US oil prices rose for the third time in four weeks on an across the board draw from US oil and fuel supplies, and on stronger than expected data from China and the US…after ticking up 0.2% to $78.26 a barrel last week after the Saudis increased prices to Europe and Asia and US oil supplies unexpectedly fell, the contract price for the benchmark US light sweet crude for June delivery moved lower in overnight trading Sunday in a follow through of selling on Friday of last week, on expectations that the Fed would keep interest rates higher for longer, but advanced Monday on bullish expectations for holiday travel in the US after AAA projected a record number people would travel by car over the Memorial Day weekend, and settled 86 cents higher at $79.12 a barrel on signs of improving demand in both the U.S. and China, the top two oil consumers…oil prices were little changed in overseas trading early on Tuesday, as OPEC maintained its global oil demand forecasts and traders waited on US inflation data, then turned lower after US producer prices increased more than expected in April, indicating that inflation remained elevated, and settled down $1.10 at $78.02 a barrel, after that inflation data stoked concerns that interest rates would stay high, even as risks to supply from Mideast tensions and wildfires in Canada put a floor under prices…oil prices slipped further in overseas markets early on Wednesday after the International Energy Agency (IEA) forecast that demand in developed countries would slow this year as inflation remained persistent, but rebounded from an interday 11 week low as the market balanced somewhat bullish US economic and storage data against the 2024 forecast for weaker global oil demand growth from the EIA, then surged on apprehensions regarding potential disruptions to oil production regions stemming from wildfires ravaging parts of Canada, before settling 61 cents higher at $78.83 a barrel on a bigger-than-expected crude drawdown and on lukewarm consumer inflation data that fueled hope for a cut in interest rates later this year…oil prices rose early on Thursday in light of that slower than expected inflation report, which increased expectations that the Federal Reserve might start cutting interest rates in the fall, and settled 60 cents higher at $79.23 a barrel, extending gains on easing inflationary pressure and on the bullish inventory statistics released the prior day by the EIA…oil prices moved higher early Friday after traders got a strong reminder that geopolitical risks remained when Ukrainian drones set Russia’s Tuapse refinery on fire, and settled 83 cents higher at $80.06 a barrel, ending above $80 for first time this month and 2.3% higher than they were a week ago, folowing a week when economic indicators from the world’s top two oil consumers – China and the U.S. – bolstered hopes for higher demand…
natural gas prices also finished higher, in their case for the fourth time in five weeks, and ended at a four month high, as the return of Freeport LNG added 2% to daily demand and inventories increased less than had been forecast….after rising 5.1% to $2.252 per mmBTU last week on lower production and on an inventory increase that was less than expected, the contract price for natural gas for June delivery opened two cents higher and rallied confidently throughout the day on Monday, as weather forecasts turned supportive and production remained subdued, and settled 12.9 cents or 6% higher at a 15-week high of $2.381 per mmBTU as gas flows to LNG export plants increased with the return of Freeport LNG’s plant in Texas…however, natural gas prices started 6 cents lower on Tuesday, hit by updated fundamentals, maintenance limiting exports, and updated weather forecasts, and settled with a 3.7 cent loss at $2.344 per mmBTU as traders took profits and ongoing maintenance projects called into question the timing of a full rebound in export demand…the June contract opened four cents higher on Wednesday, supported by updated forecasts for cooling demand in the South and continued production cuts, and settled 7.2 cents higher at $2.416 per mmBTU as the promise of summer cooling demand atop tighter underlying fundamentals continued to stir bullish optimism…with support from subdued production and expectations for increased LNG exports, natural gas prices started Thursday 5 cents higher, then jumped to a near four-month intraday high of $2.575 following a bullish storage report, and settled 7.9 cents higher at $2.495 per mmBTU, as the reported increase was a miss against expectations and against historical averages…natural gas prices surged Friday, extending a rally that brought June the contract to near a four-month high, as fundamentals suggested a balancing market, and settled 13.1 cents higher at a 4 month high of 2.626 per mmBTU, supported by tight inventory balances ahead of peak summer months, thus ending 16.6% higher on the week..
The EIA’s natural gas storage report for the week ending May 10th indicated that the amount of working natural gas held in underground storage rose by 70 billion cubic feet to 2,633 billion cubic feet by the end of the week, which left our natural gas supplies 421 billion cubic feet, or 19.0% above the 2,212 billion cubic feet that were in storage on May 10th of last year, and 620 billion cubic feet, or 30.8% more than the five-year average of 2,013 billion cubic feet of natural gas that had typically been in working storage as of the 10th of May over the most recent five years…the 70 billion cubic foot addition to US natural gas working storage for the cited week was less than the 76 billion cubic foot addition to storage that traders were expecting just ahead of the report, and less than the 93 billion cubic feet that were added to natural gas storage during the corresponding 2nd week of May 2023, and also less than the average 90 billion cubic foot injection into natural gas storage that has been typical for the same spring week over the past 5 years…
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending May 10th indicated that after a modest decrease in our oil exports offset an increase in our refinery throughput, lower imports meant we again needed to pull oil out of our stored commercial crude supplies for the fifth time in sixteen weeks and for the 11th time in the past 30 weeks, as demand for oil that the EIA could not account for was again a minor factor….Our imports of crude oil fell by an average of 226,000 barrels per day to an average of 6,744,000 barrels per day, after rising by an average of 198,000 barrels per day over the prior week, while our exports of crude oil fell by 333,000 barrels per day to 4,135,000 barrels per day, which when used to offset our imports, meant that the net of our trade in oil worked out to a net import average of 2,609,000 barrels of oil per day during the week ending May 10th, 107,000 more barrels per day than the net of our imports minus our exports during the prior week. At the same time, transfers to our oil supply from Alaskan gas liquids, from natural gasoline, from condensate, and from unfinished oils averaged 473,000 barrels per day, while during the same week, production of crude from US wells was unchanged at 13,100,000 barrels per day. 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 rounded total of 16,182,000 barrels per day during the May 10th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 16,255,000 barrels of crude per day during the week ending May 10th, an average of 307,000 more barrels per day than the amount of oil that our refineries reported they were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 274,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US… So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending May 10th appear to indicate that our total working supply of oil from storage, from net imports, from transfers, and from oilfield production was 201 barrels per day more than what our oil refineries reported they used during the week…To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a [-201,000 ] barrel per day figure onto 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 indicating there must have been an error or omission of that magnitude in the week’s oil supply & demand figures that we have just transcribed…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 (as is obvious to anyone who watches oil prices), 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….and there is also an aging twitter thread from an EIA administrator addressing these ongoing weekly errors, and what they had hoped to do about it)
This week’s average 274,000 barrel per day decrease in our overall crude oil inventories came as an average of 358,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 85,000 barrels per day were being added to our Strategic Petroleum Reserve, the twenty-third SPR increase in thirty weeks, following nearly continuous withdrawals from the SPR over the prior 39 months… Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to 6,503,000 barrels per day last week, which was 2.1% more than the 6,370,000 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 13,100,000 barrels per day because the EIA’s rounded estimate of the output from wells in the lower 48 states was unchanged at 12,700,000 barrels per day, while Alaska’s oil production was 4,000 barrels per day lower at 417,000 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 just matches that of our pre-pandemic production peak, while it’s also 35.1% 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 90.4% of their capacity while processing those 16,255,000 barrels of crude per day during the week ending May 10th, up from their 88.5% utilization rate of a week earlier, and finally a near normal operating rate for early May, as US refineries have lagged normal operating rates since arctic cold penetrated to the Gulf Coast in mid January and froze off some operations… the 16,255,000 barrels of oil per day that were refined this week were 1.7% more than the 15,990,000 barrels of crude that were being processed daily during week ending May 12th of 2023, but 2.5% less than the 16,676,000 barrels that were being refined during the prepandemic week ending May 10th, 2019, when our refinery utilization rate was also at a near normal 90.5%...
With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 203,000 barrels per day to 9,698,000 barrels per day during the week ending May 10th, after our refineries’ gasoline output had increased by 99,000 barrels per day during the prior week. This week’s gasoline production was 2.3% more than the 9,482,000 barrels of gasoline that were being produced daily over week ending May 12th of last year, but 2.2% less than the gasoline production of 9,912,000 barrels per day during the prepandemic week ending May 10th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 22,000 barrels per day to 4,804,000 barrels per day, after our distillates output had increased by 275,000 barrels per day during the prior week. After nine production increases in the past thirteen weeks, our distillates output was still 1.1% less than the 4,856,000 barrels of distillates that were being produced daily during the week ending May 12th of 2023, and 8.7% less than the 5,264,000 barrels of distillates that were being produced daily during the week ending May 10th, 2019…
Even with this week’s increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the eleventh time in fifteen weeks, decreasing by 235,000 barrels to 227,767,000 barrels during the week ending May 10th, after our gasoline inventories had increased by 915,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 78,000 barrels per day to 8,875,000 barrels per day, and because our exports of gasoline rose by 90,000 barrels per day to 897,000 barrels per day while our imports of gasoline rose by 7,000 barrels per day to 726,000 barrels per day.…Even after thirty-five gasoline inventory withdrawals over the past fifty-six weeks, our gasoline supplies were still 3.8% above last May 12th’s gasoline inventories of 219,711,000 barrels, but were about 1% below the five year average of our gasoline supplies for this time of the year…
Likewise, even with this week’s increase in our distillates production, our supplies of distillate fuels fell for the twelfth time in seventeen weeks, following eight consecutive prior increases, decreasing by 45,000 barrels to 116,365,000 barrels over the week ending May 10th, after our distillates supplies had increased by 560,000 barrels during the prior week. Our distillates supplies ended lower this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 342,000 barrels per day to 3,831,000 barrels per day, while our exports of distillates fell by 257,000 barrels per day to 1,069,000 barrels per day, and while our imports of distillates rose by 22,000 barrels per day to 89,000 barrels per day.…Even with 31 inventory decreases over the past fifty-five weeks, our distillates supplies at the end of the week were 9.5% above the 106,233,000 barrels of distillates that we had in storage on May 12th of 2023, but were still about 7% below the five year average of our distillates inventories for this time of the year…
Finally, after the increase in our refinery throughput, our commercial supplies of crude oil in storage fell for the 9th time in twenty-six weeks and for the 30th time in the past year, decreasing by 2,508,000 barrels over the week, from 459,528,000 barrels on May 3rd to 457,020,000 barrels on May 10th, after our commercial crude supplies had decreased by 1.362,000 barrels over the prior week… With this week’s decrease, our commercial crude oil inventories slipped to about 4% below the most recent five-year average of commercial oil supplies for this time of year, but they were still about 29% above the average of our available crude oil stocks as of the second weekend of May 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 due to higher exports relating to the onset of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this May 10th were 2.3% less than the 467,624,000 barrels of oil left in commercial storage on May 12th of 2023, but were 8.6% more than the 420,820,000 barrels of oil that we still had in storage on May 13th of 2022, while still 6.0% less than the 486,011,000 barrels of oil we had in commercial storage on May 14th of 2021, after refinery damage from winter storm Uri left even more crude oil remaining after 2020’s pandemic precautions had left a glut of oil unused…
This Week’s Rig Count
In lieu of a detailed report on the rig count, we are again just including a screenshot of the rig count summary from Baker Hughes…in the table below, the first column shows the active rig count as of May 17th, the second column shows the change in the number of working rigs between last week’s count (May10th) and this week’s (May 17th) count, the third column shows last Friday’s May 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 period a year ago, which in this week’s case was the 19th of May, 2023…
DUC well report for March
Monday of the past week saw the release of the EIA’s Drilling Productivity Report for May, which included the EIA’s April data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)….that data showed an increase in uncompleted wells nationally for the second time in 14 months and for just the 5th time out of the past 45 months, even as drilling of new wells decreased while completions of drilled wells increased in April, and even as both still remained well below the average pre-pandemic levels….for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 6 wells, rising from a revised 4,504 DUC wells in March to 4,510 DUC wells in April, which was also 16.3% fewer DUCs than the 5,323 wells that had been drilled but remained uncompleted as of the end of April of a year ago…this month’s DUC increase occurred as 864 wells were drilled in the seven regions that this report covers (representing 87% of all U.S. onshore drilling operations) during April, down by 3 from the 867 wells that were drilled in March, while 858 wells were completed and brought into production by fracking them, up from the 857 well completions seen in March, but down from the 1,050 completions seen during April of last year….at the April completion rate, the 4,510 drilled but uncompleted wells remaining at the end of the month represents a 5.3 month backlog of wells that have been drilled but are not yet fracked, same as the DUC well backlog of a month ago, but up from the eight year low of 4.6 months of January 2023, on a completion rate that is still more than 20% below 2019’s pre-pandemic average…
the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, was up by 7 from a month earlier, rising from 813 DUC wells at the end of March to 820 DUC wells at the end of April, as 83 new wells were drilled into the Marcellus and Utica shales during the month, while 76 of the already drilled wells in the region were fracked…
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