Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, August 13, 2017

OPEC oil production jumps to 7 month high; US oil refining at a new record...

oil prices trended lower this week, mostly on a report that OPEC producers had increased their crude oil output for the 4th month in a row, reaching their highest level since their production cut pact was initiated...after closing last week little changed at $49.58 a barrel, oil prices headed lower on Monday after a report of higher oil output from Libya's largest oil field, with the contract for September US oil closing down 19 cents at $49.58 a barrel...oil prices continued falling Tuesday, ending down another 22 cents at $49.17 a barrel, on a report that several OPEC producers had increased exports, despite the loudly orchestrated export cuts by the Saudis...contract prices then recovered on Wednesday, after the weekly EIA report showed another huge draw from US oil supplies, with oil closing up 39 cents at $49.56 a barrel...oil prices continued heading higher on Thursday morning, reaching as high as $50.22 a barrel on heavy trading volume, before reversing and falling to as low as $48.35 a barrel, after the August OPEC monthly market report revealed that OPEC output rose by 172.6 thousand barrels per day to 32.87 million barrels per day, their highest monthly production this year, with oil prices finally stabilizing at $48.59 a barrel at the close for a loss of 97 cents on the day, in the heaviest trading in September oil in the history of the contract...after continuing to fall to a 2½ week low of $48.01 a barrel on Friday morning, oil prices then moved higher on reports of instability in Nigeria and higher global demand for oil, closing the week at $48.82 a barrel, still logging the 2nd consecutive weekly decline...

OPEC's July oil report

with OPEC's increased production a major factor in this week's lower oil price, we'll start by quickly reviewing OPEC's August Oil Market Report (covering July OPEC & global data), which as we noted was released on Thursday of this week....the first table from the August report that we'll include here is from page 62 of that OPEC pdf, 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 indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures... 

July 2017 OPEC cude output via secondary sources

from this table of official oil production data, we can see that OPEC oil output increased by 172,600 barrels per day in July, to 32,869,000 barrels per day, from a June oil production total of 32,696,000 barrels per day, a figure that was originally reported as  32,611,000 barrels per day (for your reference, here is the table of the official June OPEC output figures before this month's revisions)...as we can see in the far right column, the entirety of the July OPEC increase of 172,600 barrels per day came as a result of a 154,300 barrel per day increase from Libya, and a 34,300 barrel per day increase from Nigeria, the two OPEC countries that are exempt from the production cuts because their production had previously been driven lower by domestic strife...in addition, the relatively large decrease of 33,100 barrels per day by Iraq, who still remains well over their production quota, was almost entirely offset by a 31,800 barrels per day increase in oil output from Saudi Arabia, who produced 10,067,000 barrels of oil per day in July, which is now slightly over their quota too, as can be seen in the table below:

August 12 2017 OPEC production and targets via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first seven months of this year (the targeted period) and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as they agreed to at their November meeting, and the 3rd column shows how much each has averaged over or under their quotas for the seven months of this year that OPEC has curtailed production...the problem with this is that the current publication of this table had erroneously placed data on the lines for Iran and Iraq, and although i have notified Platts of their error, a corrected table is not yet forthcoming...so what i did was insert the Iran and Iraq data from the previous iteration of this table onto the Iran and Iraq lines, so we at least have an accurate representation of the daily quotas for each of the OPEC members...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from August 2015 to July 2017, and it comes from page 63 of the August OPEC Monthly Oil Market Report....the light blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...the last bar, mistakenly marked Jun 17, actually shows July 17 data...

July 2017 OPEC report global supply

the preliminary data graphed above indicates that total global oil production rose to 97.30 million barrels per day in July, up by 0.17 million barrels per day from a June total of 97.13 million barrels per day, which was revised .54 million barrels per day higher than the 96.59 million barrels per day global oil output for June that was reported a month ago...the July figure was also 1.99 million barrels per day higher than the 95.14 million barrels of oil per day that was being produced globally in July a year ago (see last August's OPEC report for year ago data)...OPEC's July production of 32,869,000 barrels per day thus represented 33.8% of what was produced globally,  a small decrease from the revised 33.9% OPEC share in June...OPEC's July 2016 production, excluding Indonesia, was at 32,369,000 barrels per day, so even after the alleged production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are still producing nearly 1.1% more oil than they were producing a year ago, when they were supposedly producing flat out...

furthermore, even with the seven months of production cuts we can see on the above graph, there is still a small surplus of oil supply being produced globally, as the next table that we'll include will show us..    

July 2017 global oil demand estimate via OPEC copy

the table above comes from page 37 of the August OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally over 2017 over the rest of the table...on the "Total world" line of the fourth column, we've circled in blue the figure we're interested in, which is their estimate for global oil demand for the third quarter of 2017...

OPEC's estimate is that during the 3rd quarter of this year, all oil consuming areas of the globe will use 97.28 million barrels of oil per day, up from the 95.65 millions of barrels of oil per day the world was using in the 2nd quarter, and up from the 95.12 millions of barrels of oil per day they were using in 2016...that's typical for summer, since the most heavily populated regions of the globe are in the Northern Hemisphere, and demand for gasoline and power for air conditioning rises in the summer...however, as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with the OPEC and non-OPEC production cuts, the world's oil producers were still producing 97.30 million barrels per day during July, which means that even during the period of greatest demand, there continued to be a surplus of around 20,000 barrels per day of global oil production in July, even after 7 months of OPEC and NOPEC production cuts...also note that global production for June was concurrently revised higher, to 97.13 million barrels per day, so that means the global oil surplus during June was therefore around 1,480,000 barrels per day,  based on the revised second quarter global demand figure of 95.65 million barrels per day shown above...at the same time, May's global oil surplus was reduced by the upward revision of 2nd quarter demand to 270,000 barrels per day....that revision also means that April's global oil supply was roughly 40,000 barrels per day less than the revised demand, so there is now one month out of the seven when OPEC cuts were effective at reducing supply....prior to that, however, we saw that the global oil surplus during March was around 780,000 barrels per day, and nearly a million barrels per day in January and February, as we've shown when reviewing revisions to these reports in prior months...taken together, this data means that despite the seven months of OPEC production cuts, more than 135 million barrels of oil have been added to the global oil glut since the 1st of the year..  

last, we'll include a graph of the total OPEC oil output for the 13 long term OPEC members included in this report, so we can see how this month's production stacks up compared to historical figures...

July 2017 OPEC oil production historical graph

the above graph, taken from the 'OPEC July Production Data" post at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to July 2017, using the same official data from secondary sources as we saw in the first table above...here we can obviously see that OPEC's July production of 32,869,000 barrels per day is up quite a bit from their previous production this year and is even approaching the record of 33,374,000 million barrels per day the cartel produced in November, a level achieved as they all over produced so that their cuts would be off a higher base...so even as they've cut their oil production from that level, their output for the seven months of this year was actually higher than in the same seven months a year ago, leaving OPEC well on track to exceed their 2016 production this year, even as they continue to orchestrate the oil markets with reports of their "reduced" production...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending August 4th, indicated a big drop in our imports of crude oil, accompanied by a record amount of oil used by US refineries, and hence a large withdrawal from our commercial stocks of crude oil to meet the needs of that refining...our imports of crude oil fell by an average of 491,000 barrels per day to an average of 7,762,000 barrels per day during the week, while at the same time our exports of crude oil rose by 5,000 barrels per day to an average of 707,000 barrels per day, which meant that our effective imports netted out to 7,055,000 barrels per day during the week, 496,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 7,000 barrels per day to an average of 9,423,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,478,000 barrels per day during the cited week...

during the same week, refineries used a record 17,574,000 barrels of crude per day, 166,000 barrels per day more than they used during the prior week, and hence at the same time 922,000 barrels of oil per day had to be pulled out of oil storage facilities in the US...however, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was still 174,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+174,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports still rose to an average of 8,014,000 barrels per day, which was 4.9% below the imports of the same four-week period last year...the 922,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercial stocks of crude oil, since the amount of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's 7,000 barrel per day decrease in our crude oil production resulted from a 22,000 barrel per day decrease in oil output from Alaska, which was partially offset by a 15,000 barrels per day increase in oil output from wells in the lower 48 states...the 9,423,000 barrels of crude per day that were produced by US wells during the week ending August 4th was 7.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.6% more than the 8,445,000 barrel per day of oil output during the during the same week a year ago, while it was still 1.9% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

US oil refineries were operating at 96.3% of their capacity in using those 17,574,000 barrels of crude per day, which was up from 94.5% of capacity the prior week, and the highest refinery utilization rate in 12 years...the record amount of oil refined this week was 5.9% more than the 16,597,000 barrels of crude per day.that were being processed during week ending August 5th, 2016, when refineries were operating at 92.2% of capacity, and roughly 12% above the 10 year average of 15.75 million barrels of crude refined per day this time of year....since we have a new record for oil refining, we'll include a graphic of what that looks like below...

August 9 2017 refinery throughput for week ending August 4

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...the graph shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput for any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year....the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented in red...thus we can see that for most all of 2016, US oil refining was either at seasonal record highs or near the top of the average range...furthermore, we can also see that this year's oil refining has thus been beating last year's record levels by a large margin since the beginning of April, setting several record highs, each of which has subsequently been topped as the year progressed...

with the record level of oil refining, gasoline production from our refineries increased by 6,000 barrels per day to 10,301,000 barrels per day during the week ending August 4th, short of the record set two weeks ago, but still 2.0% higher than the 10,098,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 73,000 barrels per day to 5,305,000 barrels per day, which was also short of the record set 4 weeks ago, but still 11.9% more than the 4,739,000 barrels per day of distillates that were being produced during the week ending August 5th last year....

even with small increase in our gasoline production, our end of the week supply of gasoline increased by 3,424,000 barrels to 231,103,000 barrels by August 4th, the first increase in gasoline inventories in 8 weeks and the largest increase in 7 months…the major factor in the gasoline supply increase was an increase of 559,000 barrels per day to 1,108,000 barrels per day in our imports of gasoline, the most gasoline we've imported in any week since the week ending July 3rd of 2011...in addition, a drop of 45,000 barrels per day to 9,797,000 barrels per day in our domestic consumption of gasoline and a decrease of 55,000 barrels per day to 454,000 barrels per day in our gasoline exports also both contributed to the week over week increase in supplies....however, following 7 weeks of gasoline supply withdrawals prior to this week, our gasoline inventories are still 1.8% below last year’s seasonal high of 235,383,000 barrels for this week of the year, but they are now 7.2% higher than the 215,482,000 barrels of gasoline we had stored on August 7th of 2015...

even with the increase in our distillates production, our supplies of distillate fuels still dropped by 1,729,000 barrels to 147,685,000 barrels over the week ending August 4th, the 6th drop in seven weeks…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 370,000 barrels per day to 4,510,000 barrels per day, and as our imports of distillates fell by 67,000 barrels per day to 41,000 barrels per day, the least we've imported in over a year...however, there was also a 138,000 barrel per day decrease to 1,083,000 barrels per day in our exports of distillates at the same time, more than offsetting the decrease in imports….after this week’s decrease, our distillate inventories were 2.3% lower than the 151,196,000 barrels that we had stored on August 5th, 2016, and fractionally lower than the distillate inventories of 147,806,000 barrels of distillates that we had stored on August 7th of 2015, even as they are roughly 5.7% above the 10 year average for distillates stocks for this time of the year

finally, the big drop in our oil imports and the record level of oil refining meant our commercial crude oil inventories again shrunk, decreasing for the 16th time in the past 18 weeks, falling by another 6,458,000 barrels to 475,437,000 barrels as of August 4th, leaving us with the least oil we've had in storage since early February of 2016...thus, our oil inventories as of August 4th were also 3.6% below the 492,969,000 barrels of oil we had stored on August 5th of 2016, even as they were still 12.7% more than the 421,822,000 barrels in of oil that were in storage on August 7th of 2015...compared to historical figures at the same time of year, before our oil glut began to build up,  this week's oil supplies were still 41.7% higher than the 335,568,000 barrels of oil we had in storage on August 8th of 2014, and about 42.2% above the 10 year average of oil supplies for the first week of August ... here is a graph from John Kemp of what that looks like over the last 4 years:

August 9 2017 crude oil inventories as of August 4

This Week's Rig Count

US drilling activity decreased for the 4th time in 7 weeks during the week ending August 11th, following a string of 23 consecutive weeks of increases earlier this year, as natural gas drilling tanked while oil drilling increased....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 5 rigs to 949 rigs in the week ending Friday, which was still 468 more rigs than the 481 rigs that were deployed as of the August 12th report in 2016, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by three rigs to 768 rigs this week, which was up by 372 oil rigs over the past year and the most oil seeking rigs deployed since April 2nd, 2015, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 8 rigs to 181 rigs this week, which was still 98 more rigs than the 83 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the Gulf of Mexico rig count rose by one rig to 17 rigs this week, after falling by 7 rigs during the prior week....there were reports last week's drop was due to the movement of Tropical Storm Emily through the eastern Gulf, but since the Gulf rig count didn't recover after the storm was passed, we now doubt that was the case...the 17 rigs now active in the Gulf now matches the 17 rigs that were working in the Gulf the same week last year, but since there is also a rig drilling offshore from Alaska this year, this week's total US offshore rig count of 18 rigs is up by 1 rig from the total offshore last year..

active horizontal drilling rigs fell by 6 rigs to 807 rigs this week, the largest horizontal rig decrease since April 29th, 2016...however, this week's horizontal rig count was still up by 426 rigs from the 375 horizontal rigs that were in use in the US on August 12th of last year, while it was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the vertical rig count was down by 1 rig to 72 vertical rigs this week, which was still up from the 62 vertical rigs that were deployed during the same week last year...meanwhile, the directional rig count was up by 2 rigs to 76 rigs this week, which was also up from the 44 directional rigs that were deployed on August 5th of last year....

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 August 11th, the second column shows the change in the number of working rigs between last week's count (August 4th) and this week's (August 11th) count, the third column shows last week's August 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 12th of August, 2016...  

August 11 2017 rig count summary

other than the major producing states shown on the above table, Mississippi also saw a rig added this week, and they now have two rigs drilling in the state, which is still down from the 3 rigs they had deployed last August 12th..

 

note: there's more here:

Sunday, August 6, 2017

oil prices retreat on rising OPEC output; US burns more gasoline than in any other week in our history

oil prices were up three out of 5 trading sessions last week but still ended fractionally lower than where they started, mostly on a report that OPEC had increased its output....building on last week's 8.6% rally to $49.71 a barrel, the largest price increase this year, WTI oil for September delivery was up another 46 cents on Monday, closing above $50 for the first time in 2 months, and ending July with the largest monthly gain since April 2016, on reports that the US was preparing sanctions against the Venezuelan oil industry...that $50 level didn't hold, however, as oil prices tumbled more than 3% on Tuesday after a Reuters survey found that OPEC oil output was up by 90,000 barrels per day in July to a 2017 high, with US crude ending the day down $1.01 to $49.16 a barrel...oil prices then recovered 43 cents to $49.59 a barrel on Wednesday after the weekly EIA report showed another decrease in US crude oil supplies and the largest weekly burn of gasoline in US history...oil prices then gave up early gains to trade lower Thursday afternoon, after legendary oil trader Andy Hall (known as "God") was forced to shutter his hedge fund due to low oil prices, with light sweet crude for delivery in September falling 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 early in the day...oil prices continued falling Friday morning, dropping as low as $48.50 a barrel, but then recovered Friday afternoon to close at $49.58 a barrel, after Baker Hughes reported the largest rig count drop since January of this year, with oil thus ending the week just 13 cents lower, easing less than a third of a percent from last week's close...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending July 28th, indicated another increase in the amount of oil used by US refineries, but a larger increase in our imports of crude, accompanied by a decrease in our exports of it, which together meant that much less oil was withdrawn from our commercial stocks of crude oil to meet this week's needs than the prior one...our imports of crude oil rose by an average of 209,000 barrels per day to an average of 8,253,000 barrels per day during the week, while at the same time our exports of crude oil fell by 328,000 barrels per day to an average of 702,000 barrels per day, which meant that our effective imports netted out to 7,551,000 barrels per day during the week, 537,000 barrels per day more than during the prior week...at the same time, our field production of crude oil rose by 20,000 barrels per day to an average of 9,430,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,981,000 barrels per day during the cited week...

during the same week, refineries used 17,408,000 barrels of crude per day, 123,000 barrels per day more than they used during the prior week, while at the same time 218,000 barrels of oil per day were being pulled out of oil storage facilities in the US (down from the withdrawal of 1,030,000 barrels of oil per day the prior week)....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 209,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+209,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,976,000 barrels per day, which was still 3.8% below the imports of the same four-week period last year...the 218,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercial stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's 20,000 barrel per day increase in our crude oil production resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 5,000 barrels per day decrease in oil output from Alaska...the 9,410,000 barrels of crude per day that were produced by US wells during the week ending July 21st was 7.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 10.5% more than the 8,515000 barrel per day of oil output during the during the same week a year ago, while it was still 2.1% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

US oil refineries were operating at 94.5% of their capacity in using those 17,408,000 barrels of crude per day, which was up from 94.3% of capacity the prior week, and above normal for this or any time of year...the amount of oil refined this week was also above the seasonal norm, as it was 3.3% more than the 16,852,000 barrels of crude per day.that were being processed during week ending July 29th, 2016, when refineries were operating at 93.3% of capacity, and roughly 10.5% above the 10 year average of 15.75 million barrels of crude refined per day for the fourth week of July....

even with the increase in refining, gasoline production from our refineries decreased by 98,000 barrels per day from last week's near record level to 10,295,000 barrels per day during the week ending July 28th, which was still 3.0% higher than the 9,992,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 101,000 barrels per day to 5,232,000 barrels per day, which was 5.9% more than the 4,940,000 barrels per day of distillates that were being produced during the week ending July 29th last year....

with nominal decrease in our gasoline production, our end of the week supply of gasoline decreased by 2,517,000 barrels to 227,679,000 barrels by July 28th, the 7th drop in gasoline inventories in a row....a record high level of domestic consumption of gasoline, which rose by 21,000 barrels per day to 9,842,000 barrels per day, continues to be responsible for the drop in gasoline supplies, as our gasoline exports decreased by 83,000 barrels per day to 512,000 barrels per day while our imports of gasoline decreased by 174,000 barrels per day to 549,000 barrels per day at the same time....with the decrease in our gasoline supplies, our gasoline inventories are now 4.4% below last year's seasonal high of  238,190,000 barrels for this week of the year, but are still 5.1% higher than the 216,733,000 barrels of gasoline we had stored on July 31st of 2015, and roughly 5.6% above the 10 year average of gasoline supplies for this week of the year… 

even with the increase in our distillates production, our supplies of distillate fuels still slipped  by 150,000 barrels to 149,414,000 barrels over the week ending July 28th, the 5th drop in six weeks, albeit the smallest ....factors in this week's small decrease in distillates supplies was a 71,000 barrel per day increase to 1,221,000 barrels per day in our exports of distillates, while our imports of distillates fell by 22,000 barrels per day to 108,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 236,000 barrels per day to 4,140,000 barrels per day....with this week's decrease, our distillate inventories are now more than 2.4% lower than the 153,155,000 barrels that we had stored on July 29th, 2016, while they remain 3.2% higher than the distillate inventories of 144,812,000 barrels that we had stored on July 31st of 2015, and roughly 8.7% above the 10 year average for distillates stocks for this time of July...

finally, even with the net drop in oil imports, the pickup in oil refining still meant our supplies of oil in storage decreased for the 15th time in the past 17 weeks, as our commercial crude oil inventories fell by another 1,527,000 barrels to 481,888,000 barrels as of July 28th, again the least oil we've had in storage anytime this year...our oil inventories as of July 28th were also 2.0% below the 490,501,000 barrels of oil we had stored on July 29th of 2016, while they were still 13.9% more than the 423,226,000 barrels in of oil that were in storage on July 31st of 2015...compared to historical figures, before our oil glut began to build up,  this week's oil supplies were still 44.2% higher than the 334,167,000 barrels of oil we had in storage on August 1st of 2014, and 43.9% above the 10 year average of oil supplies for this time of year ...    

This Week's Rig Count

US drilling activity decreased for the 3rd time in 6 weeks during the week ending August 4th, following 23 consecutive weeks of increases earlier this year, but it appears this week's drop may have been weather related...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 954 rigs in the week ending Friday, which was still 490 more rigs than the 464 rigs that were deployed as of the August 5th report in 2016, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by a single rig to 765 rigs this week, which was still up by 384 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 3 rigs to 189 rigs this week, which was still 108 more rigs than the 81 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the Gulf of Mexico rig count fell by 7 rigs to 16 this week, apparently due to the movement of Tropical Storm Emily through the eastern Gulf...watching the movement of the storm, i saw nothing that i felt would threaten rigs offshore from Louisiana, but i imagine some of those rigs may have been shut down as a precaution...the 16 rigs still active in the Gulf was thus down from the 17 rigs that were working in the Gulf the same week last year, but since there is also a rig drilling offshore from Alaska this year, the total US offshore rig count of 17 rigs is the same as the total offshore last year..

active horizontal drilling rigs fell by 3 rigs to 807 rigs this week, the largest horizontal rig decrease in more than a year...however, this week's horizontal rig count was still up by 445 rigs from the 362 horizontal rigs that were in use in the US on August 5th of last year, while it was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the directional rig count was also down by 3 rigs to 74 directional rigs this week, which was still up from the 44 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count was up by 2 rigs to 73 rigs this week, which was also up from the 58 vertical rigs that were deployed on August 5th of last year....

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 August 4th, the second column shows the change in the number of working rigs between last week's count (July 28th) and this week's (August 4th) count, the third column shows last week's July 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 5th of August, 2016...

August 4 2017 rig count summary

obviously, with the shutdown of 7 of its Gulf of Mexico rigs, Louisiana saw the largest rig count drop this week, even as two land based rigs were added in the southern part of the state...Texas is back with the largest increase this week, adding 4 rigs despite no net change in the Permian, as the Eagle Ford in south Texas added a net of 2 rigs, its first increase in 10 weeks...the largest drop in any basin was in the Cana Woodford of Oklahoma, where three rigs were shut down, as that area of the state experienced another swarm of earthquakes this week...and despite the decrease of 3 natural gas rigs, both the Utica and Marcellus stood pat, thus meaning no change in drilling activity in Ohio, Pennsylvania, or in West Virginia...one natural gas rig was pulled out of the Eagle Ford, where 3 oil directed rigs were added, and two more natural gas rigs were removed from other basins not individually itemized by Baker Hughes, possibly from the Gulf of Mexico...otherwise, the above table is a pretty good representation of the changes that took place this week...

 

note:  there’s more here

Sunday, July 30, 2017

oil prices rally 8.6%; US crude supplies fall below those of a year earlier for first time since 2014

oil prices rose every day this past week, in what ended up with the biggest weekly price increase so far this year...the rally started with news on Monday that OPEC had reached an agreement that Saudi Arabia, the Emirates and Kuwait would further cut oil exports, and that previously exempt Nigeria would agree to cap their oil production at 1.8 million barrels a day, with US crude for September delivery increasing 57 cents to $48.60 a barrel on the day....WTI September futures then rose $1.55 or 3.3 percent on Tuesday, to finish at $47.89 a barrel, the highest close for that benchmark since early June, after the Saudis further committed to a million barrel per day export reduction and Anadarko Petroleum said it would cut its 2017 outlays by $300 million because of depressed oil prices, in the first sign that U.S. oil producers might be cutting back on new well drilling...oil prices then approached eight-week highs on Wednesday,  rising 86 cents or 1.8 percent to $48.75 a barrel, after the EIA reported that U.S. crude, gasoline, and distillate inventories all fell in the prior week, with our oil supplies dropping below their year earlier level for the first time since 2014...the buying momentum spurred by the inventory declines carried into Thursday, as US light, sweet crude prices rose another 29 cents, or 0.6%, to $49.04 a barrel, the first close over $49 a barrel since May 30th...with a relatively small increase in oil rigs reported on Friday, traders remained focused on the OPEC crude oil export cuts and the larger than expected inventory draws and pushed oil prices up another 67 cents, or 1.4 percent, to $49.71 on Friday, capping an 8.6% increase for the week, the largest weekly gain this year...

with the headlines all noting that "largest price gain this year" for this week, we'll include a chart of oil prices over the past 6 months for some perspective...

July 29 2017 oil prices

the above graph is a screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for one day of oil trading between February 1st and July 28th, wherein green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while on red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...at the far right, we can see the five green bars that represent this week's price rally; but note that this week's rally started from last Friday's 8 day low, so more than a third of this week's increase was just recovering what was lost last week...also note that this week's close is still nearly $2 a barrel below the May high, which itself was $2 a barrel below the April high...furthermore, we had an extended 4 month period ending in March where oil rarely saw prices below $52 a barrel...so we're still a way from reaching those levels, or anything that looks like a permanent change to the downward trend that we've been in since then...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending July 21st, showed a small increase in US oil imports, a big increase in our oil exports, and a substantial increase the amount of oil used by US refineries, which thus meant that more oil was again withdrawn from our commercial stocks of crude oil to meet those needs...our imports of crude oil rose by an average of 48,000 barrels per day to an average of 8,044,000 barrels per day during the week, while at the same time our exports of crude oil rose by 302,000 barrels per day to an average of 1,030,000 barrels per day, which meant that our effective imports netted out to 7,014,000 barrels per day during the week, 254,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 19,000 barrels per day to an average of 9,410,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,424,000 barrels per day during the cited week...

during the same week, refineries used 17,285,000 barrels of crude per day, 166,000 barrels per day more than they used during the prior week, while at the same time 1,030,000 barrels of oil per day were being pulled out of oil storage facilities in the US (coincidentally the same amount of oil as we exported)....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 169,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (-169,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports inched up to an average of 7,848,000 barrels per day, which was still 4.2% below the imports of the same four-week period last year...the 1,030,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercial stocks of crude oil, as oil stored in our Strategic Petroleum Reserve was unchanged....this week's 19,000 barrel per day decrease in our crude oil production resulted from a 54,000 barrels per day drop in oil output from Alaska, which was only partially offset by a 35,000 barrel per day increase in oil output from wells in the lower 48 states...the 9,410,000 barrels of crude per day that were produced by US wells during the week ending July 21st was 7.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 10.5% more than the 8,515000 barrel per day of oil output during the during the same week a year ago, while it was still 2.1% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

US oil refineries were operating at 94.3% of their capacity in using those 17,285,000 barrels of crude per day, which was up from 94.0% of capacity the prior week, and above normal for this or any time of year...the amount of oil refined this week was also above the seasonal norm, as it was 4.2% more than the 16,586,000 barrels of crude per day.that were being processed during week ending July 22nd, 2016, when refineries were operating at 92.4% of capacity, and roughly 9% above the 10 year average of 15.8 million barrels of crude refined per day for the third week of July....

with the increase in refining, gasoline production from our refineries increased by 297,000 barrels per day to 10,393,000 barrels per day during the week ending July 21st, which was the third highest weekly gasoline production on record; it was also 3.2% higher than the 10,068,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) also rose by 186,000 barrels per day to 5,131,000 barrels per day, which was 4.3% more than the 4,918,000 barrels per day of distillates that were being produced during the week ending July 22nd last year....

even with the increase in our gasoline production, our end of the week supply of gasoline decreased by 1,015,000 barrels to 230,196,000 barrels by July 21st, the 6th drop in gasoline inventories in a row....a 229,000 barrels per day increase to 9,821,000 barrels per day in our domestic consumption of gasoline was responsible for the drop in supplies, which occurred despite a 132,000 barrel per day increase to 723,000 barrels per day in our imports of gasoline... meanwhile, our gasoline exports increased by 22,000 barrels per day to 595,000 barrels per day at the same time, partially offsetting the increase in gasoline imports....with the week’s decrease in our gasoline supplies, our gasoline inventories are now 4.7% below last year's seasonal high of  241,452,000 barrels for this week of the year, but are still 6.6% higher than the 215,922,000 barrels of gasoline we had stored on July 24th of 2015, and roughly 6.5% above the 10 year average of gasoline supplies for this week of the year… 

likewise, even with the increase in our distillates production, our supplies of distillate fuels fell by 1,852,000 barrels to 149,564,000 barrels over the week ending July 21st, the 4th drop in five weeks....a factor in this week's decrease in distillates supplies was a 108,000 barrel per day increase to 1,150,000 barrels per day in our exports of distillates...in addition, the amount of distillates supplied to US markets, a proxy for our consumption. rose by 42,000 barrels per day to 4,376,000 barrels per day, while our imports of distillates rose by 4,000 barrels per day to 130,000 barrels per day....with this week's decrease, our distillate inventories are nearly 1.6% lower than the 152,003,000 barrels that we had stored on July 22nd, 2016, but they remain 38% higher than the distillate inventories of 144,103,000 barrels that we had stored on July 24th of 2015, and roughly 10.7% above the 10 year average for distillates stocks for this time of July...

finally, with the increase in oil exports and the pickup in oil refining, our stored supplies of oil decreased for the 14th time in the past 16 weeks, as our commercial crude oil inventories fell by 7,208,000 barrels to 483,415,000 barrels as of July 21st, leaving us with the least oil we've had in storage anytime this year.. furthermore, our oil supplies dropped below their year ago level for the first time since 2014, as July 21st's oil inventories were 1.4% below the 490,501,000 barrels of oil we had stored on July 22nd of 2016...with that, we have another graph that will attempt to put this into perspective...

July 26 2017 crude supply as of July 21

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters, which i've attempted to embellish with a bit of additional information...John's graph shows US commercial oil inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our gasoline supplies on any given day of the year shown in the light blue shaded area, and the median level of our oil supplies, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year...the original graph also shows the number of barrels of oil we had stored for each week in 2016 traced weekly by a yellow line, with our 2017 oil supplies represented in red for the year to date ..to that i've added a green line which very approximately represents our 2015 oil inventories in thousands of barrels for each day of that year, a violet line which similarly represents our 2014 oil inventories in thousands of barrels for each day of that year, and a brown line which represents our 2013 oil inventories in thousands of barrels for each day of that year...note that the lines that i've included were drawn by hand by dragging a mouse over the graph using the Microsoft Paint utility, and thus are far less than exact; they're only meant to show the trend in our oil supplies over that period...

and the trend that they show is that oil inventories stayed in a narrow range fairly close to the 10 year mean throughout 2013 and 2014, typically falling to below 330 million barrels by the end of each summer and then rising to nearly 370 million barrels by early spring...however, at the beginning of 2015, represented by the green colored graph, our inventories of oil started rising each week till they topped 450 million barrels at the end of April 2015, and then stayed elevated in a range roughly 80 to 100 million barrels above the previous norms over the rest of that year...that large year over year difference continued into early 2016, represented by Mr Kemp's yellow colored graph, and although the rate of increase tailed off from the previous year, our 2016 oil supplies still generally averaged about 15% above 2015's elevated levels, and more than 40% above historical levels...now note that the red graph representing 2017 has been above the 2016 level, which previously had represented a record for each "day of the year" throughout the year, up until this week..so although our oil supplies as of July 21st may have just slipped below those of the same week in 2016, they are still 13.0% higher than the 427,633,000 barrels in of oil that we had in storage on July 24th of 2015, 44.0% higher than the 335,631,000 barrels of oil we had in storage on July 25th of 2014, and 43.7% higher than the 10 year average of oil supplies for this time of year ...  

N.B. take a good look at those graphs for 2013, 2014, and 2015 while you're here; they're probably the last you'll ever see me try to draw by hand...   

This Week's Rig Count


US drilling activity increased for only the 2nd time in 5 weeks during the week ending July 28th, following 23 consecutive weeks of increases earlier this year....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 8 rigs to 958 rigs in the week ending Friday, which was 495 more rigs than the 463 rigs that were deployed as of the July 29th report in 2016, and the most drilling rigs we've had running since April 10th, 2015, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 2 rigs to 766 rigs this week, which was up by 392 oil rigs over the past year, and the most oil rigs that were in use since April 2nd 2015, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 6 rigs to 192 rigs this week, which was 108 more rigs than the 86 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 23 platforms, up from the 19 rigs working in the Gulf a year ago...however, a new platform started drilling offshore from Alaska this week, so the total US offshore rig count increased to 24 rigs, up from a total of 19 offshore a year ago, because it was this week a year ago that the rig deployed in the Cook Inlet offshore from Alaska was shut down..

active horizontal drilling rigs increased by 7 to 810 rigs this week, up by 392 from the 374 horizontal rigs that were in use in the US on July 29th of last year and the most horizontal rigs in use since March 27th of 2015, while the horizontal count is still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the directional rig count was up by 2 rigs to 77 directional rigs this week, which was also up from the 48 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count was down by 1 rig to 71 rigs this week, which was still up from the 61 vertical rigs that were deployed during the same week last year....

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 July 28th, the second column shows the change in the number of working rigs between last week's count (July 21st) and this week's (July 28th) count, the third column shows last week's July 21st active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 July, 2016...

July 28 2017 rig count summary

notice that although the Permian basin saw the largest increase with 5 new drilling rigs, the rig count in Texas was still down by one...that's because 4 of the new Permian rigs were set up on the New Mexico side of the border, which is why New Mexico saw the most rigs added of any state this week...the other large increase was in the Cana Woodford of central Oklahoma, where 4 rigs were added, and since the Mississippian shale increase was also in Oklahoma, at least two rigs were pulled out of the state in areas not targeting the major shale deposits...the reason for the Texas drilling decrease was a 6 rig reduction in Texas Oil District 2, a small wedge in the southeast part of the state that includes part of the Eagle Ford trend...otherwise, Texas rig increases were seen in District 1 in the south central part of the state, District 3, centered around Houston, District 8, in the heart of the Permian, and in District 9, which would be in the Barnett shale underlying Dallas-Ft Worth...since there was no change in Texas District 10, that means the rig that was added in the Granite Wash was on the Oklahoma side of the panhandle border...meanwhile, rigs targeting natural gas were added in Ohio's Utica shale, in the Marcellus in West Virginia, the Barnett in Texas and 3 rigs in 'other' basins that are not named in Baker Hughes summary data...also note that of the states not included in the major producing states table above, Mississippi saw two rigs pulled out this week, and now have just one rig remaining; that's also a decrease from the same week a year ago, when 3 rigs were working in the state..

 

note:  there’s  more here

Sunday, July 23, 2017

oil prices down on rising OPEC output; another drop in US oil, gasoline supplies; backlog of unfracked wells at record high

oil prices were mixed but modestly higher over the first four days of last week, hitting a 6 week high on Thursday, but then fell nearly two and a half percent on Friday to close below $46 a barrel for the first time in a week and a half, on indications of rising OPEC oil output....after rising every day the prior week and closing at $46.54 a barrel, US oil for August delivery fell 52 cents to $46.02 on Monday, after the Drilling Productivity Report from the EIA forecast an August increase of 113,000 barrels in US shale oil production....prices bounced back on Tuesday after Bloomberg reported that Saudi Arabia was mulling output cuts on the order of 1 million barrels per day, twice what the OPEC pact required, with oil closing up 38 cents on the day at $46.40 a barrel...prices then jumped over $47 a barrel for the first time in two weeks on Wednesday, closing at $47.12, after the EIA reported a big drop in US crude, gasoline and distillate stockpiles....US oil for August delivery then rose to a six week high of $47.55 a barrel Thursday morning before falling on profit taking to close Thursday at $46.79 a barrel, as trading in the August contract expired...concurrently, oil for September delivery, the new front month contract, fell 40 cents to close Thursday at $46.92 a barrel...now trading September oil on Friday, prices fell more than 2 percent for the day, wiping out the week's gains, after Reuters reported that an oil tanker-tracking firm reported July supply from OPEC would rise by 145,000 barrels per day, with September oil closing down $1.15 at $45.77 a barrel, a drop of 98 cents or almost 2% from where that contract started the week, and 77 cents lower than last week's close for August oil...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending July 14th, showed an increase in US oil imports, a decrease in our oil exports, and a decrease the amount of oil used by US refineries, which nonetheless still left us short of oil for the week, which thus meant another withdrawal from our commercial stocks of crude oil...our imports of crude oil rose by an average of 386,000 barrels per day to an average of 7,996,000 barrels per day during the week, while at the same time our exports of crude oil fell by 190,000 barrels per day to an average of 728,000 barrels per day, which meant that our effective imports netted out to 7,268,000 barrels per day during the week, 576,000 barrels per day more than during the prior week...at the same time, our field production of crude oil rose by 32,000 barrels per day to an average of 9,429,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,797,000 barrels per day during the cited week...

during the same week, refineries reportedly used 17,119,000 barrels of crude per day, 125,000 barrels per day less than they used during the prior week, while at the same time 676,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 254,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (-254,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,841,000 barrels per day, which was 1.7% below the imports of the same four-week period last year...the 676,000 barrel per day decrease in our total crude inventories shows up as a 675,000 barrel per day withdrawal from our commercial stocks of crude oil while oil stored in our Strategic Petroleum Reserve was unchanged, so there's some weird rounding in one or both of those metrics....this week's 32,000 barrel per day increase in our crude oil production resulted from a 30,000 barrel per day increase in oil output from wells in the lower 48 states and a 2,000 barrels per day increase in oil output from Alaska...the 9,429,000 barrels of crude per day that were produced by US wells during the week ending July 14th was 7.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 11.0% from our 8,494,000 barrel per day of oil output during the during the same week a year ago, while it was still 1.9% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

US oil refineries were operating at 94.0% of their capacity in using those 17,119,000 barrels of crude per day, which was down from 94.5% of capacity the prior week, but still above normal for this time of year...the amount of oil refined this week was also above the seasonal norm, as it was 1.5% more than the 16,863,000 barrels of crude per day.that were being processed during week ending July 15th, 2016, when refineries were operating at 93.2% of capacity, and roughly 10% above the 10 year average of 15.6 million barrels of crude refined per day for the second week of July....

with the slowdown in refining, gasoline production from our refineries decreased by 373,000 barrels per day to 10,096,000 barrels per day during the week ending June 14th, which was still fractionally higher than the 10,050,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 404,000 barrels per day from last week's all time high to 4,945,000 barrels per day, which was also down by 1.2% from the 5,004,000 barrels per day of distillates that were being produced during the week ending July 15th last year.....  

with the drop in our gasoline production, our end of the week supply of gasoline decreased by 4,445,000 barrels to 231,211,000 barrels by July 14th, the 5th drop in gasoline inventories in a row....that was despite a 194,000 barrels per day drop to 9,592,000 barrels per day in our domestic consumption of gasoline, and in spite of a 68,000 barrel per day increase to 591,000 barrels per day in our imports of gasoline... meanwhile, our gasoline exports increased by 26,000 barrels per day to 573,000 barrels per day at the same time, partially offsetting the increase in gasoline imports....with the week’s decrease in our gasoline supplies, our gasoline inventories are now 4.1% below last year's seasonal high of  241,000,000 barrels for this week of the year, but are still 6.9% higher than the 216,285,000 barrels of gasoline we had stored on July 17th of 2015, and roughly 7.4% above the 10 year average of gasoline supplies for this time of year… 

with a similar sizable drop in our distillates production, our supplies of distillate fuels fell by 2,137,000 barrels to 151,416,000 barrels during the week ending July 14th, after increasing by 3,131,000 barrels the prior week....other than the drop in production, the major factor in this week's decrease in distillates supplies was a 467,000 barrel per day increase to 4,334,000 barrels per day in the amount of distillates supplied to US markets, a proxy for our consumption...meanwhile our exports of distillates fell by 127,000 barrels per day to 1,042,000 barrels per day, while our imports of distillates rose by 1,000 barrels per day to 126,000 barrels per day....with this week's increase, our distillate inventories are nearly 1% lower than the 152,783,000 barrels that we had stored on July 15th, 2016, but they remain 7.0% higher than the distillate inventories of 141,515,000 barrels that we had stored on July 17th of 2015, and roughly 12.6% above the 10 year average for distillates stocks for this time of July...

finally, with the increase in oil imports, and the relatively slower refining, our commercial supplies of crude oil decreased for the 13th time in the past 15 weeks, as our commercial oil inventories fell by 4,727,000 barrels to 490,623,000 barrels as of July 14th, leaving us with the least oil in storage since the end of January.. however, we still finished the week with 2.4% more crude oil in storage than the 479,012,000 barrels we had stored at the end of last year, and a small fraction more crude oil in storage than the 488,830,000 barrels of oil in storage on July 15th of 2016....compared to historical figures, when the oil glut was still building, this week still saw 13.6% more crude than the 431,836,000 barrels in of oil that were in storage on July 17th of 2015, 44.6% more crude than the 339,328,000 barrels of oil we had in storage on July 18th of 2014, and 45.7% more than the 10 year average of oil supplies for this time of year ...      

This Week's Rig Count

US drilling activity stalled for the 3rd time in 4 weeks during the week ending July 21st, following 23 consecutive weeks of increases....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 950 rigs in the week ending Friday, which was still 488 more rigs than the 462 rigs that were deployed as of the July 22nd report in 2016, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by 1 rig to 764 rigs this week, which was still up by 393 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations also decreased by 1 rig to 186 rigs this week, which was still 98 more rigs than the 88 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...

however, new drilling started from 2 platforms in the Gulf of Mexico offshore of Louisiana this week, which brought the Gulf of Mexico activity count up to 23 rigs, up from 18 rigs in the Gulf and a total of 19 offshore a year ago, when there was also a rig deployed offshore of Alaska, in the Cook Inlet...

the count of active horizontal drilling rigs decreased by one rig to 803 rigs this week, the first drop in horizontal drilling since November 11th of 2016...however, active horizontal rigs were still up by 446 rigs from the 357 horizontal rigs that were in use in the US on July 22nd of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the vertical rig count was down by 4 rigs to 72 vertical rigs this week, which was still up from the 61 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was up by 3 rigs to 75 directional rigs this week, which was also up from the 44 directional rigs that were deployed during the same week last year...

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 July  21st, the second column shows the change in the number of working rigs between last week's count (July 14th) and this week's (July 21st) count, the third column shows last week's July 14th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 22nd of July, 2016...

July 21st 2017 rig count summary

clearly, there's a lot of minus signs on this week's table, something we haven't seen much of this past year...the two most active states, Texas and Oklahoma, were down 3 rigs each, with decreases in the Barnett near Dallas-Ft Worth and the Eagle Ford of south Texas contributing to the Texas drop, while Oklahoma dropped rigs in the Arkoma Woodford and the Mississippian...meanwhile, Louisiana added 4 rigs, with additions in the Gulf of Mexico and the Haynesville...once again, the number of drilling rigs working in the Utica and the Marcellus were unchanged, and hence there was also no change in drilling activity in Ohio, Pennsylvania, or West Virginia...natural gas rigs ended up down one despite the addition of two in the Haynesville, however, as one natural gas rig was pulled from the Arkoma Woodford and two were removed from other basins not individually itemized by Baker Hughes...of the states not included on the above list of major producers, Alabama got rid of one rig and Illinois got rid of two; that left Alabama with two rigs, still up from just 1 rig throughout last July, and left Illinois with one rig, down from the 3 that were running in the state last July 22nd...meanwhile, Kentucky saw two rigs start up in the the state's first drilling since June 2nd, also an increase from a year ago, when there were no rigs active in the state...

DUC well report for June

this past week also saw the release of the EIA's Drilling Productivity Report for July, which includes the EIA's June data for drilled but uncompleted oil and gas wells in the 7 most productive US shale basins...once again, this report showed a large increase in uncompleted wells nationally, entirely because of dozens of newly drilled but uncompleted wells (DUCs) in the two Texas oil basins, the Permian basin of west Texas and the Eagle Ford in the south.... for all 7 sedimentary basins covered by this report, the total count of DUC wells rose from 5,877 wells in May to 6031 wells in June, the eighth consecutive monthly increase in uncompleted wells, and the highest number of such unfracked wells in the short history of this report....as we know from the weekly rig counts,  horizontal drilling has rapidly expanded over the past year, more than doubling over that period, and as a result a shortage of competent fracking crews has developed, such that existing fracking crews are unable to keep up with the number of newly drilled wells...yet another article this week tells us that skilled worker shortages are hampering fracking operations, noting 200 frack crew job openings listed for North Dakota alone...over the 2 and a half year oil field slump and associated layoffs that began in early 2015, most frackers had gone nearly two years with just skeleton fracking crews still working in most basins around of the country, and as a result many of those who had had been working in the oil fields before the bust had since found work elsewhere, and have no interest in returning to boom/bust oil work...furthermore, fracking crew retirements were up 33 percent last year, & intelligent young people dont want to work in an oilfield any more than they want any kind of dirty, manual labor job... fracking has also become more complex and technically demanding over that period, with 50 stage fracks explosively driving several hundred pounds of proppant per foot of lateral not uncommon, so putting together a fracking crew capable of correctly & accurately executing the current fracking techniques has become that much more difficult...

a total of 1,026 new wells were drilled in the 7 basins covered by this report during June, but only 872 drilled wells were completed, thus accounting for the 154 DUC well increase for the month....as has been the case all year, the June DUC increases were oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 130, from 2,114 DUC wells in May to 2,244 DUCs in June, as 475 new wells were drilled into the Permian but only 345 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 42, from 1,364 DUC wells in May to 1,406 DUCs in June, as 187 wells were drilled in the Eagle Ford in June but only 145 drilled wells were completed....in addition, DUC wells in the Bakken of North Dakota increased by 8 to 819, as 92 wells were drilled but just 84 Bakken wells were fracked, while the Niobrara chalk of the Rockies front range saw their uncompleted well inventory increase by 2 wells to 663, as 142 wells were drilled into the Niobrara, while 140 wells were fracked during the same period....on the other hand, the Marcellus DUC count fell by 20 wells, from 663 DUCs in May to 643 DUCs in June, as 60 Marcellus wells were drilled while 80 were fracked...likewise, Ohio's Utica shale showed a decrease of 11 uncompleted wells and thus had only 62 uncompleted wells remaining at the end of June, as 23 new wells were drilled into the Utica during the month while 34 Utica wells were completed...meanwhile, the Haynesville shale of Louisiana was the only natural gas basin to see a DUC well decrease, as their uncompleted well inventory rose by 3 wells to 194, as 47 wells were drilled into the Haynesville, while 44 wells were fracked in the same region...for the month, DUCs in the 4 oil basins tracked by in this report (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 182 wells to 5,132 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by 28 wells to 899 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

 

note: there's more here....