oil prices in a record losing streak; natural gas prices jump 13% on forecast cold; rig count at a 44 month high

oil prices were again lower every day this past week, ​& ​hence extend​ed the number of consecutive daily losses to ten, the longest streak of lower oil prices in records going back to November 1984after falling daily last week to a 6.6% loss at $63.14 a barrel, contracts for December delivery of US crude oil initially moved 64 cents higher on Monday as US sanctions on Iran began, but then eased after the U.S. granted waivers to eight countries to continue buying Iranian crude and ended the day with a loss of 4 cents at $63.10 a barrel…oil prices continued falling on Tuesday, tumbling to as low as $61.31 a barrel on the Iran sanctions waivers, and then ending the day down 89 cents at $62.21 a barrel on worries that ​the global ​economic slowdown ​would reduce demand…oil prices then extended their losses ​on Wednesday, ​after the EIA reported a surprisingly large increase in US crude inventories as US oil production spiked to a record high, ​with WTI ​finishing down another 54 cents at $61.67 a barrel…US crude prices dropped for a ninth consecutive session on Thursday, falling into what traders consider a bear market, ending the day down a dollar at $61.67 a barrel, as traders seemed fixated on the new weekly record high in U.S. crude production cited by the EIAU.S. crude prices fell then fell for a record 10th consecutive session on Friday, wiping out the contract’s gains for the entire year and falling below $60 a barrel for the first time since February, before rallying at the close to end the day down 48 cents at $60.19 a barrel…US crude prices thus ended 4.7% lower for the week and are now down 21.2% from the 4-year high of $76.41 a barrel set on October 3rd, at which time contracts for November oil were being quoted..

since we now have a record setting series of decreases in oil prices on our hands, we’ll include a graph of US oil prices over the past five months, so you can see what the past month’s price drop looks like…

November 10 2018 daily oil prices

the above graph is an early Saturday afternoon screenshot of the interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets…each bar on the above graph represents oil prices for a day of oil trading between June 25, 2018 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down…for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while for red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar…also visible on this “candlestick” style graph are the faint grey “wicks” above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day…outside of 4 days in February, oil prices are now at the lowest they’ve been all year….note that since this graph includes off market and after hours trading, the prices shown above do not correspond exactly to the NYMEX exchange prices we have been quoting.. 

meanwhile, natural gas prices for December delivery spiked by more than 13% this week to end at their highest level this year, largely on the Climate Prediction Center​’s​ forecasts for colder than normal temperatures over most of the country…the initial jump in prices came on Monday, when December natural gas contracts rose 28.3 cents or 8.6% to $3.567 per mmBTU, when the new 6 to 10 day outlook indicated temperatures much below normal for an area from Maine to the Dakotas and down to Texas…natural gas prices changed little over the next three days, ignoring a larger than expected storage increase, and then jumped another 17.6 cents to $3.719 per mmBTU on Friday, despite indications of a warming trend in the 3 to 4 week outlook

since natural gas prices also made an unusual move to their high for this year, we’ll include a graph of those here too…

November 10 2018 daily natural gas prices

like the oil graph above, this is a screenshot of the live interactive US natural gas price graph at Daily FX, covering natural gas prices daily between April 23rd, 2018 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down…you can clearly see that natural gas prices spiked much higher to begin this week, after first moving out of a narrow range ​generally below $3 per mmBTU ​at the beginning of October…we​ should men​tion that natural gas prices for January ​2018 ​saw a similar price spike last December, but by January the February contract was already trading lower, and the same could happen this year if the warmer than normal El Nino winter develops as forecast​ and fears of a shortage are alleviated​…

the natural gas storage report for the week ending November 2nd from the EIA indicated that natural gas in storage in the US rose by 65 billion cubic feet to 3,208 billion cubic feet during that week, which left our gas supplies 580 billion cubic feet, or 15.3% below the 3,788 billion cubic feet that were in storage on November 3rd of last year, and 621 billion cubic feet, or 16.2% below the five-year average of 3,829 billion cubic feet of natural gas that are typically in storage on the first weekend of November….this week’s 65 billion cubic feet increase in natural gas supplies was more than the 55 billion cubic feet increase in stocks that was called for by a S&P Global Platts survey of analysts , and was also much above the average of 48 billion cubic feet of natural gas that have been added to storage during the bridge week between October and November in recent years, but was still just the 6th average or below average inventory increase over the past eighteen weeks…natural gas storage facilities in the Midwest saw a 24 billion cubic feet increase over the week, which reduced their supply deficit to 10.3% below normal, but natural gas supplies in the East only increased by 5 billion cubic feet and their supply deficit ticked up to 9.6% below normal for this time of year…on the other hand, the South Central region saw a 30 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 23.8% below their five-year average for the first weekend of November…meanwhile, the natural gas pipeline rupture in British Columbia has been repaired, but flows to the US remained limited, so only 2 billion cubic feet were added to supplies in the Mountain region, as their deficit from normal still fell to 16.9%, while the 3 billion cubic feet were added to gas in storage in the Pacific region also lowered their natural gas supply deficit to 24.5% below normal for this time of year….

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration for the week ending November 2nd indicated a large upward adjustment to our crude oil production while most other crude supply and demand metrics were relatively little changed, and hence there was another addition to our commercial crude supplies for ​the seventh week in a row…our imports of crude oil rose by an average of 195,000 barrels per day to an average of 7,539,000 barrels per day, after falling by an average of 334,000 barrels per day the prior week, while our exports of crude oil fell by an average of 80,000 barrels per day to an average of 2,405,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,134,000 barrels of per day during the week ending November 2nd, 275,000 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 400,000 barrels per day higher at 11,600,000 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 16,734,000 barrels per day during this reporting week… 

meanwhile, US oil refineries were using 16,408,000 barrels of crude per day during the week ending November 2nd, 9,000 barrels per day less than the amount of oil they used during the prior week, while over the same period a net of 793,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 467,000 fewer barrels per day than what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+467,000) 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”…again, with an “unaccounted for crude” figure that large, one or more of this week’s oil metrics must still be off 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) indicate that the 4 week average of our oil imports rose to an average of 7,544,000 barrels per day, still 1.2% less than the 7,639,000 barrel per day average that we were importing over the same four-week period last year….the net 793,000 barrel per day increase in our total crude inventories included a 826,000 barrel per day increase in our commercially available stocks of crude oil, which was slightly offset by a 34,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two months ago….this week’s crude oil production was reported up by 400,000 barrels per day to 11,600,000 barrels per day as a result of a rounded 400,000 barrels per day upward adjustment to 11,100,000 barrels per day output from wells in the lower 48 states in light of last week’s confirmed production figures, while oil output from Alaska remained at 488,000 barrels per day​, giving us a rounded total of 11,600,000 barrel per day​…last year’s US crude oil production for the week ending November 3rd was at 9,620,000 barrels per day, so this week’s rounded oil production figure was 20.6% above that of a year ago, and 37.6% 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 90.0% of their capacity in using 16,408,000 barrels of crude per day during the week ending November 2nd, up from 89.4% of capacity the prior week, but still a normal utilization rate for the end of the fall refinery maintenance season….the 16,408,000 barrels per day of oil that were refined this week were once again at a seasonal high, for the 21st out of the past 23 weeks, but only fractionally higher than the 16,305,000 barrels of crude per day that were processed during the week ending November 3rd, 2017, when US refineries were operating at 89.6% of capacity…

even with  little change​ in ​the amount of oil being refined this week, gasoline output from our refineries was quite a bit lower, decreasing by 650,000 barrels per day to 9,714,000 barrels per day during the week ending November 2nd, after our refineries’ gasoline output had increased by 336,000 barrels per day during the week ending October 26th…as a result of that drop in our gasoline output, our gasoline production during the week was 4.5% lower than the 10,167,000 barrels of gasoline that were being produced daily during the same week last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 20,000 barrels per day to 4,963,000 barrels per day, after that output had increased by 23,000 barrels per day the prior week….and like gasoline, this week’s distillates production was also 4.5% lower than the 5,199,000 barrels of distillates per day that were being produced during the week ending October 27th 2017…. 

however, even with that big drop in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,852,000 barrels to 228,021,000 barrels by November 2nd, the 16th increase in the past 37 weeks, after our gasoline supplies had fallen by 7,987,000 barrels over the prior two weeks….our gasoline supplies rose despite lower production because our imports of gasoline rose by 228,000 barrels per day to 591,000 barrels per day, while our exports of gasoline fell by 318,000 barrels per day to 694,000 barrels per day, and because the amount of gasoline supplied to US markets fell by 163,000 barrels per day to 9,099,000 barrels per day…so even after falling most of the fall, our gasoline inventories are still at a seasonal high, 8.8% higher than last November 3rd’s level of 209,537,000 barrels, and roughly 8.6% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, with our distillates production little changed, our supplies of distillate fuels fell for the 7th week in a row, decreasing by 3,465,000 barrels to 122,857,000 barrels during the week ending November 2nd, after our distillates suppliies had fallen by 4,052,000 barrels the prior week…our distillates supplies fell even as the amount of distillates supplied to US markets, a proxy for our domestic demand, decreased by 108,000 barrels per day to 4,318,000 barrels per day, while our exports of distillates rose by 29,000 barrels per day to 1,306,000 barrels per day, and while our imports of distillates rose by 25,000 barrels per day to 166,000 barrels per day….after this week’s decrease, our distillate supplies ended the week 2.2% below the 125,562,000 barrels that we had stored on November 3rd, 2017, and fell to roughly 8.5% below the 10 year average of distillates stocks for this time of the year…     

finally, with higher oil production and somewhat higher oil imports, our commercial supplies of crude oil increased for the 7th week in a row and for the 23rd time in 2018, rising by 5,783,000 barrels during the week, from 426,004,000 barrels on October 26th to 431,787,000 barrels on November 2nd…that increase means that our crude oil inventories continue to be more than 3% above the five-year average of crude oil supplies for this time of year, and roughly 23.4% above the 10 year average of crude oil stocks for the first weekend in November, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 2nd were still 5.5% below the 457,143,000 barrels of oil we had stored on November 3rd of 2017, 11.0% below the 485,010,000 barrels of oil that we had in storage on November 4th of 2016, and 5.1% below the 454,822,000 barrels of oil we had in storage on November 6th of 2015…       

This Week’s Rig Count

US drilling rig activity increased for the fifth time in 7 weeks during the week ending November 7th, and thereby pushed to a 44 month high….Baker Hughes reported that the total count of rotary rigs running in the US increased by 14 rigs to 1081 rigs over the week ending on Friday, which was also 174 more rigs than the 907 rigs that were in use as of the November 10th report of 2017, but 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 increased by 12 rig​s​ to 886 rigs this week, which was the largest weekly rise in the oil rig count since May and 148 more oil rigs than were running a year ago, while it 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 2 to 195 rigs, which was also 26 more than the 169 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 3 rigs to 21 rigs this week, which was also 3 rigs more than the 18 Gulf of Mexico rigs active a year ago​; since there is now no other offshore drilling elsewhere, this week’s Gulf of Mexico totals are equal to the national offshore rig count​….​ ​meanwhile, the count of active horizontal drilling rigs increased by 6 rigs to 935 horizontal rigs this week, which was also 159 more horizontal rigs than the 776 horizontal rigs that were in use in the US on November 10th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count increased by 1 to 74 directional rigs this week, which is the same number of directional rigs that were in use during the same week of last year….in addition, the vertical rig count was up by 7 rigs to 72 vertical rigs this week, which was also up from the 57 vertical rigs that were operating on November 10th 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 November 9th, the second column shows the change in the number of working rigs between last week’s count (November 2nd) and this week’s (November 9th) count, the third column shows last week’s November 2nd active rig count, the 4th column shows the change between the number of rigs running on Friday and those running 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 10th of November, 2017…     

November 9 2018 rig count summary

you might notice that the basin count does not add up to the 6 horizontal rig count that we​ just​ reported, and you might also notice a nine rig decrease in Oklahoma’s Cana Woodford that appears to coincide with and contradict ​the 4 rig increase in Oklahoma’s count…i don’t have an explanation for that, but i would speculate that it’s possible that a number of the rigs that were previously indicated as targeting the Cana Woodford might have been reclassified to another Anadarko basin which Baker Hughes doesn’t list…the national totals in the basin by basin spreadsheet add up, because they show an increase of 15 oil rigs and 2 natural gas rigs in “other basins” not tracked separately by Baker Hughes, so for some reason around a dozen rigs that might have previously been included in the Cana Woodford were shifted to that catch all “other” category…elsewhere, the Permian basin shows a 5 rig increase because there was a net increase of one rig in the Texas basins (+3 in the Delaware and -2 in the Midland) and an increase of 4​ rigs​ in Delaware on the New Mexico side of the state line…as we noted, the natural gas rig increase can be accounted for by the 2 rig increase in the “other basins” category, as the two natural rigs that were added in Pennsylvania’s Marcellus were offset by natural gas rigs that were shut down in Ohio’s Utica and the Eagle Ford of south Texas, which also dropped two oil rigs and now shows a deployment of 68 oil rigs and 8 natural gas rigs….

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