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 5, 2017

three more natural gas pipelines approved, gasoline supplies at a seasonal high, gasoline demand near a 16 year low

US oil contracts continued to trade in a narrow price range this week, as OPEC production cuts seemed to be holding but market participants continued to worry about the ongoing U.S. drilling recovery...after closing last week at $53.16 a barrel, the contract for March delivery slid 54 cents, or 1%, to settle at $52.63 a barrel on Monday as traders focused on last week's increased US oil production and Friday's jump in the rig count...but then, despite large increases oil and product inventories reported by the American Petroleum Institute on Tuesday and by the EIA on Wednesday, oil prices climbed to close at $52.81 on Tuesday and then to close at $53.88 a barrel on Wednesday, after Trump's saber rattling at Iran spooked oil traders...US prices were then down 34 cents, or 0.6 percent, to $53.54 a barrel on Thursday as the implications of record gasoline supplies became apparent, but they went on to post a modest increase for the week, closing Friday at $53.83 a barrel after Reuters and Bloomberg agreed that OPEC had achieved a roughly 80 percent compliance rate with its promised cuts...US oil prices have now been stuck between $52 and $55 a barrel for over two months, with the price range narrowing to $52 a barrel to $54 a barrel over the past month...typically, when such a tight trading range breaks down, it precipitates a large change, whether positive or negative...

natural gas prices, on the other hand, continued their 6 week slide, ending the week at $3.063 per mmBTU (million British thermal units), their lowest settle since November 23rd...the 2 week and longer range forecasts are now indicating above normal temperatures for almost the entire country, and if that warmth holds there wont be much heating season left to pressure supplies...so it looks like we're out of the woods for the time being, at least until such time as the half dozen LNG export trains now under construction are completed, and gas from our area starts being piped south for shipment to Europe and Asia...

you may recall last week we speculated that despite Trump's order to expedite the Dakota Access Pipeline, there would be little movement on it until his appointees took up their positions at the head of the specific relevant Army units....this week, .however, despite the fact that Vincent Viola, Trump's billionaire nominee for Secretary of the Army, withdrew his name under a cloud of ethics and financial disclosure problems, two congresscritters from North Dakota both issued statements alleging that the acting secretary of the Army, Robert Speer, had ordered the Army Corps of Engineers to grant an easement for the pipeline to run under Lake Oahe...apparently, they're the only ones who knew about it, because a representative of Energy Transfer Partners said that the company did not know anything beyond what they read on the Congressmen's website...still, that pipeline still seems to be moving forward faster than we expected it to....

on the other hand, there was no additional news about the Keystone XL this week, although TransCanada was in the news regarding pipelines in our area...word is that the Federal Energy Regulatory Commission (FERC) ignored the EPA's concerns and approved two of TransCanada's planned natural gas pipelines intended to moved gas from the Marcellus and Utica areas to Midwest and Gulf Coast Markets...the $1.4 billion Leach XPress will transport 1.5 billion cubic feet per day of natural gas across the northern panhandle of West Virginia to Fairfield country southeast of Columbus and then south through Ohio on existing natural gas pipelines, while the Rayne XPress will move 1.0 billion cubic feet a day from Waynesburg PA along the Ohio river and then south to Rayne Louisiana, from where we would not be surprised to see it exported through Cheniere Energy's Sabine Pass natural gas terminal or other Gulf coast LNG export facilities now under construction...

in addition to those two pipelines, on Friday FERC approved the Williams Cos. $3 billion Atlantic Sunrise 200 mile natural gas pipeline expansion from the northeastern Marcellus producing region in Pennsylvania to the Transco mainline in southeastern Pennsylvania, from where it will move south through Maryland, Virginia, North Carolina, and South Carolina...construction on the two Transcanada pipelines is expected to start later this month, and be completed by November, while construction will start on the Atlantic Sunrise in mid-2017, with the portion along the Eastern Seaboard to be completed in time for the 2017-2018 winter heating season, while the Pennsylvania leg will follow in the spring of 2018..

The Latest Oil Stats from the EIA

this week's oil data for the week ending January 27th from the US Energy Information Administration showed that our imports of crude oil rose substantially, while our refining of that oil fell for the 3rd week in a row, and hence the week's surplus of crude that was added to our stored supplies was the largest since October...our imports of crude oil rose by an average of 480,000 barrels per day to an average of 8,290,000 barrels per day during the week, while at the same time our exports of crude oil fell by 50,000 barrels per day to an average of 509,000 barrels per day, which meant that our effective imports netted out to 7,741,000 barrels per day for the week, 530,000 barrels per day more than last week...at the same time, our crude oil production fell by 46,000 barrels per day to an average of 8,915,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,656,000 barrels per day during the week...

meanwhile, refineries reportedly used 15,947,000 barrels of crude per day during the week, 100,000 barrels per day less than the prior week, while at the same time, 923,000 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 214,000 more barrels of oil per day than were accounted for by our oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted that phantom 214,000 barrel per day number onto line 13 of the balanc 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.", and hence we've been calling that number the EIA's weekly oil fudge factor...

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports rose to an average of 8.256 million barrels per day, now 5.3% higher than the same four-week period last year...from that same source, we also find that this week's 46,000 barrel per day oil production decrease included a 45,000 barrel per day drop in production in the lower 48 states, and a thousand barrel per day decrease in output from Alaska..our crude oil production for the week ending January 27th turned out to be 3.2% lower than the 9,214,000 barrels of crude that we produced during the week ending January 29th of last year, and 7.2% below our June 5th 2015 record oil production of 9,610,000 barrels per day...

US refineries were operating at 88.2% of their capacity in using those 15,947,000 barrels of crude per day, down from 88.3% of capacity the prior week and down from the year high of 93.6% just three weeks earlier, but up from the 86.6% capacity utilization during the same week a year ago, as refineries are now in a typical seasonal slowdown...thus, even though the week's refining was down by almost 1.2 million barrels per day from the first week of this year, it was 2.1% more than the 15,615,000 barrels of crude refined during the week ending January 29th, 2016....and even though they took in less crude, gasoline production from those refineries rose by 276,000 barrels per day to 9,101,000 barrels per day during the week ending January 27th, which was 5.3% more than the 8,642,000 barrels per day of gasoline that were produced during the week ending January 29th a year ago....in addition, refineries' production of distillate fuels (diesel fuel and heat oil) also rose, increasing by 102,000 barrels per day to 4,677,000 barrels per day...thus the week's distillates production was up by 5.5% from the 4,435,000 barrels per day that were being produced during the week ending January 29th last year, while it was just fractionally higher than the 4,666,000 barrels per day of distillates produced during the same week of 2015, which was during a colder winter than the last two...     

with the increase in our gasoline production, the EIA reported that our gasoline supplies rose again, by 3,866,000 barrels to 257,086,000 barrels as of January 27th, for what is now a five week jump of nearly 30 million barrels in our gasoline inventories since Christmas...& we might have stored even more, but our gasoline exports were up by 28,000 barrels per day to 902,000 barrels per day, while our gasoline imports were down by 105,000 barrels per day to 488,000 barrels per day...coincidental to that, our domestic consumption of gasoline rose by 261,000 barrels per day from last week's 35 month low to 8,310,000 barrels per day, which left the 4 week average of gasoline demand at 8.222 million barrels per day, down from 8.715 million barrels a day during the same four weeks last year...since something unusual has happened to gasoline demand in this new year, we'll repeat the graph we showed two weeks ago, now including these latest updates:

February 4 2017 gasoline demand as of January 27

the above graph was taken from the bottom of the gasoline section of the EIA's "This Week in Petroleum" and it shows the weekly four week moving average of US gasoline consumption over the past two years, with February 2015 to February 2016 charted in brown, and February 2016 to the most recent week in charted blue...as we pointed out two weeks ago, gasoline consumption was running well ahead of the prior year's pace for most of 2016, until it slipped slightly below the 2015 levels in November and December.....now, following 5 consecutive weeks of low demand, that 4 week average of gasoline demand has dropped to well below last year's pace, and except for a virtually equivalent period in January 2012, is at the lowest it's been since the winter of 2001...two weeks ago i thought the drop to below last year's totals might have been due the ice storms that moved through the middle of the country during that reference week, but now, after a relatively long period of good January driving weather over most of the country, this now unexplained collapse in gasoline demand still persists...Americans certainly aren't  buying smaller cars; sales of vehicles built on truck frames outpaced conventional passenger car sales throughout 2016...yet as you can see, demand for gasoline has almost dropped to a 16 year low...

meanwhile, with the increase in distillates production, we also added 1,568,000 barrels to our supplies of distillate fuels, which reached 170,717,000 barrels by January 27th, for a 5 week increase of over 19 million barrels, at a time of year when distillates are usually being drawn down and consumed as heat oil...the amount of distillates supplied to US markets, a proxy for our consumption, rose by 146,000 barrels per day to 3,809,000 barrels per day, and was thus above the average of the past 5 years...but still, our distillate inventories are 6.9% higher than the distillate inventories of 159,695,000 barrels of January 29th last year, and 27.0% above the distillate inventories of 134,475,000 barrels of January 30th, 2015…  

finally, with big jump in our oil imports, our inventories of crude oil rose by 6,466,000 barrels to 494,762,000 barrels by January 27th, a level which is now only 3.4% below the April 29th record of 512,095,000 barrels...moreover, we ended the week with 5.0% more crude oil in storage than the then record 471,344,000 barrels we had stored on January 29th of 2016, and 30.4% more crude than the 379,473,000 barrels of oil we had in storage on January 30th of 2015...  

This Week's Rig Count

US drilling activity increased for the 13th time in 14 weeks during the week ending February 3rd, with the three week increase in drilling rigs now the largest 3 week increase since January 2010...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 17 rigs to 729 rigs in the week ending on this Friday, which was an increase of 158 rigs from the 571 rigs that were deployed as of the February 5th report a year earlier, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

the entire increase was in rigs drilling for oil, which were up by 17 rigs to 583 rigs during the week, and as a result active oil directed rigs are now at their highest since October 23rd, 2015...oil drilling was thus also up from the 467 oil directed rigs that were working in the US on February 5th last year, while down from the recent high of 1609 oil rigs that were drilling on October 10, 2014....drilling rigs targeting natural gas formations remained unchanged at 145 rigs, which was still up from the 104 natural gas directed rigs that were in use a year ago, while it was still way down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... 

one drilling platform offshore from Louisiana in the Gulf of Mexico started drilling this week, which brought the Gulf of Mexico rig count up to 21, which was still down from the 26 rigs working in the Gulf a  year ago…our total offshore count for the week was thus up to 22 rigs, with an ongoing drilling operation in the offshore waters off Alaska...the number of horizontal drilling rigs working in the US increased by 17 rigs  to 579 rigs this week, which is now up by 138 from the 458 horizontal rigs that were in use in the US on February 5th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was up by 5 rigs to 66 rigs as of January 27th, which was up by 13 rigs from last February 5th's count of 53 directional rigs....meanwhile, a net of 5 vertical rigs were shut down during the week, reducing the vertical rig count to 67, which was still up from the 60 vertical rigs that were deployed during the same week last year

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 3rd, the second column shows the change in the number of working rigs between last week's count (January 27th) and this week's (February 3rd) count, the third column shows last week's January 27th 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 5th of February, 2016...      

February 3 2017 rig count summary

in something of a change from recent weeks, drilling in the Permian with an increase of just 4 rigs was not the driver of this week's increase, as drillers in the Cana Woodford of Oklahoma added 7 rigs to now match the Eagle Ford as the second most active basin in the US...the Cana Woodford is home to the SCOOP and the STACK, two of most discussed plays in the US over the past year...that's the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko basin Canadian and Kingfisher (STACK), in case anyone else had been wondering what those acronyms stood for...other than the aforementioned variances, there aren't many other major changes above, with no change in either the Utica or the Marcellus, as the natural gas rig added in the Fayetteville offset the gas rig pulled from the Haynesville....you might note that the totals of new drilling in the basins above don't add up to the 17 rig increase in horizontal rigs...that's because 4 oil directed rigs began operations in basins other than those listed, the names of which Baker Hughes does not include in their summary data sets...

note: there's more here

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