new record for US oil production; record April natural gas build, 5 week storage injection is triple normal

oil prices fell for the second week in nine this past week, largely on a selloff precipitated by the report of the biggest increase in US crude supplies yet this year, and likely exacerbated by short selling by commodity traders probably trying to take advantage of severely overextended bullish hedge fund positionsafter falling 1.1% to $63.30 a barrel last week on Trump’s BS to reporters, the benchmark US crude for June delivery opened lower early Monday in a continuation of Friday’s Trump comment selloff and fell to as low a $62.46 a barrel, before shaking off Trump’s balderdash after OPEC and Saudi sources denied that any officials spoken to Trump, and subsequently rebounded to close 20 cents higher at $63.50 a barrel…prices then opened higher on Tuesday and rose to as high as $64.75 a barrel on a coup attempt in Venezuela before paring those gains to settle just 41 cents higher at $63.50 a barrel after reports Venezuelan oil operations were not disrupted and military leaders remained loyal to Maduro…oil prices fell on Wednesday, however, as the EIA reported U.S. crude supplies rose nearly 10 million-barrels to their highest since September 2017, with US crude finishing down 55 cents at $63.36 per barrel…with supply concerns thus alleviated, that selloff continued into Thursday, with oil prices breaking through a key support level and falling as much as 4% before steadying and ending $1.81 lower at $61.81 a barrel, despite a number of geopolitical concerns….oil prices then edged back up on strong economic data on Friday, closing 13 cents higher at $61.94 a barrel, but still finished the week 2.2% lower, thus logging its second straight weekly decline...

natural gas prices, meanwhile, ended a bit lower, as a near record addition of gas to storage​ reported​ on Thursday​ ​reversed price gains logged earlier in the week…with little associated commentary, natural gas contracts for June delivery rose 1.3 cents on Monday and then fell back 1.8 cents on Tuesday before rising 4.5 cents to $2.620 per mmBTU on Wednesday on strong cash prices and cooling demand in the US South…however, a bearish EIA report knocked prices back 3.1 cents on Thursday, with momentum from that carrying into a 2.2 cent loss on Friday to end the week down half a percent at $2.567 per mmBTU, despite forecasts for unseasonably cool weather in the north-central states and above average temperatures in the southeast..

the natural gas storage report for the week ending April 26th from the EIA indicated that the quantity of natural gas held in storage in the US increased by a new April record 123 billion cubic feet to 1,462 billion cubic feet by the end of the week, which meant our gas supplies were 128 billion cubic feet, or 9.6% more than the 1,334 billion cubic feet that were in storage on April 27th of last year, while remaining 316 billion cubic feet, or 17.8% below the five-year average of 1,778 billion cubic feet of natural gas that have typically been in storage as of the fourth weekend in April in recent years….this week’s 123 billion cubic feet injection into US natural gas storage exceeded analysts’ expectations of a 114 billion cubic foot increase, and it was quite a bit more than the 70 billion cubic feet of natural gas that are normally added to gas storage during the fourth week of April…and as it turns out, that 123 billion cubic feet increase was also the highest ever for April, and the second highest injection in the recent history of this storage report, which we can see in the graphic below..

May 3 2019 change of gas in storage as of April 26

the above graphic is a screenshot of an interactive graphic included on the EIA’s weekly natural gas storage dashboard, and as the heading indicates, it shows the weekly change, in billions of cubic feet, of natural gas in storage in the lower 48 states…the blue dots represent the weekly changes of natural gas in storage for this year up to the current report, and the dark diamonds represent the 5 year average change of natural gas in storage for each of the weeks of the year, while the shaded grey background to those markers represent the range of changes for each week of the year over that 5 year span…thus, for this week, which i have highlighted on this interactive by moving my cursor over that blue dot, you can see the 123 billion cubic feet addition for this year, the 70 billion cubic feet average for the same week over the prior 5 years, and the prior range between 51 billion cubic feet and 81 billion cubic feet of natural gas that was added to storage over the prior 5 years…

as it turns out, that 123 billion cubic foot addition of this reporting week was the second largest injection shown on the graph, topped only by the 126 billion cubic feet injection over the week ending May 31, 2015, not easily differentiated on this scale…but if you look at the blue dots over the 7 most recent weeks, you can see that they all topped the 5 year average, with 4 of the last five weeks actually establishing a short term high injection for the weeks in question…over the five most recent weeks, 355 billion cubic feet of natural gas have been added to storage in the lower 48 states; that is almost triple the 5 year historical average addition of 120 billion cubic feet over the same 5 weeks, and in sharp contrast to a year ago, when 34 billion cubic feet of natural gas had to be withdrawn from storage over the same 5 week period…

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 April 26th, showed that another increase in our oil imports on top of last week’s big import jump meant that we had more surplus oil left to add to our commercial supplies of crude for the fifth time in six weeks…our imports of crude oil rose by an average of 265,000 barrels per day to an average of 7,414,000 barrels per day, after rising by an average of 1,157,000 barrels per day the prior week, while our exports of crude oil fell by an average of 70,000 barrels per day to 2,611,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,803,000 barrels of per day during the week ending April 26th, 335,000 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 reported to be up by 100,000 barrels per day to a record 12,300,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 17,103,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 16,446,000 barrels of crude per day during the week ending April 26th, 137,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that 1,342,000 barrels of oil per day were being added to the oil that’s in storage in the US….therefore, 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 685,000 barrels per day short of what was added to storage plus what the oil 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 (+685,000) 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”….with that much oil unaccounted for again this week, we have to figure that one or more of this week’s oil metrics is 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) indicated that the 4 week average of our oil imports rose to an average of 6,789,000 barrels per day last week, still 19.2% less than the 8,400,000 barrel per day average that we were importing over the same four-week period last year…the 1,342,000 barrel per day increase in our total crude inventories included 1,419,000 barrels per day that were added to our commercially available stocks of crude oil, which was partially offset by a 77,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve…this week’s crude oil production was reported to be 100,000 barrels per day higher at a record 12,300,000 barrels per day because the rounded estimate ​of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,800,000 barrels per day, while Alaska’s oil production was unchanged at 477,000 barrels per day and hence did not impact the rounded national total…last year’s US crude oil production for the week ending April 27th was at 10,619,000 barrels per day, so this reporting week’s rounded oil production figure was 15.8% above that of a year ago, and 45.9% 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 89.2% of their capacity in using 16,446,000 barrels of crude per day during the week ending April 26th, down from 90.1% of capacity the prior week, and below the historical refinery utilization rate for the last week of April….similarly, the 16,446,000 barrels per day of oil that were refined this week were still a bit less than the 16,561,000 barrels of crude per day that were being processed during the week ending April 27th, 2018, when US refineries were operating at 91.1% of capacity… 

even with the decrease in the amount of oil being refined, gasoline output from our refineries was still somewhat higher, increasing by 146,000 barrels per day to 9,927,000 barrels per day during the week ending April 26th, after our refineries’ gasoline output had decreased by 136,000 barrels per day the prior week….but even with that increase in gasoline output, this week’s gasoline production was still 1.2% less than the 10,045,000 barrels of gasoline that were being produced daily during the same week last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 64,000 barrels per day to 5,128,000 barrels per day, after that distillates output had increased by 241,000 barrels per day the prior week…after this week’s increase, the week’s distillates production was 2.7% more than the 4,995,000 barrels of distillates per day that were being produced during the week ending April 27th, 2018…. 

with the increase in our gasoline production, the supply of gasoline in storage at the end of the week rose for the first time in 11 weeks, increasing by 917,000 barrels to 226,743,000 barrels over the week to April 26th, after gasoline supplies had fallen by 2,129,000 barrels over the prior week….that inventory increase came as the amount of gasoline supplied to US markets decreased by 181,000 barrels per day to 9,228,000 barrels per day, after decreasing by 397,000 barrels per day over the prior two weeks, while our imports of gasoline fell by 135,000 barrels per day to 770,000 barrels per day, and while our exports of gasoline rose by 142,000 barrels per day to 688,000 barrels per day….but after having reached an all time record high fourteen weeks ago, our gasoline supplies are still 4.7% lower than last April 27th’s inventory level of 237,978,000 barrels, and remain roughly 2% below 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 fell for the 24th time in thirty-one weeks, decreasing by 1,307,000 barrels to 125,722,000 barrels during the week ending April 26th, after our distillates supplies had decreased by 662,000 barrels over the prior week…the draw on our distillates supplies was a greater this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 419,000 barrels per day to 4,215,000 barrels per day, while our imports of distillates fell by 182,000 barrels per day to 63,000 barrels per day, and while our exports of distillates fell by 445,000 barrels per day to 1,163,000 barrels per day…but even after this week’s inventory decrease, our distillate supplies were still 5.8% higher than the 118,829,000 barrels of distillate that we had stored on April 27th, 2018, even as they remain roughly 6% below the five year average of distillates stocks for this time of the year…

finally, with record oil production and higher oil imports, our commercial supplies of crude oil in storage increased for the eleventh time in 15 weeks, rising by 9,934,000 barrels over the week, from 460,633,000 barrels on April 19th to 470,567,000 barrels on April 26th…that increase left our crude oil inventories near the recent five-year average of crude oil supplies for this time of year, while they also were also about a third higher than the prior 5 year (2009 – 2013) average of crude oil stocks after the fourth week of April, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories have ​generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of April 26th were 7.9% above the 435,955,000 barrels of oil we had stored on April 27th of 2018, but at the same time still 10.8% below the 527,772,000 barrels of oil that we had in storage on April 28th of 2017, and 8.9% below the 512,095,000 barrels of oil we had stored on April 29th of 2016…   

This Week’s Rig Count

US drilling rig activity was down by just one this past week, thus technically falling to another 13 month low and continuing the recent slide that has seen active rigs decrease ten out of the last 11 weeks…..Baker Hughes reported that the total count of rotary rigs running in the US fell by 1 rigs to 990 rigs over the week ending May 3rd, which was also down by 42 rigs from the 1032 rigs that were in use as of the May 4th report of 2018, and quite a bit below 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 2 rigs to 807 rigs this week, which was still 27 fewer oil rigs than were running a year ago, and was barely half of 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 3 rigs to 183 natural gas rigs, which was also down by 13 rigs from the 196 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

drilling activity offshore in the Gulf of Mexico was down by 1 rig to 20 rigs this week, which was still 1 more rig than the 19 rigs active in the Gulf a year ago…the number of active horizontal drilling rigs was unchanged at 873 horizontal rigs this week, which was still 40 fewer horizontal rigs than the 913 horizontal rigs that were in use in the US on May 4th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..in addition, the vertical rig count was also unchanged at 47 vertical rigs this week, which was also down from the 55 vertical rigs that were in use during the same week of last year….however, the directional rig count decreased by 1 rig to 70 directional rigs this week, but those were still up by 7 rigs from the 64 directional rigs that were operating on May 4th 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 oil & gas 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 May 3rd, the second column shows the change in the number of working rigs between last week’s count (April 26th) and this week’s (May 3rd) count, the third column shows last week’s April 26th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number 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 4th of May, 2018…      

May 3 2019 rig count summary

as you can see, rig removals from Texas were responsible for this week’s decrease, as rigs were being added in several other states…of the 7 rigs pulled out in Texas, two rigs were again removed from Texas Oil District 8, or the core Permian Delaware, and two rigs were also pulled out of Texas Oil District 7C, or the southern Permian Midland basin, while two rigs were added in Texas Oil District 8A, or the northern Permian Midland basin…a rig was also pulled out of Texas Oil District 7B, which would include the Permian​’s ​eastern shelf in its westernmost extent, suggesting a net reduction of three Permian ​oil ​rigs in Texas while two Permian ​oil ​rigs were being added in New Mexico…

it also appears that several natural gas rigs were also pulled out of Texas, even though some don’t show on the basin count, because while two natural gas rigs were pulled out of Texas Oil District 6, which would include the western portion of the Haynesville shale, and while one natural gas rig was removed from Pennsylvania’s Marcellus, two natural gas rigs were added in Oklahoma’s Arkoma Woodford and one was added in Ohio’s Utica…thus for the national natural gas rig count to show a net decrease of 3 rigs, 3 natural gas rigs had to have been pulled out of basins not tracked separately by Baker Hughes…since Texas is the only state with gas rigs that shows a negative count for the week, we thus have to believe that some or all of those idled natural gas rigs had to have been operating in Texas…

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