oil imports at a 47 month high, oil exports at a record high, stockpiles of oil & products also at another record high

oil prices fell $4.48 a barrel, or almost 10%, over the first 4 days of this past week, then recovered by almost 3% from there on Friday, after a weak jobs report decreased the likelihood of a Fed September interest rate hike, meaning the dollar would remain weak, thus boosting prices for internationally traded commodities like oil…after closing the prior week at $47.64 a barrel, oil fell 66 cents a barrel, or 1.4% on Monday to close at $46.98, on prospects of peace in Nigeria and expectations that crude stockpiles rose for a 2nd week in a row…after moving up slightly on Tuesday morning, oil prices then dropped a dollar a barrel in the afternoon after the American Petroleum Institute reported a modest crude buildup and a 3 million barrel addition to distillates stockpiles, more than 10 times what was expected, leaving oil prices at $46.35 a barrel at the close…on Wednesday it was more of the same, as oil prices fell 3% to close at $44,70 a barrel after EIA data showed a larger-than-expected weekly buildup of crude and distillate stockpiles and a smaller-than-expected drawdown of gasoline supplies…that report brought the reality of the oversupply glut back into focus, driving US crude prices down another $1.54, or 3.4%, to settle at $43.16 a barrel at the close of trading Thursday…Friday then brought a Putin interview with Bloomberg in which he said he’d like OPEC and Russian producers of half of the world’s oil, to reach a deal to freeze supply, which brought out the buyers hopeful for a OPEC deal, who then drove oil prices up $1.28 a barrel in spite of a rising rig count, to close the week at $44.44 a barrel…

since a lot has happened since we last looked at a graph of oil prices, we’ll include one here now…

September 3rd 2016 oil prices

the graph above shows the daily prices per barrel over the past 3 months for the October contract of the US benchmark oil, West Texas Intermediate (WTI) as traded for delivery at the Cushing Oklahoma depot…when we last looked at this graph, September oil contracts had just completed a two week run-up from around $39 a barrel to $48.50, and it looked like $50 a barrel oil was a certainty…but the rally ran out of steam last week, and then October contract prices started falling when last week’s reports showed building gluts of oil and all of its products…this week, oil prices were in virtual freefall during all the high volume hours, while the volume of trading underlying the price recovery on Friday was not very convincing…fundamentals would seem to call for $40 oil, but until the OPEC – Russian freeze issue is resolved one way or the other, we can expect more volatility like we’ve seen here going forward…

The Latest Oil Stats from the EIA

as we mentioned, the oil data for the week ending August 26th from the US Energy Information Administration showed increases in our supplies of oil and of distillates, as our oil imports rose to a 47 month high, and as our refinery operations slowed, in keeping with the approaching end of summer…meanwhile, this week’s crude oil fudge factor needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was at +233,000 barrels per day, down from 523,000 barrels per day last week, but which still meant that 233,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week’s metrics were off by that amount…the EIA did announce that as of this week, they’re shifting to real time reporting of oil exports as provided by U.S. Customs, which should improve the weekly reporting somewhat; previously, they’d been estimating exports based on monthly export data published by the U.S. Census Bureau, and the numbers in that series always looked like they’d been woven out of whole cloth…nonetheless, we’ve now seen 10 weeks in a row with a large positive oil adjustment, bringing this year’s cumulative daily average of that weekly statistical adjustment to a positive 97,000 barrels per day, a reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn’t showing up in the final consumption or inventory figures…  

so, with that new accurate data this week, the EIA reported that our exports of crude oil rose by an average of 21,000 barrels per day to an average of 698,000 barrels per day during the week ending August 26th, which is a new high in the EIA records, not really unexpected since restrictions on US oil exports were only lifted earlier this year…ie, while our oil exports are up 46.3% from the 477,000 barrels per day we were exporting a year ago, at that time only exports to Canada and Mexico were permitted…..but while our exports were up 21,000 barrels per day, the EIA also reported that our imports of crude oil for the week ending August 26th rose by an average of 275,000 barrels per day to an average of 8,917,000 barrels per day, which was the most oil we’ve imported in any week since September 14th of 2012….this week’s oil imports were also 13.5% more than the 7,855,000 barrels of oil per day we imported during the week ending August 28th a year ago, and the 4 week average of our oil imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) averaged more than 8.5 million barrels per day, 11.4% higher than the same four-week period last year…  

the EIA also reported that our field production of crude oil fell by 60,000 barrels per day to an average of 8,488,000 barrels per day during the week ending August 26th, as output of Alaskan oil fell by 10,000 barrels per day and production from the lower 48 states was 50,000 barrels per day lower…that left the week’s domestic oil production down by 7.9% from the 9,218,000 barrels we produced during the week ending August 28th of 2015, and 11.7% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…our oil production for the week ending August 26th is now 731,000 barrels per day lower than what we were producing at the beginning of this year…  

meanwhile, the amount of that crude oil used by US refineries fell by an average of 64,000 barrels per day to an average of 16,615,000 barrels of crude per day during the week ending August 26th, even though the US refinery utilization rate rose to 92.8% for that week, up from 92.5% of capacity during the week ending the 19th, but the same as the refinery utilization rate during the week ending August 28th last year..refining on the glutted east coast increased by a nominal 18,000 barrels per day, but the refinery utilization rate there remained depressed at 86.7%, in contrast to last year’s 96.2% east coast capacity utilization…nonetheless, crude refined this week nationally was still 1.4% more than the 16,389,000 barrels of crude per day US refineries used during the week ending August 28th last year, and 1.3% more than the equivalent week in 2014, so we can see that crude refining normally tails off at this time of year, as the summer driving season comes to a close with the labor day weekend …  

with the drop in crude being refined, US refineries production of gasoline slipped by 14,000 barrels per day to 10,021,000 barrels per day during week ending August 26th, which was still 222,000 more barrels per day, or 2.6% above the 9,799,000 barrels of gasoline per day being produced during the week ending August 28th last year, and 4.7% more than our gasoline production of 9,572,000  barrels per day during the week ending August 29th, 2014….and even with the operations cutback, east coast refineries still managed to produce an average of 3,294,000 barrels of gasoline per day, 18,000 barrels per day more than last week and 1.2% more than a year earlier….concurrently, refinery output of distillate fuels (diesel fuel and heat oil) rose by 124,000 barrels per day to 4,973,000 barrels per day during the week ending August 26th, which lifted our distillates output to 1.0% more that the distillates production of 4,923,000 barrels per day during the week ending August 28th of last year, while it still lagged the distillates output of 5,080,000 barrels per day during the week ending August 29th 2014 by 2.1% ……       

with the modest downturn in gasoline production, our gasoline inventories fell by 691,000 barrels to 232,004,000 barrels as of August 26th, which was still less than the normal late August drawdown…that was as our gasoline imports rose by 31,000 barrels per day to 832,000 barrels per day and as domestic demand for gasoline fell by 148,000 barrels per day to 9,511,000 barrels per day…that left this week’s gasoline inventories 8.3% higher than the 214,163 ,000 barrels of gasoline that we had stored on August 28th last year, and 10.5% higher than the 209,992,000 barrels of gasoline we had stored on August 29th of 2014…meanwhile, our distillate fuel inventories rose by 1,496,000 barrels to 154,753,000 barrels by August 26th, which left our distillate inventories 3.2% above the distillate inventories of 149,951,000 barrels of August 28th last year, and 24.8% above the distillate inventories of 122,794,000 barrels of August 29th, 2014…  

end of the week inventories of the other major refined products were mixed….our stockpiles of propane/propylene rose by 2,375,000 barrels to 98,51,000 barrels last week, which meant they were 2.2% above the 96,344,000 barrels stored as of August 28th last year, and 29.4% higher than the propane/propylene inventories of the same weekend in 2014…inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) other than propane/propylene rose by 1,684,000 barrels to 149,770,000 barrels as of August 26th, 17.5% higher than the 127,428,000 barrels we had stored as of August 28th last year, and 14.2% higher than the equivalent week in 2014…but inventories of kerosene type jet fuel fell by 717,000 barrels to 41,034,000 barrels as of August 26th, 3.5% below our jet fuel stockpiles of 42,546,000 barrels on August 28th last year, but 18.5% higher than our 34,636,000 barrels of jet fuel supplies we had stored on August 29th of 2014…and stockpiles of residual fuel oils fell by 467,000 barrels to 40,026,000 barrels as of August 26th, a bit below the 40,161,000 barrels we had stored a year earlier, but 9.5% higher than the 36,541,000 barrels of residual fuel oils we had stored on August 29th of 2014…

and of course, with the near record oil imports and the refinery slowdown, our inventories of crude oil that has yet to be refined into any of the above products also rose, increasing by 2,276,000 barrels to 525,870,000 barrels as of August 26th, the 5th oil inventory increase in 6 weeks, at a time of year when oil stockpiles are usually being used up….thus we ended up with 15.5% more crude oil in storage than the 455,428,000 barrels we had stored as of the same weekend a year earlier, and 46.2% more crude oil than the 359,570,000 barrels we had stored on August 29th of 2014… 

lastly, adding the barrels of oil products inventories to the amount of crude oil in storage, we find the aggregate of our Total Crude Oil and Petroleum Products Supplies (not including the Strategic Petroleum Reserve) to be at a record high of 1,404,679,000 barrels, up by 4,503,000 barrels from last week….that’s the 24th new record high for total supplies set in 2016, and we’ve now set new records for total supplies 9 consecutive weeks in a row, adding a total of 32.8 million barrels of oil and oil products to the record we already had stored over that 9 week stretch….that leaves our total supply up by 115.77 million barrels, or 9.0% from a year ago, and 24.9% higher than the total supplies of 1,124,415,000 that we had stored two years earlier on the same weekend..

This Week’s Rig Count

the rig count for the week ending September 2nd was impacted by the movement of hurricane Hermine through the eastern Gulf of Mexico, and therefore a number of the oil platforms that we’ll see were shutdown this week will likely be up and running again next week, so it wont be until then that we can get a firm count on rigs in the area…even so, Baker Hughes reported that the total count of active rotary rigs running in the US rose by 8 rigs to 497 rigs as of Friday, the 12th increase in 14 weeks and a 7 month high…still, the total count was down by 367 rigs from the 864 rigs that were deployed as of the September 4th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil was up by just 1 rig this week at 407, but was still down from the 662 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 7 rigs to 88 rigs this week, which was the largest increase in gas rigs since 8 gas directed rigs were added during the week ending April 24th 2015, and probably the largest percentage increase in gas rigs this century …but gas rigs were still down from the 202 natural gas rigs that were drilling on September 4th a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there also remained two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from none the same week a year ago…  

seven of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico were shut down this week, with no indication in the Baker Hughes data as to the reason, which we nonetheless suspect was due to the hurricane in the Gulf, which was said to have idled 11% of Gulf production, which we’ll likely see in the EIA data next week…that still left 10 rigs active in the Gulf of Mexico and offshore nationally at the week’s end, down from 31 rigs drilling in the Gulf and a total of 33 rigs offshore nationally a year ago…however, there was also another rig set up to drill through an inland lake in southern Louisiana, which brought the inland waters rig count up to 5 rigs, which was up from 4 inland waters rigs a year earlier..

in an indication of what was going on away from the Gulf, the number of working horizontal drilling rigs rose by 16 rigs this week, which brought the count of active horizontal rigs up to 395 rigs, which was still down from the 659 horizontal rigs that were in use on September 4th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count dropped by 2 rigs to 60 rigs this week, which was exactly half of the 120 vertical rigs that were drilling in the US during the same week last year…meanwhile, the directional drilling rig count fell by 6 rigs to 42 rigs, which was down from the 85 directional rigs that were deployed during the same week last year…     

the details on this week’s changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of September 2nd, the second column shows the change in the number of working rigs between August 26th and September 2nd, the third column shows last week’s August 26th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was September 4th of 2015:     

September 2 2016 rig count summary

the first thing that sticks out in the tables above is the shut down of 7 offshore rigs in Louisiana, most of which we believe to be due to the hurricane…otherwise, it’s a fairly normal week in that Texas saw an increase of 4 rigs, and the 2 Texas basins, the Permian of west Texas and the Eagle Ford in the south, both saw increases of 3 rigs…but right offhand, we can only account for 3 of the 7 new gas directed rigs that were started up this week; there were two rigs added in the Marcellus, and one in the Utica, but since the Utica rig did not increase the Ohio count, we’d have to guess that was a Utica shale well in Pennsylvania…furthermore, since Pennsylvania only saw two additional rigs, we have to believe one of the new Marcellus rigs was set up in West Virginia…that still leaves 4 gas rigs unaccounted for….pulling up the historical data by basin from Baker Hughes (XLS), we see there are 5 gas wells in the Eagle Ford, but none of those are new…but it does appear that a gas rig was added in the Haynesville of Louisiana, while an oil rig was shut down there, which appears as a net no change above…the other 3 gas directed rigs appear to have been set up in basins not listed above, as the gas rig count in the “others” category rose from 23 rigs to 26 rigs as of September 2nd…both Wyoming and Oklahoma are thus suspect, with increases of 4 rigs in each state, as N. Dakota, the only other state with an increase, added an oil rig in the Williston basin…

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