According to Wednesday’s EIA Report, total US commercial inventory rose by 4.3 million barrels in the week ending 10/22. On the other hand, Strategic Petroleum Reserve saw another draw of 1.1 million barrels, making total crude oil stocks a 3.2 million build. Both Western Texas Intermediate (WTI) and Brent crude prices tumbled after the report was released.
While oil stockpiles have seen a moderate build, inventory for fuel products continued to trend lower last week. Total motor gasoline inventory was down 2 million barrels, and diesel inventory was down 0.4 million barrels.
In Cushing, Oklahoma, inventory of the delivery hub fell by 3.9 million barrels last week to 27.3 million barrels, the lowest since October 2018.
At the same time, US oil production continued to experience almost no changes from last week, sitting at 11.3 million barrels per day. EIA’s Drilling Report in October saw minimum changes for shale production growth in the forecast of November. New- well oil production per rig continued to see a decline across most basins, and the same situation goes for drilled but uncompleted wells(DUC).
Back in July, EIA issued a warning on US oil production amid declining of drilled but uncompleted wells(DUC). In Permian alone, DUCs are at the lowest since December 2017. During the Covid Pandemic, due to the heavy cost of new drilling, shale producers reduced the number of drilling activities and relies on DUCs to bring production back online. Although total Rig Count has climbed back to 400 level according to the Baker Hughes report, it is nowhere close to the 600 level from pre-pandemic.
Image source: investing.com
Congress in Capitol Hill continues to debate whether or not to include a carbon tax and methane fees in the upcoming infrastructure bill. With anti-fossil fuel policies, persistent inflation concerns, the difficulty to increase drilling becomes more obvious in recent months. If new drilling cannot be opened up quicker, while DUCs continued to see decline via month to month basis, it becomes a dire situation for US oil producers to ramp up production growth next year. If domestic production can not keep up with oil demand, the U.S. may have to rely on foreign oil again soon.