Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, December 4, 2016

OPEC announces oil production cuts back to March levels, oil prices jump 14%

at their meeting in Vienna on Wednesday, the member nations of OPEC agreed to cut their oil production by 4.5% for a period to run 6 months, effective January 1st...the amount of oil output each member is expected to forgo is generally based on their October production, although for some countries, such as Iran, the baseline for the output cut has been adjusted for special factors...Libya and Nigeria, whose recent production has been disrupted by civil conflict, will be exempt from the cuts...Indonesia, an oil importer who would not agree to a cut, was suspended from OPEC, and what they would have cut was to be absorbed by other member....figures released by OPEC indicate they want a cut of almost 1.2 million barrels per day, or roughly in line with what we previewed last week...in addition, OPEC announced that non-OPEC oil producers, who were not represented at the meeting, will contribute an additional output cut of 600,000 barrels per day... presumably, details on those non-OPEC oil production cuts will be worked out at a December 9th meeting at Doha, but since Russia is on board with a cut of 300,000 barrels per day, achieving that target should not be difficult....oil traders apparently believe that OPEC and other producers will be able to achieve what they've set out, because since the announcement of the deal, oil prices have risen 14%...

as you may recall, last week i was skeptical that such an agreement could be worked out, and thought that even if it were, it would quickly fall apart...i'm now of the opinion that their production cut will hold, and that it will be at least partially if not completely effective in reducing the global oil glut, and thereby push up the price of oil...one factor i hadn't counted on was the direct involvement of Vladimir Putin in the deal; originally, the Russian oil companies had only committed to give up the increase in production they planned for next year; now it appears they've also been pressured into participating in an actual 300,000 barrels per day cut in their own production...moreover, Putin himself acted as an intermediary between Saudi Prince Mohammed bin Salman and Iran's Ayatollah Ali Khamenei and President Hassan Rouhani to grease the skids for the deal that was eventually made, that allowed Iran's production figures to be overstated such that their "cut" actually amounts to a small increase from their current production...with the Saudis and Iranians waging proxy wars in both Syria and Yemen, that Putin could convince them to put their animosity aside and agree to a deal was a major breakthrough for OPEC...moreover, their strategy has already resulted an instant success, which will now convince all parties to hold the line irregardless of their personal differences...after agreeing to cut their production by 4.5%, oil prices immediately rose 14%, so they already have a gain of 9.5% on the oil that they will be producing over what they would have had otherwise....

to put this production cutback in perspective, we'll next include a series of graphics which should give you a decent idea how big this production cut is relative to OPEC's recent and earlier oil production, and relative to the global oil supply...first, we'll start with a graph of OPEC's monthly oil production over the past dozen years...

December 3 2016 OPEC oil production as of October

the above graph, taken from the 'OPEC oil charts" page at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 14 members of OPEC for the period from January 2005 to October 2016...as we pointed out last week, OPEC production has been spiking the past few months as member states pumped what they could to be better positioned for any percentage cutback resulting from this earlier planned meeting, and had reached 33.643 million barrels per day as of the October report...the agreed to production cuts will reduce their output to approximately 32.5 million barrels per day, which you should notice is about what they were producing in March and April of this year...

next, we have a table of oil production by each of the members of OPEC for the recent months, quarters, and years, which comes from the November OPEC Monthly Oil Market Report, which was released on November 11th...here you can see that the total oil output for the first quarter of 2016 (1Q16) was 32,500,000 barrels per day, exactly what these "cutbacks in production" hope to get back to...for the Persian Gulf OPEC members, much of cut that will be close to their normal seasonal reduction anyhow, since they usually ramp up their oil production during the summer months to generate electricity for air conditioning...

December 3 2016 OPEC production table

note that the numbers shown in the October column above are close to the reference production levels on which the 4.5% production cuts are based...for instance, the Saudis will be cutting from 10,544,000 barrels per day back to 10,058,000 barrels per day, the Iraqis will be cutting from the 4,561,000 barrels per day shown above to 4,351,000 barrels per day, and the Kuwaitis will be cutting from 2,838,000 barrels per day to 2,707,000 barrels per day...the exception is for Iran, whose cuts are based on their production from Table 5.8: OPEC crude oil production based on direct communication in that same OPEC monthly report, wherein Iran reported oil production of 3,920,000 barrels per day in October...thus, when Iran cuts 4.5% from that level, their allowed production will be 3,797,000 barrels per day, actually 90,000 barrels per day more than their OPEC reference production...

the next graphic, as the heading tells us, shows both OPEC and world oil production monthly on the same graph, from November 2014 to October 2016, and it also comes from the November OPEC Monthly Oil Market Report...the pale blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the green graph represents global oil production in millions of barrels per day, and that's shown on the right scale...global oil production reached 96.32 million barrels per day in October, just short of last year's November record, and OPEC production represented 34.9% of what was produced globally...note that the June OPEC Monthly Oil Market Report indicates global production in May was at 94.51 million barrels per day, so if OPEC is successful in cutting their production by 1.2 barrels per day from October levels, and the non-OPEC producers cut another 600,000 barrels per day, global oil production will be reduced all the way back to the level that we saw in May of this year, when there was an acceleration of rebel attacks on oil facilities and pipelines in Nigeria and Canadian oil production was interrupted by the Alberta wildfires...

December 3 2016 world oil supply

lastly, instead of explaining in detail how oil prices moved this week, we'll just include a chart which shows oil prices for every hour, every day, for the 5 trading days in question...the graph below is a Saturday afternoon screenshot of the oil price graph at DailyFX, a trading news platform which specializes in foreign exchange (FX) trading...each bar on this graph represents oil prices for one hour of trading; when oil prices went up during a given hour, the bar will be green, with the starting price at the bottom of the bar and the price at the end of the hour at the top of the bar...during hours when the price of oil fell, the bar will be red, with the starting price at the top of the bar and the price at the end of the hour at the bottom of the bar...this variety of graph is called a candlestick, and the range of oil prices outside of the opening and closing price for any given period is indicated by a thin 'wick' above or below the "candlestick" part of the graph...thus we can see that in the wee hours of Wednesday morning, when it appeared neither Iran or Iraq would agree to a cut, oil prices fell below $45 a barrel, as some were even forecasting that oil prices would fall to $20 a barrel after the presumed OPEC meeting failure...oil prices then ran up to as high as $51.75 a barrel during the day on Thursday, before sliding back to close at $51.06...but the rally picked up again on Friday and oil closed the week with another gain at $51.68 a barrel, up 14.2% in the three days after the OPEC meeting..

December 3 2016 hourly oil prices

oil prices above $50 a barrel will likely accelerate the return of US drillers and frackers to the field, as we've already seen 5 months of steadily rising rig counts with oil prices stuck between $42 and $50 a barrel...also recall that two weeks ago, the Drilling Productivity Report for November showed that the count of drilled but uncompleted wells rose to 5,155 in October, with more than half of those in the Permian and the Eagle Ford, the two big shale oil fields of Texas...we would expect a pickup in completion of those wells, and an attendant increase in US oil production as prices rise, partially ameliorating the OPEC production cuts...and should oil prices top $60 a barrel, the Dallas Fed 3rd quarter energy survey of American oil and gas executives indicates that between 65% and 70% of oil execs would then pull out all the stops and start drilling everywhere again...


The Latest Oil Stats from the EIA

the US Energy Information Administration's release of oil data for the week ending November 25th indicated that our imports of oil were little changed, and that gasoline and distillates production and inventories rose, while our supplies of crude oil were slightly lower...the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance decreased to +384,000 barrels per day, from last week's +419,000 barrels per day, which still means that 384,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning that one or several of this week's metrics were off by that amount...that's the 6th large positive adjustment in a row, but the cumulative daily average of that adjustment remains at +116,000 barrels per day, meaning the EIA's week figures remain out of balance for the whole year...as we saw last week, much of that imbalance has been due to under-reported oil production

for the week ending November 25th, the EIA reported that production of crude oil from US wells rose by 9,000 barrels per day to an average of 8,699,000 barrels per day, the 7th increase in 8 weeks, as output from Alaskan fields rose by 11,000 barrels per day while production from well in the lower 48 states was 2,000 barrels per day lower....that left the week's domestic oil production 5.5% lower than the 9,202,000 barrels of crude we produced during the week ending November 27th of last year, and 9.5% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...

at the same time, the EIA reported that our imports of crude oil fell by an average of 30,000 barrels per day to an average of 7,548,000 barrels per day during the week ending November 25th, as the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) fell back to an average of 7.7 million barrels per day, now just 5.3% higher than the same four-week period last year...meanwhile, our exports of crude oil rose by an average of 5,000 barrels  per day to an average of 474,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 445,000 barrels per day during the week ending November 27th...

meanwhile, the EIA also reported that the amount of crude oil used by US refineries fell by an average of 114,000 barrels per day to an average of 16,283,000 barrels of crude per day during the week ending November 25th, as our refinery utilization rate slipped back to 89.8% during the week, after last week's 90.8%, which left it way down from the refinery utilization rate of 94.5% of the week ending November 27th last year...US oil refining is now down 3.8% from the pre Labor Day high of 16,930,000 barrels per day, at which time refinery utilization rate had peaked at 93.7%...the rate of crude oil refined this week nationally is also down 3.1% from the 16,803,000 barrels of crude per day US refineries used during the week ending November 27th last year, and down a half percent from the 16,356,000 barrels per day that were being refined during the equivalent week in 2014... 

however, even with the decrease in the amount of crude oil being refined, refineries’ production of gasoline rose by 286,000 barrels per day to 9,986,000 barrels per day during the week ending November 25th, as we continue to see large swings in the fudge factor for gasoline, shown in Table 2 on page 7 of the U.S. Petroleum Balance Sheet, which the footnote tells us is an "adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components"...that fudge factor fell by 307,000 barrels per day this week, from -339,000 barrels per day to -32,000 barrels per day, accounting for the apparent increase in production from last week's distorted figure...the year over year comparison now shows that our gasoline production was up 2.4% from the 9,752,000 barrels per day of gasoline produced during the same week a year ago, despite the lower refining throughput...the EIA also reported that refinery output of distillate fuels (diesel fuel and heat oil) rose by 136,000 barrels per day to 5,216,000 barrels per day during the week ending November 25th, the highest since last December 4th....that distillates output was 0.9% higher than the 5,168,000 barrels per day that was being produced during the week ending November 27th last year, and 3.7% higher than the 5,028,000 barrels per day of distillates produced during the equivalent week of 2014...     

with the jump in gasoline production, the EIA reported that our gasoline supplies rose by 2,097,000 barrels to 226,123,000 barrels as of November 25th, as both our domestic consumption of gasoline and our gasoline imports were little changed...as a result, our gasoline inventories as of November 25th were 4.3% higher than the 216,867,000 barrels of gasoline that we had stored on November 27th of last year, and 8.4% higher than the 208,567,000 barrels of gasoline we had stored on November 28th of 2014....at the same time, our distillate fuel inventories rose by 4,957,000 barrels to 154,196,000 barrels by November 25th, the largest one week jump in distillate supplies since January 8th of this year...so while our distillates inventories are still down by 10.8 million barrels over the past 10 weeks, they were 6.8% higher than the distillate inventories of 144,415,000 barrels of November 27th last year, and 32.7% above the distillate inventories of 116,174,000 barrels of November 28th, 2014…

finally, with our oil imports still below the recent mean, our inventories of crude oil fell by 884,000 barrels to 488,145,000 barrels by November 25th, which left them 4.7% below their April 29th peak of 512,095,000 barrels...however, we still ended the week with 6.8% more crude oil in storage than the 457,212,000 barrels we had stored as of the same weekend a year earlier, and 40.7% more crude oil than the 347,015,000 barrels we had stored on November 28th of 2014...  


This Week's Rig Count

because of last week's Thursday holiday, the Baker Hughes rig count report for the week ending December 2nd covers changes in drilling activity for the nine days from November 23rd to December 2nd.. for that period, they reported that drilling rig activity increased for the 10th time out of the last 11 weeks, as the active rig count rose by 4 rigs, from 593 rigs on November 23rd to 597 rigs on December 2nd....that was still down from the 737 rigs that were working as of the December 4th report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014....noteworthy in this week's report was that Canadian drillers added 26 rigs, which brought their active rig total up to 200, surpassing the 177 rigs they had deployed a year ago at this time..

rigs deployed drilling for oil in the US rose by 3 rigs to 477 rigs during the week, which was the most oil rigs we've had working in any week since January 29th, as oil drilling activity has only been down once in the past 23 weeks...but oil drilling was still down from the 545 oil directed rigs that were working on December 4th a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 1 rig to 119 rigs, which still left active gas rigs down from the 192 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...one rig that was classified as miscellaneous also remained active, an increase from a year ago, when no such miscellaneous rigs were working...

one of the rigs that had been working on a drilling platform offshore from Louisiana was shut down this week, which reduced the Gulf of Mexico rig count to 22, and also cut the total US offshore count to 22 rigs, down from the 25 rigs that were working in the Gulf of Mexico last year at this time, which was also the total for all US offshore rigs active a year ago...in addition, one rig that had been drilling through inland freshwater in southern Louisiana was also shut down, leaving just one rig working on inland waters, down from 2 such rigs a year ago...

the number of working horizontal drilling rigs increased by 10 rigs to 485 rigs this week, which was still down from the 569 horizontal rigs that were in use on December 4th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, six directional drilling rigs were pulled out and stacked, reducing the directional rig count to 46, which was down from the 64 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count of 66 rigs was unchanged from last week, but down from last year's deployment of 104 vertical rigs..

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of December 2nd, the second column shows the change in the number of working rigs between last week's count (on November 23rd) and this week (December 2nd), the third column shows last week's November 23rd active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for December 4th of 2015...   

December 2nd 2016 rig count summary

this week's variances show a return to the pattern we've being seeing for most of the past 5 months, wherein the biggest jump in drilling was again in the Permian basin of western Texas, which at 235 rigs now shows more drilling activity than the 217 rigs that were working there a year ago...since both the Dallas area Barnett shale and the south Texas Eagle Ford also saw two rig increases, that suggests that Texas saw an increase of 11 horizontal rigs, while other drilling rig types were pulled out...also note the increase of 3 gas directed drilling rigs in the Haynesville, generally a northwestern Louisiana field, although with the 4 rig decrease in that state, those additions could be in across the border in Texas too...also hard to square is the 4 rigs that were added in Wyoming; they weren't in any of the major basins, since the DJ Niobrara saw a 2 rig decrease...all in all, this week’s changes were not as immediately clear as we normally see...



note: there's more here...

Wednesday, November 30, 2016

Sunday, November 27, 2016

finding the missing US oil production while waiting for the OPEC meeting

the regularly scheduled biennial meeting of OPEC will take place at their headquarters in Vienna on Wednesday of this week, and the swirl of rumors and speculation as to what might come out of it has been the major factor in oil price swings this week, while dominating the rest of the week's oil related news...you might recall that at the end of September, OPEC members met in Algiers and agreed to cut their oil production back to 32.5 million barrels a day, without making any commitments on how those cuts would be achieved, leaving those important details to be worked out at this November 30th meeting...while that apparent agreement voiced after the September meeting was enough to cause an immediate $3 a barrel spike in the price of oil, within a few days it became obvious that both Iran and Iraq had not agreed to the figures OPEC had published for their production, and hence were not on board with the cuts...in the weeks since, the oil markets have remained on edge about the possible outcome of this coming meeting, jumping or diving on the slightest mention pro or con from major oil ministers involved in the negotiations...at the same time, most of the OPEC countries attempted to pump as much oil as they could, hoping to improve their negotiating position at this week’s meeting, and as a result OPEC's production of oil rose from the already elevated level of 33.2 million barrels a day at the time of the September meeting to a record high 33.643 million barrels a day in October....so you can all get an idea how the major players in this stack up, we'll include a small bar graph of their October production, which is taken from a Friday Bloomberg article about the failure of a planned meeting between OPEC and non-OPEC oil producers...

November 26 2016 oil producers

this graphic shows the major OPEC oil producers in blue and non-OPEC producers who have indicated a willingness to negotiate with OPEC on production limits in red; other large producers of oil, such as China, Canada, Norway, Kazakhstan and the US are obviously not included...in round numbers, OPEC countries have to find 1.15 million barrels a day in production cuts to meet their stated target of 32.5 million barrels a day...the Saudis have said they'd be willing to cut back a half million barrels, which doesn't even get them half way to what they need...but Iran says its current production is at 3.8 million barrels a day, higher than the 3.65 million barrels a day OPEC estimates it produces, and they want to pump 4.2 million barrels a day before they'd even be willing to freeze output...likewise, Iraq disputes OPEC figures that peg the nation's output at less than 4.2 million barrels per day; they say they're pumping 4.7 million barrels a day and that they should be exempt from production cuts anyway, because they've been at war with ISIS and other Islamic militants...meanwhile, the Russians are already planning a 300,000 barrel per day output increase for 2017, and while they have said they'd be willing to give that up and freeze at today's levels, they will not cut from where they are today...so we can already see that given the intransigence of these major producers, achieving anything like a 1.15 million barrel per day cuts seems nearly impossible...and we haven't even counted Nigeria and Libya, who are exempt from the cuts because civil strife has severely restrained output in both countries...both of those counties could easily add a million barrels per day of oil output each by next year, should their production be allowed to return to normal...still, if OPEC should announce an agreement to cut to 32.5 million barrels a day and the market believes them, it could boost oil prices into the $50 to $60 a barrel range, which is the figure at which most US drillers say they would put all their stacked rigs back into the field...

so, despite what appears to be the unlikely possibility that a meaningful freeze or cut could be negotiated, news of this week's coming meeting continued to move oil prices last week....after closing last week with a 5.3% increase at $45.69 a barrel, the expiring contract price for December US crude rose $1.80, or 3.9%, to finish Monday at $47.49 a barrel, after Putin was quoted saying “We will do everything that our partners from OPEC are expecting" in affirming Russia's willingness to freeze production...at the same time the contract for January WTI crude, which became the new front-month contract on Monday, rose $1.88, or 4.1%, to end at $48.24 a barrel... with January contract prices now being quoted, oil prices faltered on Tuesday and slipped to $48.03 a barrel, as word was that Iraq and Iran still remained hesitant about an output cut...against the backdrop of the simultaneous release of the weekly EIA data and the Baker Hughes rig count, oil prices fell again on Wednesday, as doubts persisted that OPEC could agree to a production cut large enough to make a significant dent in the global glut of crude, recovering  by the end of the day to end & closing down 7 cents at $47.96 a barrel...then on Friday, after OPEC made it known that they would also ask non-OPEC oil producers to make big cuts in output, the Saudis suddenly pulled out of planned Monday talks with non-OPEC nations including Russia, saying they want an OPEC deal in place before they would send anyone to the non-OPEC talks...against that backdrop, oil prices fell nearly $2 a barrel that afternoon to close the week at $46.06 a barrel, thereby erasing all but 37 cents of Monday’s increases...

The Latest Oil Stats from the EIA

Wednesday's release of oil data for the week ending November 18th by the US Energy Information Administration indicated the third consecutive large increase in our oil refining and a concurrent large drop in our imports of oil, which thus resulted in a draw-down of our supplies of crude oil and a corresponding increase in our supplies of the products made from it...for the same report, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance increased to +419,000 barrels per day, from last week's +256,000 barrels per day, which means that 419,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning that one or several of this week's metrics were off by that amount...that's now the 5th large positive adjustment in a row, and as a result the cumulative daily average of that adjustment has risen to +116,000 barrels per day, meaning the EIA's figures remain out of balance for the whole year...but since these figures still continue to drive oil prices and hence oil field activity, we'll continue to track them as long as the market participants continue to follow them...

so, for the week ending November 18th, the EIA reported that our imports of crude oil fell by an average of 845,000 barrels per day to an average of 7,578,000 barrels per day, the 5th week in a row wherein our oil imports changed by more than 10% as last week our imports rose by 981,000 barrels per day, the prior week they fell by 1,553,000 barrels per day, and the week before that they rose by 1,979,000, as tankers that had been held offshore by hurricane Matthew made it into port...while i've seen no reason for the ongoing extreme volatility in weekly imports, those swings meant that the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) actually rose this week to an average of 8.1 million barrels per day, 13.3% higher than the same four-week period last year...meanwhile, our exports of crude oil fell by an average of 12,000 barrels  per day to an average of 469,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 445,000 barrels per day during the equivalent week

at the same time, the EIA reported that production of crude oil from US wells rose by 9,000 barrels per day to an average of 8,690,000 barrels per day during the week ending November 18th, the sixth increase in 7 weeks, as output from Alaskan fields fell by 3,000 barrels per day for the second week in row, while production from well in the lower 48 states was 12,000 barrels per day higher....that still left the week's domestic oil production 5.2% lower than the 9,165,000 barrels of crude we produced during the week ending November 20th of last year, and 9.6% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...our oil production for the week ending November 18th was also 529,000 barrels per day, or 5.8% lower than what we were producing at the beginning of this year, which we're citing as an interim benchmark, since our otherwise declining production had also been rising in the last few months of 2015...since we're talking about OPEC oil production this week, and since it's been two years since OPEC tried to overwhelm US production with their won, we'll also include a graph of the recent track of US oil production...

November 23 2016 oil production

the above graph comes from the online version of the OilPrice Intelligence Report, which was prepared Friday of this week with the headline "Saudis Withdraw From Non-OPEC Meeting, But Odds For Deal Are Still Good"...this graph shows the EIA's Monthly U.S. Field Production of Crude Oil from January 2014 up until August 2015 in blue, and the EIA's Weekly U.S. Field Production of Crude Oil in yellow, with both expressed in thousands of barrels of oil per day...notice that the monthly data is actual confirmed production, unlike the weekly estimates that the markets follow and we quote weekly, which are based on a small sampling of refineries...that confirmed data indicates that production of crude oil from US wells was at 8,744,000 barrels per day during August, the highest level in three months...in contrast to that, we reported oil production of 8,445,000 barrels per day for the week ending August 5th, 8,597,000 barrels per day for the week ending August 12th, 8,548,000 barrels per day for the week ending August 19th, 8,488,000 barrels per day for the week ending August 26th, and 8,458,000 barrels per day for the week ending September 2nd, which means we reported an August mean production of 8,511,000 barrels per day, or 233,000 barrels per day short of what was actually being produced...so right here we have a prime example of the kind of errors that are in the weekly data, which the balance sheet "fudge factor" covers for...the monthly data shows that US oil production fell no more than 10% from the peak, and as of August was only down around 7% from the average production of the summer of 2015...thus these two years of oil prices generally half of what they were in mid-2014' barely dented US oil output, and makes a joke of the early forecasts that our output would fall to 5 million barrels per day...

returning to this week's estimates, the EIA also reported that the amount of crude oil used by US refineries rose by an average of 271,000 barrels per day to an average of 16,397,000 barrels of crude per day during the week ending November 18th, as our refinery utilization rate rose to 90.8% during the week from last week's 89.2%, but was still lower than the refinery utilization rate of 92.0% of the week ending November 20th last year...US oil refining has thus increased by 949,000 barrels per day in the past three weeks, and is now only down 3.1% from the pre Labor Day high of 16,930,000 barrels per day, at which time refinery utilization rate had peaked at 93.7%...the rate of crude oil refined this week nationally is now up 0.1% from the 16,380,000 barrels of crude per day US refineries used during the week ending November 20th last year, and up 2.8% from the 15,957,000 barrels per day that were being refined during the equivalent week in 2014... 

however, even with the increase in the amount of crude oil being refined, refineries’ production of gasoline apparently fell by 452,000 barrels per day to 9,700,000 barrels per day during the week ending November 18th, the 2nd large weekly drop in gasoline production, after a apparent record high prior week...you might recall that when that apparent production record was set two weeks ago, we pointed out that it was mostly due to a swing of 554,000 barrels per day in the fudge factor for gasoline, which is shown in Table 2 on page 7 of the U.S. Petroleum Balance Sheet, which the footnote tells us is an "adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components"...that fudge factor swung by 692,000 barrels per day this week, from +353,000 barrels per day to -339,000 barrels per day, rendering the week over week gasoline production comparison useless...the year over year comparison shows that gasoline production was still up 1.6% from the 9,544,000 barrels per day of gasoline produced a year ago, a more likely increase than the 8% & 12% jumps in gasoline output being reported two weeks ago...also reasonable is the EIA report that refinery output of distillate fuels (diesel fuel and heat oil) rose by 96,000 barrels per day to 5,080,000 barrels per day during the week ending November 18th....that puts the week's distillates output 1.1% higher than the 5,023,000 barrels per day that was being produced during the same week last year, and 3.7% higher than the 4,900,000 barrels per day of distillates we produced during the equivalent week of 2014...     

the large drop in gasoline production figures are further called into question by the EIA report that our gasoline supplies rose by 2,317,000 barrels to 224,026,000 barrels as of November 18th, as our domestic consumption of gasoline fell by 335,000 barrels per day to 9,024,000 barrels per day and as our gasoline imports rose by 34,000 barrels per day to 855,000 barrels per day...as a result, our gasoline inventories as of November 18th were 3.4% higher than the 216,732,000 barrels of gasoline that we had stored on November 20th of last year, and 8.5% higher than the 206,424,000 barrels of gasoline we had stored on November 21st of 2014....at the same time, our distillate fuel inventories rose by 327,000 barrels to 149,239,000 barrels by November 18th, only the 2nd increase in our distillate supplies in 9 weeks....and despite the withdrawal of nearly 15.8 million barrels of distillates from storage over the past 9 weeks, our distillate inventories were still 5.6% higher than the distillate inventories of 141,364,000 barrels of November 20th last year, and 31.9% above the distillate inventories of 113,146,000 barrels of November 21st, 2014…

finally, with that big drop in our oil imports, our inventories of crude oil fell by 1,255,000 barrels to 489,029,000 barrels by November 18th, the first drop in our oil supplies in four weeks....however, with 2 hurricanes interfering with oil imports over the last 12 weeks, our oil stockpiles are now more than 6.2 million barrels below the 495,238,000 barrels we had stored at the end of August, thus slipping at a time of year when oil supplies are usually rising, and are now thus 4.5% below their April 29th peak of 512,095,000 barrels...however, we still ended the week with 7.2% more crude oil in storage than the 456,035,000 barrels we had stored as of the same weekend a year earlier, and 39.4% more crude oil than the 350,704,000 barrels we had stored on November 21st of 2014... 

This Week's Rig Count

because of the holiday, the weekly Baker Hughes rig count report was released on Wednesday, November 23rd, and thus covers changes in drilling activity for just the five days from November 18th to the 23rd...nonetheless, they reported that drilling rig activity increased for the 9th time out of the last 10 weeks, as the active rig count rose by 5 rigs, from 588 rigs on November 23rd to 593 rigs on November 23rd...that was still down from the 744 rigs that were deployed as of the November 25th report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

rigs deployed drilling for oil rose by 3 rigs to 474 rigs during the abbreviated week, which was still the most oil rigs we've had working since January 29th, as oil drilling activity has only been down once in the past 22 weeks...but oil drilling was still down from the 555 oil directed rigs that were working on November 25th a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 2 rigs to 118 rigs, which still left active gas rigs down from the 189 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...one rig that was classified as miscellaneous also remained active, an increase from a year ago, when no such miscellaneous rigs were working...

offshore drilling activity remained unchanged at 23 rigs, all of which were in the Gulf of Mexico, down from 30 in the Gulf and in total last year at this time...the number of working horizontal drilling rigs increased by 5 rigs to 475 rigs this week, which was still down from the 569 horizontal rigs that were in use on November 25th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the count of both vertical rigs and directional rigs were unchanged from last week, with 66 vertical rigs in use, down from last year's 109 rigs, and 52 directional rigs deployed, down from the 66 directional rigs that were working on November 25th 2015...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 23rd, the second column shows the change in the number of working rigs between last week (November 18th) and this week (November 23rd), the third column shows last week's November 18th active rig count, the 4th column shows the change in the number of rigs running this Wednesday from the equivalent Wednesday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this  case was for November 25th of 2015...   

November 23 2016 rig count summary

what's obviously most notable in this week's tables is that the increase in drilling was driven by a 4 rig increase in Pennsylvania's Marcellus, and that while there was a 3 rig increase in Texas, it was not in the Permian, which is where more than half of the new rigs added since May have been concentrated...since gas directed rigs were only up by 2, that 4 rig increase in the Marcellus means gas drlling rigs were reduced elsewhere, and where that is is not shown in our major basins above, as Baker Hughes has the 2 gas rig reduction listed under "other"...the 3 rig drop in Wyoming drilling is similarly not in any major basin, since the only major basin that extends into Wyoming is the Denver-Julesburg Niobrara, which showed a 2 rig increase...and we should note that of the states not shown above, Mississippi saw a doubling of its active rigs count from 2 rigs to 4, which is still down from the 7 rigs that were drilling in Mississippi through November of last year...



Note: there's more here...

Sunday, November 20, 2016

US becomes a natural gas exporter, press finds "largest oil deposit ever", rigs jump, DUCs increase

we’ll start by noting that the US has hit a major natural gas milestone as of this week, as our exports of natural gas have exceeded our imports, making us a net exporter of natural gas for the first time in our history....this came about as our ongoing imports from Canada were reduced because the discount for Canadian gas compared to US prices had fallen to 36 cents per mmBTU from a prior average of 60-cents per mmBTU, and because the sole operating natural gas liquefaction facility at Sabine Pass Louisiana began to run a third "train" to liquefy gas for export...not many knew that up until this week, we've continued to import copious amount of Canadian gas despite our own overproduction, because it could be had for even lower prices than our own record lows, even as we exported smaller amounts of gas to Mexico...this switch to being an exporter is just the beginning... recall that 5 weeks ago we published a list of 19 LNG export projects that were at various stages along the regulatory process, and that we noted that should they all be completed, they would require more than 30 billion cubic feet of gas per day to meet their combined capacities...since our current natural gas production has been running at around 72 billion cubic feet of gas per day, production of gas from newly fracked US wells would have to increase by more than 40% from current levels if all those projects would be completed...since more than half of the new natural gas production over the past 4 years has come from the Marcellus and the Utica, that suggests that it would be new wells in our region that would be supplying this export demand...in the Utica, that new gas supply would generally have to come from the counties east and south of Geauga because, as we showed 6 months ago, the hydrocarbons in the Utica underlying most of our county and points west exist as oil..

that news on our gas exports notwithstanding, the fracking patch story that by far received the most mainstream media coverage this week was that "The largest oil deposit ever found in America was just discovered in Texas"...now, of course, the way that headline and many other headlines put it is just plain nonsense; there was no massive oil deposit in west Texas that had gone undiscovered until this week...what prompted the headline was the first assessment of the Wolfcamp shale in the Midland Basin portion of Texas' Permian Basin by the U.S. Geological Survey, which found that the Wolfcamp "contains an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids" of technically recoverable resources...the Wolfcamp shale is just one of many shale deposits in the Permian basin; others that you might find familiar include the Delaware, the Spraberry, Bone Springs, and the Wolfberry...and the existence of copious oil reserves in this basin isn't new or "just discovered"; drilling in the Wolfcamp has been part of the rig count increase in the Permian basin that we've been seeing since May, which as we've pointed out, has accounted for more than half of the rigs added nationally over the past 5 months...in fact, the USGS itself notes that their assessment came by way of the over 3000 horizontal wells that had already been drilled and completed in the Wolfcamp, and as a result of those wells they found from that that the reserves in Wolfcamp alone were nearly three times larger than the reserves shown to be contained in the Bakken shale, which the USGS last assessed in 2013....what i found most notable in the description of this shale basin was that it's as much as a mile thick in some places, which is more than 10 times the thickness of the Eagle Ford or the Bakken...compare that to the thickness of the combined Utica-Point Pleasant formation that underlies Ohio, which is only 225 to 245 feet thick where it's now being worked, and which maxes out at 395 feet thick in the far northeastern corner of the state..

so just how much oil is 20 billion barrels?  matched up against the current US oil production of around 8.7 million barrels per day, 20 billion barrels could replace our current production for 2,325 days, or somewhat less than 6 and a half years...but when considering the US, we have to note that our oil consumption is far in excess of our oil production...so, if we take this year's cumulative daily average of our production plus our net imports (i.e., imports minus exports) from line 1 and line 4 of the weekly U.S. Petroleum Balance Sheet, we find that we've been using about 16.2 million barrels of oil per day throughout 2016... thus, at that rate, the 20 billion barrels of oil in the Wolfcamp would last us 1,234 days, or less than three and a half years....but since our oil has just started to flow overseas this year with the lifting of the oil export ban and much more of it may be destined for export once additional facilities to load oil onto ocean going ships are constructed, we have to consider that the oil found in the US has now become part of the global oil supply....in that case, the 20 billion barrels of oil in the Wolfcamp shale is only about 210 days of global oil consumption at current levels, which means that for oil to continue to be a sustainable energy source for entire planet, we'd have to find three world class oil reservoirs the size of the Wolfcamp every two years...

coincidentally, the Drilling Productivity Report for November was released on Monday of this past week, and it showed the first increase in uncompleted wells nationally in the past 7 months, largely as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian...you might recall that as of the September Drilling Productivity Report, the EIA began providing a monthly estimate of the number of drilled but uncompleted wells (DUCs) in the 7 regions that the Drilling Productivity Report covers; at that time, they estimated that such wells had decreased by 34 wells during August, indicative of frackers completing more wells than were being drilled... in September, such DUCs were again down by 27 wells, as higher oil prices continued to result in more fracking than drilling...in the current report for October, they showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5097 in September to 5,155 in October...the Permian basin, which includes the Wolfcamp and several other shale plays in EIA stats, saw its total count of uncompleted wells rise from 1,382 in September to 1,467 in October, in keeping with the increase in drilling that we've seen in that basin...on the other hand, DUCs in the Eagle Ford of south Texas fell by 30, from 1339 in September to 1,309 in October...the Marcellus also saw a decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 650 in September to 643 in October...DUCs in other basins were little changed; the Utica showed an increase of one uncompleted well and thus had 115 DUCs in October...for the month, DUCS in the 4 oil basins (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased for the first time in 7 months, as drilling in the Permian picked up, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) slipped by 2 wells and has generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered.... 

The Latest Oil Stats from the EIA

this week's release of oil data for the week ending November 11th by the US Energy Information Administration indicated the second consecutive big increase in our oil refining since the fall slowdown began, accompanied by a large jump in our imports of oil, which thus resulted in increases in our supplies of both oil and most of the products made from it...in the same report, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance fell to +256,000 barrels per day, from last week's +450,000 barrels per day, which means that 256,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning that one or several of this week's metrics were off by that amount...that's now the 4th large positive adjustment in a row, and as a result the cumulative daily average of that adjustment has risen to 109,000 barrels per day, meaning the EIA's figures remain out of balance for the whole year, and should by rights be taken with a large grain of salt, if not completely ignored...but these figures still continue to drive oil prices and hence oil field activity, so we'll just continue to track them as long as the market participants continue to believe them...

so, for the week ending November 11th, the EIA reported that our imports of crude oil rose by an average of 981,000 barrels per day to an average of 8,423,000 barrels per day, as our imports still remain inexplicably more volatile than usual after the hurricane induced disruption of 5 weeks ago...those imports were 20.9% more oil than the 6,968,000 barrels per day we imported during the week ending November 13th last year and as a result, the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) bounced back up to an average of 8.0 million barrels per day, 12.6% higher than the same four-week period last year...meanwhile, our exports of crude oil rose by an average of 71,000 barrels  per day to an average of 481,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 504,000 barrels per day during the equivalent week

at the same time, the EIA reported that production of crude oil from US wells slipped by 11,000 barrels per day to an average of 8,681,000 barrels per day during the week ending November 11th, the first decrease in 6 weeks, coming after US production had increased by 170,000 barrels per day last week... that happened as output from Alaskan fields fell by 3,000 barrels per day, and production from the lower 48 states was 8,000 barrels per day lower....that left the week's domestic oil production 5.4% lower than the 9,182,000 barrels we produced during the week ending November 13th of last year, and 9.7% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...our oil production for the week ending November 11th was also 538,000 barrels per day, or 5.8% lower, than what we were producing at the beginning of this year, which we're citing as an interim benchmark, since our otherwise declining production had also been rising in the last few months of 2015...

meanwhile, the also reported that the amount of crude oil used by US refineries rose by an average of 309,000 barrels per day to an average of 16,126,000 barrels of crude per day during the week ending November 11th, as our refinery utilization rate rose to 89.2% during the week from last week's 87.1%, but it was still lower than the refinery utilization rate of 90.3% logged during the week ending November 13th last year...US oil refining is still down by 804,000 barrels per day, or by 4.7%, in the 10 weeks since Labor Day, as the refinery utilization rate had fallen from 93.7% from then to 85.2% by the end of October .. the quantity of crude oil refined this week nationally is now up slightly from the 16,076,000 barrels of crude per day US refineries used during the week ending November 13th last year, and up 1.3% from the 15,913,000 barrels per day that were being refined during the equivalent week in 2014... 

however, even with the jump in the amount of crude oil being used by refineries, the EIA reported that refineries’ production of gasoline fell by 302,000 barrels per day to 10,456,000 barrels per day during the week ending November 11th, after it had risen by 632,000 barrels per day to an apparent record high prior week, a record which was facilitated by the change in the fudge factor to correct for the imbalance created by the blending of ethanol with gasoline...thus this week's 'drop' in gasoline production reflects the absence of the big change in that fudge factor, rather than a real decrease...hence, our gasoline output for the week was still 6.2% higher than the gasoline output of 9,558,000 barrels per day during the week ending November 13th last year, and 5.4% higher than the gasoline production during the same week of 2014....at the same time, the EIA reported that refinery output of distillate fuels (diesel fuel and heat oil) rose by 200,000 barrels per day to 4,984,000 barrels per day during the week ending November 11th....however, that increase still the week's distillates output 1.0% lower than the 5,032,000 barrels per day that was being produced during the same week last year, while it was 4.0% higher than the 4,793,000 barrels per day of distillates we produced during the equivalent week of 2014...     

absent the big swing in the gasoline fudge factor, the EIA reported that our gasoline supplies rose by 746,000 barrels to 221,709,000 barrels as of November 11th, even as our domestic consumption of gasoline rose by 146,000 barrels per day to 9,359,000 barrels per day, largely because our gasoline imports rose by 321,000 barrels per day to 821,000 barrels per day, which looks to be the largest increase in gasoline imports since July 26th 2013...as a result, November 11th's gasoline inventories were 3.5% higher than the 214,254,000 barrels of gasoline that we had stored on November 13th of last year, and 8.4% higher than the 204,599,000 barrels of gasoline we had stored on November 14th of 2014....at the same time, our distillate fuel inventories rose by 310,000 barrels to 148,912,000 barrels by November 11th, the first increase in our distillate supplies in 8 weeks....however, even after the withdrawal of 16.1 million barrels of distillates from storage over the past 8 weeks, our distillate inventories were still 6.1% higher than the distillate inventories of 140,318,000 barrels of November 13th last year, and 29.7% above the distillate inventories of 114,794,000 barrels of November 14th, 2014…

finally, with that big jump in our oil imports, our inventories of crude oil rose by 5,274,000 barrels to 490,284,000 barrels by November 11th, the third increase in a row, over which time our supplies of crude oil have increased by 22,126,000 barrels....however, with 2 hurricanes interfering with oil imports in the 8 prior weeks, our oil stockpiles are still nearly 5 million barrels below the 495,238,000 barrels we had stored at the end of August, thus slipping at a time of year when oil supplies are usually rising, and remain 4.3% below their April 29th peak of 512,095,000 barrels...however, we still ended the week with 7.7% more crude oil in storage than the 455,074,000 barrels we had stored as of the same weekend a year earlier, and 40.6% more crude oil than the 348,758,000 barrels we had stored on November 14th of 2014...   

This Week's Rig Count

US drilling activity rose for the 8th time in 9 weeks during the week ending November 18th, bouncing back from last week's one rig decrease to post the largest increase in 31 months....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 20 rigs to 588 rigs by this Friday, which was still down from the 767 rigs that were deployed as of the November 20th report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

rigs deployed drilling for oil rose by 19 rigs to 471 rigs for the week, the most oil rigs we've had working since January 29th, as oil drilling activity has only been down once in the past 21 weeks...oil drilling work is still down from the 564 oil directed rigs that were working on November 20th a year ago, however, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 1 rig to 116 rigs, which still left active gas rigs down from the 193 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...another rig that was active was classified as miscellaneous, an increase from a year ago, when no such miscellaneous rigs were active...

offshore drilling activity increased with the activation of two additional drilling platforms in the Gulf of Mexico off the Louisiana coast, where there are now 22 rigs drilling....another driller is working offshore from Texas, so the Gulf of Mexico count is now up to 23, but still down from 30 last year at this time...that's also true of the total US offshore count, because no rigs other than those in the Gulf were active offshore elsewhere this week or during the same week a year ago....in addition, a single rig was set up to drill through an inland lake in southern Louisiana this week, bringing the inland waters rig count back up to two, same as a year ago...

the number of working horizontal drilling rigs increased by 13 rigs to 470 rigs this week, which was still down from the 581 horizontal rigs that were in use on November 20th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count increased by 7 rigs to 66 rigs this week, which was down from the 107 vertical rigs that were drilling in the US during the same week last year...meanwhile the directional rig count was unchanged at 52 rigs, which was down from the 69 directional rigs that were deployed during the same week last year... 

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 18th, the second column shows the change in the number of working rigs between last week (November 11th) and this week (November 18th), the third column shows last week's November 11th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was for November 20th of 2015...   

November 18 2016 rig count summary

once again, we can see that the Permian basin increase was behind the near record increase in drilling this week, as once again the 11 rigs added in Permian accounted for more than half of this week's jump...note that at 229 rigs, drilling in the Permian is now up by 4 rigs from a year ago, and accounts for nearly half of the horizontal rigs working in the entire nation...also notice that there were 3 rigs added in the Utica, all of which were drilling for natural gas, as are all of the 19 rigs that were active here this week; that's only 1 rig shy of the 20 active in the Utica a year ago, meaning the Utica is close to joining the Permian and the Cana Woodford as the plays seeing the largest rebound this summer and fall....note that in addition to the state changes shown in the first table above, Alabama also saw a rig start up this week, their first activity since October 14th...it's also an increase from a year ago, as there was no drilling in Alabama between mid October of 2015 and mid January of this year



Note: there's more here...

Sunday, November 13, 2016

fracking Trump, largest oil output rise in 18 months, record high gasoline production*, global rigs, et al

i imagine you all know what happened on Tuesday...while we can hardly garner exactly what energy and environmental policies a candidate might initiate based on his or her campaign speeches and tweets, we can certainly begin to get an idea where Mr Trump is going to take this country based on the moves he's already making in building his transition team....his initial move towards taking over came on Wednesday, even before all the votes were counted, when he appointed well known climate denier Myron Ebell, dubbed a 'climate criminal' by Greenpeace, to lead his EPA transition team...while it seems unlikely that that Trump would eliminate the EPA entirely, as he had promised he would during the campaign, Ebell's appointment certainly indicates an end to EPA regulation of CO2 and probably lax enforcement of the rest of our environmental laws...moreover, that initial move against the EPA probably means that he'll move to carry out his other anti-environment campaign pledges, such as scrapping the Clean Power plan and other environmental regulations that Obama put in place, eliminating all Federal incentives for renewable energy and clean power R&D, and pulling the US out of the Paris climate accords...while theoretically the earliest date that the US could legally withdraw from the Pairs accords would be 4 years after they came into force (ie, November. 4, 2020), lawyers have already suggested Trump could get around that by pulling out of the parent climate treaty, the 1992 U.N. Framework Convention on Climate Change, that was ratified by George Bush Sr, in one year, by simply giving the UN a notice to that effect...

we can also glean from his campaign speeches that he'll push a “drill-baby-drill” policy for oil & gas exploitation, which would included opening up all federal lands and waters to fracking, and that he'd cut Federal regulations that have slowed big oil projects from going forward...that would certainly include the Dakota Access Pipeline that he's personally invested in, which the Obama administration had held up in September, and which is now just 2 weeks away from drilling under the Missouri River...btw, the original plans for that project called for the pipeline to cross the Missouri River north of Bismarck, but that route was rejected as a threat to the water supply of the white people of Bismarck, and the route was instead moved to cross the river downstream, where it would only impact the Standing Rock Sioux tribe's water...Trump had also campaigned on reopening the Keystone XL pipeline route, and with his election we find that TransCanada is formulating plans to resubmit their proposal for that pipeline...it's hard to understand their thinking, since all the tar sands expansion projects that had been proposed early in the decade have since been cancelled because of low oil prices, and the takeaway needs for current tar sands production is already being met by existing pipelines...we also know that fracking interests will be well represented in the Trump administration, since fracking billionaire Harold Hamm has been his energy adviser throughout the campaign and is rumored as the next Energy Secretary...in addition, Politico reports that Trump is considering fracker Forrest Lucas of Lucas Oil as the next Secretary of the Interior...and if you think that's bad, it could even get worse, because someone from Trump's inner circle has leaked that Sarah Palin is in line for one of those cabinet positions too, while Newt Gingrich is being vetted for Secretary of State... 

still, it's not the end of the world, although Trump's election may bring that end a little closer...we'd do well to remember that we've been here before, and survived...if you're old enough, you might remember that Jimmy Carter's National Energy Policy had once set the nation on a course to switch to renewable forms of energy and replace fossil fuel vehicles with electric, and that his green energy policy came to a complete halt after Ronald Reagan was elected and removed the 32 solar panels from the roof of the White House, which Carter had installed to provide the premises with heat and hot water...historically, most of our political leaders have been partially owned by the energy companies anyway, so if you’ve bought into the idea of American democracy, you have to live with it's fickle consequences...

still, no matter what Trump or his appointees do, they cannot force US oil and gas exploitation if it's unprofitable, and this week saw prices for both of those commodities again fall...initially, US oil prices were up 82 cents, or 1.86%, to $44.89 a barrel on Monday, after the FBI said it had not found new evidence to warrant charges against Hillary Clinton, and on renewed hope that OPEC would come to an agreement on production cuts...prices then rose to $44.98 a barrel on Tuesday after after the American Petroleum Institute reported a larger than expected crude supply increase, offset by larger than expect drawdowns of gasoline and distillates...oil prices then fell almost $2 from there in overnight trading as most markets were limit down as the election returns came in showing that Trump was winning, but recovered by the time the market opened on Wednesday and went on to increase to $45.27 a barrel, after the EIA reported smaller supply diversions from market expectations than were indicated by the API....prices then fell 61 cents, or 1.4%, to $44.66 a barrel on Thursday, after the IEA’s monthly report showed OPEC members pumped a record 33.83 million barrels a day in October, and then gathered pace on Friday to fall another 3% on that same news, ending the week down by $1.51, or 3.4 percent, at $43.14 per barrel...

natural gas prices also started out the week higher, rising to $2.816 per mmBTU on Monday before forecasts of mild weather drove prices down 18.3 cents, or 6.5%, to $2.633 permmBTU on Tuesday...and while they rebounded to $2.690 per mmBTU by the close on Wednesday, they fell right back to $2.632 per mmBTU on Thursday, after the EIA reported record inventories of natural gas in storage...prices then drifted lower from there on Friday to end the week at 2.619 per mmBTU, 5.3% lower than the previous week's close...

The Latest Oil Stats from the EIA

this week's release of oil data for the week ending November 4th by the US Energy Information Administration indicated that our crude oil production jumped by the most in 18 months, while our crude oil imports fell back to more normal levels, while refiners started to recover from their fall slowdown...for the week, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance rose to +450,000 barrels per day, from last week's +395,000 barrels per day, which means that 450,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning that one or several of this week's metrics were off by that amount...that's now the 3rd large positive adjustment in a row, and as a result the cumulative daily average of that adjustment has risen to 105,000 barrels per day, meaning the EIA's figures are also going off balance for the whole year, and should by rights be taken with a large grain of salt, if not completely ignored...but these figures are still what drives prices and hence oil field activity, so we'll just continue to track them as long as the market participants continue to believe them...

thus, for the week ending November 4th, the EIA reported that production of crude oil from US wells rose by 170,000 barrels per day to an average of 8,692,000 barrels per day, the 5th US oil production increase in a row and the largest production jump in 18 months...moreover, that happened as output from Alaskan fields rose by just 7,000 barrels per day, and production from the lower 48 states was 163,000 barrels per day higher, and that means our oil field production is now the highest it's been since June 10th of this year....however, that still left the week's domestic oil production 5.4% lower than the 9,185,000 barrels we produced during the week ending November 6th of last year, and 9.6% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...our oil production for the week ending November 4th was also 527,000 barrels per day, or 5.7% lower, than what we were producing at the beginning of this year, which we're citing as an interim benchmark, since our otherwise declining production had also been rising in the last few months of 2015...

at the same time, the EIA reported that our imports of crude oil fell by an average of 1,553,000 barrels per day to an average of 7,442,000 barrels per day during the week ending November 4th, down from last week's 4 year high of 8,995,000 barrels per day during...as a result, the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) slipped back to an average of 7.6 million barrels per day, 5.3% higher than the same four-week period last year...meanwhile, our exports of crude oil were again little changed, rising by an average of 6,000 barrels  per day to an average of 410,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 504,000 barrels per day for the same week, since the EIA has recently switched to reporting Custom's export data, rather than use estimates based on untimely export stats from the Census Bureau..

the EIA also reported that the amount of crude oil used by US refineries rose by an average of 369,000 barrels per day to an average of 15,817,000 barrels of crude per day during the week ending November 4th, as our refinery utilization rate rose to 87.1% during the week, up from last week's 85.2%, but down from the refinery utilization rate of 89.5% seen during the week ending November 6th last year...US oil refining is still down by 1,113,000 barrels per day, or by 6.6%, in the 9 weeks since Labor Day, as the refinery utilization rate has fallen from 93.7% over that stretch .. the crude oil refined this week nationally was also 0.8% below the 15,939,000 barrels of crude per day US refineries used during the week ending October 30th last year, but up 0.4% from the 15,752,000 barrels per day that were being refined during the equivalent week in 2014...

with the jump in the amount of crude oil being used by refineries, the EIA reported that refineries’ production of gasoline rose by 632,000 barrels per day to 10,456,000 barrels per day during the week ending November 4th, which appears to be a new record high for US gasoline output...if that number is to be believed (it's consistent across several EIA reports), it means our gasoline output was 7.9% higher that the gasoline output of 9,693,000 barrels per day during the week ending November 6th last year, and 11.9% higher than the gasoline production during the same week of 2014....at the same time, the EIA reported that refinery output of distillate fuels (diesel fuel and heat oil) rose by 122,000 barrels per day to 4,784,000 barrels per day during the week ending November 4th....however, the week's distillates output was still 1.8% lower than the 4,873,000 barrels per day that was being produced during the same week last year, and 0.8% lower than the 4,822,000 barrels per day of distillates we produced during the equivalent week of 2014...    

however, even with that big jump our gasoline production, our gasoline supplies reportedly fell by 2,841,000 barrels to 220,963,000 barrels as of November 4th, as our domestic consumption of gasoline rose by 30,000 barrels per day to 9,213,000 barrels per day and as our gasoline imports rose by 42,000 barrels per day to 500,000 barrels per day....the reason those numbers don't add up* is because there was a large swing of 554,000 barrels per day in yet another fudge factor for gasoline, as shown in Table 2 on page 7 of the U.S. Petroleum Balance Sheet, which the footnote tells us is an "adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components"  ..be that as it may, November 4th's gasoline inventories were still 3.6% higher than the 213,245,000 barrels of gasoline that we had stored on November 6th of last year, and 8.5% higher than the 203,565,000 barrels of gasoline we had stored on November 7th of 2014....at the same time, our distillate fuel inventories fell by 1,948,000 barrels to 152,378,000 barrels by November 4th, the 7th consecutive large drop in our distillate supplies....however, even after the withdrawal of 16.4 million barrels of distillates from storage over the past 7 weeks, our distillate inventories were still 5.7% higher than the distillate inventories of 141,109,000 barrels of November 6th last year, and 27.2% above the distillate inventories of 116,850,000 barrels of November 7th, 2014

finally, even with the 1.5 million barrel per day drop in our oil imports, our inventories of crude oil still rose by 2,432,000 barrels to 485,010,000 barrels by November 4th, following last week's 14,420,000 barrel addition, the largest supply jump in history...however, with 2 hurricanes interfering with oil imports over the past 10 weeks, our oil stockpiles have still decreased by 10.23 million barrels, or 2.1% over that span, at a time of year when oil supplies are usually rising, and are 5.3% below their April 29th peak of 512,095,000 barrels...however, we still ended the week with 6.6% more crude oil in storage than the 454,822,000 barrels we had stored as of the same weekend a year earlier, and 40.1% more crude oil than the 346,150,000 barrels we had stored on November 7th of 2014...   

This Week's Rig Count

US drilling activity slipped for the 1st time in 8 weeks during the week ending November 11th, as lower prices for both oil and natural gas over recent weeks seem to be taking their toll.....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 1 rig to 568 rigs by this Friday, which was also down from the 767 rigs that were deployed as of the November 13th report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

active oil rigs still rose by 2 rigs to 452 rigs this week, as oil drilling activity has only been down once in the past 20 weeks...oil drilling work is still down from the 574 oil directed rigs that were working a year ago, however, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 2 rigs to 115 rigs, which also left active gas rigs down from the 193 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...another rig that was shut down this week was classified as miscellaneous, which still left one miscellaneous rig active, up from a year ago, when no such miscellaneous rigs were active...

a single rig that had been drilling through an inland lake in Louisiana was among those shut down this week, which left only one such rig set up on inland waters, down from 3 a year ago...the number of horizontal drilling rigs that were deployed nationally also fell for the first time in 8 weeks, dropping by 2 rigs to 457 rigs this week, which was also down from the 587 horizontal rigs that were in use on November 6th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count rose by 1 rig to 59 rigs this week, which was still down from the 108 vertical rigs that were in use a year earlier... meanwhile, the directional rig count was unchanged at 52 rigs, which was down from the 72  directional rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 11th, the second column shows the change in the number of working rigs between last week (November 4th) and this week (November 11th), the third column shows last week's November 4th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this  case was for November 13th of 2015...  

November 11 2016 rig count summary

International Rig Count for October

Baker Hughes also released the international rig counts for October this week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end....Baker Hughes reported that an average of 1,620 rigs were drilling for oil and natural gas around the globe in October, which was up from the 1,584 rigs that were drilling around the globe in September, but down from the 2,086 rigs that were working globally in October of last year...increased North American drilling again accounted for the global increase, as the average US rig count rose from 509 rigs in September to 544 rigs in October, which was still down from the average of 791 rigs that were working in the US in October a year ago, while the average Canadian rig count rose from 141 rigs in September to 156 rigs in October, again still down from the 184 Canadian rigs that were deployed in October a year earlier....outside of Northern America, the International rig count fell by 14 rigs to 920 rigs in October, which was also down from 1,111 rigs a year ago, as an increase in drilling in the Middle East was more than offset by decreases elsewhere.. 

drilling activity in the Middle East rose for the 4th time in the past 10 months, as the countries included in this region added a net of 5 rigs, bringing their average up to 391 rigs for the month, which was still down from the 403 rigs deployed in the Middle East a year earlier....the largest regional drilling increase was again in Qatar, where their active rig count rose from 9 rigs in September to 12 in October, which was also up from the 6 rigs that Qatar had deployed in September a year ago...both Iraq and the Saudis added two rigs in October; that brought the Iraqi count up to 42 rigs, which was still down from last year's 50, and brought the Saudi's count up to 126 rigs, which was up from 125 rigs last October...the Saudi count has averaged near 125 rigs weekly since early 2015, which means they've increased drilling from their average of around 105 rigs in 2014...in addition to the Qataris, the Iraqis, and the Saudis, Abu Dhabi also added a rig in October; they now have 50 rigs deployed, up from 48 rigs a year ago..

meanwhile, the Latin American region saw its active rig count drop by a net of 6 rigs to 183 rigs, their first drop in 4 months, while they were also down from 294 rigs in October of 2015, as the region had idled 92 rigs over the first 6 months of 2016...the regional decrease came by way of shutting down 8 offshore platforms, as Latin American offshore activity fell from 38 rigs to 30 rigs, which was also down from 55 offshore last October...both Brazil and Mexico cut 4 rigs for the month, which left Brazil with 14 rigs, down from 36 rigs a year ago, and left Mexico with 21 active rigs, down from the 38 rigs they were running last October... at the same time, Venezuela shut down 3 rigs, leaving them with 48 still running, down from 71 rigs a year earlier...Argentina also idled a rig, leaving them with 69, down from 105 rigs last October...on the other hand, drillers in Columbia activated 5 additional rigs, as they had 11 rigs running in October, which was nonetheless still down from the 20 rigs thy had active a year earlier...in addition, Chile saw a rig added, bringing their count up to 3 rigs, up from 1 rig a year earlier...

at the same time, drilling activity in the Asia-Pacific region was reduced by 8 rigs to 182 rigs in October, with their offshore count reduced from 88 rigs to 84, which was down from the 213 rigs working the region a year earlier, which included 89 working offshore at that time....India shut down 3 rigs, leaving 112 still active nationwide, which was up from the 110 rigs they had deployed in October of last year...Indonesia idled the 2 rigs they had added in August and hence are back to running 17 rigs, down from the 23 rigs they had working a year earlier...Vietnam also idled 2 rigs, leaving 2 rigs still working, down from 3 rigs a year earlier...in addition, Australia, Myanmar, the Philippines and China offshore each saw a one rig drop...that left Australia with 3 rigs, down from 16 a year ago, left Myanmar with no activity, same as a year ago, left the Philippines with 1 rig, down from 2 last year, and left China with 28 platforms drilling offshore, same as they had last October...on the other hand, Malaysian drillers added 2 rigs; they now have 5 rigs deployed, still down from 7 a year ago, and 1 rig started drilling in Japan, which except for three months this summer, was their only drilling activity in 2 years...

meanwhile, the net rig count in Europe fell by 5 rigs to 87 rigs in October, which was down from the 108 rigs working in Europe a year ago at this time...however, that net drop masked an even larger pullback in the North Sea, as the European offshore count fell by 50%, dropping from 36 rigs in September to 24 offshore in October, which was also down from 43 offshore rigs a year ago...leading that pullback, Norwegian drillers shut down 7 platforms, leaving just 9 still working in October, which was also down from 15 working there a year earlier...the UK also shut down an offshore rig, leaving 7, which was down from the 14 platforms they had working offshore a year earlier...at the same time, Turkey added 2 rigs and thus had 31 rigs running, also up from 29 rigs a year ago...in addition, both Germany and the Netherlands added rigs in October; that meant 2 rigs active for the Germans, down from 3 a year earlier, and meant 4 rigs active for the Dutch, up from 3 rigs a year earlier...digging further into other files to resolve the offshore discrepancy, we find that Italy shut down their only offshore rig, while at the same time added one on land, leaving them unchanged at 3 rigs for the month, while "other Europe" shows an offshore reduction of 3 rigs, while 2 rigs were added on land...that ‘other’ category would include Sakhalin Island off the east coast of Russia, mysteriously included in the European count, where the overall rig count fell from 8 rigs to 7, which was also down from 8 rigs a year ago at the time..

lastly, the African continent saw no net change in its total activity in October, although at 77 rigs they were still down from the 93 rigs working in Africa last year at this time...Angola shut down 2 rigs, leaving 2 rigs still working, which was down from the 12 rigs that they had active a year earlier...in addition, both Morocco and Nigeria idled rigs; that left Morocco with none, same as a year earlier, and cut the Nigerian count to 4 rigs, down from 9 rigs a year earlier...at the same time, both the Congo Republic and Tunisia each started up 2 rigs, after both had none operating in September; for the Congo Republic, those 2 rigs were down from 3 rigs a year ago; while Tunisia also had no rigs in operation last October....finally, note that Iranian, Russian, and Chinese rig counts are not included in Baker Hughes international data, although you may have noted that China's offshore area, with an average of 28 rigs active in October, down from 29 in September, were included in the Asian totals here... 



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