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 1, 2017

US oil production at a 26 month high, US oil exports at a record high..

both US and international oil prices were higher again this week, largely on the strength of a Monday rally that saw US WTI prices rise $1.56 a barrel to a 5 month high at $52.22 a barrel, while North Sea Brent rose $2.16 a barrel to $59.02 a barrel...prices for both oil contracts then fell back in profit taking on Tuesday, with US WTI for November delivery shedding 34 cents and closing at $51.88, while Brent for November delivery fell 58 cents to 58.44 a barrel...however, after Wednesday's EIA report showed that US crude exports were at a record high, US oil prices rose 26 cents to $52.14, while the international benchmark price fell 54 cents to $57.90 a barrel...prices for both crude grades pulled back on Thursday as oil traders closed out their positions ahead of the end of the third quarter, with US crude falling 58 cents to 51.56 a barrel and Brent falling 59 cents to 57.41...however, the oil price rally resumed on Friday, on fears of geopolitical instability in Iraqi Kurdistan, with US crude prices finishing 11 cents higher at $51.67 a barrel, thus closing September with a 9.4% increase, their largest monthly gain since April 2016, while Brent prices ended the day up 13 cents at $57.54 a barrel in the strongest 3rd quarter gain for the international oil benchmark in 13 years..

now, although we've been warning over the past few weeks that such a large price difference between the US benchmark and the international oil price would lead to a surge in US crude exports, and although we did see a record for US crude exports this week, we're not yet sure that the coincidence is connected, as we did think it would take more than a few weeks for that price driven trade in physical oil to develop...let's take a look at a graph of recent US exports so i can point out the reason for my skepticism...

September 27 2017 oil exports as of Sept 22nd

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph 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 4 weeks...what we can see from the recent history is that our weekly crude oil exports have been very volatile 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 reason that the volume of our crude exports appears so irregular is largely due to the size of the oil tankers and the time it takes to load them...the largest oil tankers can transport as much as 2,000,000 barrels of oil at once, so any week when a number of tankers happen to leave port within a few days of each other, we're going to see a spike in exports on a barrels per day basis...

with that in mind, then, look above at our oil exports for the last 4 weeks...in the week ending September 1st, our oil exports fell to a 3 year low at 153,000 barrels per day, as Hurricane Harvey shut down Corpus Christi and other Texas oil export ports...there was then a recovery to 774,000 barrels per day during the week ending the 8th, and to 928,000 barrels per day during the week ending September 15th, a time when many Texas ports still had draft restrictions in place, limiting the size of the ships that could enter...so it's possible that this week's spike in oil exports was just 'catching up' after Harvey, as the larger tankers that had been waiting offshore were finally docked, filled and departed...that's not to say that US oil exports wont eventually rise due to the lower price of US crude compared to that of international grades, but that from what we see here, we don't yet know if that has yet begun....

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 22nd, showed a big increase in the amount of oil used by refineries, that aforementioned big jump in our oil exports, and just modest increases in US oil production and imports, and as a result our crude oil supplies fell for the first time in four weeks....our imports of crude oil rose by an average of 59,000 barrels per day to an average of 7,427,000 barrels per day during the week, while at the same time our exports of crude oil rose by 563,000 barrels per day to a record high of 1,491,000 barrels per day, which meant that our effective imports netted out to an average of 5,936,000 barrels per day during the week, 504,000 barrels per day less than during the prior week...at the same time, our field production of crude oil rose by 37,000 barrels per day to an average of 9,547,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,583,000 barrels per day during the reported week... 

during the same period, US oil refineries were using 16,174,000 barrels of crude per day, 1,002,000 barrels per day more than they used during the prior week, and at the same time 377,000 barrels of oil per day were being withdrawn from 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 314,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+314,000) 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 fell to an average of 7,090,000 barrels per day, which was 9.3% below the imports of the same four-week period last year....the rounded 377,000 barrel per day withdrawal from our total crude inventories came about on a 264,000 barrel per day addition to our commercial stocks of crude oil and a 114,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which is still being tapped to address temporary spot shortages caused by Hurricane Harvey...this week's 37,000 barrel per day increase in our crude oil production was the result of a 16,000 barrels per day increase in oil output from wells in the lower 48 states and a 21,000 barrel per day increase in oil output from Alaska...the 9,547,000 barrels of crude per day that were produced by US wells during the week ending September 22nd was the most oil produced in any week since July 17th, 2015, 8.9% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.4% more than the 8,497,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 0.7% 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 88.6% of their capacity in using those 16,174,000 barrels of crude per day, up from the of 83.2% of capacity the prior week, but down from the 96.6% capacity utilization rate in the week before Harvey struck....the 16,174,000 barrels of oil that was refined this week was up 14.9% from the 14,078,000 barrels of crude per day that were being processed two weeks earlier, but still 8.8% less than the 17,725,000 barrels per day that were being refined four weeks earlier, and 1.0% below the 16,334,000 barrels of crude per day that were being processed during week ending September 23rd, 2016, when refineries were operating at 90.1% of capacity...

even with the big increase in US oil refining, gasoline production from our refineries rose by just 62,000 barrels per day to 9,855,000 barrels per day during the week ending September 22nd...however, that gasoline output was still 3.1% higher than the 9,555,000 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 97,000 barrels per day to 4,639,000 barrels per day, which was still 1.5% less than the 4,709,000 barrels per day of distillates that were being produced during the week ending September 23rd last year....   

with the increase in gasoline production, our end of the week gasoline inventories rose by 1,107,000 barrels to 217,292,000 barrels by September 22nd, only the 4th increase in gasoline inventories in 15 weeks...that increase was largely because our imports of gasoline rose by 354,000 barrels per day to 1,041,000 barrels per day while our exports of gasoline rose by just 6,000 barrels per day to 550,000 barrels per day, and while our domestic consumption of gasoline rose by 81,000 barrels per day to 9,522,000 barrels per day....still, with significant gasoline supply withdrawals in 11 out of the last 15 weeks, our gasoline inventories are still down by 10.3% from June 9th's level of 242,444,000 barrels, and 4.4% below last September 23rd's level of 227,183,000 barrels, even as they are still roughly 2.7% above the 10 year average of gasoline supplies for this time of the year... 

  even with the increase in our distillates production, their output still remained below normal, and hence our supplies of distillate fuels fell by 814,000 barrels to 138,045,000 barrels over the week ending September 22nd, following a big 5,693,000 barrel drop the prior week....that was mostly because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 518,000 barrels per day to 3,746,000 barrels per day, and as our exports of distillates fell by 84,000 barrels per day to 1,093,000 barrels per day, while our imports of distillates at 84,000 barrels per day were little changed from the prior week...after this week’s decrease, our distillate inventories ended the week 15.3% lower than the 163,077,000 barrels that we had stored on September 23rd, 2016, and 4.2% lower than the 10 year average for distillates stocks for this time of the year

finally, with the big jump in our oil exports and the increase in the use of crude by our refineries, our commercial crude oil inventories fell for the first time in four weeks, decreasing by 1,846,000 barrels to 470,986,000 barrels as of September 22nd, also the 21st decrease in the past 26 weeks...while our oil inventories as of September 15th were still fractionally below the 472,084,000 barrels of oil we had stored on September 23rd of 2016, they were still 10.6% higher than the 425,988,000 barrels in of oil that were in storage on September 25th of 2015, and much higher than the normal level for our oil supplies in the years before the oil glut started building up, ie., 44.7% greater than the 325,465,000 barrels of oil we had in storage on September 26th of 2014... 

This Week's Rig Count

US drilling activity increased for just the 4th time in the past 12 weeks during the week ending September 29th, after a string of 23 consecutive weekly increases earlier this year, with oil well drilling up while gas well decreased....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 940 rigs in the week ending Friday, which was 418 more rigs than the 522 rigs that were deployed as of the September 30th 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 was up by 6 rigs to 750 rigs this week, their first increase in 8 weeks, which still put oil rigs up by 325 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 one rig to 189 rigs this week, which was 93 more rigs than the 96 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 continued drilling this week, same as a year ago...

drilling started from 3 more platforms off the Louisiana coast this week, and hence the Gulf of Mexico rig count increased by 3 to 22 rigs this week, which was hence up from the 21 rigs that were drilling in the Gulf a year ago...however, a year ago there was also a rig drilling the Cook Inlet, offshore of Alaska, which means this week's total offshore rig count of 22 is the same as that of a year ago....however, another platform that had been drilling on an inland lake in southern Louisiana was shut down this week, leaving an 'inland waters' count of just 2 rigs, down from 3 on inland waters a year ago... 

the count of active horizontal drilling rigs rose by 4 rigs to 794 rigs this week, which was also up by 387 rigs from the 407 horizontal rigs that were in use in the US on September 30th of last year, but was 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 up by 5 rigs to 82 rigs this week, which was also up from the 51 directional rigs that were deployed on September 30th of 2016.....on the other hand, the vertical rig count was down by 4 rigs to 64 vertical rigs this week, the same number of 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 29th, the second column shows the change in the number of working rigs between last week's count (September 22nd) and this week's (September 29th) count, the third column shows last week's September 22nd 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 30th of September, 2016...      

September 29 2017 rig count summary

what you might immediately notice from the above table is that despite an increase of 5 rigs nationally, and an increase of 4 horizontal rigs, the count of rigs in the major geological oil and gas basins that are tracked separately is down...that's mostly because neither of the oil basins in Utah, the state with the largest rig count increase this week, are covered individually by this Baker Hughes report (there is a North America Rotary Rig Count Pivot Table (xls) which covers each well drilled since 2011 as a line item, but it's tedious to search through)...so except for that 4 rig increase in Utah, and the 3 rig increase in the Gulf of Mexico off Louisiana, drilling in the rest of the country was pretty much stagnant, with Oklahoma, where their horizontal drilling has been damaging their old vertical wells, seeing the largest decrease...and in addition to the major producing states shown on the table above, both Illinois and Mississippi saw single rig increases this week; those additions increased Illinois drilling activity to 2 rigs, same as a year ago, and increased the Mississippi count to 4 rigs, up from 3 rigs a year ago...

 

note: there's more here...

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