oil tops $50, natgas prices at 21 mo high, gasoline imports hit 41 mo high, global rigs for Sept, et al

oil prices rose to a four month high on Thursday before falling back on Friday, while natural gas prices rose nearly 15 cents on Friday alone to end the week at $3.198, a 21 month high…underpinned early in the week by last week’s OPEC agreement to make an agreement, US oil price rose 76 cents on Monday to close at 48.81 a barrel…then, after a flurry of negative articles about OPEC’s deal, oil prices fell by more than 50 cents on Tuesday morning, only to rally to close at $48.69 a barrel after the American Petroleum Institute reported yet another “shockingly large” drop in US crude oil supplies, when markets were expecting an increase…prices continued to rise on Wednesday, then closed at $49.83 a barrel after government data showed that U.S. crude stockpiles had indeed dropped last week, though not quite as much as the API had reported…that rally on falling supplies carried through to Thursday, when U.S. oil prices closed at $50.44 a barrel, the first close above the $50 level since June…US crude then slid 63 cents to $49.81 on Friday, as oil traders reportedly cashed in their quick profits, with oil prices by that point up more than 12% in the prior 7 trading sessions…

natural gas prices, meanwhile, had been riding near the upper end of their 4 month $2.60 to $3.00 per mmBTU range over the last 2 weeks on continued forecasts of above normal temperatures for most of the US, as traders interpreted those forecasts to indicate greater than normal power consumption for air conditioning…after closing at $2.923 per mmBTU on Monday and $2.964 per mmBTU on Tuesday,  natural gas prices rose to $3.041 per mmBTU on Wednesday, after the winter outlook from the Natural Gas Supply Association forecast this winter to be 12% colder than a year-ago and otherwise made a bullish case for gas prices….after inching up less than a penny to close at $3.049 on Thursday, natural gas prices then rose to close the week at 3.198 per mmBTU on forecasts of unseasonably warm weather in the US from October 12th to the 21st, and expectations that power outages from Hurricane Matthew would not be as great as feared

The Latest Oil Stats from the EIA

the oil data for the week ending September 30th from the US Energy Information Administration once again showed cutbacks in both oil imports and refining activity, and unusually large drawdowns in supplies of crude oil and distillates for this time of year, leading to the largest drop in aggregate supplies of oil and products since hurricane Hermite disrupted transportation in the Gulf 5 weeks ago…that was as the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung to -130,000 barrels per day, from last week’s +240,000 barrels per day, which means that 130,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final oil consumption or inventory figures, meaning one or several of this week’s metrics were off by that amount…however, the 4 week average of this statistical adjustment remained at a modest +23,000 barrels per day, so at least most of the oil that disappears from the statistics one week seems to be finding its way back into the data in subsequent weeks…

for the week ending September 30th, the EIA reported that production of crude oil from US wells fell by 30,000 barrels per day to an average of 8,467,000 barrels per day, as output from Alaskan oil rose by 8,000 barrels per day while production from the lower 48 states was 38,000 barrels per day lower, the first decrease in continental US production in 4 weeks….that left the week’s domestic oil production 7.7% lower than the 9,172,000 barrels we produced during the week ending October 2nd of last year, and 11.9% below the record 9,610,000 barrels  per day of oil production that we saw during the week ending June 5th last  year…our oil production for the week ending September 30th is now 752,000 barrels per day lower than what we were producing at the beginning of this year, an interim peak after our production had general been rising in the last few months of 2015…

meanwhile, the EIA reported that our imports of crude oil fell by an average of 125,000 barrels per day to an average of 7,710,000 barrels per day during the week ending September 30th, which was a 9.1% increase from the 7,068,000 barrels of oil per day we imported during the corresponding week a year ago…oddly, that decrease actually increased the 4 week average of our oil imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) to  an average of 8.0 million barrels per day, 10.1% higher than the same four-week period last year, because the year’s low for oil imports that had occurred as Hermine moved through the Gulf and up the coast dropped out of the average… meanwhile, our exports of crude oil were also down, dropping by an average of 67,000 barrels per day to an average of 440,000 barrels per day for the week,16.4% less than last year’s exports of 526,000 barrels per day in the same week, at a time when these volatile weekly export estimates were less reliable..

at the same time, the amount of crude oil used by US refineries fell by an average of 302,000 barrels per day to an average of 16,032,000 barrels of crude per day during the week ending September 30th, the fourth significant refining cutback in a row and the largest since April, as the US refinery utilization rate fell to 88.3% for the week, down from 90.1% of capacity the prior week, but up from the refinery utilization rate of 87.5% seen during the week ending October 2nd last year…US oil refining is now down by 896,000 barrels per day, or 5.3%, in the 4 weeks since Labor Day, as the refinery utilization rate has dropped from 93.7% over that span …nonetheless, the crude refined this week nationally was still 3.0% more than the 15,559,000 barrels of crude per day US refineries used during the week ending October 2nd last year, and 3.1% more than was refined during the equivalent week in 2014 …    

oddly, even with that large reported drop in the amount of oil used by refineries, their output of both gasoline and distillates was reported higher during the week ending September 30th, following reports for the week ending September 23rd when the drop in both gasoline and distillates output was far in excess of the drop in oil used…that suggests to me that the output of some of last week’s refinery runs got shifted into this week’s data…whatever the case, the EIA reported that refineries’ production of gasoline rose by 433,000 barrels per day to 9,988,000 barrels per day during the week ending September 30th, the largest increase in gasoline output since the week ending June 17th…our gasoline output was also 7.3% higher than the gasoline output of 9,306,000 barrels per day during the week ending October 2nd last year, and 12.6% higher than the gasoline production during the equivalent week of 2014….at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also rose a bit, from 4,709,000 barrels per day during the week ending September 23rd to 4,713,000 barrels per day during the week ending September 30th….however, that still left our distillates output 7.1% less than the 5,071,000 barrels per day that was being produced during the same week last year, and 0.7% less than the 4,748,000 barrels per day of distillates production during the equivalent week of 2014…  

with the increase in gasoline production, our gasoline supplies rose by a modest 222,000 barrels to 227,405,000 barrels as of September 30th, as our domestic demand for gasoline rose by 510,000 barrels per day to 9,390,000 barrels per day and our gasoline imports rose by 225,000 barrels per day to a 41 month record of 1,003,000 barrels per day…probably contributing to both of those unusual increases was the shut down of the leaking Colonial Pipeline during that week, which normally delivers gasoline from the Gulf Coast to the east coast states…fearing shortages of gasoline, drivers in Tennessee, Virginia, Georgia, South Carolina, Alabama and North Carolina were reported lining up for extra gasoline, while the gasoline wholesalers turned to imports from Canada and overseas to meet the shortage…the result left the week’s gasoline inventories 1.6% higher than the 223,920,000 barrels of gasoline that we had stored on October 2nd last year, and 8.5% higher than the 209,668,000 barrels of gasoline we had stored on October 3rd of 2014… meanwhile, our distillate fuel inventories fell by 2,359,000 barrels to 160,718,000 barrels by September 30th, which nonetheless still left our distillate inventories 7.8% above the distillate inventories of 149,150,000 barrels of October 2nd last  year, and 27.4% above the distillate inventories of 126,140,000 barrels of October 3rd 2014….

lastly, even though the drop in oil demand from refineries exceeded the drop in supply, our inventories of crude oil still fell by 2,976,000 barrels to 499,740,000 barrels as of September 30th, the 5th consecutive drop in our oil supplies and the first time our oil inventories fell below a half billion barrels since the end of January (NB they’d never been above a half billion barrels before this year)…our oil supplies have thus fallen 5.0% over 5 weeks at a time of year when supplies usually rise, and are down 9.0% from their April 29th peak of 543,394,000 barrels…nonetheless, we still ended the week with 8.4% more crude oil in storage than the 460,997,000 barrels we had stored as of the same weekend a year earlier, and 38.2% more crude oil than the 361,650,000 barrels we had stored on October 3rd 2014… 

This Week’s Rig Count

US drilling activity increased for the 3rd week in a row during the week ending October 7th and has now increased 16 out of the last 19 weeks, after a 39 week stretch that hadn’t seen any increases…Baker Hughes reported that the total count of active rotary rigs running in the US rose by 2 rigs to 524 rigs by Friday, which was still down from the 795 rigs that were deployed as of the October 9th 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 rose by 3 rigs to 428 rigs this week, and oil rigs have now been rising for 16 weeks without a retreat, but they’re still down from the 605 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations fell by 2 rigs to 94 rigs, which left gas directed rigs down from the 189 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…a single rig that was classified as miscellaneous was also added this week, and now there are two such, up from the single miscellaneous rig that was deployed a year ago..

of the water based rig changes this week, an offshore rig was started on a drilling platform offshore from Louisiana, which brought the Gulf of Mexico rig count up to 22, which was still down from the 31 rigs that were working in the Gulf of Mexico last year at this time, and which brought the total US offshore count up to 23 rigs, down from 32 offshore rigs a year ago, as we still have a rig offshore from Alaska..at the same time, 2 rigs which had been drilling through inland lakes in southern Louisiana were shut down, which left just one rig drilling through inland waters, down from 3 such inland waters rigs a year ago..

the number of working horizontal drilling rigs rose by 6 rigs to 413 rigs this week, which was still down from the 598 horizontal rigs that were in use on October 9th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…meanwhile, the vertical rig count fell by 3 rigs to 61 rigs this week, which was down from the 114 vertical rigs that were drilling in the US during the same week last year…at the same time, a single directional drilling rig was also pulled out, leaving 50 directional rigs still working, which was also down from the 83 directional rigs that were deployed during the same week last year…

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 from Baker Hughes which shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of October 7th, the second column shows the change in the number of working rigs between last week (September 30th) and this week (October 7th), the third column shows last week’s September 30th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday 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 for October 9th of 2015:         

October 7 2016 rig count summary

once again, we have a week with very little changed in drilling activity; only Texas and Oklahoma saw the addition of as many as 2 rigs, and only the Barnett shale of the Dallas-Ft Worth area saw that large of an increase, while no state or basin saw a rig count reduction greater than 1…we should note that of the states not shown above, both Alabama and Mississippi also saw one rig shut down this week, which left Alabama with 1 rig still working, down from 3 rigs a year ago, and left Mississippi with 2 working rigs, down from 5 rigs last October 9th…in addition, Indiana saw a rig start operating in the state for the first time since June; except for the 5 week period entailed by that occasion, Indiana had not seen drilling over the 17 months prior to this week…

International Rig Counts for September

Baker Hughes also released the international rig counts for September this week, 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 1,584 rigs were drilling for oil and natural gas around the globe in September, which was up from the 1,547 rigs that were drilling around the globe in August, but down from the 2,171 rigs that were working globally in September of last year…increased North American drilling again accounted for the global increase, as the average US rig count rose from 481 rigs in August to 509 rigs in September, which was still down from the average of 848 rigs working in the US in September a year ago, while the average Canadian rig count rose from 129 rigs in August to 141 rigs in September, again still down from the 183 Canadian rigs that were deployed in September a year earlier….outside of Northern America, the International rig count fell by 3 rigs to 934 rigs in September, which was also down from 1,140 rigs a year ago, as increases in drilling in the Middle East and Latin American regions were more than offset by decreases elsewhere.. 

drilling activity in the Middle East rose for just the 3rd time in the past 9 months, as countries included in this region added a net of 7 rigs, bringing their average up to 386 rigs for the month, which was still down a bit from the 396 rigs deployed in the Middle East a year earlier….the largest regional drilling increase was in Qatar, where their active rig count rose from 5 rigs in August to 9 rigs in September, which was also up from the 6 rigs they had deployed in Qatar in September a year ago…both Iraq and Dubai added two rigs in September; that brought the Iraqi count up to 40 rigs, which was still down from last year’s 49, and brought Dubai’s count up to 4 rigs, which was up from 2 rigs last September…other countries seeing changes in activity in the Middle East included Kuwait, where their count rose by 1 rig to 48, which was up from the 43 rigs they had deployed last year at this time, Egypt, where they idled a rig, leaving 26 rigs, also down from last year’s 38 rigs, and Oman, where they also idled a single rig, leaving 64 rigs active in September, down from the 66 rigs they were runnng in September a year ago…the Saudi rig count, meanwhile, was unchanged at 124, which was down from 125 rigs a year ago…the Saudi count has averaged ~125 rigs since early 2015, which was up from their average of around 105 rigs in 2014, so they really did make an effort to increase their production after the November 2014 OPEC meeting, as they said they would

meanwhile, the Latin American countries netted an increase of 2 rigs, thus increasing their activity by 11 rigs over the past 3 months, after the region had idled 92 rigs over the first 6 months of 2016…in September, Latin America drillers averaged 189 active rigs, which included 38 offshore, down from their average of 321 rigs, which included 55 offshore rigs, that were active in Latin America in September of 2015…once again, the small net increase masked a number of changes in the individual countries, however, as Argentina increased their active drilling by 5 rigs to 70 rigs, after they had idled 7 rigs in August, which thus left them down from the 110 rigs they had deployed in September of 2015…Ecuador added 2 rigs, bringing their count up to 6 rigs, which was still down from 11 rigs a year earlier…Bolivia also added a rig; they now have 5 active, still down from last year’s 6 rigs…Latin American countries cutting rigs in September included Venezuela, where they were down 2 rigs to 51 rigs, also down from 75 rigs a year earlier; Columbia, where they also cut 2 rigs, leaving 6 rigs, down from 26 rigs a year earlier; Mexico, where they were down 1 rig to 25, which was also down from 38 rigs a year earlier, and Chile, where their current 2 rig count matches their year ago activity..

at the same time, the Asia-Pacific region had 190 rigs working in September, down from the 194 rigs they had deployed in August, and down from the 218 rigs working the region a year earlier, as the Asia-Pacific offshore rig count also fell by four rigs to 88….Australia idled 2 of the 3 rigs they added in August and hence are back to 4 rigs, down from the 16 rigs they had working a year earlier…Thailand also idled two rigs in September, leaving 11 still working, down from 18 rigs a year ago…Vietnam, Malaysia, and the Philippines each stacked 1 rig; that left Vietnam with 4 rigs working, up from 3 a year earlier, left Malaysia with 3 rigs, down from last year’s 9 rigs, and left the Philippines with 2 rigs, still up from the single rig they had deplored last September…at the same time, the rig count offshore from China increased from 26 rigs to 29, which was also up from the 28 platforms sited offshore of China in September of 2015…

elsewhere, countries in Africa also reduced their net activity by 4 rigs, leaving 77 rigs still drilling, down from the 96 rigs working the African continent last year at this time…Algeria shut down 3 rigs, leaving 53 rigs still working, which was nonetheless up from the 51 rigs that they had active a year earlier…in addition, both Congo and Nigeria idled rigs; that left Congo with none, down from 1 rig a year earlier, and cut the Nigerian count back to 5 rigs, down from 10 rigs a year earlier…at the same time, Morocco set up a single rig, their only one for now, down from 2 a year earlier..

and lastly, the net rig count in Europe also dropped by 4 rigs to 92 rigs in September, which was down from the 109 rigs working in Europe a year ago at this time…Germany and Turkey both stopped 2 rigs; in Germany, that left them with 1 rig active, same as a year ago, and in Turkey, it left 29 rigs still running, up from 28 in September of 2015…in addition, Italy and Norway each idled one rig, that left Italy with 3 rigs active, down from last year’s 4 rigs, and left Norway with 16 rigs running, down from 17 last September…meanwhile, both Romania and Denmark added a rig in September, for Romania, that brought them up to 6 rigs, down from 8 rigs a year earlier, while for Denmark, it was their first rig after 2 months without drilling; a year ago, Denmark had 4 rigs working….finally, note that Iranian, Russian, and Chinese rig counts are not included in Baker Hughes international data, although you might have noted that China’s offshore area, with an average of 29 rigs active in September, up from 26 in August, were included in the Asian totals here…   

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