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, April 10, 2016

US oil supplies fall for first time in 8 weeks, oil & products glut still at a record high, US & global rig counts, et al

US oil prices rose more than 10% over the last three days of this week after the EIA reported that US crude oil supplies fell for the first time in 8 weeks, and after the on again / off again OPEC - Russian oil production freeze that's been driving the markets the past two months appeared to be back on again...oil prices had been sliding since mid-March as oil traders realized that the prior 50% run-up in prices had been driven by a short squeeze, wherein traders who had contracted to sell oil they didn't own were forced to buy oil to cover their contracts, and that virtually no one else was buying oil in the interim....prices then collapsed to a one month low at $36.79 a barrel last Friday after Bloomberg released a 5-hour long interview with Saudi Crown Prince Mohammed bin Salman, in which he said that the Saudis would only freeze their production if Iran did so too, something Iran had adamantly refused to do...oil prices then opened the week lower and fell to close at $35.70 a barrel on Monday, after Iranian Oil Minister Bijan Zanganeh again rejected the Saudi proposal while announcing that Iranian oil exports had risen by 250,000 barrels a day to 2 million barrels per day in March...oil prices then stabilized on Tuesday, rising slightly to close at $35.89 a barrel, after an API report that US oil inventories had fallen by 4.3 million barrels...oil prices then jumped on Wednesday after the EIA confirmed that oil inventories had indeed fallen by the most in any week since January, and after Reuters reported that Nawal Al-Fuzaia, the Kuwaiti governor at OPEC, said there were "positive indications an agreement on freezing production" would be reached when OPEC meets with Russia at Doha on April 17th, and hence oil closed the day at $37.75 a barrel...reports of a jump in Iraqi exports weighed on prices a bit on Thursday, as oil slipped to $37.26 a barrel, but the combination of another record low in drilling activity and a shutdown of the Keystone crude pipeline to Cushing due to a rupture in South Dakota drove prices 6% higher on Friday to close the week at $39.58 a barrel...for a picture of those changes, we'll include a graph of oil prices over the last month, which should cover the time elapsed since we last included an oil price graph in these synopses...
April 9 2016 oil prices
again, the above graph shows the daily closing contract price per barrel for May delivery of the US benchmark oil, West Texas Intermediate (WTI), as traded on the New York Mercantile Exchange over the last month...the last time we showed an oil price graph it was for the April contract, and prices for this May future trading at that time were then higher, so this graph is not directly comparable to those showing prices for contracts from prior months...nonetheless, the oil price quotes you'll see in media articles or on sidebar graphics are always for the current front month that's actively traded at that time….and with futures prices now much higher, once a month you’ll see the oil price jump a few bucks just because the current contract rolled over to the next month ...in the case of Brent, the international benchmark, current price quotes are for the June delivery contract, which closed the week at $41.94 a barrel...
The Latest Oil Stats from the EIA
this week's oil data from the US Energy Information Administration showed that our oil inventories fell for the first time in 8 weeks, as our imports of oil also fell to their lowest in 8 weeks, and refiners used more crude than they had in any prior week this year...Wednesday's report showed that our imports of crude oil fell by 494,000 barrels per day to average 7,254,000 barrels per day during the week ending April 1st, down from the average of  7,748,000 barrels per day we were importing during the week ending March 25th...while that was 11.7% less than the 8,217,000 barrels of oil per day we imported during the week ending April 3rd a year ago, oil imports are typically volatile week to week as 2 million barrel VLCC tankers arrive and are offloaded irregularly, so the EIA's weekly Petroleum Status Report (62 pp pdf) reports imports as a 4 week moving average...that metric showed that the 4 week average of our imports was still at the 7.8 million barrel per day level, which was 2.1% above the same four-week period last year... 
at the same time, production of crude oil from US wells slipped for the 10th time in the past 11 weeks, as few new wells are being completed to make up for those being depleted...our field production of crude oil fell by another 14,000 barrels per day, from an average of 9,022,000 barrels per day during the week ending March 25th to an average of 9,008,000 barrels per day during the week ending April 1st...that's now 4.2% below the 9,404,000 barrels per day we were producing during the same week last year, but that nominal 14,000 bpd drop this week obviously had little impact on overall supply when compared to the 494,000 barrel per day drop in imports...
meanwhile, U.S. refineries’ crude oil inputs averaged 16,433,000 barrels of per day barrels during the week ending April 1st, which was 199,000 barrels per day more than the 16,234,000 barrels of crude per day they processed during the week ending March 25, which itself was 414,000 barrels per day more than they were taking in a week earlier, as the US refinery utilization rate rose to 91.4% during the week from 90.4% of capacity the prior week...that was up 3.1% from the 15,929,000 barrels per day US refineries used during the week ending April 3rd last year, the highest refinery throughput for any week in April in our history, and the only the second time in history that US refiners took in more than 16 million barrels of crude per day in any week in April...so with refineries running at a seasonally record pace, and with our imports of oil down by 1,130,000 barrels per day from the 33 month high hit two weeks ago, oil had to be drawn out of storage to meet the demand, and hence our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, fell by 4,937,000 barrels to end the week at 529,897,000 barrels…still, that’s more oil than we ever had in storage previously, save for the last two weeks, and despite the drop, our oil inventories are still 9.9% higher than the 482,393,000 barrels we had stored on April 3rd last year, and 38.0% more than the 384,122,000 barrels we had stored on April 4th of 2014...we'll include what is effectively a 7 year graphic of our oil supplies here so you can all see what that drop looks like as it relates to the recent record highs:
April 6 2016 oil inventory for April 1
in the graph above, copied from page 10 of the EIA's weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of US oil inventories over the period from June 2014 to April 1st, 2016, while the grey 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, basically showing us the normal range of US oil inventories as they fluctuated from season to season over the 5 years prior to the two years shown by the blue line....we can see that crude oil inventories typically rise in the winter and fall through the summer, but that beginning in early 2015 our inventories topped 400 million barrels for the first time and have only been drawn down modestly since...note that the increase in the grey wedge on the right now includes the record oil inventories that we were setting last year at this time (ie, it includes the image of the blue line, or the early 2015 record inventories) which we have recently been exceeding by 10% to 20% each week...it's for that reason that we're now comparing current inventories to those of two years ago, when inventories were in a more normal range...despite the 4,937,000 barrel drop this week, we still have more than 48.8 million more barrels of oil in storage than we had stored just 12 weeks ago...
with more oil being refined this week, our refinery production of gasoline rose for the 1st time in 3 weeks, increasing by 187,000 barrels per day to 9,617,000 barrels per day during week ending April 1st, from our gasoline output of 9,430,000 barrels per day during week ending March 25th...that was 5.2% more than the 9,143,000 barrels of gasoline per day we were producing during the same week last year, and our year to date totals are now running well ahead of last years pace.....however, our refinery output of distillate fuels (ie, diesel fuel and heat oil) slipped by 89,000 barrels per day to 4,838,000 barrels per day during week ending April 1st, which put our distillates production 3.2% below the 4,838,000 barrels per day we produced during the same week of 2015...   
the increase in gasoline production, when combined with a 155,000 barrel per day jump to 617,000 barrels per day in our gasoline imports and a 20,000 barrel per day drop in gasoline consumed to 9,224,000 barrels per day meant that we had a bunch of surplus gasoline left over at the end of the week, and hence our gasoline inventories rose by 1,438,000 barrels, from 242,560,000 barrels last week to 243,998,000 barrels as of April 1st...that was 6.1% more than the 229,945,000 barrels of gasoline we had stored on April 3rd last year, and 15.9% more than the 210,436,000 barrels of gasoline we had stored on April 4th 2014, as the EIA says gasoline inventories are now "well above the upper limit of the average range for this time of year"...our distillate fuel inventories also rose, despite the lower production, increasing by 1,799,000 barrels to 162,984,000 barrels as of April 1st....those too were "above the upper limit of the average range for this time of year", as distillate inventories are now 28.4% higher than the 126,924,000 barrels we had stored at the same time last year...in order to see what those gasoline and distillate stocks look like compared to recent history, we'll include the graphs for both, taken from pages 12 and 14 of the EIA's weekly Petroleum Status Report (pdf) respectively...
April 6 2016 gasoline inventory for April 1
like the oil inventories graph we included earlier, the blue line above shows the recent track of US gasoline inventories over the period from June 2014 to April 1st, 2016, while the grey 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, thus showing us the normal range of US gasoline inventories as they fluctuate from season to season, falling during the driving season every summer and rising in winter...note that gasoline inventories started setting new records late in 2014, and hence the recent inventory records are now well above the records established a year ago for this time of year...nonetheless, our gasoline stocks are so much above the normal (grey) range right now that the EIA characterizes them as "well above the upper limit of the average range for this time of year"...
likewise, for the distillate inventories graph below, the blue line shows the recent track of US distillate inventories over the period from June 2014 to April 1st, 2016, while the grey shaded area represents the range of distillate inventories as reported weekly by the EIA over the prior 5 years for the same time of year...unlike oil and gasoline, however, distillate inventories peak in late summer, and fall through the winter as heat oil is consumed from those supplies...in this graph we can see that up until last summer, distillate inventories had been in the lower half of the average range for time time of year, and even below the average range early in the period...however, with the mild fall and winter, less distillates than normal were used, supplies grew rapidly, and distillate inventories are now too classified as "above the upper limit of the average range for this time of year".
April 6 2016 distillates inventory for April 1
in like manner, our inventories of jet fuel and residual fuel oil are both "well above the upper limit of the average range for this time of year" and our inventories of propane/propylene are "above the upper limit of the average range for this time of year", having stayed above the 5 year average for almost 2 years in a row now...similar graphs for each of those refinery products can be found on pages 16 to 20 of the EIA's weekly Petroleum Status Report (pdf) ...the point is that we don't just have a glut of oil in storage, we have a glut of all the major products made from oil...and if we add them all together, which the EIA also does each week, we find our total inventories of oil and oil products rose by 1,130,000 barrels to a new record of 1,357,005,000 barrels this week, up from the total oil & products supplies of 1,355,875,000 barrels that we had stored as of March 25th...and like it's composite products, that total is 11.3% higher than the 1,219,347,000 barrels of everything we had stored last April 3rd, and 30.2% higher than the 1,042,458 barrels of oil & products we had stored 2 years ago...
This Week's Drilling Activity
as we mentioned earlier, we once again set another new record low for the number of rotary drilling rigs running in the US, as Baker Hughes reported that the total rig count fell by another 7 rigs to 443 rigs as of April 8th, which was down from the 988 drilling rigs that were active a year earlier, and down from the recent high of 1929 active rigs seen on November 21st of 2014, the week before the OPEC meeting that opened the global oil spigots...this is now the 5th week in a row that US drilling activity has further quieted to a new low; as we first eclipsed the Apr. 23, 1999 record low rig count of 488 on March 11th, when the count of active rigs fell to 480...this week's report showed that the count of rigs drilling for oil fell by 8 to 354, which was down from 802 a year earlier, and down from the recent high of 1609 working oil rigs that was set on October 10, 2014, while the count of drilling rigs targeting natural gas rose by 1 to 89, which was still down from the 225 rigs drilling for natural gas a year ago, and down from the recent high of 1,606 natural gas rigs that was set on August 29th, 2008... 
the offshore rig count fell by 1, as the drilling platform that started work offshore of California two weeks ago has apparently been shut back down, leaving a total of 25 offshore rigs still running, with 24 in the Gulf of Mexico and one horizontal rig drilling to frack under the Cook Inlet in Alaska...that's down from the 31 that were active in the Gulf of Mexico and a total of 33 that were working offshore on April 10th of 2015...
a net of 5 horizontal rigs were pulled out this week, dropping the count of horizontal rigs to 341, which was down from the 770 horizontal rigs that were in use a year earlier, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014; hence there are now less than a quarter of the horizontal frackers active now than were active before OPEC opened their oil taps.....at the same time, 5 more vertical rigs were also stacked, leaving 50 still running, which was down from the 128 vertical rigs that were in use at the end of the same week a year earlier...on the other hand, a net of 3 directional rigs were added, bringing the directional rig count back up to 52, which was still down from the 90 directional rigs that were in use the same week last year...  
of the major shale basins, the Permian basin of west Texas and eastern New Mexico saw 3 rigs removed, leaving 142, which was down from the 264 rigs working the Permian last April 10th...the Haynesville of Arkansas, the Barnett of the Dallas - Ft Worth area, and the Williston of North Dakota each saw 2 rigs pulled out this week; those shutdowns left the Haynesville with 12 rigs working, down from 27 a year earlier, left the Barnett with 4 rigs, down from 6 both last week and from a year earlier, and left the Williston with 27 rigs, down from 89 a year earlier...however, 2 rigs were added in both the Cana Woodford of Oklahoma and the Utica shale of Ohio; that brought the Cana Woodford total up to 32, still down from 38 a year earlier, and brought the number of rigs drilling the Utica back up to 12, still down from 28 a year ago at this time...lastly, a single rig was added to the Eagle Ford of south Texas for the 2nd week in a row; they now have 43, which is still way down from the 125 rigs working there a year earlier...
the state count tables showed that Texas again saw the largest drilling rig decrease, as they saw 7 rigs idled this week, leaving 197 rigs still working there, which is down from the 427 rigs that were working in Texas on April 10th last year…North Dakota saw 2 rigs pulled out, leaving 27, which was down from the 88 that were drilling in North Dakota a year earlier...then Alaska, California, Kansas and Mississippi all saw 1 rig removed this week; that left Alaska with 8 rigs, down from 13 a year earlier, it left California with just 4 rigs working, down from 15 a year earlier, left Kansas with 5 rigs active, down from the 13 rigs working there the same week last year, and left Mississippi with 1 rig still active, down from 4 rigs a year ago...meanwhile, both Ohio and Oklahoma each added two rigs; that brought the Ohio rig count back up to 12, down from 26 last year at this time, and brought the Oklahoma rig count up to 63, which was still down from 124 a year earlier...lastly, both New Mexico and Alabama added as single rig this week; that brought New Mexico’s activity up to 17 rigs, which was still way down from the 47 rigs deployed there a year earlier, and brought Alabama back up to 2 rigs, the same number as they had last year at this time...
International Rig Count for March
the past week also saw the monthly release of the international rig count for March, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the total of those drilling at month end....Baker Hughes reported that an average of 1,551 rigs were drilling for oil and natural gas around the globe in March, which was down from 1,761 rigs drilling globally in February and down from the 2,557 rigs that were deployed globally in March of last year...once again, most of the 210 rigs that were pulled out worldwide had been drilling in North America, where the average number of rigs deployed fell from 714 in February to 566 in March...the US averaged 478 active rigs during the month, down from 532 in February, and down from 1,110  in March of last year, while the Canadian average deployment was 88 rigs, down from 211 in February, and down from the 196 rigs that were working in Canada a year ago at this time...thawing frost may be a problem for Canadian drillers at this time of year, especially with the El Nino weather...
the Middle East saw rigs pulled out for the 3rd month in a row, after a run of 5 monthly increases, as the region was down by 7 rigs to a March average of 397, which was also down from the 407 rigs deployed in the Middle East a year earlier...the entirety of the net regional cutback was in rigs that had been working offshore, as the offshore count fell from 50 in February to 43 in March, which was also down from 52 offshore in March a year ago, while the Middle East's land based rig count was unchanged from February at 354 and down just 1 rig from last March's average of 355 land based rotary rigs running....Egypt accounted for 4 of the net rigs removed from the region, as they were were down to 31 rigs in March from 35 in February, and down from the 41 rigs that were drilling in Egypt a year earlier...Kuwait idled two rigs; that left them with 41 still active, which was down from 53 a year earlier...the Saudis pulled out just 1 rig to reduce their total active drilling rig count up to 127, which was still up from the 125 rigs that were drilling in Saudi Arabia last March, while other single rig losses were seen in Oman, Iraq and Israel....Pakistan was the only country in the Middle East to see a drilling increase in March, as they added 3 rigs, bringing their total count up to 24, which was also up 3 rigs from the 21 they had deployed a year ago at this time...
meanwhile, the Latin American countries pulled out another 19 rigs, after idling 6 rigs in February and 27 in January, as the region averaged 218 rigs in March, including 40 offshore, down from the total of 351 rigs, which included 67 offshore rigs, that were active in Latin America in March of 2015....Mexico saw the largest pullback, as they were down 12 rigs to 27, which was down from 68 rigs that were in use in Mexico a year ago...Brazil idled 7 rigs and were hence down to just 28 active, from the 44 deployed in Brazil in March last year...and Colombia cut another 3 rigs and are now running just 4 rigs, down from 31 a year ago and a high of 48 in November of 2014....meanwhile, Argentina, which had cut their active rig count from 101 to 65 over the prior three months, added 3 rigs in March, which brought them back up to 68, which was still down from the 112 rigs they had deployed last March...also, Venezuela added 2 rigs and now have 71 active, up from 62 in March of 2015...
elsewhere, the Asia-Pacific region had 183 drilling rigs working in March, up from 182 rigs working in February, but still down from the 233 rigs working the region a year earlier...India had the largest drilling increase in the region, as they added 4 rigs to average 103 in March, which was nonetheless still down from the 110 they had deployed a year earlier...meanwhile, both the the Thais and Malaysia idled 2 rigs; that left Thailand with 14 rigs active, down from 19 a year earlier, and left Malaysia with 3 rigs, down from 8 rigs a year earlier...countries in Africa also added 3 rigs, as their count rose from 88 rigs in February to 91 rigs in March, which was still down from the 125 rigs working the African continent last year at this time...both Angola and Nigeria added two rigs; Angola thus averaged 54 active rigs in March, the same as they had deployed a year earlier, while Nigeria averaged 8 active rigs, down from 13 a year earlier...lastly, the rig count in Europe fell by 11 to  96 in March, which was down from the 135 rigs working in Europe a year ago at this time...Polish drillers idled 3 rigs and now have just 4 running, down from 7 in February and in March a year ago...Germans shut down 2 rigs, but still had 5 working, which was up from 4 in March a year earlier...and Bulgaria idled the only 2 rigs they had active, they are now at zero, same as they were a year ago...at the same time, 2 rigs were added offshore in the United Kingdom, bringing the offshore UK rig count back up to 9, which was still down from 19 rigs a year ago....note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China's offshore area, with an average of 26 rigs active in March, is included in the Asian totals here...  

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