OPEC report indicates a global oil shortage of 1.57 million barrels per day in August; DUCs fell as completions rose and new wells drilled remained at all time low; November natural gas price is 28.6% higher than October natural gas price..
US oil prices rose for the first time in three weeks after hurricane Sally cut output, US oil supplies fell, and the Saudis pressured their OPEC partners to cut production…after falling 6.1% to $37.33 a barrel last week after the Saudis marked down their export prices and domestic crude supplies increased, the contract price of US light sweet crude for October delivery moved higher early Monday as another tropical storm in the Gulf of Mexico forced offshore production offline yet again, but turned lower and finished down 7 cents at $37.26 a barrel amid concerns about a stalled global economy, after OPEC had forecast a 9.46 million barrels per day drop in global demand this year…prices edged slightly lower early Tuesday, but turned higher as Hurricane Sally stalled offshore, and ended with a gain of $1.02 as $38.28 a barrel as more than a quarter of U.S. offshore oil and gas production was shut, and key exporting ports were closed by the approaching storm…oil prices then opened higher Wednesday after the API report indicated falling crude inventories, and then surged more than 4% after the EIA report confirmed a big drawdown in U.S. crude and gasoline inventories as Hurricane Sally left a swath of U.S. offshore production shut down, with US crude prices ending up $1.88 at $40.16 a barrel in their largest daily gain since June…oil prices gave up more than 1% of that gain in early trading on Thursday, but then reversed those losses to end 81 cents or 2% higher at $40.97 a barrel as an OPEC panel pressed laggards Iraq, Nigeria and the United Arab Emirates to cut more barrels to compensate for their overproduction in recent months…the oil rally weakened on Friday after a Libyan General said the blockade on the country’s oil exports would be lifted for a month as a prelude to negotiations, but still ended the day 14 cents higher at $41.11 a barrel, the highest close in over two weeks…oil prices thus ended more than 10% higher for the week, after Saudi Arabia pressured its allies to stick to production quotas, Hurricane Sally cut U.S. production, and banks including Goldman Sachs predicted an oil supply deficit for the remainder of this year..
natural gas prices, on the other hand, fell for the third consecutive week, as a bigger than expected injection into storage put gas supplies on track to go into winter at a record level….after falling 12% to a four week low of $2.269 per mmBTU last week on an early cold weather outbreak and rising gas supplies, the contract price of natural gas for October delivery opened the week higher on Monday and held onto a 4.1 cent gain at $2.310 as LNG exports rose and natural gas output fell as producers shut in production ahead of Hurricane Sally’s expected landfall on the Gulf Coast…natural gas prices rose another 5.2 cents on Tuesday as Sally’s slow approach outweighed rising LNG exports and forecasts for milder weather and lower cooling demand over the next two weeks, but then gave up the week’s gains in falling 9.5 cents to a four week low of $2.267 per mmBTU on Wednesday after Sally made landfall far east of Louisiana’s gas production and was downgraded to a tropical storm…natural gas prices then plummeted 10% to a six week low of $2.042 per mmBTU on Thursday as the EIA reported a much bigger-than expected increase in gas inventories that kept stockpiles on track to reach record highs by the end of October.…gas prices were then down another 6% at $1.926 per mmBTU on Friday before clawing their way back to close with a gain of six-tenths of a cent at $2.048 per mmBTU, as resuming output in the Gulf of Mexico offset an increase in LNG exports, which left the October contract down more than 9% on the week, and at a record 61 cents per mmBTU below the closing November natural gas quote of $2.633 per mmBTU…
the natural gas storage report from the EIA for the week ending September 11th indicated that the quantity of natural gas held in underground storage in the US increased by 89 billion cubic feet to 3,614 billion cubic feet by the end of the week, which left our gas supplies 535 billion cubic feet, or 17.4% greater than the 3,079 billion cubic feet that were in storage on September 11th of last year, and 421 billion cubic feet, or 13.2% above the five-year average of 3,193 billion cubic feet of natural gas that have been in storage as of the 11th of September in recent years….the 89 billion cubic feet that were added to US natural gas storage this week was significantly higher than the forecast of a 77 billion cubic foot increase from an S&P Global Platts” survey of analysts, and it was also more than the 82 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and well above the average of 77 billion cubic feet of natural gas that has been added to natural gas storage during the same 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 September 11th showed that because of a drop in our oil imports and an increase in our refinery throughput, we needed to withdraw oil from our stored supplies for the seventh time out of 8 weeks and for the 12th time in thirty-five weeks…our imports of crude oil fell by an average of 416,000 barrels per day to an average of 5,423,000 barrels per day, after rising by an average of 523,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 349,000 barrels per day to an average of 2,595,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,413,000 barrels of per day during the week ending September 11th, 67,000 fewer 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 reportedly 900,000 barrels per day higher at 10,900,000 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 13,313,000 barrels per day during this reporting week…
meanwhile, US oil refineries reported they were processing 13,488,000 barrels of crude per day during the week ending September 11th, 709,000 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 total of 931,000 barrels of oil per day were being pulled out of 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, from storage, and from oilfield production was 755,000 barrels per day more than 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 (-755,000) 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 data for 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 there must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…moreover, since last week’s fudge factor was +547, indicating a week over week difference of 1,302,000 barrels per day in the line 13 balance sheet adjustment, the size of those errors render our week over week comparisons of oil supply and demand as nonsense…but since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as published, just as they’re watched & believed to be 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 fell to an average of 5,513,000 barrels per day last week, which was 20.1% less than the 6,652,000 barrel per day average that we were importing over the same four-week period last year….the 931,000 barrel per day net withdrawal from our total crude inventories was as 627,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 304,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is now being leased for commercial use, and hence the recent SPR additions and withdrawals should really be included in our commercial supplies….this week’s crude oil production was reported to be 900,000 barrels per day higher at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 900,000 barrels per day to 10,400,000 barrels per day, while Alaska’s oil production rose by 3,000 barrrels per day to 459,000 barrels per day but still added 500,000 barrels per day to the rounded national total….last year’s US crude oil production for the week ending September 13th was rounded to 12,400,000 barrels per day, so this reporting week’s rounded oil production figure was 12.1% below that of a year ago, yet still 29.3% 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 75.8% of their capacity while using 13,488,000 barrels of crude per day during the week ending September 11th, up from 71.8% of capacity during the prior week, but excluding the 2005 and 2008 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years…hence, the 13,488,000 barrels per day of oil that were refined this week were 19.3% fewer barrels than the 16,707,000 barrels of crude that were being processed daily during the week ending September 13th of last year, when US refineries were operating at 91.2% of capacity….
even with the jump in the amount of oil being refined, gasoline output from our refineries was still lower, decreasing by 111,000 barrels per day to 8,819,000 barrels per day during the week ending September 11th, after our refineries’ gasoline output had decreased by 604,000 barrels per day over the prior week…and since our gasoline production is still recovering from a multi-year low in the wake of this Spring’s covid lockdown, this week’s gasoline output was 6.7% less than the 9,451,000 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) increased by 5,000 barrels per day to 4,403,000 barrels per day, after our distillates output had decreased by 381,000 barrels per day to a three year low of 4,398,000 barrels per day over the prior week…after this week’s increase in distillates output, our distillates’ production was still 13.8% less than the 5,109,000 barrels of distillates per day that were being produced during the week ending September 13th, 2019….
with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 9th time in 11 weeks and for the 24th time in 33 weeks, falling by 381,000 barrels to 231,524,000 barrels during the week ending September 11th, after our gasoline supplies had decreased by 2,954,000 barrels over the prior week…our gasoline supplies decreased by less this week even though the amount of gasoline supplied to US markets increased by 88,000 barrels per day to 8,478,000 barrels per day because our imports of gasoline roseby 26,000 barrels per day to 574,000 barrels per day and because our exports of gasoline fell by 203,000 barrels per day to 506,000 barrels per day….but even after the gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 0.8% higher than last September 13th’s gasoline inventories of 229,685,000 barrels, and roughly 3% above the five year average of our gasoline supplies for this time of the year…
meanwhile, even with our distillates production near a three year low, our supplies of distillate fuels increased for the eighteenth time in 24 weeks and for the 22nd time in 49 weeks, rising by 1,675,000 barrels to 177,195,000 barrels during the week ending September 11th, after our distillates supplies had decreased by 1,675,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 904,000 barrels per day to nearly a 28 year low of 2,809,000 barrels per day, and even as our exports of distillates rose by 128,000 barrels per day to 1,212,000 barrels per day, while our imports of distillates fell by 48,000 barrels per day to 112,000 barrels per day…and after this week’s inventory increase, our distillate supplies at the end of the week were 31.2% above the 136,663,000 barrels of distillates that we had in storage on September 13th, 2019, and about 22% above the five year average of distillates stocks for this time of the year…
finally, with the increase in our refinery throughput and the decrease in our oil imports, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) fell for the 9th time in the past fifteeen weeks and for the 16th time in the past year, decreasing by 4,389,000 barrels, from 500,434,000 barrels on September 4th to 496,045,000 barrels on September 11th…even after that decrease, our commercial crude oil inventories were still around 14% above the five-year average of crude oil supplies for this time of year, and about 53% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the second weekend of September, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories have generally been rising over the past two years, except for during the past two summers, after generally falling over the year and a half prior to September of 2018, our crude oil supplies as of September 11th were 18.9% above the 417,126,000 barrels of oil we had in commercial storage on September 13th of 2019, 25.9% more than the 394,137,000 barrels of oil that we had in storage on September 14h of 2018, and 5.9% above the 468,241,000 barrels of oil we had in commercial storage on September 8th of 2017…
OPEC’s Monthly Oil Market Report
Monday of this past week saw the release of OPEC’s September Oil Market Report, which covers OPEC & global oil data for August, and hence it gives us a picture of the global oil supply & demand situation in the first month after the unprecedented agreement between OPEC, the Russians, and other oil producers to cut production by 9.7 million barrels a day was reduced to a 7.7 million barrels a day cut….we’ll again caution that estimating oil demand while most countries are still trying to recover from a Covid-19 induced recession is pretty speculative, and hence the demand figures we’ll be reporting this month should again be considered as having a much larger margin of error than we’d expect from this report during normal, more predictable periods..
the first table from this monthly report that we’ll review is from the page numbered 50 of this month’s report (pdf page 63), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures…
as we can see from the above table of oil production data, OPEC’s oil output was up by 763,000 barrels per day to 24,045,000 barrels per day during August, from their revised July production total of 23,283,000 barrels per day…however that July output figure was originally reported as 23,172,000 barrels per day, which means that OPEC’s July production was revised 111,000 barrels per day higher with this report, and hence August’s production was, in effect, a rounded 874,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official July OPEC output figures as reported a month ago, before this month’s revisions)…
from the above table, we can also see that production increases of 475,000 barrels per day from the Saudis, 180,000 barrels per day from the Emirates, and 175,000 barrels per day from Kuwait accounted for the August increase, even as Iraq made a deeper production cut of 100,000 barrels per day….recall that the original oil producer’s agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months, during May and June, but that agreement was extended to include July at a meeting between OPEC and other producers on June 6th….then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day in August, which accounts for the output increase by most members that we see today…however, since Iraq had never been in compliance with the original cuts during May, June and July, the producers group pressured them into committing to make “compensation cuts” over August and September to make up for their overproduction in previous months, which is what accounts for their deeper cut we see above….
there does not seem to be a table or listing available of how much each OPEC member was expected to produce under the newly eased cuts of August, so we’ll include below the table which shows the October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to during May, June, and July….
the above table shows the oil production baseline in thousands of barrel per day from which each of the oil producers was to cut from in the first column, a figure which is based on each of the producer’s October 2018 output, ie., a date before the past year’s and this year’s output cuts took effect; the second column shows how much each participant had committed to cut in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant had agreed to after that cut…the producer’s agreement for August amends the above such that each member would be allowed to increase their May thru July production cut level (ie, the “voluntary adjustment” shown above) by 20%…for example, Algeria’s “cut” was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period…under the agreement for August, Algeria would reduce their “cut” by 20% to 193,000 barrels per day, allowing them to produce 864,000 barrels per day during August…offhand, it appears that only the UAE, who should have held their production under 2,690,000 barrels per day, has exceeded their quota for August…note that sanctioned OPEC members Iran and Venezuela and war-torn Libya are exempt from these cuts…
the next graphic from this month’s report that we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from September 2018 to August 2020, and it comes from page 51 (pdf page 64) of the September OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC’s monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale….
including the 763,000 barrel per day increase in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global oil production increased by a rounded 1.32 million barrels per day to average 89.88 million barrels per day in August, a reported increase which apparently came after July’s total global output figure was revised down by 190,000 barrels per day from the 88.75 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 560,000 barrels per day in August after that revision, with oil production from Canada and Russia accounting for the lion’s share of the non-OPEC increase in August…but even with the increase in August’s global output, the 89.88 million barrels of oil per day that were produced globally in August were 10.01 million barrels per day, or 10.1% less than the revised 99.89 million barrels of oil per day that were being produced globally in August a year ago, the 8th month of OPECs first round of production cuts (see the September 2019 OPEC report (online pdf) for the originally reported August 2019 details)…with this month’s increase in OPEC’s output, their August oil production of 24,045,000 barrels per day rose to 26.8% of what was produced globally during the month, up from their revised 26.3% share in July, and up from the 25.4% share they contributed to global output in June…OPEC’s August 2019 production, which included 537,000 barrels per day from former OPEC member Ecuador, was reported at 29,741,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 5,159,000, or 17.4% fewer barrels per day of oil in August than what they produced a year ago, when they accounted for 30.0% of global output…
Even with the increase in OPEC’s and global oil output that we’ve seen in this report, there was still a shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…
the above table came from page 27 of the September OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2020 over the rest of the table…on the “Total world” line in the fourth column, we’ve circled in blue the figure that’s relevant for August, which is their estimate of global oil demand during the third quarter of 2020…
OPEC is estimating that during the 3rd quarter of this year, all oil consuming regions of the globe have been using an average of 91.45 million barrels of oil per day, which is a 650,000 barrels per day downward revision from the 92.10 million barrels of oil per day they were estimating for the 3rd quarter a month ago (revisions are encircled in green), reflecting quite a bit of coronavirus related demand destruction compared to 2019, when summertime global demand exceeded 100 million barrels per day….however, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were only producing 89.88 million barrels per day during August, which would imply that there was a shortage of around 1,570,000 barrels per day in global oil production in August when compared to the demand estimated for the month…
in addition to figuring that August oil shortage implied by this report, the downward revision of 190,000 barrels per day to July’s global oil output that’s implied in this report, combined with the 650,000 barrels per day downward revision to 3rd quarter demand that we’ve circled in green means that the3,350,000 barrels per dayglobal oil output shortage we had previously figured for July would now be revised to a shortage of 2,890,000 barrels per day….
Note that in green we’ve also circled a downward revision of 200,000 barrels per day to second quarter demand, a quarter when there was alarge excess of oil production…based on that downward revision to demand, our previous estimate that there was a surplus of 5,610,000 barrels per day in June would now be revised to a 5,810,000 barrels per day surplus, the oil surplus of 8,390,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 8,590,000 barrels per day & the 17,140,000 barrels per day that we had previously figured for April would have to be revised to a surplus of 17,340,000 barrels per day…
there was also an upward revision of 10,000 barrels per day to first quarter demand, which we have also encircled in green on the table above…that means that the record global oil surplus of 17,788,000 barrels per day we had previously figured for March would have to be revised downward to a still record global oil surplus of 17,778,000 barrels per day, the 1,900,000 barrel per day global oil production surplus we had figured for February would now be a 1,890,000 barrel per day global oil output surplus, and the 930,000 barrel per day global oil output surplus we last had for January would now be revised to a 920,000 barrel per day oil output surplus.. so despite the shortage of oil that has developed in July and August, it’s obvious the world’s oil producers had produced a lot of oil earlier this year that no one wanted...
This Week’s Rig Count
the US rig count rose for the 3rd time in the past 28 weeks during the week ending September 18th, but it is still down by 68% over that twenty-eight week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 1 to 255 rigs this past week, which was still down by 613 rigs from the 868 rigs that were in use as of the September 20th report of 2019, and was also 149 fewer rigs than the all time low prior to this year, and 1,674 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 1 rig to 179 oil rigs this week, after decreasing by 1 oil rig the prior week, leaving us with 540 fewer oil rigs than were running a year ago, and less than a 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 increased by two to 73 natural gas rigs, which was still down by 75 natural gas rigs from the 148 natural gas rigs that were drilling a year ago, and was also less than a twentieth of 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 Sonoma County, California, and one in the Permian basin in Eddy County, New Mexico…a year ago, there only one such “miscellaneous” rig deployed…
The Gulf of Mexico rig count fell by 1 to 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and two drilling for oil offshore from Texas…that was 9 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when all 23 Gulf rigs were drilling offshore from Louisiana…while there are no rigs operating off of other US shores at this time, a year ago there were also two rigs deployed offshore from Alaska, so this week’s national offshore count is down by 11 from the national offshore rig count of 25 a year ago…also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling in inland waters..
The count of active horizontal drilling rigs was up by 1 to 215 horizontal rigs this week, which was still 541 fewer horizontal rigs than the 756 horizontal rigs that were in use in the US on September 20th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count was up by 21 to 23 directional rigs this week, but those were still down by 38 from the 61 directional rigs that were operating during the same week of last year….on the other hand, the vertical rig count fell by 2 to 17 vertical rigs this week, and those were also down by 34 from the 51 vertical rigs that were in use on September 20th 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 September 18th, the second column shows the change in the number of working rigs between last week’s count (September 11th) and this week’s (September 18th) count, the third column shows last week’s September 11th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count 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 20th of September, 2019…
as has been the case most of the summer, there were only a few changes in drilling activity again this week, with only four rig removals and just five rig additions, suggesting that prices are currently high enough that drillers are no longer trying to shut down money-losing operations, but not high enough to encourage the addition of new rigs to the field….checking the rig counts in the Texas part of Permian basin, we find that 2 rigs were added in Texas Oil District 8, which is the core Permian Delaware, while rig counts in the other Permian basin districts remained unchanged…since the national Permian basin rig count was down by one, that means that the three rigs that were pulled out of New Mexico must have been drilling in the far western Permian Delaware, to balance the national rig count on that basin…meanwhile, the Texas rig count is only up by one because the Gulf oil rig that was removed this week had been drilling in Texas waters…elsewhere, rig additions this week were in North Dakota’s Williston basin, Louisiana’s Haynesville, and West Virginia’s Marcellus, with the latter two additions accounting for this week’s increase in drilling for natural gas…
DUC well report for August
Monday of this past week also saw the release of the EIA’s Drilling Productivity Report for September, which includes the EIA’s August data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions….for the 14th time in the past eightteen months, this report showed a decrease in uncompleted wells nationally in August, as completions of drilled wells increased while drilling of new wells remained unchanged….for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 77 wells, falling from 7,742 DUC wells in July to 7,665 DUC wells in August, which was also 7.8% fewer DUCs than the 8,310 wells that had been drilled but remained uncompleted as of the end of August of a year ago…this month’s DUC increase occurred as 292 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, the same number that were drilled in July, and hence matching lowest number of wells drilled in any month in the history of this report, while 369 wells were completed and brought into production by fracking, an increase of 95 well completions from the 274 completions seen in July, but still down by 73.4% from the 1,389 completions seen in August of last year….at the August completion rate, the 7,655 drilled but uncompleted wells left at the end of the month represents a 20.7 month backlog of wells that have been drilled but are not yet fracked, down from the 29.3 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by near record low completions…
both oil producing regions and natural gas producing regions saw DUC well increases in August, even as one natural gas basin saw a small DUC increase… the number of uncompleted wells remaining in the Oklahoma Anadarko decreased by 25, falling from 725 at the end of July to 700 DUC wells at the end of August, as just 10 wells were drilled into the Anadarko basin during August, while 35 Anadarko wells were being fracked…at the same time, DUCs in the Permian basin of west Texas and New Mexico decreased by 22, from 3,554 DUC wells at the end of July to 3,532 DUCs at the end of August, as 133 new wells were drilled into the Permian, while 155 wells in the region were completed….in addition, DUC wells in the Bakken of North Dakota decreased by 14, from 881 DUC wells at the end of July to 867 DUCs at the end of August, as 19 wells were drilled into the Bakken in August, while 33 of the drilled wells in that basin were being fracked…there was also a decrease of 10 DUC wells in the Eagle Ford of south Texas, from 1,187 DUC wells at the end of July to 1,177 DUCs at the end of August, as 15 wells were drilled in the Eagle Ford during August, while 25 already drilled Eagle Ford wells were completed…meanwhile, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range was unchanged at 481, as 20 new Niobrara wells were drilled in August while 20 drilled Niobrara wells were being fracked…
among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 10 wells, from 601 DUCs at the end of June to 591 DUCs at the end of August, as 61 wells were drilled into the Marcellus and Utica shales during the month, while 71 of the already drilled wells in the region were fracked….on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 4 to 317, as 34 wells were drilled into the Haynesville during August, while 30 of the already drilled Haynesville wells were fracked during the same period….thus, for the month of August, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 71 wells to 6,757 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 6 wells to 908 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…
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