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, September 27, 2015

new driving mileage record, oil production up, oil inventories down, other stats

a report from the Department of Transportation this week indicated that Americans put 283.7 billion miles on their vehicles in July, 4.2% more than they did last July...on a seasonally adjusted basis, that was 0.8% more miles than we drove in June, and the 12 month average thus set another new record for any 12 month period in US history...prior to this year, our miles driven had stayed below the previous peak for 85 months, but with lower gas prices starting last fall, we broke out of the downward trend in January and have been setting records for miles driven ever since...

also this week, an Energy Information Administration report showed that US gasoline sales had surged 5% in July, the fastest growth in US gasoline consumption in a decade...note that the reason that our gasoline consumption is rising faster than our miles driven is that we're buying and driving larger vehicles; recall that just 3 weeks ago, we reported on car sales for August, which showed that 57.3% of August light vehicle sales were built on a truck frame...those big vehicles typically use nearly 40 percent more fuel to cover the same mileage than smaller passenger cars...

other than that, i haven't seen any news out of the ordinary enough this week that would be worth exploring any further than what the links below provide (see here), nor do i have any particular insights to share, so today we'll just review the weekly oil stats from the EIA and the rig count data from Baker Hughes and wrap it up...

Current EIA Reports

this week's report showed that US field production of crude oil rose for the first time in 8 weeks, from 9,117,000 barrels per day during the week ending September 11th to 9,136,000 barrels per day for the week ending September 18th...putting that production into perspective, that's about 4.9% below the modern record production of 9,610,000 barrels per day that was set in the first week of June this year, a bit more than 3% above our production rate of 8,867,000 barrels per day in the 3rd week of September a year ago, and roughly 64.4% higher than our 5,556,000 barrel per day production of 5 years ago...to help you visualize how our output of oil has changed, we'll include a copy of the EIA graph that accompanies the production data that we cite every week, from which we have excised the not particularly relevant period between 1990 and 2003 so the graph would better fit on the page…

September 26 2015 EIA weekly production of crude

from that graph we can see how our domestic production of crude generally declined from the 90s till it bottomed out over the 2006 to 2008 span, before it started rising as hydraulic fracking technology, which had been used earlier in shale gas basins, was extended to be used in oil bearing shale...then, from the period starting in 2012, US production of crude began to increase exponentially, as fracking activity spread across several basins, fed by low interest rates and high oil prices...also note that although the number of active oil drilling rigs started to decrease late last year, it wasn't until June that our oil production seriously turned down..

our other main source of oil supply is from imports, which have remained stubbornly high over the past two years even as US oil production had been rising....in the week ending September 18th, our imports of crude oil were little changed, falling from 7,189,000 barrels per day in the week ending September 11th to 7,176,000 barrels per day in this week's report...while that's 4.5% higher than the same week a year ago, weekly oil imports are volatile, so we check the 4 week average of imports carried in the weekly Petroleum Status Report (62 pp pdf), which indicates U.S. crude oil imports averaged 7.4 million barrels per day over the last 4 weeks, 2.0% below the same 4 weeks last year...

so, with oil imports down a bit and oil production up a bit, domestic supplies of crude were little changed this week...however, refinery operations slowed from last week, as they typically do once the summer driving peak is past, as U.S. crude oil refinery inputs averaged 16,203,000 barrels per day in the week ending September 18, down from 16,513,000 barrels per day in the prior week...the refinery utilization rate dropped to 90.9%, from 93.1% of capacity last week, with no news as to why; that kind of drop is typical for the end of September and the beginning of October, however, so perhaps they're downshifting refinery operations a bit early this year...

users still took oil out of storage this week, however, although less so than last week...in the week ending September 18th, our commercial crude oil inventories in storage fell to 453,969,000 barrels, down from the 455,894,000 barrels we had stored as of the 11th...however, that still leaves us with 26.8% more oil in storage than the 357,998,000 barrels of oil that we had stored in the same week last year, and it’s also the most oil stored in the 3rd week in September in the 80 years that such records have been kept, which had never seen more than 400 million barrels stored before this year...we made a copy of the EIA graph that accompanies the inventory data too, so we can all get a look at what that looks like historically...and like we did above, we have excised the period between 1990 and 2003 so the graph would better fit on the page…(full graph here)

September 26 2015 week end inventory of crude oil

here we can see that our oil inventories (excluding the Strategic Petroleum Reserve) had remained in the same range, somewhat below 400 million barrels, over the entire past three decades, only gradually approaching that 400 million barrel mark in 2013, before suddenly spiking at the end of January of this year...what we see on this chart also belies the analysis of Reuters energy analyst Jack Kemp, who has been claiming that inventories are tighter than they look, because much more of our inventory is now in transit in railcars, pipelines and barges, or in in situ storage in the oil fields, than it was previous to widespread fracking...it's clear from both the chart and from the weekly data that our inventories spiked during the same weeks when oil prices fell the most, leaving contracts for oil to be delivered in the future at a price somewhat higher than the spot price, setting up the contango trade we've talked about previously, wherein speculators bought oil on the cheap and paid for its storage, and simultaneously entered into a contract to sell it back at a higher price in the future...if there had been a structural change in the amount of oil stored occurring, it would have happened gradually over a period of several years, not in a quick spike when oil prices fell...

Latest Rig Counts

oilfield drilling activity slowed again this week, but not by as much as it had in the past four weeks, as the total active rig count fell by just 4 to 838 rigs for the week ending September 25th...Baker Hughes reported that rigs drilling for oil in the US decreased from 644 last week to 640 this week, that rigs drilling for gas fell from 198 to 197, and drillers added one miscellaneous rig for the first time in two months....active oil rigs are still above the 5 year low of 628 which they fell to on June 26th, but down 952 from the year ago count of 1592 and down 969 from the high of 1609 hit on October 10th of last year, while active gas rigs are down from 338 a year ago and down by 159 from the recent peak of 356 gas rigs that were operating during the week of November 11th, 2014....

there were two drilling operations started in the Gulf of Mexico this week, so the Gulf rig count is up to 31, and with rigs off Alaska and California, the offshore count is up to 33, but that's still down from 62 in the same week last year....horizontal drillers took a big hit this week, as the net count for that type of rig was down 11 to 629, and down from 1347 horizontal rigs in the same week last year...active vertical rigs, on the other hand, increased by 4 to  123, which was still well off the 373 vertical rigs that were drilling a year ago...and directional rigs increased also, up by 3 to 86, but are still down from the 211 directional rigs that were deployed last year at this time..

the major shale basins saw an even greater reduction in rigs; both the Permian and Eagle Ford shale of Texas, as well as the Haynesville shale of the Louisiana-Texas border, each saw 3 rigs stacked...in addition, single rigs were shut down in the Ardmore Woodford of Oklahoma, the Barnett shale of the Dallas Fort Worth region, the Fayetteville of Arkansas, the Granite Wash of the Oklahoma-Texas border and the Williston of North Dakota...those decreases left the Permian with 250 rigs, down from 556 a year ago, the Eagle Ford with 85, down from 207 a year earlier, the Haynesville with 26, down from 46 a year ago, the Ardmore Woodford with 4, down from 5 last year, the Barnett shale with 6, down from 22 a year ago, the Fayetteville with 3, down from 9 a year ago, the Granite Wash with 12, down from 66 a year ago, and the Williston with 67, down from 198 a year ago...

even with all the rigs removed from Texas shale plays, the state rig count only fell by 2 to 363, as apparently most of the vertical and directional rigs added were in that state...that number was still down by 534 rigs from the 897 rigs that were active in Texas on the 4th weekend of September last year...other states that saw less rigs this week corresponded with the basin decreases; Arkansas was down a rig to 3, and down from 12 rigs a year ago, North Dakota was down 1 rig to 66 and down from 189 a year ago, and the Oklahoma rig count was also down by 1 to 105, which was down from 213 rigs a year earlier...the only state to see an increase in active rigs was New Mexico, which was up 1 rig to 50 this week, but down from 101 rigs a year earlier...net rigs counts for all other states remained unchanged this week, although as we've noted previously, that does not preclude that rigs may have been stacked in one area of a state and started up in another....

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