oil imports at a 22 year low, refining slowest in 16 months; global oil production down a million barrels per day..

oil prices pushed to a three month high this week, largely on the news that OPEC had met its production cut quota in January, and was cutting oil output even further in February…after falling 4.6% to $52.72 a barrel on global trade and economic concerns last week, prices o​f US crude contracts for March delivery fell 31 cents to $52.41 on Monday, as concerns about the lack of progress in U.S.-China trade talks overshadowed price support from OPEC-led supply curbs… however, oil prices jumped to over $54 a barrel during early trading on Tuesday on an OPEC report showing they had sharply cut output in January, but faded near the close to end at $53.10 a barrel, a​n​ increase​ ​of 69 cents on the day….oil prices again rallied on the OPEC report early Wednesday, trading as high as $54.60 a barrel, but prices reversed again after the EIA reported US crude oil inventories rose to their highest since November 2017, with March oil prices ending up 80 cents, or 1.5 percent, at $53.90 a barrel…oil prices then rose on the OPEC output cuts for a third day on Thursday, but the gains were capped after a report showing the steepest decline in U.S. retail spending since 2009 heightened fears of a economic slowdown, with oil prices finishing 51 cents higher at $54.41 a barrel…however, an outage at Saudi Arabia’s largest offshore oilfield and the announcement that the Saudis would cut over half a million barrels per day more in March than the OPEC deal called for sent prices surging on Friday, with US crude rising $1.18 or 2.2% to close the week at a 3-month high of $55.59 a barrel, 5.4% higher than the previous Friday​’s​ close…at the same time, the April Brent crude oil contract price rose $1.68 on Friday to settle at $66.25 per barrel, ​finishing with a week-over-week gain of $4.15 a barrel, or 6.7%, propelled by a Russian pledge to speed up their production cuts in conjunction with the OPEC effort….

natural gas prices, meanwhile, eked out a small increase, after a cold blast at the end of the week lifted prices back into the plus columnafter fall​ing ​15.1 cents to an eleven month low of $2.583 per mmBTU last week, natural gas contracted for March delivery jumped 5.9 cents on Monday, and another 4.6 cents on Tuesday, on forecasts for colder weather at the end of February…however, gas gave up those gains and fell 11.3 cents on Wednesday, when the weather models flipped back to warmer, with significantly more warm​th in the East in the 8 to 14 day forecastafter falling two tenths of a cent on a slightly bearish storage report on Thursday, natural gas prices rebounded 5.2 cents to close the week at $2.625 mmBTU, as weather models added back demand and LNG exports rose, tightening up supply balances

the natural gas storage report for the week ending February 8th from the EIA indicated that the quantity of natural gas held in storage in the US fell by 78 billion cubic feet to 1,882 billion cubic feet over the week, which meant our gas supplies ​ended the period 30 billion cubic feet, or 1.6% below the 1,912 billion cubic feet that were in storage on February 9th of last year, and 333 billion cubic feet, or 15.0% below the five-year average of 2,215 billion cubic feet of natural gas that have typically been in storage as of the 2nd weekend in February….this week’s 78 billion cubic feet withdrawal from US natural gas supplies was a bit below analyst’s consensus expectation that 85 billion cubic feet of stored gas would be needed, and was quite a bit less than the average of 160 billion cubic feet of natural gas that have been withdrawn from US gas storage during the same winter week over the last 5 years…as you can see on the temperature map from the EIA below, the densely populated Midwest, East, and South Central regions of the country were all warmer than normal during the period, and hence saw below normal withdrawals of natural gas from storage…however, it was cooler than normal in the Pacific states, where 17 billion cubic feet of gas were needed from storage, against their normal draw of 9 billion cubic feet for the first full week of February, and hence their supply deficit increased to 30.5% below the normal for this time of year…the Mountain states also saw an above normal draw of 10 billion cubic feet, against their normal 7 billion cubic feet withdrawal, and saw their natural gas supplies fall to 29.6% below normal for the 2nd weekend in February….

February 16 2019 temperature departure from normal for week ending February 7

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending February 8th, indicated a large drop in our refinery throughput, a corresponding large drop in our oil imports, a modest drop in our oil exports, and a modest addition of surplus oil to our commercial supplies of crude oil …our imports of crude oil fell by an average of 936,000 barrels per day to an average of 6,210,000 barrels per day, ​a 22 year low, ​after rising by an average of 63,000 barrels per day the prior week, while our exports of crude oil fell by an average of 506,000 barrels per day to an average of 2,364,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,846,000 barrels of per day during the week ending February 8th, 430,000 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 estimated to be unchanged at a record 11,900,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 15,746,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 15,768,000 barrels of crude per day during the week ending February 8th, 865,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period 519,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….thus, 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 541,000 fewer barrels per day than the oil that was added to storage plus 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 inserted a (+541,000) 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)….  

since our oil imports have now dropped to the lowest level since the first week of 1997, we’ll include a graph of that ​oil ​import history below…note, however, that there were extenuating circumstances ​impacting​ this week’s imports; first, the embargo of oil imports from Venezuela reduced deliveries to the Gulf Coast a​s​ ​oil tankers in transit remained offshore, and secondly, the shutting down of the Keystone pipeline due to a leak near St. Louis stopped its oil deliveries from Canada…both of those ​supply ​interruptions also impacted the availability of heavy sour crude to those US oil refineries that are optimized for it

February 13 2019 oil imports as of February 8th

further details from the weekly Petroleum Status Report (pdf) indicate​d​ that the 4 week average of our oil imports fell to an average of 7,158,000 barrels per day last week, now 11.2% less than the 8,063,000 barrel per day average that we were importing over the same four-week period last year…. the 519,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, while the oil stored in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported unchanged at 11,900,000 barrels per day because the rounded estimate for output from wells in the lower 48 states was unchanged at 11,400,000 barrels per day, and because Alaska’s production was also unchanged at 498,000 barrels per day, ie not enough to change the rounded national total…last year’s US crude oil production for the week ending February 9th was at 10,271,000 barrels per day, so this week’s rounded oil production figure was 15.9% above that of a year ago, and 41.2% 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 85.9% of their capacity in using 15,768,000 barrels of crude per day during the week ending February 8th, down from the prior week’s 90.7% of capacity, and the lowest capacity utilization rate in 16 months….the 15,768,000 barrels per day of oil that were refined this week was also the lowest in 16 months, 2.4% below the 16,162,000 barrels of crude per day that were being processed during the week ending February 9th, 2018, when US refineries were operating at 89.8% of capacity… 

with the big drop in the amount of oil being refined, the gasoline output from our refineries was also lower, falling by 237,000 barrels per day to 9,619,000 barrels per day during the week ending February 8th, after our refineries’ gasoline output had decreased by 48,000 barrels per day the prior week….but even with the decrease in this week’s gasoline output, our gasoline production was still a bit higher than the 9,592,000 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 537,000 barrels per day to 4,764,000 barrels per day, after that output had increased by 102,000 barrels per day the prior week….with that decrease, this week’s distillates production was almost 1.0% below the 4,811,000 barrels of distillates per day that were being produced during the week ending February 9th, 2018…. 

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose by 408,000 barrels to 258,301,000 barrels by February 8th, after rising by 513,000 barrels over the prior week….our gasoline supplies rose this week mostly because the amount of gasoline supplied to US markets fell by 425,000 barrels per day to 8,648,000 barrels per day, after decreasing by 491,000 barrels per day the prior week, while our imports of gasoline fell by 168,000 barrels per day to 457,000 barrels and as our exports of gasoline rose by 64,000 barrels per day to 959,000 barrels per day….having set a record high three weeks ago, our gasoline inventories are still at a seasonal high for the second weekend of February, 3.7% higher than last February 9th’s level of 249,073,000 barrels, and roughly 4% above the five year average of our gasoline supplies ​at this time of the year…

even with the increase in our distillates production, our supplies of distillate fuels still managed to increase for the 7th time in twenty-one weeks, rising by 1,087,000 barrels to 140,200,000 barrels during the week ending February 8th, after our distillates supplies had decreased by 2,257,000 barrels over the prior week…our distillates supplies increased this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 906,000 barrels per day to 3,767,000 barrels per day, not surprising considering the reduced demand for heat oil, while our exports of distillates rose by 36,000 barrels per day to 1,265,000 barrels per day, and while our imports of distillates fell by 21,000 barrels per day to 438,000 barrels per day…but even with this week’s increase, our distillate supplies are still 0.8% below the 141,367,000 barrels that we had stored on February 9th, 2018, and remain roughly 2% below the five year average of distillates stocks for this time of the year…

finally, with the cutback in refining and falling exports​ more than offsetting falling imports​, our commercial supplies of crude oil in storage increased for the 5th time in the past 11  weeks, rising by 3,633,000 barrels over the week, from 447,207,000 barrels on February 1st to 450,840,000 barrels on February 8th …with weekly increases now in 15 out of the last 21 weeks, our crude oil inventories are roughly 6% above the five-year average of crude oil supplies for this time of year, and nearly 30% above the 10 year average of crude oil stocks for the second weekend of February, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories have mostly been rising since this past Fall, after ​generally ​falling until then through most of the previous year and a half, our oil supplies as of February 8th were thus 6.8% above the 422,095,000 barrels of oil we had stored on February 9th of 2018, while still remaining 13.0% below the 518,119,000 barrels of oil that we had in storage on February 10th of 2017, and 4.6% below the 472,823,000 barrels of oil we had in storage on February 12th of 2016…    

OPEC’s Monthly Oil Market Report

with the news of OPEC’s production cuts moving the oil markets​ this week​, we’re next going to review OPEC’s February Oil Market Report (covering January OPEC & global oil data), which was released on Tuesday of this past week, and which is available as a free download, and hence it’s the report we check for monthly global oil supply and demand data…the first table from this monthly report that we’ll look at is from the page numbered 57 of that report (pdf page 67), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures…

January 2019 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC’s oil output dropped by 797,000 barrels per day to 30,806,000 barrels per day in January, from their revised December production total of 31,603,000 barrels per day…however that December figure was originally reported as 31,578,000 barrels per day, so their production for January was effectively a 772,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official December OPEC output figures as reported a month ago, before this month’s revisions)…

as we can tell from the far right column on the table above, most of the OPEC member​s​ contributed output cutbacks to this month’s production reduction, led by a the 350,000 barrel per day drop in the oil output from Saudi Arabia, the 146,000 barrel per day drop in the oil output from the United Arab Emirates, and the 90,000 barrels per day drop in the oil output from Kuwait….except for Iraq and Nigeria, the oil output from OPEC members as shown above is already pretty close to the output allocations assigned to each member after their December 7th meeting, when they agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers…this can be seen in the table of OPEC production allocations we’ve included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, which has more details: the column of numbers shows average daily production quota in millions of barrels of oil per day for each of the OPEC members for the first 6 months of this year, as was agreed to at their December 2018 meeting…note that Venezuela and Iran, who’s oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by disruptive civil strife, are exempt from any production quotas, yet their output also continues to fall…

the next graphic we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from February 2017 to January 2019, and it comes from page 58 (pdf page 68) of the February OPEC Monthly Oil Market Report….on this graph, the cerulean 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 global output shown on the right scale…    

January 2019 OPEC report global oil supply

OPEC’s preliminary estimate indicates that total global oil production fell by 1.03 million barrels per day to 99.32 million barrels per day in January, after December’s total global output figure was revised up by 330,000 barrels per day from the 100.02 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 230,000 barrels per day in January after that revision, with decreased oil output from Canada, the former Soviet Union, and China the major reasons for the non-OPEC production​ ​decrease….OPEC also reported that global oil output during January was 1.73 million barrels per day below global oil output in January a year ago, but the February 2018 OPEC report online (pdf) indicated January 2018 global output was at 97.66 million barrels per day, so we have to assume that they should have reported that global oil production in January was 1.73 million barrels per day greater than the revised global output in January a year ago…after the big January decrease in OPEC’s output, their January oil production of 30,806,000 barrels per day represented just 31.0% of what was produced globally during the month, down from the 31.6% share they reported for December….OPEC’s January 2018 production was reported at 32,302,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year’s total and new member Congo from this year’s, are now producing 1,210,000 fewer barrels per day of oil than they were producing a year ago, with a 496,000 barrel per day decrease in output from Venezuela and a 1,075,000 barrel per day decrease in output from Iran from that time more than offsetting the production increases of 236,000 barrels per day from the Saudis, 214,000 barrels per day from the Emirates, and 234,000 barrels per day from Iraq…   

however, despite the 1.03 million barrels per day decrease in global oil output we’ve seen during January, we still had a modest surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us… 

January 2019 OPEC report global oil demand

the table above comes from page 31 of the February OPEC Monthly Oil Market Report (pdf page 41), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2019 over the rest of the table…on the “Total world” line in the second column, we’ve circled in blue the figure that’s relevant for January, which is their revised estimate of global oil demand during the first quarter of 2018…       

OPEC’s estimate is that during the 1st quarter of this year, all oil consuming regions of the globe will be using 99.02 million barrels of oil per day, which was revised from their estimate of a month ago that we’d be using 99.10 million barrels of oil per day….meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were still producing 99.32 million barrels per day during January, which means that there was a surplus of around 300,000 barrels per day in global oil production as compared to the demand now estimated for the month…    

we should also note that ​the ​previous estimate for 2018’s oil demand was revised 30,000 barrels per day lower with this report, a figure which we’ve highlighted in green…that revision wasn’t consistent over the whole year, however, as the 2018 demand table on page 30 of the February OPEC Monthly Oil Market Report (pdf page 40) shows demand for the 3rd and 4th quarters revised 50,000 barrels per day lower, while ​2018’s ​1st and 2nd quarter oil demand was unrevised from previously published figures…we’re not going to review all of 2018’s monthly surplus and deficit figures anymore now, but we should note that December’s global output total was revised up by 330,000 barrels per day at the same time as demand was revised 50,000 barrels per day lower, which means that December’s global oil surplus would now figure to have been 420,000 barrels per day, rather than the 40,000 barrels per day indicated by last month’s report…that, and the other demand revisions mean that for all of 2018, global oil demand exceeded production by roughly 38,370,000 barrels, a comparatively tiny net oil shortfall that would be the equivalent of roughly 9 hours and ​10 minutes of global oil production at the revised December production rate

This Week’s Rig Count

drilling activity in the US saw another small increase this week, but it still remains below the levels of this past Fall, when both oil and natural gas prices were considerably higher….Baker Hughes reported that the total count of rotary rigs running in the US rose by 2 rigs to 1051 rigs over the week ending February 15th, which was also 76 more rigs than the 975 rigs that were in use as of the February 16th report of 2018, 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 rose by 3 rigs to 857 rigs this week, which was also 59 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 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by one rig to 194 natural gas rigs, which was still 17 more rigs than the 177 natural gas rigs that were drilling a year ago, but way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

offshore platforms drilling in the Gulf of Mexico increased by 2 to 21 this week, with the addition of one rig offshore from Texas and one rig offshore from Louisiana…that meant there were 3 more Gulf rigs running than were drilling a year earlier, when 17 rigs were deployed offshore from Louisiana and a rig was also active offshore from Texas…since there is still no other offshore drilling off either coast or off Alaska at this time, nor was there during the same week of 2018, this week’s Gulf of Mexico totals are again identical to the overall US offshore totals…

in addition, another drilling platform also started up on an inland body of water in Louisiana this week, where their are now two such “inland waters” rigs drilling, up from one inland waters rig a year ago..

the count of active horizontal drilling rigs decreased by 8 rigs to 915 horizontal rigs this week, which was still 76 more horizontal rigs active than the 839 horizontal rigs that were in use in the US on February 16th of last year, but was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….in addition, the vertical rig count decreased by 2 rigs to 66 vertical rigs this week, which was still up by one from the 65 vertical rigs that were in use during the same week of last year…on the other hand, the directional rig count increased by 12 rigs to 70 directional rigs this week, which was still down from the 71 directional rigs that were operating on February 16th of 2018… 

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 February 15th, the second column shows the change in the number of working rigs between last week’s count (February 8th) and this week’s (February 15th) count, the third column shows last week’s February 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before 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 16th of February, 2018…     

February 15 2019 rig count summary

the negative basin counts we see above just about account for this week’s 8 rig drop in horizontal rigs, and a net of one more horizontal ​rig ​was pulled from basins not tracked separately by Baker Hughes…the 5 rig d​rop in the Permian basin included three rigs pulled from Texas Oil District 7C, or the southern Permian Midland, and two rigs pulled out of the Permian Delaware in New Mexico; activity in Texas Oil District 8, or the core Permian Delaware, remained unchanged, with 314 rigs still drilling there…in rigs drilling for natural gas, two horizontal rigs were added in the Haynesville of northern Louisiana, while one horizontal rig was added in West Virginia’s Marcellus; at the same time, three horizontal rigs were pulled out of the Marcellus in Pennsylvania, and one rig of the 5 horizontal gas rigs drilling in the Arkoma Woodford of Oklahoma was switched​ from targeting natural gas​ to target oil….note that other than in the major producing states shown above, drillers in Alabama also started up a rig this week, after 2 weeks of no drilling in th​at state; a year ago, Alabama had one rig active, and has generally seen one or two rigs running most weeks over the past three years…

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