US crude supplies highest ever for May; oil + products supplies are highest ever; rig count is lowest on record

oil prices rose for a second week as US oil producers curtailed production and states began to loosen restrictions on travel that had been imposed in the wake of the coronavirus pandemic…after rising 17% to $19.78 a barrel last week as OPEC’s production cuts kicked in and fears of negative oil prices faded, the contract price of US light sweet crude for June delivery reversed early steep losses and moved higher on Monday as optimism for a demand recovery offset concern over a spat that broke out between the United States and China over the origin of the virus and finished trading 61 cents higher at $20.39 a barrel…prices continued climbing early Tuesday as prospects for rising demand increased as lockdowns began to ease and then surged in late trading as optimism around ongoing production cuts and the reopening of economies around the world pushed prices higher and finished with an increase of $4.17, or more than 20%, at $24.56 barrel, and then extended those gains in after-hours trading despite industry data showing a larger-than-forecast weekly build in U.S. crude inventories, as the report also showed a surpris​ingly​ large ​drop in gasoline supplies…oil prices opened higher but edged down early Wednesday on that increase in US crude inventories, but rebounded after the EIA’s data showed both production cuts and a smaller crude build and then rose to as high as $26.08 a barrel before turning lower in profit taking to finish at $23.99 a barrel, a loss of 57 cents on the day…oil prices again opened higher and rose to as high as $26.76 on Thursday​,​ but ​again ​turned negative in afternoon trading as optimism that had previously supported prices began to fade, and US crude ended the session down 44 cents at $23.55 a barrel after downbeat comments from Federal Reserve officials and ​on ​doubts over producer compliance with the OPEC+ output-cut agreement….after opening lower on Friday, oil prices turned higher after U.S. producers shut-in more crude production and more states announced plans to relax the lockdowns that had destroyed demand, with the benchmark US crude closing $1.19 or 5% higher at $24.74 a barrel…oil prices thus finished the week 25% above those of the prior Friday, largely on optimism over production cuts and rising demand that had yet to materialize

natural gas prices, on the other hand, finished lower for a second week on ongoing coronavirus demand destruction and rising supplies…after ending last week down less than 1% at $1.890 per mmBTU as concerns over falling demand outweighed prospects for lower supplies, the contract price of natural gas for June delivery opened 4% higher and rose to a gain of 10.3 cents on Monday, as a sustained drop in production and forecasts for another shot of winter-like temperatures fueled the increase…prices then jumped 14.1 cents to a 16 week high of $2.134 per mmBTU​ ​on Tuesday after a gas pipeline explosion in Kentucky shut down a section of the Texas Eastern pipeline, cutting off over 1 billion cubic feet per day of gas flows from the Marcellus Shale to the Gulf Coast…but natural gas prices reversed that gain when they tumbled 19 cents on Wednesday on forecasts for lower than expected demand next week and longer-term projections that businesses would use less of the fuel and that exports would drop in coming months on coronavirus related curtailmentsa triple digit injection of natural gas into storage hit prices Thursday, and they fell back another 5 cents to $1.894 per mmBTU…gas prices then fell another 4% on Friday on forecasts for lower demand in mid-May due to milder weather while commercial demand was expected to remain low and ended the week at $1.823 per mmBTU, down 3.5% on the week even as three Enbridge pipeline segments remained shut down after the Tuesday explosion

the natural gas storage report from the EIA for the week ending May 1st indicated that the quantity of natural gas held in underground storage in the US rose by 109 billion cubic feet to 2,319 billion cubic feet by the end of the week, which left our gas supplies 796 billion cubic feet, or 52.3% higher than the 1,523 billion cubic feet that was in storage on May 1st of last year, and 395 billion cubic feet, or 20.5% above the five-year average of 1,924 billion cubic feet of natural gas that has been in storage as of the 1st of May in recent years….the 109 billion cubic feet that were added to US natural gas storage this week was a bit higher than the consensus forecast for a 105 billion cubic feet increase from a survey of analysts by S&P Global Platts, and quite a bit above the 74 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and also above the 96 billion cubic feet addition of natural gas to storage during the corresponding week of 2019…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending May 1st indicated that a large increase in our oil imports offset the increases in our exports and our oil refining to again leave a ​substantial ​surplus of oil to be added to our stored commercial supplies, the fifteenth consecutive increase and the twenty-sixth addition of oil to storage in the past thirty-four weeks…our imports of crude oil rose by an average of 410,000 barrels per day to an average of 5,712,000 barrels per day, after rising by an average of 365,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 244,000 barrels per day to an average of 3,546,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,166,000 barrels of per day during the week ending May 1st, 166,000 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 fell by 200,000 barrels per day to 11.900,000 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 14,066,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 12,976,000 barrels of crude per day during the week ending May 1st, 216,000 more 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 901,000 barrels of oil per day were being added to the supplies of oil stored in the US….so ​from all that data, 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 189,000 barrels per day more 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 plugged a (-189,000) 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….(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 5,408,000 barrels per day last week, now 20.6% less than the 6,812,000 barrel per day average that we were importing over the same four-week period last year….the 901,000 barrel per day addition to our total crude inventories included 656,000 barrels per day that w​ere added to our commercially available stocks of crude oil, and 245,000 barrels per day that w​ere added to our Strategic Petroleum Reserve….this week’s crude oil production was reported to be down by 200,000 barrels per day to 11,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 11,500,000 barrels per day, while a 23,000 barrel per day decrease in Alaska’s oil production to 443,000 barrels per day was enough to cause the subtraction of another 100,000 barrels per day from the rounded national total….last year’s US crude oil production for the week ending May 3rd was rounded to 12,200,000 barrels per day, so this reporting week’s rounded oil production figure was 2.5% below that of a year ago, yet still 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 70.5% of their capacity in using 12,976,000 barrels of crude per day during the week ending May 1st, up from 69.6% of capacity during the prior week, but still among the lowest refinery utilization rates of the last dozen years…hence, the 12,976,000 barrels per day of oil that were refined this week still 20.9% fewer barrels than the 16,405,000 barrels of crude that were being processed daily during the week ending May 3rd, 2019, when US refineries were operating at a seasonally weak 88.9% of capacity….

even with the increase in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 30,000 barrels per day to 6,705,000 barrels per day during the week ending May 1st, after our refineries’ gasoline output had increased by 530,000 barrels per day over the prior week….but since the recent increases have been coming off a 22 year low in gasoline output, our gasoline production this week was still 33.8% lower than the 10,129,000 barrels of gasoline that were being produced daily over the same week of last year….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 100,000 barrels per day to 5,082,000 barrels per day, after our distillates output had decreased by 25,000 barrels per day over the prior week…and after this week’s increase in distillates output, our distillates’ production for the week was just a fraction less than the 5,089,000 barrels of distillates per day that were being produced during the week ending May 3rd, 2019….

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week ​decreased for ​the 2nd time in 5 weeks and for the 10th time in 14 weeks, falling by 3,158,000 barrels to 256,407,000 barrels during the week ending May 1st, after our gasoline supplies had decreased by 3,669,000 barrels over the prior week…our gasoline supplies decreased again this week because the amount of gasoline supplied to US markets increased by 804,000 barrels per day to  6,664,000 barrels per day, even as our exports of gasoline fell by 373,000 barrels per day to 532,000 barrels per day while our imports of gasoline rose by 140,000 barrels per day to 368,000 barrels per day….and even after this week’s inventory decrease, our gasoline supplies were still 14.5% higher than last May 3rd’s gasoline inventories of 226,743,000 barrels, and roughly 9% above the five year average of our gasoline supplies for this time of the year…

with the increase in our distillates production, our supplies of distillate fuels increased for the fifth time in 16 weeks and for the 10th time in 31 weeks, and by the most since January 4th, 2019, rising by 9,518,000 barrels to 151,490,000 barrels during the week ending May 1st, after our distillates supplies had increased by 5,092,000 barrels over the prior week….our distillates supplies rose by more this week because our exports of distillates fell by 397,000 barrels per day to 929,000 barrels per day while our imports of distillates rose by 101,000 barrels per day to 336,000 barrels per day, while the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 35,000 barrels per day to 3,129,000 barrels per day….after this week’s big inventory increase, our distillate supplies at the end of the week were 20.6% above the 125,563,000 barrels of distillates that we had stored on May 3rd, 2019, and about 12% above the five year average of distillates stocks for this time of the year…

finally, with higher oil exports and a modest increase in oil refining being mostly offset by higher oil imports, our commercial supplies of crude oil in storage rose for the twenty-seventh time in forty-four weeks and for the thirty-fourth time in the past 52 weeks, increasing by 4,590,000 barrels, from 527,631,000 barrels on April 24th to 532,221,000 barrels on May 1st…after 15 straight increases and three record increases over past 5 weeks, our crude oil inventories are now 12% above the five-year average of crude oil supplies for this time of year, and 49.2% higher than the prior 5 year (2010 – 2014) average of crude oil stocks as of the first of May, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels, and continued rising from there….since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of May 1st were 14.1% above the 466,604,000 barrels of oil we had in commercial storage on May 3rd of 2019, and 22.7% above the 435,955,000 barrels of oil that we had in storage on May 4th of 2018, 1.9% above the 522,525,000 barrels of oil we had in commercial storage on May 5th of 2017… and if we take the total of our commercial oil supplies and the stores of all the refined product made from oil, we find those supplies are now at a record high of 1,395,429,000 barrels, 11.6% more than the 1,249,867,000 barrel total of a year ago…

This Week’s Rig Count

the US rig count fell for the 9th week in a row during the week ending May 8th, and is now down by 52.8% over that nine week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 34 rigs to 374 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940, down by 614 rigs from the 988 rigs that were in use as of the May 10th report of 2019, and 1,555 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 33 rigs to 292 oil rigs this week, after falling by 57 oil rigs the prior week, leaving oil rig activity at its lowest since September 11, 2009, which was also 513 fewer oil rigs than were running a year ago, and less than a fifth 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 1 to 80 natural gas rigs, the fewest natural gas rigs active in ​80 years of ​Baker Hughes records, down by 103 natural gas rigs from the 183 natural gas rigs that were drilling a year ago, and just a twentieth of 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, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there were no such “miscellaneous” rigs deployed..

the Gulf of Mexico rig count was down by one rig to 15 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana’s offshore waters…that’s five less than the rig count in the Gulf a year ago, when 17 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters…there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, just as it has been since the onset of winter…

the count of active horizontal drilling rigs decreased by 36 rigs to 338 horizontal rigs this week, which was the fewest horizontal rigs active since July 1st, 2016, and hence is a 46 month low for horizontal drilling…it was also 534 fewer horizontal rigs than the 872 horizontal rigs that were in use in the US on May 10th of last year, and down by more than a thousand 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 2 to 9 vertical rigs this week, and those were down by 36 from the 45 vertical rigs that were operating during the same week of last year….on the other hand, the directional rig count increased by 4 to ​​leave 27 directional rigs running this week, but those were still down by 44 from the 71 directional rigs that were in use on May 10th 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 May 8th, the second column shows the change in the number of working rigs between last week’s count (May 1st) and this week’s (May 8th) count, the third column shows last week’s May 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 10th of May, 2019…    

May 8 2020 rig count summary

this weeks basin totals show a decrease of 32 rigs, once again short of the 36 horizontal rigs removed nationally this week, thus indicating that 4 horizontal rigs were also shut down in basins not tracked separately by Baker Hughes and hence not shown above…at first glance, it appears they might have been in Texas, since the other state’s totals balance with the listed basin counts…so first checking the rig losses in the Texas part of Permian basin, we find that 23 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, and 2 more rigs were removed from Texas Oil District 7C, or the southern Permian Midland, and hence the Permian in Texas saw a total reduction of 25 rigs…since the overall Permian rig total was only down by 21 rigs, that means that the 4 rigs that were added in New Mexico must have been set up to drill in the western Permian Delaware, to bring the national Permian reduction ​back down ​to 21 rigs…elsewhere in Texas, 1 rig was pulled out of Texas Oil District 1, 1 rig was pulled from Texas Oil District 2, and 1 rig was pulled out of Texas Oil District 4, which together would account for the 3 rig reduction in Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and thus touches on 4 ​Oil ​Districts…meanwhile, the 6 rigs that were pulled out of North Dakota had all been drilling in the Williston basin, home of the Bakken shale, and the rig removed from the Ardmore Woodford accounts for one of the two rigs pulled out of Oklahoma….elsewhere, the only rig pulled out of Louisiana was the oil rig that had been drilling in the Gulf, while the Utica shale rig pulled out of Ohio was the only natural gas rig change anywhere nationally this week…

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