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, July 26, 2015

the Houston barge fire; unusual increases in oil imports, oil inventories, and active drilling rigs, et al

it was an interesting week in the fracking patch, at least for us numbers nerds....among other anomalies, we saw the largest increase in oil rigs in 15 months, a 2.5 million barrel build in crude oil inventory, the largest such increase since early April, and the largest one week summertime buildup of crude stores since August 23, 2013, and finally the largest jump in imports in 11 weeks, which pushed the monthly oil imports stats higher than a year ago....so as usual, we'll look at how that all shook out, and take a guess at what might be happening here...

otherwise, it was apparently a quiet week in the fracking patch, which saw only one major explosive oil related accident cross my news-feeds...early Monday morning, a barge carrying roughly a million gallons of petroleum naphtha burst into flames after a collision with another barge near the entrance to the Houston Ship Channel, that actually involved six vessels maneuvering thru the area...two tugboats, one hauling two barges of naphtha and the other hauling two barges of isopropylbenzene, were passing each other moving in opposite directions near the harbor entrance when the tug pushing the isopropylbenzene lost power, sending its barges drifting without power, and as one of it's barges careened into a naphtha barge, the fire broke out...as naphtha is a very flammable gasoline additive, the fire raged for four hours, lighting Galveston Bay, before Houston firefighters and Coast Guard fire crews were able to extinguish it...some of the naphtha and possibly other chemicals leaked into the ship channel, exposing sensitive conservation areas, leaving officials still assessing the environmental impact...by Monday night, the three damaged vessels were moved out of the way, allowing one side of the ship channel to reopen... as a major oil and petrochemical port, the Houston ship channel is a frequent site of spills; in March, we reported that a collision between a tanker and a bulk carrier spilled thousands of barrels of MTBE, a flammable toxic chemical, at almost the same spot as this barge mishap...

while there were major changes in most other oil metrics, US crude oil production was nearly unchanged in this week's report, slipping to 9,558,000 barrels per day in the week ending July 17th, from 9,562,000 barrels per day the prior week...that output rate was up 11.6% from our oil output of 8,565,000 barrels per day in the third week of July last year, and less than a half percent below the modern crude oil production record of 9,610,000 barrels per day in first week of June this year...but even with near record oil production, oil companies and speculators still managed to import 7,941,000 barrels per day during the week, up from 7,354,000 barrels per day last week and the third highest imports in any week over the past year...so this week's imports were up 7.2% from the same week a year ago, and the weekly Petroleum Status Report (62 pp pdf) shows our 4 week average of crude oil imports was over 7.5 million barrels per day, which was 2.5% above the same four-week period last year...

part of the reason for the jump in imports was that our refineries were running just about flat out, with refinery input of 16,870,000 barrels per day in this week's report, up from 16,825,000 barrels per day last week, as refineries were running at a post recession high of 95.5% of operable capacity over the week ending July 17th...still, that 45,000 barrels per day in additional refinery throughput doesn't account for the 587,000 barrels per day in additional imports we were bringing in, so we find that that excess that we've imported this week has been added to our already record high stockpiles of crude oil we have in storage, as U.S. commercial crude inventories rose by nearly 2.5 million barrels, from 461,417,000 barrels last week to 463,885,000 barrels as of July 17th...that works out to more than 25.0% more oil in storage than 371,071,000 barrels we had stored at the end of the third week of July last year, and nearly 20% more than had ever been stored in mid July in the 80 years of EIA record keeping, which had never seen the 400 million barrel level breached before this year... 

what appears to be happening here is probably the same thing we saw when oil prices were collapsing in early March, wherein contracts for oil to be delivered in the future are at a price somewhat higher than the cost of buying oil now, such that it theoretically pays for speculators 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; as we noted then, much of this is done on paper, but some of this so-called contango trade is obviously being done with the physical commodity, and that demand to put oil in storage for speculative reasons at the same time our refineries are running flat out is creating a demand for more imports, even though our field production of crude oil is near a record high...but as i warned in March, for every buyer of a speculative contract, 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...they both can't be winners, someone is going to lose, and possibly do us some economic damage in the process, just as we saw when the market for housing derivatives went belly up during the GFC...

however, there was no obvious reason for the rather large jump in the oil rig count this week...US oil prices fell another 4% this week, after falling 4% the prior week and 12% the week before that, and in closing this week at $48.14 a barrel, they're back to the level where 97% of the shale plays in the US are unprofitable...despite that, Baker Hughes reported that the count of active drilling rigs in the US rose by 19 rigs from last week to 876, with oil rigs up 21 to 659, gas rigs down 2 to 216, and miscellaneous rigs unchanged at 1...that's still 1007 less than the same week a year ago, as 903 oil rigs, 102 gas rigs, and 2 miscellaneous rigs have been shut down over that period...

unlike the past couple months, there was also an increase in unconventional drilling rigs, as horizontal rigs in use rose by 12 to 662, while active vertical rigs rose by 8 to 131 and directional rigs fell by 1 to 83...those numbers are down from 1293 horizontal, 361 vertical, and 229 directional that were in use a year ago....of the 19 rigs added this week, 17 were land based and 2 were added on inland waters, bringing the land rig total to 841 and the lake rig total to 4, while the total offshore rig count remained unchanged at 31 for the 3rd week in a row...a year ago, we had 1805 land based rigs operating, 18 drilling inland waters, and 59 drillships working offshore...

in yet another oddity, there were no net losses of rigs in any major oil basin, nor in any state over the past week...of the major basins, frackers added 3 rigs in the Permian, 3 rigs in the Haynesville, 2 in the Eagle Ford, 2 in the Cana Woodford, and one each in the Williston, the Utica, and the Granite Wash...that leaves 245 rigs active in the Permian, which is down from 555 a year ago, 29 rigs working in the Haynesville, down from 43 last July 18th, 100 in the Eagle Ford, down from 211, 33 in the Cana Woodford, up from 31, 70 in the Williston, down from 184, 23 in the Utica, down from 45, and 16 in the Granite Wash, which is down from 76 a year earlier...in addition, the Marcellus rig count, which was unchanged at 59 rigs this week, is down from 78 a year ago, while the Niobrara chalk of the Rockies front range was unchanged at 31 but down from 60 a year earlier...

within state boundaries, Texas added 8 rigs, bringing the state up to 374 this week , but down from the 886 rigs that were running in Texas last year; Louisiana added 7 rigs by adding 2 in the Haynesville, 2 on inland lakes, 4 in the southern part of the state, while one Louisiana offshore rig was shut down (Texas had added a rig offshore)...Louisiana now has 76 rigs operating, down from 119 a year ago...in other states that added rigs, Oklahoma was up 2 rigs to 107, but down from 204 a year ago, New Mexico was up 1 to 51 but down from 94 a year ago, North Dakota was up 1 to 69 but down from 178 a year ago, Pennsylvania was up  1 to 44 but down from 53 a year ago, and Ohio was up 1 to 20 but down from 43 a year ago...the rig count in all other states was unchanged this week..


(Note: from Focus on Fracking, where you can other fracking patch news from last week)

1 comment:

Teeluck said...

With all this carbon usage it is surprising that the earth is still here.