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, August 13, 2017

OPEC oil production jumps to 7 month high; US oil refining at a new record...

oil prices trended lower this week, mostly on a report that OPEC producers had increased their crude oil output for the 4th month in a row, reaching their highest level since their production cut pact was initiated...after closing last week little changed at $49.58 a barrel, oil prices headed lower on Monday after a report of higher oil output from Libya's largest oil field, with the contract for September US oil closing down 19 cents at $49.58 a barrel...oil prices continued falling Tuesday, ending down another 22 cents at $49.17 a barrel, on a report that several OPEC producers had increased exports, despite the loudly orchestrated export cuts by the Saudis...contract prices then recovered on Wednesday, after the weekly EIA report showed another huge draw from US oil supplies, with oil closing up 39 cents at $49.56 a barrel...oil prices continued heading higher on Thursday morning, reaching as high as $50.22 a barrel on heavy trading volume, before reversing and falling to as low as $48.35 a barrel, after the August OPEC monthly market report revealed that OPEC output rose by 172.6 thousand barrels per day to 32.87 million barrels per day, their highest monthly production this year, with oil prices finally stabilizing at $48.59 a barrel at the close for a loss of 97 cents on the day, in the heaviest trading in September oil in the history of the contract...after continuing to fall to a 2½ week low of $48.01 a barrel on Friday morning, oil prices then moved higher on reports of instability in Nigeria and higher global demand for oil, closing the week at $48.82 a barrel, still logging the 2nd consecutive weekly decline...

OPEC's July oil report

with OPEC's increased production a major factor in this week's lower oil price, we'll start by quickly reviewing OPEC's August Oil Market Report (covering July OPEC & global data), which as we noted was released on Thursday of this week....the first table from the August report that we'll include here is from page 62 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures... 

July 2017 OPEC cude output via secondary sources

from this table of official oil production data, we can see that OPEC oil output increased by 172,600 barrels per day in July, to 32,869,000 barrels per day, from a June oil production total of 32,696,000 barrels per day, a figure that was originally reported as  32,611,000 barrels per day (for your reference, here is the table of the official June OPEC output figures before this month's revisions)...as we can see in the far right column, the entirety of the July OPEC increase of 172,600 barrels per day came as a result of a 154,300 barrel per day increase from Libya, and a 34,300 barrel per day increase from Nigeria, the two OPEC countries that are exempt from the production cuts because their production had previously been driven lower by domestic strife...in addition, the relatively large decrease of 33,100 barrels per day by Iraq, who still remains well over their production quota, was almost entirely offset by a 31,800 barrels per day increase in oil output from Saudi Arabia, who produced 10,067,000 barrels of oil per day in July, which is now slightly over their quota too, as can be seen in the table below:

August 12 2017 OPEC production and targets via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first seven months of this year (the targeted period) and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as they agreed to at their November meeting, and the 3rd column shows how much each has averaged over or under their quotas for the seven months of this year that OPEC has curtailed production...the problem with this is that the current publication of this table had erroneously placed data on the lines for Iran and Iraq, and although i have notified Platts of their error, a corrected table is not yet forthcoming...so what i did was insert the Iran and Iraq data from the previous iteration of this table onto the Iran and Iraq lines, so we at least have an accurate representation of the daily quotas for each of the OPEC members...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from August 2015 to July 2017, and it comes from page 63 of the August OPEC Monthly Oil Market Report....the light 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, with the metrics for global output shown on the right scale...the last bar, mistakenly marked Jun 17, actually shows July 17 data...

July 2017 OPEC report global supply

the preliminary data graphed above indicates that total global oil production rose to 97.30 million barrels per day in July, up by 0.17 million barrels per day from a June total of 97.13 million barrels per day, which was revised .54 million barrels per day higher than the 96.59 million barrels per day global oil output for June that was reported a month ago...the July figure was also 1.99 million barrels per day higher than the 95.14 million barrels of oil per day that was being produced globally in July a year ago (see last August's OPEC report for year ago data)...OPEC's July production of 32,869,000 barrels per day thus represented 33.8% of what was produced globally,  a small decrease from the revised 33.9% OPEC share in June...OPEC's July 2016 production, excluding Indonesia, was at 32,369,000 barrels per day, so even after the alleged production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are still producing nearly 1.1% more oil than they were producing a year ago, when they were supposedly producing flat out...

furthermore, even with the seven months of production cuts we can see on the above graph, there is still a small surplus of oil supply being produced globally, as the next table that we'll include will show us..    

July 2017 global oil demand estimate via OPEC copy

the table above comes from page 37 of the August OPEC Monthly Oil Market Report, and it shows regional and total 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...on the "Total world" line of the fourth column, we've circled in blue the figure we're interested in, which is their estimate for global oil demand for the third quarter of 2017...

OPEC's estimate is that during the 3rd quarter of this year, all oil consuming areas of the globe will use 97.28 million barrels of oil per day, up from the 95.65 millions of barrels of oil per day the world was using in the 2nd quarter, and up from the 95.12 millions of barrels of oil per day they were using in 2016...that's typical for summer, since the most heavily populated regions of the globe are in the Northern Hemisphere, and demand for gasoline and power for air conditioning rises in the summer...however, as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with the OPEC and non-OPEC production cuts, the world's oil producers were still producing 97.30 million barrels per day during July, which means that even during the period of greatest demand, there continued to be a surplus of around 20,000 barrels per day of global oil production in July, even after 7 months of OPEC and NOPEC production cuts...also note that global production for June was concurrently revised higher, to 97.13 million barrels per day, so that means the global oil surplus during June was therefore around 1,480,000 barrels per day,  based on the revised second quarter global demand figure of 95.65 million barrels per day shown above...at the same time, May's global oil surplus was reduced by the upward revision of 2nd quarter demand to 270,000 barrels per day....that revision also means that April's global oil supply was roughly 40,000 barrels per day less than the revised demand, so there is now one month out of the seven when OPEC cuts were effective at reducing supply....prior to that, however, we saw that the global oil surplus during March was around 780,000 barrels per day, and nearly a million barrels per day in January and February, as we've shown when reviewing revisions to these reports in prior months...taken together, this data means that despite the seven months of OPEC production cuts, more than 135 million barrels of oil have been added to the global oil glut since the 1st of the year..  

last, we'll include a graph of the total OPEC oil output for the 13 long term OPEC members included in this report, so we can see how this month's production stacks up compared to historical figures...

July 2017 OPEC oil production historical graph

the above graph, taken from the 'OPEC July Production Data" post 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 July 2017, using the same official data from secondary sources as we saw in the first table above...here we can obviously see that OPEC's July production of 32,869,000 barrels per day is up quite a bit from their previous production this year and is even approaching the record of 33,374,000 million barrels per day the cartel produced in November, a level achieved as they all over produced so that their cuts would be off a higher base...so even as they've cut their oil production from that level, their output for the seven months of this year was actually higher than in the same seven months a year ago, leaving OPEC well on track to exceed their 2016 production this year, even as they continue to orchestrate the oil markets with reports of their "reduced" production...

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 August 4th, indicated a big drop in our imports of crude oil, accompanied by a record amount of oil used by US refineries, and hence a large withdrawal from our commercial stocks of crude oil to meet the needs of that refining...our imports of crude oil fell by an average of 491,000 barrels per day to an average of 7,762,000 barrels per day during the week, while at the same time our exports of crude oil rose by 5,000 barrels per day to an average of 707,000 barrels per day, which meant that our effective imports netted out to 7,055,000 barrels per day during the week, 496,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 7,000 barrels per day to an average of 9,423,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,478,000 barrels per day during the cited week...

during the same week, refineries used a record 17,574,000 barrels of crude per day, 166,000 barrels per day more than they used during the prior week, and hence at the same time 922,000 barrels of oil per day had to be pulled out of oil storage facilities in the US...however, 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 still 174,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+174,000) 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 (pdf) show that the 4 week average of our oil imports still rose to an average of 8,014,000 barrels per day, which was 4.9% below the imports of the same four-week period last year...the 922,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercial stocks of crude oil, since the amount of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's 7,000 barrel per day decrease in our crude oil production resulted from a 22,000 barrel per day decrease in oil output from Alaska, which was partially offset by a 15,000 barrels per day increase in oil output from wells in the lower 48 states...the 9,423,000 barrels of crude per day that were produced by US wells during the week ending August 4th was 7.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.6% more than the 8,445,000 barrel per day of oil output during the during the same week a year ago, while it was still 1.9% below the June 5th 2015 record US oil production of 9,610,000 barrels per day...

US oil refineries were operating at 96.3% of their capacity in using those 17,574,000 barrels of crude per day, which was up from 94.5% of capacity the prior week, and the highest refinery utilization rate in 12 years...the record amount of oil refined this week was 5.9% more than the 16,597,000 barrels of crude per day.that were being processed during week ending August 5th, 2016, when refineries were operating at 92.2% of capacity, and roughly 12% above the 10 year average of 15.75 million barrels of crude refined per day this time of year....since we have a new record for oil refining, we'll include a graphic of what that looks like below...

August 9 2017 refinery throughput for week ending August 4

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...the 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 for 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...thus we can see that for most all of 2016, US oil refining was either at seasonal record highs or near the top of the average range...furthermore, we can also see that this year's oil refining has thus been beating last year's record levels by a large margin since the beginning of April, setting several record highs, each of which has subsequently been topped as the year progressed...

with the record level of oil refining, gasoline production from our refineries increased by 6,000 barrels per day to 10,301,000 barrels per day during the week ending August 4th, short of the record set two weeks ago, but still 2.0% higher than the 10,098,000 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) rose by 73,000 barrels per day to 5,305,000 barrels per day, which was also short of the record set 4 weeks ago, but still 11.9% more than the 4,739,000 barrels per day of distillates that were being produced during the week ending August 5th last year....

even with small increase in our gasoline production, our end of the week supply of gasoline increased by 3,424,000 barrels to 231,103,000 barrels by August 4th, the first increase in gasoline inventories in 8 weeks and the largest increase in 7 months…the major factor in the gasoline supply increase was an increase of 559,000 barrels per day to 1,108,000 barrels per day in our imports of gasoline, the most gasoline we've imported in any week since the week ending July 3rd of 2011...in addition, a drop of 45,000 barrels per day to 9,797,000 barrels per day in our domestic consumption of gasoline and a decrease of 55,000 barrels per day to 454,000 barrels per day in our gasoline exports also both contributed to the week over week increase in supplies....however, following 7 weeks of gasoline supply withdrawals prior to this week, our gasoline inventories are still 1.8% below last year’s seasonal high of 235,383,000 barrels for this week of the year, but they are now 7.2% higher than the 215,482,000 barrels of gasoline we had stored on August 7th of 2015...

even with the increase in our distillates production, our supplies of distillate fuels still dropped by 1,729,000 barrels to 147,685,000 barrels over the week ending August 4th, the 6th drop in seven weeks…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 370,000 barrels per day to 4,510,000 barrels per day, and as our imports of distillates fell by 67,000 barrels per day to 41,000 barrels per day, the least we've imported in over a year...however, there was also a 138,000 barrel per day decrease to 1,083,000 barrels per day in our exports of distillates at the same time, more than offsetting the decrease in imports….after this week’s decrease, our distillate inventories were 2.3% lower than the 151,196,000 barrels that we had stored on August 5th, 2016, and fractionally lower than the distillate inventories of 147,806,000 barrels of distillates that we had stored on August 7th of 2015, even as they are roughly 5.7% above the 10 year average for distillates stocks for this time of the year

finally, the big drop in our oil imports and the record level of oil refining meant our commercial crude oil inventories again shrunk, decreasing for the 16th time in the past 18 weeks, falling by another 6,458,000 barrels to 475,437,000 barrels as of August 4th, leaving us with the least oil we've had in storage since early February of 2016...thus, our oil inventories as of August 4th were also 3.6% below the 492,969,000 barrels of oil we had stored on August 5th of 2016, even as they were still 12.7% more than the 421,822,000 barrels in of oil that were in storage on August 7th of 2015...compared to historical figures at the same time of year, before our oil glut began to build up,  this week's oil supplies were still 41.7% higher than the 335,568,000 barrels of oil we had in storage on August 8th of 2014, and about 42.2% above the 10 year average of oil supplies for the first week of August ... here is a graph from John Kemp of what that looks like over the last 4 years:

August 9 2017 crude oil inventories as of August 4

This Week's Rig Count

US drilling activity decreased for the 4th time in 7 weeks during the week ending August 11th, following a string of 23 consecutive weeks of increases earlier this year, as natural gas drilling tanked while oil drilling increased....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 5 rigs to 949 rigs in the week ending Friday, which was still 468 more rigs than the 481 rigs that were deployed as of the August 12th report in 2016, even though it was 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 increased by three rigs to 768 rigs this week, which was up by 372 oil rigs over the past year and the most oil seeking rigs deployed since April 2nd, 2015, 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 decreased by 8 rigs to 181 rigs this week, which was still 98 more rigs than the 83 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the Gulf of Mexico rig count rose by one rig to 17 rigs this week, after falling by 7 rigs during the prior week....there were reports last week's drop was due to the movement of Tropical Storm Emily through the eastern Gulf, but since the Gulf rig count didn't recover after the storm was passed, we now doubt that was the case...the 17 rigs now active in the Gulf now matches the 17 rigs that were working in the Gulf the same week last year, but since there is also a rig drilling offshore from Alaska this year, this week's total US offshore rig count of 18 rigs is up by 1 rig from the total offshore last year..

active horizontal drilling rigs fell by 6 rigs to 801 rigs this week, the largest horizontal rig decrease since April 29th, 2016...however, this week's horizontal rig count was still up by 426 rigs from the 375 horizontal rigs that were in use in the US on August 12th of last year, while it was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the vertical rig count was down by 1 rig to 72 vertical rigs this week, which was still up from the 62 vertical rigs that were deployed during the same week last year...meanwhile, the directional rig count was up by 2 rigs to 76 rigs this week, which was also up from the 44 directional rigs that were deployed on August 12th of 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 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 August 11th, the second column shows the change in the number of working rigs between last week's count (August 4th) and this week's (August 11th) count, the third column shows last week's August 4th 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 for the 12th of August, 2016...  

August 11 2017 rig count summary

other than the major producing states shown on the above table, Mississippi also saw a rig added this week, and they now have two rigs drilling in the state, which is still down from the 3 rigs they had deployed last August 12th..

 

note: there's more here:

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