refining at a 13 month high, oil imports at 11 month low as Hermine leads to largest drop in oil supplies in 17 years; global rigs for August

oil prices were remarkably volatile this past week, as we saw two price spikes of nearly 5%, each followed by price retreats of almost the same magnitude…early on Monday morning, a holiday in the US markets, news of a meeting between Russian ol minister Alexander Novak and his Saudi counterpart Khalid al-Falih.was announced, and prices for US oil, which had drifted from last week’s close of $44.44 a barrel to near $44.10 a barrel in European and US off-market trading, suddenly spiked up by more than $2 in the first few hours of trading, briefly hitting $46.53 a barrel on production freeze speculations, only to crash right back down to near where they started the day after the joint statement from the meeting was released, which only said that the parties agreed to work together on stabilizing the oil market, with no specifics…then, with the official US markets open on Tuesday, US crude slipped back to below $44 a barrel in the morning, on news of Saudi budget cuts, before gradually recovering in the afternoon to end the day down 7 cents, or 0.2% lower than the prior Friday, to close at $44.38 a barrel on the New York Mercantile Exchange…prices continued to meander on Wednesday morning, then spiked over to $46 a barrel in the afternoon, after the American Petroleum Institute reported a 12 million barrel drawdown from our stockpiles of crude, against market expectations of a million barrel increase in supplies…after closing Wednesday at $45.50 a barrel, oil prices hovered in that range early Thursday until the EIA report, delayed a day because of the holiday, showed a 14.5 million draw down in our supplies of crude, the largest weekly crude-supply drop since 1999, which sent oil prices soaring 4.7%, to close Thursday at a two-week high of $47.62 a barrel…then on Friday, as traders realized the big drop in supplies was likely just a temporary aberration caused by the hurricane of that week, and as hopes for a production freeze faded, oil prices gave up most of Thursday’s gains and closed down $1.74 at 45,88 a barrel, or 3.7% lower on the day, but up 3.2% for the week..

The Latest Oil Stats from the EIA

as we noted, the oil data for the week ending September 2nd from the US Energy Information Administration indicated that our supplies of oil and gasoline nosedived, as our oil imports fell to an 11 month low on tropical storm related shipping disruptions on the east coast and in the Gulf of Mexico and an unrelated shutdown of the Houston ship channel…furthermore, this week’s crude oil fudge factor needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung to -169,000 barrels per day, down from + 233,000 barrels per day last week, which meant that 169,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final consumption or inventory figures….that breaks the string of 10 weeks wherein we’d seen a large positive adjustment each week, and lowers this year’s cumulative daily average of that weekly statistical adjustment to a positive 90,000 barrels per day, which means that on average this year, 90,000 more barrels of oil per day were showing up in our final consumption and inventory figures than were accounted for by our production or import figures…. 

after we reported last week that our imports had hit a 47 month high during the week ending August 26th, the EIA reported this week that our imports of crude oil fell from there by 1,848,000 barrels per day to an average of 7,069,000 barrels per day during the week ending September 2nd, the least oil we’ve imported in any week since the 7,068,000 barrels per day we imported during the week ending October 19th last year….although this week’s crude imports were 5.2% lower than the 7,459,000 barrels of oil per day we imported during the week ending September 4th last year, the 4 week average of our imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) was still at an average of 8.2 million barrels per day, 7.4% higher than the same four-week period last year… 

at the same time, EIA data showed that production of crude oil from US wells fell by 30,000 barrels per day, from an average of 8,488,000 barrels per day during the week ending August 26th to an average of 8,458,000 barrels per day during the week ending September 2nd, as output of Alaskan oil fell by 45,000 barrels per day while production from the lower 48 states was 15,000 barrels per day higher…why there wasn’t also a curtailment in domestic production due to the storms is a mystery to me, since we know from last week’s Baker Hughes data that a large percentage of Gulf of Mexico platforms were shut down during this same week… at any rate, this week’s nominal output drop left the week’s domestic oil production down by 7.4% from the 9,135,000 barrels we produced during the week ending September 4th of last year, and 12.0% 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 September 2nd was thus 761,000 barrels per day lower than what we were producing at the beginning of this year…  

meanwhile, the amount of crude oil used by US refineries jumped by an average of 315,000 barrels per day to an average of 16,930,000 barrels of crude per day during the week ending September 2nd, which was the most oil we’ve refined in 13 months and our 3rd highest refinery throughput in history…that was as the US refinery utilization rate rose to 93.7% for the week, up from 92.6% of capacity during the week ending August 26th, and up from the 90.9% refinery utilization rate during the week ending September 4th last year..refining on the glutted east coast rose by 40,000 barrels per day as the refinery utilization rate there rose from 86.7% to 89.6%, while the Midwest refineries picked up the slack with a 98.4% utilization rate and Gulf coast refineries took in 165,000 more barrels of crude per day than they did last week…as a result, the amount of crude refined this week nationally was 5.1% more than the 16,110,000 barrels of crude per day US refineries used during the week ending September 4th last year, and 3.7% more than the equivalent week in 2014, being that we’re at a time of year that crude refining normally tails off, as “the summer driving season” apparently comes to a close with the labor day weekend …   

with more oil being refined, our refinery production of gasoline rose by 152,000 barrels per day to an average of 10,173,000 barrels per day during the week ending September 2nd, which was the 5th highest gasoline output in any week on record, and 6.1% higher than our gasoline production during the equivalent week of 2015…at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 58,000 barrels per day to 5,031,000 barrels per day during week ending the 2nd, which was 237,000 barrels per day, or 4.9% higher than our distillates production during the same week of 2015…    

however, even with the near record output of gasoline, our gasoline inventories fell for second week in a row, dropping by 4,211,000 barrels to 227,793,000 barrels as of September 2nd, the largest one week drop in gasoline supplies since mid-March….that was as our imports of gasoline fell by 225,000 barrels per day to a 21 week low of 607,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 84,000 barrels per day to 9,595,000 barrels per day, apparently in one last consumption surge before the holiday… nonetheless, this week’s gasoline supplies were still 6.2% higher than the 214,547,000 barrels of gasoline that we had stored on September 4th last year, and 7.3% higher than our gasoline supplies of September 5th, 2014, and thus our gasoline stores are still categorized as “well above the upper limit of the average range” for this time of year.. 

meanwhile, our distillate fuel inventories rose by 3,382,000 barrels to 158,135,000 barrels as of September 2nd, which pushed our distillate inventories to a level 4.8% above the then 4 year high of 150,903,000 barrels of September 4th last year, and 24.0% above the distillate inventories of 127,493,000 barrels of September 5th, 2014… that increase thus changed the EIA characterization of our distillate inventories to “above the upper limit of the average range for this time of year”

lastly, after that big 1.848 million barrel per day drop in oil imports, refineries found it necessary to withdraw 14,513,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 2nd fell to 511,357,000 barrels, the largest one week drop in oil supplies since the week ending January 1st 1999...from where we sit, it’s impossible to tell if that drop in supplies is just a one week aberration or not, and whether that supply will be restored in the weeks ahead, once all the ships that were forced to anchor offshore come in and unload…even so, this week’s 511,357,000 barrels of crude supplies is still 11.7% higher higher than the 457,998,000 barrels of oil we had stored as of September 4th, 2015, and 42.6% higher than the 358,598,000 barrels of oil we had stored on September 5th of 2014…. 

This Week’s Rig Counts

whereas this week’s EIA oil data for September 2nd was impacted by the movement of hurricane Hermine through the eastern Gulf of Mexico and up the East Coast, this week’s rig count report for the week ending September 9th was influenced by the reversal of last week’s storm impacts…Baker Hughes reported that the total count of active rotary rigs running in the US was up by 11 rigs to 508 rigs as of Friday, which was still down from the 848 rigs that were working as of the September 11th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014… the count of rigs drilling for oil rose by 7 rigs to 414, which was down from the 652 oil directed rigs running a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 4 to 92, which was still down from the 196 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…  

while last week we saw 7 platforms that had been drilling offshore in the Gulf of Mexico shut down, this week saw the startup of 8 such platforms, all of which are logged in as being offshore of Louisiana…thus, without the temporary hurricane effect, we have the net addition of one Gulf of Mexico rig over two weeks, bringing the Gulf count and the total offshore nationally up to 18 rigs, which is down from 29 rigs drilling in the Gulf and a total of 31 rigs offshore nationally a year ago…

meanwhile, the count active horizontal drilling rigs was up by 1 rig to 396 rigs this week, which was still down from the 652 horizontal rigs that were in use on September 11th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, 6 more directional rigs were also added, bringing the directional rig count up to 48 rigs, which still was down from the 81 directional rigs that were in use at the end of the same week a year earlier…in addition, the vertical rig count was up by 4 rigs to 64 rigs, which was still down from the 119 vertical rigs that were up and running in the US 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 US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 9th, the second column shows the change in the number of working rigs between last week (September 2nd) and September 9th, the third column shows last week’s September 2nd 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 11th of 2015:     

September 9 2016 rig count summary

from the state table we see that the biggest change is the restarting of 8 rigs in Louisiana, 7 of which had just been shut down a week earlier…elsewhere, Texas added 4 rigs, none of which were horizontal by the looks of the basin count, while Oklahoma saw 4 rigs shut down, possibly as a result of the earthquake and subsequent shutdown of the injection wells, leaving frackers with no place to dispose of their wastewater, which in Oklahoma amounts to ten times the quantity of oil they produce…also note the addition of another rig in the Utica in Ohio, and two more nearby, in the Marcellus in West Virginia…otherwise, changes in activity in the shale basins was pretty subdued, as would be supported the addition on just one horizontal rig, a stat which sometimes masks much more activity when we peel back the details…so all in all, an uneventful week, once we get past the return of drilling to the eastern Gulf of Mexico…

International Rig Counts for August

this week also saw the monthly release of the international rig counts for August, which unlike the weekly count, is an average of the number of rigs running in each country during the month, rather than the total of those rig drilling at month end….Baker Hughes reported that an average of 1547 rigs were drilling for oil and natural gas around the globe in August, which was up from the 1,481 rigs that were drilling around the globe in July but down from the 2,226 rigs that were working globally in August of last year…increased North American drilling again accounted for the global increase, as the average US rig count rose from 449 rigs in July to 481 rigs in August, which was still down from the average of 849 rigs working in the US in August a year ago, while the average Canadian rig count rose from 94 rigs in July to 129 rigs in August, again still down from the 206 Canadian rigs that were deployed in August a year earlier….outside of Northern America, the International rig count fell by a single rig to 937 rigs in August, which was also down from 1,118 rigs a year ago, as a pullback in drilling in the Middle East region offset small increases elsewhere..

drilling activity in the Middle East fell for the 6th time in the past 8 months, as countries included in this region idled a net of 11 rigs, leaving an average of 379 rigs still drilling, which was down from the 393 rigs deployed in the Middle East a year earlier….the largest regional drilling cutback was in Pakistan, where their active rig count dropped from 29 rigs in July to 21 rigs in August, with the idling of 6 rigs targeting oil and 2 rigs targeting natural gas; however, that drop only left the Pakistanis two rigs shy of the 23 rigs they were running a year ago, as the 30 rigs they had active in June was their most in the recent record…meanwhile, Qatar saw the idling of 2 of the 7 rigs they had active in July; the 5 rigs they had running in August was down from 9  rigs a year earlier…at the same time, both the Saudis and the Iraqis saw their rig count drop by a single rig; the Saudis went from a total of 125 rigs in July to 124 in August with the idling of 3 rigs targeting natural gas and the start up of 2 rigs targeting oil, while the Iraqis, who only have oil rigs deployed, dropped from 39 rigs to 38….while that left Iraq down from the 48 rigs they were running last August, the Saudi count was up from 120 rigs a year earlier, and up from the 106 rigs they had working in August of 2014…meanwhile, Abu Dhabi was the lone Middle East country to add a rig; they now have 48, which is up from the 38 rigs they had deployed a year ago…

while the Middle East was cutting back, the Asia-Pacific region added 8 rigs and thus had 194 rigs deployed in August, up from the 186 drilling rigs working in July, but down from the 220 rigs working the region a year earlier, as the Asia-Pacific offshore rig count also rose by four rigs to 92…Australia doubled their active rig count from 3 rigs to 6 in August, but they were still down from the 15 rigs they had working a year earlier…India, Indonesia, and Thailand each added two rigs in August; for India, that brought them back to 115 rigs, the same as they had working a year earlier, for Indonesia, it brought them back to 19 rigs, which was still down from the 25 they were using last August, while for Thailand, their count rose to 13 rigs, which was still short of the 15 rigs they had in use a year earlier…in addition, Malaysian drillers also added a rig, giving them 4 rigs active, which was down from 9 rigs in August of 2015…on the other hand, Brunei cut back from 2 rigs to 1, the same as a year earlier, while the Japanese idled their lone active rig, leaving none, same as year ago…at the same time, the rig count offshore from China dropped from 28 rigs to 26, which was still up from 25 rigs in August of 2015…

meanwhile, the Latin American countries netted an increase of 1 rig, after adding 8 rigs in July, in the region’s only increases this year; prior to July, the region had idled 92 rigs over the first 6 months of 2016…in August, Latin America drillers averaged 187 rigs, which included 37 offshore, down from the average of 319 rigs, which included 53 offshore rigs, that were active in Latin America in August of 2015….that single rig increase masked a lot of changes in the individual countries, however, as Brazil, Mexico and Venezuela each added 3 rigs in August…for Brazil, that increase brought them up to 18 rigs, which was still down from the 39 rigs they had in use a year earlier; for Mexico, their increase brought them back up to 26 rigs, which was down from 41 rigs a year earlier and down from the 81 rigs they were running in August of 2014, and for Venezuela, it brought them back to 53 rigs in August, still down from 72 rigs a year earlier…in addition, Colombian drillers added 2 rigs and now have 8 rigs working, but that’s still way down from the 30 rigs they were using last year at this time…offsetting those increases, Argentina’s drillers idled 7 rigs in August, after they had started up 9 rigs in July, which left them with 65 active rigs, down from the 108 rigs that were drilling in Argentina a year earlier…3 other Latin American counties idled one rig: Bolivia cut their count to 4 rigs, which was still up from last years 2 rigs, while Chile cut back to 3 rigs, same as as a year ago, and Trinidad cut back to 3 rigs, down from last year’s 6 rigs..

elsewhere, countries in Africa reduced their net activity by 1 rig in August, leaving 81 rigs still in drilling, down from the 96 rigs working the African continent last year at this time…Angola shut down 1 rig, leaving 4 rigs, which was down from the 8 rigs that they had active a year earlier…Morocco and Tunisia both shut down the only rigs they had active, a cut from 1 rig in Morocco and 2 in Tunisia a year earlier…meanwhile, both Algeria and Nigeria added rigs; that brought the Algerian count up to 56, also up from 52 rigs a year earlier, and brought the Nigerian count back to 6 rigs, down from 9 rigs a year earlier…

and lastly, the net rig count in Europe increased by 2 to 96 rigs in August, which was down from the 109 rigs working in Europe a year ago at this time…Poland saw their rig count double from 4 rigs to 8, which was up from 7 rigs a year earlier…Romania added 2 rigs, so the 5 rigs they were running in August was the same as they had active a year earlier…Turkey also added 2 rigs, and at 31 rigs rigs in August they were up from the 28 rigs they had active a year earlier…both Germany and the Netherlands increased their drilling activity from 2 rigs in July to 3 rigs in August; for the Germans, it was up from 1 a year earlier, while for the Dutch, that was down from last year’s 7 rigs…on the other hand, Norway cut its drilling activity from 20 rigs to 17, still up from 16 rigs a year earlier, and the Czechs idled both of the rigs they had been running over the past 12 months… elsewhere, UK offshore was cut back from 10 rigs to 9, down from 12 platforms offshore a year ago, and Hungary shut down 1 rig, leaving 1 rig, down from 2 rigs a year earlier…..finally, note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China’s offshore area, with an average of 26 rigs active in August, down from 28 from July, were included in the Asian totals here…   

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