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, April 30, 2017

US oil refining at an all time high, topping previous year's summertime records...

based on recommendations from an OPEC panel meeting last Friday and statements from the major producers, it's now broadly accepted that OPEC will be extending their production cuts after June, although that won't be made official till they meet on May 25th....with that as a given, oil traders have turned their attention to recent oil supply and shipment data, and found that global oil supplies remain adequate and shipments of oil continue to set new records, and they’ve thus deemed the OPEC production cuts we've seen so far to be ineffective...as a result, oil again traded lower this week, ending down another 29 cents a barrel, after last week's $3.98 a barrel, 7.4% plunge....

after opening higher on Monday, US crude for June delivery fell after a report that Russian oil output might climb to its highest rate in 30 years if the OPEC and non-OPEC producers did not agree extend their cuts, and closed at $49.23 a barrel, down 39 cents from last Friday's close....prices then edged up in choppy trade on Tuesday in anticipation of the weekly American Petroleum Institute and EIA oil inventory reports, which were expected to show a third consecutive weekly draw of around 1.6 million barrels, with U.S. June futures closing 33 cents higher at $49.56 a barrel, their first increase in 7 trading days....with the API report showing a smaller than expected decrease in supplies, oil prices opened lower on Wednesday morning, but then spiked to as high as $50.20 a barrel in early afternoon, after the EIA report showed the largest draw on crude inventories thus far this year, but then later retreated after analysts noted the EIA report also showed gasoline and distillate stockpiles grew, while U.S. production and imports increased, with prices hanging on to a gain of 6 cents on the day tp close at $49.62 per barrel....oil prices then extended the Wednesday afternoon selloff on Thursday, after the big jump in gasoline supplies knocked gasoline prices down to their lowest April price in 8 years, and after the restart of two oilfields in Libya added more crude to an already bloated global market, with oil prices closing down 1.3% for the day at $48.97 a barrel, a one month low...prices then edged back up on Friday, as traders who had earlier sold oil they didn't own bought it back to close out their positions before the end of the month, thus forcing a 36 cent increase in prices that left oil priced at $49.33 a barrel at the close...

natural gas pricing for the week was a little more complicated, because trading in the natural gas contract for May delivery expired on Wednesday, and after that the quoted price of natural gas was referencing the June contract...after closing last week at $3.101 per mmBTU (million British thermal units), May natural gas fell 3.5 cents on Monday to close at $3.066 per mmBTU, a four week low, on expectations that warmer-than-normal weather and light heating demand would mean higher-than-usual additions to supplies through mid-May...prices for May natural gas then fell another 2.3 cents on Tuesday to close at $3.043 per mmBTU, as lower spot prices for natural gas in New England weighed on the expiring futures contract...natural gas prices then turned higher on Wednesday on forecasts of cooler weather, with the expiring May contract closing up 9.9 cents at 3.142 per mmBTU, while the contract for June natural gas, which had gained a half cent on Tuesday, rose another 10.6 cents to close at on Wednesday $3.271 per mmBTU...now quoting the June contract, natural gas retreated 3.2 cents on Thursday to close at $3.239, after the EIA's weekly natural gas storage report showed a 74 billion cubic feet addition to US supplies, 2 billion cubic feet more than the industry had expected...prices for June natural gas then rose 3.7 cents on Friday to close the week at $3.276 per mmBTU, as a report indicated an average 12-month decline rate of 51 percent for existing wells in the Marcellus...that would mean, for instance, that a typical well in the Marcellus that started producing at 10 million cubic feet per day a year ago is now yielding only 4.9 million cubic feet per day, which in turn means that natural gas "producers have to drill at a breakneck pace just to keep output stable"

The Latest US Oil Data from the EIA

the big story from the US oil data for the week ending April 21st from the US Energy Information Administration was that US refineries processed more crude than in any other week in our history, so despite a concurrent big jump in our oil imports, we had to take oil out of storage to meet refining needs for the third week in a row...our imports of crude oil increased by an average of 1,102,000 barrels per day to an average of 8,912,000 barrels per day during the week, while at the same time our exports of crude oil rose by 587,000 barrels per day to an average of 1,152,000 barrels per day, which meant that our effective imports netted out to 7,760,000 barrels per day during the week, 515,000 barrels per day more than during the prior week...at the same time, our crude oil production rose by 13,000 barrels per day to an average of 9,265,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 17,025,000 barrels per day during the cited week...

at the same time, refineries reportedly used a record 17,285,000 barrels of crude per day, 347,000 barrels per day more than they used during the prior week, while 592,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's EIA oil figures seem to indicate that our total supply of oil from net imports, production and from storage was 332,000 more barrels per day than what refineries used...since that oil couldn't have just vanished, the EIA inserted a -332,000 barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the supply and demand data balance out, which they label in their footnotes as "unaccounted for crude oil"

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports rose to an average of 8,113,000 barrels per day, now 4.9% above the imports of the same four-week period last year...the 592,000 barrel per day decrease in our total crude inventories came about on a 520,000 barrel per day withdrawal from our commercial stocks of crude oil and a 72,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 19 months ago...this week's 13,000 barrel per day crude oil production increase resulted from a 20,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 7,000 barrels per day decrease in oil output from Alaska...the 9,265,000 barrels of crude per day that we produced during the week ending April 21st was another 20 month high, up by 5.6% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 3.7% from the 8,938,000 barrel per day output during the during week ending April 22nd a year ago, while it was still 3.6% below the June 5th 2015 record oil production of 9,610,000 barrels per day...

US oil refineries were operating at 94.1% of their capacity in using that record 17,285,000 barrels of crude per day, up from 92.9% of capacity the prior week, and the highest capacity utilization since the last week in November 2015...since we now have a new record for the amount of oil refined in any one week, we'll include a graph here of what that looks like, compared to recent refining history...

April 26 20017 refinery throughput  for April 21

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph shows US refinery throughput in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our refinery throughput on any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year...the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented in red...from that we can note that for most all of 2016 and through most of 2017, US oil refining was either at seasonal record highs or near the top of the average range...however, we can also note there is normally a seasonal swing for oil refining, with demand for their products highest in the summer and again around the holidays, so for a refining record to be set this early in the year is truly an outlier...the 17,285,000 barrels of crude per day refined during the week ending March 21st beat the previous record of 17,107,000 set during the first week of 2017 by more than 1%; it was also 9.1% more than the 15,847,000 barrels per day that were being refined during the week ending April 22nd of 2016, when refineries were running at 88.1% of capacity...

even with the week's refining increase, gasoline production from our refineries decreased by 84,000 barrels per day to 9,710,000 barrels per day during the week ending April 21st, which was still 2.3% more than the 9,507,000 barrels of gasoline that were being produced daily during the comparable week a year ago....in addition, refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 87,000 barrels per day to 5,150,000 barrels per day, which was 4.6% more than the 4,622,000 barrels per day of distillates that were being produced during the week ending April 22nd last year....meanwhile, there were small increases in refinery production of residual fuels, jet fuel, propane/propylene, and other refined products, but not enough to account for the 347,000 barrel per day increase in the amount of oil refined...

however, even with the drop in our gasoline production, the EIA reported that our gasoline inventories increased by 3,369,000 barrels to 241,041,000 barrels as of April 21st, after they had increased by 1,542,000 barrels the prior week....that additional surplus came about because our imports of gasoline rose by 73,000 barrels per day to 916,000 barrels per day, and as our gasoline exports fell by 23,000 barrels per day to 625,000 barrels per day, while our domestic consumption of gasoline fell by 17,000 barrels per day to 9,206,000 barrels per day...we'll take a look at a graph of that, too, since our gasoline supplies have started increasing at a time of year when they're normally being drawn on...

April 26 20017 gasoline inventories for April 21

like the earlier graph, this graph comes from that emailed package of oil graphs from John Kemp, and it also shows our gasoline supplies in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our gasoline supplies on any given date shown in the light blue shaded area, and with the median level of our gasoline supplies over the 10 year period traced by the blue dashes over each day of the year...the graph also shows our gasoline supplies in thousands of barrels for each week in 2016 traced weekly by a yellow line, and our year to date oil refining during 2017 traced by a red line...from that we can see that for all of 2016 and through the first month of 2017, US oil refining was continuously at record high for each time of year, with an all time record of 259,063,000 barrels of gasoline supply set during the week ending February 10th of this year...however, even though our gasoline inventories were being drawn on for the following 8 weeks, shrinking by nearly 23 million barrels over that period, they've now recovered nearly 5 million barrels of that drawdown, and are now just a small fraction off the 241,259,000 barrels we had stored on the equivalent day a year ago...moreover, current gasoline inventories are now 6.0% higher than the 225,738,000 barrels of gasoline we had stored on April 24th of 2015, and 13.9% more than the 211,572,000 barrels of gasoline we had stored on April 25th of 2014...

similarly, even with the nominal decrease in distillate's production, our supplies of distillate fuels rose by 2,651,000 barrels to 148,266,000 barrels during the week ending April 21st, because the amount of distillates supplied to US markets, a proxy for our consumption during that warm week, decreased by 510,000 barrels per day to 3,667,000 barrels per day, and as our exports of distillates fell by 348,000 barrels per day to 1,071,000 barrels per day even as our imports of distillates fell by 113,000 barrels per day to 54,000 barrels per day at the same time...while our distillate inventories are still 4.6% below the 158,240,000 barrels that we had stored on April 22nd, 2016, following last year's warm El Nino winter, they are now 16.7% higher than the distillate inventories of 129,270,000 barrels that we had stored on April 24th of 2015, following a more normal winter… 

finally, with a record amount of crude going to our refineries, our commercial inventories of crude oil fell for the 3rd week in a row, decreasing by 3,641,000 barrels to 528,702,000 barrels as of April 21st, in the largest weekly drop since December 30th....however, we still finished the week with 10.4% more crude oil in storage than the 479,012,000 barrels we had stored on December 30th, and 3.8% more crude oil in storage than what was then a record 509,311,000 barrels of oil in storage on April 22nd of 2016, and 15.4% more crude than what was also then a record 458,181,000 barrels in storage on April 24th of 2015, and 43.8% more crude than the 367,576,000 barrels of oil we had in storage on April 25th of 2014...

This Week's Rig Count

US drilling activity increased for the 25th time in the past 26 weeks during the week ending April 28th, and the week's increase was also the 12th double digit rig increase in the past 15 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 13 rigs to 870 rigs in the week ending Friday, which was 450 more rigs than the 420 rigs that were deployed as of the April 29th report in 2016, and the most drilling rigs we've had running since August 28th, 2015, while it was 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 increased by 9 rigs to 697 rigs this week, which was more than double the 332 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 24th 2015, while it was still way down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations also rose by 4 rigs to 171 rigs this week, which was up from the 87 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...in addition, there were also 2 rigs in use that were classified as miscellaneous, compared to a year ago, when there was one miscellaneous rig at work... 

three more drilling platforms that had been working offshore from Louisiana in the Gulf of Mexico were shut down this week, which left 17 offshore rigs still drilling in the Gulf, down from the 24 working in the Gulf of Mexico a year earlier....that was also down from the total of 25 offshore rigs that were deployed a year ago, as there was also an drilling platform working in the Cook Inlet offshore from Alaska during the equivalent week of 2016...however, there was an additional drilling platform set up on an inland lake in southern Louisiana this week, which brought the inland waters rig count back up to 4 rigs, the same as a year ago...

active horizontal drilling rigs increased by 12 rigs to 730 rigs this week, which was up from the the 324 horizontal rigs that were in use in the US on April 29th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, a net of 3 directional rigs were added this week, bringing the directional rig count up to 63, which was also up from the 46 directional rigs that were deployed during the same week last year....however, 2 vertical rigs were pulled out this week, reducing the vertical rig count down to 77 rigs, which was still up from the 50 vertical rigs that were deployed during the same week a year ago...

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 pdf 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 April 28th, the second column shows the change in the number of working rigs between last week's count (April 21st) and this week's (April 28th) count, the third column shows last week's April 21st active rig count, the 4th column shows the change between the number of rigs running on 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 the 29th of April, 2016...     

April 28 2017 rig count summary

once again, most of this week's new drilling rigs were deployed in Texas, and although it's not evident from the above, the Permian in west Texas saw an addition of 5 rigs, as did the Eagle Ford of south Texas...what appears to have happened is that 3 of the rigs that were drilling in the Permian in southeastern New Mexico were moved across the border to Texas this week, which is only apparent when looking at the rig counts from the separate Texas oil and gas districts (pdf map), so the net Permian count was only up 2 rigs...other than that, Oklahoma added 3 rigs with the addition of 4 rigs in the Cana Woodford, and Louisiana ended up with a net change of zero after 3 rigs were pulled out of the Gulf, one was added on an inland lake in southern Louisiana, a natural gas rig was added in the Haynesville in the north, and another rig was added in the southern half of the state...deployment of all 12 additional horizontal rigs is evident from the basin counts above, while the four new natural gas rigs were added in the Haynesville and 3 other unnamed basins....also note that of the states not shown above, Florida saw it's first drilling rig in operation since July 2015 start this week, while one rig was shut down in Mississippi, where there is now just 1 rig still active, down from 3 rigs a year ago....

 

note:  there's more here...

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