US oil prices fell for a second straight week, following a four week run up on increasing hostilities in the Middle East & Eastern Europe, after Iran and Israel exchanged attacks on each other’s territories but played down the likelihood of further counter-strikes…after falling 1.4% to $85.66 a barrel last week as ongoing ceasefire talks between Israel and Hamas in Egypt tempered the geopolitical risk premium underlying oil price strength, the contract price of the benchmark US light sweet crude for May delivery fell from a five week high in late weekend trading, after most of the 300 drones and missiles fired at Israel by Iran on Saturday were intercepted and did no damage. then moved lower in Monday as the risk premium associated with Iran’s threats eased after Iran said it considers its retaliation to be over, but pared those losses after Reuters reported that Israel’s Netanyahu had summoned his war cabinet for the second time in less than 24 hours and settled 25 cents, or 0.3% lower, at $85.41 a barrel, as strong retail sales increased the likelihood that US interest rates would remain higher for longer and reduce demand for oil…oil prices rose in Asian trading early Tuesday amid unresolved tensions in the Middle East and better-than-expected economic data from China, the world’s largest oil importer, and opened higher in New York, but gave up their gains and sold off to a low of $84.05 by mid-morning, as lowered geopolitical tensions allowed the market to retrace its previous rise, but partly recovered to settle just 5 cents lower at $85.36 a barrel as disappointing domestic economic data offset Mideast supply fears…oil prices declined during early Asian trade Wednesday, following the late Tuesday release of American Petroleum Institute data reflecting bearish demand in the US, then extended their decline in US trading after the EIA confirmed the unexpected build in U.S. crude inventories, and settled $2.67 lower at $82.69 a barrel after Fed chair Powell stated that monetary policy needs to be restrictive for longer due to recent stronger-than-expected inflation readings….oil prices fell for a fourth day in overseas markets Thursday, following data indicating weak oil demand in the US, the world’s largest oil consumer, and the growing opposition to the conflict in Palestine. but bounced off March lows in US trading to settle 4 cents higher at $82.73 a barrel, even as the international benchmark Brent and oil product prices remained in negative territory for the fourth consecutive session….oil prices spiked by over 4% in global markets on Friday after Israel carried out a series of strikes on Iran, including a site near their nuclear facilities, but backed off the highs in the New York session to settle 41 cents higher at $83.14 a barrel, after Tehran played down the incident and said it did not plan to retaliate, and thus left oil prices down 2.9% on the week..
meanwhile, natural gas prices finished lower for the third time in four weeks, weighed down by a massive glut of gas in storage, and by negative spot power and gas prices in the Southwest US, where producers have been paying to have their natural gas disposed of…after falling 0.8% to $1.770 per mmBTU last week as producers exited the winter with almost 39% more gas in storage than normal for that time of year, the contract price for natural gas for May delivery opened six cents lower on Monday, on the lack of technical and fundamental support, and then fell steadily after bouncing to an intraday high of $1.746 at 10:00AM to settle 7.9 cents lower at $1.691 per mmBTU, on light seasonal demand, soft export data, and bullish production estimates….natural gas prices trended lower through midday Tuesday due to weak fundamentals, but spiked to an intraday high of $1.802 at 2:05PM after TC Energy reported “an incident” on their Nova Gas Transmission Ltd. (NGTL) system in Alberta, before retreating to settle 4.1 cents higher at $1.732 per mmBTU after TC Energy reported the affected section of the pipeline had been isolated and shut down..natural gas prices opened two cents lower and slid from the opening on Wednesday as TC Energy was able to contain the ruptured pipeline and fire, avoiding any material disturbances to operations, but mounted a recovery into the afternoon to close 2.0 cents lower on Wednesday at $1.712 per mmBTU on mild weather forecasts, an earlier drop in feedgas to LNG export plants, and worries about the huge surplus of gas in U.S. storage…natural gas prices moved up early Thursday as traders assessed a mixed weather outlook against lighter production readings, then jumped after the EIA reported an injection of natural gas into storage that was in line with expectations and settled 4.5 cents higher at $1.757 mmBTU, on forecasts for cooler weather next week than had been expected, and on an increase in the amount of gas flowing to LNG export plants, including Freeport…after volatile trading on Friday, natural gas prices finished little changed, slipping a half cent to $1.752 per mmBTU, as bullish forecasts for cooler weather next week and a continued drop in output offset bearish negative spot power and gas prices in the Southwest and a massive oversupply of gas in storage, and thus settled 1.0% lower for the week…
The EIA’s natural gas storage report for the week ending April 12th indicated that the amount of working natural gas held in underground storage rose by 50 billion cubic feet to 2,333 billion cubic feet by the end of the week, which left our natural gas supplies 424 billion cubic feet, or 22.2% above the 1,909 billion cubic feet that were in storage on April 12th of last year, and 622 billion cubic feet, or 36.4% more than the five-year average of 1,711 billion cubic feet of natural gas that had typically been in working storage as of the 12th of April over the most recent five years…the 50 billion cubic foot addition to US natural gas working storage for the cited week was in line with the 50 billion cubic foot addition to storage that analysts in a Reuters poll had forecast, but it was less than the 61 billion cubic feet that were added to natural gas storage during the corresponding second week of April 2023, and less than the average 61 billion cubic foot injection into natural gas storage that has been typical for the second week of April 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 April 12th indicated that despite a big jump in our oil exports, we again had surplus oil to add to our stored commercial crude supplies for the tenth time in twelve weeks and for the 18th time in the past 26 weeks, essentially due to a big jump in oil supply that the EIA could not account for….Our imports of crude oil rose by an average of 27,000 barrels per day to an average of 6,461,000 barrels per day, after falling by an average of 183,000 barrels per day over the prior week, while our exports of crude oil jumped by 2,018,000 barrels per day to average 4,726,000 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 1,735,000 barrels of oil per day during the week ending April 12th, 1,991,000 fewer 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 395,000 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 15,130,000 barrels per day during the April 12th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,913,000 barrels of crude per day during the week ending April 12th, an average of 131,000 more 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 an average of 483,000 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 April 12th appear to indicate that our total working supply of oil from net imports, from transfers, and from oilfield production was 1,166,000 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 [+1,166,000 ] 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…Moreover, since 518,000 barrels of oil demand per day could not be accounted for in the prior week’s EIA data, that means there was a 1,684,000 barrel per day difference between this week’s oil balance sheet error and the EIA’s crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week’s report are off by that much, and therefore nonsense…however, 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 (as is obvious to anyone who watches oil prices), 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….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 483,000 barrel per day increase in our overall crude oil inventories came as an average of 391,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 93,000 barrels per day were being added to our Strategic Petroleum Reserve, the nineteenth SPR increase in twenty-six 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 slipped to 6,437,000 barrels per day last week, which was 0.7% more than the 6,390,000 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 5,000 barrels per day lower at 431,000 barrels per day, but still 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 88.3% of their capacity while processing those 15,913,000 barrels of crude per day during the week ending April 12th, down from their 88.3% utilization rate of a week earlier, and a below normal operating rate for early April, as US refineries have lagged normal operating rates since arctic cold penetrated to the Gulf Coast in mid January and froze off some operations… the 15,913,000 barrels of oil per day that were refined this week were 0.4% more than the 15,844,000 barrels of crude that were being processed daily during week ending April 14th of 2023, but 1.0% less than the 16,078,000 barrels that were being refined during the prepandemic week ending April 12th, 2019, when our refinery utilization rate was also at a below normal 87.7%..
Even with the increase in the amount of oil being refined this week, gasoline output from our refineries was a bit lower, decreasing by 25,000 barrels per day to 9,417,000 barrels per day during the week ending April 12th, after our refineries’ gasoline output had decreased by 538,000 barrels per day during the prior week. This week’s gasoline production was 0.6% less than the 9,475,000 barrels of gasoline that were being produced daily over week ending April 14th of last year, and 5.1% less than the gasoline production of 9,917,000 barrels per day during the prepandemic week ending April 12th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 38,000 barrels per day to 4,601,000 barrels per day, after our distillates output had increased by 33,000 barrels per day during the prior week. Even after seven production increases in the past nine weeks, our distillates output was 3.1% less than the 4,750,000 barrels of distillates that were being produced daily during the week ending April 14th of 2023, and 4.6% less than the 4,823,000 barrels of distillates that were being produced daily during the week ending April 12th, 2019…
With this week’s decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the ninth time in eleven weeks, decreasing by 1,154,000 barrels to 227,377,000 barrels during the week ending April 12th, after our gasoline inventories had increased by 715,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 50,000 barrels per day to 8,662,000 barrels per day, and as our imports of gasoline fell by 21,000 barrels per day to 709,000 barrels per day, while our exports of gasoline fell by 152,000 barrels per day to 826,000 barrels per day.…After thirty-two gasoline inventory withdrawals over the past fifty-two weeks, our gasoline supplies were still 1.7% above last April 14th’s gasoline inventories of 223,544,000 barrels, but were about 4% 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 tenth time in thirteen weeks, following eight consecutive prior increases, decreasing by 2,760,000 barrels to 114,968,000 barrels over the week ending April 12th, after our distillates supplies had increased by 1,659,000 barrels during the prior week. Our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 681,000 barrels per day to 3,666,000 barrels per day, even as our exports of distillates fell by 102,000 barrels per day to 1,478,000 barrels per day, while our imports of distillates fell by 14,000 barrels per day to 149,000 barrels per day.…Even with 30 inventory decreases over the past fifty-two weeks, our distillates supplies at the end of the week were 2.6% above the 112,090,000 barrels of distillates that we had in storage on April 14th of 2023, but were about 7% below the five year average of our distillates inventories for this time of the year…
Finally, even after our exports of crude oil jumped by nearly 75%, our commercial supplies of crude oil in storage rose for the 18th time in twenty-six weeks and for the 25th time in the past year, increasing by 2,735,000 barrels over the week, from 457,258,000 barrels on April 5th to 459,993,000 barrels on April 12th, after our commercial crude supplies had increased by 5,841,000 barrels over the prior week… With this week’s increase, our commercial crude oil inventories increased to about 1% below the most recent five-year average of commercial oil supplies for this time of year, while they were about 32% above the average of our available crude oil stocks as of the second weekend of April 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 due to higher exports relating to the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this April 12th were still 1.3% less than the 465,968,000 barrels of oil left in commercial storage on April 14th of 2023, but were 9.1% more than the 421,753,000 barrels of oil that we still had in storage on April 15th of 2022, while still 6.7% less than the 493,017,000 barrels of oil we had in commercial storage on April 16th of 2021, after refinery damage from winter storm Uri left even more crude oil remaining after 2020’s pandemic precautions had left a glut 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…in the table below, the first column shows the active rig count as of April 19th, the second column shows the change in the number of working rigs between last week’s count (April 12th) and this week’s (April 19th) count, the third column shows last week’s April 12th 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 21st of April, 2023…
DUC well report for March
Monday of the past week saw the release of the EIA’s Drilling Productivity Report for April, which included the EIA’s March data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (click tab 3)….that data showed an increase in uncompleted wells nationally for the first time in 13 months and for just the 4th time out of the past 46 months, as drilling of new wells increased while completions of drilled wells decreased in March, even as both still remained well below the average pre-pandemic levels….for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 9 wells, rising from a revised 4,513 DUC wells in February to 4,483 DUC wells in March, which was also 16.1% fewer DUCs than the 5,387 wells that had been drilled but remained uncompleted as of the end of March of a year ago…this month’s DUC increase occurred as 868 wells were drilled in the seven regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, up by 4 from the 864 wells that were drilled in February, while 859 wells were completed and brought into production by fracking them, down from the 866 well completions seen in February, and down from the 1,050 completions seen during March of last year….at the March completion rate, the 4,522 drilled but uncompleted wells remaining at the end of the month represents a 5.3 month backlog of wells that have been drilled but are not yet fracked, up from the 5.2 month DUC well backlog of a month ago, and up from the eight year low of 4.6 months of January 2023, on a completion rate that is still more than 20% below 2019’s pre-pandemic average…
the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, was up by 7 from a month earlier, rising from 813 DUC wells at the end of February to 820 DUC wells at the end of March, as 83 new wells were drilled into the Marcellus and Utica shales during the month, while 76 of the already drilled wells in the region were fracked..
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