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, February 19, 2017

record highs for US oil exports, gasoline and crude supplies; monthly OPEC and DUC reports, et al

oil contracts once again traded in a narrow price range this week, sliding by 90 cents a barrel to $52.93 a barrel on Monday, and then gradually clawing more than half of that drop back to end the week at $53.40 a barrel, down less than 1% for the week...oil traders seem to believe that the OPEC production cuts will eventually dent the supply glut, which has kept prices from falling below current levels, while US crude inventories continue to pile up, holding back any price increases...rather than discussing how prices moved, we'll just include a current graph so you can see for yourself...

February 18 2017 crude oil prices

the graph above shows the daily closing prices per barrel of oil over the past 3 months for the March contract for the US benchmark oil, West Texas Intermediate (WTI), as stored or to be delivered to the Cushing Oklahoma storage depot...we can see how oil prices jumped 14% during the last week of November, after the OPEC deal was announced, inched up a bit from there to approach $55 a barrel in December, and then slipped back to the $52 to $54 a barrel range over the past 6 weeks...this is a far cry from the 5% a day price changes we saw over most of 2015 and 2016, and we should figure that kind of volatility will return once prices break out of this narrow range...

next we'll include a similar graph of natural gas prices, so you can all see what's happened to them as our winter has turned warmer than expected:

February 17 2007 natural gas prices

the above graph shows the daily closing contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in March at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...as you can see, natural gas contract quotes have been sliding since Christmas, at a time when a cold snap brought on the largest December drawdown of natural gas supplies in 6 years...at that time, the then current January contract hit a 2 year high of $3.93 per mmBTU, which ultimately led to a nominal increase in drilling for gas early this year...historically, however, natural gas drilling activity has been on a long downtrend from the 1,606 natural rigs that were deployed on August 29th, 2008, only increasing briefly in late 2009 and early 2010 and again in 2014 in the months after natural gas prices briefly rose above $4.00 per mmBTU, but ultimately sliding to just 82 rigs on June 3rd, 2016 after gas price had earlier slipped below $2 per mmBTU...so although this week has seen another small rig increase, that's probably drilling that was contracted for earlier in the year...absent such contracts, we should expect gas drilling to slow down again until such time as natural gas prices rise appreciably from these levels...

OPEC's February report

Monday of this past week saw the release of the OPEC Monthly Oil Market Report for February (covering January data), so we'll look at that first, because it's the production data in this report, not the IEA estimates that we looked at last week, that will determine, by OPEC's own standards, whether their members have complied with the agreed to production cuts or not...this first table is from page 59 of the OPEC pdf and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled...for all their official production measurements, OPEC uses "secondary sources", such as analyst's reports from satellites and shipping data, as an impartial adjudicator of their output quotas and production cuts, to resolve any potential disputes that might arise if each member reported their own figures...this is also the data we typically see quoted in the media, other than in independent analysis by energy research divisions of organizations such as Platts and Reuters that'll have their own numbers.. 

February 18 2017 January OPEC production

here we see that the official data shows that OPEC production was down by 890,200 barrels per day in January, from a December oil production total that was revised 56,000 barrels per day lower from what was reported last month...(for your reference, here is the December table before those revisions)...recall that OPEC committed to reducing their production by 1.2 million barrels per day, so these initial figures show they're not there yet....these figures are also somewhat less than the 1.04 million barrels per day that the IEA said that OPEC had cut last week, but IEA numbers were higher for December, so their total of 32.06 million barrels per day in January production is closer to OPEC's figure...the IEA showed that the Saudis had cut 560,000 barrels per day to end January at 9.98 million barrels per day, whereas these official numbers indicate the Saudis cut 496,000 barrels per day to end at 9.946 million barrels per day...the IEA also showed smaller cuts for Iraq and the Emirates, two major producers who have only cut half what they promised, than OPEC shows, so these figures would seem to indicate that the cooperation with the cuts is more evenly spread than IEA figures had indicated, even if it was less overall... 

the next table, also from page 59 of the OPEC pdf, shows the oil production that each of the members reported to OPEC (for those that did report)...this data is considered suspect because of the many incentives OPEC members have to fudge their data, and is rarely reported by the media, but i'm including it as a curiosity, because OPEC members are quite obviously reporting that they've cut their output more than the official figures show...what stands out below is that the Saudis claimed to have cut 717,600 barrels per day, while the official totals “from secondary sources" above show they've actually only cut 496,200 barrels per day....that's important because Saudi claims are usually reported by the media, and often move the price of oil...

February 18 2017 January reported OPEC production

next, we'll include a graph of the OPEC data for all members included in this report, so we can see how this month's production stacks up next to historical figures...

February 16 2017 OPEC Januaary outpul

the above graph, taken from the 'OPEC oil charts" page at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to January 2017...obviously, we can see that OPEC production is down quite a bit over the past two months from their record production of 33,374,000 million barrels per day in November, in their run-up before the agreement was reached, but note that their current production is still more than what they were producing last April and May of 2016, and every other month before that, including last January, when they produced 31,628,000 barrels per day (a figure i arrived at by subtracting Indonesian production from the 14 member total they reported last year.pdf) ...that means that despite all of the hullabaloo they've made over cutting production, their January 2017 production of 32,139,000 barrels per day is still 1.6% more oil than they were producing in January 2016...

this next graphic we'll include, as the heading tells us, shows us both OPEC and world oil production monthly on the same graph, from February 2015 to January 2017, and it also comes from page 59 of the February OPEC Monthly Oil Market Report...the pale blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, and that's shown on the right scale...global oil production fell to 95.82 million barrels per day in January, and OPEC production thus represented 33.5% of what was produced globally, a decrease from 34.0% in December...but even with the two months of cuts we can obviously see here, global oil supply is still in surplus, as the table after this graph will show..

February 18 2017 January world oil supply

the table below comes from page 34 of the February OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally over 2017 over the rest of the table...while the changes by region from quarter to quarter may be interesting, the reason we're including this table here today is for the forecast for oil demand in the first quarter of 2017, which is shown on the "Total world" line of the second column...projections are that during the first three months of this year, all oil consuming areas of the globe will use 94.84 million barrels of oil per day, up from the 94.62 millions of barrels of oil per day they used in 2016...but as OPEC showed us in the supply section of this report and the summary supply graph above, even with the production cuts, the world's oil producers were still producing 95.82 million barrels per day during January...that means that even after all the production cuts have take place, there was still a surplus of around a million barrels per day in global oil production...

February 18 2017 January world oil demand

The Latest Oil Stats from the EIA

this week's oil data for the week ending February 10th from the US Energy Information Administration showed that our imports of crude oil fell back from last week's record but remained elevated, while our refining of that oil fell for the 5th week in a row to the second lowest rate in a year, and as a result there was another large surplus of crude added to our oil supplies, which were thus boosted to an all time high...our imports of crude oil fell by an average of 881,000 barrels per day to an average of 8,491,000 barrels per day during the week, while at the same time our exports of crude oil rose by 459,000 barrels per day to an average of 1,026,000 barrels per day, which meant that our effective imports netted out to 7,465,000 barrels per day for the week, 1,340,000 barrels per day less than last week...at the same time, our crude oil production slipped by 1,000 barrels per day to an average of 8,977,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,442,000 barrels per day during the week...

meanwhile, refineries reportedly used 15,458,000 barrels of crude per day during the week, 435,000 barrels per day less than during the prior week, while at the same time, 1,361,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA oil figures seem to indicate that we consumed or stored 377,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 377,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents "unaccounted for crude oil"...that is further described 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.", which means they got that number by backing into it, using the same method we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports inched up to an average of 8.491 million barrels per day, 9.9% higher than the same four-week period last year...we should also note that our crude oil exports of 1,026,000 barrels per day is a new record for oil exports, beating the prior record set in the first year of this year by 299,000 barrels per day...so you'll be sure to see that, we'll include a self explanatory.graph of that jump in our exports from the EIA's crude oil exports page, directly below.....

February 18 2017 crude oil exports for February 10

meanwhile, this week's 1,000 barrel per day oil production decrease included a 6,000 barrel per day increase in oil production in the lower 48 states, offset by a 7,000 barrel per day decrease in output from Alaska...our crude oil production for the week ending February 10th was 1.7% lower than the 9,135,000 barrels of crude that we produced during the week ending February 12th of last year, while it remained 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day...

US refineries were operating at 85.4% of their capacity in using those 15,458,000 barrels of crude per day, down from 87.7% of capacity the prior week, and down from the year high of 93.6% of capacity just five weeks earlier, when they were processing 17,107,000 barrels of crude per day....their processing of oil is also down by 2.5% from the 15,848,000 barrels of crude that were being refined during the week ending February 12th, 2016, when refineries were operating at 88.3% of capacity....with the refinery slowdown, gasoline production from our refineries fell by 854,000 barrels per day to 8,950,000 barrels per day during the week ending February 10th, which was 7.5% less than the 9,675,000 barrels per day of gasoline that were being produced during the week ending February 12th a year ago...at the same time, refineries' production of distillate fuels (diesel fuel and heat oil) fell by 271,000 barrels per day to 4,531,000 barrels per day, which was 2.8% less than the 4,663,000 barrels per day of distillates that were being produced during the week ending February 12th last year, also during a mild winter...

however, even with the big drop in our gasoline production, the EIA reported that our gasoline inventories rose by 2,846,000 barrels to a record 259,063,000 barrels as of February 10th, in the sixth increase in our gasoline supplies in 7 weeks...that happened as our domestic consumption of gasoline fell by 508,000 barrels per day to 8,433,000 barrels per day, again well below normal for this time of year...in addition, our gasoline exports, which have often served to reduce our excess supplies, fell by 447,000 barrels per day to 555,000 barrels per day, while our imports of gasoline fell by 207,000 barrels per day to 604,000 barrels per day, making for the first week our gasoline imports exceeded our gasoline exports since the week ending October 14th...since this week's gasoline supplies are at an all time time high, we'll include a graph of their recent history here...

February 16 2017 gasoline inventory as of Feb 3

the above graph comes from the twitter feed of John Kemp, who is an energy analyst and columnist with Reuters...it shows US gasoline stores in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our supplies, or the middle of the daily range, traced by the blue dashes over each day of the year...the graph also shows our 2016 gasoline inventories traced weekly in a yellow line, with our year to date 2017 gasoline supplies represented in red...thus we can clearly see that for almost all of 2016, our gasoline supplies were at a seasonal high for every given date, and so far in 2017, our weekly totals have broke those year old 2016 records...

and that's what happened this week...last year, on February 12th, our gasoline supplies rose to a new record of 258,693,000 barrels, beating the February 13th 2015 record of 243,132,000 barrels by 6.4%...this week's 259,063,000 barrels thus topped last year's record by just a small fraction, but it is still a new record nonetheless...recent years have shown that gasoline supplies usually start to fall after the 2nd week of February, (which is clearly visible on the graph), so that may very well happen again this year...still, our gasoline stores are now up by nearly 32 million barrels since Christmas, and on track to continue setting seasonal records higher than those set last year..

meanwhile, the big drop in distillates production served to reduce our supplies of distillate fuels by 689,000 barrels to 170,057,000 barrels by February 10th, as the amount of distillates supplied to US markets, a proxy for our consumption, fell by 57,000 barrels per day to 3,853,000 barrels per day, and as our exports of distillates fell by 105,000 barrels per day to 992,000 barrels per day...even so, our distillate inventories are still 4.7% higher than the distillate inventories of 162,375,000 barrels of February 12th last year, and 33.5% above the distillate inventories of 127,409,000 barrels of February 13th, 2015… 

lastly, the ongoing elevated level of our oil imports, combined with slack refining, led to another large addition to our weekly inventories of crude oil, which rose by 9,527,000 barrels to 518,119,000 barrels by February 10th, thus topping the previous record high oil supply of 512,095,000 barrels set on April 29th 2016...so another record high calls for yet another graph...

February 16 2017 oil inventory as of Feb 3

like the previous graph, this graph also comes from the twitter feed of John Kemp, who seems to post several graphs daily, along with other energy news...also like the prior graph, this one shows US oil supplies in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our oil supplies for any day traced by the blue dashes over each day of the year...this graph also shows our 2016 oil inventories traced weekly in yellow, with our year to date 2017 oil supplies in red...the difference here, as we saw last week, is that our 2016 oil supplies were not just fractionally higher than those of 2015, they averaged more than 10% higher, while 2015 oil supplies ran as much as a third higher than those of 2014...thus the 2017 oil inventories are that much higher again, and we've now set a new record for oil supplies on the 41st day of the year, which unlike gasoline supplies, tend to continue to rise seasonally until at least the 120th day of each year (when refining for summer gasoline supplies picks up)....thus, our oil supplies on February 10th were 9.6% higher than the then February record 472,823,000 barrels that we had stored on February 12th of 2016, 32.3% higher than the previous mid-February record of 391,516,000 barrels in storage on February 13th of 2015, and 56.6% higher than the closer to normal 330,956,000 barrels of oil that we had stored on February 12th of 2014...

This Week's Rig Count

US drilling activity increased for the 15th time in 16 weeks during the week ending February 17th, with the five week increase of 92 drilling rigs still the largest 5 week increase since January 2010...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 10 rigs to 751 rigs in the week ending on this Friday, which was 237 more rigs than the 514 rigs that were deployed as of the February 19th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

the number of rigs drilling for oil rose by 6 rigs to 597 rigs this week, which was up from the 413 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 153 rigs this week, which was also up from the 101 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work...   

four drilling platforms offshore from Louisiana in the Gulf of Mexico were shut down this week, while one was added offshore from Texas, which reduced the net Gulf of Mexico rig count down to 17, which was also down from the 25 rigs working in the Gulf a  year ago…the total US offshore count for the week was thus cut back to 18 rigs, as a drilling operation is still going on in the offshore waters off Alaska.....

the number of horizontal drilling rigs working in the US increased by 7 rigs to 614 rigs this week, which is now up by 184 rigs from the 413 horizontal rigs that were in use in the US on February 19th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, 6 directional rigs were added during the week, bringing the total directional rig count up to 72, up from the 66 directional rigs that were deployed during the same week last year...on the other hand, a net of 3 vertical rigs were stacked this week, reducing the vertical rig count to 65, which was still up from the 50 vertical rigs that were deployed during the same week a year ago...

as usual, 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 February 17th, the second column shows the change in the number of working rigs between last week's count (February 10th) and this week's (February 17th) count, the third column shows last week's February 10th 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 week’s case was for the 19th of February, 2016...        

February 17 2017 rig count summary

as you can see from the above tables, the rig count story this week was all Texas, but not so much in the Permian basin as it has been lately, as the 16 Texas rig increases were fairly widespread, with 8 different Texas oil and gas districts seeing increases, while 2 districts saw drilling cut back...the unusual activity was the 5 rig increase in the Granite Wash basin of the eastern Texas panhandle and adjacent Oklahoma area, where all 13 rigs there are now drilling for oil, versus a year ago, when 7 out of the 10 rigs deployed there were drilling for natural gas...as for the increase of 4 rigs targeting natural gas, none were in our area, as 3 were added in the Haynesville and one was added in the Eagle Ford, while obviously the Ohio and Pennsylvania rig counts remained unchanged...also note that outside of the major producing states shown above, Mississippi saw a rig added this week; they now have 3 rigs working, up from just one rig during the same week a year ago..

DUC report for January

this week also saw the release of the EIA's Drilling Productivity Report for January, which once again showed another increase in uncompleted wells nationally, mostly as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin...we had expected that with oil prices above $50, some of the DUC well backlog would be completed, but this report again showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5,289 in December to 5,391 in January....a possible cause for this increase that i hadn't considered until this week might be a shortage of competent fracking crews...an article at Rigzone this week titled Bringing Back Our People: Industry Combats Workforce Challenges cites their problem as previously laid off workers who will probably never return to the oil industry....since the oil field layoffs started in early 2015, we've now gone nearly two years with just skeleton fracking crews operating in much of the country, and many of those who had worked in the oil fields before have since found work elsewhere...fracking has also gotten much more complex over that period, so putting together a fracking crew familiar with the latest techniques has become that much harder...

like in December, all of the January DUC increases were oil wells; the Permian basin, which includes the Wolfcamp and several other shale plays in these stats, saw its total count of uncompleted wells rise from 1,673 in November to 1,757 in January, in keeping with the increase in drilling that we've seen in that basin...at the same time, DUCs in the Niobrara chalk of the Rockies front range rose by 13, to 708 in January, and DUCs in the Eagle Ford of south Texas increased by 11 to 1,255...on the other hand, the Marcellus saw a small decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 610 in December to 600 in January...in addition; the Utica also showed a decrease of five uncompleted wells and thus had only 98 DUCs remaining in January...for the month, DUCS in the 4 oil basins tracked by the EIA (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 107 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) fell by 15 wells, as they have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered....  

 

note:  there’s more here…

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