crude exports at a record high as US becomes a net oil exporter for the first time in 75 years..

oil prices rose for a second week after 7 ​weeks of ​decreases in volatile trading this past week, as shifting stories out of Washington and the OPEC meeting in Vienna led to large intraday price swings…after rising roughly 1% even while ending November more than 22% lower at $50.93 a barrel last week, the price of US oil contracted for January delivery opened 3% higher on Monday morning and spiked to a 6% increase before settling $2.02 higher at $52.95 a barrel, after the weekend G-20 meeting in Buenos Aires resulted in a 90 day trade truce between the U.S. and China and an extension of a Saudi – Russia cooperation pact on oil supplies, and the Alberta Premier followed by mandating a 325,000 barrel per day reduction in Canadian oil output to alleviate a pipeline bottleneck…oil prices continued rising to as high as $54.55 a barrel on Tuesday before pulling back and settling with a gain of 30 cents at $53.25 a barrel​,​ as cracks started showing up in the US-China trade truce…oil prices again rose as high as 54.44 on Wednesday before again falling back to end the session 36 cents lower at $52.89 a barrel, as oil traders feared the rumored OPEC oil cuts would not be enough to rein in supplies,..prices then tested the $50 a barrel level before ending down $1.40 at $51.49 a barrel on Thursday, after OPEC ended its meeting without a decision on how much crude the cartel would cut…oil prices started out lower again on Friday, but then surged 5% after OPEC, Russia and other producers ​announc​ed an agreement to cut output by 1.2 million barrels per day during the first half of 2019, before ​prices fell back​ to close with an increase of $1.12 at $52.61 a barrel…oil prices thus finished the week 3.3% higher than they ended last week, after trading as high as $54.55 a barrel on Tuesday and as low as $50.08 a barrel on Thursday…

natural gas prices, meanwhile, ended the week 12.4 cents lower at $4.488 per mmBTU, largely on a 27.3 cent drop on Monday to $4.339 per mmBTU, on forecasts for mid-December warming, as​ the​ 8 to 14 day forecasts from the Climate Prediction Center continued to indicate a warming trend for the lower 48 states all week, but they did see a surge of 16.1 cents on Friday, as some models indicated more cold risksthe natural gas storage report for the week ending November 30th from the EIA showed that the quantity of natural gas in storage in the US fell by 63 billion cubic feet to 2,991 billion cubic feet over the week, which left our gas supplies 704 billion cubic feet, or 19.1% below the 3,695 billion cubic feet that were in storage on December 1st of last year, and 720 billion cubic feet, or 19.5% below the five-year average of 3,716 billion cubic feet of natural gas that are typically in storage at the end of November….this week’s 63 billion cubic feet withdrawal from US natural gas supplies was pretty much in line with what analysts had been expecting, but it was a bit more than the average of 58 billion cubic feet of natural gas that have been withdrawn from storage during the last week of November in recent years…natural gas storage facilities in the East saw a 26 billion cubic feet drop in supplies over the week, which increased the region’s gas supply deficit to 14.2% below normal for this time of year, while natural gas supplies in the Midwest fell by 24 billion cubic feet while their supply deficit slipped to 12.6% below normal for the end of November…meanwhile, the South Central region saw a 9 billion cubic feet drop in their supplies, increasing their natural gas storage deficit to 27.0% below their five-year average for this time of year…at the same time, 3 billion cubic feet were pulled out of natural gas supplies in the sparsely populated Mountain region as their deficit from normal rose to 21.1%, while just 1 billion cubic feet were withdrawn from storage in the Pacific region, where their natural gas supply deficit fell to 26.0% below normal for this time of year….  

putting this week into perspective historically, the 2,991 billion cubic feet of natural gas that we had in storage on November 30th was 12.3% lower than the previous 5 year November low of 3,410 billion cubic feet that was set on November 28th of 2014, and was 10.9% below the previous 10 year low of 3​,​358 billion cubic feet that was set on November 28th of 2008…this year’s November 30 storage was also 5.5% below the 3​,​166 billion cubic feet of natural gas we had in storage on December 2nd of 2005, and 3.3% below the 15 year low of 3,095 billion cubic feet that were in storage on November 28th of 2003…we have to follow the archived records (xls) back 16 years, to November 29th of 2002, when 2,956 billion cubic feet of natural gas were in storage, to find a lower quantity of natural gas in storage at the end of November than we have now….

S&P Global Platts Analytics is holding a North American Gas Winter Outlook Webinar on December 18th, & i’ve received an invitation to submit a question which you should be able to read here:

the following is the question that i sent in:

during the winter of 2013 – 2014, 3,010 billion cubic feet of natural gas were pulled out of storage between the November peak and the March 28 nadir…
in that winter, natural gas supplies began the heating season at 3,834 billion cubic feet in storage on November 8th and had seen 59 billion cubic feet withdrawn over the first two weeks…
this year we started the heating season with 3,247 billion cubic feet of natural gas supplies in storage on November 9th and have already withdrawn 193 billion cubic feet over two weeks, including the largest early November withdrawal on record..
that withdrawal, plus other withdrawals during the winter of 2017-18, seem to indicate that greater quantities of natural gas are needed from storage for an equivalent number of population weighted heating degree days now than were needed in prior years..
if we merely match the withdrawals of 2014 from here on, our natural gas supplies would fall to below 200 billion cubic feet by the end of the heating season, and they could possibly go to zero should this coming winter be as cold or colder..
so my question for the webinar is:
are there any contingency plans to ration natural gas if such a scenario should develop, and if so, how would the limited supplies be allocated between residential, industrial, utility and export demand…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending November 30th, showed that a big drop in the amount of oil we imported and a ​simultaneous jump in our oil ​exports meant that we ​needed to withdraw​ oil from our commercial crude supplies​ for the first time​ in 11 weeks…our imports of crude oil fell by an average of 943,000 barrels per day to an average of 7,219,000 barrels per day, after rising by an average of 608,000 barrels per day the prior week, while our exports of crude oil rose by an average of 761,000 barrels per day to a record average of 3,203,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,016,000 barrels of per day during the week ending November 30th, 1,704,000 fewer 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 11,700,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 15,716,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 17,487,000 barrels of crude per day during the week ending November 30th, 66,000 barrels per day less than the amount of oil they used during the prior week, while over the same period 1,189,000 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 would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was still 582,000 barrels per day short of what refineries reported they used during the week….to account for that disparity between the supply of oil and the consumption of it, the EIA inserted a (+582,000) 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”…(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 fell to an average of 7,597,000 barrels per day, still 0.3% more than the 7,576,000 barrel per day average that we were importing over the same four-week period last year….the total 1,189,000 barrel per day decrease in our total crude inventories included a 1,046,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 143,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed three months ago….this week’s crude oil production was reported as unchanged at 11,700,000 barrels because the rounded figure for output from wells in the lower 48 states was unchanged at 11,200,000 barrels per day, while a 1,000 barrel per day increase to 499,000 barrels per day in oil output from Alaska was not enough to change the rounded national total…last year’s US crude oil production for the week ending December 1st was at 9,707,000 barrels per day, so this week’s rounded oil production figure was 20.5% above that of a year ago, and 38.8% 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…  

US oil refineries were operating at 95.5% of their capacity in using 17,553,000 barrels of crude per day during the week ending November 30th, down a bit from last week’s 95.6% of capacity, which had been the highest November refinery utilization rate in 20 years….the 17,487,000 barrels per day of oil that were refined this week were still at a seasonal high for the time of year for the 24th time out of the past 27 weeks, and 1.7 higher than the 17,195,000 barrels of crude per day that were being processed during the week ending December 1st, 2017, when US refineries were operating at 93.8% of capacity… 

even with the modest drop in the amount of oil being refined, the gasoline output from our refineries was much lower, decreasing by 502,000 barrels per day to 9,666,000 barrels per day during the week ending November 30th, after our refineries’ gasoline output had increased by 132,000 barrels per day during the week ending November 23rd…after that big decrease in this week’s gasoline output, our gasoline production during the week was almost 1% lower than the 9,758,000 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) increased by 100,000 barrels per day to a seasonal record 5,571,000 barrels per day, after that output had increased by 270,000 barrels per day the prior week….with that increase, this week’s distillates production was 3.1% higher than the 5,402,000 barrels of distillates per day that were being  produced during the week ending December 1st, 2017…. 

even with the big drop in our gasoline production, our supply of gasoline in storage by the end of the week​ still increased by 1,699,000 barrels to 226,250,000 barrels by November 30th, the 2nd increase in the past 8 weeks, a span which left our gasoline supplies 9,922,000 barrels lower than on the 5th of October….our gasoline supplies rose ​this week ​in part because the amount of gasoline supplied to US markets fell by 311,000 barrels per day to 8,877,000 barrels per day and because our exports of gasoline fell by 60,000 barrels per day to 1,001,000 barrels per day, while our imports of gasoline fell by 195,000 barrels per day to 189,000 barrels per day…while our gasoline inventories are no longer at a seasonal high, they are still 2.4% higher than last December 1st’s level of 220,882,000 barrels, and roughly 6.2% above the 10 year average of our gasoline supplies for this time of the year

with our distillates production nearing a record high, our supplies of distillate fuels increased for a second ​consecutive week after nine decreases, rising by 3,811,000 barrels to 125,612,000 barrels during the week ending November 30th, after our distillates supplies had fallen by more than 20 million barrels over the 8 weeks leading up to November 9th…our distillates supplies increased even though the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 468,000 barrels per day to 4,037,000 barrels per day, because our exports of distillates fell by 289,000 barrels per day to 1,426,000 barrels per day while our imports of distillates rose by 250,000 barrels per day to 436,000 barrels per day…but even after this week’s increase, our distillate supplies still ended the week 3.0% below the 129,446,000 barrels that we had stored on December 1st, 2017, and roughly 7.4% below the 10 year average of distillates stocks for this time of the year…       

finally, with this week’s record oil exports and the simultaneous big drop in oil imports, our commercial supplies of crude oil decreased for first time in 11 weeks and for the 22nd time in 2018, falling by 7,323,000 barrels during the week, from 450,485,000 barrels on November 23rd to 443,162,000 barrels on November 30th…but even with that decrease, our crude oil inventories are still roughly 6% above the five-year average of crude oil supplies for this time of year, and roughly 28.4% above the 10 year average of crude oil stocks for the end of 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 30th were still 1.1% below the 448,103,000 barrels of oil we had stored on December 1st of 2017, 8.8% below the 485,756,000 barrels of oil that we had in storage on December 2nd of 2016, and 2.3% below the 453,553,000 barrels of oil we had in storage on December 27th of 2015..  

with our record high crude oil exports the major reason for the first drop in our crude supplies in 11 weeks, we’ll include here a graph of those oil exports over the past 27 months..  

December 7 2018 crude exports as of November 30

the above graph of US crude oil exports came from a pdf of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out last week, which i’ve updated to reflect this week’s oil exports… it shows weekly US crude oil exports in thousands of barrels per day from September 2016 to the current week, and also highlights the exact amount of our crude exports in thousands of barrels per day for this year’s previous high and low marks…as you can see, prior to January 2017, our oil exports were minimal, because by law they ​had been outlawed​ for 40 years​, with the exception of oil exports to Mexico and Canada, which were allowed under provisions of the North American Free Trade Agreement (NAFTA)…since that time, however, our exports have steadily risen, often limited by the number and size of ships that could be loaded in one week and the number of ports which could provide such loading​ ​(which also accounts for the volatility you see in the chart above)…contributing to the push to ship our oil offshore has been ​a price differential between US light sweet crude grades such as West Texas Intermediate, and North Sea Brent, the international benchmark price, which has been running close to 10% for most of the past year…as of Friday’s close, February Brent was being quoted at $61.67 a barrel, as compared to the $52.81 a barrel pricing for February WTI…so obviously, US oil traders will ​continue selling as much US crude into international markets as our port capacity will allow, all the while pulling down large windfall profits even after paying the roughly $2 a barrel trans oceanic transportation costs…

this week’s big jump in oil exports, combined with the drop in imports, also result​ed in another anomaly; the first week that the US was a net exporter of crude and products made from crude in roughly 75 years…to show you ​what led up to ​that, we’ll include the last two years of the spread sheet for ​our ​total net imports of crude oil and oil products…

December 7 2018 net imports of crude and products as of November 30

the above table shows the last two years of net US oil & oil product imports in thousands of barrels per day, a metric which includes gasoline, distillates, kerosene (jet fuel), residual fuel oil (bunker fuel), propane/propylene, and other oils in addition to crude…the weekly numbers shown above are arrived at by taking the total of our imports of crude oil and our imports of products made from crude for each week, and subtracting our exports of crude and products made from crude from that to arrive at a net import total…however, as you can see in the lower right hand corner, that number for this most recent week ending November 30th has turned negative for the first time on record…that -211 thus means that we exported 211,000 barrels per day more oil and oil products this week than we imported of the same for the first time in 75 years, although to be fair, methods for keeping such records have changed several times in that span…

This Week’s Rig Count

US drilling activity decreased for the third week in a row, and was hence down for the 5th time in the past 11 weeks during the week ending December 7th, as drilling for natural gas increased while drilling for oil slowed​, consistent with the recent changes in price for the two commodities​… Baker Hughes reported that the total count of rotary rigs running in the US decreased by 1 rig to 1075 rigs over the week ending December 7th, which was still 144 more rigs than the 931 rigs that were in use as of the December 8th 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 announced their attempt to flood the global oil market…  

the count of rigs drilling for oil decreased by 10 rigs to 877 rigs this week, which was still 126 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 9 rigs to 198 natural gas rigs, which was also 18 more than the 180 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 activity was unchanged with 23 rigs ​continuing to drill in the Gulf of Mexico, which was 3 more rigs than the 20 rigs active in the Gulf of Mexico and in total a year ago…the count of active horizontal drilling rigs decreased by 1 rig to 933 horizontal rigs this week, which was still 137 more horizontal rigs than the 796 horizontal rigs that were in use in the US on December 8th 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 vertical rig count decreased by 4 rigs to 70 vertical rigs this week, which was still up from the 64 vertical rigs that were in use during the same week of last year….on the other hand, the directional rig count increased by 4 rigs to 72 directional rigs this week, which was thus up from the 71 directional rigs that were operating on December 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 December 7th, the second column shows the change in the number of working rigs between last week’s count (November 30th) and this week’s (December 7th) count, the third column shows last week’s November 30th 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 the 8th of December, 2017… 

December 7 2018 rig count summary

this week’s drop of 10 oil rigs might be accounted for by the 10 oil rigs that were shut down in Texas Oil District 8, which would correspond to the core Permian ​- ​Delaware basin; however, at the same time 4 oil rigs were added in Texas Oil District 7C, which would be Permian Midland rigs, and another 2 Permian oil rigs were added in New Mexico…the​ week’s​ natural gas rig increases, however, aren’t evident in ​these tables, since 10 natural gas rigs were added in “other basins” not tracked separately by Baker Hughes….a good bet would be that some of those were in Texas, though, since 4 rigs were added in Texas Oil Districts 2 and 3 in the southeast, and 4 more were added in District 6 in the eastern wedge of the state, some of which were likely vertical rigs pressed into service to take advantage of the recent 50% rise in natural gas prices…in the major shale basins, however, natural gas rigs were down by one, as two natural gas rigs were shut down in Ohio’s Utica while presumably a Utica rig was added in Pennsylvania, while a Marcellus gas rig addition in West Virginia was offset by the idling of a natural gas rig in northwestern Louisiana’s Haynesville…

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