smallest January natgas draw in 21 years; gasoline supplies rise most in 4 years as gasoline demand falls to a 3 year low

oil prices fell for the first ​​week in six​​ and by the most in one week since July​ this past week​, following the lack of any significant disruption to oil supplies in the wake of ​the latest U.S.-Iran ​missile exchange…after rising 2.2% to $63.05 a barrel last week following the US assassination of Iran’s top General, the benchmark price of US light sweet crude for February delivery opened higher on Monday and rose to as high as $64.72 as Trump and Tehran continued to trade bellicose rhetoric, but backed off that high to settle with an increase of just 22 cents at $63.27 a barrel on growing doubts that Iran would strike back in a way that would disrupt oil supplieswith oil supplies remaining uninterrupted​​, oil prices opened lower on Tuesday and continued falling to register their first loss in 4 days, ending down 57 cents as $62.70 a barrel, as oil traders reconsidered the likelihood of the feared supply disruptions and cashed in their profits…but ​then ​oil prices spiked nearly $3 higher to start trading on Wednesday, first because the API had reported a larger than expected drawdown of US crude supplies, and then because Iranian missiles had struck US military bases in Iraq…however prices turned around that afternoon and doubled that ​big ​early ​spike in a downward tumble, falling nearly 10% from the day’s high to end down $3.09 at $59.61 a barrel, after the EIA reported an increase in US crude supplies again​st​ the expected draw and Trump said Iran “appears to be standing down” following those overnight missile strikes…oil prices then fell for a third day on Thursday, drifting below the levels prevailing before the ​initial ​U.S. attack and ending down 5 cents at $59.56 a barrel as calm in the Mideast prevailedwith both countries appearing to take a step back from the brink on Friday, oil prices fell another 52 cents to close at $59.04 a barrel, leaving the front-month oil contract 6.4% lower on the week, it’s biggest weekly loss since July

natural gas prices, on the other hand, finished modestly higher, after bouncing off a life-of-contract low last weekafter falling 4.5% to $2.130 per mmBTU on ‘exceptionally bearish’ weather forecasts last week, the price of natural gas for February delivery opened lower and fell to below $2.10 on Monday before recovering to close half a cent higher at $2.135 per mmBTU.. natural gas prices rose 2.7 cents to $2.162 per mmBTU​ ​on Tuesday as some models began to show an extended stretch of below-normal temperatures, but then gave 2.1 cents of that gain back on wednesday, as oversupply continued to weigh on prices …but despite widespread warmth on Thursday, prices rose 2.5 cents as natural gas traders “eyed an end to the blowtorch regime”…prices then rallied a bit on Friday on the prospect of a return to something resembling winter temperatures later this month and closed 3.6 cents higher at $2.202 per mmBTU, thus finishing th​is week ​3.4% higher than last​…

the natural gas storage report for the week ending January 3rd from the EIA indicated that the quantity of natural gas held in storage in the US decreased by 44 billion cubic feet to 3,148 billion cubic feet by the end of the week, which left our gas supplies 521 billion cubic feet, or 19.8% higher than the 2,627 billion cubic feet that were in storage on January 3rd of last year, and 74 billion cubic feet, or 2.4% above the five-year average of 3,074 billion cubic feet of natural gas that has been in storage as of the 3rd of January in recent years….the 44 billion cubic feet that were withdrawn from US natural gas storage this week was the smallest January ​gas ​draw since 1998, a bit below the average forecast for a 50 billion cubic feet withdrawal by analysts surveyed by S&P Global Platts, less than ​half of ​the 94 billion cubic feet withdrawal reported during the corresponding week in 2019, and less than​ a quarter of/​ the average 184 billion cubic feet of natural gas that have been pulled from natural gas storage during New Year​’​s week over the past 5 years….

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 3rd showed that because of a big drop in our oil exports, a sizable increase in our oil imports, and a decrease in demand for oil from our refineries, we were able to add to our stored commercial supplies of crude for the eleventh time in the past seventeen weeks…our imports of crude oil rose by an average of 379,000 barrels per day to an average of 6,730,000 barrels per day, after falling by an average of 457,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,398,000 barrels per day to 3,064,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,666,000 barrels of per day during the week ending January 3rd, 1,777,000 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 unchanged at 12,900,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,566,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,897,000 barrels of crude per day during the week ending January 3rd, 387,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that an average of 166,000 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 497,000 barrels per day less than what what was 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 just inserted a (+497,000) 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”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we’ll continue to report them, just as they’re watched & believed as accurate by most 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 slipped to an average of 6,617,000 barrels per day last week, now 12.7% less than the 7,579,000 barrel per day average that we were importing over the same four-week period last year….the 166,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve was unchanged….this week’s crude oil production was reported to be unchanged at 12,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 12,400,000 barrels per day, while oil production from Alaska was 4,000 barrels per day lower at 483,000 barrels per day but still added the same rounded 500,000 barrels per day to the rounded national total….last year’s US crude oil production for the week ending January 4th was rounded to 11,700,000 barrels per day, so this reporting week’s rounded oil production figure was 10.3% above that of a year ago, and 53.1% 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 93.0% of their capacity in using 16,897,000 barrels of crude per day during the week ending January 3rd, down from 94.5% of capacity the prior week, and a bit below the recent average capacity utilization for the first week of January…as a result, the 16,897,000 barrels per day of oil that were refined this week were 3.8% below the 17,566,000 barrels of crude per day that were being processed during the week ending January 4th, 2018, when US refineries were operating at 96.1% of capacity….

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 1,286,000 barrels per day to 8,887,000 barrels per day during the week ending January 3rd, after our refineries’ gasoline output had decreased by 96,000 barrels per day over the prior week…after this week’s big d​rop in gasoline output, our gasoline production was 5.4% lower than the 9,392,000 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) slipped by 1,000 barrels per day to 5,310,000 barrels per day, after our distillates output had decreased by 83,000 barrels per day over the prior week…and after this week’s small decrease in distillates output, our distillates’ production for the week was 4.5% below the 5,563,000 barrels of distillates per day that were being produced during the week ending January 4th, 2018….

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the ninth week in a row and for the 15th time in 29 weeks, rising by 9,137,000 barrels to 251,609,000 barrels during the week to January 3rd, the largest increase in 4 years, after our gasoline supplies had increased by 3,212,000 barrels over the prior week….our gasoline supplies increased by much more this week because the amount of gasoline supplied to US markets decreased by 828,000 barrels per day to a three year low of 8,133,000 barrels per day, and because our exports of gasoline fell by 219,000 barrels per day to 806,000 barrels per day​,​ while our imports of gasoline fell by 72,000 barrels per day to 401,000 barrels per day….after this week’s increase, our gasoline supplies were 1.4% higher than last January 4th’s gasoline inventory level of 248,062,000 barrels, while they remained roughly 5% above the five year average of our gasoline supplies for this time of the year…

likewise, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 5th time in 15 weeks and for 15th time in the past 40 weeks, rising by 5,330,000 barrels to 139,050,000 barrels during the week ending January 3rd, after our distillates supplies had increased by 8,776,000 barrels over the prior week….our distillates supplies increased by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 318,000 barrels per day to 3,373,000 barrels per day, and because our exports of distillates rose by 243,000 barrels per day to 1,428,000 barrels per day, while our imports of distillates rose by 69,000 barrels per day to 252,000 barrels per day….but even after this week’s inventory increase, our distillate supplies were 0.7% less than the 140,042,000 barrels of distillates that we had stored on January 4th, 2018, and roughly 8% below the five year average of distillates stocks for this time of the year…

finally, with this week’s big drop in oil exports, combined with higher oil imports and the decrease in the amount of oil used by refineries, our commercial supplies of crude oil in storage rose for the fourteenth time in twenty-nine weeks and for the twenty-ninth time in 49 weeks, increasing by 1,146,000 barrels, from 429,896,000 barrels on December 27th to 431,060,000 barrels on January 3rd….with that modest increase, our crude oil inventories remained near the five-year average of crude oil supplies for this time of year, but were still more than 35% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the first weekend of January, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels….even though our crude oil inventories had generally been rising over this past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of January 4th were 2.0% below the 439,738,000 barrels of oil we had stored on January 4th of 2018, while remaining 2.8% above the 419,515,000 barrels of oil that we had in storage on January 5th of 2017, but at the same time were 10.8% below the 483,109,000 barrels of oil we had in commercial storage on January 6th of 2016…       

This Week’s Rig Count

the US rig count decreased for the 18th time in the past 21 weeks during the week ending January 10th, and is now 27.9% lower than the last count of 2018…Baker Hughes reported that the total count of rotary rigs running in the US decreased by 15 rigs to a 34 month low of 781 rigs this past week, which was also down by 294 rigs from the 1075 rigs that were in use as of the January 11th report of 201​9, and 1,148 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business

the number of rigs drilling for oil decreased by 11 rigs to 659 oil rigs this week, which was a 33 month low for oil rigs, 214 fewer oil rigs than were running a year ago, and much less than 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 fell by 4 to 119 natural gas rigs, the fewest natural gas rigs deployed since December 2nd 2016, and hence a 37 month low for natural gas drilling, down by 83 gas rigs from the 202 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 rigs drilling for oil & gas, three rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, one in Washoe County, Nevada, and one in Lake County, California, compared to a year ago, when there were no such “miscellaneous” rigs deployed..

offshore drilling activity in the Gulf of Mexico decreased by one rig to 21 rigs this week, as another rig that had been drilling offshore from Louisiana was shut down this week…as a result, the 20 rigs that continued drilling in Louisiana waters plus the one that was drilling offshore from Texas matched the Gulf of Mexico rig count of 21 rigs a year ago, when 20 rigs were drilling offshore from Louisiana and one rig was drilling in Texas waters…since there are no rigs deployed off US shores elsewhere, nor were there a year ago, the Gulf of Mexico count for this year and last is equal to the national total in both cases..

the count of active horizontal drilling rigs was down by 3 rigs to 698 horizontal rigs this week, which was 250 fewer horizontal rigs than the 948 horizontal rigs that were in use in the US on January 11th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the vertical rig count was down by 6 rigs to 38 vertical rigs this week, and those were also down by 27 from the 65 vertical rigs that were operating during the same week of last year….in addition, the directional rig count was also down by 6 to 45 directional rigs this week, and those were down by 17 from the 62 directional rigs that were in use on January 11th of 2019…

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 January 10th, the second column shows the change in the number of working rigs between last week’s count (January 3rd) and this week’s (January 10th) count, the third column shows last week’s January 3rd 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 11th of January, 2019…   

January 10 2020 rig count summary

in the Texas Permian basin, there was a three rig reduction in Texas Oil District 8, or the core Permian Delaware, and ​a ​one rig reduction in Texas Oil District 8A, or the northern Permian Midland, while one rig was added in Texas Oil District 7C, the southern Permian Midland…in addition, two rigs were pulled out of Texas Oil District 7B, often shown as east of the Permian but ​a region ​which nonetheless has accounted for Permian rig additions in recent weeks…with the New Mexico rig count also down by two, we have to figure either one of those, or one of the retired rigs from Texas District 7B, had not been targeting the Permian…​meanwhile, ​most the other changes were pretty straightforward; oil rigs were pulled out of North Dakota’s Williston shale and Colorado’s Niobrara chalk, while rigs ​targeting oil ​were added in Oklahoma’s Ardmore Woodford and Cana Woodford…for rigs targeting natural gas, one was added in Pennsylvania’s Marcellus shale, one was shut down in Ohio’s Utica shale, and four were shut down in the Haynesville shale…for those, the northern Louisiana region that includes the Haynesville shale was down 2 rigs to 31, while the adjacent Texas Oil District 6 was down 3 rigs to 16, so with the Haynesville down four, one of those rigs  ​was apparently​ ​not targeting that formation…

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