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, October 11, 2015

house votes to export oil, TPP trade deal finalized, oil inventories still growing, global rig counts, etc

although the full House passed a bill to remove 40-year-old U.S. ban on crude oil exports on Friday by a 261-159 count, with 26 Democrats joining the Republicans in favor of it, the most important news affecting the future of oil and gas fracking in the US this week was the early Monday morning finalization of the Trans Pacific Partnership by the US and 11 other Pacific region nations, ranging from Canada and Chile to Japan and Australia...admittedly, we were once somewhat hysterical about the passage of a bill overturning the export ban, and even started a petition against it, but Obama has since come out opposed to that congressional initiative, saying that such a decision is the prerogative of the Commerce Department, and on Wednesday, before the congressional vote, the White House issued a statement saying that bill would be vetoed should it reach Obama's desk...

so that leaves us with the trade agreements with the Pacific and Europe as the primary threats to unleash a major round of oil & gas exports overseas, and in so doing, reignite the dying fracking boom...the 12 countries who are signatories to the Trans Pacific Partnership supposedly represent 40% of the nominal global economy, although that widely quoted percentage is largely due to the inflated value of the US dollar, which makes our economy vis a vis the others appear larger than it is in real terms, and this agreement will mandate free trade in oil and gas with all of them, giving the signatories equal claim to our resources as our own citizens, and will supersede all domestic energy policy and protections currently in place (the extra-legal provisions of such treaties were endorsed by the Supreme Court last year)...according to the provisions of the trade promotion authority which was granted to the President earlier this year, Obama must wait at least 90 days before he can sign it and send it to Congress, which then has 30 days to sign it, and the full text of the agreement must be made public for at least 60 of those days...so we'll have at least 90 days to pass petitions against it back and forth among ourselves, pretending democracy, while the corporate interests will be quietly buying off the Senators and Congresscritters they need to get it passed....the treaty will become binding when 6 of the signatories, representing 85% of the GDP of the total, have ratified it, something that can't happen without the US, but which should be in place as soon as the US ratification process is complete...

with the completion of this trade deal, US oil prices saw their largest one week jump since 2009...after closing last week at $45.54 a barrel, oil prices rose quickly early in the week after the treaty announcement, to close Tuesday at $48.53 a barrel, and while they were back down to $47.81 on Wednesday on news of a production and inventory surge, they recovered to rise to $49.43 a barrel on Thursday, and briefly saw $50 a barrel on Friday before closing the week at $49.63, up nearly 9% for the week...meanwhile natural gas prices moved up every day this week, albeit at a more measured pace, rising from 2.45 per mmBTU last Friday and on Monday to $2.470 per mmBTU on at the close on Tuesday, $2.474 on Wednesday,  $2.498 on Thursday, finally closing the week at $2.502 per mmBTU on Friday...

This Week’s EIA Reports

as we mentioned, our oil output increased for the 2nd week of the past 3 weeks, despite the ongoing pullback in US oilfield activity that is now approaching a year in duration...and while there was a sizable decrease in the amount of oil we imported this week, their was an equally sizable drop in demand for that oil from refineries, and hence there was quite a bit of unused oil left over at week end, which led to another large jump in our stored oil inventories....

the EIA weekly data indicated that US field production of crude oil rose by 76,000 barrels a day, from 9,096,000 barrels per day during the week ending September 25th to 9,172,000 barrels per day during the week ending October 2nd, for the highest weekly output of domestic crude since August...that was more than 3.3% above our production rate of 8,875 ,000 barrels per day in the 1st week of October a year ago, and more than 66.3% higher than our 5,514,000 barrel per day production of early October five years ago,  but still about 4.6% below the modern record production of 9,610,000 barrels per day that was set in the first week of June this year ...

meanwhile, our crude oil imports, the other primary source of domestic supply, fell by 486,000 barrels per day from last week, and at 7,068,000 barrels per day during the week ending the 2nd was 8.4% below the import rate of the 1st week of October last year...checking the 4 week average of imports carried in the weekly Petroleum Status Report (62 pp pdf), we find that U.S. crude oil imports averaged 7.2 million barrels per day over the last 4 weeks, 3.3% below the same 4 weeks last year, so it appears imports may actually be falling again...but US refineries, hit with a wave of maintenance in the Midwest at the same time as they slow down seasonally, saw crude oil usage drop by more than 400,000 barrels per day, as their crude oil inputs averaged 15,559,000 barrels per day in the week ending October 2nd, down from 15,962,000 barrels per day in the prior week, as US refineries operated at 87.5% of their capacity last week, down from 89.8% the prior week and down from running at 96.1% of capacity just two months earlier...

so with the ongoing slowdown in our oil refining, we once again added oil to our storage depots this week, as our commercial crude oil inventories in storage rose to 460,997,000 barrels, up from the 457,924,000 barrels we had stored as of September 25th....that jump means we now have 29.3% more oil in storage than the 356,635,000 barrels of oil that we had stored in the same week last year, and it’s also the most oil stored anytime in any October in the 80 years that such records have been kept...since it appears that oil inventories are once again rising, we'll revisit a graph of crude oil inventories over the last 5 years that we haven't looked at for several months...

October 9 2015 crude oil inventory for Oct 2

in the graph above, copied from the weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of US oil inventories over the period from January 2014 to October 2, 2015, while the shaded area represents the range of US oil inventories as reported weekly by the EIA over the prior 5 years for any given time of year, essentially showing us the normal range of US oil inventories as they fluctuate from season to season....you can see that crude oil inventories typically fall through the summer, when refineries are running flat out, just as they did this year, but we're now heading into the fall period where oil inventories typically rise...but if you look close you can see what we've been documenting in covering this surplus over the past several months; in the spring, our oil inventories were running 20% to 22% above the top of the normal range; that gap has gradually widened to 25% to 28% above the highest previous level over the late summer, and as of the past two weeks, it's now approaching 30%, more above the range than it's ever been...so even though the glut of oil we now have stored has fallen since March, the amount relative to what's normal has risen, and hence the surplus of oil we have stored is still expanding...

Latest US & Global Rig Counts

the number of rigs drilling for oil fell for the 6th straight week during the week ended October 9th, while the total rig count was down for the 7th month in a row...Baker Hughes reported that their count of active drilling rigs in the US fell by 14 to 795 in the week just ended, with rigs targeting oil down by 9 to 605, rigs drilling for gas down by 6 to 189, while one rig classified as miscellaneous was added...that's down by 1,135 rigs from the year ago total of 1,930 working rigs, with oil rigs down 1,004 from last year's record 1609, gas rigs down 131 from last year's 320, and miscellaneous rigs unchanged at 1...2 rigs were added in the Gulf of Mexico this week, so we now have 32 offshore, which is still down from 58 offshore rigs a year ago...

rigs designed to drill horizontally were down by 11 to 598; that's now down from the 1353 horizontal rigs that were drilling a year ago...vertical drilling rigs were down 3 to 114 this week; that was down from 370 in the same week last year...meanwhile,directional drilling rigs were unchanged at 83 this week, but were down from 207 directional rigs that were operating a year ago...

the Permian basin of west Texas again saw the largest reduction of rigs, as the count of active rigs there fell by 10 to 235, which was down from 562 rigs in the Permian a year earlier...the Eagle Ford Shale of south Texas saw two rigs stacked this week, leaving 80, which was down from 211 rigs that were working that play last year at this time...the Haynesville shale, mostly underlying northwestern Louisiana, also saw 2 rigs idled; they now have 24, down from last year's 43...other shale basins seeing single rig reductions included the Granite Wash, which now has 11, down from 64 a year ago, the Marcellus, which now had 46 rigs still working, down from 81 last year, the Mississippian, which is now at 13 rigs, down from 79 a year ago, the Williston, which was down to 65 rigs this week and down from 194 a year ago, and the Utica, which is back down to 20, and down from 46 rigs a year ago...the only basin to see a rig increase this week was the Niobrara Chalk of the Rockies front range; they added 1 rig and now have 27, but that's still down from the 63 they had the second weekend of October last year...

as a result of that, Colorado was the only state to see an increase in active rigs this week, as they now have 31, down from 76 last year at this time...Oklahoma saw the largest decrease, as they were down 6 rigs to 91, which was down from 211 last year...Texas only saw a net decrease of 4 rigs, despite losing 12 in shale plays, as 6 of their other oil districts saw added rigs; they ended the week with 353 working rigs, down from 896 a year earlier...otherwise, states seeing a 1 rig reduction this week included Kansas, now with 9, and down from 25 rigs a year ago, Louisiana, with 65, down from 111 a year ago; North Dakota, now with 64 rigs, down from 182 a year ago, Pennsylvania, which now has 29 rigs, down from 55 a year ago, and Ohio, which has 19 rigs remaining, down from 42 a year ago...

this week also saw the monthly release of the global rig count for September, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the month end total...September saw an average of 2,171 rigs drilling for oil and natural gas around the globe, which was down from 2,226 in August and down from 3,659 rigs that were in use in September of last year...except for North America, which saw a total reduction of 58 rigs - 35 from the US and 23 from Canada, the aggregate international total of active rigs was little changed from August, rising by 3, from 1137 rigs in August to 1140 in September, with the international offshore rig count dropping by 2 over the same time, from 270 to 268...those totals were down from 1,323 rigs that were active internationally in September of last year, of which 333 were drilling offshore..

the Middle East region saw an increase of 3 rigs for the month, as their count rose from 393 in August to 396 in September, with 47 of those offshore in the Gulf region, down from 52 offshore in August...that brings their total active rig count back to the same level as a year ago, albeit they have 3 more working on land and 3 less drilling offshore than they did at that time....most notably, the Saudis saw the largest increase, as they had 125 rigs working in September, up from 120 in August and up from 119 a year ago...the Pakistanis averaged 27 active rigs in September, up from 23 in August, and up from 22 a year earlier...Abu Dhabi added 2 rigs to the 38 they had running in August, and the 40 they ran in September is up from 35 a year earlier...meanwhile, the Egyptians cut their working rigs from 41 to 38, which is down from 51 a year ago, and the Kuwaitis idled 3 rigs, leaving them with 43 drilling, down from the 48 they were running in September of 2014...

a net of 2 rigs were added by Latin American countries, bringing the regional total to 321, which was down from 402 a year earlier...Venezuela added 3, and they now have 75 drilling rigs active, up from 64 a year ago; other notable changes in the region included Argentina, up 2 to 110, Mexico, down 2 to 39 and down from 69 a year ago, and Columbia, who idled 4 rigs, leaving 26...

elsewhere, the Asia-Pacific region had 218 drilling rigs working in September, 2 fewer than in August and down from 260 last September...notable changes in the region included Thailand, who added 3 rigs and now are running 18, China offshore, also up 3 rigs to 28, and Vietnam, who cut their rig total from 6 to 3...the total count of rigs drilling in Africa was unchanged at 96 in September, which was down from 117 rigs that were working there a year earlier...Nigeria added a rig while Angola idled one for the only changes on the continent...and the rig count in Europe was also unchanged at 109, and down from 148 a year ago, with the addition of 2 offshore rigs in the UK, where they have 14 active, while the Netherlands stacked two rigs, leaving 5 Dutch rigs still operating in September...


(related news links from the past week here)

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