EIA reports 1st oil supply draw in 11 weeks after a record supply to demand change in their crude oil balance sheet error; oil drilling rig activity is at a 6 month low..
US oil prices fell for the third time in four weeks as traders repriced the likelihood of a demand crushing recession following hawkish comments from Fed Chairman Powell....after rising 4.4% to $79.68 a barrel last week on stronger than expected economic data from China, record US crude oil exports, and a falling US dollar, the contract price for the benchmark US light sweet crude for April delivery moved lower in early Asian trading on Monday after China set a lower-than-expected 5% target for economic growth, then steadied as top oil executives debated supply tightness at an oil conference in Houston, and subsequently bounced back from early losses by mid-day to settle 78 cents, or 1% higher, at $80.46 a barrel, supported by a Saudi price hike for its flagship Arab light crude to Asia, as well as by a weaker dollar...oil prices were steady in Dubai trading early on Tuesday, as optimism over China’s economic recovery offset concerns of further monetary tightening, but turned lower on weak trade data from China and then tumbled after the Energy Information Administration lowered its 2023 forecasts for U.S. natural-gas and oil prices before settling $2.88 or 3.6% lower at to $77.58 a barrel, further pressured by a selloff in financial markets after Fed Chairman Powell opened the door for a 50-basis point rate hike at the Fed's next policy meeting, spooking traders across financial and commodity markets....oil prices extended those losses overnight as markets came to grips with the prospect that the Fed would continue aggressive rate increases and thus hamper US demand. but rebounded early Wednesday after EIA data showed an unexpected draw from US crude oil inventories for the first time in eleven weeks, but then fell back again a second day to settle 92 cents lower at $76.66 a barrel as the supportive U.S. inventory data was canceled out by Fed Chair Powell’s testimony to Congress, which continued to spook traders worried about the intensity of oncoming rate hikes...oil prices rose in overseas trading on Thursday, as a strike-disrupted fuel supply in France, a drop in U.S. crude inventories, and a weaker dollar temporarily offset fears over the economic impact of rising interest rates, but again turned south in US trading to extend losses for third straight session and close 94 cents lower at $75.72 a barrel as traders braced for an employment report that was seen likely to impact the decision on interest rates...oil prices extended those losses into early morning Friday, pressured by weak fuel demand and the hawkish comments from Fed Chairman Powell, but rallied after the BLS reported much better-than-expected U.S. employment data and settled up 96 cents, or 1.3% higher, at $76.68 a barrel, but nonetheless ended 3.8% lower on the week, amid fears that the Fed would pivot to more aggressive interest-rate hikes, compounding pressure from tempered economic projections from China and a slower-than-expected recovery in international travel...
Meanwhile, natural gas prices fell for the first time in 3 weeks on lowered demand expectations following moderating temperature forecasts...after rising 18.1% to a five week high of $3.009 per mmBTU last week as the amount of gas flowing to U.S. LNG export plants soared to a record high amid colder two-week forecasts, the contract price of US natural gas for April delivery opened at $2.630 per mmBTU on Monday, thirty-eight cents below Friday’s closing price, following a milder shift in the temperatures expected next week, and maintained its downward momentum to settle 43.7 cents or 14.5% lower at $2.572 per mmBTU, its biggest one-day drop in over eight months, as the weekend weather models had removed a huge amount of demand from the 15-day outlook...but natural gas prices opened higher and staged a mild rally on Tuesday, on record gas flows to liquefied natural gas (LNG) export plants following Freeport LNG's return from its outage, and settled 11.5 cents or 4.5% higher at $2.687 per mmBTU, as incoming frigid temperatures held off any additional selling...however, natural gas prices reversed and fell 13.6 cents, or about 5% on Wednesday to a one-week low of $2.551 per mmBTU, after data showed the amount of gas flowing to Freeport plant in Texas had dropped, and on forecasts indicating the weather in the near term would be warmer than had been expected...even so, natural gas prices opened higher and rose to $2.639 by 10:00AM, ahead of the weekly storage report on Thursday, before pulling back and settling eight-tenths of a cent lower at $2.543 per mmBTU, as the storage withdrawal was much smaller than usual for this time of year and as the latest weather forecasts called for less cold over the next two weeks...prices continued falling on Friday on declining March heating demand expectations coast-to-coast and settled 11.3 cents, or 4.4% lower at $2.430 per mmBTU, and thus finished 19.2% lower for the week...
The EIA's natural gas storage report for the week ending March 3rd indicated that the amount of working natural gas held in underground storage in the US fell by 84 billion cubic feet to 2,030 billion cubic feet by the end of the week, which left our natural gas supplies 493 billion cubic feet, or 32.1% above the 1,537 billion cubic feet that were in storage on March 3rd of last year, and 359 billion cubic feet, or 21.5% more than the five-year average of 1,671 billion cubic feet of natural gas that were in storage as of the 3rd of March over the most recent five years….the 84 billion cubic foot withdrawal from US natural gas working storage for the cited week was a little more than was expected by a Reuters survey of analysts, whose average forecast called for a 80 billion cubic feet withdrawal, but it was much less than the 126 billion cubic feet that were pulled out of natural gas storage during the corresponding week of 2022, and also less than the average 101 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 March 3rd indicated that even after a near record drop in our oil exports, we needed to pull oil out of our stored commercial crude supplies for the first time in 11 weeks, and for the 17h time in the past 46 weeks, largely due to the absence of oil that could not be accounted for... Our imports of crude oil rose by an average of 63,000 barrels per day to average 6,271,000 barrels per day, after falling by an average of 118,000 barrels per day during the prior week, while our exports of crude oil fell by 2,267,000 barrels per day to 3,362,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 2,909,000 barrels of oil per day during the week ending March 3rd, 2,330,000 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 lower 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 15,109,000 barrels per day during the March 3rd reporting week…
Meanwhile, US oil refineries reported they were processing an average of 14,967,000 barrels of crude per day during the week ending March 3rd, an average of 12,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that an average of 242,000 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 March 3rd appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 384,000 barrels per day more than what our oil refineries reported they used during the week. To account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [-384,000] 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 omission or error of that size in this week’s oil supply & demand figures that we have just transcribed..... Furthermore, since last week’s “unaccounted for crude oil” was at [+2,266,000] barrels per day, that means there was a record 2,650,000 barrel per day difference between this week's balance sheet error and the EIA's crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, thus rendering such comparisons nonsensical.... However, since most everyone treats these weekly EIA reports as precise, 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)….
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,259,000 barrels per day last week, which was still 1.4% more than the 6,176,000 barrel per day average that we were importing over the same four-week period last year. This week's 242,000 barrel per day decrease in our overall crude oil inventories was all withdrawn from our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve remained unchanged.. This week’s crude oil production was reported to be 100,000 barrels per day lower 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 11,800,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day lower at 440,000 barrels per day and added 400,000 barrels per day to the the rounded national total, same as 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 6.9% 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 86.0% of their capacity while using those 14,967,000 barrels of crude per day during the week ending March 3rd, up from their 85.8% utilization rate during the prior week, and close to normal utilization for early March, when seasonal maintenance is still slowing throughput.. The 14,967,000 barrels per day of oil that were refined this week were 2.7% less than the 15,377,000 barrels of crude that were being processed daily during week ending March 4th of 2022, and 6.4% less than the 15,990,000 barrels that were being refined during the prepandemic week ending March 1st, 2019, when our refinery utilization was 87.5%, also close to normal utilization for early March ...
With another modest decrease in the amount of oil being refined this week, the gasoline output from our refineries finally turned lower, decreasing by 179,000 barrels per day to 9,557,000 barrels per day during the week ending March 3rd, after our gasoline output had increased by 302,000 barrels per day during the prior week. This week’s gasoline production was fractionally less than the 9,577,000 barrels of gasoline that were being produced daily over the same week of last year, and 3.0% less than the gasoline production of 9,652,000 barrels per day during the prepandemic week ending March 1st, 2019. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 84,000 barrels per day to 4,525,000 barrels per day, after our distillates output had decreased by 91,000 barrels per day during the prior week. With those decreases, our distillates output was 2.8% less than the 4,640,000 barrels of distillates that were being produced daily during the week ending March 4th of 2022, and 8.0% less than the 4,919,000 barrels of distillates that were being produced daily during the week ending March 1st, 2019...
With the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the fifth time in seventeen weeks and for the 15th time in 30 weeks, decreasing by 1,134,000 barrels to 238,058,000 barrels during the week ending March 3rd, after our gasoline inventories had decreased by 874,000 barrels during the prior week. Our gasoline supplies fell by more this week even though the amount of gasoline supplied to US users fell by 550,000 barrels per day to 8,562,000 barrels per day, because our imports of gasoline fell by 226,000 barrels per day to 446,000 barrels per day, and because our exports of gasoline rose by 180,000 barrels per day to 831,000 barrels per day.. Following three straight gasoline inventory decreases, our gasoline supplies were 2.7% below last March 4th's gasoline inventories of 244,606,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…
Even with the decrease in our distillates production, our supplies of distillate fuels increased for the 5th time in 10 weeks, and for the 29th time over the past year, rising by 138,000 barrels to 122,252,000 barrels during the week ending February 24th, after our distillates supplies had increased by 179,000 barrels during the prior week. Our distillates supplies managed to increase again this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 321,000 barrels per day to 3,514,000 barrels per day, even as our imports of distillates fell by 56,000 barrels per day to 141,000 barrels per day, and as our exports of distillates rose by 187,000 barrels per day to 1,132,000 barrels per day... Even after fifty-seven inventory withdrawals over the past ninety-six weeks, our distillate supplies at the end of the week were were 7.4% above the 113,874,000 barrels of distillates that we had in storage on March 4th of 2022, but still about 7% below the five year average of our distillates inventories for this time of the year...
Finally, with copius new oil supplies that could not be accounted for not an issue this week, our commercial supplies of crude oil in storage fell for the 13th time in 30 weeks and for the 27th time in the past year, decreasing by 1,694,000 barrels over the week, from 480,207,000 barrels on February 24th to 478,513,000 barrels on March 3rd, after our commercial crude supplies had increased by 1,166,000 barrels over the prior week. With several large oil supply increases in the weeks following the Christmas refinery freeze offs, our commercial crude oil inventories were still about 7% above the most recent five-year average of commercial oil supplies for this time of year, and also about 45% above the average of our available crude oil stocks as of the first weekend of March over the 5 years at the beginning of the past decade, with the apparent 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 March 3rd were 16.2% more than the 413,425,000 barrels of oil we had in commercial storage on March 4th of 2022, but 4.0% less than the 498,403,000 barrels of oil that we had in storage after winter storm Uri on March 5th of 2021, while 5.9% more than the 444,119,000 barrels of oil we had in commercial storage on March 6th of 2020…
This Week's Rig Count
The number of drilling rigs active in the US decreased for the 17th time over the prior 31 weeks during the week ending March 10th, and were 5.9% below the prepandemic count, even after increasing ninety-five times over the past 127 weeks... Baker Hughes reported that the total count of rotary rigs drilling in the US fell by three to 746 rigs over the past week, which was still 83 more rigs than the 663 rigs that were in use as of the March 11th report of 2022, but was 1,183 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business. .
The number of rigs drilling for oil decreased by 2 to to a 26 week low of 590 oil rigs during the past week, after the number of rigs targeting oil had decreased by 8 during the prior week, but there are still 63 more oil rigs active now than were running a year ago, even as they amount to just 36.7% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and while they are now down 13.6% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 153 natural gas rigs, which was still up by 18 natural gas rigs from the 135 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.6% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….
In addition to those rigs targeting oil and natural gas, Baker Hughes indicates that three rigs they've labeled as "miscellaneous" are still drilling this week: those include a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, 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 directional rig drilling to between 5,000 and 10,000 feet into a formation in Pershing county Nevada, also unnamed by Baker Hughes….While we haven't seen any details on any 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 two such "miscellaneous" rigs running...
The offshore rig count in the Gulf of Mexico was down by two to 14 rigs this week, with 13 of those remaining drilling for oil in Louisiana's offshore waters and one drilling for oil in Texas waters….that Gulf rig count is still up by 3 from the 11 Gulf rigs running a year ago, when 10 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 at this time, the Gulf rig count is equal to the national offshore count..
In addition to rigs running offshore, there is also a water based directional rig drilling for oil at a depth greater than 15,000 feet through an inland body of water in Terrebonne Parish, Louisiana this week...a year ago, there were three rigs drilling on inland waters...
The count of active horizontal drilling rigs was up by 2 to 692 horizontal rigs this week, which was also 85 more rigs than the 607 horizontal rigs that were in use in the US on March 11th of last year, but was just over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014.....on the other hand, the vertical rig count was down by two to 12 vertical rigs this week, which was also down by 11 from the 23 vertical rigs that were operating during the same week a year ago… at the same time, the directional rig count was down by three to 42 directional rigs this week, while those were still up by 9 from the 33 directional rigs that were in use on March 11th 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 March 10th, the second column shows the change in the number of working rigs between last week’s count (March 3rd) and this week’s (March 10th) count, the third column shows last week’s March 3rd 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 11th of March, 2022...
with that big rig drop in the Permian basin count, we'll start by checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian...there we find that there were five rigs pulled out of Texas Oil District 8, which overlies the core Permian Delaware, and that another rig was pulled out of Texas Oil District 8A, which overlies the northern part of the Permian Midland, but that 3 rigs were added in Texas Oil District 7C, which covers the southern Permian Midland...since the Texas Permian rig count was thus down by 3 rigs while the national Permian count was down by 6, we can figure that the 3 rigs pulled out of New Mexico had been drilling in the western Permian Delaware, in the southeast corner of that state....elsewhere in Texas, the rig count was down by one in Texas Oil District 3, apparently pulled from a basin that's not tracked by Baker Hughes, but up by one in Texas Oil District 4, which would account for the addition of a natural gas rig in the Eagle Ford shale, where the basin split is now 4 rigs targeting gas and 68 targeting oil... the Texas rig count remained unchanged, however, with the addition of three rigs in Texas Oil District 6, which included a natural gas rig in the Haynesville shale and two rigs targeting a basin that's not tracked by Baker Hughes...
that Haynesville shale gas rig addition in Texas offset the removal of a Haynesville shale natural gas rig from Louisiana, leaving the Haynesville unchanged, while the other two rigs removed from Louisiana had been drilling in state waters offshore...other natural gas rig changes include the three rigs that were pulled out of the Marcellus in Pennsylvania, and the two natural gas rigs added to the Marcellus in West Virginia...meanwhile, the oil rig added to the DJ Niobrara chalk was in Colorado, while the rig added to the Mississippian shale was in Oklahoma, which means that another rig had to have been removed from elsewhere in Oklahoma for the state count to remain unchanged....lastly, the three rigs added in Alaska were all directional rigs targeting oil at depths between 10,000 and 15,000 feet; one was targeting the Sagavanirktok formation east of the Colville River, another was drilling over the Umiat Oil Field, and the location and target of the third is not indicated...all the legacy rigs drilling in Alaska are on the North Slope, with no other specific information given...
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