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, September 10, 2017

slow recovery of Texas ports, refineries; US oil & gasoline prices remain distorted

most of news out of the oil and gas patch this week related to the gradual recovery of Texas and Louisiana oil port operations, Gulf of Mexico and Eagle Ford oil and gas production, Gulf refinery operations and the related product distribution pipelines...by Monday, the Colonial Pipeline from Houston to the New York area, which supplies about 60% of the incoming oil products to the Atlantic Coast, resumed pumping distillates and jet fuel; by Tuesday, they also resumed pumping gasoline...by Wednesday, almost half of the refinery capacity that had been shut down at the height of the flooding was coming back, with just 4 refineries still remaining totally shut down, and 13 refineries in the process of restarting, which we've learned is a fraught and dangerous procedure...at the beginning of the week, at least 54 tankers with capacity to carry more than 33 million barrels remained in a queue off the Gulf Coast, and although the ports around Houston were open, draft restrictions due to silting of the ship channels remained in place, and as a result Texas oil imports were only proceeding at one fifth of their normal pace...

oil prices remained volatile; US contract prices for October fell to as low as $45.96 a barrel on Wednesday of last week as export ports and refineries closed, then moved back up to as high as $49.16 a barrel this Wednesday, as Harvey damage concerns eased, only to fall back to $47.48 a barrel on Friday as the refinery recovery seemed to be going slower than expected...note that these price quotes are only for US oil and also only for the near term; for instance, the front month price quote for North Sea Brent oil, the international benchmark price, only fell to as low as $50.73 a barrel on Wednesday of last week, and then recovered to close this week at $53.78 a barrel, more than 13% higher than the US price for oil...at the same time, US oil prices for December delivery only fell to close as low as 46.94 at last week's nadir, and then recovered to $48.56 a barrel on Friday, whereas the October 2018 contract price for oil only fell to as low as $48.26 a barrel on Wednesday of last week, and then recovered to close this week at $49.94 a barrel, more than 5% higher than the current oil price...meanwhile, contract prices for October gasoline had risen by as much as 28 cents a gallon to $1.7792 a gallon last week; those prices fell every day this week and ended Friday at $1.6476 a gallon as supply threats were gradually ameliorated...meanwhile, gasoline prices at the pump averaged 30 cents a gallon higher nationally and 50 cents a gallon higher in Texas, as orders to evacuate all 5.6 million people living in Florida put new pressure on gasoline supplies in the Southeast...

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 September 1st, largely reflects the effect of Hurricane Harvey on oil supplies and consumption as it stalled over Texas and the adjacent Gulf of Mexico for most of the week; thus it indicates a drop in oil imports, as ships avoided the affected ports, a drop in oil exports, as the primary US oil export facilities were shut down, a drop in oil production, as output from the Eagle Ford shale was shut in as the hurricane transversed the area, a drop in oil refining, as up to 25% of refining capacity was shut down by the end of the week, and an increase in US crude oil supplies, because without refineries, crude oil is pretty useless...

our imports of crude oil fell by an average of 822,000 barrels per day to an average of 7,083,000 barrels per day during the week, while at the same time our exports of crude oil fell by 749,000 barrels per day to an average of 153,000 barrels per day, which meant that our effective imports netted out to an average of 6,930,000 barrels per day during the week, 73,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 749,000 barrels per day to an average of 8,781,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,711,000 barrels per day during the cited week...

during the same period, US oil refineries were using 14,472,000 barrels of crude per day, 3,253,000 barrels per day less than they used during the prior week, while at the same time 614,000 barrels of oil per day were being added to 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 and from oilfield production was 625,000 more barrels per day than what refineries reported they used during the week plus what was added to storage...to account for that discrepancy, the EIA needed to insert a (-625,000) 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"...note that last week's unaccounted for crude was +421,000, so this week's unaccounted oil represents a swing of 1,046,000 barrels per day, and thus we can surmise that the week over week oil data is accordingly suspect...

US oil refineries were operating at 79.7% of their capacity in using those 14,472,000 barrels of crude per day, down from the 12 year high of 96.6% of capacity the prior week, and the lowest capacity utilization rate since the first week of February 2010....the 14,472,000 barrels of oil refined this week was the least oil refined in the US since April 19, 2013, 14.5% less than the 16,615,000 barrels of crude per day.that were being processed during week ending September 2nd, 2016, when refineries were operating at 93.7% of capacity, and roughly 7.5% below the 10 year average of 15.7 million barrels of crude being refined per day at this time of year...for a visual on how bad US refinery throughput was hit by Harvey, we'll include a graph of that below...

Sept 8 2017 refinery throughput for Sept 2 (Harvey)

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, and that since April of this year, US oil refining had consistently beat the previous records by a large margin...however, oil refining for the week ending September 1st represents a drop of 18.3% from last week's record, a shortfall we might expect to see continue for a least another week as flooded refineries gradually recover...

now, i know no one can look at that chart without asking what caused that obvious plunge to 11,500 gallons per day in the 10 year history...best i can determine that was the result of Hurricane Ike of 2008, which made landfall on Galveston Island on September 13 as a strong Category 2 hurricane, with a storm surge of over 15 feet from Galveston into southern Louisiana...Ike also knocked out power to most of the Houston area at the same time, so while it didn't cause flooding, it certainly could have been responsible for a similar reduction of refining capacity in the week that it hit, which coincidentally marked the onset of the Global Financial Crisis and Great Recession...

with this week's big hit to US oil refining, gasoline production from our refineries fell by 1,085,000 barrels per day from last week's record to 9,517,000 barrels per day during the week ending September 1st, the lowest gasoline output since March....that left this week's gasoline output at a level 6.4% lower than the 10,173,000 barrels of gasoline that were being produced daily during the comparable week a year ago....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 563,000 barrels per day to 4,492,000 barrels per day at the same time, which was 10.7% less than the 5,031,000 barrels per day of distillates that were being produced during the week ending September 2nd last year....

with this week's reduced gasoline production, our end of the week gasoline inventories fell by 3,199,000 barrels to 226,738,000 barrels by September 1st, the 9th decrease in gasoline inventories in 12 weeks...that was even as our domestic consumption of gasoline fell by 683,000 barrels per day to 9,163,000 barrels per day, the least since April, and as our imports of gasoline fell by 364,000 barrels per day to 475,000 barrels per day, and as our exports of gasoline fell by 418,000 barrels per day to 319,000 barrels per day...with significant gasoline supply withdrawals in 9 out of the last 12 weeks, our gasoline inventories are now half a percent below last September 2nd's level of 227,793,000 barrels, while they are still 5.7% higher than the 214,547,000 barrels of gasoline we had stored on September 4th of 2015, and roughly 8% above the 10 year average of gasoline supplies for this time of the year...

meanwhile, with the big decrease in our distillates production, our supplies of distillate fuels fell by 1,396,000 barrels to 147,767,000 barrels over the week ending September 1st, the first distillates inventory decrease in 4 weeks…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 153,000 barrels per day to 4,063,000 barrels per day, while our exports of distillates fell by 384,000 barrels per day to 738,000 barrels per day and our imports of distillates rose by 26,000 barrels per day to 110,000 barrels per day...after this week’s decrease, our distillate inventories were 6.6% lower than the 158,135,000 barrels that we had stored on September 2nd, 2016, and 2.1% lower than the distillate inventories of 150,903,000 barrels of distillates that we had stored on September 4th of 2015, even as they remain more than 4% above the 10 year average for distillates stocks for this time of the year

finally, with the big drop in use of crude by our refineries, our commercial crude oil inventories rose for only the 3rd time in the past 22 weeks, increasing by 4,580,000 barrels to 457,773,000 barrels as of September 1st, an increase not even as large as the prior week's decrease...however, while our oil inventories as of September 1st were 3.8% below the 480,725,000 barrels of oil we had stored on September 2nd of 2016, they were 8.5% higher than the 426,062,000 barrels in of oil that were in storage on September 4th of 2015, and up considerably from the normal level for our oil supplies in the years before the oil glut started building up, ie., 41.2% higher than the 327,428,000 barrels of oil we had in storage on September 5th of 2014... 

This Week's Rig Count

US drilling activity increased for the 4th time in the past 11 weeks during the week ending September 8th, after a string of 23 consecutive weekly increases earlier this year, but the count still remains lower than during July and August....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 1 rig to 944 rigs in the week ending Friday, which was 436 more rigs than the 508 rigs that were deployed as of the September 9th 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 was down by 3 rigs to 756 rigs this week, which still left oil rigs up by 342 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 increased by 4 rigs to 187 rigs this week, which was 95 more rigs than the 92 natural gas rigs that were drilling a year ago, but still 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 was unchanged at 16 rigs this week, as was the total offshore count...in both cases, that was down from 18 offshore in the Gulf and in total a year ago...however, a platform was set up and began drilling operations on an inland lake in southern Louisiana this week, for an 'inland waters' count of 5 rigs, the same as a year ago...

working horizontal drilling rigs fell by 1 rig to 793 rigs this week, which left the horizontal rig count still up by 397 rigs from the 396 horizontal rigs that were in use in the US on September 9th 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....at the same time, the directional rig count was down by 5 rigs to 76 rigs this week, which was still up from the 48 directional rigs that were deployed on September 9th of 2016.... on the other hand, the vertical rig count was up by 7 rigs to 75 vertical rigs this week, which was also up from the 64 vertical 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 September 8th, the second column shows the change in the number of working rigs between last week's count (September 1st) and this week's (September 8th) count, the third column shows last week's September 1st 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 9th of September, 2016...     

September 8th 2017 rig count summary

other than the major producing states listed above, Alabama saw its rig count fall by a rig to 1 rig, which was also down from the 2 rigs active in Alabama in the same week last year, while Mississippi saw its rig count increase by 1 rig to 3 rigs, which was still down from the 4 rigs deployed in Mississippi on September 9th 2016..

 

note: there’s more here

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