US oil prices rose every day this week and ended at a new five month high on threats to supply from increasing hostilities in eastern Europe and the Mideast….after rising 3.2% to a 5 month high of $83.17 a barrel last week on stronger than expected US economic data and on expectations that OPEC would leave its production cuts in place, the contract price for the benchmark US light sweet crude for May delivery rallied almost 2% early Monday on expectations of increased oil demand following the release of supportive economic news from the U.S. and China, but reversed part of those early gains to settle 54 cent higher at $83.71 a barrel as traders figured that stronger US manufacturing data would reduce the chances of a meaningful Fed rate cut…oil prices continued on their upward trend on Tuesday amid a new wave of attacks on Russian and Ukrainian energy facilities, and escalating tensions in the Middle East, and settled $1.44 cents higher at a new 5 month high of $85.15 a barrel after Iran vowed to take revenge on Israel for an airstrike that killed two top generals at the Iranian embassy compound in Damascus, raising the specter of a broader war…oil prices edged higher early Wednesday after OPEC+ ministers affirmed the current supply cuts would continue and after the American Petroleum Institute reported across the board draws from oil & product supplies, then pulled back after the EIA reported a surprise crude inventory build, but still settled the session 28 cents higher at another 5 month high of $85.43 a barrel as trader concerns about supply disruptions due to conflict in the Middle East offset the bearish jump in U.S. crude oil inventories…oil prices fell on the EIA’s report of sluggish US fuel demand in early Asian trading Thursday, then moved mostly sideways for much of the US session as they slipped back below the $85 level as caution over US jobs data and interest rates weighed against OPEC’s output cuts and geopolitical tensions, but rallied late in the afternoon session to close $1.16 higher at another 5 month high of $86.59 a barrel on news that Israeli embassies across the U.S. had been placed on high alert due to increasing threats of an Iranian attack on Israeli diplomats….oil prices surged more than $1 a barrel in overseas markets on Friday as traders watched for a possible direct military conflict between Israel and Iran that could further tighten supplies, but pared those early gains to settle up 32 cents at a 24 week high of $86.91 a barrel as better than expected US jobs data was bullish for oil demand but potentially bearish for interest rate cuts by the Fed later this year, and thus finished 4.5% higher on the week…
natural gas prices rose for the 2nd time in three weeks, or for the first time in four weeks, depending on whether one counts a switch to quoting a higher priced contract as a rise in prices, as Reuters and most of the media does, or not, as we would favor…after falling 2.7% to $1.763 per mmBTU while natural gas quotes were 6.3% higher on the switch from the April contract last week, the contract price for natural gas for May delivery opened nearly six cents higher on Monday and rose all morning, as analysts pointed to lower production as the impetus for the early rally, but slipped in afternoon trading to settle 7.4 cents higher at a three-week high of $1.837 per mmBTU, as gas well output dropped and forecasts were lifted for demand next week…but natural gas prices opened 5 cents lower on Tuesday, knocked back down overnight by weakening LNG exports and weak heating demand, and fell to the day’s low of $1.778 within minutes, before mounting a steady advance to settle 2.5 cents higher at another three week high of $1.862 per mmBTU, as producers continued to cut output, even as price gains were limited by lowered forecasts for demand this week…while natural gas prices opened 3 cents higher on Wednesday, prices soon backed off, as declines in production could no longer buoy a market with such saturated storage levels, and May natural gas settled 2.1 cents lower at $1.841 per mmBTU as the reported decline in output was less than traders had been expecting…the May contract then traded sideways near $1.835 leading up to the weekly storage report release on Thursday, then moved lower as the report hit the wire, as updated forecasts for reduced heating demand in the coming weeks added to the market’s existing bearish sentiment, and settled 6.7 cents lower at $1.774 per mmBTU, after the EIA’s storage report confirmed lofty supply levels…natural gas prices clawed back some of their losses in early trading Friday, as traders continued to mull a mix of restrained production, mild weather and plump inventories, but a serious rally could not be sustained and gas settled 1.1 cents higher at $1.785 per mmBTU, but still managed to eke out a 1.2% gain on the week…
The EIA’s natural gas storage report for the week ending March 29th indicated that the amount of working natural gas held in underground storage fell by 37 billion cubic feet to 2,259 billion cubic feet by the end of the week, which left our natural gas supplies 422 billion cubic feet, or 23.0% above the 1837 billion cubic feet that were in storage on March 29th of last year, and 633 billion cubic feet, or 38.9% more than the five-year average of 1,626 billion cubic feet of natural gas that were typically in working storage as of the 29th of March over the most recent five years…the 37 billion cubic foot withdrawal from US natural gas working storage for the cited week was less than the 41 billion cubic foot withdrawal that the market was expecting, while it was more than the 29 billion cubic feet that were pulled from natural gas storage during the corresponding third week of March 2023, and was quite a bit more than the average 1 billion cubic foot withdrawal from natural gas storage that has been typical for the same last week of March 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 March 29th indicated that after small decreases in our oil exports and in our refinery throughput, we again had surplus oil to add to our stored commercial crude supplies for 8th time in ten weeks and for the 16th time in the past 24 weeks, as even the oil supplies that the EIA could not account for were little changed….Our imports of crude oil fell by an average of 85,000 barrels per day to an average of 6,618,000 barrels per day, after rising by an average of 424,000 barrels per day over the prior week, while our exports of crude oil fell by 159,000 barrels per day to average 4,022,000 barrels per day, which when used to offset our imports, meant that the net of our trade in oil worked out to a net import average of 2,596,000 barrels of oil per day during the week ending March 29th, 74,000 more barrels per day than the net of our imports minus our exports during the prior week. At the same time, transfers to our oil supply from Alaskan gas liquids, from natural gasoline, from condensate, and from unfinished oils averaged 384,000 barrels per day, while during the same week, production of crude from US wells was unchanged at 13,100,000 barrels per day. Hence our daily supply of oil from the net of our international trade in oil, from transfers, and from domestic well production appears to have averaged a rounded total of 16,080,000 barrels per day during the March 29th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,897,000 barrels of crude per day during the week ending March 29th, an average of 35,000 fewer barrels per day than the amount of oil that our refineries reported they were processing during the prior week, while over the same period the EIA’s surveys indicated that a rounded average of 543,000 barrels of oil per day were being added to the supplies of oil stored in the US… So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending March 29th appear to indicate that our total working supply of oil from net imports, from transfers, and from oilfield production was 360,000 barrels per day less than what what was added to storage plus our oil refineries reported they used during the week…To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a +360,000] barrel per day figure onto line 16 of the weekly U.S. Petroleum Balance Sheet, in order to make the reported data for the supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there was an error or omission of that magnitude in the week’s oil supply & demand figures that we have just transcribed…Even so, since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it’s published, and just as it’s watched & believed to be reasonably reliable 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)….(note there is also an aging twitter thread from an EIA administrator addressing these ongoing weekly errors, and what they had hoped to do about it)
This week’s average 543,000 barrel per day increase in our overall crude oil inventories came as an average of 459,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 84,000 barrels per day were being added to our Strategic Petroleum Reserve, the seventeenth SPR increase in twenty-four weeks, following nearly continuous withdrawals over the prior 39 months… Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to 2,272,000 barrels per day last week, which was 0.9% more than the 6,214,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be unchanged at 13,100,000 barrels per day because the EIA’s rounded estimate of the output from wells in the lower 48 states was unchanged at 12,700,000 barrels per day, while Alaska’s oil production was also unchanged at 432,000 barrels per day and added the same 400,000 barrels per day to the EIA’s rounded national total as it did last week…US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure matches that of our pre-pandemic production peak, and is also 35.1% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021.
US oil refineries were operating at 88.6% of their capacity while processing those 15,897,000 barrels of crude per day during the week ending March 29th, down from their 88.7% utilization rate of a week earlier, but a nearly normal operating rate for late March, after refineries recovered from damage caused by the arctic cold that penetrated to the Gulf Coast in mid January… the 15,897,000 barrels of oil per day that were refined this week were 1.8% more than the 15,615,000 barrels of crude that were being processed daily during week ending March 31st of 2023, and 0.3% more than the 15,849,000 barrels that were being refined during the prepandemic week ending March 29th, 2019, when our refinery utilization rate was at a below normal 86.4%..
Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was quite a bit higher, increasing by 767,000 barrels per day to 9,980,000 barrels per day during the week ending March 29th, after our refineries’ gasoline output had decreased by 435,000 barrels per day during the prior week. This week’s gasoline production was 1.3% more than the 9,851,000 barrels of gasoline that were being produced daily over week ending March 31st of last year, and 1.7% more than the gasoline production of 9,813,000 barrels per day during the prepandemic week ending March 29th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 208,000 barrels per day to 4,606,000 barrels per day, after our distillates output had increased by 124,000 barrels per day during the prior week. Even after six production increases in the past 7 weeks, our distillates output was 2.8% less than the 4,740,000 barrels of distillates that were being produced daily during the week ending March 31st of 2023, and 5.4% less than the 4,870,000 barrels of distillates that were being produced daily during the week ending March 29th, 2019…
Even with this week’s increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the eighth time in nine weeks, decreasing by 4,256,000 barrels to 227,816,000 barrels during the week ending March 29th, after our gasoline inventories had increased by 1,299,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users jumped by 521,000 barrels per day to 9,236,000 barrels per day, and because our exports of gasoline rose by 77,000 barrels per day to 863,000 barrels per day, and because our imports of gasoline fell by 34,000 barrels per day to 488,000 barrels per day.…But even after thirty-two gasoline inventory withdrawals over the past fifty-two weeks, our gasoline supplies were still 2.4% above last March 31st’s gasoline inventories of 222,575,000 barrels, but were about 3% below the five year average of our gasoline supplies for this time of the year…
With this week’s decrease in our distillates production, our supplies of distillate fuels fell for 8th time in ten weeks, following eight consecutive prior increases, decreasing by 1,268,000 barrels to 116,069,000 barrels over the week ending March 29th, after our distillates supplies had decreased by 1,185,000 barrels during the prior week. Our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 533,000 barrels per day to 3,495,000 barrels per day, because our exports of distillates rose by 276,000 barrels per day to 1,396,000 barrels per day, and because our imports of distillates fell by 61,000 barrels per day to 104,000 barrels per day…Even with 30 inventory decreases over the past fifty-two weeks, our distillates supplies at the end of the week were 2.7% above the 113,051,000 barrels of distillates that we had in storage on March 31st of 2023, but were about 7% below the five year average of our distillates inventories for this time of the year…
Finally, after supply and demand metrics for US oil were little changed this past week, our commercial supplies of crude oil in storage rose for the 17th time in twenty-six weeks and for the 24th time in the past year, increasing by 3,210,000 barrels over the week, from 448,207,000 barrels on March 22nd to 451,417,000 barrels on March 29th, after our commercial crude supplies had increased by 3,165,000 barrels over the prior week… With this week’s increase, our commercial crude oil inventories remained about 2% below the most recent five-year average of commercial oil supplies for this time of year, but were roughly 33% above the average of our available crude oil stocks as of the last weekend of March over the 5 years at the beginning of the past decade, with the big difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories had first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021’s winter storm Uri froze off US Gulf Coast refining, but then fell in the wake of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this March 29th were still 3.9% less than the 469,952,000 barrels of oil left in commercial storage on March 31st of 2023, but 9.5% more than the 412,371,000 barrels of oil that we still had in storage on April 1st of 2022, while still 9.4% less than the 498,313,000 barrels of oil we had in commercial storage on April 2nd of 2021, after refinery damage from winter storm Uri left even more crude oil remaining after 2020’s pandemic precautions had left a lot of oil unused…
This Week’s Rig Count
In lieu of a detailed report on the rig count, we are again just including a screenshot of the rig count summary from Baker Hughes…note that since last week’s rig count was released a day early, ahead of the Good Friday holiday, this week’s report thus covers 8 days…in the table below, the first column shows the active rig count as of April 5th, the second column shows the change in the number of working rigs between last week’s count (March 28th) and this week’s (April 5th) count, the third column shows last week’s March 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 period a year ago, which in this week’s case was the 7th of April, 2023…
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