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, July 2, 2017

oil prices rise 7%, but are still down more than 14% in 2017, in the largest first half price drop in 19 years...

oil prices rose every day this week, capped by a big jump on Friday afternoon that was propelled by the first drop in the rig count in 24 weeks...the rally, which actually started on Thursday of last week, has been underpinned by short covering hedge funds, who had amassed a near record short position in the five main futures and options contracts linked to crude oil as oil prices fell going into last week....what that means is that they were contracting to sell oil that they didn't own, in the expectation that prices would fall further, and they could then buy oil at a lower price later to fulfill their contracts and make a profit...however, once prices began to rise, some of them were forced to buy oil to close their positions, hence forcing even further increases in the price of oil and hence more force buying...since the latest data on those trades are as of last Tuesday, their positions as of this weekend are unknown, but such a short covering rally might yet last another week or more, meaning oil prices could continue to rise without a fundamental reason for doing so (just as prices previously fell as the hedge funds sold short, gambling on a further decline...)

after closing last week at $43.01 a barrel, up from the prior Wednesday's intraday low of $42.05, US oil for August delivery rose another 37 cents to close at $43.38 a barrel on Monday, in what was largely seen as bargain hunting buying...oil prices then rose nearly two percent on Tuesday, ending the session at $44.24 a barrel, on the aforementioned short covering, and expectations that crude inventories would decline for a third consecutive week, further bolstered by a weak dollar, which makes commodities priced in dollars more expensive...while the expected drop in crude inventories did not materialize (both the American Petroleum Institute and the EIA indicated small increases in oil supplies) oil prices rallied again anyway on Wednesday, as the EIA data did show an unexpected drop in gasoline supplies, and the largest drop in US oil field production since August of last year, with front month oil futures ending the day up another 50 cents, or 1.1%, at $44.74 per barrel....on the heels of that report of a drop in production, oil prices ran up to a two week high of $45.45 a barrel on Thursday morning, before falling back in the afternoon and ending Thursday's session at $44.93 a barrel....while up a bit in overseas trading Friday morning, oil was mostly unchanged on Friday until Baker Hughes reported the first decrease in oil drilling in 6 months, after which oil prices rallied throughout the afternoon, and ended Friday's trading $1.11 higher at $46.04 a barrel, a gain of 2.5% for the day and 7 percent for the week....oil prices have hence risen seven days in a row, the longest rally this year, following on the heels of a 5 week slump, which had been the longest losing streak since the summer of 2015...thus, despite 8 percent recovery in oil prices over the last 7 days of June, oil prices still ended the month 14.3% lower than where they started the year, which turned out to be the largest first half price drop since 1998...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending June 23rd, showed a modest increase in US oil imports and a larger than normal sale of oil from the Strategic Petroleum Reserve, which were accompanied by a rather large pullback in operations at US refineries, resulting in an addition to our commercial stocks of crude for only the 2nd time out of the last twelve weeks...our imports  of crude oil rose by an average of 140,000 barrels per day to an average of 8,016,000 barrels per day during the week, while at the same time our exports of crude oil rose by 11,000 barrels per day to an average of 528,000 barrels per day, which meant that our effective imports netted out to 7,488,000 barrels per day during the week, 129,000 barrels per day more than during the prior week...at the same time, our field production of crude oil fell by 100,000 barrels per day to an average of 9,250,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,738,000 barrels per day during the cited week...

during the same period, refineries reportedly used 16,890,000 barrels of crude per day, 262,000 barrels per day less than they used during the prior week, while at the same time a net of 184,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 32,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA inserted a (-32,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it 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 slipped to an average of 7,484,000 barrels per day, now 2.3% above the imports of the same four-week period last year...the 184,000 barrel per day decrease in our total crude inventories came about on a 201,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was negotiated in a Federal budget deal 20 months ago, while our commercial stocks of crude oil increased by 17,000 barrels per day at the same time...this week's 100,000 barrel per day decrease in our crude oil production resulted from a 55,000 barrel per day decrease in oil output from wells in the lower 48 states, likely due to tropical storm Cindy disruptions of output in the Gulf, and a 45,000 barrels per day decrease in oil output from Alaska, which was due to maintenance ...the 9,250,000 barrels of crude per day that we produced during the week ending June 23rd was still 5.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 7.3% from the 8,622,000 barrel per day output during the during the same week a year ago, while it was still 3.7% below the June 5th 2015 record oil production of 9,610,000 barrels per day...

US oil refineries were operating at 92.5% of their capacity in using those 16,890,000 barrels of crude per day, which was down from 94.0% of capacity the prior week, and closer to normal for this time of year...the amount of oil refined this week was still above the seasonal norm, however, 1.2% more than the 16,695,000 barrels of crude per day.that were being processed during week ending June 24th, 2016, when refineries were operating at 93.0% of capacity, and roughly 9% above the 10 year average of 15.6 million barrels of crude per day for the 3rd week of June....

even with the slowdown in refining, however, gasoline production from our refineries increased by 171,000 barrels per day to 10,334,000 barrels per day during the week ending June 23rd, the third highest weekly gasoline output in US history...that gasoline output was thus 3.8% higher than the 9,959,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) slipped by 7,000 barrels per day to 5,244,000 barrels per day, still near a seasonal high and 4.4% more than the 5,021,000 barrels per day of distillates that were being produced during the week ending June 24th last  year.....  

the increase in gasoline production notwithstanding, our end of the week gasoline inventories decreased by 894,000 barrels to 240,972,000 barrels by June 23rd, the 2nd modest drop after two large builds...this week's gasoline supplies were reduced because our imports of gasoline fell by 338,000 barrels per day to 571,000 barrels per day, which more than offset a decrease of 278,000 barrels per day to 9,538,000 barrels per day in our domestic consumption of gasoline while the 5,000 barrels per day increase to 662,000 barrels per day in our gasoline exports had little impact on the weekly change...with the week’s modest decrease in our gasoline supplies, our gasoline inventories are still at a seasonal high for this week of the year, 0.8% above the prior seasonal record 238,998,000 barrels that we had stored on June 24th a year ago, 11.2% higher than the 216,737,000 barrels of gasoline we had stored on June 26th of 2015, and 12.7% more than the 213,742,000 barrels of gasoline we had stored on June 27th of 2014…  

even with little change in our distillates production, our supplies of distillate fuels fell by 223,000 barrels to 152,272,000 barrels during the week ending June 16th, after increasing by 5,762,000 barrels over the prior three weeks....factors accounting for the difference of this week's distillates supplies were our exports of distillates, which rose by 360,000 barrels per day to 1,386,000 barrels per day, while our imports of distillates rose by 52,000 barrels per day to 139,000 barrels per day, and while the amount of distillates supplied to US markets fell by 129,000 barrels per day to 4,029,000 barrels per day....nonetheless, our distillate supplies are still 1.2% higher than the 150,513,000 barrels that we had stored on June 24th, 2016, and 12.1% higher than the distillate inventories of 135,820,000 barrels that we had stored on June 26th of 2015...

finally, with slowdown of US refining, our commercial supplies of crude oil rose for only the 2nd time in the past 12 weeks, as our oil inventories inched up by 118,000 barrels to 509,213,000 barrels as of June 23rd... we thus finished the week with 6.3% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 2.7% more crude oil in storage than the 495,941,000 barrels of oil in storage on June 24th of 2016....compared to the same week in prior years, before our oil glut became so extreme, we ended the week with 17.5% more crude than the 433,223,00 barrels in of oil that were in storage on June 26th of 2015, and 44.2% more crude than the 353,229,000 barrels of oil we had in storage on June 20th of 2014...    

This Week's Rig Counts

US drilling activity decreased for the first time in the past 24 weeks, and for the 3rd time in the past 52 weeks, during the week ending June 30th, with oil drilling pulling back and drilling for natural gas inching up....Baker Hughes reported that the total count of active rotary rigs running in the US decreased by a net of 1 rig to 940 rigs in the week ending Friday, which was 509 more rigs than the 431 rigs that were deployed as of the July 1st report in 2016, but still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by 2 rigs to 756 rigs this week, which was still up by 415 oil rigs over the past year, while it was still far 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 increased by 1 rig to 184 rigs this week, which was 95 more rigs than the 89 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008....

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 21 platforms, up from the 18 rigs working in the Gulf a year ago...however, the drilling platform that had been working offshore from Alaska was shut down this week, so the total US offshore count fell to 21 rigs, up from 19 rigs a year ago, at which time there was one rig drilling offshore from Alaska in addition to those in the Gulf...active horizontal drilling rigs were unchanged a 792 rigs this week, still up by 460 from the 332 horizontal rigs that were in use in the US on July 1st of last year, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....the vertical rig count was also unchanged at 77 rigs this week, which was up from the 61 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was down by 1 rig to 71 directional rigs this week, which was still up from the 38 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 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 June 30th, the second column shows the change in the number of working rigs between last week's count (June 23rd) and this week's (June 30th) count, the third column shows last week's June 23rd 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 1st of July, 2016...        :

June 30 2017 rig count summary

there's not much to see here, in what has to have been the quietest week for rig changes this year...only three states saw any change in their count at all; Alaska and Colorado both saw one rig shut down, while Texas saw one added.....the district details on Texas do indicate some movement of 4 rigs in the 3 districts of the Eagle Ford, and one more rig than what was added in the Permian, but elsewhere everything was unchanged...if you're curious, the lone new natural gas rig was added in the Arkoma Woodford of Oklahoma, as the rig added in the Haynesville was targeting oil, in the first oil drilling in that natural gas basin since last July...

 

note:  there’s  more here

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