US crude production at another record, refinery throughput at a seasonal high; record swing in "unaccounted for oil"

oil prices were heading for a modest drop this week, with both international and US prices still falling on Friday morning, when they inexplicably spiked by more than 2% just before noon, with the US price then ending Friday at $62.34 a barrel, a gain of $1.15 for the day but just 30 cents for week…before that Friday jump, oil prices had been down 68 cents at $61.36 a barrel on Monday, after the EIA’s monthly drilling productivity report forecast a 131 barrel per day increase in crude production from the major U.S. shale plays in April, and then down another 65 cents to $60.71 a barrel on Tuesday, as a falling stock market dragged commodity prices lower…oil prices were then modestly higher on both Wednesday and Thursday, as the weekly EIA report showed both rising inventories of crude oil and falling inventories of fuel

meanwhile, natural gas prices first moved higher on Monday on continued forecasts of late-season cold weather throughout much of the country, but then fell later in the week as reports of higher gas production and signs of winter weather fading weighed on pricesthe weekly storage report also indicated a smaller than expected withdrawal of natural gas supplies from storage, which precipitated a 5 cent drop in prices on Thursday, as April natural gas went on to end the week at $2.688 per mmBTU, 4.4 cents below last week’s close…the week’s natural gas storage report indicated that our natural gas in storage fell by 93 billion cubic feet to 1,625 billion cubic feet over the week ending Friday, March 9th, which left our gas supplies 718 billion cubic feet, or 31.9% lower than the 2,250 billion cubic feet that were in storage on March 10th of last year, and 296 billion cubic feet, or 16.1% below the five-year average of 1828 billion cubic feet typically in storage at the end of the tenth week of the year….the average withdrawal of natural gas during the tenth week of the year over the past 5 years has been 97 billion cubic feet, so even though this was the fourth week in a row where our natural gas withdrawals have been below normal, we haven’t been gaining much against the long term averages…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering the week ending March 9th, indicated that despite a big decrease in our oil imports and a big increase in refining, we apparently still had oil left over to add to storage for the sixth time in seven weeks…our imports of crude oil fell by an average of 418,000 barrels per day to an average of 7,585,000 barrels per day during the week, while our exports of crude oil fell by an average of 11,000 barrels per day to an average of 1,478,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 6,098,000 barrels of per day during the week, 407,000 barrels per day less than out net imports during the prior week…at the same time, field production of crude oil from US wells rose by 12,000 barrels per day to a record high of 10,381,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,479,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,367,000 barrels of crude per day, 432,000 barrels per day more than they used during the prior week, while at the same time 717,000 barrels of oil per day were being added to oil storage facilities in the US….hence, this week’s crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 605,000 barrels per day less than what refineries reported they used plus what was added to storage during the week…to account for that disparity, the EIA needed to insert a (+605,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the 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”… (how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, is explained here)…this was only the second time in 10 years that the adjustment factor was positive by more than 600,000 barrels per day…since that meant there was a record 1,175,000 barrel per day change in that ‘unaccounted for oil’ figure, from -570,000 barrels per day last week to +605,000 barrels per day this week, the week over week changes reported here are correspondingly unreliable…even so, the data as it’s presented here will often drive the price of oil..

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 7,473,000 barrels per day, which was 1.8% less than the 7,608,000 barrel per day average we imported over the same four-week period last year….the 717,000 barrel per day increase in our total crude inventories was all added to our commercial stocks of crude oil, as stocks in our Strategic Petroleum Reserve were unchanged…this week’s 12,000 barrel per day increase in our crude oil production included a 20,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by an 8,000 barrel per day decrease in output from Alaska…the 10,381,000 barrels of crude per day that were produced by US wells during the week ending March 9th was the highest on record, 14.0% more than the 9,109,000 barrels per day that US wells were producing during the week ending March 10th of last year, and 23.2% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016…

US oil refineries were operating at 90.0% of their capacity in using those 16,367,000 barrels of crude per day, up from 88.0% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set ten weeks earlier, as some US refineries are still down due to pre-spring blend changeover and scheduled maintenance…nonetheless, the 16,367,000 barrels of oil that were refined this week was a seasonal record, the first time refineries processed more than 16 million barrels during the usual refinery maintenance season through February and the first three weeks of March…while that high was 7.4% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, it was 5.8% more than the 15,472,000 barrels of crude per day that were being processed during the week ending March 10th, 2017, when refineries, still undergoing seasonal maintenance at that time, were operating at 85.1% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries also rose, increasing by 357,000 barrels per day to 10,280,000 barrels per day during the week ending March 9th, after our gasoline output had increased by 532,000 barrels per day the prior week....that increase meant our gasoline production was 7.8% greater during the week than the 9,540,000 barrels of gasoline that were being produced daily during the week ending March 10th of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 118,000 barrels per day to 4,478,000 barrels per day, after falling by 553,000 barrels per day over the prior 4 weeks…that left the week’s distillates production 4.5% lower than the 4,690,000 barrels of distillates per day than were being produced during the equivalent week of 2017….   

the big increase in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still fell by 6,271,000 barrels to 244,758,000 barrels by March 9th, the largest decrease since September, but just the third draw from stocks in 18 weeks….our supplies were down for a second week because our domestic consumption of gasoline rose by 366,000 barrels per day to 9,642,000 barrels per day, after rising by 416,000 barrels per day the prior week….at the same time, our exports of gasoline rose by 25,000 barrels per day to 785,000 barrels per day, while our imports of gasoline fell by 4,000 barrels per day to 604,000 barrels per day…so even after our gasoline supplies have increased 15 of the last eighteen weeks, our gasoline inventories are now fractionally lower than last March 10th’s level of 246,279,000 barrels, even as they are roughly 7.5% above the 10 year average of gasoline supplies for this time of the year…        

meanwhile, our supplies of distillate fuels fell by 4,360,000 barrels to 133,066,000 barrels over the week ending March 9th, the largest draw since October despite the cold spells in January…in addition to the drop in production, that drop in supplies was because our exports of distillates rose by 477,000 barrels per day to 1,492,000 barrels per day while our imports of distillates fell by 44,000 barrels per day to 223,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 94,000 barrels per day to 3,832,000 barrels per day…after this week’s inventory decrease, our distillate supplies ended the week 15.4% lower than the 157,303,000 barrels that we had stored on March 10th, 2017, and 5.0% lower than the 10 year average of distillates stocks at this time of the year…  

finally, despite the drop in our oil imports up and the increase in refining, we were still able to add to our commercial supplies of crude oil for the 7th time in 17 weeks and for the 16th time in the past year, as our commercial crude supplies increased by 5,022,000 barrels, from 425,906,000 barrels on March 2nd to 430,928,000 barrels on March 9th….but even with increases in six out of the last seven weeks, our oil inventories as of that date were 18.4% below the 528,156,000 barrels of oil we had stored on March 10th of 2017, and 12.4% lower than the 492,160,000 barrels of oil that we had in storage on March 12th of 2016, even as they were still 1.4% greater than the 425,047,000 barrels of oil we had in storage on March 13th of 2015, at a time when the US glut of oil was just beginning to build…   

This Week’s Rig Count

US drilling activity increased for the 4th week in a row and for the 13th time in the past 19 weeks during the week ending March 16th, a period which has seen the rig increases far exceed the few decreases…Baker Hughes reported that the total count of active rotary rigs running in the US rose by 6 rigs to 990 rigs in the week ending on Friday, which was also 201 more rigs than the 789 rigs that were in use as of the March 17th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014… 

the number of rigs drilling for oil rose by 4 rigs to 800 rigs this week, which was 169 more oil rigs than were running a year ago, even while the week’s oil rig count still 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 1 rig to 189 rigs this week, which was also 32 more gas rigs than the 157 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008…in addition, a rig that was considered “miscellaneous” also began drilling this week, in the first such “miscellaneous” rig operating since October 6th, 2017..

drilling in the Gulf of Mexico was unchanged at 13 rigs, the least rigs working in the Gulf this century, & down by 6 rigs from the 19 rigs that were deployed in the Gulf of Mexico a year ago….meanwhile, the week’s count of active horizontal drilling rigs jumped by 17 rigs to 865 horizontal rigs this week, which was also up by 207 rigs from the 658 horizontal rigs that were in use in the US on March 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 vertical rig count was down by 4 rigs to 57 vertical rigs this week, which was also down from the 70 vertical rigs that were in use during the same week of last year…at the same time, the directional rig count was down by 7 rigs to 68 directional rigs this week, which was  still up from the 61 directional rigs that were deployed on March 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 March 16th, the second column shows the change in the number of working rigs between last week’s count (March 9th) and this week’s (March 16th) count, the third column shows last week’s March 9th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 17th of March, 2017…    

March 16 2018 rig count summary

while most of the changes above refer to oil rigs, deployment of natural gas rigs increased by one each in the Haynesville of Louisiana and the Fayetteville of Arkansas, and decreased by one in the Marcellus, with the shutdown of 2 rigs in Pennsylvania, while one was added in West Virginia…meanwhile, the rig that was added in the Utica was an oil rig; hence, of the 24 rigs now working the Utica, 8 are drilling into oil-bearing shale and 16 are targeting wet gas formations…in addition to the major producing states shown above, a rig also began drilling for oil in Nevada this week in the first drilling the state has seen in over a year…

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