oil prices were modestly higher this past week, as repeated rumors that a US-China trade deal was imminent continued to goose financial & energy markets…after falling 0.8% to $56.20 a barrel as pressure from increasing oil supplies outweighed trade hopes and improving economic data last week, prices of US light sweet crude for December delivery slid to as low as $55.83 early Monday before talk of a meeting between Chinese President Xi and Trump and Saudi Arabia’s offering of public stock in state oil giant Aramco fueled optimism and pushed prices to a 6 week high at $57.43 a barrel, before settling back to $56.54, a gain of 43 cents on the day…hopes for a U.S.-China trade agreement and optimism that Trump would roll back some of the tariffs he had imposed on Chinese imports pushed prices higher on Tuesday, as the benchmark US crude price rose 69 cents, or 1.2%, to close at a 6 week high of $57.23 a barrel…however, prices started sliding in after hours trading Tuesday after the API reported a larger than expected build of crude supplies and continued lower throughout the Wednesday session, pulled down by the EIA report of a much larger-than-expected crude inventory build and by weak euro zone economic data, and ultimately ended 88 cents lower at $56.35 a barrel…but prices bounced back on Thursday, rising 80 cents throughout the day to finish at $57.15 a barrel, buoyed once again by optimism for a potential resolution of the U.S.-China trade dispute…renewed uncertainty over trade then pushed prices much lower early Friday, with oil trading as low as $55.76 after Trump said that he had not agreed to roll back tariffs on China, but pared those losses in the afternoon to end the day 9 cents higher at $57.24 a barrel…oil prices thus shrugged off this week’s big inventory build and trade uncertainty to finish at a 6 week high, nearly 1.9% higher than the prior week’s close…
natural gas prices were also higher this week amid warnings of a historically severe outbreak of cold temperatures across the eastern two thirds of the US… after rising more than 10% to $2.714 per mmBTU on the arrival of cold weather last week, the price of natural gas for December delivery rose 10.7 cents on Monday and another 4.1 cents on Tuesday, as weather guidance after the weekend indicated it would be much colder the following week…but prices then fell 3.4 cents on Wednesday despite forecasts for 15 degrees below normal 6 to 10 days out, as weaker cold showed up in the 11 to 15 day outlook,…despite a modest rally after the storage report, prices turned lower on a milder forecast Thursday at ended 5.6 cents lower at $2.772 per mmBTU….prices then inched up 1.7 cents on Friday to end the week 2.8% higher that the prior Friday at $2.789 per mmBTU..
the natural gas storage report for the week ending November 1st from the EIA indicated that the quantity of natural gas held in storage in the US increased by 34 billion cubic feet to 3,729 billion cubic feet by the end of the week, which meant our gas supplies were 530 billion cubic feet, or 16.6% more than the 3,199 billion cubic feet that were in storage on November 1st of last year, and 29 billion cubic feet, or 0.8% above the five-year average of 3,700 billion cubic feet of natural gas that have been in storage as of the 1st of November in recent years….this week’s 34 billion cubic feet injection into US natural gas storage was the smallest since April 5th, 5 billion cubic feet less than the average forecast for a 39 billion cubic feet injection from analysts surveyed by S&P Global Platts, and well below the average 57 billion cubic feet of natural gas that have been added to gas storage during the last week of October over the past 5 years, the 1st below average storage build in 15 weeks and only the 3rd below average increase in 34 weeks…the 2,569 billion cubic feet of natural gas that have been added to storage over the 32 weeks of this year’s injection season are still near a modern record, eclipsed only by the record 2727 billion cubic feet of natural gas that were injected into storage over the same 32 weeks of the 2014 natural gas injection season…
while there is still a chance for a small injection in next week’s report, this week may have been the last one for this year, as the following two graphs from the EIA’s Natural Gas Storage Dashboard will show….the first graph we have below shows US residential and commercial natural gas use over the period from October 25th to November 7th, thus covering the current reporting week and the next one, with the November 6th and 7th figures being estimates based on weather forecasts…
as the legend indicates, the blue graph shows this year’s daily residential and commercial natural gas use over the period, and the green graph shows the residential and commercial natural gas use for the same dates in 2018, while the grey-shaded background shows the range of usage over the prior 5 years…this is from an interactive graphic, so you can get the exact daily totals by going to the EIA’s Natural Gas Storage Dashboard and mousing over each part of the graph in question…you can check my addition, but it appears that this week’s residential and commercial natural gas use was 54 billion cubic feet more than that of the current report week, which would suggest a withdrawal of natural gas from stoarage except for what the next graph shows..
the above graph, formatted just like the first one, shows electric utility natural gas use over the period, and as you can see, this reporting week had been unusually high, presumably due to late season air conditioning in the East, where temperatures averaged 5 to 9 degrees above normal over the period, even as the rest of the country was colder than normal…again, by my hand count, this week’s utility natural gas use was 10 billion cubic feet less than last week’s, not enough to make up for the larger residential increase, which hence still suggests that the coming report will show a modest withdrawal…there are other factors, such as exports and imports, especially across the Canadian border, which impact our supply in any given week, but none are as volatile week to week as residential and commercial consumption and electric power generation…
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending November 1st showed that because of a big drop in our oil exports and a slowdown in our refining, we had surplus oil to add to our stored supplies for the seventh time in the past eight weeks…our imports of crude oil fell by an average of 620,000 barrels per day to an average of 6,077,000 barrels per day, after rising by an average of 840,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 956,000 barrels per day to an average of 2,371,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,706,000 barrels of per day during the week ending November 1st, 336,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reported to be unchanged at a record 12,600,000 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 16,306,000 barrels per day during this reporting week..
meanwhile, US oil refineries were reportedly processing 15,761,000 barrels of crude per day during the week ending November 1st, 237,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 1,033,000 barrels of oil per day were being added to the supplies of oil stored 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 and from oilfield production was 488,000 barrels per day less than what was reportedly added to storage plus what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA inserted a (+488,000) 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 they label in their footnotes as “unaccounted for crude oil”….that unaccounted oil means that one or all of the oil metrics that the EIA has reported and that we have just transcribed are necessarily well off the mark…however, since the media and most analysts treat these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we continue to report them just as they’re seen & believed by everyone else (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 fell to an average of 6,232,000 barrels per day last week, now 17.4% less than the 7,554,000 barrel per day average that we were importing over the same four-week period last year….the 1,033,000 barrel per day net addition to our total crude inventories was despite a withdrawal of 100,000 barrels per day from our Strategic Petroleum Reserve, which means that 1,133,000 barrels per day were being added to our commercially available stocks of crude oil….this week’s crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 28,000 barrel per day increase to 484,000 barrels per day in Alaska’s oil production was not enough to impact the final rounded total…last year’s US crude oil production for the week ending November 2nd was rounded to 11,600,000 barrels per day, so this reporting week’s rounded oil production figure was 8.6% above that of a year ago, and 49.5% 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 86.0% of their capacity in using 15,761,000 barrels of crude per day during the week ending November 1st, down from 87.1% of capacity the prior week, and somewhat below normal for early November…as a result, the 15,761,000 barrels per day of oil that were refined this week was 3.9% below the 16,408,000 barrels of crude per day that were being processed during the week ending November 2nd, 2018, when US refineries were operating at 90.0% of capacity….
with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 148,000 barrels per day to 10,036,000 barrels per day during the week ending November 1st, after our refineries’ gasoline output had increased by 86,000 barrels per day the prior week….but even with that decrease in gasoline output, this week’s gasoline production was 3.3% higher than the 9,714,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 95,000 barrels per day to 4,875,000 barrels per day, after our distillates output had increased by 205,000 barrels per day over the prior week…with this week’s decrease in distillates output, our distillates’ production this week was 1.8% below the 4,963,000 barrels of distillates per day that were being produced during the week ending November 2nd, 2018….
with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 14th time in 20 weeks and for the 28th time in thirty-five weeks, falling by 2,828,000 barrels to 217,229,000 barrels during the week to November 1st, after our gasoline supplies had decreased by 3,037,000 barrels over the prior week….our gasoline supplies were down again this week even though the amount of gasoline supplied to US markets decreased by 639,000 barrels per day to 9,145,000 barrels per day, because our imports of gasoline fell by 180,000 barrels per day to 493,000 barrels per day and because our exports of gasoline rose by 357,000 barrels per day to 1,009,000 barrels per day….after this week’s decrease, our gasoline supplies were 4.7% lower than last November 2nd’s inventory level of 228,021,000 barrels, and but remained roughly 1% above the five year average of our gasoline supplies for this time of the year…
likewise, with the decrease in our distillates production, our supplies of distillate fuels fell for the 22nd time in the past 32 weeks, decreasing by 622,000 barrels to 119,132,000 barrels during the week ending November 1st, after our distillates supplies had decreased by 2,715,000 barrels over the prior week…our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 33,000 barrels per day to 4,296,000 barrels per day, because our imports of distillates rose by 148,000 barrels per day to 306,000 barrels per day and because our exports of distillates fell by 38,000 barrels per day to 974,000 barrels per day…after this week’s inventory decrease, our distillate supplies were down by 3.0% from the 122,857,000 barrels of distillates that we had stored on November 2nd, 2018, but improved to around 9% below the five year average of distillates stocks for this time of the year, since prior years saw greater decreases during the same week …
finally, this week’s drop in oil exports coupled with the decrease in refinery throughput meant our commercial supplies of crude oil in storage rose for the ninth time in twenty-one weeks and for the nineteenth time in 41 weeks, increasing by 7,929,000 barrels, from 438,853,000 barrels on October 25th to 446,782,000 barrels on November 1st …that increase lifted our crude oil inventories to 3% above the five-year average of crude oil supplies for this time of year, and to nearly 33% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the beginning of November, 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 had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 25th were 3.5% above the 431,787,000 barrels of oil we had stored on November 2nd of 2018, but at the same time were 2.3% below the 457,143,000 barrels of oil that we had in storage on November 3rd of 2017, and 7.9% below the 485,010,000 barrels of oil we had in commercial storage on November 4th of 2016…
This Week’s Rig Count
the US rig count fell for the 11th time in 12 weeks and for the 34th time in 38 weeks over the week ending November 8th, and is now down by 24.6% since the end of last year….Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 31 month low of 817 rigs this past week, which was also down by 264 rigs from the 1081 rigs that were in use as of the November 9th report of 2018, and 1102 fewer rigs than 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 number of rigs drilling for oil decreased by 7 to a 31 month low of 684 oil rigs this week, which was also 202 fewer oil rigs than were running a year ago, and quite a bit 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 remained unchanged at 130 natural gas rigs, still down by 65 rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those drilling for oil & gas, three rigs classified as miscellaneous were also deployed this week; one on the big island of Hawaii, one in Washoe county Nevada, and one in Lake county California, in contrast to a year ago, when there were no such “miscellaneous” rigs deployed..
offshore drilling activity in the Gulf of Mexico increased by 1 rig to 22 rigs this week, as another rig was added to those drilling offshore from Louisiana this week…the 22 rigs drilling in Louisiana’s offshore waters was one more than the Gulf of Mexico rig count of 21 a year ago, when 19 rigs were drilling in Louisiana waters and two were drilling offshore from Texas…in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, whereas a year ago the only offshore rigs were in the Gulf…hence, the national total of 23 offshore rigs is up by 2 rigs from the 21 rigs that were deployed offshore a year ago…
the count of active horizontal drilling rigs was down by 7 rigs to 710 horizontal rigs this week, which was the least horizontal rigs deployed since April 13th, 2017 and hence is virtually a new 31 month low for horizontal drilling…that was also 225 fewer horizontal rigs than the 935 horizontal rigs that were in use in the US on November 9th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..in addition, the vertical rig count decreased by 1 to 51 vertical rigs this week, and those were down by 21 from the 72 vertical rigs that were operating during the same week of last year….on the other hand, the directional rig count increased by 3 rigs to 56 directional rigs this week, but those were also down by 18 from the 74 directional rigs that were in use on November 9th of 2018…
the details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 8th, the second column shows the change in the number of working rigs between last week’s count (November 1st) and this week’s (November 8th) count, the third column shows last week’s November 1st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same 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 9th of November, 2018…
the 4 rig drop in New Mexico all came out of the Permian basin, since the net of Permian basin activity in Texas was unchanged, as 3 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while 3 rigs were added in Texas Oil District 7C, or the southern Permian Midland…the 3 rig drop in Texas represents the 3 rig drop in the Eagle Ford shale in the southeast of the state, with 2 of those coming out of Texas Oil District 1 and the other removed from Texas Oil District 4, while drilling activity in all other Texas districts was unchanged…the rig pulled out of North Dakota had obviously been drilling in the Williston, while additions shown above include a new oil rig in an unnamed Alaska basin, an oil rig in Oklahoma’s Cana Woodford, and the aforementioned “miscellaneous” rig in California…the ‘miscellaneous’ rig in Nevada, meanwhile, represents the first drilling in that state since September of last year…while the table shows no evidence of changes in natural gas drilling, there was in fact a natural gas rig start-up in the northern Louisiana Haynesville while that basin’s lone oil rig was shut down, while at the same time one of the 3 rigs pulled out of the Eagle Ford had been targeting natural gas, leaving the Eagle Ford deployment at 7 natural gas rigs and 53 rigs targeting oil…
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