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, January 22, 2023

natural gas prices at a 19 month low; 520,000 barrels per day excess oil was produced worldwide in December

natural gas prices settle at a 19 month low; global oil production exceeded demand by 520,000 barrels per day in December; despite OPEC production that was 854,000 barrels per day below their reduced quota

US oil prices finished higher for the fifth time out of the past six weeks on the belief that China's reopening would boost​ the​ demand for crude.... after rising 8.3% to $79.86 a barrel last week on the reopening of China and signs of easing inflation in the US, the contract price for the benchmark US light sweet crude for February delivery headed lower in overseas trading on our Monday holiday as traders took profits from last week’s rally after rising numbers of COVID-19 cases in China clouded prospects for demand, then slipped further in early Asian trading Tuesday as recession fears dominated headlines out of the World Economic Forum's meeting in Davos, draining ​the ​optimism that had stoked the market last week on prospects of a fuel demand recovery, but steadied after US markets opened as traders looked to a revival in Chinese demand after data showed that their economy fared better than expected last quarter, but sharply pared an early advance to a nine-week high at $81.23 per barrel to settle for a 32 cent gain to $80.18 a barrel after a survey on manufacturing activity in New York State showed business activity had collapsed to the lowest level since June 2020....oil prices extended Tuesday’s gains into early European trading on Wednesday, rising by 1% as market sentiment turned bullish on hopes that China’s reopening would boost demand growth and that major developed economies might avoid recession and hit their highest intraday prices since early December in New York trading before turning south to settle 70 cents, or 0.9% lower, at 79.48 a barrel as worries about a possible U.S. recession outweighed optimism that China's lifting of COVID-19 curbs would fuel demand for crude....oil prices extended their losses in after hours trading after the American Petroleum Institute reported a bigger crude inventory build than anyone expected​,​ and then traded more than 1% lower in Asia on Thursday on weak economic reports from the US amid recession fears, and on the hefty rise in crude stockpiles, but rallied in US trading despite EIA data showing nationwide crude oil stock levels spiked ​by ​8.4 million barrels, as refinery operations remained below normal follwing widespread disruptions ​due to ​the ​bitter cold weather in late December. and settled 85 cents higher at $80.33 a barrel, the highest close since December 1st, thus extending the rally of recent weeks built around rising Chinese demand....oil prices moved higher in Asian trade early Friday, supported by economic recovery signs from China, then rallied further after Baker Hughes reported the number of US oil-targeting rigs unexpectedly fell by the most in 16 months, while a softer U.S. dollar index further boosted buying to add 98 cents or 1.2% to close at a two month high of $81.31 a barrel, thus finishing 1.8% higher on the week as trading in the February ​oil ​contract expired, while the new front-month contract price for the benchmark US crude for March delivery added $1.03, or 1.3%, to settle at $81.64​ a barrel​, with that contract up 1.9% on the week...

Meanwhile, US natural gas prices finished lower for the seventh time in eight weeks, on indications of a further delay ​in the resumption ​of LNG exports from Freeport Texas, ​following forecasts ​that ​again shifted warmer ..after falling 7.8% to an 18-month low of $3.419 per mmBTU last week following the first January addition to US gas inventories on record, the contract price of US natural gas for February delivery jumped 16.7 cents, or almost 5% to $3.586 per mmBTU on Tuesday, as gas started to flow to the long-shut Freeport LNG export plant in Texas, while forecasts indicated colder weather over the next two weeks than had been expected...but natural gas prices reversed lower early Wednesday as updated forecasts reduced the amount of cold expected for the Lower 48 during the final week of January, and prices dropped 27.5 cents to a new 18 month low of $3.311 per mmBTU as gas production climbed, benign weather persisted and traders braced for an anemic storage withdrawal report...natural gas prices were close to even early Thursday ahead of the EIA storage report, then ticked lower after the EIA reported a steeper than expected withdrawal of 82 Bcf ​of​ natural gas from underground storage and settled down 3.6 cents ​at $3.275 per mmBTU,​ ​after a gas tanker turned away from Freeport LNG's export plant in Texas, a sign that the plant's restart would likely not happen in January...after trading in a narrow range much of Friday, prices turned lower to settle down 10.1 cents at ​a 19 month low of $3.174 per mmBTU amid mild weather and elevated gas production levels​,​ and thus ended 7.2% lower on the week...

The EIA's natural gas storage report for the week ending January 13th indicated that the amount of working natural gas held in underground storage in the US fell by 82 billion cubic feet to 2,820 billion cubic feet by the end of the week, which still left our gas supplies 19 billion cubic feet, or 0.7% below the 2,839 billion cubic feet that were in storage on January 13th of last year, but 40 billion cubic feet, or 1.2% more than the five-year average of 2,786 billion cubic feet of natural gas that were in storage as of the 13th of January over the most recent five years....the 82 billion cubic foot withdrawal from US natural gas working storage for the cited week was more than was expected by a Reuters poll of analysts, whose average forecast called for a 71 billion cubic feet withdrawal of gas, but it was well less than half of the 203 billion cubic feet that were pulled out of natural gas storage during the corresponding week of 2022, and far below the average 156 billion cubic feet of natural gas that have typically been withdrawn from our natural gas storage during the same winter 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 January 13th indicated that after another big increase in our oil imports, we again had surplus oil left to add to our stored commercial crude supplies for the 4th consecutive week, and for the 23rd time in the past 39 weeks, despite a big jump in our oil exports and a further rebound in our refinery throughput... Our imports of crude oil rose by an average of 511,000 barrels per day to average 6,861,000 barrels per day, after rising by an average of 637,000 barrels per day during the prior week, while our exports of crude oil rose by 1,735,000 barrels per day to average 3,872,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,989,000 barrels of oil per day during the week ending January 13th, 1,224,000 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 12,200,000 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 15,189,000 barrels per day during the January 13th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 14,853,000 barrels of crude per day during the week ending January 13th, an average of 203,000 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 an average of 1,201,000 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 from the EIA for the week ending January 13th appears to indicate that our total working supply of oil from net imports and from oilfield production was 866,000 barrels per day less than what was added to storage plus 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 (+866,000) 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 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 weekly 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 1,201,000 barrel per day increase in our overall crude oil inventories was all added to our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve remained unchanged.. ​Last week marked the end of the emergency SPR 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 in May to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising over that time​, and which was later ​extended to run through the end of December..  Including the administration's initial 50,000,000 million barrel SPR release much earlier last year, and their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 284,567,000 barrels of oil had been withdrawn from the Strategic Petroleum Reserve over the ​last 29 months, and as a result the 371,580,000 barrels of oil that still remain in our Strategic Petroleum Reserve is at its lowest level since December 2nd, 1983, or at a 39 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.  While the administration announced in mid-December an initial token purchase of three million barrels of oil to be delivered back to the SPR in February, no one would sell us oil at the below market price we were offering, so the Biden plan to begin refilling the SPR has been postponed...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,294,000 barrels per day last week, which was 1.1% less than the 6,364,000 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 12,200,000 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 lower at 11,700,000 barrels per day, but Alaska’s oil production was 5,000 barrels per day higher at 453,000 barrels per day and thus added 100,000 barrels per day to the rounded national total. (by the EIA's math). 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 6.8% below that of our pre-pandemic production peak, but was 25.8% 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 85.3% of their capacity while using those 14,853,000 barrels of crude per day during the week ending January 13th, up from  their 84.1% utilization rate during the prior week, but still well below normal utilization for early January. The 14,853,000 barrels per day of oil that were refined this week were 3.9% less than the 15,453,000 barrels of crude that were being processed daily during week ending January 14th of 2022, and 12.5% less than the 16,973,000 barrels that were being refined during the prepandemic week ending January 10th, 2020, when our refinery utilization was at ​a more normal ​92.2%, as refinery utilization typically hits a winter peak around New Year's day ...

With the increase in the amount of oil being refined this week, gasoline output from our refineries was ​also higher, increasing by 332,000 barrels per day to 8,865,000 barrels per day during the week ending January 13th, after our gasoline output had increased by 67,000 barrels per day during the prior week. This week’s gasoline production was still 0.2% less than the 8,688,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.5% less than the gasoline production of 9,281,000 barrels per day during the prepandemic week ending January 10th, 2020. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 57,000 barrels per day to 4,601,000 barrels per day, after our distillates output had ​rebounded by 509,000 barrels per day during the prior week. Even after those increases, our distillates output was ​still ​2.7% less than the 4,728,000 barrels of distillates that were being produced daily during the week ending January 14th of 2022, and 11.4% less than the 5,205,000 barrels of distillates that were being produced daily during the week ending January 10th 2020...

With the increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the 8th time in ten weeks and for the 11th time in 23 weeks, increasing by 3,483,000 barrels to 226,776,000 barrels during the week ending January 13th, after our gasoline inventories had increased by 4,114,000 barrels during the prior week. Our gasoline supplies rose by less this week because the amount of gasoline supplied to US users rose by 496,000 barrels per day, and because our exports of gasoline rose by 67,000 barrels per day to 934,000 barrels per day, while our imports of gasoline rose by 340,000 barrels per day to 556,000 barrels per day. Even after 8 recent gasoline inventory increases, our gasoline supplies were still 6.6% below last January 14th's gasoline inventories of 246,621,000 barrels, while falling to about 8% below the five year average of our gasoline supplies for this time of the year…

Even with the increase in our distillates production, our supplies of distillate fuels decreased for the 4th time in 5 weeks, and for the 28th time over the past year, falling by 1,939,000 barrels to 115,777,000 barrels during the week ending January 13th, after our distillates supplies had decreased by 1,069,000 barrels during the prior week. Our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 202,000 barrels per day to 4,023,000 barrels per day, while our imports of distillates fell by 61,000 barrels per day to 148,000 barrels per day, and while our exports of distillates fell by 83,000 barrels per day to 1,002,000 barrels per day... After ​a run of ​fifty-five inventory withdrawals over the past eighty-nine weeks, our distillate supplies at the end of the week were were 9.5% below the 127,952,000 barrels of distillates that we had in storage on January 14th of 2022, and about 20% below the five year average of distillates inventories for this time of the year...

Meanwhile, even without an oil release from the SPR, our commercial supplies of crude oil in storage rose for the 11th time in 23 weeks and for the 22nd time in the past year, increasing by 8,408,000 barrels over the week, from 439,607,000 barrels on January 6th to 448,015,000 barrels on January 13th, after our commercial crude supplies had increased by 18,961,000 barrels over the prior week. After those two big increases, our commercial crude oil inventories were about 3% above the most recent five-year average of crude oil supplies for this time of year, ​and were nearly 40% above the average of our crude oil stocks as of the second weekend of January over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels. And even 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 January 13th were 8.3% more than the 413,813,000 barrels of oil we had in commercial storage on January 14th of 2022, but 7.9% less than the 486,563,000 barrels of oil that we had in storage during the 2nd Covid surge on January 15th of 2021, while 4.6% more than the 428,511,000 barrels of oil we had in commercial storage on January 10th of 2020…

Finally, with our inventories of crude oil and our supplies of all products made from oil ​trending ​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​ for a sense of the big picture.​. After the commercial crude and gasoline inventory increases we've already noted for this week, 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 2,378,000 barrels this week barrels this week, from 1,599,229,000 barrels on January 6th to 1,601,607,000 barrels on January 13th, after our total inventories had increased by 21,602,000 barrels during the prior week. Even after those increases, our total petroleum liquids inventories were still down by 355,525,000 barrels or 18.2% from their prepandemic high, and just 1.5% from​ hitting​ a new 18 1/2 year low...

OPEC's Report on Global Oil for December

Tuesday of this past week saw the release of OPEC's January Oil Market Report, which includes the details on OPEC's & global oil data for December, and hence it gives us a picture of the global oil supply & demand situation during a period when demand for oil was impacted by strict Covid-related lockdowns in Beijing and several other major ​Chinese ​cities, while oil supplies from Russia were further reduced by December 5th's European Union ban of Russian oil imports by sea​,​ and​ by​ the G7​'s​ Russian oil price cap, also imposed on the 5th....December was also the second 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 surplus and related market prices​... 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 48 of this month's report (pdf page 58), 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 increased by a rounded 91,000 barrels per day to 28,971,000 barrels per day during December, up from their revised November production total that averaged 28,879,000 barrels per day....however, that November output figure was originally reported as 28,826,000 barrels per day, which therefore means that OPEC's November production was revised 53,000 barrels per day higher with this report, and hence OPEC's December production was, in effect, 144,000 barrels per day higher than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official November OPEC output figures as reported a month ago, before this month's revision)...

while OPEC and other aligned oil producers agreed to reduce production by 2,000,000 barrels per day beginning in November, and while the 744,000 barrel per day production cut they made in November came up short of that, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce during October, so the modest December production increase still leaves them 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 2023, and the quotas shown above were reaffirmed for December in the press release following the 34th OPEC and non-OPEC Ministerial Meeting on November 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 level, 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 ​next ​December...therefore, the 24,562,000 barrels those 10 OPEC members actually produced in December were 854,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of the month's 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 January 2021 to December 2022, and it comes from page 49 (pdf page 59) of OPEC's January 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....

After this month's 91,000 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 increased by a rounded 300,000 barrels per day to average 101.70 million barrels per day in December, a reported increase which came after November's total global output figure was apparently revised down by ​a rounded ​100,000 barrels per day from the 101.50 million barrels per day of global oil output that was reported for November a month ago, as non-OPEC oil production rose by a rounded 200,000 barrels per day in December after that downward revision, with most of December's production growth coming from OECD Europe, Latin America and Eurasia ex-Russia, which were partially offset by ​oil ​production declines in the US and Russia...

After that 300,000 barrel per day increase in December's global output, the 101.70 million barrels of oil per day that were produced globally during the month were 3.72 million barrels per day, or 3.8% more than​ ​the revised​ ​97.98 million barrels per day that were being produced globally in December a year ago, which was the fifth 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 January 2022 OPEC report for the originally reported December 2021 details)...since this month's increase in OPEC's output co​rresponds to the modest global increase, their December oil production of 28,971,000 barrels per day was unchanged at 28.5% of what was produced globally during the month, after their share of the global total in November was revised up from the 28.4% reported last month....OPEC's December 2021 production was originally reported at 27,882,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 1,089,000 barrels per day, or 3.9% more barrels per day of oil this December than what they produced last  December, when they accounted for 28.3% of a smaller global output total...

With the modest increase in OPEC's output and in other global oil output that we've seen in this report, the amount of oil being produced globally during the month was somewhat above the expected global demand, as this next table from the OPEC report will show us....

The above table came from page 27 of the January Oil Market Report (pdf page 37), 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 highlighted in blue the figure that's relevant for December, which is their estimate of global oil demand during the fourth quarter of 2022....OPEC has estimat​e​d that during the 4th quarter of this year, all oil consuming regions of the globe were using an average of 101.18 million barrels of oil per day, which is an upward revision of 70,000 barrels per day from their estimate 101.11 million barrels per day for 4th quarter demand of a month ago (revisions are highlighted 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 producing 101.70 million barrels per day during December, which would imply that there was surplus of around 520,000 barrels per day of global oil production in December, when compared to the demand estimated for the month...

in addition to figuring the December oil surplus that's indicated by this report, the upward revision of 70,000 barrels per day to 4th quarter demand we've highlighted in green above, combined with the downward revision of 100,000 barrels per day to November's global oil output that's implied in this report, means that the 390,000 barrels per day global oil output surplus we had previously figured for November would now be revised to an oil production surplus of 220,000 barrels per day...likewise, the upward revision of 70,000 barrels per day to 4th quarter demand noted above means that the 347,000 barrels per day global oil output surplus we had previously figured for October would now be revised to an oil surplus of 277,000 barrels per day...

Note on the table above that we've highlighted in green a downward revision of 110,000 barrels per day to the third quarter's demand....that means that the 1,270,000 barrels per day global oil output surplus we had previously figured for September would now be revised to a surplus of 1,380,000 barrels per day....in like manner, the 110,000 barrels per day downward revision to 3rd quarter demand means that the surplus of 1,010,000 barrels per day we had previously figured for August would now be revised to a surplus of 1,120,000 barrels per day, and that the surplus of 460,000 barrels per day barrels per day we had previously figured for July would have to be revised to a surplus of 570,000 barrels per day...

Note that in green we have also highlighted a small downward revision of 10,000 barrels per day to OPEC's previous estimates of second quarter demand...based on that downward revision to demand, our previous estimate that there was a surplus of 690,000 barrels per day in June would now be revised to a 700,000 barrels per day surplus, while the oil shortage of 40,000 barrels per day that we had previously figured for May would have to be revised to a shortage of ​50​,000 barrels per day, and finally, that the 680,000 barrels per day global oil output surplus we had previously figured for April would have to be revised to a surplus of 690,000 barrels per day...

Also note that in green that we have highlighted an upward revision of 40,000 barrels per day to OPEC's previous estimate of first quarter demand, during a period when supply and demand seemed to be close to being in balance.....so for March, that means that the global oil output surplus of 140,000 barrels per day we had previously figured for March would be revised to a surplus of 100,000 barrels per day, and that the 70,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 110,000 barrels per day, and that the global oil output shortage of 820,000 barrels per day we had previously figured for January would now be revised to a shortage of 860,000 barrels per day, in light of that 40,000 barrel per day upward revision to first quarter demand...

This Week's Rig Count

The number of drilling rigs active in the US decreased for the 11th time over the prior 25 weeks during the week ending January 20th, and is ​now 2.8% below the prepandemic level, despite increasing ​in ​94 ​of ​the past 121 weeks....Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 4 to 771 rigs over the past week, which was still 167 more rigs than the 604 rigs that were in use as of the January 21st report of 2022, but was 1,158 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business. .

The number of rigs drilling for oil decreased by 10 to 613 oil rigs during the past week, after the number of rigs targeting oil had increased by 5 during the prior week, ​but there are now 122 more oil rigs active now than were running a year ago, even as they amount to just 38.1% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, while they are now down 10.3% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 6 to 156 natural gas rigs, which was also up by 43 natural gas rigs from the 113 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 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 haven't seen any details on either of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration, for carbon dioxide storage, and for utility scale geothermal projects....a year ago, there were were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico decreased by three to sixteen rigs this week, with 15 rigs still drilling in Louisiana's offshore waters, and one rig still drilling for oil offshore from Texas....that Gulf rig count is now two less than the 18 Gulf rigs running a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas....since there aren't any rigs drilling off our other coasts, the Gulf rig count is equal to the national offshore count..

In addition to rigs running offshore, there are still two water based rigs drilling through inland bodies of water this week; those include a directional rig drilling 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 also two rigs drilling on inland waters...

The count of active horizontal drilling rigs was unchanged at 700 horizontal rigs this week, which was still 159 more rigs than the 532 horizontal rigs that were in use in the US on January 21st of last year, but just ​overr half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....in addition, the directional rig count was ​also ​unchanged at 49 directional rigs this week, and those were up by 12 from the 37 directional rigs that were operating during the same week a year ago…on the other hand, the vertical rig count was down by 4 to 22 vertical rigs this week, which was also down by 1 from the 23 vertical rigs that were in use on January 21st 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 January 20th, the second column shows the change in the number of working rigs between last week’s count (January 13th) and this week’s (January 20th) count, the third column shows last week’s January 13th 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 21st of January, 2022...

the three rig decrease in Louisiana was due to the 3 rigs that were pulled out of the state's offshore waters; rigs elsewhere in the state were unchanged... checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin, we find that there was one rig pulled out of Texas Oil District 7B, which includes the easternmost counties in the Permian Midland, but that rig counts in other Texas Permian districts were unchanged....since the national Permian basin count was down by two oil rigs, we can thus figure that the rig pulled out of New Mexico had been drilling for oil in the far western Permian Delaware, in the southwest corner of that state....elsewhere in Texas, there was a rig added in Texas Oil District 3, apparently targeting a basin not tracked by Baker Hughes, while there was an oil rig pulled out of Texas Oil District 4, which would have come from the Eagle Ford shale....there was also a rig added in Texas Oil District 6, accounting for the natural gas rig addition in the Haynesville shale, since the rig count in the Haynesville shale area in adjacent Louisiana was unchanged....Texas also saw a rig added in Texas Oil District 5, apparently targeting a basin not tracked by Baker Hughes...

In Oklahoma, there was an oil rig pulled out of the Ardmore Woodford, and since the Oklahoma count is unchanged, there must have been a rig added to another basin in the state not tracked by Baker Hughes...there was also an oil rig pulled out of Alaska, which had been drilling on the North Slope...meanwhile,there was a natural gas rig added to the Utica shale in Beaver county Pennsylvania, while there was a natural gas rig pulled out of the Marcellus shale elsewhere in the state, leaving the Pennsylvania​ ​and ​the ​natural gas rig count unchanged...​ ​other ​than​ in the Haynesville​, f​​ive natural gas rig additions were in basins not tracked by Baker Hughes, and other than the three unidentified rig additions we've already mentioned, there are no anomalous changes in other states that could account for those...that means that 2 oil rigs would have had to have been removed in the same state or states ​that ​the natural gas rigs were added to, in order to net a unchanged count for those spots...

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Note:  there’s more here..

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