had in commercial storage on September 4th of 2020, after early pandemic precautions had left a lot of oil unused…

This Week's Rig Count

in lieu of our usual rig count coverage, we are just including below a screenshot of the rig count summary pdf from Baker Hughes...in the table below, the first column shows the active rig count as of September 8th, the second column shows the change in the number of working rigs between last week’s count (September 1st) and this week’s (September 8th) count, the third column shows last week’s September 1st active rig count, the 11th 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 9th of September, 2022...

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Note:  there’s more here..

Monday, September 4, 2023

US commercial oil supplies at an 8 month low; total domestic oil supplies, including SPR, at a 38 year low

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending August 25th indicated that after a decrease in our oil imports and an increase in our oil exports, we had to pull oil out of our stored commercial crude supplies for the sixth time in seven weeks, and for 17th time in the past 36 weeks, as unaccounted for oil supply ​was also ​lower....Our imports of crude oil fell by an average of 316,000 barrels per day to 6,617,000 barrels per day, after falling by an average of 225,000 barrels per day the prior week, while our exports of crude oil rose by 270,000 barrels per day to average 4,528,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,089,000 barrels of oil per day during the week ending August 25th, 636,000 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 a forty month high of 12,800,000 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 14,889,000 barrels per day during the August 25th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,603,000 barrels of crude per day during the week ending August 25th, an average of 173,000 fewer barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 1,427,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending August 25th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 287,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +287,000 ] 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 was an error of that magnitude in the week’s oil supply & demand figures that we have just transcribed.... However, since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 1,427,000 barrel per day decrease in our overall crude oil inventoriesleft our domestic oil supplies, including those in the SPR, at 772,486​,000 barrels, the lowest since April 9, 1985, and came as an average of 1,512,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 85,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the fourth increase in the SPR after three years of withdrawals.   This week’s crude oil production was reported to be unchanged at a forty month high of 12,800,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 12,400,000 barrels per day, while Alaska’s oil production was unchanged at 402,000 barrels per day and added the same 400,000 barrels per day to the rounded national total as it did last week...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 2.3% below that of our pre-pandemic production peak, but was 32.0% 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 93.3% of their capacity while using those 16,603,000 barrels of crude per day during the week ending August 25th, down from their 94.5% utilization rate during the prior week, both utilization rates that are in the normal range for mid August... The 16,603,000 barrels per day of oil that were refined this week were 2.2% more than the 16,238,000 barrels of crude that were being processed daily during week ending August 26th of 2022, but 4.6% less than the 17,408,000 barrels that were being refined during the prepandemic week ending August 23rd, 2019, when our refinery utilization rate was at 95.2%, also within the normal range for this time of year...

Even with the decrease in the amount of oil being refined this week, the gasoline output from our refineries was higher, increasing by 290,000 barrels per day to 10,005,000 barrels per day during the week ending August 25th, after our refineries' gasoline output had increased by 130,000 barrels per day during the prior week. This week’s gasoline production was 2.3% more than the 9,778,000 barrels of gasoline that were being produced daily over the same week of last year, but 6.1% less than the gasoline production of 10,660,000 barrels per day during the prepandemic week ending August ​2​3rd, 2019. On the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 43,000 barrels per day to 5,023,000 barrels per day, after our distillates output had increased by 337,000 barrels per day during the prior week. Even with that decrease, our distillates output was 2.1% more than the 4,919,000 barrels of distillates that were being produced daily during the week ending August 26th of 2022, but 3.3% less than the 5,193,000 barrels of distillates that were being produced daily during the week ending August ​2​3rd, 2019...

​Even with this week's increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the twentieth time in twenty-eight weeks, decreasing by 214,000 barrels to 217,412,000 barrels during the week ending August 25th, after our gasoline inventories had increased by 1,468,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 158,000 barrels per day to 9,068,000 barrels per day, and because our imports of gasoline fell 45,000 barrels per day to 848,000 barrels per day, and because our exports of gasoline rose by 24,000 barrels per day to 854,000 barrels per day....Even after twenty gasoline inventory decreases over the past twenty-eight weeks, our gasoline supplies were 1.4% above last August 26th’s gasoline inventories of 214,475,000 barrels, ​w​hile about 5% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, even with this week's ​decrease in our distillates production, our supplies of distillate fuels increased for the twelfth time in twenty-five weeks, rising by 1,235,000 barrels to 116,688,000 barrels during the week ending August 25th, after our distillates supplies had increased by 945,000 barrels during the prior week. Our distillates supplies rose this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 134,000 barrels per day to 3,702,000 barrels per day, and as our imports of distillates rose by 75,000 barrels per day to 163,000 barrels per day, and while our exports of distillates rose by 108,000 barrels per day to 1,308,000 barrels per day....With 37 inventory increases over the past sixty-seven weeks, our distillates supplies at the end of the week were 5.6% above the 111,706,000 barrels of distillates that we had in storage on August 26th of 2022, but were still about 15% below the five year average of our distillates inventories for this time of the year...

Finally, with our oil imports lower and our oil exports higher, our commercial supplies of crude oil in storage fell for 15th time in twenty-two weeks and for the 25th time in the past year, decreasing by 10,584,000 barrels over the week, from 433,528,000 barrels on August 18th to an eight month low of 422,944,000 barrels on August 25th, after our commercial crude supplies had decreased by 6,134,000 barrels over the prior week. With this week's decrease, our commercial crude oil inventories slipped to about 3% below the most recent five-year average of commercial oil supplies for this time of year, but were about 27% above the average of our available crude oil stocks as of the fourth weekend of August over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this August 25th were 1.1% more than the 418,346,000 barrels of oil we had in commercial storage on August 26th of 2022, but were 1.1% less than the 425,395,000 barrels of oil that we still had in storage on August 27th of 2021, and were 15.1% less than the 498,401,000 barrels of oil we had in commercial storage on August 28th of  2020, after early pandemic precautions had left a lot of oil unused…

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Note:  there’s more here..

Wednesday, August 30, 2023

US oil production at a new post pandemic high; Strategic Petroleum Reserve still near 40 year low

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending August 18th indicated that after modest offsetting decreases in our oil imports and our oil exports and little change in refining, we had to pull oil out of our stored commercial crude supplies for the 14th time in twenty-one weeks, and for the 16th time in the past 35 weeks, as our production of oil also ticked up to a new post pandemic high....Our imports of crude oil fell by an average of 225,000 barrels per day to 6,933,000 barrels per day, after rising by an average of 476,000 barrels per day the prior week, while our exports of crude oil fell by 341,000 barrels per day to average 4,258,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,675,000 barrels of oil per day during the week ending August 18th, 116,000 more barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day higher at a forty month high of 12,800,000 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 15,475,000 barrels per day during the August 18th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,776,000 barrels of crude per day during the week ending August 18th, an average of 30,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 792,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending August 18th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 509,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +509,000 ] 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 was an error of that magnitude in the week’s oil supply & demand figures that we have just transcribed.... However, since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 792,000 barrel per day decrease in our overall crude oil inventories came as an average of 876,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 85,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the third increase in the SPR after three years of withdrawals...outside of the lower figures of the past two weeks, the 348,948,000 barrels of oil that still remain in our Strategic Petroleum Reserve would still be the lowest since August 19th,1983, as repeated tapping of our emergency oil 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 big SPR withdrawals of last year. However, those Biden administration withdrawals amounted to about 42% of what was left in the SPR when they took office, and that left us with what is now less than a 18 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 860,000 barrels per day last week, which was 6.3% more than the 6,454,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be 100,000 barrels per day higher at a forty month high of 12,800,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 12,400,000 barrels per day, while Alaska’s oil production was 18,000 barrels per day higher at 402,000 barrels per day, but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 2.3% below that of our pre-pandemic production peak, but was 32.0% 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 94.5% of their capacity while using those 16,776,000 barrels of crude per day during the week ending August 18th, down from their 94.7% utilization rate during the prior week, utilization rates that are in the normal range for early August... The 16,776,000 barrels per day of oil that were refined this week were 3.2% more than the 16,255,000 barrels of crude that were being processed daily during week ending August 19th of 2022, but 5.2% less than the 17,702,000 barrels that were being refined during the prepandemic week ending August 16th, 2019, when our refinery utilization rate was at 95.9%, on the high side of the normal range for this time of year...

With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also higher, increasing by 130,000 barrels per day to 9,715,000 barrels per day during the week ending August 18th, after our refineries' gasoline output had decreased by 336,000 barrels per day during the prior week. This week’s gasoline production was 3.0% more than the 9,429,000 barrels of gasoline that were being produced daily over the same week of last year, but 1.8% less than the gasoline production of 9,897,000 barrels per day during the prepandemic week ending August 16th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 337,000 barrels per day to 5,066,000 barrels per day, after our distillates output had decreased by 182,000  barrels per day during the prior week. Even with that increase, our distillates output was 2.6% less than the 5,200,000 barrels of distillates that were being produced daily during the week ending August 19th of 2022, and 5.1% less than the 5,340,000 barrels of distillates that were being produced daily during the week ending August 16th, 2019...

With this week's increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the eighth time in twenty-seven weeks, increasing by 1,468,000 barrels to 217,626,000 barrels during the week ending August 18th, after our gasoline inventories had decreased by 262,000 barrels during the prior week. Our gasoline supplies rose this week even though the amount of gasoline supplied to US users rose by 59,000 barrels per day to 8,910,000 barrels per day, because our imports of gasoline rose by 307,000 barrels per day to 893,000 barrels per day, and because our exports of gasoline fell by 51,000 barrels per day to 830,000 barrels per day, while ...Even after nineteen gasoline inventory decreases over the past twenty-seven weeks, our gasoline supplies were 0.9% above last August 19th’s gasoline inventories of 215,647,000 barrels, and about 5% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, with this week's big increase in our distillates production, our supplies of distillate fuels increased for the eleventh time in twenty-four weeks, rising by 945,000 barrels to 116,688,000 barrels during the week ending August 18th, after our distillates supplies had increased by 296,000 barrels during the prior week. Our distillates supplies rose this week even as the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 188,000 barrels per day to 3,836,000 barrels per day, and even as our imports of distillates fell by 41,000 barrels per day to 88,000 barrels per day, and while our exports of distillates rose by 15,000 barrels per day to 1,182,000 barrels per day....With 36 inventory increases over the past sixty-six weeks, our distillates supplies at the end of the week were 4.6% above the 111,594,000 barrels of distillates that we had in storage on August 19th of 2022, but are still about 16% below the five year average of our distillates inventories for this time of the year...

Finally, with oil supply and demand little changed from a week ago, our commercial supplies of crude oil in storage fell for the 16th time in 34 weeks and for the 25th time in the past year, decreasing by 6,134,000 barrels over the week, from 439,662,000 barrels on August 11th to 433,528,000 barrels on August 18th, after our commercial crude supplies had decreased by 5,960,000 barrels over the prior week. With this week's decrease, our commercial crude oil inventories were about 2% below the most recent five-year average of commercial oil supplies for this time of year, but were about 29% above the average of our available crude oil stocks as of the third weekend of August over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this August 18th were 2.8% more than the 421,672,000 barrels of oil we had in commercial storage on August 19th of 2022, and were 0.92% more than the 432,564,000 barrels of oil that we still had in storage on August 20th of 2021, but were 14.6% less than the 507,763,000 barrels of oil we had in commercial storage on August 21st of 2020, after early pandemic precautions had left a lot of oil unused…

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Note:  there’s more here..

Monday, August 21, 2023

US oil production at a 40 month high; gasoline supplies at a 8 month low; DUC backlog at 5.1 months

US oil production at a new post pandemic high; gasoline supplies at a new eight month low; natural gas rigs at an eighteen month low; DUC backlog at 5.1 months

US oil prices fell for the first ​week in eight week on weak economic data from China and fears of an extended period of higher US interest rates ...after inching up 0.4% to $83.19 a barrel last week after the EIA, OPEC, and the International Energy Agency (IEA) all forecast tighter supplies and growing demand for oil, the contract price for the benchmark US light sweet crude for September delivery slipped in Asian trading on Monday on a firmer US dollar and on a sluggish China recovery and continued to sputter during the New York trading session amid a summertime slump in liquidity, leaving the commodity at the mercy of volatile broader markets​, before settling 68 cents lower at $82.51 a barrel after China's largest real estate developer suspended payments on its bond obligations, with additional price pressure coming from the news that Nigerian Forcados crude exports had resumed...oil prices rose in Asia early on Tuesday on news of surprise rate cuts in China as the Chinese central bank attempted to stimulate the sluggish China recovery by easing borrowing costs for financial institutions, but then turned lower after China’s industrial output and retail sales data showed the economy slowed further in July, and slid further in New York on fears that China’s unexpected rate cut was not substantial enough to support the country’s post-pandemic recovery...oil prices slipped slightly in Asia trade Wednesday.as concerns over the sluggish China recovery and the disappointing economic data recently released overshadowed news of depleting US oil stockpiles, but were little changed at the open in New York, with both oil benchmarks halting the week's losses as traders balanced concerns over the health of China's economy against tight supplies from the OPEC+ coalition, but then extended the week's losses after the EIA reported that crude production was nearing its pre-Covid highs, and further extended its losses to a low of $79.28 following the release of the Fed minutes in which officials said inflation risks could require further tightening, and thus settled the session down $1.61 at $79.38 a barrel as a stronger U.S. dollar tied to prospects for tighter monetary policy further pressured the oil complex...oil prices edged up in Asian trading Thursday, after China's central bank said it would keep liquidity reasonably ample and maintain “precise and forceful” policy to support economic recovery to stem the rising tide of pessimism over the country's property market, then retraced most of the losses seen during the prior session in New York as tightening crude supplies took center stage, sidelining concerns about the Chinese economy and US monetary policy, as September oil settled $1.01 higher at $80.39 a barrel on bullish optimism following the vow by Beijing’s central bank to get its economy moving...oil prices crept higher in Asia on Friday as the focus turned to consolidation after the general level of risk appetite had “taken a knock from strengthening macroeconomic headwinds from China growth to rising rate concerns”, then continued to rally during New York trading, finding support from falling​ US crude oil inventories and signs of a tightening global market. and settled 86 cents or about 1.1% higher at $81.25 a barrel after industry data showed that the U.S. oil and natural gas rig count fell for the sixth week in a row, but still finished 2.3% lower on the week, ending the seven-week winning streak on worries about the Chinese economy and fears that interest rates would remain higher for longer...

US natural gas prices also finished lower, falling for a sixth time in eight weeks, on milder weather forecasts and an underwhelming demand for air conditioning... after rising 7.5% to $2.770 per mmBTU last week as a strike among LNG workers in Australia led European gas prices to spike 40%, the contract price of US natural gas for September delivery opened 2 cents higher on Monday on forecasts for above average temperatures for most of the country, but traded in a narrow range for the rest of the session before settling 2.5 cents higher at $2.795 per mmBTU as hotter-than-normal weather kept cooling demand high, with consumption forecast to rise further into next week...however, natural gas prices opened 7 cents lower on Tuesday in response to a bearish shift in short-term weather forecasts and traded below that level for the rest of the session before settling down 13.6 cents at $2.659 per mmBTU on forecasts for lower demand into next week along with relatively high output...natural gas prices were marked down another 3 cents by the opening bell on Wednesday​, as cooling demand was forecast to decline to close out the month and retreated from that level to settle 6.7 cents cents lower at ​$2.592 per mmBTU as easing weather-driven demand expectations cooled a market hoping for late-summer heat to whittle away at a healthy supply cushion...natural gas prices opened 4 cents higher Thursday and rose to an intraday high of $2.670 at 10:00AM ahead of the storage report, but retreated after the print to settle just 2.9 cents higher at $2.621 per mmBTU as the injection of gas into storage was largely in line with expectations of a smaller-than-normal storage build....with the storage report offering no bullish surprises, natural gas prices were ​again undercut by the lack of intimidating heat heading into late August on Friday, and settled down 7.0 cents at $2.551 per mmBTU, and thus ended 7.9% lower on the week...

The EIA's natural gas storage report for the week ending August 11th indicated that the amount of working natural gas held in underground storage in the US increased by 35 billion cubic feet to 3,065 billion cubic feet by the end of the week, which left our natural gas supplies 549 billion cubic feet, or 21.8% above the 2,516 billion cubic feet that were in storage on August 11th of last year, and 299 billion cubic feet, or 10.8% more than the five-year average of 2,766 billion cubic feet of natural gas that were in working storage as of the 11th of August over the most recent five years… however, natural gas supplies were still 8.7% below normal for this date in the EIA region defining the Pacific states, while 13.6% above normal in the South Central region of the country at the same time....the 35 billion cubic foot injection into US natural gas working storage for the cited week was largely in line with the 34 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, but was more than the 21 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, while less than the average 41 billion cubic feet addition to natural gas storage that has been typical for the same summer week over the past 5 years…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending August 11th indicated that after a big jump in our oil exports and an increase in refining, we had to pull oil out of our stored commercial crude supplies for the 13th time in twenty weeks, and for the 15th time in the past 34 weeks, as our production of oil also ticked up to a post pandemic high....Our imports of crude oil rose by an average of 476,000 barrels per day to 7,158,000 barrels per day, after rising by an average of 14,000 barrels per day the prior week, while our exports of crude oil rose by 2,239,000 barrels per day to average 4,599,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,559,000 barrels of oil per day during the week ending August 11th, 1,763,000 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 100,000 barrels per day higher at 12,700,000 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 15,259,000 barrels per day during the August 11th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,746,000 barrels of crude per day during the week ending August 11th, an average of 166,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 766,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending August 11th appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 721,000 barrels per day less than what our oil refineries reported they used during the week. To account for that obvious disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +721,000 ] 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 was an error of that magnitude in the week’s oil supply & demand figures that we have just transcribed.... However, since most oil traders respond to these weekly EIA reports as if they were accurate, and since these weekly figures therefore 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 reliable 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 766,000 barrel per day decrease in our overall crude oil inventories came as an average of 851,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 86,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the second increase in the SPR since July 10th, 2020....however, outside of the July lows, the 348,354,000 barrels of oil that still remain in our Strategic Petroleum Reserve would still be the lowest since August 19th,1983, as repeated tapping of our emergency oil 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 big SPR withdrawals of last year. However, those Biden administration withdrawals amounted to about 42% of what was left in the SPR when they took office, and that left us with what is now less than a 18 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 slipped to an average of 6,719,000 barrels per day last week, which was​ still 4.1% more than the 6,452,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be 100,000 barrels per day higher at a forty month high of 12,700,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 12,300,000 barrels per day, while Alaska’s oil production was 7,000 barrels per day lower at 384,000 barrels per day, but still added the same 400,000 barrels per day to the rounded national total as it did last week...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 3.1% below that of our pre-pandemic production peak, but was 30.9% 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 94.7% of their capacity while using those 16,746,000 barrels of crude per day during the week ending August 11th, up from their 93.8% utilization rate during the prior week, ​b​ut a utilization rate that's ​still in the normal range for early August... The 16,746,000 barrels per day of oil that were refined this week were 2.0% more than the 16,423,000 barrels of crude that were being processed daily during week ending August 12th of 2022, but 3.2% less than the 17,302,000 barrels that were being refined during the prepandemic week ending August 9th, 2019, when our refinery utilization rate was at 94.8%, also in the normal range for this time of year...

Even with the increase in the amount of oil being refined this week, the gasoline output from our refineries was ​lower, decreasing by 336,000 barrels per day to 9,585,000 barrels per day during the week ending August 11th, after our refineries' gasoline output had increased by 92,000 barrels per day during the prior week. This week’s gasoline production was 3.8% less than the 9,965,000 barrels of gasoline that were being produced daily over the same week of last year, and 6.1% less than the gasoline production of 10,203,000 barrels per day during the prepandemic week ending August 9th, 2019.   At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 182,000 barrels per day to 4,911,000 barrels per day, after our distillates output had increased by 50,000 barrels per day during the prior week.  With that decrease, our distillates output was 8.7% less than the 5,178,000 barrels of distillates that were being produced daily during the week ending August 12th of 2022, and 6.9% less than the 5,077,000 barrels of distillates that were being produced daily during the week ending August 9th, 2019...

With this week's decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the nineteenth time in twenty-six weeks, decreasing by 262,000 barrels to an eight month low​ of 216,158,000 barrels during the week ending August 11th, after our gasoline inventories had decreased by 2,661,000 barrels during the prior week. Our gasoline supplies fell by less this week because the amount of gasoline supplied to US users fell by 451,000 barrels per day to 9,302,000 barrels per day, and because our exports of gasoline fell by 60,000 barrels per day to 881,000 barrels per day, while our imports of gasoline fell by 98,000 barrels per day to 586,000 barrels per day.....And after nineteen gasoline inventory decreases over the past twenty-six weeks, our gasoline supplies were at another eight month low, just 0.2% above last August 12th’s gasoline inventories of 215,674,000 barrels, and about 6% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, even with this week's increase in our distillates production, our supplies of distillate fuels increased for the tenth time in twenty-three weeks, rising by 296,000 barrels to 115,447,000 barrels during the week ending August 11th, after our distillates supplies had decreased by 1,706,000 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, fell by 114,000 barrels per day to 3,648,000 barrels per day, and because our imports of distillates rose by 64,000 barrels per day to 129,000 barrels per day, and because our exports of distillates fell by 291,000 barrels per day to 1,167,000 barrels per day....With 35 inventory increases over the past sixty-five weeks, our distillates supplies at the end of the week were 3.1% above the 112,256,000 barrels of distillates that we had in storage on August 12th of 2022, but are still about 16% below the five year average of our distillates inventories for this time of the year...

Finally, with the ​n​ear doubling of our oil exports, our commercial supplies of crude oil in storage fell for the 15th time in 33 weeks and for the 25th time in the past year,​ decreasing by 5,960,000 barrels over the week, from 445,622,000 barrels on August 4th to 439,662,000 barrels on August 11th, after our commercial crude supplies had increased by 5,851,000 barrels over the prior week.  With this week's decrease, our commercial crude oil inventories were about 1% below the most recent five-year average of commercial oil supplies for this time of year, but were about 30% above the average of our available crude oil stocks as of the second weekend of August over the 5 years at the beginning of the past decade, with the difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this August 11th were 3.5% more than the 424,954,000 barrels of oil we had in commercial storage on August 12th of 2022, and were 0.9% more than the 435,544,000 barrels of oil that we still had in storage on August 13th of 2021, but were 14.2% less than the 512,452,000 barrels of oil we had in commercial storage on August 14th of 2020, after early pandemic precautions had left a lot of oil unused…

This Week's Rig Count

The number of drilling rigs active in the US decreased for the fifteenth time over the past sixteen weeks during the week ending August 18th, and is now 19.0% below the prepandemic rig count, despite increasing ninety-six times during the 123 weeks of the post pandemic recovery... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 12 rigs to 642 rigs over the past week, which was 120 fewer rigs than the 762 rigs that were in use as of the August 19th report of 2022, and was also 1,287 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 was down by 5 to 520 oil rigs during the past week, after the number of rigs targeting oil was unchanged during the prior week, leaving 81 fewer oil rigs active now than were running a year ago, as they now amount to just 32.3% of the shale era high of 1,609 rigs that were drilling for oil on October 10th, 2014, while they are now down 23.9% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 6 to ​to an 18 month low of 117 natural gas rigs, which left natural gas rigs down by 42 from the 159 natural gas rigs that were drilling during the same week of 2022, as they now amount to less than 7.3% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….

In addition to those rigs specifically targeting oil and natural gas, Baker Hughes reports that six rigs they've labeled as "miscellaneous" continued drilling this weekdown by one from a week ago...miscellaneous rigs still operating this week included a vertical rig drilling to between 5,000 and 10,000 feet in Beaver county Utah, a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, a horizontal rig drilling to more than 15,000 feet into the Williston basin in Dunn county, North Dakota, 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, and a vertical rig drilling to more than 15,000 feet into a formation in Lincoln county Wyoming, also into a formation unnamed by Baker Hughes...the vertical rig targeting the Marcellus at between 10,000 and 15,000 feet in Monongalia county West Virginia was shut down this week,..in the past we've identified various "miscellaneous" rig activity as being for exploration rather than production, for geothermal energy, and for carbon dioxide storage...

The offshore rig count in the Gulf of Mexico was down by one to 16 rigs this week, and included 14 rigs drilling for oil in Louisiana's offshore waters, and two drilling for oil in Texas waters....the Gulf rig count now matches the 16 Gulf rigs running a year ago, when all 16 Gulf rigs were drilling for oil offshore from Louisiana…in addition to Gulf rigs, there is also a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet, offshore from the Kenai Peninsula of Alaska, while there were two rigs drilling offshore from Alaska in that same area during the same week a year ago, hence, the national total of 17 rigs drilling offshore this week is down 1 from the national offshore count of 18 a year ago..

In addition to rigs drilling offshore, there are also four inland water based deployed this week, all in Louisiana, and down from five last week...they include a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet in Lafourche Parish, a directional rig drilling for oil at a depth of between 10,000 and 15,000 feet through an inland body of water in Saint Mary Parish; a directional rig drilling for oil at a depth of less than 5,000 feet on inland waters in Lafourche Parish, and a directional rig drilling for oil at over 15,000 feet through an inland body of water in Terrebonne Parish Louisiana....a year ago, there were three such rigs drilling on inland waters...

The count of active horizontal drilling rigs was down by 7 to 572 horizontal rigs this week, which was also 122 fewer rigs than the 694 horizontal rigs that were in use in the US on August 19th of last year, and is now down 58.4% from the high of 1,374 horizontal rigs that were drilling on November 21st of 2014… meanwhile, the directional rig count was down by 1 to 52 directional rigs this week, but those were still up by 3 from the 39 directional rigs that were operating during the same week a year ago....at the same time, the vertical rig count was down by 4 to 18 vertical rigs this week, but those were down by11 from the 29 vertical rigs that were in use on August 12th of 2022…

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of August 18th, the second column shows the change in the number of working rigs between last week’s count (August 4th) and this week’s (August 18th) count, the third column shows last week’s August 11th active rig count, the 11th 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 August, 2022...

Louisiana's three rig drop included one that had been drilling offshore, and two in the northern parts of the state, one of which had been drilling for natural gas in the Haynesville shale...in the Appalachian natural gas ​b​asins, two gas rigs were pulled out of Ohio's Utica shale, two gas rigs and a miscellaneous rig were pulled out of West Virginia's Marcellus, while two gas rigs were added back in Pennsylvania's Marcellus.....elsewhere, North Dakota drillers pulled two oil rigs from the Bakken shale in the Williston basin, and in Oklahoma, they pulled three oil rigs out of the Cana Woodford and added one in the Granite Wash, while in Wyoming, a rig was pulled from one of the basins not tracked by Baker Hughes....

checking the Rigs by State file at Baker Hughes for the changes in Texas Permian, where oil rigs were up by one to 323, while natural gas rigs were down by one to four, we find that there was one rig added in Texas Oil District 7C, which overlies the southern Permian Midland, while rigs in all other Texas Permian districts were unchanged...hence, since the Texas Permian count is up by one while the national count was unchanged, we can conclude that the rig pulled out of New Mexico had been drilling for natural gas in the far western Permian Delaware, in the southeast corner of that state....elsewhere in Texas, there was a rig pulled out of Texas Oil District 1, while there was a rig added in Texas Oil District 3, and another rig added in Texas Oil District 4; all of which likely represent offsetting changes in the Eagle Ford shale, which was unchanged for the week...Texas also saw a rig pulled out of Texas Oil District 6, which was likely from a basin not tracked by Baker Hughes since the Haynesville​ shale change i​s already accounted for, as well as a rig pulled out of Texas Oil District 10, also likely from a basin not tracked by Baker Hughes, since the Granite Wash saw a rig increase.....on net, basins not tracked by Baker Hughes accounted for the loss of two natural gas rigs and​ of two oil rigs, over and above the basin changes we've noted above...

DUC well report for July

Monday of this ​past week saw the release of the EIA's Drilling Productivity Report for August, which included the EIA's July data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)....that data showed a decrease in uncompleted wells nationally for the 3​4​th time out of the past 37 months, as drilling of new wells fell in July, while completions of drilled wells rose, but both remained well below the average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by just 5 wells, falling from a revised 4,792 DUC wells in June to 4,787 DUC wells in July, which was also 9.1% fewer DUCs than the 5,241 wells that had been drilled but remained uncompleted as of the end of July of a year ago...this month's DUC decrease occurred as 957 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down by just 3 from the 930 wells that were drilled in June, while 932 wells were completed and brought into production by fracking them, up from the 927 well completions seen in June, but down by 63 from the 995 completions seen in July of last year....at the July completion rate, the 4,787 drilled but uncompleted wells remaining at the end of the month represents a 5.1 month backlog of wells that have been drilled but are not yet fracked, up from the 5.0 month DUC well backlog of a month ago, and up from the 7 1/2 year low of 4.4 months of eight months ago, on a completion rate that is now roughly 20% below 2019's pre-pandemic average...

Oil basin DUCS fell in July while natural gas basin DUCs were higher, even as three out of the seven basins covered by this report saw no net DUC change....the number of uncompleted wells in the Bakken of North Dakota decreased by 10, from 510 DUC wells at the end of June to 500 DUCs at the end of July, as 70 new wells were drilled into the Bakken during July, while 80 already drilled wells in the region were being fracked....at the same time, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 1, falling from 717 at the end of ​J​une to 716 DUC wells at the end of July, as 105 wells were drilled into the Niobrara chalk during July, while 106 Niobrara wells were completed...Meanwhile, the number of DUC wells in the in the Permian basin of west Texas and New Mexico was unchanged at 856 DUCs at the end of July, as 460 wells were drilled into the Permian during July, while 460 of the drilled wells in the Permian basin were being fracked.....at the same time, DUCs in the Eagle Ford shale of south Texas were also unchanged, with 480 Eagle Ford DUCs at the end of July, as 92 wells were drilled in the Eagle Ford during July, while 92 of the already drilled Eagle Ford wells were fracked....in addition, the number of uncompleted wells  remaining in Oklahoma's Anadarko basin remained at 739 DUC wells at the end of July, as 51 wells were drilled into the Anadarko basin during July, while 51 Anadarko 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 six wells, from 716 DUCs at the end of June to 710 DUCs at the end of July, as 92 new wells were drilled into the Marcellus and Utica shales during the month, while 98 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 12, from 774 DUCs in June to 786 DUCs by the end of July, as 57 wells were drilled into the Haynesville during July, while just 45 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of July, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by 11 to 3,291  DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) increased by 6 to 1,496 DUC wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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