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 27, 2017

US oil production at a 25 month high, gasoline production at a record high, oil supplies at a 19 month low

oil prices fell on Monday and never recovered to the levels of last week, as potential impacts from the hurricane hitting the Texas coast weighed on crude prices, while simultaneously boosting those of gasoline...after closing last Friday with a 3% gain to $48.51 a barrel in a week that saw prices a bit lower, US light sweet crude for September delivery fell $1.14 to $47.37 a barrel on Monday, in a selloff that was widely described as "profit-taking'...oil prices then headed higher Tuesday, with the expiring September oil contract closing 27 cents higher at $47.64 a barrel, while the October contract, which had started the week at $48.89, rose 30 cents to $47.83 a barrel, on expectations that the week's data would show that U.S. supplies of crude oil had fallen for an eighth-consecutive week...with Wednesday's oil price quotes now referencing crude for October delivery, oil prices rose 58 cents, or 1.2%, to settle at $48.41 a barrel at the close on Wednesday after the EIA report showed the expected decreases in supplies of crude oil and gasoline...with Hurricane Harvey strengthening and heading towards the Texas coast where one third of US refining capacity was in the path of the storm, oil prices tumbled 98 cents, or 2%, to $47.43 a barrel on Thursday, on fears that the Harvey would force refinery closures and thus reduce demand; hence, at the same time, September gasoline rose 4.52 cents, or almost 3%, to $1.6641 a gallon...oil prices then recovered and edged up 44 cents to $47.87 a barrel on Friday, as the the oil industry shut down production and evacuated offshore wells as the storm approached...that left the October oil contract price down 89 cents, or 1.8% for the week, its third consecutive weekly drop, while at the same time US gasoline spot prices had risen almost 10 percent to a high of $1.74 a gallon, their highest since April....the result was that U.S. gasoline crack spreads, or the difference between the price refineries pay for oil and their price of gasoline, rose throughout the week and ended at their widest in five years for this time of year...

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 18th, showed a big increase in our imports of crude oil, still near-record amounts of crude oil being used by US refineries, and yet another withdrawal of oil from our commercial stocks....our imports of crude oil rose by an average of 664,000 barrels per day to an average of 8,790,000 barrels per day during the week, while at the same time our exports of crude oil rose by 59,000 barrels per day to an average of 936,000 barrels per day, which meant that our effective imports netted out to an average of 7,854,000 barrels per day during the week, 605,000 barrels per day more than during the prior week...at the same time, our field production of crude oil rose by 26,000 barrels per day to an average of 9,528,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 17,382,000 barrels per day during the cited week...

during the same week, refineries used 17,461,000 barrels of crude per day, 104,000 barrels per day less than they used during the prior week, while at the same time 475,000 barrels of oil per day were being pulled out of oil storage facilities in the US...hence, 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 396,000 more barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (-396,000) 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"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,233,000 barrels per day, which was still 3.1% below the imports of the same four-week period last year....this week's 26,000 barrel per day increase in our crude oil production resulted from a 14,000 barrel per day increase in oil output from Alaska and a 12,000 barrels per day increase in oil output from wells in the lower 48 states...the 9,528,000 barrels of crude per day that were produced by US wells during the week ending August 18th was the most oil US wells have produced since July 17, 2015, 8.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.5% more than the 8,548,000 barrels per day of oil we produced during the during the week ending August 19th a year ago, while oil output was still 0.9% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...

US oil refineries were operating at 95.4% of their capacity in using those 17,461,000 barrels of crude per day, which was down from 96.1% of capacity the prior week, but still above normal for this or for any time of year...the amount of oil refined this week was 4.7% more than the 16,679,000 barrels of crude per day.that were being processed during week ending August 19th, 2016, when refineries were operating at 92.5% of capacity, and roughly 11.2% above the 10 year average of 15.7 million barrels of crude refined per day at this time of year...

even with oil refining down a bit this week, gasoline production from our refineries increased by 518,000 barrels per day to a new record high of 10,566,000 barrels per day during the week ending August 18th, topping the previous record set during the week ending last December 23rd, 2016....that put this week's gasoline output at a level 5.3% higher than the 10,035,000 barrels of gasoline that were being produced daily during the comparable week a year ago....however, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 196,000 barrels per day to 5,091,000 barrels per day at the same time, which was still 5.0% more than the 4,849,000 barrels per day of distillates that were being produced during the week ending August 19th last year....

however, even with this week's record gasoline production, our end of the week gasoline inventories decreased by 1,223,000 barrels to 229,902,000 barrels by August 18th, the 8th decrease in gasoline inventories in 10 weeks...that was as our domestic consumption of gasoline rose by 107,000 barrels per day to 9,629,000 barrels per day, and as our imports of gasoline fell by 122,000 barrels per day to 555,000 barrels per day, and as our exports of gasoline rose by 23,000 barrels per day to 693,000 barrels per day...with significant gasoline supply withdrawals in 8 out of the last 10 weeks, our gasoline inventories are now 1.2% below last August 19th's level of 232,695,000 barrels, even as they are still 7.2% higher than the 214,434,000 barrels of gasoline we had stored on August 21st of 2015, and almost 9% above the 10 year average for gasoline supplies for this time of the year...

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels were little changed, rising by just 28,000 barrels to 148,387,000 barrels over the week ending August 18th, after rising by 702,000 barrels the previous week…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 145,000 barrels per day to 4,077,000 barrels per day, while our imports of distillates fell by 35,000 barrels per day to 132,000 barrels per day and as our exports of distillates rose by 10,000 barrels per day to 1,142,000 barrels per day....after this week’s small increase, our distillate inventories were still 3.2% lower than the 153,257,000 barrels that we had stored on August 19th, 2016, and fractionally lower than the distillate inventories of 149,836,000 barrels of distillates that we had stored on August 21st of 2015, even as they remain roughly 5.7% above the 10 year average for distillates stocks for this time of the year

finally, even with the large increase in oil imports, our commercial crude oil inventories fell for the 18th time in the past 20 weeks, decreasing by another 3,327,000 barrels to 463,165,000 barrels as of August 18th, leaving us with the least oil we've had in storage since January 15th, 2016...since that's been a matter of concern in some corners, we'll include a graph of what that looks like below...

August 23 2017 crude oil supplies as of August 18

the above graph was taken from the Zero Hedge coverage of this week's EIA release and it shows our commercial inventories of crude in billions of barrels from September 2012 through this week's report....while we can clearly see that our oil supplies are down substantially over the last 4 months from their March peak, to a level roughly matching that of mid-January 2016, they're still up considerably from the normal level for our oil supplies in the years before the oil glut started building up.. thus, though our oil inventories as of August 18th were 6.0% below the 492,962,000 barrels of oil we had stored on August 19th of 2016, they were still 10.5% more than the 418,990,000 barrels in of oil that were in storage on August 21st of 2015, and 40.8% higher than the 329,024,000 barrels of oil we had in storage on August 22nd of 2014...

This Week's Rig Count

US drilling activity decreased for the 6th time in the past 9 weeks during the week ending August 25th, following a string of 23 consecutive weekly increases earlier this year, as both drilling for oil and for natural gas slowed....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 6 rigs to 940 rigs in the week ending Friday, which was still 451 more rigs than the 489 rigs that were deployed as of the August 26th report in 2016, while 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 decreased by four rigs to 759 rigs this week, which still left oil rigs up by 353 oil rigs over the past year, while their count remained 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 2 rigs to 180 rigs this week, which was still 99 more rigs than the 81 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...in addition, one rig that was classified as miscellaneous was still drilling this week, compared to the 2 miscellaneous rigs that were working a year ago..

the Gulf of Mexico rig count rose by one rig to 17 Gulf rigs this week, the same number that were working in the Gulf during the same week last year...that's also the same as the total US offshore rig count for this week, since there was no other US offshore drilling except in the Gulf...

active horizontal drilling rigs fell by 3 rigs to 796 rigs this week, which left the horizontal rig count still up by 417 rigs from the 379 horizontal rigs that were in use in the US on August 26th of last year, while their count 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 2 rigs to 64 vertical rigs this week, which was still up from the 62 vertical rigs that were deployed during the same week last year...at the same time, the directional rig count was down by 1 rig to 80 rigs this week, which was still up from the 48 directional rigs that were deployed on August 26th of 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 August 25th, the second column shows the change in the number of working rigs between last week's count (August 18th) and this week's (August 25th) count, the third column shows last week's August 18th 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 26th of August, 2016...    

August 25 2017 rig count summary

noteworthy this week is that the Marcellus saw the greatest loss of any basin, down 3 rigs to 43 rigs...hence, Pennsylvania joined Texas as the states with the greatest decrease, as drillers in both states shut down three rigs...we would also note that the number of rigs active in Pennsylvania fallen to 31, while at the same time the Ohio rig count was up by 1 rig to 29 rigs with the addition of another rig in the Utica...the drop of 2 rigs in natural gas activity was a bit more involved than Pennsylvania shutting down 3 rigs while Ohio added one, however, since natural gas rigs were also added in the Haynesville of Louisiana and the Eagle Ford of south Texas, where there were two oil-directed rigs pulled out at the same time...that was as two natural gas rigs were concurrently pulled out of 'other' basins, which are not named by Baker Hughes in their summaries....going forward, we can probably expect to see a reduction in Eagle Ford drilling next week, because widespread rain totals of up to 40 inches are expected in the area, and some analysts believe those shale fields could be out of commission for up to two months in the subsequent flooding...meanwhile, that new rig in the Gulf of Mexico was supposedly offshore from Texas, and we can almost guarantee that there was no drilling going on there as the Category 4 Hurricane passed overhead...

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note:  there’s more here

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