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, August 14, 2016

oil prices up on new OPEC production freeze rumors; rig count up most in a year, the biggest % jump in 23 years...

oil prices rose more than 6.4% this week and are now up nearly 14% from the low they hit the prior Tuesday, largely on renewed rumors that OPEC might negotiate a freeze of oil production at current levels...recall we've been through these rumors before, when Russia and OPEC ministers talked the same game before their April meeting in Doha, and subsequently pushed oil prices up 50% from their February lows, only to have the Saudis refuse to participate and ultimately increase their production ...this time a September meeting of oil producers is planned in Algeria, and Russia will be there (although they've dismissed the freeze rumors so far), and the same agents responsible for the March freeze talk are spreading it again, and the market is reacting, despite record Saudi production, Iraqi contracts to increase theirs, and indications that Oman will not even attend...still, it's obviously in the interest of OPEC's spokesmen, the Russians, and those in the US with oil interests to push oil prices up by keeping the rumor alive, so we may be in for an extended period of volatile oil markets as they respond to the latest "news" of this freeze talk...

so, despite the ongoing glut in oil and oil products, US oil contract prices for September jumped right out of the gate on those rumors Monday, rising by $1.22, or 2.9%, to close at $43.02 a barrel...they opened higher on Tuesday, but slid in the afternoon to close at $42.77 a barrel after the American Petroleum Institute reported a 2.09 million barrel increase in crude supplies, the biggest jump in in 3 months...prices continued to fall on Wednesday despite the EIA"s report of a crude supply increase of half that much, and settled at $41.71 a barrel, as traders focused on an even larger build of inventories at Cushing, the oil depot on which US prices are based...oil prices then jumped over $2 a barrel, or 5%, on Thursday morning, after comments from the Saudi oil minister about possible action to stabilize prices, and closed at $43.49 a barrel, in their largest one-day jump since April...the upward price momentum carried into Friday as prices barely skipped a beat on news of the largest jump in American oil rigs in a year, and they thus added another $1 to close the week at $44.49 a barrel...

The Latest Oil Stats from the EIA

the oil data for the week ending August 5th from the US Energy Information Administration indicated a modest drop in our oil imports from the prior week's near 4 year high, a corresponding drop in the amount of crude being refined by domestic refineries, a modest increase in the amount of crude we stored, and larger than normal seasonal drops in our gasoline and distillate inventories, which were offset by increases in stores of other petroleum products...however, this week's crude oil fudge factor the EIA included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +575,000 barrels per day, which meant that 575,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures...that's now the 7th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 70,000 barrels per day, which means a lot of oil & products are turning up, where the sources haven't been accounted for...i really dont have any idea why that adjustment has so dramatically reversed from earlier this year, when much of what we had appeared to have produced or imported each week did not show up in the final weekly consumption or inventory figures; one would think that aberrant data gathering would at least show a fairly consistent error in one direction or another ... 

domestic production of crude oil from US wells was down by just 15,000 barrels per day to an average of 8,445,000 barrels per day during the week ending August 5th, as Alaskan production fell 2,000 barrels per day and output from the lower 48 fell by 13,000 barrels per day...that left us down by 774,000 barrels per day from what we what were producing at the beginning of this year, and our oil production this week was 10.1% below the 9,395,000 barrels we produced during the week ending August 7th of 2015, and 12.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...

at the same time, our imports of crude oil, the other major source of our domestic crude supply, fell to an average of 8,404,000 barrels per day during the week ending August 5th, dropping by 334,000 barrels per day from the 45 month high average of 8,738,000 barrels per day we imported during the week ending July 29th.... however, that was still 11.0% more than the 7,496,000 barrels per day we were importing during the same week of last year, and our 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf) has now increased to the 8.4 million barrel per day level, 11.5% above the same four-week period last year...   

meanwhile, crude oil used by US refineries dropped by an average of 255,000 barrels per day to an average of 16,597,000 barrels of crude per day during the week ending August 5th, as the US refinery utilization rate fell to 92.2% for that week, down from 93.3% of capacity the prior week, and down from the refinery utilization rate of 96.1% logged during the week ending August 7th last year...although east cost crude oil refining fell by 64,000 barrels per day and their capacity utilization fell to 80.6%, the largest pullback of 171,000 barrels per day was seen by Midwest refiners, whose utilization rate fell from 97.7% to 93.4%...nationally, crude oil refined this week was 2.5% less than the 17,029,000 barrels of crude per day US refineries used during the week ending August 7th last year, but still 1.2% more than the equivalent week in 2014...

even with the drop in oil being refined, however, US refineries production of gasoline still increased by 106,000 barrels per day to 10,098,000 barrels per day during week ending August 5th, which was also up by 105,000 barrels per day, or 1.1% more than the 9,993,000 barrels of gasoline per day being produced during the week ending August 7th last year, as east coast refineries still managed to produce an average of 3,321,000 barrels of gasoline per day, 50,000 barrels per day more than the prior week and 3.4% more than a year earlier....however, refinery output of distillate fuels (diesel fuel and heat oil) fell by 201,000 barrels per day to 4,739,000 barrels per day during the week ending August 5th, which left our distillates output 7.9% below the distillates production of 5,148,000 barrels per day during the week ending August 7th of last year......      

even with the decent increase in gasoline production, our gasoline inventories fell again, dropping by 2,807,000 barrels to 235,383,000 barrels as of August 5th, which was about twice the normal weekly summertime decrease...that was despite a 293,000 barrel per day jump in our gasoline imports, from 637,000 barrels per day the prior week to 930,000 barrels per day during the week ending August 5th, as the amount of gasoline supplied to US markets barely inched up by 17,000 barrels per day to 9,769,000 barrels per day....in addition, gasoline exports look to be stable, although accurate data for that lags, so i have no idea where all that gasoline production and those gas imports went...nonetheless, this week's gasoline inventories were still 9.2% higher than the 215,482,000 barrels of gasoline that we had stored on August 7th  last year, and also 10.7% higher than the 212,689,000 barrels of gasoline we had stored on August 8th of 2014, so our gasoline supplies still remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..     

meanwhile, our distillate fuel inventories fell by 1,959,000 barrels to 151,196,000 barrels as of August 5th, which left them just 2.3% above the distillate inventories of 147,806,000 on the 7th of August last year, but still 23.4% above the distillate inventories of 122,502,000 barrels of August 8th, 2014...in this case, there was nearly a 10% increase in demand for distillates, from 3,605,000 barrels per day during the week ending July 29th, to 3,937,000 barrels per day during the reporting week, that accounted for the drawdown of supplies, and thus the EIA has changed the characterization of our distillates supply to "near the upper limit of the average range for this time of year"...

finally, with both crude oil imports and refinery consumption of that crude down by similar magnitudes, we again ended the week with a surplus of oil, and hence our stocks of crude oil in storage rose by 1,055,000 barrels to 523,601,000 barrels, the 3rd increase of more than a million barrels in a row...as a result, we ended the week with 14.8% more oil in storage than the 455,275,000 barrels we had stored as of the same weekend a year earlier, and 42.9% more oil than we had stored on August 8th of 2014....since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it goes without saying that our current crude oil supplies of 523.6 million barrels also remain "well above the upper limit of the average range" for this time of year..."     

This Week's Rig Count

the Friday US rig count was up by the most in one week since July 24th 2015 as US drilling activity increased for the 10th time out of the last 11 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 17 rigs to 481 rigs as of August 12th, which was still down from the 884 rigs that were deployed as of the August 14th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 15 rigs to 396, which was still down from the 672 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were deployed on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 2 rigs to 83 rigs this week, which was down from the 211 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs working this week that were classified as miscellaneous, unchanged from last week but up by 1 miscellaneous rig from the same week a year ago....this week's 3.66% increase in rigs was the largest percentage increase in drilling since 30 drilling rigs were added to the prior week's 641 rigs on May 28th, 1993..

the number of working horizontal drilling rigs increased for the 9th time in the past 11 weeks, rising by 13 rigs to 375, which still was down from the 676 horizontal rigs that were in use on August 14th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count increased by 4 rigs to 62 rigs, which was still down from the 127 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was unchanged at 44 rigs, which was down from the 81 directional rigs that were deployed during the same week last year...

details on this week's changes in drilling activity by state and shale basin are included in our screenshot of that part of the rig count summary from Baker Hughes which shows those changes below...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 12th, the second column shows the change in the number of working rigs between August 5th and August 12th, the third column shows the August 5th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was August 14th of 2015:   

August 12 2016 rig count summary

once again, we see that the lions share of this week's increased activity occurred in the Permian basin of western Texas, where 12 rigs were added, which contributed to the 13 rig increase in Texas....and again, outside of that area, the changes were pretty subdued, with no state or shale basin seeing a change in activity greater than 1 rig...we should note that the Utica shale had a rig added, and hence the count for both the Utica and for Ohio increased to 14 rigs...in other states not listed above, Alabama again saw another rig added, and now they have 3 active, which is an increase of 2 rigs from the 1 rig they had active a year ago, while Illinois saw one of the 3 rigs they had running shut down this week, leaving them two, also up from just 1 rig a year ago...



note: there's more here...

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