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 18, 2015

Ohio, PA, & WVa form shale gas cartel to promote industry, oil inventories see largest jump in 6 months, et al

the state of Ohio has now joined forces with West Virginia and Pennsylvania in a natural gas cartel formed to promote and strengthen the Marcellus and Utica shale industry in the hopes that our region of the country will become the petro chemical capitol of the world, with all the polluting development and campaign kickbacks to government officials that would imply...this 3 year agreement to promote exploitation and use of natural gas from the shale underlying the 3 states came at the end of the Tri-State Shale Summit in Morgantown, WV, hosted by West Virginia governor Earl Ray Tomblin and attended by Pennsylvania governor Tom Wolf,  West Virginia Senator Joe Manchin, Ohio Lt Governor Mary Taylor and a host of business and oil industry executives, in which business leaders and government officials from the three states pledged to help build area's shale industry...the idea is that the states would collaborate rather than compete in bringing gas consuming industry to our area, apparently hoping to build a refining and petrochemical industry to rival that of the Gulf Coast, possibly along the Ohio River...and this isn't just a political pipe dream, either; the states already have partial commitments for up to four ethane cracker plants to produce ethylenes for plastics at various locations in the region...with this level of industry promotion, maybe the governors of the three states should be looking to meet biannually in Vienna, possibly on a schedule to coincide with the meetings there of OPEC...

This Week’s Data from the EIA

meanwhile, the big story coming out of this week's reports from the Energy Information Administration was the largest jump in our inventories of oil in storage since the first week in April...that came about in part due a decrease in usage of oil by refineries, in part due to higher imports, and in spite of a small drop in domestic production of crude...we're now into the time of year when inventories normally increase, as demand for most oil products are at seasonal lows, and at the rate inventories are growing now we may well see a new all time high before the year is out....according to the EIA, US stocks of crude oil in storage, not counting the government's Strategic Petroleum Reserve, rose to 468,559,000 barrels as of October 9th, up from the 460,997,000 barrels we had stored on October 2nd...that was the largest one week jump in oil inventories since the week ending April 3rd, and left us with 26.4% more oil in storage than we had in the 2nd week of October a year ago...that was also the most oil we ever had stored any time in October in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...

part of the reason for the large increase in inventories, at least compared to the 3.1 million barrel increase of last week, was an increase in our imports of crude oil, which were up by 247,000 barrels per day to 7,315,000 barrels per day during the week ending October 9th, as the restart of Syncrude in Canada led to higher imports in the Midwest...that was still 5.4% lower than the same week last year, and our 4 week moving average of imports remained at 7.3 million barrels per day, 1.7% below the same four-week period last year...the other factor contributing to the glut of oil headed into storage this week was weaker demand, as refinery inputs of crude oil fell to 15,267,000 barrels per day during the week ending October 9th, 292,000 barrels per day less than in last week's report...refinery activity slowed once again, as the refinery utilization rate fell to 86.0%, which is way down from the 93.1% of refinery capacity in use a month ago, and the lowest capacity utilization for refineries since January 16th  ...nonetheless, gasoline production still increased over last week, averaging 9,536,000 barrels per day, up from 9,443,000 last week, as output of distillates and other products were down by a similar amount...even so, ending stocks of gasoline in storage were down by over 2.6 million barrels to 221,302,000 barrels in the week ending October 9th, but that was still 7.6% more than the 205,673,000 barrels of gasoline than we had stored at the 2nd weekend of October last year...

as we mentioned, our field production of crude was also down some, from 9,172,000 barrels per day for the week ending October 2nd to 9,096,000 barrels per day in the current report, which coincidentally was the same output as during the week ending September 25th...that's about 5.3% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this year, but still 1.6% above our production rate of 8,951,000 barrels per day in the 2nd week of October a year ago...

A Look at Refined Product Inventories

that low refinery utilization rate and falling gasoline inventories might lead one to believe that it's just a matter of time before the refineries ramp back up their production and lessen that building oil glut; indeed, the 2.6 million barrel drop in gasoline stocks was cited by Reuters as the reason oil prices held steady in the face of the crude buildup....so let's take a look at the inventories of oil products and see how reasonable an assumption that might be...we'll do that by taking a quick look at a few oil products inventory graphs from the weekly Petroleum Status Report (62 pp pdf) that are similar to the crude oil inventory chart that we looked at last week; the first one is a graph of gasoline inventories over the last 5 years, that includes by inference gasoline inventories back to the beginning of 2009...

gasoline inventory 10/9/15:

October 2015 gasoline stocks as of Oct 9

just so we're on the same page when viewing this, the blue line in the graph above shows the recent track of US gasoline inventories over the period from January 2014 to October 9, 2015, while the shaded area represents the range of US gasoline 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 gasoline inventories as they fluctuate from season to season....see can see that even with the recent drop in gasoline supplies, the gasoline we had stored on October 9th was still higher than any time in any October over the past 5 years, and we'd that our gasoline supplies are close to the highest for any October in US history if that chart covered a longer time span...so how about other refined products?  the next chart shows inventories of distillate fuel oil, which we most often see as diesel fuel or home heating oil...

distillates inventory 10/9/15:

October 2015 distillate stocks as of Oct 9

here again, the blue line in the graph above shows the recent track of US distillate fuel oil inventories over the period from January 2014 to October 9, 2015, while the shaded area represents the range of distillate fuel oil inventories as reported by the EIA over the prior 5 years...here, the story is a bit different; until this year, our distillate fuel oil inventories were running below normal, just climbing back into the normal range about a year ago...but now they've stayed pretty much near the middle of the historical seasonal range since the beginning of summer, and there's no reason to believe refining has to be stepped up to increase their supplies at this point, either...

next we have propane/propylene inventories as of October 9th:

October 2015 propane propylene stocks as of Oct 9

again, the blue line above shows the recent track of our propane/propylene oil inventories over the period from January 2014 to October 9, 2015, while the shaded area is the range of propane/propylene inventories over the prior 5 years...this product of oil refining is the basic building block from which most petrochemicals are derived...this chart clearly shows a large surplus in our stockpiles of propane/propylene that started to build last summer and which leaves our supplies roughly 20 million barrels, or at least 20% higher than the top of the normal range...

the EIA weekly Petroleum Status Report also has similar graphs of inventories of other refined products, such as kerosene type jet fuel, which are in the normal range, and residual fuel oil, which are above the historical  range, but you get the point; there is no shortage or shortfall of stockpiles of any refined products that would provide a reason for US refineries to ramp up production (and hence consume more crude) beyond the level at which they are now operating...

Latest Rig Counts

active oil rigs dropped for the 7th straight week during the week ended October 16th, and despite an increase in working gas rigs, the total rig count was down for the 8th month in a row...Baker Hughes reported that the number of active drilling rigs in the US fell by 8 to 787 in the week just ended, with rigs drilling for oil down by 10 to 595, rigs drilling for gas up by 3 to 192, while the last working rig classified as miscellaneous was shut down...those counts are down from 1590 oil rigs and 328 gas rigs the same week a year ago, and marks the anniversary of the first drop of oil rigs from the peak they hit in the week ending October 10th last year...one rig was added in the Gulf of Mexico this week, so we now have 32 offshore, down from 55 the same week last year...active offshore drilling rigs are also more than one year past the recent peak of 66 first reached on August 29th 2014, which was matched on two other dates in September of that year...so a year of oil rig shutdowns has not diminished the oil glut..

horizontal drillers continue to shut down operations, as the net count of wells being drilled horizontally for fracking fell by 7 to 591, which was down from the 1353 horizontal rigs that were running the same week a year ago...4 vertical rigs were also stacked this week, leaving 110 in operation, which was down from the 362 vertical rigs in operation a year earlier...meanwhile, three directional rigs were added to those operating this week, increasing their active count to 86, which was down from the 203 directional rigs that were deployed in the same week last year... 

half of the reductions in active rigs working in major shale basins came out of the Eagle Ford shale of south Texas, where 4 rigs were stacked, leaving 76, which was down from 209 running as of the 17th of October last year...two rigs were also shut down in the Permian basin of west Texas and eastern New Mexico, which is still the most active basin with 233 rigs working, which is also down from 561 rigs a year ago...single rigs were also pulled from the Williston basin of North Dakota, which now has 64, which is down from last year's 193, and the Cana Woodford of Oklahoma, which at 36 is just down 2 from last year's 38...meanwhile, one rig was added in the Granite Wash of the Texas panhandle Oklahoma border area, where they're now back up to 12 rigs, but still down from 62 a year ago...

the rig count by state data indicates that the net rig figures hide a lot of shifting of activity from one part of the country to another...New Mexico was the state with the greatest rig reduction, as their count was down 5 to 41, and down from 98 a year ago...Oklahoma and Texas were both down 2, the former down to 89, and down from 204 a year earlier, and the latter down to 351 this week and from 898 a year ago....in addition, Alabama, which isn't even carried on the rig count summary, saw two rigs shut down this week, leaving them just 1..the Baker Hughes historical Excel file shows us that they had 5 rigs running this week a year ago...likewise for Nebraska; they had their only rig pulled out this week, and now they're rig free; a year ago, they were encumbered by 2 rigs...moving on, North Dakota saw one rig stacked, and they're now down to 63 rigs, and down from 181 a year ago, as did Colorado, where they're down to 30, and down from 76 a year ago...meanwhile, Louisiana had 3 rigs added; one offshore and two in the northern part of the state, and they now have 68 rigs active, which is still down from 111 a year ago at this time...in addition, Wyoming added 2 rigs, and they're now up to 26, but that's still down from 63 a year ago, and California added 1, bring their total back up to 14, down from 44 a year earlier...meanwhile, this week's active rig count in Ohio and all other states not mentioned above was unchanged...


(Note: this week’s related news links are here)

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