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, January 8, 2017

record distillates production, year high jump in gasoline & distillates supplies, drilling rigs now up from a year ago, et al

oil prices rose for the 4th week in a row this week, but only after clawing back from an opening day nosedive...after closing December 2016 at $53.72 a barrel, US oil prices shot up to well above $55 a barrel in early trading on Tuesday morning, hitting an 18 month high on the first day of the agreed to oil production cuts by OPEC and non-OPEC oil producers, as Arab media reported that Kuwait and Oman had cut their crude output...however, with other news from other OPEC members not forthcoming, oil traders grew nervous, and oil prices turned sharply lower by that afternoon, as the February contract price tumbled nearly $3 in a few hours before closing at $52.33 a barrel, a two week low...the OPEC rally resumed on Wednesday, and oil prices were further propelled higher to close at $53.20 a barrel after the American Petroleum Institute reported a 7.4 million barrel draw on U.S. crude oil inventories, the largest drop in US oil supplies since September...oil prices then slid on Thursday morning, as official US oil data showed a surprisingly large increase in U.S. gasoline and distillate inventories, but news that Saudi Arabia had cut production as they had agreed to sent prices back up in the afternoon, and they went on to close at $53.76 a barrel....oil prices then opened lower on Friday, after the release of weak economic reports on US employment and trade, but rose again on further signs of OPEC compliance, to end the week at 53.99 a barrel, up slightly from where it started...oil prices have thus increased 19.4% since the November 30th OPEC meeting, and will probably stay at these elevated levels as long as the OPEC/NOPEC production cuts are on the table...

natural gas prices, on the other hand, have no cartel controlling the supply, and when the weather forecast turns against them, as it did this week, natural gas prices plunge...you might recall that on Wednesday of last week, natural gas prices for January hit a two year high of $3.93 per mm-BTU (million British thermal units) before that contract expired, and then the February contract eventually fell to close the week at $3.743 per mmBTU...well, over the three day weekend, the long range weather forecast changed to indicate a shorter severe cold snap followed by much warmer winter temperatures, and as a result, natural gas prices opened the new year lower and dove 12% on Tuesday to end the day at $3.327 per mmBTU...that weather related price drop extended into Wednesday, as natural gas prices fell another 6 cents to close at a six-week low of $3.267 per mmBTU...gas prices then steadied on Thursday, closing the day at $3.273 per mmBTU,after the EIA's Weekly Natural Gas Storage Report indicated a decline of 49 billion cubic feet (Bcf) of gas in storage for the week ending December 30th, which left our gas supplies at 3,311 billion cubic feet, 9.9% less than a year ago...gas prices then closed higher for the second day in a row on Friday, rising 1.2 cents, or 0.4%, at $3.285 per mmBTU, after recovering after trading as low as $3.214/mmBtu earlier in the session...NOAA's climate prediction center continues to show expectations for a warmer than normal winter for much of the densely populated eastern areas of the country, so unless that should change, we'd expect natural gas prices will remain under pressure...

The Latest Oil Stats from the EIA

this week's reports on oil from the US Energy Information Administration were released on Thursday and are for the week ending December 30th...in the last week of 2016, our imports of crude oil were almost a million barrels per day lower than the prior week, while our refineries were consuming more oil than in any week since Labor Day, and hence they needed to draw a large amount of crude oil from storage to meet their needs...our imports of crude oil fell by an average of 984,000 barrels per day to an average of 7,183,000 barrels per day during the week, our lowest oil imports since the interruption cause by Hurricane Matthew...at the same time, our exports of crude oil rose by an average of 59,000 barrels per day to an average of 686,000 barrels per day, the 2nd most ever, which meant that our effective imports netted out to 6,497,000 barrels per day for the week...meanwhile, our crude oil production rose by 4,000 barrels per day to an average of 8,770,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled just 15,267,000 barrels per day for the week...

refineries reportedly used 16,689,000 barrels of crude per day during the week, an increase of 123,000 barrels per day from the week before Christmas, while at the same time, 1,007,000 barrels of oil per day were being pulled out of oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we still consumed 415,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that phantom 415,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out...the EIA footnote to that line 13 calls it "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...as you know, we've been calling that balance number the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports fell to an average of 7.8 million barrels per day, now just 0.5% higher than the same four-week period last year....our crude oil production for the week ending December 30th was still 4.9% lower than the 9,219,000 barrels of crude we produced during the week ending January 1st of last year, and 8.7% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015...

US refineries operated at 92.0% of capacity in using those 16,557,000 barrels of crude per day, up from 91.0% of capacity the prior week, but still down from 92.5% of capacity during the same week a year ago, even though they refined 37,000 more barrels of crude per day this week than they did during the same week last year...however, gasoline production from those refineries fell by 1,071,000 barrels per day to 9,467,000 barrels per day during the week ending December 30th, from last week's record high of 10,537,000 barrels per day...nonetheless, this week's gasoline production was still 8.0% more than the 8,766,000 barrels per day of gasoline produced during the week ending January 1st a year ago, and 8.8% more than the 8,701,000 barrels per day of gasoline produced during the week ending January 2nd, 2015, so there's apparently a normal slowdown in gasoline refining at this time of year...and at the same time that gasoline output was falling, refineries' output of distillate fuels (diesel fuel and heat oil) was rising by 372,000 barrels per day to 5,329,000 barrels per day, which was a new record high for distillates production...thus our distillates production was up by 7.1% from the 4,976,000 barrels per day that was being produced during the week ending January 1st last year, and 2.9% higher than the 5,180,000 barrels per day of distillates produced during the same week of 2014...     

however, even with that big drop in our gasoline production, the EIA reported that our gasoline supplies rose by 8,307,000 barrels to 227,143,000 barrels as of December 30th, the biggest one week jump in gasoline inventories since last January, as our domestic consumption of gasoline fell by 813,000 barrels per day to 8,465,000 barrels per day, which was likewise our lowest gasoline consumption since last January...also contributing to this week's jump in our gasoline supplies was a 288,000 barrel per day increase to 722,000 barrels per day in our gasoline imports, while at the same time our gasoline exports fell by 153,000 barrels per day from last week's record high of 1,149,000 barrels per day...that increase kept our gasoline inventories as of December 30th 1.5% higher than the 231,996,000 barrels of gasoline that we had stored on January 1st of last year, while they were still 0.7% below the 237,163,000 barrels of gasoline we had stored on January 2nd of 2015..

moreover, at the same time as our gasoline supplies were jumping by 8.3 million barrels, our supplies of distillate fuels were also rising, increasing by 10,051,000 barrels to 152,378,000 barrels by December 30th...in addition to record refinery production, a major factor in that increase of distillates supplies was a 1,175,000 barrel per day drop to 2,792,000 barrels per day in the amount of distillates supplied to US markets, a proxy for consumption...now, that seems to be some kind of anomaly, because that's the lowest product supplied number for distillates since the week ending April 19, 1999, and we have seen a similar drop in that metric at this time of year each of the last 5 years...nonetheless, that, combined with record production of distillates and a 216,000 barrels per day drop from last week's record high of 1,416,000 barrels per day our exports of distillates, meant that we saw the largest one week jump in distillates supplies in two years...since both gasoline supplies and distillate supplies saw such large jumps this week, we'll include a graph here that will help us see what's going on...

January 7 2017 invenories as of December 30th

the two bar graphs above, taken from the Zero Hedge coverage of this week's EIA report, show the weekly change in gasoline and distillate inventories for each week of the last 3 years, with the bar graph for gasoline inventories on top and the bar graph for distillate inventories below that....within each graph, each red or green bar represents a weekly change in inventories over the past 3 years, with green bars indicating an addition to that inventory during the reference week, and red representing a withdrawal from that inventory for that week, with the size of the bars indicating the volume in barrels of the addition or withdrawal...in addition, a heavy green arrow has been added to each chart to indicate the number of weeks that have elapsed since an inventory addiction large as the current one has occurred ....thus on the gasoline graph we can see that large volumes of gasoline are typically added to storage during the winter months of November through February, while smaller withdraws from storage are made most weeks during the summer driving season...so this week's increase in gasoline supplies was not that unusual at all, as increases to gasoline inventories of that magnitude were obviously typical in each of the last three winters...we have a similar seasonality, but less regular, for distillate storage and withdrawal as shown in the lower graph...since refineries tend to step up distillate production during the winter months to meet heat oil demand, wintertime withdrawals aren't as severe as they otherwise might be, and when that increased winter distillates output coincides with a week of weak demand such as we saw this week, all that extra distillate production ends up heading for storage....thus we have the largest addition to distillate inventories since the 2nd week of January 2015, which leaves us with 1.4% more distillate inventories than we had on January 1st last year, and 18.1% above the distillate inventories of 136,926,000 barrels on January 2nd, 2015...…

finally, the big drop in our oil imports, combined with the increase in refining, meant that we had to pull crude oil out of storage to meet the refiner's needs, and hence our inventories of crude oil fell by 7,051,000 barrels to 479,012,000 barrels by December 30th, which was the lowest level for our crude supplies since February 19th of last year, and  6.4% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 6.2% more crude oil in storage than the 450,956,000 barrels we had stored at the beginning of 2016, and 37.2% more crude than the 348,806,000 barrels of oil we had in storage on January 2nd of 2015...    

This Week's Rig Count

US drilling activity increased for the 10th week in a row and for the 15th time in the past 16 weeks during the week ending January 6th, although the pace of increase remains modest compared to that of the weeks immediately following the OPEC deal...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 7 rigs to 665 rigs by this Friday, which was up by 1 from the 664 rigs that were deployed as of the January 8th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 4 rigs to 529 rigs during the week, which was the most oil drilling rigs that have been in use since December 4th of 2015, as oil drilling activity has only retreated once in the past 27 weeks...oil drilling is now up from the 516 oil directed rigs that were working in the US on January 8th last year, but 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 135 rigs, which still left active gas rigs down from the 148 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... one rig that was classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

a single drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 23, still down from 27 offshore rigs a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 24 rigs, also down from last year's offshore total of 27...the number of working horizontal drilling rigs increased by 2 rigs to 534 rigs this week, which is now up from the 519 horizontal rigs that were in use in the US on January 8th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, four vertical rigs were added to those active, increasing the vertical rig count to 74, which was down from the 81 vertical rigs that were deployed during the same week last year..in addition, the directional rig count rose by 1 rig to 57 rigs as of January 6th, which still left the directional rig count down from last year's deployment of 64 directional rigs...

once again, 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 that 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 January 6th, the second column shows the change in the number of working rigs between last week's count (December 30th) and this week's (January 6th) count, the third column shows last week's December 30th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for January 8th of 2016...       

January 6th 2017 rig count summary

we do have an unusual change this week, in that 5 rigs were pulled out of the Granite Wash of the Texas-Oklahoma panhandle region, yet it's hard to tell where they came from at a glance, since the Oklahoma rig count is unchanged and the Texas rig count is up three...looking at the details on drilling in the individual Texas oil districts, we see that drilling in district 10, which is the panhandle region, was down from 11 rigs to 6 rigs, so that question is solved  ...in addition, it also appears that at least one of the 3 rig increase in New Mexico was in the Wolfcamp, in the western part of the Permian, since Texas details only shows a 2 rig increase in that basin...note that yet another gas-directed rig was also added in Ohio's Utica shale...that brings the Utica shale rig count up to 21, up from 14 a year ago...we could therefore say that with a 50% year over year increase, drilling in the Utica shale is increasing faster than in any other basin in the US, since the 58 rig increase in the Permian only represents a 28% jump...also note that of the states not shown among the major producers above, Indiana saw two rigs pulled out this week, leaving one still active in the state, whereas a year ago they had none, while Illinois drillers added a rig, their first activity in a while, which is still down from the 2 rigs that were deployed in Illinois last January 8th..



note: there's more here..

1 comment:

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