natural gas prices hit 4 year high, pre-winter supplies at a 15 year low; oil supplies rise most in 21 months; OPEC report, DUC wells, et al

oil prices fell for the 6th week in a row, extending their record losing streak to twelve days before recovering a small fraction of their earlier losses…after falling 4.7% to $60.19 a barrel on the US waiver of Iran sanctions last week, prices of US oil contracts for December delivery opened more than 50 cents higher on Monday morning and rose to as high as $61.28 a barrel after Saudi Arabia announced a December production cut of a million barrels a day, but then gave up those early gains after Trump warned he hopes OPEC doesn’t cut crude production because oil prices should be much lower, with prices then falling below $60 a barrel for the first time since February before steadying to close at $59.93 a barrel, a loss of 23 cents on the day and down a record 11 sessions in a row…oil prices then tumbled to one year lows in high trading volume on Tuesday as oil traders capitulated and sold their positions en masse, with oil prices ending down $4.24 or 7% at $55.69 a barrel in the largest one-day percentage decline for the contract since September 2015….oil prices finally rebounded on Wednesday, rising as much as 3% as OPEC leaders discussed a supply cut, before settling back to end with a 56 cent increase at $56.25 a barrel, after the API reported the largest increase in US crude supplies since Februaryoil prices managed another increase on Thursday despite a jump in US crude stockpiles and production, closing up 21 cents at $56.46 a barrel…oil prices then staged another 3% rally on Friday morning, rising as high as $57.96 a barrel on a Saudi push for a deep oil output cut, before settling back to close at $56.46 a barrel, unchanged on the day…however, after the big Tuesday selloff, oil prices still ended down 6.2% for the week, and are now down more than 26% from the 4-year high of $76.41 a barrel that they hit on October 3rd, just a little over 6 weeks earlier…

as volatile as oil prices were this week, the swings in the front month contract for natural gas almost defy explanation…natural gas contract prices for December delivery spiked 23.5 cents on a colder European weather model early Monday before pulling back anbd ending the day 6.9 cents higher at $3.788 per mmBTU, then were up limit to $4.101 per mmBTU on Tuesday on bullish weather risks and continued fear about low storage levels, before jumping nearly 20% to $4.929 per mmBTU on an even colder forecast early Wednesday in the largest price move since February 2003 and ending at $4.837 per mmBTU, the highest closing price in more than four years…however, after some warmer weather model guidance on Thursday, natural gas prices gave back all of their Wednesday gains and then some, tumbling nearly $1 to as low as $3.882 per mmBTU before recovering to close at $4.038 per mmBTU….a forecast for a cold early December sent natural gas prices flying again to as high as $4.390 per mmBTU on Friday, before settling at $4.272 per mmBTU at the close, for a net increase of 14.9% on the week…

the natural gas storage report for the week ending November 9th from the EIA showed that natural gas in storage in the US rose by 39 billion cubic feet to 3,247 billion cubic feet during that week, which left our gas supplies 528 billion cubic feet, or 14.0% below the 3,775 billion cubic feet that were in storage after a 13 billion cubic feet withdrawal on November 10th of last year, and 601 billion cubic feet, or 15.6% below the five-year average of 3,848 billion cubic feet of natural gas that are typically in storage on the second weekend of November….this week’s 39 billion cubic feet increase in natural gas supplies was somewhat more than the low- to mid-30s billion cubic feet increase in stocks that was projected by major surveys, and was much above the average of 19 billion cubic feet of natural gas that have been added to storage during the first full week of November in recent years, the 7th average or above average inventory increase over the past nineteen weeks…natural gas storage facilities in the Midwest saw an 11 billion cubic feet increase over the week, which reduced the region’s supply deficit to 9.3% below normal, and natural gas supplies in the East increased by 4 billion cubic feet and their supply deficit fell to 9.2% below normal for this time of year…meanwhile, the South Central region saw a 30 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 22.6% below their five-year average for the second weekend of November…on the other hand, only 1 billion cubic feet were added to supplies in the Pacific region, but their deficit from normal still fell to 24.2%, while 1 billion cubic feet were withdrawn from storage in the Mountain region, where their natural gas supply deficit rose to 17.4% below normal for this time of year…. 

the natural gas in storage as of this reporting week ending November 9th will most certainly be the high for the year, because as most of you know, the past week has seen an outbreak of winter-like cold temperatures across most of the US…this year’s peak at 3,247 billion cubic feet thus compares to the lowest pre-winter peak in the past 5 years of 3611 billion cubic feet on November 7th of 2014, the 10 year low pre-winter peak of 3,488 that was hit on November 14th of 2008, and the early decade low pre-winter peaks of 3,282 billion cubic feet on November 11th of 2005, and the 3,187 billion cubic feet on that were in storage to start the winter on November 7th of 2003….to get an idea of what kind of temperature factors will be influ​​encing next week’s natural gas supply report, we’ll take a quick look at the most recent average temperature summary from the EIA’s natural gas storage dashboard

November 16 2018 daily average temps thru Nov 15th

the above graphic from the EIA’s natural gas storage dashboard gives us both the average daily temperature from November 2nd thru November 15th in each of the five natural gas regions, as well as a color-coded variance from normal for each of those daily temperature averages, with shades of brown indicating the average temperatures in the region were above normal on a given date, while shades of blue indicate average temperatures that were below normal for the date, as indicated in the legend at the bottom….thus this graphic gives us not only the actual average temperature for each region for each day, but also indicates how much that temperature deviated from the norm…we can see that average temperatures began to shift from above normal to below normal on November 7th for the Mountain and Midwest states, and by November 9th that cold weather outbreak had spread to the East Coast and South Central regions, with the latter experiencing an average 20 degree temperature drop in just a matter of days…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, ​referencing the week ending November 9th, indicated a moderate decrease in our crude oil exports while most other crude supply and demand metrics were relatively little changed, and hence there was an even larger addition to our commercial crude supplies ​than the prior week, the 8th increase in a row…our imports of crude oil fell by an average of 87,000 barrels per day to an average of 7,452,000 barrels per day, after rising by an average of 195,000 barrels per day the prior week, while our exports of crude oil fell by an average of 355,000 barrels per day to an average of 2,050,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,402,000 barrels of per day during the week ending November 9th, 268,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,700,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,102,000 barrels per day during this reporting week… 

meanwhile, US oil refineries were using 16,432,000 barrels of crude per day during the week ending November 9th, 24,000 barrels per day more than the amount of oil they used during the prior week, while over the same period a net of 1,271,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 601,000 barrels per day short of what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+601,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…again, with an “unaccounted for crude” figure that large, one or more of this week’s oil metrics must still be off by a statistically significant amount, most likely oil production, since it has historically been the least dependable of the​se reported​ metrics (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….that “unaccounted for crude” figure strongly suggests that US crude oil output has already topped 12 million barrels per day…

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 7,503,000 barrels per day, now 3.1% less than the 7,742,000 barrel per day average that we were importing over the same four-week period last year….the net 1,271,000 barrel per day increase in our total crude inventories included a 1,467,000 barrel per day increase in our commercially available stocks of crude oil, which was partly offset by a 196,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two months ago….this week’s crude oil production was reported up by 100,000 barrels per day to 11,700,000 barrels on a rounded 100,000 barrels per day increase to 11,200,000 barrels per day output from wells in the lower 48 states, while an 11,000 barrel per day increase to 499,000 barrels per day in oil output from Alaska gave us the re-rounded national total of 11,700,000 barrel per day…last year’s US crude oil production for the week ending November 10th was at 9,645,000 barrels per day, so this week’s rounded oil production figure was 21.3% above that of a year ago, and 38.8% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…  

US oil refineries were operating at 90.1% of their capacity in using 16,432,000 barrels of crude per day during the week ending November 9th, up from 90.0% of capacity the prior week, a fairly normal utilization rate for the middle of November….the 16,432,000 barrels per day of oil that were refined this week were 1.2% lower than the 16,639,000 barrels of crude per day that were processed during the week ending November 10th, 2017, when US refineries were operating at 91.0% of capacity…

while the amount of oil being refined was little changed this week, gasoline output from our refineries was quite a bit higher, increasing by 342,000 barrels per day to 10,056,000 barrels per day during the week ending November 9th, after our refineries’ gasoline output had decreased by 650,000 barrels per day during the week ending November 2nd…as a result of that rebound in our gasoline output, our gasoline production during the week was 2.1% higher than the 9,852,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 30,000 barrels per day to 4,993,000 barrels per day, after that output had decreased by 20,000 barrels per day the prior week….however, the week’s distillates production was still 4.5% lower than the 5,231,000 barrels of distillates per day that were being produced during the week ending November 10th 2017…. 

however, even with that big increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 1,411,000 barrels to 226,610,000 barrels by November 9th, the 22nd decrease in the past 38 weeks, after our gasoline supplies had fallen by 8,151,000 barrels during the 4 ​full ​weeks of October….our gasoline supplies fell despite higher production because our imports of gasoline fell by 338,000 barrels per day to a 13 month low of 253,000 barrels per day, while our exports of gasoline rose by 46,000 barrels per day to 740,000 barrels per day, and because the amount of gasoline supplied to US markets rose by 93,000 barrels per day to 9,192,000 barrels per day…but even after falling most of the fall, our gasoline inventories are still at a seasonal high, 7.7% higher than last November 10th’s level of 210,431,000 barrels, and roughly 8% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, with our distillates production little changed, our supplies of distillate fuels fell for the 8th week in a row, decreasing by 3,589,000 barrels to 119,268,000 barrels during the week ending November 9th, after our distillates supplies had fallen by 7,517,000 barrels over the prior two weeks…our distillates supplies fell again because the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 315,000 barrels per day to 4,633,000 barrels per day, even as our exports of distillates fell by 128,000 barrels per day to 1,178,000 barrels per day, and as our imports of distillates rose by 139,000 barrels per day to 305,000 barrels per day….after this week’s decrease, our distillate supplies ended the week 4.4% below the 124,763,000 barrels that we had stored on November 10th, 2017, and were nearly 10% below the 10 year average of distillates stocks for this time of the year…     

finally, with higher oil production and somewhat lower oil exports, our commercial supplies of crude oil increased for the 8th week in a row and for the 24th time in 2018, rising by 10,270,000 barrels during the week, from 431,787,000 barrels on November 2nd to 442,057,000 barrels on November 9th, the largest weekly increase since the week ending February 3rd 2017…that increase means that our crude oil inventories are now roughly 5% above the five-year average of crude oil supplies for this time of year, and roughly 27% above the 10 year average of crude oil stocks for the second weekend in November, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 9th were still 3.7% below the 458,997,000 barrels of oil we had stored on November 10th of 2017, 9.8% below the 490,284,000 barrels of oil that we had in storage on November 11th of 2016, and 2.8% below the 455,074,000 barrels of oil we had in storage on November 13th of 2015…   

OPEC’s Monthly Oil Market Report

next we’ll review OPEC’s November Oil Market Report (covering October OPEC & global oil data), which was released on Tuesday of this past week, and​ which​ is available as a free download, and hence it’s the report we check for monthly global oil supply and demand data…the first table from this monthly report that we’ll look at is from the page numbered 59 of that report (pdf page 69), 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 thus resolve any potential disputes that could arise if each member reported their own figures…

October 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC’s oil output increased by 127,000 barrels per day to 32,900,000 barrels per day in October, from their September production total of 32,773,000 barrels per day….however, that September figure was originally reported as 32,761,000 barrels per day, so OPEC’s September output was therefore revised 12,000 barrels per day higher with this report (for your reference, here is the table of the official September OPEC output figures as reported a month ago, before this month’s revisions)…as you can tell from the far right column above, increases of 142,000 barrels per day in the oil output from the United Arab Emirates, 127,000 barrels per day in the oil output from Saudi Arabia and 60,000 barrels per day in the oil output from Libya were the major reasons for this month’s increase, more than offsetting the decrease of 156,000 barrels per day in Iranian output…however, excluding new member Congo, the September output of 32,576,000 barrels per day from the other OPEC members was still 164,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly due to the big drop in Venezuelan output, another OPEC country that has also been impacted by US sanctions…  

the next graphic we’ll look at shows us both OPEC and global monthly oil production on the same graph​​, over the period from November 2016 to October 2018, and it’s taken from the page numbered 60 (pdf page 70) of the November OPEC Monthly Oil Market Report…on this graph, the cerulean 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 millions of barrels per day of global output shown on the right scale…      

October 2018 OPEC report global oil supply

OPEC’s preliminary estimate indicates that total global oil production rose by 440,000 barrels per day to a record high 99.76 million barrels per day in October, after September’s total global output figure was revised up by 3​2​0,000 barrels per day from the 90.0 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by ​a rounded ​310,000 barrels per day in October after that revision, with increased US and Canadian output the major contributors to the non-OPEC increase….global oil output during October was also 3.05 million barrels per day, or 3.2% higher than the 96.71 million barrels of oil per day that were reportedly being produced globally in October a year ago (see the November 2017 OPEC report online (pdf) for the originally reported year ago details)…with the October increase in OPEC’s output following the upward revision to their September output, their October oil production of 32,900,000 barrels per day represented 33.0% of what was produced globally during the month, same as their global share in September, which had originally been reported as a 33.1% share….OPEC’s October 2017 production was reported at 32,589,000 barrels per day, which means that the 14 OPEC members who were part of OPEC last year, excluding new member Congo, are producing 13,000 fewer barrels per day of oil than they were producing a year ago, during the tenth month that their production quotas were in effect, with a 692,000 barrel per day decrease in output from Venezuela and a 527,000 barrel per day decrease in output from Iran from that time more than offsetting the production increases from the Saudis, the Emirates, Iraq and Libya…  

despite the 440,000 barrel per day increase in global oil output in October, increasing demand meant that we again saw a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…  

October 2018 OPEC report global oil demand

the table above comes from page 32 of the November OPEC Monthly Oil Market Report (pdf page 42), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2018 over the rest of the table…on the “Total world” line ​in the fifth column, we’ve circled in blue the figure that’s relevant for October, which is their revised estimate of global oil demand during the fourth quarter of 2018…       

OPEC’s estimate is that during the 4th quarter of this year, all oil consuming regions of the globe will be using 99.98 million barrels of oil per day, which was a downward revision by a 0.10 million barrels of oil per day from their prior oil consumption estimate for the quarter (see demand revisions circled in green above)….meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, the world’s oil producers were producing 99.76 million barrels per day during October, which means that there was a still a shortfall of around 220,000 barrels per day in global oil production vis-a vis the demand estimated for the month…    

meanwhile, a month ago we estimated a global shortfall of around 350,000 barrels per day in global oil production during September, based on figures published at that time…however, as we saw earlier, September’s global output figure was revised up by 3​20,000 barrels per day from those figures…in addition, as we’ve circled in the green ellipse above, oil demand for the 3rd quarter was revised 3,000 barrels per day lower, so with those two revisions September’s global output would have thus​ virtually matched demand​…that 30,000 barrels per day revision to third quarter demand also means that the global shortfall of 580,000 barrels per day that we had figured for August last month would thus be revised to 550,000 barrels per day, and that the 960,000 barrels per day shortfall we had figured for July would thus be reduced to 930,000 barrels per day….

in addition, last month we estimated there was a shortfall of around 50,000 barrels per day in global oil production vis-a vis the demand in June, a shortfall for May of 490,000 barrels per day, and a shortfall in April of 300,000 barrels per day… but as we see in the green ellipse above, oil demand for the 2nd quarter has been revised 120,000 barrels per day higher, so our revised global oil shortfalls for the 2nd quarter months will thus now be 170,000 barrels per day for June, 610,000 barrels per day for May, and 400,000 barrels per day for April…

since there was no revision to demand in the first quarter, our surplus figures of 20,000 barrels per day for March, 200,000 barrels per day for February, and 40,000 barrels per day for January remain as we figured them a month ago…so by totaling up these 10 monthly revised estimates of surplus or shortfall, we find that for the first ten months of 2018, global oil demand exceeded production by roughly 81,250,000 barrels, actually a comparatively small net oil shortfall that is the equivalent of roughly 19.5 hours of global oil production at the October production rate

This Week’s Rig Count

US drilling rig activity increased for the sixth time in 8 weeks during the week ending November 16th, albeit not by much, but enough to push the rig count to a new 44 month high….Baker Hughes reported that the total count of rotary rigs running in the US increased by 1 rig to 1082 rigs over the week ending on Friday, which was also 167 more rigs than the 915 rigs that were in use as of the November 17th report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…  

the count of rigs drilling for oil increased by 2 rigs to 888 rigs this week, which was 150 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the number of drilling rigs targeting natural gas formations decreased by 1 to 194 rigs, which was still 17 more than the 177 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 1 rig to 22 rigs this week, which was also 1 more rig than the 21 Gulf of Mexico rigs active a year ago…with no other offshore US drilling being done elsewhere either this week or a year ago, those Gulf of Mexico totals are also equal to the national offshore rig count…. meanwhile, one of the platforms which had been drilling through inland waters in Louisiana was shut down this week, leaving two rigs active on inland waters, ​still ​up from the 1 inland water rig running a year ago

the count of active horizontal drilling rigs increased by 4 rigs to 939 horizontal rigs this week, which was also 163 more horizontal rigs than the 776 horizontal rigs that were in use in the US on November 17th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count decreased by 3 to 71 directional rigs this week, which was also down from the 76 directional rigs that were in use during the same week of last year….meanwhile, the vertical rig count was unchanged at 72 vertical rigs this week, which was still up from the 63 vertical rigs that were operating on November 17th of 2017…  

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 the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of November 16th, the second column shows the change in the number of working rigs between last week’s count (November 9th) and this week’s (November 16th) count, the third column shows last week’s November 9th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 17th of November, 2017…      

November 16 2018 rig count summary

the 3 rig increase in the Eagle Ford of south Texas indicated above included 2 rigs drilling for oil and one targeting natural gas, bringing the Eagle Ford deployment up to 70 oil rigs and 9 targeting gas; the rig that was shut down in the Dallas area Barnett shale had been targeting oil; a natural gas rig still remains active there…while there were 2 natural gas rigs added in the Pennsylvania Marcellus, two natural gas rigs were shut down in the Utica, one each in Pennsylvania and Ohio​; as a result, ​the Utica shale rig count is now at a 2 year low…the natural gas rig count was still down by one, however, because 2 gas rigs were idled in formations not tracked separately by Baker Hughes…note that in addition to the rig changes in the major producing states shown above, Illinois also saw a rig start up this week, the first drilling activity in that state since February 23rd of this year; a year ago, there was also one rig active in Illinois..

DUC well report for October

Wednesday of this past week saw the release of the EIA’s Drilling Productivity Report for November, which includes the EIA’s October data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the 25th consecutive month, this report again showed an increase in uncompleted wells nationally in ​October, as both drilling of new wells and completions of drilled wells increased, but the new drilling increased at a faster pace….like most previous months, this month’s uncompleted well increase was mostly due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with increases of uncompleted wells in the Anadarko basin of Oklahoma and the Eagle Ford of south Texas also contributing…for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 269, from 8,276 wells in September to 8,545 wells in October, again the highest number of such unfracked wells in the history of this report, and up 32.5% from the 6,329 wells that had been drilled but remained uncompleted in October a year ago…that was as 1,577 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, up from the 1,547 drilled in September, while 1,308 wells were completed and brought into production by fracking, a increase of 23 well completions over the 1285 completions seen in September…at the October completion rate, the 8,545 drilled but uncompleted wells left at the end of the month again represent a 6.5 month backlog of wells that have been drilled but not yet fracked…

as has been the case for most of the past two years, the October DUC well increases were predominantly oil wells, with most of those in the Permian basin…the Permian basin saw its total count of uncompleted wells rise by 249, from 3,617 DUC wells in September to 3,866 DUCs in October, as 684 new wells were drilled into the Permian​,​ but only 435 wells in the region were fracked…at the same time, DUC wells in the Anadarko basin region in & around Oklahoma rose by 41, from 1,043 DUC wells in September to 1,084 DUCs in October, as 206 wells were drilled in the Anadarko basin during October, while 165 Anadarko basin wells were completed…over the same period, the number of DUC wells in the Eagle Ford of south Texas increased by 25 to 1,546, as 210 wells were drilled into the Eagle Ford while 185 Eagle Ford wells were fracked….in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 7 wells to 203, as 60 wells were drilled into the Haynesville during October, while 53 Haynesville wells were fracked during the same period…

on the other hand, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 19 wells, from 642 DUCs in September to 623 DUCs in October, as 119 wells were drilled into the Marcellus and Utica shales, while 138 of the already drilled wells in the region were fracked…in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range decreased by 14 wells to 401, as 178 Niobrara wells were drilled while 192 Niobrara wells were being fracked…lastly, DUC wells in the Bakken of North Dakota fell by 20, from 817 DUC wells in September to 797 DUCs in October, as 120 wells were drilled into the Bakken in October, while 140 of the drilled wells in that basin were completed….thus, for the month of October, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 281 wells to 7719 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 12 wells to 826 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas… 

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October’s consumer prices, retail sales, industrial production; September’s business inventories..

Major reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index and the October Import-Export Price Index from the Bureau of Labor Statistics, and the October report on Industrial Production and Capacity Utilization from the Fed…in addition, the BLS also released the Regional and State Employment and Unemployment for October on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released two weeks ago by region and by state…

This week also saw the release of three regional Fed manufacturing surveys for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +21.1 in October to +23.3 in November, suggesting stronger growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions moved lower, from a reading of +22.2 in October to +12.9 in November, suggesting a somewhat slower expansion of that the region’s manufacturing, while the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +15 in November, up from +8 in October and +13 in September, suggesting an ongoing expansion in that region’s manufacturing for the twenty-fourth month in a row…

October CPI up 0.3% on Higher Fuel, Electricity, Used Car Costs

The consumer price index increased by 0.3% in October, as higher prices for gasoline, electricity, and used vehicles were only partially offset by lower food prices…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.3% in October after it had risen 0.1% in September, 0.2% in August, 0.2% in July, 0.1% in June, 0.2% in May, 0.2% in April but after falling 0.1% in March after it had risen by 0.2% in February, 0.5% in January, 0.1% in December, 0.4% in November, and by 0.1% last  October…the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 252.439 in September to 252.885 in October, which left it statistically 2.522% higher than the 246.663 index reading in October of last year, which is reported as a 2.5% increase….with higher prices for energy driving the CPI increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core price index rising from 258.429 to 259.063, which left the core index 2.139% ahead of its year ago reading of 253.638, which is reported as a 2.1% year over year increase, down from the 2.2% annual increase reported a month ago..

The volatile seasonally adjusted energy price index rose by 2.4% in October, after falling by 0.5% in September, rising by 1.9% in August, falling by 0.3% in July and by 0.3% in June, rising by 0.9% in May and by 1.4% in April, falling by 2.8% in March, rising by 0.1% in February and by 3.0% in January, and hence is now 8.9% higher than in October a year ago…prices for energy commodities were 2.9% higher in October, while the index for energy services rose by 1.7%, after falling by 0.8% in September…the energy commodity index was higher due to a 3.0% increase in price of gasoline, the largest component, and a 3.7% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.8% lower…within energy services, the index for utility gas service fell by 0.6% after falling by 1.7% in September and is now 2.1% lower than it was a year ago, while the electricity price index was up 2.3%, after it was down 0.5% in September….energy commodities are now 16.3% higher than their year ago levels, with gasoline prices averaging 16.1% higher than they were a year ago, while the energy services price index is now 0.1% higher than last October, as electricity prices have now increased by 0.7% over that period…

The seasonally adjusted food price index was 0.1% lower in October, after being unchanged in September, rising 0.1% in August, 0.1% in July, 0.2% in June, being unchanged in May, rising 0.3% in April, 0.1% in March, being unchanged in February, rising 0.2% in January, 0.2% in December, being unchanged in October and November, and rising 0.1% last September, as the index for food purchased for use at home fell 0.2% in October, while prices for food bought to eat away from home was 0.1% higher, as prices at fast food outlets fell 0.1%, prices at full service restaurants rose 0.2%, and food prices at employee sites and schools rose 1.0%…

In the food at home categories, the price index for cereals and bakery products was 0.6 lower even though bread prices rose 0.4%, because prices for flour and prepared flour mixes fell 2.7% and the index for rice, pasta, and cornmeal prices fell 2.8%…meanwhile, the price index for the meats, poultry, fish, and eggs group was unchanged, as the fish and seafood price index rose 1.4% while prices for beef roasts fell 3.8% and ham prices were 1.8% lower….at the same time, the index for dairy products was 0.4% lower, mostly on a 1.1% decrease in the index for cheese and related products…in addition, the fruits and vegetables index was 0.7% lower on a 1.8% decrease in the price index for fresh fruits and a 1.0% decrease in the price index for canned fruits and vegetables….on the other hand, the beverages index was 0.2% higher, as frozen noncarbonated juices and drink prices were priced 1.1% higher and instant coffee prices rose 1.5%…lastly, the index for the ‘other foods at home’ category was unchanged, as the index for sugar and sweets fell 0.7% while prices for soups rose 1.4%….the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2 for this release, which gives us a line item breakdown for prices of more than 200 CPI items overall…since last October, none of the ‘food at home’ line items have seen prices change by more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in October after rising by 0.1% in September, by 0.1% in August, 0.2% in July, 0.2% in June, 0.2% in May, 0.1% in April, 0.1% in March, 0.2% in February, 0.3% in January, 0.3% in December, 0.1% in November, 0.2% in October, 0.1% in September, 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was 0.3% higher, while the more heavily weighted composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust October retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.4%, as the index for appliances rose 1.6% and the index for window and floor coverings was 2.2% higher…at the same time, the apparel price index was 0.1% higher, as the index for men’s suits, sport coats, and outerwear rose 3.9% and the index for girl’s apparel was 1.1% higher, while prices for women’s outerwear fell 6.4%…in addition, prices for transportation commodities other than fuel were up 0.8%, as prices for used cars and trucks rose 2.6% while new vehicle prices fell 0.2%…on the other hand, prices for medical care commodities were 0.1% lower as prescription drugs prices fell 0.6%, while the recreational commodities index fell 0.5% on 1.2% lower prices for televisions and 1.7% lower prices for sports vehicles including bicycles…in addition, the education and communication commodities index was 1.5% lower on a 1.6% decrease in the index for personal computers and peripheral equipment and a 2.5% drop in the index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ fell 0.3% on a 5.6% decrease in the price index for miscellaneous personal goods…

Within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.3% increase in homeowner’s equivalent rent, while prices for lodging away from home at hotels and motels fell 2.4%, and the sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average unchanged….the price index for medical care services was also up by 0.2%, as dental services rose 0.3%, nursing homes and adult day rose 0.5%, and health insurance rose 1.1%…meanwhile, the transportation services index was up by 0.1% as car and truck rentals rose 3.3% while intercity bus fares fell 2.0%…at the same time, the recreation services index was unchanged as video discs and other media services rose 5.5% while photo processing fell 1.4%….in addition, the index for education and communication services was also unchanged as the price index for college tuition and fees rose 0.6% while prices for land-line telephone services fell 1.1%…lastly, the index for other personal services was up 0.5% as haircuts rose 0.6% and the index for tax return preparation and other accounting fees rose 0.7%…among core line items, prices for televisions, which are now 17.8% cheaper than a year ago, the price index for audio equipment, which has fallen 11.9% over the past year, the price index for toys, which is down by 10.9% since last October, and the price index for miscellaneous personal goods, which has now decreased 10.0% year over year, have all seen prices fall by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude over that span…

Retail Sales Rise 0.8% in October after Prior Months Sales Revised Lower

Seasonally adjusted retail sales increased in October after retail sales for August and September were revised lower…the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $511.5 billion during the month, which was 0.8 percent (±0.5%) higher than September’s revised sales of $507.6 billion and 4.6 percent (±0.5%) above the adjusted sales in October of last year…September’s seasonally adjusted sales were revised from the $509.0 billion reported last month to $507.6 billion, while August’s sales were revised from $508.5 billion to $507.87 billion, and hence the August to September percent change was revised from +0.1% (±0.5 percent)* to -0.1% (±0.2 percent)*….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 4.7%, from $482,985 million in September to $505,604 million in October, while they were up 5.9% from the $477,592 million of sales in October a year ago…the total $2.03 billion downward revision to August and September’s retail sales should reduce the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.15 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the October Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each kind of business from the September revised figure to this month’s October “advance” report in the first sub-column, and then the year over year percentage sales change since last October in the 2nd column…the second double column pair below gives us the revision of the September advance estimates (now called “preliminary”) as of this report, with the new August to September percentage change under “Aug 2018 r” (revised) and the September 2017 to September 2018 percentage change as revised in the last column shown…for your reference, the table of last month’s advance estimate of September sales, before this month’s revisions, is here.…

October 2018 retail sales table

To compute October’s real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes from the October consumer price index, which we reviewed above…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on this table, we can see that October retail sales excluding the 3.5% price-related increase in sales at gas station were only up by 0.5%…since the CPI report showed that the composite price index for all goods less food and energy goods was up 0.2% in October, we can thus approximate that real retail sales excluding food and energy will on average be 0.2% lower than the core retail sales shown above, or show an increase of roughly 0.3%…however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 1.1%, the price index for for transportation commodities other than fuel were up 0.8%, which would mean that real unit sales at auto & parts dealers was actually only the order of 0.3% higher… similarly, while sales at clothing stores were 0.5% higher in October, the apparel price index was 0.1% higher, which means that real sales of clothing rose around 0.4%.…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.5%, the price index for recreational commodities fell 0.5%, so real sales of recreational goods were up on the order of 1.0%…

In addition to figuring those core retail sales, we should adjust food and energy retail sales for price changes separately…the CPI report showed that the food price index was 0.1% lower in October, with the index for food purchased for use at home 0.2% lower in October, while prices for food bought to eat away from home were 0.1% higher… hence, with nominal sales at food and beverage stores 0.3% higher, real sales of food and beverages would be roughly 0.5% higher in light of the 0.2% lower prices…on the other hand, the 0.2% decrease in nominal sales at bars and restaurants, once adjusted for 0.1% higher prices, suggests that real sales at bars and restaurants fell 0.3%…meanwhile, while sales at gas stations were up 3.5%, there was a 3.0% increase in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline… averaging real sales computed thusly together, we’d estimate that the income and outlays report for August will show that real personal consumption of goods rose around 0.3% in October, after rising by a revised 0.2% in September…that October increase will account for almost 8% of 4th quarter GDP…

Industrial Production Up 0.1% in October, after Prior Months Revised much higher

The Fed’s G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.1% in October after rising by a revised 0.2% in September and by a revised 0.8% in August, as “hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month.“….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.1 in October from 109.0 in September, which was revised from the 108.5 index level reported last month…at the same time, the August index was revised from 108.2 to 108.8, primarily as a result of a large upward revision to mining output, and the July index was revised from 107.8 to 107.9….as a result of those revisions, industrial production is now 4.1% higher than a year ago, while third quarter output is now reported to have increased at an annual rate of 4.7 percent, appreciably above the 3.3% annualized increase reported initially….

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3%, from 105.1 in September to 105.4 in October, after September’s manufacturing index was revised up from 104.8 to 105.1, August’s index was revised up from 104.6 to 104.8, and July’s index was revised up from 104.3 to 104.4….on the other hand, the mining index, which includes oil and gas well drilling, fell by 0.3%, from 126.7 in September to 126.3 in October, after the September mining index was revised up from 124.8, and the August index was revised from 124.3 to 126.9, leaving the mining index 13.1% higher than it was a year ago….meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% in October, from an unrevised 105.2 to 104.7, after August utility index was revised up from 105.2 to 105.4, leaving the utility index 1.7% higher than it was a year earlier..

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 78.4% in October from 78.5% in September, which was revised from the 78.1% utilization reported in last month’s report …capacity utilization of NAICS durable goods production facilities rose from 76.4% in September to 76.6% in October, after September’s figure was revised up from 76.3%, while capacity utilization for non-durables producers rose from 77.2% in September to 77.3% in October, after September’s nondurables utilization was revised up from 77.0%…capacity utilization for the mining sector fell to 92.7% in October from 93.5% in September, which was originally reported as 92.2%, while utilities were operating at 77.3% of capacity during October, down from their 77.8% of capacity during September, which was revised from the previously reported 77.7%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories…. 

Business Sales Up 0.4% in September, Business Inventories Up 0.3%

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,468.0 billion in September, up 0.4 percent (±0.2 percent) from August’s revised sales, and up 6.6 percent (±1.3 percent) from September sales of a year earlier…note that total August sales were concurrently revised up from the originally reported $1,461.9 billion to $1,462.0 billion….manufacturer’s sales were up 0.9% to $509,779 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, rose 0.2% to $447,088 million, while wholesale sales rose 0.2% to $511,169 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,888.7 billion at the end of September, up 0.3% (±0.1%) from August, and 4.4  percent (±1.3 percent) higher than in September a year earlier…the value of end of August inventories were revised from the $1,960.8 billion reported last month to $1,961.0 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $680,400 million, up 0.5% from August, inventories of retailers were valued at $642,496 million, 0.1% more than in August, while inventories of wholesalers were estimated to be valued at $644,556 million at the end of September, 0.4% higher than in August…

We had previously estimated that 3rd quarter GDP was underestimated by around 0.03 percentage points based on what the wholesales report showed, and that 3rd quarter GDP was overestimated by around 0.04 percentage points based on what the factory inventories report showedthe BEA’s Key source data and assumptions (xls) that accompanied the release of the advance estimate of 3rd quarter GDP indicates that they had estimated that the value of retail inventories would be unchanged in September before adjustment with the PPI, so the $0.423 billion increase that this report shows means that they underestimated the annualized 3rd quarter inventory component at an annual rate of around $1.7 billion….that would imply that the contribution of the retail inventory component of 3rd quarter GDP was underestimated by around 0.03 percentage points, so after netting out the 3 inventory changes, this report indicates an upward adjustment of around 0.02 percentage points to 3rd quarter GDP when the 2nd estimate is released at the end of November…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)      

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tables and graphics for November 17

retail sales:

October 2018 retail sales table

rig count summary:

November 16 2018 rig count summary

regional daily temperatures to November 15:

November 16 2018 daily average temps thru Nov 15th

OPEC oil output:

October 2018 OPEC crude output via secondary sources

global oil output:

October 2018 OPEC report global oil supply

global oil demand:

October 2018 OPEC report global oil demand

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oil prices in a record losing streak; natural gas prices jump 13% on forecast cold; rig count at a 44 month high

oil prices were again lower every day this past week, ​& ​hence extend​ed the number of consecutive daily losses to ten, the longest streak of lower oil prices in records going back to November 1984after falling daily last week to a 6.6% loss at $63.14 a barrel, contracts for December delivery of US crude oil initially moved 64 cents higher on Monday as US sanctions on Iran began, but then eased after the U.S. granted waivers to eight countries to continue buying Iranian crude and ended the day with a loss of 4 cents at $63.10 a barrel…oil prices continued falling on Tuesday, tumbling to as low as $61.31 a barrel on the Iran sanctions waivers, and then ending the day down 89 cents at $62.21 a barrel on worries that ​the global ​economic slowdown ​would reduce demand…oil prices then extended their losses ​on Wednesday, ​after the EIA reported a surprisingly large increase in US crude inventories as US oil production spiked to a record high, ​with WTI ​finishing down another 54 cents at $61.67 a barrel…US crude prices dropped for a ninth consecutive session on Thursday, falling into what traders consider a bear market, ending the day down a dollar at $61.67 a barrel, as traders seemed fixated on the new weekly record high in U.S. crude production cited by the EIAU.S. crude prices fell then fell for a record 10th consecutive session on Friday, wiping out the contract’s gains for the entire year and falling below $60 a barrel for the first time since February, before rallying at the close to end the day down 48 cents at $60.19 a barrel…US crude prices thus ended 4.7% lower for the week and are now down 21.2% from the 4-year high of $76.41 a barrel set on October 3rd, at which time contracts for November oil were being quoted..

since we now have a record setting series of decreases in oil prices on our hands, we’ll include a graph of US oil prices over the past five months, so you can see what the past month’s price drop looks like…

November 10 2018 daily oil prices

the above graph is an early Saturday afternoon screenshot of the interactive US 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 a day of oil trading between June 25, 2018 and Friday of this week, wherein the 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 for 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…also visible on this “candlestick” style graph are the faint grey “wicks” above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day…outside of 4 days in February, oil prices are now at the lowest they’ve been all year….note that since this graph includes off market and after hours trading, the prices shown above do not correspond exactly to the NYMEX exchange prices we have been quoting.. 

meanwhile, natural gas prices for December delivery spiked by more than 13% this week to end at their highest level this year, largely on the Climate Prediction Center​’s​ forecasts for colder than normal temperatures over most of the country…the initial jump in prices came on Monday, when December natural gas contracts rose 28.3 cents or 8.6% to $3.567 per mmBTU, when the new 6 to 10 day outlook indicated temperatures much below normal for an area from Maine to the Dakotas and down to Texas…natural gas prices changed little over the next three days, ignoring a larger than expected storage increase, and then jumped another 17.6 cents to $3.719 per mmBTU on Friday, despite indications of a warming trend in the 3 to 4 week outlook

since natural gas prices also made an unusual move to their high for this year, we’ll include a graph of those here too…

November 10 2018 daily natural gas prices

like the oil graph above, this is a screenshot of the live interactive US natural gas price graph at Daily FX, covering natural gas prices daily between April 23rd, 2018 and Friday of this week, wherein the 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…you can clearly see that natural gas prices spiked much higher to begin this week, after first moving out of a narrow range ​generally below $3 per mmBTU ​at the beginning of October…we​ should men​tion that natural gas prices for January ​2018 ​saw a similar price spike last December, but by January the February contract was already trading lower, and the same could happen this year if the warmer than normal El Nino winter develops as forecast​ and fears of a shortage are alleviated​…

the natural gas storage report for the week ending November 2nd from the EIA indicated that natural gas in storage in the US rose by 65 billion cubic feet to 3,208 billion cubic feet during that week, which left our gas supplies 580 billion cubic feet, or 15.3% below the 3,788 billion cubic feet that were in storage on November 3rd of last year, and 621 billion cubic feet, or 16.2% below the five-year average of 3,829 billion cubic feet of natural gas that are typically in storage on the first weekend of November….this week’s 65 billion cubic feet increase in natural gas supplies was more than the 55 billion cubic feet increase in stocks that was called for by a S&P Global Platts survey of analysts , and was also much above the average of 48 billion cubic feet of natural gas that have been added to storage during the bridge week between October and November in recent years, but was still just the 6th average or below average inventory increase over the past eighteen weeks…natural gas storage facilities in the Midwest saw a 24 billion cubic feet increase over the week, which reduced their supply deficit to 10.3% below normal, but natural gas supplies in the East only increased by 5 billion cubic feet and their supply deficit ticked up to 9.6% below normal for this time of year…on the other hand, the South Central region saw a 30 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 23.8% below their five-year average for the first weekend of November…meanwhile, the natural gas pipeline rupture in British Columbia has been repaired, but flows to the US remained limited, so only 2 billion cubic feet were added to supplies in the Mountain region, as their deficit from normal still fell to 16.9%, while the 3 billion cubic feet were added to gas in storage in the Pacific region also lowered their natural gas supply deficit to 24.5% below normal for this time of year….

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration for the week ending November 2nd indicated a large upward adjustment to our crude oil production while most other crude supply and demand metrics were relatively little changed, and hence there was another addition to our commercial crude supplies for ​the seventh week in a row…our imports of crude oil rose by an average of 195,000 barrels per day to an average of 7,539,000 barrels per day, after falling by an average of 334,000 barrels per day the prior week, while our exports of crude oil fell by an average of 80,000 barrels per day to an average of 2,405,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,134,000 barrels of per day during the week ending November 2nd, 275,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly 400,000 barrels per day higher at 11,600,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,734,000 barrels per day during this reporting week… 

meanwhile, US oil refineries were using 16,408,000 barrels of crude per day during the week ending November 2nd, 9,000 barrels per day less than the amount of oil they used during the prior week, while over the same period a net of 793,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 467,000 fewer barrels per day than what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+467,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…again, with an “unaccounted for crude” figure that large, one or more of this week’s oil metrics must still be off by a statistically significant amount (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)…. 

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 7,544,000 barrels per day, still 1.2% less than the 7,639,000 barrel per day average that we were importing over the same four-week period last year….the net 793,000 barrel per day increase in our total crude inventories included a 826,000 barrel per day increase in our commercially available stocks of crude oil, which was slightly offset by a 34,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two months ago….this week’s crude oil production was reported up by 400,000 barrels per day to 11,600,000 barrels per day as a result of a rounded 400,000 barrels per day upward adjustment to 11,100,000 barrels per day output from wells in the lower 48 states in light of last week’s confirmed production figures, while oil output from Alaska remained at 488,000 barrels per day​, giving us a rounded total of 11,600,000 barrel per day​…last year’s US crude oil production for the week ending November 3rd was at 9,620,000 barrels per day, so this week’s rounded oil production figure was 20.6% above that of a year ago, and 37.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 90.0% of their capacity in using 16,408,000 barrels of crude per day during the week ending November 2nd, up from 89.4% of capacity the prior week, but still a normal utilization rate for the end of the fall refinery maintenance season….the 16,408,000 barrels per day of oil that were refined this week were once again at a seasonal high, for the 21st out of the past 23 weeks, but only fractionally higher than the 16,305,000 barrels of crude per day that were processed during the week ending November 3rd, 2017, when US refineries were operating at 89.6% of capacity…

even with  little change​ in ​the amount of oil being refined this week, gasoline output from our refineries was quite a bit lower, decreasing by 650,000 barrels per day to 9,714,000 barrels per day during the week ending November 2nd, after our refineries’ gasoline output had increased by 336,000 barrels per day during the week ending October 26th…as a result of that drop in our gasoline output, our gasoline production during the week was 4.5% lower than the 10,167,000 barrels of gasoline that were being produced daily during the same week last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 20,000 barrels per day to 4,963,000 barrels per day, after that output had increased by 23,000 barrels per day the prior week….and like gasoline, this week’s distillates production was also 4.5% lower than the 5,199,000 barrels of distillates per day that were being produced during the week ending October 27th 2017…. 

however, even with that big drop in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,852,000 barrels to 228,021,000 barrels by November 2nd, the 16th increase in the past 37 weeks, after our gasoline supplies had fallen by 7,987,000 barrels over the prior two weeks….our gasoline supplies rose despite lower production because our imports of gasoline rose by 228,000 barrels per day to 591,000 barrels per day, while our exports of gasoline fell by 318,000 barrels per day to 694,000 barrels per day, and because the amount of gasoline supplied to US markets fell by 163,000 barrels per day to 9,099,000 barrels per day…so even after falling most of the fall, our gasoline inventories are still at a seasonal high, 8.8% higher than last November 3rd’s level of 209,537,000 barrels, and roughly 8.6% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, with our distillates production little changed, our supplies of distillate fuels fell for the 7th week in a row, decreasing by 3,465,000 barrels to 122,857,000 barrels during the week ending November 2nd, after our distillates suppliies had fallen by 4,052,000 barrels the prior week…our distillates supplies fell even as the amount of distillates supplied to US markets, a proxy for our domestic demand, decreased by 108,000 barrels per day to 4,318,000 barrels per day, while our exports of distillates rose by 29,000 barrels per day to 1,306,000 barrels per day, and while our imports of distillates rose by 25,000 barrels per day to 166,000 barrels per day….after this week’s decrease, our distillate supplies ended the week 2.2% below the 125,562,000 barrels that we had stored on November 3rd, 2017, and fell to roughly 8.5% below the 10 year average of distillates stocks for this time of the year…     

finally, with higher oil production and somewhat higher oil imports, our commercial supplies of crude oil increased for the 7th week in a row and for the 23rd time in 2018, rising by 5,783,000 barrels during the week, from 426,004,000 barrels on October 26th to 431,787,000 barrels on November 2nd…that increase means that our crude oil inventories continue to be more than 3% above the five-year average of crude oil supplies for this time of year, and roughly 23.4% above the 10 year average of crude oil stocks for the first weekend in November, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 2nd were still 5.5% below the 457,143,000 barrels of oil we had stored on November 3rd of 2017, 11.0% below the 485,010,000 barrels of oil that we had in storage on November 4th of 2016, and 5.1% below the 454,822,000 barrels of oil we had in storage on November 6th of 2015…       

This Week’s Rig Count

US drilling rig activity increased for the fifth time in 7 weeks during the week ending November 7th, and thereby pushed to a 44 month high….Baker Hughes reported that the total count of rotary rigs running in the US increased by 14 rigs to 1081 rigs over the week ending on Friday, which was also 174 more rigs than the 907 rigs that were in use as of the November 10th report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…  

the count of rigs drilling for oil increased by 12 rig​s​ to 886 rigs this week, which was the largest weekly rise in the oil rig count since May and 148 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the number of drilling rigs targeting natural gas formations increased by 2 to 195 rigs, which was also 26 more than the 169 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 3 rigs to 21 rigs this week, which was also 3 rigs more than the 18 Gulf of Mexico rigs active a year ago​; since there is now no other offshore drilling elsewhere, this week’s Gulf of Mexico totals are equal to the national offshore rig count​….​ ​meanwhile, the count of active horizontal drilling rigs increased by 6 rigs to 935 horizontal rigs this week, which was also 159 more horizontal rigs than the 776 horizontal rigs that were in use in the US on November 10th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count increased by 1 to 74 directional rigs this week, which is the same number of directional rigs that were in use during the same week of last year….in addition, the vertical rig count was up by 7 rigs to 72 vertical rigs this week, which was also up from the 57 vertical rigs that were operating on November 10th of 2017…  

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 the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of November 9th, the second column shows the change in the number of working rigs between last week’s count (November 2nd) and this week’s (November 9th) count, the third column shows last week’s November 2nd active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 10th of November, 2017…     

November 9 2018 rig count summary

you might notice that the basin count does not add up to the 6 horizontal rig count that we​ just​ reported, and you might also notice a nine rig decrease in Oklahoma’s Cana Woodford that appears to coincide with and contradict ​the 4 rig increase in Oklahoma’s count…i don’t have an explanation for that, but i would speculate that it’s possible that a number of the rigs that were previously indicated as targeting the Cana Woodford might have been reclassified to another Anadarko basin which Baker Hughes doesn’t list…the national totals in the basin by basin spreadsheet add up, because they show an increase of 15 oil rigs and 2 natural gas rigs in “other basins” not tracked separately by Baker Hughes, so for some reason around a dozen rigs that might have previously been included in the Cana Woodford were shifted to that catch all “other” category…elsewhere, the Permian basin shows a 5 rig increase because there was a net increase of one rig in the Texas basins (+3 in the Delaware and -2 in the Midland) and an increase of 4​ rigs​ in Delaware on the New Mexico side of the state line…as we noted, the natural gas rig increase can be accounted for by the 2 rig increase in the “other basins” category, as the two natural rigs that were added in Pennsylvania’s Marcellus were offset by natural gas rigs that were shut down in Ohio’s Utica and the Eagle Ford of south Texas, which also dropped two oil rigs and now shows a deployment of 68 oil rigs and 8 natural gas rigs….

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October’s producer price index; September’s job openings & labor turnover and wholesale inventories

Major agency reports that were released the past week included the September Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for September, both from the Bureau of Labor Statistics, and the August report on Wholesale Trade, Sales and Inventories from the Census Bureau, a report that we watch for inventories…in addition, the Fed released the Consumer Credit Report for September, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $11.0 billion, or at a 3.3% annual rate, as non-revolving credit expanded at a 4.7% rate to $2,908.9 billion while revolving credit outstanding shrunk at a 0.4% rate to $1,041.1 billion….

Privately issued reports included the October Non-Manufacturing Report On Business from the Institute for Supply Management, which reported their NMI (non-manufacturing index) fell to 62.5% from 65.2% in September, indicating a smaller but still substantial plurality of service industry purchasing managers reported expansion in various facets of their business in October, and the Mortgage Monitor for September from Black Knight Financial Services, which indicated that 3.97% of all mortgages were delinquent in September, up from 3.50% in August but down from 4.40% in September of 2017, and that 0.52% of all mortgages were in the foreclosure process in September, down from from 0.54% in August and down from 0.70% a year ago….the September increase in mortgage delinquencies was the largest monthly increase in nearly a decade and was particularly elevated in regions of the country where properties have experienced hurricane damage, even as all 50 states saw delinquency increases in September

Producer Prices Rose 0.6% in October on Higher Prices for Fuel, Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand was 0.6% higher in October, as prices for finished wholesale goods were 0.6% higher, while margins of final services providers increased by 0.7%…that followed a September report that indicated the PPI was 0.2% higher, with prices for finished wholesale goods 0.1% lower and margins of final services providers 0.3% higher, an August report that showed the producer price index was 0.1% lower, with prices for finished wholesale goods unchanged while margins of final services providers decreased by 0.1%, and a revised July report that indicated the PPI was unchanged, with prices for both finished wholesale goods and for margins of final services providers also unchanged….on an unadjusted basis, producer prices are now 2.9% higher than a year ago, up from the year over year increase of 2.8% that was indicated by last month’s report…meanwhile, the core producer price index, which excludes food, energy and trade services, was up by 0.2% for the month, and is now 2.9% higher than in October a year ago…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.6% higher in October, after being 0.1% lower in September, being unchanged in July and August, but after rising by 0.2% in June and by 0.9% in May…the price index for wholesale energy was 2.7% higher in September after falling 0.8% in September, rising 0.4% in August, and falling a revised 0.8% in July and rising a revised 1.5% in June, while the price index for wholesale foods rose 1.0%, and the index for final demand for core wholesale goods (excluding food and energy) was unchanged….wholesale energy prices rose largely on a 7.6% increase in the wholesale price for gasoline and a 5.4% increase in wholesale prices for diesel fuel …the wholesale food price index, meanwhile, included a 10.6% increase in wholesale prices for fresh eggs and an 9.5% increase in wholesale prices for fresh and dry vegetables….among wholesale core goods, wholesale prices for  industrial chemicals rose 3.2% while wholesale prices for electronic components and accessories fell 2.4% and wholesale prices for passenger cars fell 1.0%..

At the same time, the index for final demand for services rose 0.7%, after rising 0.3% in September, falling 0.1% in August, being unchanged in July, and rising 0.3% in June, 0.3% in May, 0.2% in April and 0.3% in March, as the October index for final demand for trade services rose 1.6%, the index for final demand for transportation and warehousing services rose 0.6%, and the core index for final demand for services less trade, transportation, and warehousing services rose 0.2%….among trade services, seasonally adjusted margins for food and alcohol retailers rose 2.8%, margins for machinery and equipment wholesalers rose 1.8%, and margins paper and plastics products wholesalers rose 5.9%… among transportation and warehousing services, margins  for airline passenger services rose 1.1% and margins for rail transportation of passengers rose 2.5%…among the components of the core final demand for services index, the index for passenger car rentals fell 5.4% while margins for membership dues, admissions and recreation facility use rose 3.0%..

This report also showed the price index for intermediate processed goods rose 0.8%, after being unchanged in August and September, but after rising a revised 0.1% in July, and a revised 0.6% in June….the price index for intermediate energy goods rose 2.6%, as refinery prices for gasoline rose 7.6% and producer prices for residual fuels rose 7.3%…prices for intermediate processed foods and feeds rose 0.4%, as the price index for meat rose 2.4% and dairy prices rose 1.2%…meanwhile, the core price index for processed goods for intermediate demand less food and energy was also 0.4% higher on a 3.8% increase in the index for basic organic chemicals and a 4.3% increase in the price index for nitrogenates….prices for intermediate processed goods are now 5.9% higher than in October a year ago, now the 23rd consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 3.6% in October, after rising 1.7% in September, falling 5.8% in August, rising a revised 2.1% in July, and falling a revised 1.0% in June….that was as the October price index for crude energy goods rose 3.6% as crude oil prices rose 7.6%, and as the price index for unprocessed foodstuffs and feedstuffs rose 5.8%, as producer prices for slaughter hogs rose 46.3% and producer prices for raw milk rose 9.4%…at the same time, the index for core raw materials other than food and energy materials was unchanged, as prices for nonferrous metal ores rose 2.6% while prices for aluminum base scrap fell 8.0%…this raw materials index is now up by 7.8% from a year ago, up from the 4.3% year over year increase that we saw in September…

Lastly, the price index for services for intermediate demand rose 0.4% in October, after rising 0.5% in September, 0.1% in August, a revised 0.2% in July and a revised 0.2% in June…the price index for intermediate trade services was 1.5% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 7.8% and margins for margins for paper and plastics products wholesalers rose 5.9%…the index for transportation and warehousing services for intermediate demand rose 0.3%, as the index for air transportation of passengers (partial) rose 1.0% and the index for pipeline transportation of petroleum products rose 0.8%…meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.2% higher, as the index for broadcast and network television advertising time sales rose 5.0% and the index for services related to securities brokerage and dealing (partial) rose 1.7%….over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.2% higher than it was a year ago…  

Job Openings, Hiring, Layoffs and Job Quitting all Lower in September

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 284,000, from 7,293,000 in August to 7,009,000 in September, after record August job openings were revised 157,000 higher, from 7,136,000 to 7,293,000…September’s jobs openings were still 12.5% higher than the 6,229,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed fell from a record high 4.7% in August to 4.5% in September, while it was up from 4.1% in September a year ago…there were wide differences in job opening changes between industries, however, from the 118,000 job opening decrease to 1,256,000 openings in the broad professional and business services sector, to the 60,000 job opening increase to 961,000 openings in bars and restaurants (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in September, seasonally adjusted new hires totaled 5,744,000, down by 162,000 from the revised 5,906,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 3.8% from 4.0% in August, while it was still up from the 3.7% rate in September a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 112,000, from 5,779,000 in August to 5,667,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.6%, the  same as in September a year ago (see table 3)…subtracting the 5,667,000 total separations from the total hires of 5,744,000 would imply an increase of 77,000 jobs in September, somewhat less than the revised payroll job increase of 118,000 for September reported in the October establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings

Breaking down the seasonally adjusted job separations, the BLS finds that 3,601,000 of us voluntarily quit our jobs in September, down from the revised 3,648,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.4% of total employment, while it was still up from 2.2% a year earlier (see job details in table 4)….in addition to those who quit, another 1,700,000 were either laid off, fired or otherwise discharged in September, down by 90,000 from the revised 1,790,000 who were discharged in August, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 365,000 in September, up from 341,000 in August, for an ‘other separations rate’ of 0.2%, which unchanged from August and from September of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

September Wholesale Sales Up 0.2%, Wholesale Inventories Up 0.4% 

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $511.2 billion, up 0.2 percent (±0.5 percent)* from the revised August level, and up 7.8 percent (±3.5 percent) from the wholesale sales of September 2017… the August preliminary estimate was revised down to $510.37 billion from the $511.1 billion in wholesale sales reported last month, which thus revised the July to August change in sales from +0.8% to +0.7%….as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $644.6 billion at month end, up 0.4 percent (±0.4 percent)* from the revised August level and 5.2 percent (±4.0 percent) higher than in September a year ago….August’s inventory value was revised from $642.7 billion to $642.2 billion, which meant that the July to August percent change was revised from the advance estimate of +1.0 percent to +0.9 percent…

In the advance report on 3rd quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release…that report estimated that our seasonally adjusted wholesale inventories were valued at $644.081 billion at the end of September, up from $641.959 billion in August….that’s $0.475 billion less than the $644.556 billion for the end of the quarter that this report shows, which would imply that the quarterly change in 2nd quarter inventories was underestimated at roughly a $1.9 billion annual rate…assuming there’s no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 2nd quarter GDP was underestimated by around 0.03 percentage points based just on what this report shows…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)      

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tables and graphics for November 10th

rig count summary:

November 9 2018 rig count summary

6 to 10 day outlook as of Nov 5th:

November 5 2018 6 to 10 day forecast

oil prices:

November 10 2018 daily oil prices

natural gas prices:

November 10 2018 daily natural gas prices

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oil prices see largest drop in ​9 months on demand concerns, glut fears; US oil production at a record high

oil prices were down every day the past week in the largest weekly price drop since ​early ​February, and ended more than 17% below the 4 year high they set ​just ​one month agoafter falling 2.4% to $67.59 a barrel in a global market selloff last week, prices for US oil contract​s for December delivery fell 55 cents to $67.04 a barrel on Monday, as Russia signaled its oil output would remain high and concerns over the global trade slowdown deepened…oil prices then fell more than 1% on Tuesday, on rising global oil output and on concern that global economic growth and demand for fuel would fall ​due to the U.S.-China trade war, closing down 86 cents at $66.18 a barrel…Wednesday saw another 87 cent drop to $65.31 a barrel, as further signs of rising global supply emerged with US and Russian output hitting records, as oil prices finished October with their largest monthly drop in more than 2 yearsUS crude prices then tumbled $1.62, or 2.5%, to a 7-month low of $63.69 a barrel, as surging output from the US, Russia, and OPEC was met by slowing demand from emerging market economies hit by the US-China trade war…oil prices fell almost ​another percent again on Friday, closing at $63.14 a barrel, after the US said it would temporarily allow eight allies to buy crude from Iran, alleviating fears of a sanction-related supply crunch… the December US oil contract thus ​registered a weekly drop of 6.6%, as US oil prices suffered their fourth straight weekly loss, while the contract for January Brent, the international benchmark, settled at $72.83 a barrel ​with a loss of 6.2%​ for the week​..

on the other hand, natural gas prices for December rose 5.9 cents to $3.284 per mmBTU this week, whipsawed midweek by changing 8 to 14 day forecasts from the Climate Prediction Center, and boosted on Friday by the report of a smaller than expected injection of natural gas into storage…this week’s natural gas storage report from the EIA for the week ending October 26th indicated that natural gas in storage in the US rose by 48 billion cubic feet to 3,143 billion cubic feet during that week, which left our gas supplies 623 billion cubic feet, or 16.5% below the 3,766 billion cubic feet that were in storage on October 27th of last year, and 638 billion cubic feet, or 16.9% below the five-year average of 3,781 billion cubic feet of natural gas that are typically in storage after the fourth week of October….this week’s 48 billion cubic feet increase in natural gas supplies was below expectations of an inventory increase in the 51 to 53 billion cubic foot range, and was also below the average of 62 billion cubic feet of natural gas that have been added to storage during the fourth week of October in recent years, the 13th average or below average inventory increase over the past seventeen weeks…natural gas storage facilities in the Midwest saw a 22 billion cubic feet increase over the week, which reduced their supply deficit to 11.6% below normal, but natural gas supplies in the East only increased by 1 billion cubic feet and saw their supplies deficit rise to 9.5% below normal for this time of year…on the other hand, the South Central region saw a 26 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 24.9% below their five-year average for the 4th week in October…meanwhile, while the natural gas pipeline rupture in Canada has been repaired, flows south had not resumed as of this report; as a result, only 3 billion cubic feet were added to supplies in the Mountain region, where their deficit from normal fell to 17.4%, while there no change of gas in storage in the Pacific region, where the natural gas supply deficit rose to 24.9% below normal for this time of year…. 

the primary reason for this week’s much smaller than average addition to storage was the outbreak of cold weather in the populated eastern half of the country that we saw during the period; natural gas production continued at near record levels…this can be clearly seen in the map of weekly average temperature abnormalities below taken from the EIA’s natural gas storage dashboard:

November 3 2018 departure from normal temps for week ending October 25

again, this map came from the EIA’s natural gas storage dashboard, an EIA website with dozens of interactive graphics tracking various facets and factors influencing US natural gas supplies, which is updated with the most recent data on Thursday of each week…the above map shows how much the temperatures in each geographical area of the 48 states varied from normal during the week ending October 25th, with those areas that were cooler than normal in a shade of blue, while those areas that were warmer than normal are shown in a shade of tan or brown….from the legend underneath this map, we can see that most of the eastern US saw temperatures below normal during the cited week, with a broad swath running from Texas northeast through Maine showing temperatures 5 to 9 degrees below normal…for the fourth week in October, below normal would mean that most of that area, probably with the exception of southern Texas, saw heating demand closer to what one would expect in early to mid November, and hence less natural gas than normal was left to be added to winter supplies… 

however, temperatures ​have since ​moderated during the week through November 1st, which you can see if you go to the natural gas storage dashboard and run the ​daily ​animation that goes with that map…all three of those regions saw a mix of days both above and below normal, with average temperatures thus a few degrees warmer than they were during this reporting week…thus we’d expect that this coming week’s natural gas storage report will show additions of gas ​to storage ​much closer to the norm, likely in a range from 55 to 60 billion cubic feet…after that, the forecast is for temperatures to turn colder, so further additions will be minimal if at all..

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration for the week ending October 26th indicated yet another addition to our commercial crude supplies for a sixth week in a row, despite a decrease in our oil imports, an increase in our oil exports, and a modest pickup in refining…our imports of crude oil fell by an average of 334,000 barrels per day to an average of 7,344,000 barrels per day, after rising an average of 63,000 barrels per day the prior week, while our exports of crude oil rose by an average of 352,000 barrels per day to an average of 2,485,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,859,000 barrels of per day during the week ending October 26th, 639,000 fewer barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly 300,000 barrels per day higher at 11,200,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 16,059,000 barrels per day during this reporting week… 

meanwhile, US oil refineries were using 16,417,000 barrels of crude per day during the week ending October 26th, 149,000 barrels per day more than the amount of oil they used during the prior week, while over the same period a net of 239,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 597,000 fewer barrels per day than what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+597,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…once again, with an “unaccounted for crude” figure that large, one or more of this week’s oil metrics must be off by a statistically significant amount (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)…. 

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 7,509,000 barrels per day, now 2.5% less than the 7,699,000 barrel per day average that we were importing over the same four-week period last year….the net 239,000 barrel per day increase in our total crude inventories included a 460,000 barrel per day increase in our commercially available stocks of crude oil, which was partially offset by a 220,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely because of a sale of 11 million barrels from those reserves to Exxon et al that closed eight weeks ago….this week’s crude oil production was reported up by 300,000 barrels per day to 11,200,000 barrels per day due to a rounded 300,000 barrels per day rebound to 10,700,000 barrels per day output from wells in the lower 48 states after Hurricane Michael, while a 15,000 barrels per day increase to 488,000 barrels per day in oil output from Alaska was not enough to impact the reported national total, which is now being rounded to the nearest 100,000 barrels per day….last year’s US crude oil production for the week ending October 27th was at 9,553,000 barrels per day, so this week’s rounded oil production figure was 17.2% above that of a year ago, and 32.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…

while we report the preliminary US oil production estimates that are released weekly, the EIA also releases confirmed monthly oil production figures a few months later, ​after they ​have ​collect​ed​ the accurate production reports that aren’t available on a weekly basis….since this week’s release of that monthly report shows a significant divergence from the ​weekly ​figures we’ve been reporting, we’ll include a graphic showing both, so we can see what that divergence looks like…

November 3 2018 US crude production through October 26

the above graph, from this week’s OilPrice Intelligence Report, shows the history of confirmed oil production data monthly from January 2016 to August 2018 in blue, and then the weekly estimates of US oil production up until the current week in yellow after that period, with both metrics in thousands of barrels per day….as we’ve pointed out on several previous occasions, the weekly oil data from the EIA that we cover each week is preliminary, and it is typically more than 2 months before the final confirmed figures, published monthly, are released…we follow the weekly data because it’s what the oil traders follow, and hence it moves oil prices and ultimately the decisions on the part of exploitation companies to start drilling for oil…however, the confirmed oil production figures for August were released this week and showed our crude production at a much higher than expected 11,346,000 barrels per day​ average​ during that month, up from 10,964,000 barrels per day in July…the weekly production estimates for August, on the other hand, had ranged from 10,800​,000​ barrels per day to 11,000​,000​ barrels per day, and thus averaged more than 400,000 barrels per day lower than the confirmed figures…if the reason for the inaccuracies in the weekly report persisted to the current week, and we have no reason to believe they haven’t, the 400,000 barrels per day error in the weekly oil production figures would go a long way toward explaining the large “unaccounted for crude” figures we’ve been seeing in recent weeks…

meanwhile, ​this week’s report indicates that ​US oil refineries were operating at 89.4% of their capacity in using 16,417,000 barrels of crude per day during the week ending October 26th, up from 89.2% of capacity the prior week, a fairly normal utilization rate for during the fall refinery maintenance season….the 16,417,000 barrels per day of oil that were refined this week were once again at a seasonal high, for the 20th out of the past 22 weeks, 2.5% higher than the 16,015,000 barrels of crude per day that were processed during the week ending October 27th, 2017, when US refineries were operating at 88.1% of capacity…

with the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 336,000 barrels per day to 10,364,000 barrels per day during the week ending October 26th, after our refineries’ gasoline output had decreased by 402,000 barrels per day during the week ending October 19th…with that rebound in our gasoline output, our gasoline production during the week was 1.7% higher than the 10,187,000 barrels of gasoline that were being produced daily during the same week last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 23,000 barrels per day to 4,983,000 barrels per day, after that output had increased by 145,000 barrels per day the prior week….however, this week’s distillates production was still 1.1% lower than the 5,036,000 barrels of distillates per day that were being produced during the week ending October 27th 2017…. 

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week fell by 3,161,000 barrels to 226,169,000 barrels by October 26th, the 21st decrease in the past 36 weeks, after our gasoline supplies had dropped by 4,826,000 barrels the prior week….our supplies fell even as the amount of gasoline supplied to US markets fell by 62,000 barrels per day to 9,262,000 barrels per day, and as our imports of gasoline rose by 32,000 barrels per day to 363,000 barrels per day, while our exports of gasoline rose by 43,000 barrels per day to 1,012,000 barrels per day…but even after two big decreases, our gasoline inventories are still at a seasonal high, 6.3% higher than last October 27th’s level of 212,849,000 barrels, and roughly 7.1% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, even with our distillates production a bit higher higher, our supplies of distillate fuels also fell again, decreasing by 4,052,000 barrels to 126,322,000 barrels during the week ending October 26th, their sixth straight decrease after 8 straight weeks of increases, and the largest drop since March 9th…our distillates supplies fell by much more than last week’s decrease because the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 420,000 barrels per day to 4,426,000 barrels per day, while our exports of distillates fell by 163,000 barrels per day to 1,277,000 barrels per day, and while our imports of distillates fell by 22,000 barrels per day to 141,000 barrels per day….after this week’s decrease, our distillate supplies ended the week 2.0% below the 128,921,000 barrels that we had stored on October 27th, 2017, and remained roughly 6.7% below the 10 year average of distillates stocks for this time of the year…     

finally, despite higher oil exports​,​ lower ​oil ​imports​,​ and an increase in oil being refined, our commercial supplies of crude oil increased for the 6th week in a row and for the 22nd time in 2018, rising by 3,217,000 barrels during the week, from 422,787,000 barrels on October 19th to 426,004,000 barrels on October 26th to …that increase means that our crude oil inventories continue to be more than 2% above the five-year average of crude oil supplies for this time of year, and roughly 22.4% above the 10 year average of crude oil stocks for the last weekend in October, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of October 26th were still 6.4% below the 454,906,000 barrels of oil we had stored on October 27th of 2017, 11.7% below the 482,578,000 barrels of oil that we had in storage on October 28th of 2016, and 5.5% below the 450,841,000 barrels of oil we had in storage on October 30th of 2015…      

This Week’s Rig Count

US drilling rig activity slowed for the second time in 6 weeks during the week ending November 2nd, but just by a bit….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 1 rig to 1067 rigs over the week ending on Friday, which was still 169 more rigs than the 898 rigs that were in use as of the November 3rd report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…  

the count of rigs drilling for oil decreased by 1 rig to 874 rigs this week, which was still 145 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the number of drilling rigs targeting natural gas formations remained unchanged at 193 rigs, which was still 24 more than the 169 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…in addition, a year ago we had a rig categorized as “miscellaneous” deployed, while there are no such “miscellaneous” rigs drilling at this time this year…

offshore drilling in the Gulf of Mexico was unchanged at 18 rigs this week, which was also unchanged from the 18 Gulf of Mexico rigs active a year ago…meanwhile, the only rig that had  been drilling offshore from Alaska was shut down this week, so the total national offshore count is now down to 18 rigs, also the same as a year ago…

the count of active horizontal drilling rigs was up by 2 rigs to 929 horizontal rigs this week, which was also 165 more horizontal rigs than the 764 horizontal rigs that were in use in the US on November 3rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…meanwhile, the directional rig count was unchanged at 73 directional rigs this week, which ​is ​the same number of directional rigs that were in use during the same week of last year….on the other hand, the vertical rig count was down by 3 rigs to 65 vertical rigs this week, which was still up from the 61 vertical rigs that were operating on November 3rd of 2017…  

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 the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of November 2nd, the second column shows the change in the number of working rigs between last week’s count (October 26th) and this week’s (November 2nd) count, the third column shows last week’s October 26th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 3rd of November, 2017…        

November 2 2018 rig count summary

this week’s modest 2 rig decrease in the Permian masks significant other changes within its component basins; while just a single rig was shut down in Texas Oil District 8, which would correspond to the core Delaware basin, there were 4 rigs shut down in Texas Oil District 8A, which would correspond to the central platform and Midland Basins; at the same time, 2 rigs were added in Texas Oil District 7C, which could be Midland rigs or southern shelf, and another rig was added in Texas Oil District 7B, which could also be a Midland rig, or outside the basin altogether (Texas oil districts are political boundaries and hence don’t correspond directly with the geological basins underlying them)…based on that, our best guess, without digging through the individual well logs in the Rig Count Pivot Table (xls), is that Texas shed a net of 3 Permian rigs, while New Mexico picked one up….natural gas rigs, meanwhile, remained unchanged despite the loss of two in the Marcellus (one each in PA and WV) and the natural gas rig that was shut down in Oklahoma’s Arkoma Woodford because a natural gas rig was added to those working Ohio’s Utica, and two others were set up in basins not tracked separately by Baker Hughes…

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