US crude inventories and total commercial crude plus total products inventories both at record highs…

oil prices fell this week for the first time in seven weeks on fears that a second wave of the coronavirus would damage the embryonic economic recovery….after rising 11% to $39.55 a barrel last week on improving US economic data and on the prospect that OPEC would extend their production cuts, the contract price of US light sweet crude for July delivery initially moved higher on the weekend extension of the OPEC cuts on Monday, but reversed to end $1.38 lower at $38.19 a barrel as the Saudis, the Emirates and Kuwait rescinded the additional voluntary cuts they had undertaken in the wake of the collapse of May oil prices… however, optimism that the announced supply cuts would more than offset demand weakness returned on Tuesday as oil prices regained 75 cents of their Monday loss to close at $38.94 a barrel…oil prices opened lower Wednesday on an API report of crude inventory build, and then tumbled to as low as $37.73 a barrel after the EIA confirmed a big build in U.S. crude oil inventories, as well as an increase in fuel inventories, but then rallied to close 66 cents higher at $39.60 per barrel on a weak dollar and the Fed’s plans to keep interest rates at near zero through 2022…​however, the bottom dropped out of oil prices on Thursday, as they tumbled more than 10% at one point amid a broader market selloff as fears over second wave of coronavirus cases hit the market and finished $3.26, or 8% lower at $36.34 a barrel after Reuters reported U.S. coronavirus cases had surpassed 2 million, renewing concerns about a new wave of demand destruction…prices continued falling on Friday and were down more than 5% to $34.48 early in the session, but staged a gradual recovery the remainder of the day to finish just 8 cents lower at $36.26 a barrel….still, for the week, prices were down more than 8%, posting their worst week since the week ending April 24th...

natural gas prices also finished lower this week, largely on milder weather that reduced demand for air conditioning….after falling 3.6% lower to $1.782 per mmBTU on lower LNG exports last week, the contract price of natural gas for July delivery edged up seven-tenths of a cent on Monday as a slowdown in natural gas output offset forecasts for lower air conditioning demand and a drop in LNG exportsmilder weather and lower LNG exports pushed prices 2.2 cents lower Tuesday, but they moved back up 1.3 cents on Wednesday despite those lower demand concerns on another report of slowing output…. natural gas prices climbed another 3.3 cents to $1.813 mmBTU on Thursday as the weekly natural gas storage report met traders expectations, but then fell 8.2 cents, or 4.5% on Friday to a two-week low of $1.731 per mmBTU, on forecasts for milder weather and weaker cooling demand, and declining LNG exports, thus ending the week 2.9% below the prior Friday’s close..

the natural gas storage report from the EIA for the week ending June 5th indicated that the quantity of natural gas held in underground storage in the US rose by 93 billion cubic feet to 2,807 billion cubic feet by the end of the week, which left our gas supplies 748 billion cubic feet, or 36.3% higher than the 2,059 billion cubic feet that were in storage on June 5th of last year, and 421 billion cubic feet, or 17.6% above the five-year average of 2,386 billion cubic feet of natural gas that has been in storage as of the 5th of June in recent years….the 93 billion cubic feet that were added to US natural gas storage this week was just below the consensus forecast from S&P Global Platts’ survey of analysts calling for a 95 billion cubic feet increase, while it was ​near the average of 94 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, but ​it ​was well below the 107 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 June 5th showed that due to an increase our oil imports and a decrease in our oil exports, we ​had​ surplus oil to ​add to ​our stored commercial supplies of crude oil for the 2nd time in five weeks, and for the 28th time in the past thirty-nine weeks….our imports of crude oil rose by an average of 685,000 barrels per day to an average of 6,864,000 barrels per day, after falling by an average of 1,021,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 355,000 barrels per day to an average of 2,439,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,425,000 barrels of per day during the week ending June 5th, 1,040,000 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 100,000 barrels per day to 11,100,000 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 15,525,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,484,000 barrels of crude per day during the week ending June 5th, 178,000 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 a net of 1,134,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated 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 906,000 barrels per day more than 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 (-906,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the average daily 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 usually treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill for oil, we’ll continue to report them​ as is​, just as they’re watched & believed as accurate by most everyone in the industry…(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 rose to an average of 6,630,000 barrels per day last week, which was still 13.3% less than the 7,336,000 barrel per day average that we were importing over the same four-week period last year….the 1,134,000 barrel per day net addition to our total crude inventories included 317,000 barrels per day that were added to our Strategic Petroleum Reserve, and 817,000 barrels per day that were being added to our commercially available stocks of crude oil ….this week’s crude oil production was reported to be down by 100,000 barrels per day to 11,100,000 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 10,700,000 barrels per day, while a 20,000 barrel per day decrease in Alaska’s oil production to 360,000 barrels per day was not enough to have an impact on the rounded national total….last year’s US crude oil production for the week ending June 7th was rounded to 12,300,000 barrels per day, so this reporting week’s rounded oil production figure was about 9.8% below that of a year ago, yet still 31.7% 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 73.1% of their capacity while using 13,484,000 barrels of crude per day during the week ending June 5th, up from 71.8% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years…hence, the 13,484,000 barrels per day of oil that were refined this week were still 21.0% fewer barrels than the 17,064,000 barrels of crude that were being processed daily during the week ending June 7th, 2019, when US refineries were operating at 93.2% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries was ​also higher, increasing by 360,000 barrels per day to 8,139,000 barrels per day during the week ending June 5th, after our refineries’ gasoline output had increased by 608,000 barrels per day over the prior week… however, since our gasoline production is still rebounding from a multi-year low, this week’s gasoline output was still 20.8% lower than the 10,276,000 barrels of gasoline that were being produced daily over the same week of last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 48,000 barrels per day to 4,762,000 barrels per day, after our distillates output had decreased by 66,000 barrels per day over the prior week…but even after this week’s increase in distillates output, our distillates’ production was still 9.1% less than the 5,239,000 barrels of distillates per day that were being produced during the week ending June 7th, 2019….

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 3rd time in 7 weeks and for the 7th time in 19 weeks, rising by 866,000 barrels to 258,661,000 barrels during the week ending June 5th, after our gasoline supplies had increased by 2,795,000 barrels over the prior week…our gasoline supplies increased by less this week than last because the amount of gasoline supplied to US markets increased by 351,000 barrels per day to 7,900,000 barrels per day, and because our imports of gasoline fell by 153,000 barrels per day to 629,000 barrels per day, while our exports of gasoline rose by 45,000 barrels per day to 308,000 barrels per day….with this week’s inventory increase, our gasoline supplies were 10.1% higher than last June 7th’s gasoline inventories of 234,913,000 barrels, and roughly 11% 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 tenth time in 21 weeks and for the 15th time in 36 weeks, rising by 1,568,000 barrels to 175,829,000 barrels during the week ending June 5th, after our distillates supplies had increased by 9,934,000 barrels over the prior week….our distillates supplies rose by much less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 584,000 barrels per day to 3,302,000 barrels per day, and because our exports of distillates rose by 673,000 barrels per day to 1,413,000 barrels per day, while our imports of distillates rose by 14,000 barrels per day to 177,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 37.0% above the 128,372,000 barrels of distillates that we had stored on June 7th, 2019, and about 29% above the five year average of distillates stocks for this time of the year…

finally, with the jump in our oil imports and the drop in our exports, our commercial supplies of crude oil in storage rose for the 17th time in twenty weeks and for the 32nd time in the past 52 weeks, increasing by 5,720,000 barrels, from 532,345,000 barrels on May 29th to an all time high of 538,065,000 barrels on June 5th…that meant our our commercial crude oil inventories were around 14% above the five-year average of crude oil supplies for this time of year, and 52.3% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the first week of June, 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….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 June 5th were 10.8% above the 485,470,000 barrels of oil we had in commercial storage on June 7th of 2019, 24.4% above the 432,441,000 barrels of oil that we had in storage on June 8th of 2018, and 5.2% above the 511,546,000 barrels of oil we had in commercial storage on June 9th of 2017…  

furthermore, if we check the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 9,709,000 barrels ​this week ​to a record high of 1,439,638,000 barrels, 9.7% more than the 1,312,314,000 barrel total of the same week a year ago… 

This Week’s Rig Count

the US rig count fell for the 14th week in a row during the week ending June 12th, and is now down by 64.8% over that fourteen week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by ​5 rigs to 279 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940 and 125 fewer rigs than the prior all time low, also down by 690 rigs from the 969  rigs that were in use as of the June 14th report of 2019, and 1,640 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 their first attempt to put US shale out of business….

the number of rigs drilling for oil decreased by 7 rigs to 199 oil rigs this week, after falling by 16 oil rigs the prior week, leaving oil rig activity at its lowest since June 19, 2009, which was also 589 fewer oil rigs than were running a year ago, and less than an eighth 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 rose by 2 to 78 natural gas rigs, which was still down by 103 natural gas rigs from the 181 natural gas rigs that were drilling a year ago, and still less than 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 unchanged at 13 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana’s offshore waters…that’s now 11 fewer rigs than the 24 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters…there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of this past winter…

the count of active horizontal drilling rigs decreased by 7 rigs to 246 horizontal rigs this week, which was the fewest horizontal rigs active since February 10th, 2006, and hence is a new 14 year low for horizontal drilling…it was also 606 fewer horizontal rigs than the 852 horizontal rigs that were in use in the US on June 14th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count decreased by 2 to 22 directional rigs this week, and those were also down by 46 from the 68 directional rigs that were operating during the same week of last year…on the other hand, the vertical rig count rose by 4 rigs to 11 vertical rigs this week, but those were still down by 38 from the 49 vertical rigs that were in use on June 14th 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 June 12th, the second column shows the change in the number of working rigs between last week’s count (June 5th) and this week’s (June 12th) count, the third column shows last week’s June 5th 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 14th of June, 2019…    

June 12 2020 rig count summary

the net of the basin totals shown above is a decrease of 4 rigs, so to have had 7 horizontal rigs removed nationally this week, 3 more horizontal rigs would have had to have been shut down in other basins not tracked separately by Baker Hughes….checking the rig counts in the Texas part of Permian basin, we find that 4 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while a rig was added in Texas Oil District 7C, or the southern Permian Midland, at the same time…since the overall Permian rig total was down by 4 rigs, that means that one rigs that was shut down in New Mexico would have been drilling in the western Permian Delaware, and the other had likely been drillng in one of those “other” New Mexico basins not tracked by Baker Hughes, such as the San Juan….elsewhere in Texas, one rig was pulled out of Texas Oil District 1, while a rig was added in Texas Oil District 2, which could represent activity in​ the Eagle Ford shale​​, which stretches in a relatively narrow band through the southeastern part of the state and touches on both of those Oil Districts…in addition, two rigs started drilling in Texas Oil District 6, which accounts for the 2 rig increase in the Haynesville shale, since the northern Louisiana rig count remained unchanged at 21, while a rig was pulled out of Texas Oil District 10, which would account for the Granite Wash removal…elsewhere, the rig pulled out of North Dakota was the Williston basin rig, but the Oklahoma rig reduction is not accounted for in the basin table and hence it must have been operating in one of those “other basins” not tracked separately by Baker Hughes…the 2 rigs added in the Haynesville this week account for the week’s natural gas rig increase, and while two natural gas rigs were also added in Pennsylania’s Marcellus, they were offset the removal of two natural gas rigs from West Virginia’s Marcellus at the same time…

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note: there’s more here

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