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, October 29, 2017

US oil & oil products exports at a record high, wiping out a decade of US oil production gains (and then some)

in lieu of a detailed review of how oil prices moved this week, i'll just include a quick graph to show you how they moved...as you see below, US oil prices for December were up $2.33 a barrel, or about 4.3%, to a 6 month high of $53.90 a barrel...news that the Saudis and the Russians want to extend their production cuts fueled the increase...at the same time, North Sea Brent futures for December rose $3.07 a barrel, more than 5%, to $60.44 a barrel, a two year high...thus the international premium for light sweet crude oil remains more than 12% over that of similar US crude, continuing to underpin the drive by those with holdings of US oil to export it overseas...

October 28th 2017 oil prices

i want to start today with a few graphs that i intended to write about last week, but couldn't because my internet service was down, and hence i was unable to access any of the supporting data...the point that i want to make with these graphs is very simple; the entire increase in oil output that has resulted since the advent of widespread fracking has gone overseas, whether directly or as a downstream product; all the gains, if there are any, have accrued to the exploitation companies, the refiners, and the shippers; not one drop of oil has been added to the supply of US consumers...

i'll start by showing you the graph of recent US crude & product exports that made that clear to me...

October 18 2017 oil & oil products exports

the above graph was copied from the October 18th post at "Today in Energy", the daily blog of the Energy Information Administration (EIA), which was titled "Crude oil and petroleum product exports reach record levels in the first half of 2017"...it shows our total crude and oil product exports in millions of barrels per day over the period from January 1st 2010 to June 30th of this year in a stacked graph, wherein monthly crude exports are shown in maroon, other liquids exports are shown in cerulean blue, propane exports are shown in navy, gasoline exports are shown in chocolate, distillate exports are shown in caramel and other refined products, which includes chemical feedstocks, are shown in sepia, with the top of the colored area for any given month thus showing the total of all oil and oil product exports for that month...the spreadsheet of the EIA"s monthly data shown on that chart is here, and the breakdown by type of product exported is here, which will be the sources of any amounts we'll refer to subsequently...

what we can see from that chart is that at the beginning of 2010, before the advent of widespread fracking, our total crude and oil product exports were under 2 million barrels per day, and they have gradually increased over the period until the first half of this year, when they were averaging over 6 million barrels per day, with the high mark on the chart representing our 6,443,000 barrel per day of exports in February...

next, we'll look at a graph which will illustrate the change in our crude oil output over the same period....

October 27 2017 US oil production as of Oct 20

the above graph is from the webpage of the EIA spreadsheet of our weekly crude oil production totals, and it shows the oil output from US wells, in thousands of barrels per day, from late 1999 until October 20th of this year...comparing our monthly crude production to the same periods we cited above for our gross exports, we find that our crude oil production was averaging around 5.4 million barrels per day at the beginning of 2010, and that it had grown to an average of over 9.4 million barrels per day by mid 2015, before falling back due to lower prices, only to recover to just below those levels in recent months (ignoring the weeks when production was shut in due to hurricanes, which we'll consider to be an aberration for this exercise...

so, what we find when we compare the data shown by these two graphs is that our total exports of crude and oil products increased by over 4 million barrels per day in the first seven and a half years of this decade, while the production of oil from US has increased by almost the same amount over that same span....that means that the entirety of the increase that has accrued to US oil production during this period of widespread fracking, has, on a barrels of oil or products basis, ending up on ships or pipelines heading out of this country...understand we're not saying that all fracked oil is exported, as some of our oil exports no doubt comes from conventional wells, while some of our refined products exports were refined from oil first imported from overseas, but that on a net basis, the increase in oil from fracking has matched, barrel for barrel, by an increase in our exports of oil and oil products...

furthermore, notice that the first chart we included above only included export data up until the end of June...in recent months, however, the balance has shifted further towards exports, and we are now exporting much more crude oil and refined products than our increased production can account for, which we'll also show by way of a few graphs...we'll start with a graph of our weekly crude oil exports over the past year....

October 26 2017 crude oil exports for Oct 20

the above graph comes from a weekly emailed package of oil graphs distributed by John Kemp, senior energy analyst and columnist with Reuters...it shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 8 weeks...what we can see from this graph is that our weekly crude oil exports were quite volatile over the first half of this year, generally over 500,000 barrels per day, but occasionally jumping to as high as 1,200,000 or 1,300,000 barrels per day...the average of our crude oil exports for the first six months of this year was 918,000 barrels per day....however, since US crude has been selling at a 10% to 12% discount to the international price of oil, our exports have jumped to an average of 1,693,000 barrels per day over the past 5 weeks, a pace we believe will continue for the foreseeable future, since contract prices for US oil several months out are similarly discounted...

next, we have a graph which shows those crude oil exports combined with oil products exports over the past year, which serves to update the picture shown in the initial EIA graph, which only covers the year to June...

October 26 2017 crude and products exports for Oct 20

the above graph, from a Zero Hedge post on this week's EIA report, shows weekly gasoline exports from the US in black, weekly distillates exports from the US in blue, and the weekly total of all crude oil and oil products exports in green over the past year, up until the week ending October 20th...it should be immediately clear that as of the most recent week, our total oil & products exports hit a new record of 7,663,000 barrels per day, beating the previous record of 7,023,000 barrels set three weeks earlier by more than 9%...during the same week, our exports of distillates were at 1,576,000 barrels per day, just short of the distillates export record of 1,612,000 barrels per day set just two weeks earlier...and while our gasoline exports weren't a record, the 906,000 barrels of gasoline we exported per day was the most gasoline we've exported since the week ending January 13th...

returning to the comparison we made with the initial two graphs in this series, oil production from US wells during the week ending October 20th was at 9,507,000 barrels per day, or about 4.1 million barrels per day more than our January 2010 baseline...our record gross exports of 7,663,000 barrels per day, on the other hand, were about 5.7 million barrels per day higher than January 2010 gross exports....so although this is only one week's data, and likely an outlier, our gross exports of oil and products over time are now rising much faster than our field production of oil, the so-called fracking boom notwithstanding...that's a pace which is clearly unsustainable, but seems destined to continue until such time as US prices rise to those of the rest of the world, which may take a severe domestic shortage to achieve....

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 October 20th, showed large increases in both our oil imports and our domestic production of oil, enough so that a small amount of surplus oil could be returned to storage, despite a large increase in the amount of oil used by US refineries at the same time....our imports of crude oil rose by an average of 640,000 barrels per day to an average of 8,123,000 barrels per day during the week, while our exports of crude oil rose by 126,000 barrels per day to a near record 1,924,000 barrels per day, which meant that our effective imports netted out to an average of 6,199,000 barrels per day during the week, 514,000 barrels per day more than during the prior week...at the same time, field production of crude oil from US wells rose by 1,101,000 barrels per day to an average of 9,507,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,706,000 barrels per day during the reported week... 

at the same time, US oil refineries were using 16,025,000 barrels of crude per day, 586,000 barrels per day more than they used during the prior week, while during the same period 77,000 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 396,000 fewer barrels per day than what refineries reported they used plus what was added to storage 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 7,609,000 barrels per day, 3.2% above the imports of the same four-week period last year....the total 77,000 barrel per day addition to our total crude inventories came about on a 122,000 barrel per day addition to our commercial stocks of crude oil, which was partially offset by a 45,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 1,101,000 barrel per day increase in our crude oil production was due to a 1,109,000 barrel per day surge in output from wells in the lower 48 states, as production came back after Hurricane Nate, while output from Alaska fell by 8,000 barrels per day at the same time...the 9,507,000 barrels of crude per day that were produced by US wells during the week ending October 20th was 8.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.8% more than the 8,504,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 1.1% 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 87.8% of their capacity in using those 16,025,000 barrels of crude per day, up from 84.5% of capacity the prior week, a fairly normal pace for a fall seasonal maintenance period...the 16,025,000 barrels of oil that were refined this week were 9.6% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, but were still 3.0% more than the 15,552,000 barrels of crude per day that were being processed during week ending October 21st, 2016, when refineries were operating at 85.5% of capacity...

despite the pickup in US oil refining, gasoline output from our refineries was lower, decreasing by 95,000 barrels per day to 9,936,000 barrels per day during the week ending October 20th, which was still 1.0% higher than the 9,837,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 11,000 barrels per day to 4,795,000 barrels per day, which was 5.7% more than the 4,536,000 barrels per day of distillates that were being produced during the week ending October 21st last year....   

with the decrease in our gasoline production, our end of the week gasoline inventories fell by 5,456,000 barrels to 216,869,000 barrels by October 20th, the first drop in gasoline inventories in 5 weeks...the size of the decrease was exacerbated by a 270,000 barrel per day increase to 906,000 barrels per day in our exports of gasoline, while our imports of gasoline fell by 457,000 barrels per day to 233,000 barrels per day, the least gasoline we've imported since November 5 1995...also contributing to the decrease in our supplies, our domestic consumption of gasoline rose by 178,000 barrels per day to 9,314,000 barrels per day at the same time...with significant gasoline supply withdrawals in 13 out of the last 19 weeks, our gasoline inventories are now down by 10.5% from June 9th's level of 242,444,000 barrels, and 4.0% below last October 14th's level of 226,011,000 barrels, even as they are still roughly 4.8% above the 10 year average of gasoline supplies for this time of the year...   

with our distillates production little changed, our supplies of distillate fuels fell by 5,246,000 barrels to 129,241,000 barrels over the week ending October 20th, the seventh decrease in eight weeks...that large drop in our supplies was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 624,000 barrels per day to 4,101,000 barrels per day, and because our exports of distillates rose by 237,000 barrels per day to a near record 1,576,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 133,000 barrels per day...after this week’s large increase, our distillate inventories ended the week 15.2% lower than the 152,378,000 barrels that we had stored on October 21st, 2016, and 7.2% lower than the 10 year average for distillates stocks for this time of the year…if the forecast La Nina materializes, we will see a shortage of heat oil this winter...

finally, with the big rebound in our oil production and the large increase in our oil imports, our commercial crude oil inventories rose for just the 5th time in the past 29 weeks, increasing by 856,000 barrels, from 456,485,000 barrels on October 13th to 457,341,000 barrels on October 20th...while our oil inventories as of October 20th were still 2.3% below the 468,158,000 barrels of oil we had stored on October 21st of 2016, they were 2.1% higher than the 447,994,000 barrels in of oil that were in storage on October 23rd of 2015, and 31.2% greater than the 348,475,000 barrels of oil we had in storage on October 24th of 2014...

This Week's Rig Count

US drilling activity decreased for the 4th week in a row and for 10th time in the past 13 weeks during the week ending October 27th, with this week's cutbacks entirely in rigs targeting natural gas...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 909 rigs in the week ending on Friday, which was still 352 more rigs than the 557 rigs that were deployed as of the October 28th report in 2016, while it was 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 1 rig to 737 rigs this week, only their 2nd increase in 12 weeks, which meant active oil rigs were up by 296 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 5 rigs to 172 rigs this week, which was the smallest natural gas rig deployment since May 12th and just 58 more gas rigs than the 114 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the count of rigs drilling offshore was unchanged at 20 rigs this week, as 20 platforms remained active in the Gulf of Mexico, down from the 21 in the Gulf and one offshore from Alaska a year ago...however, one of the working Gulf rigs was moved from offshore Louisiana to offshore of Texas, where there are now 2 rigs drilling, up from one rig offshore from Texas a year earlier.... 

the count of active horizontal drilling rigs was down by 2 rigs to 769 rigs this week, which was the smallest number of horizontal rigs active since May 26th...however, that was still up by 319 rigs from the 450 horizontal rigs that were in use in the US on October 28th of last year, while 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 6 rigs to 74 rigs this week, which was still up from the 54 directional rigs that were deployed during the same week last year.....on the other hand, the vertical rig count was up by 4 rigs to 66 vertical rigs this week, which was also up from the 53 vertical rigs that were working on October 28th of 2016......

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 October 20th, the second column shows the change in the number of working rigs between last week's count (October 13th) and this week's (October 20th) count, the third column shows last week's October 13th 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 21st of October, 2016...        

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 October 27th, the second column shows the change in the number of working rigs between last week's count (October 20th) and this week's (October 27th) count, the third column shows last week's October 20th 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 28th of October, 2016...        

October 27 2017 rig count summary

other than the changes inidcated for the major producing states shown in the first table above, a rig also started drilling in Nebraska this week, which was the first drilling seen in that state since early July of last year...

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note: there’s more here…