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, November 26, 2017

oil prices at a 2½-year high, oil drilling picking up...

oil prices rose nearly 4% this past week and finished at a 2½-year high, as traders focused on a supply disruption to the Cushing hub in Oklahoma, while anticipating extended supply cuts from the OPEC meeting in this coming week...after closing at $56.55 a barrel, down 0.4%, last week for the first time in six weeks, US oil contracts for December crude continued sliding lower on Monday on a stronger dollar and edginess about the upcoming OPEC meeting, closing down 46 cents at $56.09 a barrel as the December contract expired...at the same time, the contract for January crude slid 29 cents to close at $56.42 a barrel...with the media now quoting January crude as 'the price of oil', that contract rose 41 cents to $56.83 on Tuesday, on restrained expectations that OPEC would extend their output cuts when they meet in Vienna next week...oil prices then jumped $1.19 or 2.1% to $58.02 on Wednesday after TransCanada reported Keystone pipeline crude deliveries to Oklahoma would be curtailed by 85 percent through November, following last week's spill of more than 210,000 gallons of tar sands oil under a farm field in northeast South Dakota, which is still unrepaired...that pipeline shutdown would reduce the glut of oil at the Cushing depot, on which these WTI oil contracts are based...momentum from that pipeline shutdown carried through the holiday as oil rose again on Friday, bolstered by reports that OPEC and Russia agreed to a framework to extend their oil production cuts to the end of next year, with oil prices ending up another 93 cents at $58.95 a barrel at the close, a gain of 1.6% on the day and more than 3.9% for the week...

since oil prices are now much higher than they've been for a good two years, we'll include a graph of the recent rally to help you envision how they got here...

November 25 20117 oil prices

the above graph is a screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for one day of oil trading between June 15th and November 24th, wherein green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while on red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...there are also feint grey "wicks" above and below each bar to indicate trading prices for each day that were above or below the opening to closing price range...note at the far right that there are four green bars that would represent this week's price rally, rather than the three day rally we have described; that's because this graph also includes online and international trading, which continued through the Thanksgiving holiday, while the New York markets that we reported on were closed...

on that graph, we can almost see that oil prices dipped to a ten month low of $42.05 a barrel on June 21st, which we saw at that time was below the average breakeven price for all US oil basins...from there, oil prices stayed below $50 a barrel until mid-September, which thus led to an extended pullback in oil drilling that lasted through October...however, with oil prices over $50 a barrel since that time, the rig crews have been returning to the field, and drilling for oil has been picking up...now, with oil prices near $60 a barrel, the disincentive of the past two years has reversed, because it will now be profitable to drill for oil in every shale basin in the US, with the possible exception of the thinnest trends of the SCOOP/STACK...if oil prices should continue rising from here, we would not be surprised to even see oil drilling return to the Utica shale, at least to the same degree as we saw before mid 2014, when more than half of the Utica rigs were targeting oil...

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 November 17th, showed a big jump in our oil exports while our oil imports were little changed, which meant that oil needed to be pulled out of storage to meet the needs of our refineries, who also saw another increase in throughput...our imports of crude oil slipped by an average of 25,000 barrels per day to an average of 7,873,000 barrels per day during the week, while our exports of crude oil rose by an average of 462,000 barrels per day to 1,591,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,282,000 barrels of per day during the week, 487,000 barrels per day less than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 13,000 barrels per day to another record high of 9,658,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,940,000 barrels per day during the reported week...

during the same week, US oil refineries were using 16,838,000 barrels of crude per day, 199,000 barrels per day more than they used during the prior week, while over the same period 511,000 barrels of oil per day were being withdrawn 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 387,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+387,000) 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, a metric that is labeled 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 slipped to an average of 7,680,000 barrels per day, now 5.3% less than the 8,110,000 barrels per day average imported over the same four-week period last year....the 511,000 barrel per day decrease in our total crude inventories included a 265,000 barrel per day withdrawal from our commercial stocks of crude oil and a 246,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was included in a Federal budget deal 25 months ago...this week's 13,000 barrel per day increase in our crude oil production was due to a 20,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 7,000 barrels per day decrease in output from Alaska....the 9,658,000 barrels of crude per day that were produced by US wells during the week ending November 17th was another new record high for US output, 10.1% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.1% more than the 8,690,000 barrels per day of oil we produced during the during the equivalent week a year ago...

US oil refineries were operating at 91.3% of their capacity in using those 16,838,000 barrels of crude per day, up from 91.0% of capacity the prior week, and above normal for November...while the 16,838,000 barrels of oil that were refined this week were still 5.0% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, they were 2.7% more than the 16,397,000 barrels of crude per day that were being processed during week ending November 18th, 2016, when refineries were operating at 90.8% of capacity, and more than 12.7% above the 10-year seasonal average for this time of year...

with increase in the amount of oil refined, gasoline output from our refineries was 5.9% higher, increasing by 580,000 barrels per day to 10,432,000 barrels per day during the week ending November 17th, which was also 7.5% higher than the 9,700,000 barrels of gasoline that were being produced daily during the comparable November week a year ago....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 104,000 barrels per day to 5,335,000 barrels per day, which was a record distillates output for any week in any November, and 5.0% more than the 5,080,000 barrels per day of distillates that were being produced during the week ending November 18th last year....   

even with the big jump in our gasoline production, our gasoline inventories at the end of the week just rose by 44,000 barrels to 210,475,000 barrels by November 17th, because our domestic consumption of gasoline rose by 423,000 barrels per day to 9,595,000 barrels per day at the same time, even as our exports of gasoline fell by 62,000 barrels per day to 782,000 barrels per day, while our imports of gasoline rose by 165,000 barrels per day to 514,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 23 weeks, our gasoline inventories are still down by 13.2% from their pre-summer high of 242,444,000 barrels, and by over 6.0% below last November 18th's level of 224,026,000 barrels, even as they are still roughly 0.8% above the 10 year average of gasoline supplies for this time of the year...  

with the increase in our distillates production, our supplies of distillate fuels rose by 269,000 barrels to 125,032,000 barrels over the week ending November 17th, in just the second small supply increase in twelve weeks, after falling by 9,724,000 barrels over the prior three weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 28,000 barrels per day to 4,057,000 barrels per day, while our exports of distillates fell by 47,000 barrels per day to 1,430,000 barrels per day, and while our imports of distillates rose by 29,000 barrels per day to 190,000 barrels per day...even after this week’s increase, our distillate inventories were still 16.2% lower at the end of the week than the 149,239,000 barrels that we had stored on November 18th, 2016, and 5.3% lower than the 10 year average of distillates stocks at this time of the year

finally, the big increase in our crude oil exports, combined with the increase in domestic refining, meant that our commercial crude oil inventories fell for the 26th time in the past 33 weeks, decreasing by 1,855,000 barrels, from 458,997,000 barrels on November 10th to 457,142,000 barrels on November 17th....while our oil inventories as of November 17th were 6.5% below the 489,029,000 barrels of oil we had stored on November 18th of 2016, they were still fractionally higher than the 456,035,000 barrels of oil that we had in storage on November 20th of 2015, and 30.3% greater than the 350,704,000 barrels of oil we had in storage on November 21st of 2014, at a time when the buildup of our oil glut in the US was just getting started...    

This Week's Rig Count

because of the holiday, the weekly Baker Hughes rig count report was released on Wednesday, November 22nd, and thus covers changes in drilling activity for just the five days from November 17th to the 22nd...nonetheless, they reported that drilling rig activity increased during that period for the 3rd week in a row, but just the 6th time out of the last 17 weeks, as the active rig count rose by 8 rigs, from 915 rigs on November 17th to 923 rigs on November 22nd...that was also 330 more rigs than the 593 rigs that were deployed as of the November 23rd report last year, but still way down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

the number of rigs drilling for oil rose by 9 rigs to 747 rigs this week, which was also up by 273 oil rigs over the past year, while this week's 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 fell by 1 rig to 176 rigs this week, which was still only 58 more gas rigs than the 118 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...

drilling began from one platform in the Gulf of Mexico offshore from Louisiana this week, which increased the Gulf of Mexico rig count to 22 rigs, which was still down from the 23 rigs active in the Gulf of Mexico a year ago...since there were no other offshore rigs active other than those deployed in the Gulf either this week or a year ago, those Gulf of Mexico rig counts are also the same count as the total US offshore count...

the count of active horizontal drilling rigs increased by 10 rigs to 786 rigs this week, which put them up by 311 rigs from the 475 horizontal rigs that were in use in the US on November 23rd of last year, but 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 up by 3 rigs to 66 vertical rigs this week, which happened to be the same number as the 66 vertical rigs that were deployed on November 23rd of 2016...on the other hand, the directional rig count was down by 5 rigs to 71 rigs this week, which was still up from the 52 directional rigs that were working 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 November 22nd, the second column shows the change in the number of working rigs between last week's count (November 17th) and this week's (November 22nd) count, the third column shows last week's November 17th 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 23rd of November, 2016...          

November 22 2017 rig count summary

as you can see from the above, we have another week where the major basin variances table doesn't tell us much; despite the net addition of 10 horizontal rigs during the period, the major basins tracked here only account for 3 rig additions, and one rig shutdown...part of the problem is that Baker Hughes has not changed the basins they track as activity has shifted over the years; for instance, the Fayetteville in Arkansas has gone almost two years with no more than one rig active, as compared to 2011, when that basin averaged over 30 active rigs a week...yet basins that are now seeing more activity, such as the Unita in Utah and the Powder River Basin in Wyoming, have not yet even been listed here...with a 4 rig increase in Wyoming, it's entirely possible that half of the week's new rigs were set up in the Powder River Basin, but without digging through the individual well logs in the North America Rotary Rig Count Pivot Table (XLS), there's no easy way of determining exactly where they were...note that in addition to the activity changes in the major producing states shown above, Montana also saw another rig added this week, and they thus have two rigs working, up from none a year ago, and the first time more than one rig was active in the state since March 2015..

 

Note: there's more here...

No comments: