YIN YANG ZONE: oil prices hit 4 month low; global oil shortage at 1,680,000 bpd in October; OPEC's output was 490,000 bpd short of quota

US oil prices hit a 4 month low; US distillates supply is at a 25 week low; global oil supply was 1,680,000 barrels per day short of global demand in October, as OPEC's output was 490,000 barrels per day below their reduced target..

US oil prices were down for a fourth straight week and tumbled on Thursday to a 4 month low before rebounding Friday to minimize losses ....after falling 4.1% to settle at $77.17 a barrel last week following softer-than-expected economic data out of China and the US, and threats of more rate hikes from central bankers, the contract price for the benchmark US light sweet crude for December delivery rebounded on Monday to settle $1.09 higher at $78.26 a barrel after OPEC's monthly market report countered concerns over declining demand in the U.S. and China...oil prices rallied again early Tuesday after the IEA increased its demand growth forecasts and the U.S. dollar fell on data showing inflation was slowing but ended the day's trading unchanged as traders positioned ahead of the release of two weeks of oil data from the U.S. EIA ...oil prices erased the week's gains on Wednesday, settling $1.60 lower at 76.66 a barrel, following the EIA's report of a larger than expected build in U.S. crude stocks, and then nosedived 5% on Thursday following reports of a Chinese refinery slowdown and on record US oil production amid rising supplies and settled $3.76 lower at a four-month low of $72.90 a barrel....however, oil prices retraced most of their losses on Friday, rallying 4% as the U.S. dollar index pulled back and traders looked ahead to next week's meeting among OPEC+ ministers and the potential for deeper production cuts, and settled $2.99 higher at $75.89 a barrel, but still posted a 1.7% loss for the week...

natural gas prices finished the week 2.4% lower at $2.960 per mmBTU, after tumbling nearly 14% to $3.033 last week, on record production, mild weather and a big addition of gas to storage in spite of the beginning of the usual heating season...The EIA's natural gas storage report for the week ending November 10th indicated that the amount of working natural gas held in underground storage in the US increased by 60 billion cubic feet to 3,833 billion cubic feet by the end of the week, after natural gas supplies had decreased 6 billion cubic feet the prior week in the season's first withdrawal, which left our natural gas supplies 198 billion cubic feet, or 5.4% above the 3,635 billion cubic feet that were in storage on November 10th of last year, and 203 billion cubic feet, or 5.6% more than the five-year average of 3,630 billion cubic feet of natural gas that were in working storage as of the 10th of November over the most recent five years…the 60 billion cubic foot injection into US natural gas working storage for the cited week was quite a bit more than the average 40 billion cubic feet addition to supplies that was expected by industry analysts surveyed by Reuters, and was much more than the average 20 billion cubic feet addition to natural gas storage that has been typical for the same Autumn week over the past 5 years, but was a bit less than the 66 billion cubic feet that were added to natural gas storage during the corresponding warm November week of 2022…

The Latest US Oil Supply and Disposition Data from the EIA

Note: Since last week's oil data was not published while the EIA was undergoing a systems upgrade, this week's statistics include two weeks of new data....hence, we will try to include as many of the key stats from last week as possible with this week's synopsis, without allowing it to get too cumbersome...also note that with the systems upgrade, the U.S. Petroleum Balance Sheet now includes three new lines: line 4) Transfers to Crude Oil Supply, which includes 5) Alaskan NGL production and 6) "Natural Gasoline, Condensate, and Unfinished Oils"...presumably, those liquids which have been included but in our oil supplies weekly should account for the large "unaccounted for crude oil" entry we've complained about for years...however, as of this week, they don't...

At any rate, the US oil data from the US Energy Information Administration for the week ending November 10th indicated that even after an increase in our oil exports and a drop in the amount of oil supplies that the EIA could not account for, we again had surplus oil to add to our stored commercial crude supplies, for the seventh time in eighteen weeks, and for the 25th time in the past 47 weeks ...Our imports of crude oil fell by an average of 21,000 barrels per day to average 6,373,000 barrels per day, after falling by an average of 31,000 barrels per day the prior week, while our exports of crude oil rose by 364,000 barrels per day to average 4,889,000 barrels per day, after falling by an average of 372,000 barrels per day the prior week, which combined meant that the net of our trade in oil worked out to a net import average of 1,484,000 barrels of oil per day during the week ending November 10th, 385,000 fewer barrels per day than the net of our imports minus our exports during the prior week. .Over the same period, transfers to our oil supply from Alaskan gas liquids, natural gasoline, condensate, and unfinished oils averaged 715,000 barrels per day, while at the same time, production of crude from US wells remained at its all time high of 13,200,000 barrels per day for the sixth straight week, and hence our daily supply of oil from the net of our international trade in oil, from transfers, and from domestic well production appears to have averaged a total of 15,399,000 barrels per day during the November 10th reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,399,000 barrels of crude per day during the week ending November 10th, an average of 164,000 more barrels per day than the amount of oil that our refineries were processing during the prior week, while over the same period the EIA’s surveys indicated that a rounded average of 513,000 barrels of oil per day were being added to the supplies of oil stored in the US. So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending November 10th appear to indicate that our total working supply of oil from net imports, from transfers, and from oilfield production was 512,000 barrels per day less than what was added to storage plus our oil refineries reported they used during the week. To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a [ +512,000 ] barrel per day figure onto what is now line 16 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the 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 in the week’s oil supply & demand figures that we have just transcribed.....Moreover, since 2,147,000 barrels of oil per day were unaccounted for in last week’s data, that means there was a 1,635,000 barrel per day difference between this week's oil balance sheet error and the EIA's much larger crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, and therefore nonsense...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 an aging twitter thread from an EIA administrator addressing these errors, and what they had hoped to do about it)

This week's 513,000 barrel per day increase in our overall crude oil inventories was all added to our commercially available stocks of crude oil, after 1,981,000 barrels per day were added to our commercial crude supplies the prior week, while the amount of oil in our Strategic Petroleum Reserve remained unchanged both weeks. Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to 6,488,000 barrels per day last week, which was 2.8% more than the 6,310,000 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 an all time high of 13,200,000 barrels per day for the sixth consecutive week because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 12,800,000 barrels per day, while Alaska’s oil production was 4,000 barrels per day lower at 433,000 barrels per day but still added the same 400,000 barrels per day to the EIA's 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 is now 0.8% above that of our pre-pandemic production peak, and 36.1% 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 86.1% of their capacity while processing those 15,399,000 barrels of crude per day during the week ending November 10th, up from their ten month low utilization rate of 85.2% last week, with such low utilization rates not uncommon during the Fall, when refineries are undergoing seasonal maintenance as they changeover to produce winter blends of fuel.. however, the 15,399,000 barrels per day of oil that were refined this week were still 4.7% less than the 16,152,000 barrels of crude that were being processed daily during week ending November 11th of 2022, and 3.2% less than the 15,916,000 barrels that were being refined during the prepandemic week ending November 8th, 2019, when our refinery utilization rate was at 87.8%..

Even with the increase in the amount of oil being refined this week, the gasoline output from our refineries was much lower, decreasing by 813,000 barrels per day to 9,415,000 barrels per day during the week ending November 10th, after our refineries' gasoline output had increased by 734,000 barrels per day during the prior week. This week’s gasoline production was 3.0% less than the 9,789,000 barrels of gasoline that were being produced daily over the same week of last year, and 6.7% less than the gasoline production of 10,173,000 barrels per day during the prepandemic week ending November 8th, 2019. At the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 53,000 barrels per day to 4,753,000 barrels per day, after our distillates output had increased by 120,000 barrels per day during the prior week. But even with those increases, our distillates output was 6.7% less than the 5,097,000 barrels of distillates that were being produced daily during the week ending November 11th of 2022, and 5.7% less than the 5,03,000 barrels of distillates that were being produced daily during the week ending November 8th, 2019..

With this week's big decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the 26th time in thirty-eight weeks, decreasing by 1,540,000 barrels to 215,670,000 barrels during the week ending November 10th, after our gasoline inventories had decreased by 6,312,000 barrels during the prior week. Our gasoline supplies fell by less this week because the amount of gasoline supplied to US users fell by 543,000 barrels per day to 8,949,000 barrels per day (after rising by 795,000 barrels per day the prior week), while our exports of gasoline fell by 49,000 barrels per day to 933,000 barrels per day, and while our imports of gasoline fell by 190,000 barrels per day to 514,000 barrels per day.…Even after twenty-six gasoline inventory decreases over the past thirty-eight weeks, our gasoline supplies were still 3.7% above than last November 11th's gasoline inventories of 207,940,000 barrels, and only 1% below the five year average of our gasoline supplies for this time of the year…

Even with this week's increase in our distillates production, our supplies of distillate fuels fell for the twenty-second time in thirty-six weeks, decreasing by 1,422,000 barrels to a 25 week low of 106,579,000 barrels over the week ending November 10th, after our distillates supplies had decreased by 3.294,000 barrels during the prior week. Our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 189,000 barrels per day to 4,109,000 barrels per day, and because our exports of distillates fell by 88,000 barrels per day to 1,000,000 barrels per day, while our imports of distillates fell by 64,000 barrels per day to 152,000 barrels per day....With 22 inventory decreases over the past thirty-six weeks, our distillates supplies at the end of the week were 0.7% below the 107,383,000 barrels of distillates that we had in storage on November 11th of 2022, and about 13% below the five year average of our distillates inventories for this time of the year...

Finally, even with our oil exports higher, our commercial supplies of crude oil in storage rose for the 12th time in twenty-six weeks and for the 27th time in the past year, increasing by 3,592,000 barrels over the week, from 435,762,000 barrels on November 4th to 439,354,000 barrels on November 11th, after our commercial crude supplies had increased by 13,869,000 barrels over the prior week. .Even with those increases, our commercial crude oil inventories were still about 2% below the most recent five-year average of commercial oil supplies for this time of year, but were still about 28% above the average of our available crude oil stocks as of the 2nd weekend of November over the 5 years at the beginning of the past decade, with the big difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories had 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 November 10th were 0.9% more than the 435,355,000 barrels of oil in commercial storage on November 11th of 2022, and 1.5% more than the 433,003 ,000 barrels of oil that we still had in storage on November 12th of 2021, but 10.2% less than the 489,475,000 barrels of oil we had in commercial storage on November 13th of 2020, after early pandemic precautions had left a lot of oil unused…

OPEC's Report on Global Oil for October

Monday of this past week saw the release of OPEC's November Oil Market Report, which includes the details on OPEC's & global oil data for October, and hence it gives us a picture of the global oil supply & demand situation as Chinese demand remained sluggish after their first half recovery from the country's restrictive Covid policy, while oil supplies were impacted by an ongoing unilateral million barrel per day production cut by the Saudis and an additional 300,000 million barrel per day supply cut by Russia...October was also the tenth month that OPEC and aligned oil producers were operating under a 2 million barrel per day production cut, meant to take roughly 2% of global oil supplies off the market, in response to a perceived global surplus and related lower prices of a year ago, and the fifrth month of a Saudi led cut of an additional 1.16 million barrels per day, which, when combined with a unilateral 500,000 million barrel per day Russian cut, was intended to take an additional 1.66 million barrels per day off the market for the rest of this year...all told, then, the members of the cartel have committed to holding 4.66 million barrels per day, or roughly 4.6% of global supplies, off the market ...

The first table from this month's report that we'll review is from the page numbered 49 of the report (pdf page 59), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate...for all their official production measurements, OPEC has been using an average of production estimates by as many as eight "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA), the industry newsletter Petroleum Intelligence Weekly, the energy consultancy Wood Mackenzie and the research and intelligence firm Rystad Energy, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures…

As we can see in the bottom right hand corner of the above table, OPEC's oil output increased by 80,000 barrels per day to 27,900,000 barrels per day during October, up from their revised September production total that averaged 27,820,000 barrels per day....however, that September OPEC output figure was originally reported as 27,775,000 barrels per day, which therefore means that OPEC's September production was revised 45,000 barrels per day higher with this report, and hence OPEC's October production was, in effect, 125,000 barrels per day more than the previously reported OPEC production figure (for your reference, here is a copy of the table of the official August OPEC output figures as reported a month ago, before this month's revision)...

since the increase in OPEC production in October was led by a 51,000 barrel per day increase by Angola and a 46,000 barrel per day increase by Iran, it remains in line with their previously announced cuts, since Iran is exempt from those cuts while Angola had been underproducting by hundreds of thousands of barrels per day...production from Kuwait, which has been producing above their assigned quota, was down by 26,000 barrel per day, while production from the Emirates, another overproducer, rose by 16,000 barrels per day...

the additional million barrel per day output cut the Saudis first implemented in July and recently extended to the end of this year was the latest in a series of oil supply cuts imposed by the OPEC+ cartel over the past year, beginning with a 2 million barrel per day production cut that the joint agreement imposed on all producers in October 2022...following that, six OPEC oil producers, led by the Saudis, and two other oil producers aligned with OPEC+, came to an agreement at the beginning of April to further reduce their combined production by an additional 1.16 million barrels per day beginning in May, over and above the formal OPEC cuts...in addition, Russia agreed to extend their ongoing 500,000 barrels per day cut for the rest of the year for a total cut of 1.66 million barrels per day from those nine producers...production cuts for OPEC members under that agreement included 500,000 barrels per day (bpd) from the Saudis, 211,000 bpd from Iraq, 140,000 bpd from the Emirates, 128,000 bpd from Kuwait, 48,000 barrels per day from Algeria, and 8,000 barrels per day from Gabon...four months ago, our initial assessment was that only the Saudis managed to hit the additional production cut target in May, and only Algeria joined them in June, indeed, most of the others who announced cuts in April increased their production over the June through September period, rather than cutting it, and it appears that's also been the case in October....hence, the net production reduction remains less than half of what had been committed to by the parties to that April 2nd agreement..

furthermore, OPEC and other aligned oil producers had previously agreed to reduce production by 2,000,000 barrels per day beginning last November, so the net 917,000 barrels per day OPEC ex-Saudi Arabia have cut since then is also short of that...however, OPEC's production was already running 1,585,000 barrels per day below what they were expected to produce when that policy was initiated in October of last year, so the 27,900,000 barrels per day OPEC produced in Octobr 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 2022 and the following months through the end of 2023, and the quotas shown above were reaffirmed by the cartel for 2023 in during the 34th OPEC and non-OPEC Ministerial Meeting on December 4th, 2022....the first column above, labeled "August 2022 required production", actually matches the October 2018 baseline production level on which OPEC and aligned producers have based all of their quotas since the onset of the pandemic, and the "Voluntary adjustment" is the production cut each country is expected to make from that benchmark level to achieve a 2 million barrel per day cut for the cartel as a whole, leaving each country with a "Voluntary Production" level they're expected to hit each month during 2023, whether they've been able to produce that much recently or not....since war torn Libya and US sanctioned producers Iran and Venezuela have been exempt from the production cuts imposed by the joint agreement that has governed the output of the other OPEC producers since May 2020, they are not shown on the above list, and OPEC's quota excluding them is aggregated under the total listed for the 'OPEC 10', which you can see was expected to be at 25,416,000 barrels per day from November 2022 through December 2023...

with the April 2nd agreement, six members of OPEC agreed to further reduce their production by 1,035.000 starting in May and through the end of the year....thus the voluntary production level for the OPEC 10 would have been reduced to 24,381,000 through December....subtracting the one million barrel per day cut from the Saudi's production initiated in July from that would leave OPEC's 'voluntary production' level at 23,381,000 barrels for the month of October....therefore, the 22,891,000 barrels those 10 OPEC members actually produced in September were 490,000 barrels per day short of what they were expected to produce during the month, with Nigeria and Angola still accounting for the majority of this month's production shortfall...

The next graphic from this month's report that we'll look at shows us both OPEC's and worldwide oil production monthly on the same graph, over the period from November 2021 thru October 2023, and it comes from page 50 (pdf page 60) of OPEC's November Oil Market Report....on this graph, the sky blue bars represent OPEC's monthly oil production in millions of barrels per day as shown on the left scale, while the purple line 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 80,000 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 average of 300,000 to an average of 101.6 million barrels per day in October, after September's total global output figure was apparently revised up by 700,000 barrels per day from the 100.6 million barrels per day of global oil output that was reported for September a month ago, as non-OPEC oil production rose by a rounded 200,000 barrels per day in October after that revision, with most of October’s non-OPEC production increase due to greater oil output from by Norway and OECD Americas, which more than offset lower production from Russia and Brazil...

After that 300,000 barrel per day increase in October's global output, the 101.60 million barrels of oil per day that were produced globally during the month were only 100,000 barrels per day, or 0.1% more than the revised 101.50 million barrels per day that were being produced globally in October a year ago, when OPEC was operating with an inconsequential 100,000 million barrel per day production cut, after their pandemic era out reductions had unwound that September... (see the November 2022 OPEC report for the originally reported October 2022 details)...since this month's increase in OPEC's output was in line with the global increase, their October oil production of 27,900,000 barrels per day amounted to 27.5% of what was produced globally during the month, same as their revised 27.5% share of the global total in September....OPEC's October 2022 production was originally reported at 29,494,000 barrels per day ,which means that the 13 OPEC members who were part of OPEC last year produced 1,594,000 barrels per day, or 5.4% fewer barrels per day of oil this October than what they produced last October, when they accounted for 29.1% of a similar global output total...

Even with the increase in global oil output in October and the big aforementioned upward revision to September's production, the amount of oil being produced globally during the month again fell short of the expected global demand, as this next table from the OPEC report will show us...

The above table came from page 27 of the November Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2022 in the first column, and then OPEC's estimate of oil demand by region and globally, quarterly over 2023 over the rest of the table…on the "Total world" line in the fifth column, we've circled in blue the figure that's relevant for October, which is their estimate of global oil demand during the fourth quarter of 2023….OPEC is estimating that during the 4th quarter of this year, all oil consuming regions of the globe will be using an average of 103.28 million barrels of oil per day, which was revised a rounded 150,000 barrels of oil per day higher from the 103.13 million barrels per day they estimated for the fourth quarter a month ago (we've circled this month's revisions in green)....but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 101.60 million barrels per day during October, which would imply that there was a shortage of around 1,680,000 barrels per day of global oil production during October, when compared to the demand estimated for the month...

in addition to figuring that October oil shortage implied by this report, the upward revision of 700,000 barrels per day to September's global oil output that's implied the data in this month's report, combined with the 60,000 barrels per day downward revision to 3rd quarter demand that we've circled in green above, means that the 1,570,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 810,000 barrels per day....in like manner, the 60,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 1,360,000 barrels per day we had previously figured for August would now be revised to a shortage of 1,300,000 barrels per day, and that the shortage of 1,480,000 barrels per day barrels per day we had previously figured for July would have to be revised to a shortage of 1,420,000 barrels per day...

Note that in green we have circled an upward revision of 130,000 barrels per day to OPEC's previous estimate for second quarter demand...so, based on that upward revision to demand, our previous estimate of a shortage of 450,000 barrels per day in June would now be revised to a shortage of 580,000 barrels per day...in addition, the 750,000 barrels per day global oil output shortage we had previously figured for May would now be revised to a shortage of 880,000 barrels per day...meanwhile, the global shortage of 130,000 barrels per day we had previously figured for April would now be revised to a shortage of 260,000 barrels per day, in light of that 130,000 barrel per upward revision to 2nd quarter demand....

Also note that in green we have encircled a downward revision of 10,000 barrels per day to OPEC's previous estimates of first quarter demand...for March, that means that the 200,000 barrels per day global oil output surplus we had previously figured for March would be revised to a surplus of 210,000 barrels per day.. similarly, the downward revision to first quarter demand means that the global oil surplus of 500,000 barrels per day we had previously figured for February would now be revised to a surplus of 510,000 barrels per day, while the 250,000 barrels per day global oil output shortage we had previously figured for January would now be revised to a shortage of 240,000 barrels per day, in light of the 10,000 barrel per day downward revision to first quarter demand...

Also note that in orange we've also circled an upward revision of 30,000 barrels per day to 2022's demand, which also means that the supply shortfalls that we previously reported for last year would have to be revised....while we're not inclined to go back and recompute supply & demand for the months of 2022, we have those totals for each month of last year accompanying our review of OPEC's January 2023 report, should anyone want to review how 2022's oil supply & demand shook out..

This Week's Rig Count

in lieu of details on the rig count, 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 November 17th, the second column shows the change in the number of working rigs between last week’s count (November 10th) and this week’s (November 17th) count, the third column shows last week’s November 10th 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 18th of November, 2022...

in addition to the removal of one natural gas rig that had been drilling in Ohio's Utica shale, there's been quite a bit of repositioning of those rigs that are still drilling; over the week ending November 17th, 2 rigs were pulled out of Belmont county, and rigs were also removed from Monroe and Columbiana counties as well; at the same time, 2 more rigs began drilling in Guernsey county, and another rig was added to Jefferson county at the same time...the key details on Ohio’s Utica shale rigs as they stand as of Friday from Baker Hughes's North America Rotary Rig Count Pivot Table (xls) are included below...