US Oil Production Spikes 163K Barrels Per Day in One Week

Lower 48 crude oil production rose from 8.012 to 8.175 million barrels per day last week.  This is the fourth increase in a row, and indicates that the rising rig count, or an increase in DUC well completions, is reversing the declining production trend.  Output now sits 480K BOPD below this time last year, and 1 million barrels per day below the peak in June 2015.  

Pemex Oil and Gas Production Continues Multi-Year Decline in September

Pemex reported another substantial decline in gas and liquids production in September, with Crude down 1.4% and Natural Gas down 1.2% on the month.  

Crude output fell 31 KBOPD from August to a new low of 2.11 million barrels per day, a 7% annual decline.

Natural Gas fell 67 MMCFD on the month, a 13.2% annual decline.  A 0.85 BCFD decline in 1 year is substantially more than the total increase in NG exports to Mexico from the U.S.  The largest gas production declines were in onshore, non-associated production.  Crude declines were more evenly spread across grades and regions, though the northern region was unchanged, an area of low production to begin with.

Slowest Start to Winter Heating Season in 7 Years for Natural Gas

Heating demand is well below normal through the first week of November.  This is easily the worst start to winter in over 7 years, with gas weighted HDDs at just 260 through Nov 6, against a 7 year average of 407.  

We normally see about 8% of our HDDs by this point in the winter, and the lack of demand is translating into a collapsing forward curve for natural gas, with Dec-Mar currently trading below $2.80, into a warm near term forecast.

Renewable Energy Marketshare in California Growing

With several megawatts of new Solar PV set to come on line by year end in California, the state embodies the struggle between Renewables and Natural Gas, the 'frenemies' of the clean power generation market.  

Solar capacity rose substantially this year already, with daily peak generation above 8GW on most days.  Hydro is also up due to rainfall of late.  As November begins, renewables are taking an ever larger bite out of the pizza.  Here is CAISO marketshare for NOV, Year on Year, showing that Renewables+Hydro is up over last year.  (Wind is the largest contributor to daily volatility in this measurement).

Because total generation hasn't changed much YOY, this reduces the call on natural gas generation.  Further exacerbating that situation is the heavy Columbia River streamflow, which is sending more renewable imported power to CA, for now.  

Warm Beginning to Winter, Quantified

Heating Degree Days, per the CPC, are off to a poor start, and the forecast is also grim in the near term.

In short, the gas-weighted HDD total through last Saturday was just 197, against a 371 norm.  That's about half (53%) the normal heating load.  Last year was also weak, at just 263.

By week, here is what we've seen since the beginning of September:

The forecast is no better, with the current 7 day forecast totaling a mere 61: