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 25, 2015

8 million more barrels of oil put into storage; what the strong dollar means for global oil production

this week's reports from the EIA, covering the week ending October 16th, again showed a large buildup in crude oil being put into storage domestically, a result of oversupply and lower demand; in fact, the addition of more than 8 million barrels this week topped last week's 6 month high, and we'd have to go back to early spring, when traders were buying boatloads of oil to store in hopes of higher prices, to find a week that saw that much oil added to US inventories....the increasing glut, combined with virtually no change in production or oilfield activity, finally turned the oil markets, which had been higher since the end of September, and the contract price for domestic WTI oil ended Friday at $44.60 a barrel, down 5.6% from $47.26 a barrel a week earlier...the price of natural gas saw a similar drop; the near term contract closed Monday at $2.442 per mmBTU, down from $2.535 per mmBTU Monday the prior week, eclipsed a three year low at $2.386 per mmBTU on Thursday and then dropped another 10 cents on Friday to close the week at $2.286 per mmBTU, 6.4% lower than its Monday close...inventories of natural gas grew a less than expected 81 billion cubic feet last week, but still remain 4.5% above the five-year average for mid-October, with forecasts for a mild El Nino winter for the northern half of the country suggesting lower than normal consumption..

also putting pressure on oil prices globally was the announcement by the United Arab Emirates (UAE), OPEC's second largest liquids producer, that they planned to expand oil production 30% by 2020, as well as reports that Ayatollah Khamenei had approved the nuclear deal between Iran and the West, and that Iran would boost its oil production within a week after sanctions were lifted, with the Iranian oil minister saying "We don’t need permission from anyone to export our oil," in reference to OPEC...there were also announcements by Thailand that they'd spend 690 billion baht ($19.4 billion) to expand their capacity to produce oil & other energy and by Cuba's state oil monopoly that they plan to drill deepwater wells in the Gulf of Mexico by the end of 2016, in spite low prices for oil...

those, and other expansion of oil exploration and exploitation abroad that we've seen recently remind us that when viewing the price of oil we have to be aware of how the strength of the dollar has made commodities such as oil appear cheap to us, while they may not be quite so low priced when viewed in other country's currencies...beginning with the devaluation of the Chinese Yuan on August 11th, we've watched as most free floating currencies around the globe fell against the dollar, and those currencies of some countries that had been pegged to the dollar were devalued...for instance, the oil and gas producing former Soviet republic of Kazahkstan's tenge fell 22% within a week of China's devaluation, and so far this year, the US dollar has increased 58% against the Brazilian real and 16% against the Canadian dollar...what that means in practical terms for a national oil producer such as Petrobras is that their domestic costs don't change, but the value of the oil they sell internationally is worth that much more in their home currency than it was before; ie, a barrel of oil at today's price will buy as much in Brazil today as a $75 barrel of oil would buy a year ago...similarly, while oil is selling for $44.60 a barrel in the US, it's fetching $58.92 a barrel in Canada, where they get U.S. dollars for the oil and gas they produce and export, but they pay wages and cover most of their other expenses in lower valued Canadian dollars...

This Week’s Data from the EIA

at any rate, the major story in the data this week was once again the big increase in our oil inventories, which rose by 8,028,000 barrels or 1.7%, from 468,559,000 barrels as of October 9th to leave 476,587,000 barrels in storage on October 16th...that eclipsed last week as the largest one week jump in oil inventories since the week ending April 3rd, and gives us 26.2% more oil in storage than the 377,684,000 barrels we had stored at the end of the 3rd week of October a year ago....over the last 4 weeks, our oil inventories have now increased by 5.0% or 22,618,000 barrels, and we now have 25.4% more oil than 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...

contributing to that increase in inventories was a 165,000 barrel per day increase in our imports of crude oil, which rose to 7,471,000 barrels per day during the week ending October 16th, barely changed from the 7,477,000 barrels per day we imported during the week ending October 17th of last year...however, checking the 4 week average of imports in the weekly Petroleum Status Report (62 pp pdf), we find that U.S. crude oil imports averaged 7.4 million barrels per day over the last 4 weeks, 2.7% below our imports in the same 4 weeks of last year...and as we mentioned, our field production of crude oil was unchanged at 9,096,000 barrels per day for the week ending October 16th, which also happens to be the same as our oil production was during the week ending September 25th...actually, our oil production hasn't budged much over the last 7 weeks, as it's averaged 9,121,000 barrels per day over that span, about 4.3% 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 more than 2% above the same 7 week span a year ago, when our excess production was already starting to impact prices...

meanwhile, consumption of that oil by refineries rose a bit, as refinery inputs of crude oil averaged 15,345,000 barrels per day in this current report, which was 78,000 barrels per day more than last week’s average...the refinery utilization rate inched back up to 86.4%, from 86.0%, but that's still well below the 96.1% of capacity US refineries were running at at the peak of the summer driving season, in late July and early August...while output of finished gasoline rose by more than 300,000 barrels per day in the week ending October 9th, it fell by 90,000 barrels per day this week, as output of distillates like diesel fuel, which fell last week, rose...but while ending gasoline inventories decreased by 1,518,000 barrels to 219,784,000 barrels this week, they're still above the upper limit of the average range for this time of year, so there’ll be no need to step up production....hence, while oil supplies increased somewhat with stable production and the increase in imports, the demand for that oil from from refineries didn't keep pace, which led to the increase in oil headed for storage...

The Latest Rig Counts

while the number of rigs drilling for oil fell for the 8th straight week this past week, the total number of active rigs was unchanged at 787, as Baker Hughes reported that their count of rigs targeting oil was down by just 1 to 594, while their count of rigs drilling for natural gas was up by 1 to 193...the total rig count is still down by 1,140 rigs from the year ago total of 1,927 working rigs, with oil rigs down 1,001 from last year's 1598 and gas rigs down 139 from last year's 320...net vertical drilling rigs in use were down by 1 to 109, which was 252 fewer than the 361 vertical rigs operating a year ago...meanwhile, 1 directional drilling rig was added bringing their total to 87, which was down from 211 on October 24th 2014, and rigs designed to drill horizontally were unchanged at 591 for the week and down from 1355 a year earlier...also note that 2 more rigs were added in the Gulf of Mexico this week, so we're now up to 35 offshore, 34 in the Gulf and one off California, which is still down from 55 offshore rigs a year ago...

the net zero change in rigs counts did not preclude several shifts within states or shale basins...the most active basin saw the greatest decrease, as 4 rigs were shut down in the Permian of west Texas, leaving 229, which was down from the 568 rigs that were working the Permian last October 24th...3 rigs were also stacked in the Marcellus, leaving 43, which was down from 81 a year earlier, while 2 rigs were taken down in the Mississippian (along the Texas / Oklahoma border) leaving 11, down from 73 a year earlier...on the other hand, two rigs were added in Ohio's Utica, bringing the Utica count up to 22, which is still down by more than half from last year's 49...two more rigs were also set up in the Haynesville of northern Louisiana, bringing the count in that basin up to 26, in contrast to the year ago Haynesville total of 40...and 1 rig was added to the Eagle Ford of south Texas, bringing the count in that basin up to 77, which was still down from 216 in the same week last year...the difference between those listed as added and those taken down leaves 4 horizontal rigs unaccounted for this week; hard to say where they might have been added, but shale basins in Illinois and Mississippi that are not listed in the Baker Hughes tables are suspect..

there were also relatively large changes in the state rig counts...including the two in the Haynesville and the two in the Gulf, Louisiana saw an increase of 5 rigs, bringing the state count up to 73, compared to 110 a year ago...two rigs were added in Ohio, and we now have 21, but that's still down from 44 last year on this date...a single rig was added in each of 5 states; Oklahoma, Alaska, Illinois, Mississippi, and Nebraska; those bringsthe Oklahoma count to 90, down from 204 a year ago; the Alaska count to 12, up from 8 a year ago; the Illinois count to 3, up from 1 a year ago, the Mississippi count to 6, which is down from 16 a year ago, while Nebraska now has 1 rig operating, down from 2 a year ago... 

with a decrease of 3 rigs in the Permian and 2 in the panhandle District 10, Texas saw the largest rig count decrease, as they were down 5 to 346 this week, and down from 906 a year ago...Kansas and Pennsylvania both saw 2 rigs shut down; Kansas now has 7, down from 21 a year ago, while Pennsylvania now has 27, down from 52 a year ago...New Mexico's count was down 1 to 40 rigs, and down from 103 a year ago, and West Virginia's was down 1 to 17, and down from 36 a year ago...lastly, Alabama saw their last active rig shut down this week; a year ago, they had 7 rigs working...


(Note: other fracking related news can be found here)

Combat Footage, Damascus, 22nd October

Tuesday, October 20, 2015

Dylan - Unreleased Version of Subterranean Homesick Blues

The previously unheard audio comes accompanied by some previously unseen video, as well. Many are familiar with D. A. Pennebaker’s promotional clip (a forerunner to the music videos of today), in which Dylan drops cue cards with the song’s lyrics written on them. However, the alleyway scene was not the only version of the clip that was shot. In this new cut, we see parts of two other scenes — in a park and atop a roof — with additional background cameos in each. Check it out HERE

Image result for subterranean homesick blues

Monday, October 19, 2015

Photograph of Lee Harvey Oswald holding gun he used to assassinate JFK is 'authentic'

Photograph of Lee Harvey Oswald holding gun he used to assassinate JFK is 'authentic' | Daily Mail Online: 

To test whether the pose was faked, Professor Farid and his colleague Emily Whiting created a computer based three-dimensional model of Oswald and posed this to match his appearance in the photo.

Their analysis using the computer model found that although Oswald appears to be off-balance, his pose was stable. Further analysis showed that the length of the rifle is consistent with the length of the rifle used to kill the president.



Lessons from America’s Continuing Misadventures in the Middle East by Chas W. Freeman

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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)

Gil Scott-Heron - The Needle's Eye

Monday, October 12, 2015

ISIS Toyota Pick Ups: U.S. Government Supplied ISIS’ Iconic Pickup Trucks

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Surprise, surprise, surprise.
Well what a ya know.

I always thought KSA was the truck dealer.

But NO
It was us, the US. 

Sorry but this particular Toyota truck is not avaiable in the US.

Will the American people please wake the EFF UP!

Say hello to my cruise missiles: by Pepe Escobar

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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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the ‘States First’ earthquake primer, even lower natural gas prices, US oil & gas glut still growing, et al

there was quite a bit of news coverage this week on the release of a 150 page "earthquake primer" by Ohio and 12 other fracking states which was supposedly issued to offer guidance to regulators on how to handle earthquakes caused by fracking or wastewater injection wells...the report was the final output of a working group on induced seismicity that was formed by said states in late March of 2014, just about the same time the Ohio Department of Natural Resources discovered that earthquakes that struck Poland Township were caused by a fracking operation with 7 laterals at the same depth at the same time and location as the earthquake, and this working group was in fact co-chaired by ODNR Oil & Gas Chief Rick Simmers, who was responsible for shutting down that Hillcorp Poland operation, and who issued new Ohio seismic drilling guidelines at that time...

no doubt there's a lot of useful information in the report (148 pp pdf), since it includes contributions from experts from universities, industry, federal agencies, and NGOs, but we want to caution against seeing this as being the beginning of any positive action against such fracking induced quakes, which is what many of the news headlines on the report implied....to start with, the participants in the group include the same oil & gas regulators from Texas, Oklahoma, and other states who have long & deep ties to the energy industry and who've been on the forefront of the attempts to sweep the fracking / earthquake relationship under the rug...furthermore, the report was released by "States First Initiative", a lobby organization formed against federal regulation of the industry...indeed, in their fact sheet they make it clear that their Seismicity Primer is an informational document, and its not intended to offer or recommended rules or regulations...so it seems like this is just an effort by industry friendly regulators to get out in front of the fracking earthquake issue and head off any regulations by appearing that they have the situation under control...

The Week in Oil and Gas: Storage Glut Growing

the near term contract price for natural gas fell by nearly 10% this week, apparently due to a change in the near term weather forecast....the contract for natural gas for November exchange at the Henry Hub in Louisiana had closed up at $2.672 per mmBTU on Monday on a weekend forecast that temperatures in the Midwest and Northeast would be normal or below normal, but they fell midweek as forecasts were revised to show above-normal temperatures for large parts of the country over the first two weeks of October...the weekly natural gas in storage report on Thursday showed inventories in underground storage rose by 98 billion cubic feet as of September 25th to 3,538 billion cubic feet, putting stockpiles 4.5% higher than the 5 year average for the 4th week of September, and although that was what traders had been expecting, prices continued to fall anyway, to close Thursday at $2.433 per mmBTU, before finally steadying on Friday to close the week at $2.451 per mmBTU...meanwhile, oil prices stayed in a narrow range near $45 a barrel, close to where they've been since August....so you can get a visual perspective of the gas price change, we'll include below a one year chart of the near term contract price for natural gas, which is probably a better indicator of the likelihood of drilling in our region than is the price of oil...

October 3 2015 natural gas contract price

the graph above shows the benchmark contract price for natural gas based on the price per mmBTU at Henry Hub, Louisiana daily over the past year....(note gas is also sometimes quoted in mcf = thousand cubic feet = 1.028 x mmBTU = million BTU)...even though natural gas prices were not affected by the OPEC driven global glut like oil prices, they've been down similarly, largely due to North American overproduction...two years ago, it was widely believed that the breakeven price for shale gas in Pennsylvania was over $4 mmBTU, and that those that continued to produce below that price were surviving by selling liquid bi-products...it's obvious from that graph that gas producers have continued to produce a surplus even as gas prices fluctuated between $2.80 and $3.20 mmBTU most of this year, although as we pointed out, most of them lost money doing so in the 2nd quarter..

this is not the first time natural gas prices have crashed to this level...in 2005, before fracking became widespread, US spot prices for gas fluctuated in the $10 to $15 mmBTU range, but after more than 1000 gas rigs began to produce a glut of gas they fell below $5 mmBTU in 2009 and ultimately crashed below $2 mmBTU after the mild winter of 2012, at which time fracking has its first major shakeout and the number of working natural gas rigs was cut in half...we'd suggest there are signs a similar shakeout may be underway now, and that at these prices, some operators don't even want  to produce from some already producing wells...recall that in August, Chesapeake Energy, the operator of more than half of Ohio's wells, announced announced that they were putting their Ohio natural gas production on hold until such time as the Ohio Pipeline Energy Network is completed, when they'd be able to ship it to the Gulf coast for exports....a week ago, Stone Energy, a Marcellus producer, shut in their West Virginia natural gas production...so it's clear that natural gas prices have reached a level where the producers of it don't even want to sell what they can easily produce, and a lot are holding what they have off the market...so it's unlikely that any new exploration not already contracted for will go forward if prices remain near these levels...

while natural gas will soon be seeing the time of year when it's being withdrawn from storage for use in heating, the opposite is true of oil, as refineries are slowing down at the end of the driving season, while crude output remains largely unchanged....but while an increase in oil inventories was to be expect, the near 4.0 million barrel increase from last week in this week's report was more than anyone expected...US stocks of crude oil in storage, not counting the government's Strategic Petroleum Reserve, rose to 457,924,000 barrels as of September 25th, from 453,969,000 barrels as of September 18th...that was the largest one week jump in oil inventories since the week ending April 17th, and left us with 28.4% more oil in storage than we had in the 4th week of September a year ago...that was also the most oil we ever had stored in late September in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...moreover, our end of week supply of gasoline in storage rose almost as much, from 218,756,000 barrel last week to 222,010,000 this week, and those supplies are now very near the upper limit of the average range...in addition, the weekly Petroleum Status Report (62 pp pdf) indicates that propane/ propylene inventories rose 1.7 million barrels last week and are also well above the upper limit of their average range, while distillate fuel inventories decreased by 0.3 million barrels last week, but are still in the middle of the average range for this time of year...thus we have not only a glut of crude oil, but are developing a glut of refined products as well...

the bulk of the increase in crude inventories came not from new production but from additional imports of crude oil, which were up by 378,000 barrels per day to 7,554,000 barrels per day in the week ending September 25th...that was 3.7% higher than the same week last year, but our 4 week average of imports was still at 7.3 million barrels per day, 1.7% below the same four-week period last year...our field production of crude was down a bit, from 9,136,000 barrels per day for the week ending September 18th to 9,096,000 barrels per day during the week ending September 25th, after it was up slightly last week...that's now 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, and only 2.9% above our production rate of 8,837,000 barrels per day in the 4th week of September a year ago...we should point out though, that as we cover the weekly stats provided by the EIA, the EIA also releases monthly oil production data that is considered revised and hence more accurate, which showed oil output for July at 9,358,000 barrels per day in the latest report, up 1% from 9,264,000 barrels per day in June, and 7% ahead of a year earlier...

while our supply of oil was thus up due to the increase in imports, the demand for it fell, as refinery inputs of crude oil fell below 16 million per day for the first time since April, as refineries used just 15,962,000 barrels per day during the week ending September 25th, down from 16,203,000 barrels per day in last week's report...refinery utilization was even weaker, as the refinery utilization rate fell to 89.8%, down from 93.1% of capacity just two weeks ago, and the first time that refinery capacity utilization had dropped below 90% since March...even so, gasoline production still increased over last week, averaging about 9.7 million barrels per day, as output of distillates and other products were down slightly...

Latest Rig Counts

meanwhile, according to Baker Hughes, this week saw the largest reduction of drilling rigs since April 17th, and the largest drop in oil rigs since the week before that...there were 29 fewer rigs operating in the 50 states in the week ending October 2nd than the week before, with total oil rigs down by 26 to 614, net gas rigs down by 2 to 195, while the single miscellaneous rig started last week also shut down...3 rigs that had been working in offshore waters were among those shut down this week; two from the Gulf of Mexico and a widely opposed Shell oil rig in Alaska...that left 30 rigs still in operation offshore; 29 in the Gulf and one off the shore of California, down from a total of 61 a year earlier...two rigs that had been operating on inland lakes were also idled, leaving just 3 on inland waters, down from 11 a year earlier...

horizontal drillers again saw the largest reduction, as the net count for that type of rig was down 20 to 609, and down from the 1341 horizontal rigs that were operating in the same week last year...active vertical rigs were also reduced, from 123 to 117, now well down from the 372 vertical rigs that were drilling a year ago...and directional rigs fell also, down by 3 to 86, also down from the 211 directional rigs that were deployed last year at this time...

the most active shale basin, the Permian basin of west Texas, saw the largest reduction of rigs, as the count there was down by 5 to 245, which was also down from 556 rigs a year earlier...three more basins saw reductions of 3 rigs each; the Eagle Ford of southeast Texas was down to 82, and down from 210 in the same week last year; the Niobrara Chalk of northeast Colorado and southeast Wyoming was down to 26, and down from 64 rigs a year ago, and Oklahoma's Cana Woodford, which was down to 37 and down from 42 a year earlier, thus marking the first time rigs in that basin fell below their year ago level...also in Oklahoma, the Ardmore Woodford saw 2 rigs idled, leaving 2, down from 4 last week and 4 a year ago...2 rigs were also stacked in the Marcellus, which now has 47, down from 82 in the first week of October last year...1 rig was also pulled from the Williston, leaving 66, down from 198 last year, while 1 rig was added in the Fayetteville of Arkansas, which now has 4, still down from 9 last year, and 1 rig was added in Ohio's Utica, which is back up to 21, but still down from the year ago 43...

the state totals appear to have followed the basin totals fairly closely this week...Oklahoma, down 8 rigs to 97 and down from 212 a year ago, saw the largest drop; they were followed by Texas, down 6 to 357, which was down from last year's 895...both Louisiana and New Mexico had 4 fewer rigs to deal with, with Louisiana down to 66 from last year's 113, and New Mexico down to 46 from last year's 99...3 rigs were idled in both Colorado and Pennsylvania, with the former down to 30 from 76 a year ago, and the latter down to 30 from 57 a year ago..although Alaska saw a reduction of two rigs, they still had 11 remaining, which was up from 9 last year, leaving them with the dubious distinction of being the only state to see a year over year rig count increase..two states saw reductions of 1 rig each: California, which at 13 was down from 46 a year earlier, and North Dakota, whose 65 rigs was down from last October 2nd's 189 rigs...rigs seeing an increase of 1 rig included Arkansas, up to 4 this week but down from 12 a year ago, Kansas, which was up to 10 but down from last year's 24, West Virginia, which was up to 18 this week but down from 30 a year ago, and last but not least Ohio, which was up to 20 rigs this week but down from 20 in the first week of October a year ago...rig counts in all other states remained unchanged from last week...


(Note: more related news links here)