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

Monday, October 23, 2017

US oil production falls to lowest in 42 months, rig count drops most in 20 months

US oil prices were up 4 days out of 5 again this week, but still only ended 2 cents higher, while Brent, the widely quoted international oil price, was also up 4 out of 5 days and ended 58 cents higher, and hence the premium that's been driving record US oil exports widened...the contract for US oil for November delivery first rose 42 cents to $51.87 a barrel on Monday, as US trained and armed Iraqi forces moved on the key oil-producing city of Kirkuk, which had been occupied by US trained and armed Kurdish forces over the past three years...with conflicting reports out of Iraq on Tuesday, US oil prices rose to as high as $52.25 on Tuesday morning, then dropped to as low as $51.21 Tuesday afternoon, but ended the day at  $51.88 a barrel, up just 1 cent on the day....prices then rose 16 cents to a three week high close of $52.04 a barrel on Wednesday, as EIA data showed a larger-than-expected draw from U.S. crude stockpiles on near record oil exports...oil prices then fell for the first time in 5 days on Thursday, dropping 75 cents to $51.29 a barrel, pressured by larger-than-expected product inventories and profit-taking after the recent run-up, as Iraq occupied Kirkuk and promised that the oil would continue flowing....US WTI crude futures for November were then mostly flat on Friday in see-saw trading, but ended the session 18 cents higher at $51.47 per barrel, after Baker Hughes reported the largest drilling rig pull back in 20 months... 

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 13th, showed both the aforementioned large increase in our oil exports as well as a large drop in our domestic production of oil, which meant that a larger quantity of oil had to be pulled out of storage to meet the needs of our refineries, which also slowed....our imports of crude oil fell by an average of 134,000 barrels per day to an average of 7,483,000 barrels per day during the week, while at the same time our exports of crude oil rose by 528,000 barrels per day to a near record 1,798,000 barrels per day, which meant that our effective imports netted out to an average of 6,347,000 barrels per day during the week, 662,000 barrels per day less than during the prior week...at the same time, our field production of crude oil fell by 1,047,000 barrels per day to an average of 8,406,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,091,000 barrels per day during the reported week...

at the same time, US oil refineries were using 15,439,000 barrels of crude per day, 819,000 barrels per day less than they used during the prior week, while during the same period 927,000 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 421,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+421,000) 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 7,435,000 barrels per day, 1.9% below the imports of the same four-week period last year....the 927,000 barrel per day withdrawal from our total crude inventories came about on a 819,000 barrel per day withdraw from our commercial stocks of crude oil and a 108,000 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 1,074,000 barrel per day decrease in our crude oil production was due to a 1,084,000 barrel per day drop in output from wells in the lower 48 states due to Hurricane Nate, the largest drop since August 2012, while output from Alaska rose by 9,000 barrels per day...the 8,406,000 barrels of crude per day that were produced by US wells during the week ending October 13th was the least oil that we've produced since the last week of April 2014, 4.2% less than the 8,770,000 barrels per day we were producing at the end of 2016, but just fractionally lower than the 8,464,000 barrels per day of oil we produced during the during the week ending October 14th a year ago...

US oil refineries were operating at just 84.5% of their capacity in using those 15,439,000 barrels of crude per day, down from 89.2% of capacity the prior week, a reduction in throughput that was mostly due to normal seasonal maintenance.... the 15,439,000 barrels of oil that were refined this week was 12.9% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck, just seven weeks earlier, but it was actually a bit more than the 15,370,000 barrels of crude per day that were being processed during week ending October 14th, 2016, when refineries were operating at 85.0% of capacity...

despite the slowdown in US oil refining, gasoline production from our refineries was higher, increasing by 290,000 barrels per day to 10,031,000 barrels per day during the week ending October 13th, which was also 5.6% higher than the 9,935,000 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) fell by 180,000 barrels per day to 4,784,000 barrels per day, which was 4.0% more than the 4,599,000 barrels per day of distillates that were being produced during the week ending October 14th last year....  

with the increase in our gasoline production, our end of the week gasoline inventories rose by 908,000 barrels to 222,334,000 barrels by October 13th, the fourth increase in gasoline inventories in a row...that was even as our exports of gasoline rose by 227,000 barrels per day to 636,000 barrels per day, while our imports of gasoline fell by 170,000 barrels per day to 690,000 barrels per day...offsetting that imbalance, however, our domestic consumption of gasoline fell by 344,000 barrels per day to 9,136,000 barrels per day at the same time...still, with significant gasoline supply withdrawals in 12 out of the last 18 weeks, our gasoline inventories are still down by 8.3% from June 9th's level of 242,444,000 barrels, and 2.5% below last October 14th's level of 227,967,000 barrels, even as they are still roughly 7.2% above the 10 year average of gasoline supplies for this time of the year...  

even with the decrease in our distillates production, our supplies of distillate fuels rose by 528,000 barrels to 134,487,000 barrels over the week ending October 13th, the first increase in seven weeks...that was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 171,000 barrels per day to 3,477,000 barrels per day, the lowest seasonal level in more than 10 years, and because our exports of distillates fell by 273,000 barrels per day to 1,339,000 barrels per day, while our imports of distillates rose by 23,000 barrels per day to 107,000 barrels per day...however, even after this week’s increase, our distillate inventories ended the week still 13.6% lower than the 155,732,000 barrels that we had stored on October 14th, 2016, and 5.5% lower than the 10 year average for distillates stocks for this time of the year

finally, with our oil exports continuing at near record levels, our commercial crude oil inventories fell for the 24th time in the past 28 weeks, decreasing by 5,731,000 barrels, from 462,216,000 barrels on October 6th to 456,485,000 barrels on October 13th...while our oil inventories as of October 13th were 2.6% below the 468,711,000 barrels of oil we had stored on October 14th of 2016, they were still 2.7% higher than the 444,618,000 barrels in of oil that were in storage on October 16th of 2015, and 31.8% greater than the 346,414,000 barrels of oil we had in storage on October 17th of 2014...

This Week's Rig Count

US drilling activity decreased for 9th time in the past 12 weeks during the week ending October 20th, with this week's total pullback the largest since the week ending February 19th 2016...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 15 rigs to 913 rigs in the week ending Friday, which was still 360 more rigs than the 553 rigs that were deployed as of the October 21st 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 down by 7 rigs to 736 rigs this week, their 10th decrease in 11 weeks, which still left active oil rigs up by 293 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 8 rigs to 177 rigs this week, which was the smallest natural gas rig deployment since May 10th and just 69 more gas rigs than the 108 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...

there was no change in offshore drilling this week, as 20 platforms, all in the Gulf of Mexico, continued to see drilling activity, down from the 22 in the Gulf and one offshore from Alaska a year ago....the count of active horizontal drilling rigs was down by 15 rigs to 771 rigs this week, which was the smallest number of working horizontal rigs since July 2nd...however, that was still up by 326 rigs from the 445 horizontal rigs that were in use in the US on October 21st 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 vertical rig count was down by 1 rig to 62 vertical rigs this week, but still up from the 57 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was up by 1 rig to 80 rigs this week, which was also up from the 51 directional rigs that were deployed on October 21st of 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...      

October 20, 2017 rig count summary

it's pretty clear from the first table which states saw rig shutdowns this past week, but the table of major basin variances misses a lot of this week's changes; Baker Hughes details indicate that 5 oil rigs and 4 gas rigs were shut down in "other' basins, which they do not name...for starters, we know that Alaska had two rigs shut down, but none of the Alaskan oil fields are listed, so that accounts for two of those missing from the basin table...likewise for Wyoming, where the 2 rig reduction, which could have been pulled out of the Powder River basin, is not accounted for in the Baker Hughes basin table...Utah also saw a rig shut down, while none of the Utah basins, such as the Unita, are listed above..then, since Louisiana had one rig shut down in the Haynesville while one rig started in the south, we can figure there's two Haynesville rigs that must have been shut down in Texas...since there were two rigs added in the Eagle Ford in south Texas while 5 rigs were pulled out of the Texas side of the Permian, three more of the unaccounted for basin reductions must have been in Texas...likewise, there's an unaccounted rig shutdown in Oklahoma, since there were 2 rigs added in the Cana Woodford while one was pulled out of the Ardmore Woodford...and outside of the states included among the major producers in the first table above, Illinois also had a rig shut down this week, leaving them with just 1 rig still running, the same number they had running on October 21st a year ago...

 

note:  there’s more here

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