Strategic Petroleum Reserve at another 39 year low, US gasoline demand at a 16 month high after the biggest one week jump in 22 years
US oil prices finished lower for a second straight week, and completely reversed the prior four week price runup following the recent surprise OPEC output cut announcement, as recession fears continued to offset bullish fundamentals... after falling 5.4% to $77.87 a barrel last week as rate hike and recession fears outweighed falling oil supplies and stronger than expected economic reports, the contract price for the benchmark US light sweet crude for June delivery fell more than 1% in overseas trading early on Monday as concern over rising interest rates, the global economy and the outlook for fuel demand outweighed the prospect of tightening supplies, but bounced off a low open in New York and rallied higher throughout the session, supported by the lack of signs of an imminent restart of Iraq’s northern oil exports after a month's standoff and settled 89 cents or 1.1% higher at $78.76 a barrel, as traders grew optimistic that holiday travel in China would boost fuel demand in the world’s largest oil importer...however, after moving higher in overnight trading, oil prices erased their gains and sold off more than $2 to the day's low of $76.50 by mid-morning Tuesday, weighed down by the strength in the dollar, amid worries about corporate earnings and the global economy, then bounced off that low and retraced some of their losses to close down $1.69 at a three week low of $77.07 a barrel on fresh signs that U.S. consumers were pulling back on spending ahead of the summer travel season...oil prices dropped further early on Wednesday after California's First Republic Bank spooked the financial markets, saying it had lost 40% of its deposits in the first quarter, then sold off sharply to a low of $74.05 ahead of the close, as demand concerns and renewed recessionary fears overshadowed a supportive EIA report that showed larger than expected draws across the board, and settled $2.77 cents lower at $74.30 a barrel as traders looked to deterioration in refining margins that had prompted some refiners in Asia and Europe to lower processing rates....oil prices rose slightly in overseas trading early on Thursday, finding some support in an increase in Russian oil exports, which had dulled the impact of OPEC production cuts, then retraced some of Wednesday’s sharp losses and remained mostly rangebound during the New York session as traders assessed economic data showing that U.S. economic growth slowed more than expected in the first quarter, but that new jobless claims fell, before settling 46 cents higher at $74.76 a barrel after Russian oil minister Novak said global oil markets were balanced and that the OPEC+ group does not see the need for further oil output cuts...oil prices were little changed in Asian trading on Friday as the disappointing economic data from the US and uncertainty on further interest rate hikes raised concerns about future fuel demand, but rallied through the New York session to settle $2.02 higher at $76.78 a barrel after major energy firms reported positive earnings and U.S. data showed crude output was declining while fuel demand was growing, but still finished with a 1.4% loss on the week, even as Friday's rally was enough to leave oil prices 1.5% higher for the month, the first monthly increase since October...
Meanwhile, US natural gas prices finished higher for the third week in a row, mostly on the market's rollover to the higher priced June contract....after rising 5.6% to $2.233 per mmBTU last week on colder near term forecasts, declining production, and a record pace of LNG exports, the contract price of US natural gas for May delivery opened lower & slid to an intraday low of $2.193 by 9:30AM on Monday, as traders positioned themselves heading into the mid-week contract expiration, but recovered from that dip to settle 4.0 cents higher at $2.273 per mmBTU, as cooler weather ushered in by a strong spring storm over the weekend had set the table for strong heating demand across the northern US for most of the week...with the May contract expiration looming, natural gas prices opened 5 cents lower and retreated further early Tuesday, as analysts observed bearish production and export trends, but recovered to finish 3.4 cents higher at $2.307 per mmBTU as gas flowing to U.S. LNG export plants remained on track for a second monthly record high in April....prices for both the May and June gas contracts opened 9 cents lower on Wednesday and retreated throughout the day, as gas production held strong, mostly benign weather prevailed in forecasts, and analysts forecast an injection that would sustain storage surpluses, and May gas prices fell 19.0 cents on the day to roll of the books priced at $2.117 per mmBTU, while June gas settled 13.2 cents lower at $2.305 per mmBTU...now citing the contract price for June gas delivery, natural gas traded slightly lower Thursday morning until the weekly storage publication hit the wire, but rose following the report to settle 5.0 cents higher on the day at $2.355 per mmBTU amid little change in bearish near-term supply/demand balances...natural gas prices moved lower early Friday, but soared 7% after a compressor station in Mississippi moving gas from Appalachia to the Gulf Coast shut down due to a fire from a suspected lighting strike, and settled 5.5 cents at a six week high of $2.410 per mmBTU, thus apparently rising 7.9% on the week, even as the quoted June contract, which had closed the prior week at $2.408 per mmbTU, was actually less than 0.1% higher...
The EIA's natural gas storage report for the week ending April 21st indicated that the amount of working natural gas held in underground storage in the US rose by 79 billion cubic feet to 2,009 billion cubic feet by the end of the week, which lifted our natural gas supplies to 525 billion cubic feet, or to 35.4% above the 1,484 billion cubic feet that were in storage on April 21st of last year, and to 365 billion cubic feet, or 22.2% more than the five-year average of 1,644 billion cubic feet of natural gas that were in storage as of the 21st of April over the most recent five years…we should note, however, that the oft quoted national average obscures the fact that supplies are 51.1% below normal in the West, while 36.4% and 36.0% above normal in the East and Midwest regions of the country....the 79 billion cubic foot injection into US natural gas working storage for the cited week was more than the 75 billion cubic feet addition that was expected by industry analysts surveyed by Reuters, and quite a bit more than the 42 billion cubic feet that were added to natural gas storage during the corresponding week of 2022, as well as the average 43 billion cubic feet addition to natural gas storage that has been typical for the same early Spring 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 April 21st indicated that after an increase in our oil exports was covered by an increase in new oil supplies that the EIA could not account for, we had to pull oil out of our stored commercial crude supplies for the 4th time in 5 weeks, and for the 13th time in the past 34 weeks, and at roughly the same rate as during the prior week... Our imports of crude oil rose by an average of 81,000 barrels per day to 6,376,000 barrels per day, after rising by an average of 101,000 barrels per day the prior week, while our exports of crude oil rose by an average of 248,000 barrels per day to 4,819,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 1,557,000 barrels of oil per day during the week ending April 21st, 167,000 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 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 13,757,000 barrels per day during the April 21st reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,833,000 barrels of crude per day during the week ending April 21st, an average of 11,000 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 868,000 barrels of oil per day were being pulled from 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 April 21st appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 1,209,000 barrels per day less than what our oil refineries reported they used during the week. To account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [+1,209,000] 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 magnitude in this week’s oil supply & demand figures that we have just transcribed.....Moreover, since last week’s “unaccounted for crude oil” was at (+936,000) barrels per day, that means there was a 272,000 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....However, since most oil traders treat these weekly EIA reports as reliable, 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)….(NB: there is also a more recent twitter thread from an EIA administrator addressing these errors, and what they hope to do about it)
This week's 868,000 barrel per day decrease in our overall crude oil inventories came as an average of 722,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 146,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time, the fourth consecutive draw on the SPR this year, now being pulled out & sold as part of an earlier budget balancing withdrawal mandated by congress, and as a result the 366,942,000 barrels of oil that still remain in our Strategic Petroleum Reserve is now the lowest since October 28th, 1983, or at a new 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 big SPR releases of last year. However, those Biden administration releases amounted to about 42% of what was left in the SPR when they took office, and left us with what is now less than a 19 day supply of oil at the current consumption rate.
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,502,000 barrels per day last week, which was 8.1% more than the 6,017,000 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 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 17,000 barrels per day higher at 441,000 barrels per day but still added the same 400,000 barrels per day to the rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 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 91.3% of their capacity while using those 15,833,000 barrels of crude per day during the week ending April 21st, up from their 91.0% utilization rate during the prior week, but still close to a normal rate for early Spring... The 15,833,000 barrels per day of oil that were refined this week were 1.0% more than the 15,684,000 barrels of crude that were being processed daily during week ending April 22nd of 2022, but 4.5% less than the 16,583,000 barrels that were being refined during the prepandemic week ending April 19th, 2019, when our refinery utilization rate was at 90.1%, also near normal for this time of year...
After an increase in the amount of oil being refined during the prior week, the gasoline output from our refineries was also higher, increasing by 541,000 barrels per day to 10,016,000 barrels per day during the week ending April 21st, after our gasoline output had decreased by 343,000 barrels per day during the prior week. This week’s gasoline production was 5.3% more than the 9,514,000 barrels of gasoline that were being produced daily over the same week of last year, and 2.4% more than the gasoline production of 9,781,000 barrels per day during the prepandemic week ending April 19th, 2019. Meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 81,000 barrels per day to 4,669,000 barrels per day, after our distillates output had increased by 167,000 barrels per day during the prior week. With that decrease, our distillates output was 2.4% less than the 4,782,000 barrels of distillates that were being produced daily during the week ending April 22nd of 2022, and 7.8% less than the 5,064,000 barrels of distillates that were being produced daily during the week ending April 19th, 2019...
Even after this week's increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the ninth time in ten weeks, and for the 40th time in 62 weeks, decreasing by 2,408,000 barrels to 221,136,000 barrels during the week ending April 21st, after our gasoline inventories had increased by 1,299,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 992,000 barrels per day, the greatest jump since February 2001, to a 16 month high of 9,511,000 barrels per day, even as our imports of gasoline rose by 322,000 barrels per day to 1,022,000 barrels per day while our exports of gasoline fell by 209,000 barrels per day to 734,000 barrels per day. Following nine gasoline inventory decreases in ten weeks, our gasoline supplies were 4.2% below last April 22nd's gasoline inventories of 230,805,000 barrels, and about 7% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 6th time in 7 weeks, falling by 577,000 barrels to 111,513,000 barrels during the week ending April 21st, after our distillates supplies had decreased by 355,000 barrels during the prior week. Our distillates supplies decreased again this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, decreased by 37,000 barrels per day to 3,728,000 barrels per day, and as our imports of distillates fell by 20,000 barrels per day to 91,000 barrels per day, while our exports of distillates fell by 33,000 barrels per day to 1,116,000 barrels per day.... Even after 62 inventory withdrawals over the past one hundred weeks, our distillate supplies at the end of the week were 3.9% above the 107,286,000 barrels of distillates that we had in storage on April 22nd of 2022, but are now about 12% below the five year average of our distillates inventories for this time of the year...
Finally, with the modest increase in our oil exports and the decrease in our oil production, our commercial supplies of crude oil in storage fell for the 5th time in 18 weeks and for the 24th time in the past year, decreasing by 5,054,000 barrels over the week, from 465,968,000 barrels on April 14th to 460,914,000 barrels on April 21st, after our commercial crude supplies had decreased by 4,581,000 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 are still about 1% above the most recent five-year average of commercial oil supplies for this time of year, and also about 33% above the average of our available crude oil stocks as of the third week of April 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. 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 fell in the wake of the Ukraine war, our commercial crude supplies as of this April 21st were 11.2% more than the 414,424,000 barrels of oil we had in commercial storage on April 22nd of 2022, but were 6.5% less than the 493,107,000 barrels of oil that we had in storage in the wake of winter storm Uri on April 23rd of 2021, and 12.6% less than the 527,631,000 barrels of oil we had in commercial storage as the pandemic took hold on April 24th of 2020…
This Week's Rig Count
The number of drilling rigs active in the US increased for the fourth time time in the past eleven weeks during the week ending April 28th, and were still 4.8% below the prepandemic count, despite increasing ninety-nine times over the past 134 weeks... Baker Hughes reported that the total count of rotary rigs drilling in the US rose by 2 rigs to 755 rigs over the past week, which was also 57 more rigs than the 698 rigs that were in use as of the April 29th report of 2022, but was still 1,174 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 remained unchanged at 591 oil rigs during the past week, after the number of rigs targeting oil had increased by 3 during the prior week, and there are still 39 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 still down 13.5% from the prepandemic oil rig count of 683….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 to 161 natural gas rigs, which was also up by 17 natural gas rigs from the 144 natural gas rigs that were drilling during the same week a year ago, even as they are still just 10.0% 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 continues to show 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 into a formation 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 rather than production, 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 up by one to 19 rigs this week, with 18 of those rigs drilling for oil in Louisiana's offshore waters, and one drilling for oil in Texas waters….that Gulf rig count is up by 6 from the 13 Gulf rigs running a year ago, when all 13 Gulf rigs were drilling for oil offshore from Louisiana…in addition to rigs drilling in the Gulf of Mexico, there is also a directional rig still drilling for oil at a depth between 10,000 and 15,000 feet, offshore from the Kenai Peninsula Borough of Alaska...since there was also a rig drilling offshore from Alaska a year ago, the national total of 20 rigs drilling offshore is up from the national offshore count of 14 a year ago..
In addition to rigs running offshore, there are now two inland water based deployed this week...the new one is a vertical rig drilling for natural gas to between 10,000 and 15,000 feet on a lake in Jefferson Parish Louisiana, while the legacy rig is a directional rig drilling for oil at a depth greater than 15,000 feet through an inland body of water in Terrebonne Parish, Louisiana...a year ago, there were also two such rigs drilling on inland waters...
The count of active horizontal drilling rigs was down by two to 685 horizontal rigs this week, which was still 39 more rigs than the 643 horizontal rigs that were in use in the US on April 29th of last year, even as it was less than half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014…at the same time, the directional rig count was down by 1 to 47 directional rigs this week, while those were up by 17 from the 30 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was up by 5 to 23 vertical rigs this week, but those were still down by 2 from the 25 vertical rigs that were in use on April 29th 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 April 28th, the second column shows the change in the number of working rigs between last week’s count (April 21st) and this week’s (April 28th) count, the third column shows last week’s April 21st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 29th of April, 2022...
Louisiana managed to see a three rig increase even after a Haynesville shale natural gas rig was shut down in the northwest corner of the state with the addition of the rig offshore, the aforementioned inland waters natural gas rig addition in Jefferson Parish, and two more new rigs in the southern part of the state targeting a basin that Baker Hughes doesn't track...on the other hand, Oklahoma ended down three rigs after an oil rig was pulled out of the Ardmore Woodford, two more rigs were pulled out of the Cana Woodford, and a fourth oil rig was removed from the Granite Wash, indicating that a rig was added elsewhere in the state in a basin not covered by Baker Hughes...next, checking the Rigs by State file at Baker Hughes for the changes in the Texas Permian, we find that there were two rigs added in Texas Oil District 8, which overlies the core Permian Delaware, while a rig was pulled out of Texas Oil District 7C, which includes the counties over the southern Permian Midland, and that rig counts in other Texas Permian Districts were unchanged....since the Texas Permian count is thus up by just one while the national Permian count was up by three oil rigs, we can therefore figure that the 2 rigs added in New Mexico were deployed in the western Permian Delaware, in the southeast corner of that state...
elsewhere in Texas, two rigs were pulled out of Texas Oil District 2, which accounts for the oil rig pulled out of the Eagle Ford shale, while a rig was added in Texas Oil District 4, which was also likely an Eagle Ford rig, offsetting the other District 2 removal...other changes nationally include the removal of an oil rig from North Dakota's Williston basin, the removal of an oil rig from Alaska's offshore waters, the addition of a natural gas rig in Pennsylvania's Marcellus, and the addition of a natural gas rig in Columbiana county, Ohio, in the Utica shale....the latter two account for the natural gas rig increase nationally, since the Louisiana inland waters gas rig addition in Jefferson Parish south of New Orleans was offset by the removal of a gas rig from the Haynesville shale in the northwest corner of the state...
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Note: there’s more here..
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