gasoline imports at a 6 month low; DUC backlog at 5.1 months as both drilling and well completions fall

oil prices fell for just the 2nd time over the past twelve weeks on the expiration of trading of the higher priced October oil contract, as the Fed telegraphed that interest rates would remain higher for longer, the UAW expanded their strike to target GM and Stellantis plants nationally, and Congress was unable to agree on a resolution to continue funding the government past September 30th...the widely quoted contract price for US crude for November delivery ended the week at $90.03 a barrel, down from last week's October oil closing quote of $90.77 a barrel, but up a penny from the last quote for November oil a week ago...

similarly, natural gas prices were little changed, with October natural gas finishing at $2.637 per mmBTU, less than a penny lower than last week's closing price of $2.644 per mmBTU, as early gains on weak production and robust LNG exports were ​later reversed in the face of bearish weather reports and planned pipeline maintenance.​.

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 15th indicated that even after a big drop in our oil refining, a bigger decrease in our oil imports and an even bigger increase in our oil exports meant we had to pull oil out of our stored commercial crude supplies for the eighth  time in ten weeks, and for the nineteenth time in the past 39 weeks, even after a big jump in oil supplies that the EIA could not account for....Our imports of crude oil fell by an average of 1,065,000 barrels per day to 6,517,000 barrels per day, after rising by an average of 812,000 barrels per day to a four year high the prior week, while our exports of crude oil rose by 1,977,000 barrels per day to average 5,067,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 1,450,000 barrels of oil per day during the week ending September 15th, 3,042,000 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-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 14,350,000 barrels per day during the September 15th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,304,000 barrels of crude per day during the week ending September 15th, an average of 496,000 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 219,000 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 September 15th appears to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 1,735,000 barrels per day less than 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 [ +1,735,000 ] 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 only at [+15,000] barrels per day, that means there was a 1,720,000 barrel per day difference between this week's big oil balance sheet error and the EIA's modest 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 219,000 barrel per day decrease in our overall crude oil inventories came as an average of 305,000 barrels per day were being ​p​ulled out of our commercially available stocks of crude oil, while an average of 96,000 barrels per day were being added to the oil in our Strategic Petroleum Reserve, the seventh consecutive weekly 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 fell to an average of 6,872,000 barrels per day last week, which was still 7.9% more than the 6,368,000 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-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 unchanged at a forty-one month high of 12,500,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day higher at 415,000 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 91.7% of their capacity while processing those 16,800,000 barrels of crude per day during the week ending September 15th, down from their 93.7% utilization rate during the prior week, a decline in refinery utilization that is fairly normal during the weeks right after Labor Day.. The 16,304,000 barrels per day of oil that were refined this week were 0.3% less than the 16,355 ,000 barrels of crude that were being processed daily during week ending September 16th of 2022, and 2.4% less than the 16,707,000 barrels that were being refined during the prepandemic week ending September 13th, 2019, when our refinery utilization rate was at 91.2%, also down sharply from the prior week of that year...

Even with decrease in the amount of oil being refined this week, the gasoline output from our refineries was higher, increasing by 499,000 barrels per day to 9,711,000 barrels per day during the week ending September 15th, after our refineries' gasoline output had decreased by 576,000 barrels per day during the prior week. This week’s gasoline production was 2.7% more than the 9,459,000 barrels of gasoline that were being produced daily over the same week of last year, and 2.8% more than the gasoline production of 9,451,000 barrels per day during the prepandemic week ending September 13th, 2019.  On the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 229,000 barrels per day to 4,782,000 barrels per day, after our distillates output had decreased by 6,000 barrels per day during the prior week. With that decrease, our distillates output was 8.7% less than the 5,236,000 barrels of distillates that were being produced daily during the week ending September 16th of 2022, and 6.4% less than the 5,109,000 barrels of distillates that were being produced daily during the week ending September 13th, 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 22nd time in thirty-one weeks, decreasing by 831,000 barrels to 219,476,000 barrels during the week ending September 15th, after our gasoline inventories had increased by 5,561,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 103,000 barrels per day to 8,410,000 barrels per day, and because our exports of gasoline rose by 233,000 barrels per day to 1,144,000 barrels per day, and because our imports of gasoline fell by 388,000 barrels per day to 511,000 barrels per day ....Even after twenty-two gasoline inventory decreases over the past thirty-one  weeks, our gasoline supplies were 2.3% more than last September 16th's gasoline inventories of 214,610,000 barrels, while about 3% below the five year average of our gasoline supplies for this time of the year…

Meanwhile, with this week's decrease in our our distillates production, our supplies of distillate fuels decreased for the fifteenth time in twenty-eight weeks, falling by 2​,867,000 barrels to 119,666,000 barrels during the week ending September 15th, after our distillates supplies had increased by 3,931,000 barrels during the prior week. Our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 588,000 barrels per day to 4,166,000 barrels per day, and because our imports of distillates fell by 102,000 barrels per day to 83,000 barrels per day, ​w​hile our exports of distillates rose by 52,000 barrels per day to 1,108,000 barrels per day....With 39 inventory increases over the past seventy weeks, our distillates supplies at the end of the week were still 2.1% above the 117,250,000 barrels of distillates that we had in storage on September 16th of 2022, but were also about 14% below the five year average of our distillates inventories for this time of the year...

Finally, with our oil imports much lower and our oil exports much higher, our commercial supplies of crude oil in storage fell for 16th time in twenty-four weeks and for the 27th time in the past year, decreasing by 2,136,000 barrels over the week, from 420,592,000 barrels on September 8th to 418,456,000 barrels on September 15th, after our commercial crude supplies had increased by 3,955,000 barrels over the prior week. With this week's decrease, our commercial crude oil inventories ​w​ere about 3% below the most recent five-year average of commercial oil supplies for this time of year, ​b​ut were 26.8% above the average of our available crude oil stocks as of the third 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 15th were 2.9% less than the 430,774,000 barrels of oil in commercial storage on September 16th of 2022, but were 1.1% more than the 413,964,000 barrels of oil that we still had in storage on September 17th of 2021, while 15.4% less than the 494,406,000 barrels of oil we had in commercial storage on September 18th 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 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 22nd, the second column shows the change in the number of working rigs between last week’s count (September 15th) and this week’s (September 22nd) count, the third column shows last week’s September 15th 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 23rd of September, 2022...

DUC well report for August

The past week saw the release of the EIA's Drilling Productivity Report for September, which included the EIA's August 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 35th time out of the past 38 months, as both drilling of new wells and completions of drilled wells fell in August and 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 39 wells, falling from a revised 4,788 DUC wells in July to 4,749 DUC wells in August, which was also 8.5% fewer DUCs than the 5,191 wells that had been drilled but remained uncompleted as of the end of August of a year ago...this month's DUC decrease occurred as 894 wells were drilled in the seven regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, down by 28 from the 922 wells that were drilled in July, while 933 wells were completed and brought into production by fracking them, down from the 949 well completions seen in July, and down by 113 from the 1046 completions seen in August of last year....at the August completion rate, the 4,749 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, unchanged from the DUC well backlog of a month ago, wh​ile up from the 7 1/2 year low of 4.6 months in January, on a completion rate that is now more than 20% below 2019's pre-pandemic average...

the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, decreased by 10 wells, from 724 DUCs at the end of July to 714 DUCs at the end of August, as 82 new wells were drilled into the Marcellus and Utica shales during the month, while 92 of the already drilled wells in the region were fracked...

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Note:  there’s more here..