US oil prices finished the week a bit higher for the 2nd time in three weeks after the Saudis increased prices to Europe and Asia and US oil supplies unexpectedly fell….after falling 6.8% to a seven week low of $78.11 a barrel last week as ongoing Israeli-Hamas peace talks reduced geopolitical risk and us oil supplies grew more than expected, the contract price for the benchmark US light sweet crude for June delivery rose in Asian trading early Monday after Saudi Arabia announced higher prices for its crude sold to Europe and Asia, then climbed again as prospects for a Gaza ceasefire appeared slim after Israel ordered an evacuation of Palestinian civilians from Rafah ahead of a threatened assault, and settled 37 cents higher at $78.48 a barrel after Israel confirmed that there was no ceasefire agreement with Hamas…oil prices continued higher in overnight trading after Israel rejected the latest ceasefire deal with Hamas and stepped up its attacks in Gaza’s southern city of Rafah, but were little changed during the Tuesday session as the U.S. moved to replenish the strategic petroleum reserve and a potential cease-fire in Gaza remained uncertain, and settled 10 cents lower at $78.38 a barrel on signs of easing supply concerns as traders shifted their focus to U.S. inventory data releases due that evening & the next day…oil prices dipped further in thin post-settlement trading Tuesday after data from the American Petroleum Institute showed across the board increases in U.S. crude and fuel stocks, and opened lower on Wednesday amid strength in the US dollar, but rallied after the EIA report showed an unexpected draw of over 1.3 million barrels from crude stocks as refiners increased their throughput, and settled 61 cents higher at $78.99 a barrel as a stronger dollar capped the gains seen from falling inventories…oil prices continued to move higher early Thursday in follow through strength from the unexpected draw from crude stocks reported by the EIA, and held those gains as data showing a rise in Chinese imports last month supported higher demand expectations for the world’s largest crude importer, and settled 27 cents higher at $79.26 a barrel as a jump in initial filings for unemployment insurance improved the odds that the Fed would lower interest rates…oil prices rose to top $80 early Friday as signs of a weakening U.S. labor market supported the case for Federal Reserve rate cuts later this year, but erased those gains to tumble to a settlement $1.00 lower at $78.26 a barrel as comments from U.S. central bank officials indicated higher-for-longer interest rates and related threats to demand, but still managed to finish 15 cents or 0.2% higher for the week…
at the same time, natural gas prices finished higher for the third time in four weeks, boosted by lower production and an inventory increase that was lower than expected….after rising 11.4% to a 13 week high of $2.142 per mmBTU last week on ongoing production cuts, higher LNG demand, and a bullish storage report, the contract price for natural gas for June delivery opened six cents higher and ccontinued rising Monday morning, as increased LNG exports and reduced downtime at the Freeport facility provided bullish support, but moved lower in afternoon trading to settle the day 5.3 cents higher at a 14 week high of $2.195 per mmBTU amid supply curtailments, improving LNG levels and forecasts for late-May heat….prices for June natural gas opened two cents higher Tuesday and held steady throughout the session, supported by pipeline maintenance induced production declines and above average temperatures in the South, and settled 1.2 cents higher at aanother new 14 week high of $2.207 per mmBTU, as traders mulled a fundamental outlook headlined by falling supply estimates…natural gas prices started Wednesday’s session 4 cents higher and rose to a three-month intraday high of $2.257 within minutes of the open in a carry over from the previous day’s fundamentals, but slid from there to settle 2.0 cents lower at $2.187 per mmBTU on profit taking and on worries that the tremendous oversupply of gas in storage would increase….but natural gas prices opened a penny higher on Thursday, then jumped to a fresh three-month intraday high of $2.313 following the weekly storage report’s release, as the injection into storage landed on the low side of expectations, before settling with an 11.4 cent gain at another new 14 week high of $2.301 per mmBTU on lower-than-expected inventories, stronger-than-expected demand forecasts over the next two weeks, and continued output declines…while the price of June natural gas slid 4.9 cents or more than 2% to $2.252 per mmBTU on Friday on forecasts for milder weather over the next two weeks than had been expected, and on worries it will take weeks or even months for utilities to use up the tremendous oversupply of gas in storage, it still finished with a 5.1% gain on the week…
The EIA’s natural gas storage report for the week ending May 3rd indicated that the amount of working natural gas held in underground storage rose by 79 billion cubic feet to 2,563 billion cubic feet by the end of the week, which left our natural gas supplies 444 billion cubic feet, or 21.0% above the 2,119 billion cubic feet that were in storage on May 3rd of last year, and 640 billion cubic feet, or 33.3% more than the five-year average of 1,923 billion cubic feet of natural gas that had typically been in working storage as of the 3rd of May over the most recent five years…the 79 billion cubic foot addition to US natural gas working storage for the cited week was less than the 85 billion cubic foot addition to storage that was forecast in a Reuters poll of analysts, but was more than the 71 billion cubic feet that were added to natural gas storage during the corresponding bridge week of April to May 2023, while a bit less than the average 81 billion cubic foot injection into natural gas storage that has been typical for the same spring 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 May 3rd indicated that after increases in our oil exports and in our refinery throughput, we needed to pull oil out of our stored commercial crude supplies for the fourth time in fifteen weeks and for the 10th time in the past 29 weeks, as demand for oil that the EIA could not account for was also a factor….Our imports of crude oil rose by an average of 198,000 barrels per day to an average of 6,969,000 barrels per day, after rising by an average of 274,000 barrels per day over the prior week, while our exports of crude oil rose by 550,000 barrels per day to 4,468,000 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 2,501,000 barrels of oil per day during the week ending May 3rd, 352,000 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 411,000 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 16,012,000 barrels per day during the May 3rd reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,948,000 barrels of crude per day during the week ending May 3rd, an average of 307,000 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 59,000 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, the crude oil figures provided by the EIA for the week ending May 3rd appear to indicate that our total working supply of oil from net imports, from transfers, and from oilfield production was 123 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 difference between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a [+123,000 ] 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 indicating there must have been an error or omission of that magnitude in the week’s oil supply & demand figures that we have just transcribed…Moreover, since 413,000 barrels of oil supply per day could not be accounted for in last week’s EIA data, that means there was a 536,000 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 useless… 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….and 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 59,000 barrel per day decrease in our overall crude oil inventories came as an average of 194,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while an average of 135,000 barrels per day were being added to our Strategic Petroleum Reserve, the twenty-second SPR increase in twenty-nine weeks, following nearly continuous withdrawals from the SPR over the prior 39 months… Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to 6,675,000 barrels per day last week, which was 8.4% more than the 6,155,000 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 8,000 barrels per day lower at 421,000 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 just matches that of our pre-pandemic production peak, while it’s 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 88.5% of their capacity while processing those 15,948,000 barrels of crude per day during the week ending May 3rd, up from their 87.5% utilization rate of a week earlier, but a below normal operating rate for early May, 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 15,948,000 barrels of oil per day that were refined this week were 1.3% more than the 15,745,000 barrels of crude that were being processed daily during week ending May 5th of 2023, but 2.8% less than the 16,405,000 barrels that were being refined during the prepandemic week ending May 3rd, 2019, when our refinery utilization rate was also at a lower than normal 88.9%..
With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 99,000 barrels per day to 9,495,000 barrels per day during the week ending May 3rd, after our refineries’ gasoline output had increased by 254,000 barrels per day during the prior week. This week’s gasoline production was still 3.3% less than the 9,823,000 barrels of gasoline that were being produced daily over week ending April 28th of last year, and 6.3% less than the gasoline production of 10,129,000 barrels per day during the prepandemic week ending May 3rd, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 275,000 barrels per day to 4,783,000 barrels per day, after our distillates output had decreased by 271,000 barrels per day during the prior week. After eight production increases in the past twelve weeks, our distillates output was 3.8% more than the 4,606,000 barrels of distillates that were being produced daily during the week ending May 5th of 2023, but 6.0% less than the 5,089,000 barrels of distillates that were being produced daily during the week ending May 3rd, 2019…
With this week’s increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the fourth time in fourteen weeks, increasing by 915,000 barrels to 228,002,000 barrels during the week ending May 3rd, after our gasoline inventories had increased by 344,000 barrels during the prior week. Our gasoline supplies rose again this week even as the amount of gasoline supplied to US users rose by 179,000 barrels per day to 8,797,000 barrels per day, and even as our imports of gasoline fell by 258,000 barrels per day to 977,000 barrels per day, as our exports of gasoline fell by 113,000 barrels per day to 807,000 barrels per day.…Even after thirty-four gasoline inventory withdrawals over the past fifty-five weeks, our gasoline supplies were still 3.8% above last May 5th’s gasoline inventories of 219,711,000 barrels, but were about 2% below the five year average of our gasoline supplies for this time of the year…
With this week’s increase in our distillates production, our supplies of distillate fuels rose for the fifth time in sixteen weeks, following eight consecutive prior increases, increasing by 560,000 barrels to 116,410,000 barrels over the week ending May 3rd, after our distillates supplies had decreased by 732,000 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 189,000 barrels per day to 3,480,000 barrels per day, while our exports of distillates rose by 288,000 barrels per day to 1,326,000 barrels per day, and while our imports of distillates rose by 8,000 barrels per day to 111,000 barrels per day.…Even with 30 inventory decreases over the past fifty-four weeks, our distillates supplies at the end of the week were 9.7% above the 106,153,000 barrels of distillates that we had in storage on May 5th of 2023, but were still about 7% below the five year average of our distillates inventories for this time of the year…
Finally, after the increases in our exports of crude oil and in refinery throughput, our commercial supplies of crude oil in storage fell for the 8th time in twenty-six weeks and for the 29th time in the past year, decreasing by 1.362,000 barrels over the week, from 460,890,000 barrels on April 26th to 459,528,000 barrels on May 3rd, after our commercial crude supplies had increased by 7,265,000 barrels over the prior week… With this week’s decrease, our commercial crude oil inventories remained about 3% below the most recent five-year average of commercial oil supplies for this time of year, and they were also about 30% above the average of our available crude oil stocks as of the first weekend of May 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 onset of the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this May 3rd were 0.7% less than the 462,584,000 barrels of oil left in commercial storage on May 5th of 2023, but were 8.3% more than the 424,214,000 barrels of oil that we still had in storage on May 6th of 2022, while still 5.2% less than the 484,691,000 barrels of oil we had in commercial storage on May 7th 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 May 10th, the second column shows the change in the number of working rigs between last week’s count (May 3rd) and this week’s (May 10th) count, the third column shows last Friday’s May 3rd 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 12th of May, 2023…
++