April OPEC report shows global oil glut still growing; US oil refining at a seasonal record

oil prices again tracked higher this week, as saber rattling about Syria had traders weighing geopolitical risks in the Middle East in addition to the usual oil supply issues of OPEC’s production cuts and increasing US oil production…after closing last week at a one-month high of $52.24 a barrel, US oil prices for May delivery moved up steadily all day Monday to finish the day at $53.08 a barrel, as hedge funds turned bullish on crude after 5 weeks of liquidating their positions…oil prices rose again on Tuesday morning on headlines of a possible OPEC production cut extension, and then extended their gains after the American Petroleum Institute reported an across the board drawdown of crude and refined products supplies, ending the day at $53.40 a barrel…prices moved higher again Wednesday morning, trading as high as $53.71 a barrel, before pulling back after the weekly EIA showed increasing stockpiles at the U.S. crude hub at Cushing, Oklahoma, and a 20 month high for US crude production, and ended the day down 29 cents at $53.11 a barrel, the first daily price decrease in 8 sessions…prices then inched back up on Thursday, closing 7 cents higher at $53.18 a barrel, despite news of a still rising rig count, as the IEA (International Energy Agency) reported that the global oil market was probably already balanced, as oil inventories were falling in many parts of the world and have started to decline in the OECD as well

OPEC’s April report

since the OPEC April Oil Market Report (covering March OPEC & global data) was out this week, and since their production cuts are ultimately underpinning higher roil prices and hence increased US drilling, we’ll take a look at that report first….the first table from that report that we’ll include here is from page 62 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled…for all their official production measurements, OPEC uses data from these “secondary sources”, such as analyst’s reports from satellites and shipping data, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures…

March 2017 OPEC cude output via secondary sources

here we can see that this official data shows that OPEC production was down by 152,700 barrels per day to 31,928,000 barrels per day in March, from a February oil production total of 32,081,000 barrels per day that was revised 123,000 barrels per day higher than what was reported last month…(for your reference, here is the table of the official February figures before these revisions)…recall that OPEC committed to reducing their production by 1.2 million barrels per day from their October levels (shown here, with Indonesia, who is no longer a member), so these figures show that the total production of the remaining 13 members is pretty close to the level they agreed to cut back to….but note that over 90 thousand barrels of this month’s reduction came from Nigeria and Libya, the two OPEC nations that were exempt from the cuts, because their production was reduced by domestic unrest…both counties had renewed disruptions in March, but should their problems be overcome, their potential production would be enough to reverse the rest of OPEC’s cuts…

next, we’ll include a graph of the total OPEC oil output for all 13 members included in this report, so we can see how this month’s production stacks up compared to historical figures…

March 2017 OPEC’s crude oil production graph

the above graph, taken from the ‘OPEC March Crude Oil Date” post at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to March 2017, using the same official data from secondary sources as in the table above…obviously, we can see that March OPEC production of 31,928,000 barrels per day is down quite a bit from their record production of 33,374,000 million barrels per day in November, a level achieved during their production run-up before the agreement was reached…but note that their current production is still somewhat more than what they were producing between February and May of 2016, and every other month before that, including last January…indeed, when we check the March 2016 production data in last April’s OPEC Oil Market Report, we find that OPEC production for that month minus the output of Indonesia comes in at 31,526,000 barrels per day….that means that their March production of 31,928,000 barrels per day this year is actually 1.3% higher than in March a year ago, despite the well orchestrated ‘cuts’ from the elevated levels of October..

this next graphic we’ll include shows us both OPEC and world oil production monthly on the same graph, from April 2015 to March 2017, and it comes from page 63 of the April OPEC Monthly Oil Market Report…the light 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 metrics for that shown on the right scale…global oil production slipped to 95.82 million barrels per day in March, down by 0.23 million barrels per day from February but up by 0.22 million barrels per day from March a year ago…OPEC’s production of 31,928,000 barrels per day thus represented 33.3% of what was produced globally, a statistically insignificant decrease from the 33.3% OPEC share in February and down from a 33.5% global share in January…but even with the three months of production cuts we can obviously see on this graph, there is still a surplus of oil supply globally, as the next table that we’ll include will show us.. 

April 2017 OPEC report, global output for March

the table below comes from page 37 of the April OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC’s forecast for oil demand by region and globally over 2017 over the rest of the table…on the “Total world” line of the second column, we’ve circled in blue the figure we’re interested in, which is the estimate for global oil demand over the first quarter of 2017…

April 2017 OPEC report, global oil demand

OPEC’s estimate is that during the first three months of this year, all oil consuming areas of the globe used 95.39 million barrels of oil per day, up from the 95.05 millions of barrels of oil per day they were using in 2016…but as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with their production cuts, the world’s oil producers were still producing 95.82 million barrels per day during March…that means that even after all the production cuts have taken place, there continued to be a surplus of around 430,000 barrels per day in global oil production in March…in addition, global production for February was revised higher, to 96.05 million barrels per day, so the global oil surplus during February was therefore around 660,000 barrels per day…and as we showed two months ago, using figures from the February report, there was also an excess of nearly a million barrels per day in global oil production in January…clearly, from these figures, oil supply is not yet balanced with demand, and those who say it is are just talking their book and not looking at the data…

The Latest Oil Data from the EIA


the oil data for the week ending April 7th from the US Energy Information Administration showed that an increase in our exports of crude oil coupled with another large increase in our oil refining meant that we had to take oil out of storage to meet those needs for only the 2nd time in the past 14 weeks…our imports of crude oil increased by an average of 28,000 barrels per day to an average of 7,878,000 barrels per day during the week, while at the same time our exports of crude oil rose by 114,000 barrels per day to an average of 689,000 barrels per day, which meant that our effective imports netted out to 7,189,000 barrels per day during the week, 86,000 barrels per day less than the prior week…at the same time, our crude oil production rose by 36,000 barrels per day to an average of 9,235,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,424,000 barrels per day during the cited week…

meanwhile, refineries reportedly used 16,697,000 barrels of crude per day, 268,000 barrels per day more than they used during the prior week, while at the same time, 399,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s EIA oil figures would seem to indicate that refineries used 126,000 less barrels of oil per day than were supplied by what we took out of storage plus our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom -126,000 barrel per day figure onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil”, which means they got that balance sheet number by backing into it, using the same arithmetic we just used in explaining it...

the weekly Petroleum Status Report also indicates that the 4 week average of our oil imports rose to an average of 8,065,000 barrels per day, now 3.0% above the imports of the same four-week period last year, and that the 4 week average of our oil exports slipped to 706,000 barrels per day, 94.5% higher than the same 4 weeks a year earlier, since we had barely started overseas exports of surplus light crude oil in early 2016…the 399,000 barrel per day decrease in our crude inventories came about on a 309,000 barrel per day withdrawal from our commercially available crude oil stores and a 89,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 18 months ago

meanwhile, this week’s 36,000 barrel per day oil production increase resulted from a 35,000 barrel per day increase in oil output from the lower 48 states and a 1,000 barrels per day increase in oil output from Alaska…the 9,235,000 barrels of crude per day that we produced during the week ending April 7th was up by 5.3% from the 8,770,000 barrels per day were producing at the end of 2016, and the most we’ve produced since the 2nd week of January 2016…while the week’s production was up by 2.9% from the 8,977,000 barrel per day output during the during week ending April 8th a year ago, it was still 3.9% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US oil refineries were operating at 91.0% of their capacity in using those 16,697,000 barrels of crude per day, up from 90.8% of capacity the prior week, but still down from the year high of 93.6% of capacity in the first week of January, when they were processing 17,107,000 barrels of crude per day…however the quantity of crude oil processed by US refineries was a Spring-time record, just topping the 16,695,000 barrels of crude per day that were being refined during the week ending June 24th last year…since we’ve had quite a ramp in the amount of crude that US refineries have been processing over recent weeks, which directly led to the first drawdown of crude supplies in 6 weeks, we’ll take a look at a graph of that to see how it compares to the historical norm…

APril 12 2017 refinery througput for April 7

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters…this graph shows US refinery throughput in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our refinery throughput on any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year…the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, and our year to date oil refining during 2017 represented in red…from this we can there is an obvious seasonal swing for oil refining, with demand for their products highest in the summer and again around the holidays, but we can still see that for most all of 2016 and through most of 2017, oil refining was either at seasonal record highs or near the top of the average range…we can also see that although refining slipped below last year’s pace earlier this year, we’ve had quite a increase in oil refining over the past four weeks, as US refinery throughput surged 7.9%, from 15,472,000 barrels per day March 10th to this week’s seasonal record of 16,697,000 barrels of crude per day…that was 4.7% more than the 15,941,000 barrels per day that were being refined during the week ending April 8th last year, when refineries were running at 89.2% of capacity…

with the week’s refining increase, gasoline production from our refineries increased by 412,000 barrels per day to 9,927,000 barrels per day during the week ending April 7th, which was 3.9% more than the 9,568,000 barrels per day of gasoline that were being produced during the comparable week a year ago….in addition, refineries’ production of distillate fuels (diesel fuel and heat oil) also increased by 93,000 barrels per day to 5,060,000 barrels per day, which was 5.8% more than the 4,784,000 barrels per day of distillates that were being produced during the week ending April 8th last year…

however, even with the big jump in our gasoline production, the EIA reported that our gasoline inventories still shrunk by 2,973,000 barrels to 236,130,000 barrels as of April 7th, after they had already dropped by almost 16.8 million barrels over the prior 5 weeks….that was because our gasoline exports rose by 121,000 barrels per day to 710,000 barrels per day and because our imports of gasoline fell by 119,000 barrels per day to 488,000 barrels per day, while our domestic consumption of gasoline inched up by 30,000 barrels per day to 9,275,000 barrels per day…while our gasoline supplies are now down by nearly 23 million barrels from the record high set 8 weeks ago, they’re still just 1.5% lower than last April 8th’s inventories of 243,998,000 barrels, and are still 3.6% above the 227,873,000 barrels of gasoline we had stored on April 10th of 2015…

in like manner, even with the increase in distillate’s production, our supplies of distillate fuels also fell during the week, decreasing by 2,153,000 barrels to 150,221,000 barrels by April 7th, as the amount of distillates supplied to US markets, a proxy for our consumption, increased by 537,000 barrels per day to 4,635,000 barrels per day, even as our exports of distillates fell by 226,000 barrels per day to 851,000 barrels per day and as our imports of distillates fell by 11,000 barrels per day to 118,000 barrels per day at the same time….while our distillate inventories are now 8.1% below the record distillate inventories of 163,489,000 barrels that we had stored on April 8th 2016, following last year’s warm El Nino winter, they are still 16.5% higher than the distillate inventories of 128,941,000 barrels that we had stored on April 10th of 2015, following a more normal winter… 

finally, our commercial inventories of crude oil fell for only the 2nd time in the past 14 weeks, decreasing by 2,166,000 barrels to 533,377,000 barrels as of April 7th….at the same time, 625,000 barrels of oil from our Strategic Petroleum Reserve was sold, which left inventories in the SPR at 691,510,000 barrels, oil that’s not considered available for commercial use….thus, for commercial purposes, we still finished the week ending April 7th with 11.3% more crude oil in storage than the 479,012,000 barrels we had stored at the end of 2016, 5.6% more crude oil in storage than what was then a record 505,232,000 barrels of oil in storage on April 8th of 2016, 18.3% more crude than what was also then a record 450,956,000 barrels in storage on April 10th of 2015, and 47.2% more crude than the 362,354,000 barrels of oil we had in storage on April 11th of 2014…

This Week’s Rig Count

Baker Hughes released this week’s rig count data on Thursday because of the Friday holiday…nonetheless, drilling activity still increased for the 23rd time in the past 24 weeks during this shortened week, although the 5 week string of double digit rig count increases did come to an end…Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 847 rigs in the 6 day week ending on Thursday April 13th, which was 407 more rigs than the 440 rigs that were deployed as of the April 15th report in 2016, and the most drilling rigs we’ve had running since September 11th, 2015, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil increased by 11 rigs to 683 rigs this week, which was up by 332 from the 351 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 24th 2016, while it was still way down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations fell by 3 rigs to 162 rigs this week, which was still up from the 89 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…in addition, there were also 2 rigs in use that were classified as miscellaneous, compared to a year ago, when there were no such miscellaneous rigs at work… 

one drilling platform that had been working offshore from Louisiana in the Gulf of Mexico was shut down this week, which left 21 offshore rigs still drilling in the Gulf, down from 27 in the Gulf of Mexico a year earlier….that was also down from the total of 28 offshore rigs that were deployed a year ago, as there was also an drilling platform working in the Cook Inlet offshore from Alaska last year at this time…in addition, one of the rigs that had been drilling in an inland lake in Louisiana was also idled this week, which still left 3 rigs working on inland waters, all in Louisiana, the same as the number as were deployed on inland waters on April 15th of 2016…

active horizontal drilling rigs increased by 11 rigs to 706 rigs this week, which was well more than double the 335 horizontal rigs that were in use in the US on April 15th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, a net of 4 vertical rigs were added this week, bringing the vertical rig count up to 77, up from the 54 vertical rigs that were deployed during the same week last year….however, 7 directional rigs were pulled out this week, reducing the directional rig count down to 64 rigs, which was still up from the 51 directional rigs that were deployed during the same week a year ago…

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 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 April 13th, the second column shows the change in the number of working rigs between last week’s count (April 7th) and this week’s (April 13th) count, the third column shows last week’s April 7th active rig count, the 4th column shows the change between the number of rigs running on Thursday and the equivalent Friday 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 for the 15th of April, 2016…  

April 13 2017 rig count summary

although increased drilling in the Permian by itself accounted for the week’s 8 rig increase, it wasn’t Texas that saw the added burden this week, as apparently 7 of the new Permian rigs were set up across the state line in southeast New Mexico…Texas only saw a 2 rig increase, which necessarily included the 3 rig increase in the south Texas Eagle Ford, while rigs were pulled out of the portions of the Granite Wash and the Haynesville that lie in the state…also note that another natural gas rig was added in the Utica shale of Ohio, which brings the Utica count up to 23 rigs, up from 12 rigs a year ago…other than the 3 rig increase in Oklahoma, 2 of which were set up in the Cana Woodford, the big change we don’t see in the table above was in Mississippi, where 3 of the 5 rigs that had been operating in the state were pulled out….the two rigs remaining in Mississippi were the same number that were working in the state on April 15th of last year…

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