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

Monday, March 9, 2015

yet another exploding oil train, rig count, and what are we gonna do with all this oil?

we were really hoping to move on from our ongoing coverage of exploding oil bomb trains this week, but we'd be remiss if we didn't tell you that we had yet another oil carrying bomb train derail and explode again this week...on Thursday afternoon, a train hauling 103 carloads of explosive Bakken crude oil derailed and burst into flames alongside the Mississippi River in a relatively unpopulated area of northwestern Illinois; twenty-one cars left the tracks, and two of those exploded into flames immediately, with a later update indicating five were on fire...once again, since the site was inaccessible to firefighting equipment, authorities had to allow the train to burn, and it was still burning as we were writing this Saturday morning, so BNSF (Burlington Northern Santa Fe) had to warn that other shipments along this Mississippi River main line could be delayed up to 48 hours while the two tracks involved were out of service...the site of this derailment, near Galena, Illinois, was about a dozen miles downstream and on the other side of the Mississippi River from the ethanol bomb train that exploded about a month ago near Dubuque Iowa, and like the bomb train that derailed and explodes in West Virginia two weeks ago, the tank cars involved were the new state of the art Model CPC1232 that exceeds Federal safety standards...

as it was the beginning of a new month, Baker Hughes released two reports on rig counts this week; the first was for US and International drilling rigs in operation in February, which surprising showed that in every major oil producing region of the globe other than North America the count of rigs either rose or was stable, as rigs operating in Latin America rose by 4 to 355, with their land based rigs rising by 11 to 283, while their offshore rigs fell by 7 to 72….in addition, rigs operating in Europe rose by 5 to 133, with an increase of 11 offshore, bringing that total to 56, offset by a reduction of land based rigs by 6 to 77, and the count of drilling rigs operating in the Asian Pacific region rose by 8 to 240, with an addition of 2 offshore oil platforms to January's 102, and an increase of 6 land based rigs to a total of 136...meanwhile the rig counts for Africa and the Middle East were unchanged at 88 and 367 respectively, although 5 land based rigs were shut down while 5 offshore rigs were added in the Middle East...

meanwhile, US operations shut down 335 rigs in February, leaving 1348, which should be the sum of the 4 weekly US reports we've covered previously; these were in addition to the 199 rigs stacked in the US in January, when the worldwide count fell by 261...but Canadians only shut down 5 rigs for the month, leaving them with 360 on land and three offshore...a possible reason that the International rig count did not fall in tandem with the US count in February is that the worldwide oil price, as benchmarked by the near term contract price for North Sea Brent, has rebounded by more than US oil prices have, and at $59.73 a barrel at week end is now more than $10 a barrel more than US WTI crude currently priced at $49.61...

Baker Hughes also released the current North American rig count, for the week ending March 6th, which gives the US rig count at 1192, down 75 from the week ending February 27, and inconsistent with the International rig count they released earlier...it appears that the prior count, then, is an average of the February weekly rig counts, rather than a month end count...nonetheless, operating oil rigs fell by 64 over this week, leaving 922, gas rigs fell by 12 to 268, and one miscellaneous rig was added, and there are now two such...all the US rigs shut down this week were land based, leaving our land based count at 1,133, while offshore rigs were unchanged at 51 and 8 rigs remained on inland waters...the Permian Basin saw the greatest reduction of rigs, 22 less than a week ago, followed by the Eagle Ford, where 8  rigs were taken out of service; hence Texas saw the greatest drop in rig count of any state, with their rig count falling by 32 to 538...the count of working horizontal rigs fell by 51 to 895, the count of active vertical rigs fell by 17 to 177, and the count of directional rigs fell by 7 to 120...this left the US rig count 600 rigs lower than the count from last March 7th, when 1792 rigs were in use, with oil rigs down 521, gas rigs down 77, and miscellaneous rigs down 2 from a year ago...

meanwhile, the Canadian rig count fell by 30 rigs in the week just ended, leaving them with 300 rigs running at week end...their active oil rigs fell by 21 to 150, and their gas rig count fell by 9, also to 150...most of the rigs taken out of service their had been operating in Alberta, as the province rig count fell by 28 to 199; in addition, Saskatchewan dropped 2 to 37, while Manitoba dropped 1 to 8 and Newfoundland added 1, and they now have 4...the Canadian rig count is now 287 rigs lower than a year ago, with oil rigs down 239 and gas rigs down 48...

US oil production jumped to another new record high again in the week ending February 27th, as oil output of 9,324,000 barrels a day was 0.4% higher than the 9,285,000 barrel per day output of the prior week, and 15.4% higher than the 8,077,000 barrel per day production the US saw in the last week of February 2014...the weekly Petroleum Status Report (62 pp pdf) also showed that US crude oil inventories rose by 10.3 million barrels to a record high 444.4 million barrels, up 22.2% from the same period a year ago, even as we continued to import 7.4 million barrels a day during the last week of February, 89,000 barrels a day more than we imported the previous week...a picture of how much out of the ordinary all this is from the energy department's "This week in Petroleum" is included below:

February 27 oil inventory:

February 27 2015 crude oil inventory

the shaded area in that graph above is the range of US oil inventories as reported weekly over the prior 5 years for any given time of year from mid 2013 to mid 2015, and then the blue line is the recent track of US oil inventories over the most recent period...you can see that at the current level of over 444 million barrels, oil inventories are much higher than they've ever been in recent years, and in fact much higher than they've been in the 80 years of EIA record keeping....there are now widespread concerns that we're running out of room to store the stuff, with estimates that US oil storage tanks could approach their operational limits by mid-April...

so with all that oil sloshing around the country, you must by now be asking yourself why we'd be importing even more oil this week than last...best as i can figure, it's all tied to a oil trading strategy employed when markets are said to be in contango, wherein contracts for oil delivered in the future are at a price somewhat higher than the cost of buying oil now, such that it pays to buy oil and pay for its storage in the expectation that it will be able to be sold back at a higher price in the future...while some of this is just being done on paper, it's quite obvious that some traders, and likely many oil companies, are trying to do this with the physical commodity, by buying oil and putting it in storage....as a result, oil storage facilities have become so tight that there's even been a future's market set up for oil storage facilities contracts...but as we should all know, for every contract there has to be a counterparty, and for every buyer there has to be a seller...so for every one who's buying oil contracts like this, betting on higher prices, there is someone on the other side of those trades, be it a bank, commodities house, or an oil company, selling that contract and effectively betting on lower prices...and by the looks of things here, when this one hits the fan there will be a lot of gooey black blood on the streets...so pull up a chair and pass the popcorn, as it appears we are now witnessing the oil markets gone mad...we've now passed through the looking glass into an era where oil is no longer being extracted and shipped halfway around the world in order to fuel transportation, heat homes, and run industries, but as tarry black poker chips in the great American commodities casino...

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