it appears that US natural gas supplies will start this winter at a 15 year low, & maybe even lower than that

oil prices fell for the first time in three weeks this week, as anxiety about the economic impact of worsening trade wars overwhelmed concerns about Iran sanction related supply issues…after rising 1.6% to $69.80 a barrel last week and not trading on Labor Day, October contracts for US light sweet crude jumped to as high as $71.40 a barrel on Tuesday when Gulf Coast platforms were shut down in advance of tropical storm Gordon, but fell back to close the day just 7 cents higher at $69.87 a barrel, weighed down by a stronger dollar and a report of higher crude supplies at the Cushing OK terminalwhen the storm weakened and moved away from oil-producing areas with little apparent impact, oil prices fell $1.15 to $68.72 a barrel on Wednesday, as concerns mounted about the economic impact of global trade disputes…with a Trump deadline on Chinese tariffs looming, oil prices extended those losses on Thursday, initially lower on an API report of a smaller than expected crude draw and continued lower on the EIA report of surging fuel supplies, with crude for October delivery settling 1.4% lower at $67.64 a barrel…oil prices were marginally lower again on Friday, as signs of tightening U.S. oil output were offset by a stronger dollar and fears rising U.S.-China trade tensions could hamper oil demand, with oil prices ending nearly 3% lower for the week at $67.75 a barrel

natural gas prices were also lower this week, despite the heat wave that sat over the heavily populated Northeastern US all week, with natural gas prices for October delivery falling 9.3 cents on Tuesday, 2.8 cents on Wednesday, and 2.3 cents on Thursday before rising four-tenths of a cent on Friday and ending the week 4.8% lower at $2.776 per mmBTU….moreover, despite the precarious winter supply situation, natural gas for January delivery didn’t fare any better, falling 14.9 cents for the week to end at 2.965 per mmBTU, the lowest close for that contract since Spring….either natural gas traders know something we don’t, or a lot of people are going to end up on the wrong side of that trade…

this week’s EIA natural gas storage report for week ending August 31st (hence not yet including this week’s heat wave) indicated that natural gas in storage in the US rose by 63 billion cubic feet to 2,568 billion cubic feet during that cited week, which still left our gas supplies 643 billion cubic feet, or 20.0% below the 3,211 billion cubic feet that were in storage on September 1st of last year, and 590 billion cubic feet, or 18.5% below the five-year average of 3,158 billion cubic feet of natural gas that are typically in storage at the end of August….this week’s 63 billion cubic feet increase in natural gas supplies was slightly more than an S&P Global Platts’ survey of analysts calling for a 60 billion cubic feet increase, but it was slightly below the 65 billion cubic foot average of natural gas that are typically added to storage during the last week of August in recent years, the eighth such below average inventory increase in the past nine weeks…once again, almost all of this week’s increase was added to natural gas storage facilities in the Midwest, which saw a 32 billion cubic feet increase, and in the East, where supplies increased by 22 billion cubic feet…just 5 billion cubic feet cubic feet of gas were added to storage in the Pacific region, where  natural gas supplies are 24.1% below normal for this time of year, while the South Central region actually saw a billion cubic feet pulled out of storage, as their natural gas storage deficit rose to 22.9% below their five-year average..

natural gas usually needs to be withdrawn from storage for heating starting around the first full week of November, so that means we most likely have 9 more weeks of the so-called natural gas ‘injection season’ to build our gas inventories before winter…over the last five years, we’ve averaged 3,835 billion cubic feet of natural gas in storage heading into winter at that first weekend in November, and that average seems to be close to the average of the last decade as well…scanning over the historical natural gas storage archive files (xls), we just find a few times over the last dozen years when gas supplies were substantially below that level going into winter; November 7th of 2014, when supplies managed to recover to 3,611 billion cubic feet after that year’s polar vortex winter; November 7th 2008, when supplies fell to 3,472 billion cubic feet, and November 8th 2007, when supplies were at 3,540 billion cubic feet before wintertime withdrawals began….thus, with our natural gas supplies starting September at 2,568 billion cubic feet, we would have to add a nearly impossible 116 billion cubic feet per week before the first weekend in November merely to avoid having our winter gas supplies fall to a 10 year low…moreover, to beat the 2008 nadir, we would still need to add more than 100 billion cubic feet a week…looking at the xls record of recent years, we added 479 billion cubic feet, or just 53 billion cubic feet per week, over the same 9 weeks of 2017; we added 610 billion cubic feet, or 61 billion cubic feet per week in the ten weeks through November 11 of 2016, and we added 723 billion cubic feet, or 80 billion cubic feet per week, during the corresponding 9 weeks of the injection season in 2015…those numbers certain suggest it’s highly unlikely that we could add 100 billion cubic feet per week of natural gas to storage for the rest of this injection season, so bettering 2008 seems out of the question…based on the averages of the last 3 years, we’ll probably add about 65 billion cubic feet per week over the next nine weeks, and show about 3153 billion cubic feet of natural gas in storage on November 2nd, which probably means we’ll be going into winter with our natural gas supplies near the 3187 billion cubic feet of gas we had stored on November 7th 2003, which would thus be a 15 year low…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering the week ending August 31st, showed that despite a sizable increase in our net oil imports, we withdrew more oil from our commercial crude supplies to meet the needs of our refineries for the seventeenth time in the past thirty-two weeks, because the “unaccounted for crude” factor switched from the supply side of the crude oil balance sheet to the consumption the side of it… our imports of crude oil rose by an average of 229,000 barrels per day to an average of 7,714,000 barrels per day, after falling by an average of 1,529,000 barrels per day over the prior 2 weeks, while our exports of crude oil fell by an average of 271,000 barrels per day to an average of 1,508,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 6,206,000 barrels of per day during the week ending August 31st, 500,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly unchanged at a record 11,000,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,206,000 barrels per day during the reporting week… 

meanwhile, US oil refineries were using 17,647,000 barrels of crude per day during the week ending August 31st, 81,000 barrels per day more than the amount of oil they used during the prior week, while over the same period 615,000 barrels of oil per day were reportedly being pulled out of the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 179,000 more barrels per day than what refineries reported they used during the week….to account for that disparity between the supply of oil and the disposition of it, the EIA needed to insert a (-179,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily 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”…since that “unaccounted for crude” figure was at +493,000 barrels per day during the prior week, the 667,000 barrel per day swing in that metric from last week explains how withdrawals from storage would rise despite higher net imports, while it also means that week over week changes for one or more of this week’s EIA oil metrics must be in error by a statistically significant amount..(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)…. 

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 7,933,000 barrels per day, still fractionally less than the 7,976,000 barrel per day average that we were importing over the same four-week period last year….the 615,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged, even as a sale of 11 million barrels from those reserves to Exxon et al was closed at the end of the week….this week’s crude oil production was reported as being unchanged at 11,000,000 barrels per day despite a rounded 100,000 barrels per day increase to 10,600,000 barrels per day in the output from wells in the lower 48 states, because oil output from Alaska fell by 16,000 barrels per day, which was enough to keep the national total, which is now being rounded to the nearest 100,000 barrels per day, unchanged at 11,000,000 barrels per day….US crude oil production for the week ending September 1st 2017 had been reduced to 8,781,000 barrels per day by Hurricane Harvey, so this week’s rounded oil production figure was roughly 25.3% above that of a year ago, and 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 96.6% of their capacity in using 17,647,000 barrels of crude per day during the week ending August 31st, up from 96.3% the prior week and well above normal, even for this time of year….the 17,647,000 barrels per day of oil that were refined this week were again at a seasonal high, for the 13th out of the past 14 weeks, but not directly comparable to the 14,472,000 barrels of crude per day that were processed during the week ending September 1st 2017, when US refineries were operating at just 79.7% of capacity, because Gulf Coast refineries had been shut down due to Hurricane Harvey at that time..

despite the modest increase in the amount of oil being refined this week, gasoline output from our refineries was a bit lower, decreasing by 22,000 barrels per day to 10,215,000 barrels per day during the week ending August 31st, after our refineries’ gasoline output had increased by 86,000 barrels per day during the week ending August 24th…again, due to Hurricane Harvey, our gasoline production during the week is not comparable to that of a year ago, but it was 3.6% lower than what had been a record 10,602,000 barrels of gasoline that were produced daily during the week ending August 25th last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 260,000 barrels per day to a high for the date of 5,439,000 barrels per day, after they had fallen by 247,000 barrels per day over the prior week…for a rough year over year comparison absent hurricane impacts, we’d note this week’s distillates production was 7.6% higher than the 5,055,000 barrels of distillates per day that were being produced during the week ending August 25th, 2017…. 

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose by 1,554,000 barrels to 232,774,000 barrels by August 31st, the 12th increase in 28 weeks, and the 26th increase in 43 weeks, as gasoline inventories, as usual, were being built up over the winter months….our supplies of gasoline rose this week because the amount of gasoline supplied to US markets fell by 165,000 barrels per day to 9,734,000 barrels per day, after rising by 446,000 barrels per day the prior week, and because our imports of gasoline rose by 120,000 barrels per day to 988,000 barrels per day, while our exports of gasoline fell by 108,000 barrels per day to 477,000 barrels per day…after this week’s increase, our gasoline inventories were at a seasonal high, 3.5% higher than last September 1st’s level of 226,738,000 barrels, and more than 10% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, with big increase in our distillates production, our supplies of distillate fuels were likewise much higher, increasing by 3,119,000 barrels to 133,120,000 barrels during the week ending August 31st, the 11th increase in 15 weeks…our distillates supplies also increased because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 147,000 barrels per day to 4,290,000 barrels per day, after increasing by 372,000 barrels per day the prior week, and because our exports of distillates also fell by 147,000 barrels per day to 989,000 barrels per day, while our imports of distillates rose by 12,000 barrels per day to 286,000 barrels per day….however, with our distillate supplies still recovering from the 14 year seasonal low that they hit 6 weeks ago, this week’s inventory increase still leaves our distillates supplies 9.9% below the 147,767,000 barrels that we had stored on September 1st, 2017, and roughly 9% lower than the 10 year average of distillates stocks for this time of the year…   

finally, despite this week’s increase in our net oil imports, our commercial supplies of crude oil decreased for the 19th time in 2018 and for the 31st time over the past year, falling by 4,302,000 barrels during the week, from 405,792,000 barrels on August 24th to 401,490,000 barrels on August 31st….but although our crude oil inventories are a bit below the five year average of crude oil supplies for this time of year, they are still roughly 29.6% above the 10 year average of crude oil stocks for the end  August, because it wasn’t early 2015 that our oil inventories first rose above 400 million barrels…but since our crude oil inventories have now been falling through most of the past year and a half, our oil supplies as of August 31st were 13.2% below the 462,353,000 barrels of oil we had stored on September 1st of 2017, 16.5% below the 480,725,000 barrels of oil that we had in storage on September 2nd of 2016, and 4.2% below the 426,062,000 barrels of oil we had in storage on September 4th of 2015… 

This Week’s Rig Count

the pace of US drilling activity again stalled during the week ending September 7th, after increasing 17 out of the 23 prior weeks….Baker Hughes reported that the total count of rotary rigs running in the US was unchanged at 1048 rigs over the week ending on Friday, which was still 104 more rigs than the 944 rigs that were in use as of the September 8th report of 2017, but was still down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…  

the count of rigs drilling for oil was down by two rigs to 860 rigs this week, which was still 104 more oil rigs than were running a year ago, while it was 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 rose by 2 rigs to 186 rigs this week, which nonetheless was down a rig from the 187 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…meanwhile, two rigs drilling exploratory wells in Ohio considered to be “miscellaneous” continued to operate this week, up from just one such “miscellaneous” rig a year ago…

one of the rigs that was added this week was in the Gulf of Mexico, where there are now 17 rigs deployed, up from 16 a year ago…in addition, two rigs continued to drill offshore from Alaska this week, so the total national offshore count is at 19 rigs, which is thus up by 3 from last year’s total of 16 offshore rigs, since a year ago there was no offshore drilling other than in the Gulf…meanwhile, another rig began drilling through an inland body of water in southern Louisiana this week, where there are now three such rigs operating, down from the 5 rigs that were drilling through inland waters there a year ago…

the count of active horizontal drilling rigs was up by 1 rig to 918 horizontal rigs this week, which was also 125 more horizontal rigs than the 793 horizontal rigs that were in use in the US on September 8th 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 decreased by one rig to 65 vertical rigs this week, which was also down from the 75 vertical rigs that were in use during the same week of last year…meanwhile, the directional rig count was unchanged at 65 directional rigs this week, which was down from the 76 directional rigs that were operating on September 8th 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 September 7th, the second column shows the change in the number of working rigs between last week’s count (August 31st) and this week’s (September 7th) count, the third column shows last week’s August 31st active rig count, the 4th column shows the change between the number of rigs running on Friday and those on the equivalent weekend 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 on Friday the 8th of September, 2017…   

September 7 2018 rig count summary

once again, these summary tables do not match the summary national summary data we just gave you, as the state table implies an increase in the rig count, while the basin table implies a decrease in horizontal drilling…the data for the states not listed is easy to find, and it shows that a rig was shut was shut down in Mississippi, where 5 rigs continue to drill, which is up from 3 rigs in Mississipppi a year ago…we imagine that the 2 rig increase in Wyoming could have been new horizontal drilling in the Powder River Basin, where oil exploiters have expressed new interest, but since the horizontal rigs that were added this week could have been in any one of a dozen basins that Baker Hughes does not track separately, one would have to dig through the individual well logs in the Baker Hughes pivot table to find out for sure, something we are not inclined to do this week…that’s also where this week’s increase in natural gas rigs also appears to be hidden, since a gas rig was shut down in the Haynesville while 3 gas rigs were added in basins not tracked separately by Baker Hughes…

+

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s