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, November 6, 2016

15 million fracking jobs at risk; a 4 year high in oil imports leads to a record jump in oil supplies, et al

on Friday, the US Chamber of Commerce released a report, apparently timed for the weekend before the election when a number of fracking initiatives are on the ballot nationally, which alleged that "14.8 million jobs could be lost, gasoline prices and electricity prices could almost double, and each American family could see their cost of living increase by almost $4,000" if fracking were banned in the US, which they apparently prepared because some candidates had earlier suggested such a ban...the 58 page pdf, “What If Hydraulic Fracturing Was Banned?” covers the recent 10 year history of fracking, then projects what would happen to the US economy over the 2017 to 2022 period if a fracking ban were initiated, and finally wraps up with scary state specific scenarios for Ohio, Pennsylvania, Colorado and Texas...their report is long on conclusions, but pretty short on methodology, and some of the links they cite are already broken...i was hoping to ignore it, but by Saturday morning it was already being picked up by the news services, with dozens of headlines indicating that a fracking ban would kill 15 million jobs....so we'll just quickly make a few points on how outrageous that allegation is...

as of the October employment report from the Bureau of Labor Statistics, which was coincidentally was also released on Friday, direct oil and gas industry employment was at 172,300 payroll jobs...in addition, there were another 283,500 employed in "support activities for mining", a broad category which might include those employed by drilling contractors such as Halliburton...although the labor department doesn't break out the details, let's also imagine that as many as 10% of the 1,072,800 jobs involved in manufacturing of machinery might be working in factories making oil field equipment...so in the most extreme scenario, where every oil and gas company shuts down completely, and all those manufacturers building oil field equipment shutter their factories, we'd lose a maximum of around 563,100 jobs, or less than 4% of the Chamber's stated job-loss total...for perspective, that's on average about as many new jobs as the US economy has been creating every three months over the last couple years...however, we know that even should fracking end tomorrow, there still would be an oil industry, and manufacturers of oil field equipment can be repurposed for other industries, such as building windmills, so many of that maximum of 563,000 jobs would not really be lost at all...

obviously the Chamber's report is projecting knock on effects, wherein they might count jobs in a fast-food restaurant in an oil producing state as at risk should the oil industry go into a slump...but how realistic is the projection of 14.8 million job losses?  as of Friday's employment report, the total seasonally adjusted payroll employment in the US was just under 145 million...that means that the Chamber is projecting that 10.2% of all those who are currently employed in the entire country would lose their jobs with 5 years should fracking be halted...considering that most fracking is only taking place in a handful of states, and that several large states such as New York and Florida have no fracking at all, that more than 10% of those who are now working in the entire US would lose their jobs is absurd on its face...moreover, we have a counterfactual...their own report shows fracking history going back to 2006, at which time less than 10% of US oil production was from fracked wells...10 yeas ago this week, at a time when gas drilling rigs outnumbered oil rigs 5 to 1, when the majority of the drilling rigs in the field were still conventional horizontal rigs, with horizontal drilling rigs only accounting for 18.1% of the 1693 rigs that were active at the time, the unemployment rate in the US was at 4.4%...so in October 2006, when the fracking industry was in it's infancy and most of it was focused on natural gas, the unemployment rate was .5% lower than the 4.9% it's at today...thus, 10 years ago we were surviving quite well without fracking, and i'm sure we will also do so 6 years into the future, should that kind of oil exploitation come to an end in the interim...

while i'm on the subject of studies that fabricate potential job losses to promote an agenda, i'd also like to point out a paper also released just a few days ago by the White House Council of Economic Advisers that has had almost no media coverage...it's a 21 page pdf titled Industries and Jobs at Risk if the Trans Pacific Partnership Does Not Pass, and it's being released at this time because Obama still hopes to push through the TPP during the lame duck session of Congress, when outgoing congresscritters are easiest to buy, since they no longer have to answer to the public...i'm not going to try to refute their paper now, but see if you can detect the same kind of prevarication and exaggeration that we saw in the Chamber report in the following section of their conclusion, where they're projecting millions of imaginary jobs at risk should the Japanese turn to their historical enemies in China to buy the same goods they're now importing from the US...via the White House CEA

In summary, the stakes involved in passage of TPP are high. There are, conservatively, 35 goods-producing industries directly at risk of increased competitive pressure from China in the Japanese market if RCEP goes into effect, taking this one country pair as an example of what may happen to market access in the 16 countries currently engaged in RCEP negotiations. These 35 industries account for just under 10 percent of total U.S. exports of goods to Japan. These industries employ close to 5 million workers and maintain 162,000 business establishments in the United States. There are a number of reasons why this does not capture all of the industries whose exports will come under pressure, and many are already under pressures from headwinds in the broader global economy. Passing TPP can help ensure they have a fair shot if RCEP goes into effect. Further, even if RCEP does not go into effect, U.S. businesses and consumers would forgo significant economic benefits if TPP does not pass. For example, 78 manufacturing, agricultural, and fishing industries export heavily to Japan, making them likely to benefit directly from increased market access under TPP through reduced tariff or non-tariff barriers. We also show that these industries maintain a total of 360,000 business establishments and employ close to 12 million workers across all 50 states.

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otherwise, it's been a pretty interesting week...both the price of natural gas and the price of crude oil were down every day this week, we added more oil to storage than in any other week in our history, and by the end of the week, the OPEC "agreement" to limit production to boost prices deteriorated into Saudi threats to increase their production to punish other OPEC members who wouldn't go along with the proposed limits...you might recall that the contract price for natural gas to be delivered in December closed last week at $3.105 per mmBTU, after the contract price for November gas expired on Wednesday, after from $3.341 per mmBTU on October 14th to $2.731 per mmBTU....this week, natural gas for December, which had traded as high as $3.54 per mmBTU on October 14th, fell every day, closing 2.5% lower than last week on Monday at $3.024 per mmBTU, then dropping another 4.1% to $2.902 per mmBTU on Tuesday, largely on warm weather in key regions of the U.S…prices were then down another 11 cents, or 3.8%, to $2.792 per mmBTU on Wednesday, and fell 2.3 cents to settle at $2.769 per mmBtu on Thursday, even after the EIA gas storage report showed a smaller than expected build of natural gas inventories...while the contract only fell fractionally to close the week at $2.767 per mmBTU, that brought the normally higher priced December contract within pennies of the November contract's closing price, 21.8% lower than it had been 3 weeks earlier..

meanwhile, US oil prices, which had slid 4.3% to close at $48.70 a barrel last week, fell nearly 4% to close at $46.86 a barrel on Monday alone, after a weekend of talks between major oil producers failed to finalize plans to implement an output cut...oil prices then edged up from that one-month low on Tuesday morning, but then fell back to close at $46.67 a barrel, after the American Petroleum Institute's weekly report indicated the largest inventory increase in 8 months...prices then fell hard again Wednesday afternoon, when the EIA reported a 14.4 million barrel addition to supplies, the largest one week jump in the 34 year history of weekly EIA data, and went on to close down 2.9% at $45.34 a barrel...selling on that record buildup of supplies carried into Thursday, as crude prices fell another 68 cents, or 1.5%, to settle at $44.46 a barrel, the lowest since Sept. 23rd....oil prices then fell more than a $1 just after noon on Friday, as the Saudis threatened to raise their production if Iran refused to cut theirs, but recovered near the close to finish the week at $44.07 a barrel, even as OPEC oil production rose to another record, at 33.54 million barrels per day, well over their 32.5 million to 33 million barrel per day target...oil prices have now fallen 9 out of the last 10 days and are thus down around 15% from their intraday high on October 19th near $52 a barrel...

The Latest Oil Stats from the EIA

this week's oil data for the week ending October 28th from the US Energy Information Administration indicated that our crude oil imports jumped to their highest rate in more than 4 years even as our refining of that crude slowed a bit, and as a result we ended up with the most surplus oil put into storage in a any week in the EIA's 34 years of weekly records...meanwhile, the crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance rose to +395,000 barrels per day, from last week's +368,000 barrels per day, which means that 395,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our crude production or import figures, meaning that one or several of this week's metrics were off by that amount...however, since the change from last week was a nominal 27,000 barrels per day, our week over week comparisons should at least be close to consistent, as will the comparisons to the same week a year ago, when the fudge factor registered +445,000 barrels per day...

for the week ending October 28th, the EIA reported that our imports of crude oil increased by an average of 1,979,000 barrels per day to an average of 8,995,000 barrels per day during, which was the most oil we've imported in any week since the week ending September 14th, 2012...such a unprecedented jump in imports led those who were caught on the wrong side of the oil trade to scream manipulation, but it's pretty easy to understand what happened if you've been paying attention...two weeks ago, with Hurricane Matthew disrupting ship traffic into the Gulf coast ports, our oil imports fell to a 16 month low, and last week they barely recovered, posting their second lowest weekly total for the year..so it now appears that all the oil tankers that had been heading to the US in mid-October and got stuck offshore by the storm all finally arrived and finished unloading last week, resulting in the big import spurt ...as a result, the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose back to an average of 7.7 million barrels per day, 7.0% higher than the same four-week period last year...at the same time, our exports of crude oil were little changed, falling by an average of 11,000 barrels  per day to an average of 404,000 barrels per day for the week, in data that is not directly comparable to last year's exports of 504,000 barrels per day for the same week, since the EIA has recently switched to reporting Custom's export data, rather than use estimates based on untimely export stats from the Census Bureau..

at the same time, the EIA reported that production of crude oil from US wells rose by 18,000 barrels per day to an average of 8,522,000 barrels per day during the week ending October 28th, the 4th US production increase in a row...that was as output from Alaskan fields rose by 9,000 barrels per day and production from the lower 48 states was also 9,000 barrels per day higher, and it means our oil field production is now the highest since July 24th....however, that still left the week's domestic oil production 7.0% lower than the 9,160,000 barrels we produced during the week ending October 30th of last year, and 11.3% below the record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th last year...our oil production for the week ending October 28th was also 697,000 barrels per day, or 7.6% lower, than what we were producing at the beginning of this year, which we're citing as an interim benchmark, since our otherwise declining production had also been rising in the last few months of 2015...

meanwhile, the amount of crude oil used by US refineries fell by an average of 104,000 barrels per day to an average of 15,448,000 barrels of crude per day during the week ending October 28th, as our refinery utilization rate fell to 85.2% during the week, down from last week's 85.6%, and down from the refinery utilization rate of 88.7% seen during the week ending October 30th last year...US oil refining is now down by 1,482,000 barrels per day, or by 8.8%, in the 8 weeks since Labor Day, as the refinery utilization rate has tumbled from 93.7% over that stretch .. the crude oil refined this week nationally was also 1.2% below the 15,637,000 barrels of crude per day US refineries used during the week ending October 30th last year, and down fractionally from the 15,485,000 barrels per day that were being refined during the equivalent week in 2014...

even with the drop in the amount of oil used by refineries, the EIA reported that refineries’ production of gasoline fell by just 13,000 barrels per day to 9,824,000 barrels per day during the week ending October 28th, as our gasoline output was still 3.0% higher that the gasoline output of 9,537,000 barrels per day during the week ending October 30th last year, and 1.3% higher than the gasoline production during the same week of 2014....at the same time, refinery output of distillate fuels (diesel fuel and heat oil) rose by 126,000 barrels per day to 4,662,000 barrels per day during the week ending October 28th....however, the week's distillates output was still 4.5% lower than the 4,882,000 barrels per day that was being produced during the same week last year, while it was 1.1% higher than the 4,609,000 barrels per day of distillates we produced during the equivalent week of 2014...    

with little change in our gasoline production, our gasoline supplies fell again, this time by 2,207,000 barrels to 227,967,000 barrels as of October 28th, leaving us with the lowest supplies of gasoline since last Christmas...but even with that large drop in our supplies, our end of the week gasoline inventories were still 3.9% higher than the 215,347,000 barrels of gasoline that we had stored on October 30th of last year, and 10.9% higher than the 201,760,000 barrels of gasoline we had stored on October 31st of 2014....at the same time, our distillate fuel inventories fell by 1,828,000 barrels to 150,550,000 barrels by October 28th, the 6th consecutive large drop in our distillate supplies....however, even after the withdrawal of 18.2 million barrels of distillates from storage over the past 6 weeks, our distillate inventories were still 7.0% higher than the distillate inventories of 140,757,000 barrels of October 30th last year, and 25.8% above the distillate inventories of 119,653,000 barrels of October 31st, 2014, as you should recall we've continuously had large surplus distillates inventories since last year's El Nino winter reduced demand for heat oil....

finally, with the nearly 2 million barrel per day jump in our oil imports, our inventories of crude oil correspondingly rose by 14,420,000 barrels to 468,158,000 barrels by October 28th, the largest one week jump in our oil supplies in EIA weekly records going back to late 1982, and thus probably the largest jump in history...still, with 2 hurricanes interfering with oil imports over the past 9 weeks, our oil stockpiles have still decreased by 12.66 million barrels, or 2.6% over that span, at a time of year when oil supplies are usually rising, and are still 5.8% below their April 29th peak of 512,095,000 barrels...however, we still ended the week with 4.5% more crude oil in storage than the 447,994,000 barrels we had stored as of the same weekend a year earlier, and 34.3% more crude oil than the 348,475,000 barrels we had stored on October 31st of 2014...  

This Week's Rig Count

US drilling activity increased for the 7th week in a row during the week ending November 4th, and has now increased 19 out of the last 22 weeks, following a prior 39 week stretch that hadn't seen any drilling increases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 12 rigs to 569 rigs by this Friday, a nine month high, which was still down from the 771 rigs that were deployed as of the November 6th report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

with rigs drilling for oil only cut back in one out of the last 19 weeks, active oil rigs rose by another 9 rigs to 450 rigs this week...nonetheless, oil drilling activity remains down from the 572 oil directed rigs that were working a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 117 rigs, which still left active gas rigs down from the 199 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...two working rigs also remain that are classified as miscellaneous, in contrast to a year ago, when no such miscellaneous rigs were active... 

the rig that had been working on a drilling platform offshore from Alaska was finally shut down this week, which reduced the total US offshore rig count to 21, all of which were in the Gulf of Mexico, down from 32 in the Gulf and in total a year ago...the number of working horizontal drilling rigs increased by 9 rigs to 459 rigs this week, which was still down from the 585 horizontal rigs that were in use on November 6th 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 rose by 5 rigs to 58 rigs this week, which was also still down from the 105 vertical rigs that were in use a year earlier... meanwhile, the directional rig count fell by 2 rigs to 52 rigs, which was down from the 81 directional rigs that were deployed during the same week last year...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 4th, the second column shows the change in the number of working rigs between last week (October 28th) and this week (November 4th), the third column shows last week's October 28th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday 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 for November 6th of 2015... 

November 4 2016 rig count summary

it appears from the above that we're back to seeing the Permian basin, with a 6 rig increase, account for the largest part of this week's increase, in what has been the most typical weekly increase over the last 5 months, with only the Eagle Ford of south Texas and the Williston of North Dakota seeing an increase as large as two rigs...the Permian has seen an 81 rig increase since May 13th, and hence accounts for almost half of the 163 rigs that have been added countrywide in the span since...otherwise, the rigs added in the Arkoma Woodford and the Cana Woodford account for 2 of the 3 rig increase increase in Oklahoma, and the Arkoma Woodford addition is a gas rig, the only gas rig added in a major basin; more than likely the other two gas rig set ups were conventional, most likely the two rigs added in Louisiana...we should also note that of the states not shown as major producers above, Mississippi saw one of its three rigs pulled out this week; at two rigs, drilling in the Magnolia state is now down from the 7 rigs they had deployed on November 6th of 2015...



note: there's more here..

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