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, December 31, 2017

oil ends 2017 above $60, first time in 30 months; US refining at wintertime high, distillates production at a record high

oil prices rose for the 2nd week in a row this week and ended at their highest level of the year, closing above $60 a barrel for the first time since June of 2015...after being little changed in light overseas trading through the Christmas weekend, US crude oil prices for February delivery surged $1.50 to close at a 2-1/2-year high of $59.97 a barrel on Tuesday, on news that an explosion on a major Libyan oil pipeline had disrupted the country's crude supply...prices then eased back 33 cents on Wednesday to close at $59.64 a barrel after the head of the Libyan state oil firm told Reuters the pipeline repair could take a week but would not have a major impact on exports, and on news that the cracked North Sea Forties pipeline was gradually resuming operations...oil prices then see-sawed on Thursday and ended 20 cents higher at $59.84 a barrel after the weekly EIA report showed a continuation of the ongoing decline in US oil supplies...US crude prices then rose 58 cents to close at $60.42 a barrel on Friday, 41% higher than its lowest point earlier this year, as oil traders interpreted a decline in US crude production and the weekly rig count to mean that producers were being cautious about ramping up their output...prices thus ended the week 12.5% higher than at the end of 2016, and up 132% from their low in February 2016...

since oil prices are at a two and a half year high and appear to have clearly broken out of the trading range they've been in for the past year and a half, we'll next include a graph of that price history so we can see how this price rally has developed..

December 30 2017 oil price history

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 week of oil trading between May 2011 and December 29th of this year, wherein green bars represent the weeks when the price of oil went up, and red bars represent the weeks when the price of oil went down...for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar...barely visible in this compressed view, there are also feint grey "wicks" above and below each bar to indicate trading prices during each week that were above or below the opening to closing price range for that week...

on this graph, we can see how oil prices stayed in a range roughly between $80 and $110 a barrel from mid-2011 till the fall of 2014, a period that saw widespread drilling and fracking helter-skelter across the breadth of the US...oil prices had already slipped to $78 a barrel the week before the Thanksgiving 2014 OPEC meeting that declared war on US fracking, after which oil prices quickly fell to $65 a barrel, and then continued lower, albeit with some intervening price rallies, until bottoming out at $26.02 a barrel on February 11, 2016, before spiking back up to $29 a barrel a day later (look closely at the graph, and you can see the 'wick' for that price dip at the bottom of the red candlestick for that week)...oil prices climbed to $50 a barrel pretty quickly after that, and generally stayed in a range between $44 a barrel and $54 a barrel from the Spring of 2016 through the Autumn of this year, a price range which kept the frackers confined to the most profitable sweet spots in the most productive oil fields...with prices now trending higher, we would expect to see a gradual expansion by exploration and exploitation enterprises into areas of the US that have seen little activity over the past few years...

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 December 22nd, showed that despite an increase in our oil imports and a decrease in our oil exports, we once again had to pull quite a bit of oil out of storage, mostly because US refineries were running at a record pace for this time of year...our imports of crude oil rose by an average of 159,000 barrels per day to an average of 7,993,000 barrels per day during the week, while our exports of crude oil fell by an average of 648,000 barrels per day to an average of 1,210,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,783,000 barrels of per day during the week, 807,000 barrels per day more than the net imports of the prior week...at the same time, field production of crude oil from US wells fell by 35,000 barrels per day to 9,754,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,537,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 17,398,000 barrels of crude per day, 335,000 barrels per day more than they used during the prior week, while at the same time 644,000 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 still 217,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+217,000) 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 fudge factor 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 rose to an average of 7,598,000 barrels per day, still 5.9% less than the 8,075,000 barrels per day average imported over the same four-week period last year....the 644,000 barrel per day decrease in our total crude inventories came about on a 658,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 14,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency... this week's 35,000 barrel per day decrease in our crude oil production was due to a 24,000 barrel per day decrease in output from wells in the lower 48 states, and an 11,000 barrels per day decrease in output from Alaska....the 9,754,000 barrels of crude per day that were produced by US wells during the week ending December 22nd was still 11.2% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 15.7% above the recent low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016...

US oil refineries were operating at 95.7% of their capacity in using those 17,398,000 barrels of crude per day, up from 94.1% of capacity the prior week, and the highest capacity utilization on record for any week in December since 1998....the 17,398,000 barrels of oil that were refined this week was only 1.8% less than the record 17,725,000 barrels per day that were being refined at the end of August of this year, and was 5.1% more than the 16,557,000 barrels of crude per day that were being processed during week ending December 23rd, 2016, when refineries were operating at 91.0% of capacity, and roughly 12.5% above the 10-year seasonal average for this time of the year... 

we'll include a graph of what that refinery throughput looks like, since it's so far above the norm, and almost a record at a out of season time of year..

December 20 2017 refinery throughput as of December 15

the above graph came from the package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out last week...this 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 by the red graph...since John was on vacation this week, i've taken the liberty of adding this week's refinery spike to his graph of the prior week, so you can see how far above last year's record level this week's refining has been...in fact, you can also see that this year's oil refining has been beating what were the record or near record levels of last year by a large margin since the beginning of April, except for during the disruptions to refining resulting from this year's hurricanes, setting several record highs on the way...

with the big increase in the amount of oil being refined, gasoline output from our refineries was likewise higher, increasing by 181,000 barrels per day to 10,246,000 barrels per day during the week ending December 22nd, after slipping during the prior week despite increased refining....however, even with this week's increase, our gasoline production was still 2.8% lower than the record 10,537,000 barrels of gasoline that were being produced daily during the week ending December 23rd of last year....however, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 270,000 barrels per day at the same time to a record high of 5,476,000 barrels per day, which was also 10.5% more than the 4,957,000 barrels of distillates per day that were being produced during the the same week a year ago....  

with the increase in our gasoline production, our gasoline inventories at the end of the week rose by 591,000 barrels to 228,374,000 barrels by December 22nd, their seventh increase in a row...that was as our domestic consumption of gasoline increased by 59,000 barrels per day to 9,485,000 barrels per day, and as our exports of gasoline rose by 58,000 barrels per day to 862,000 barrels per day, while our imports of gasoline fell by 99,000 barrels per day to 388,000 barrels per day....however, with significant gasoline supply withdrawals throughout the summer months, our gasoline inventories are still down by 5.8% from their pre-summer high of 242,444,000 barrels, even as they are up fractionally from last December 23rd's level of 227,143,000 barrels, and roughly 4.4% above the 10 year average of gasoline supplies for this time of the year...     

meanwhile, with our distillates production at a record level, our supplies of distillate fuels rose by 1,090,000 barrels to 129,935,000 barrels over the week ending December 22nd, in just the sixth increase in distillates supply in seventeen weeks...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 400,000 barrels per day to 4,326,000 barrels per day, and as our imports of distillates fell by 141,000 barrels per day 239,000 barrels per day, while our exports of distillates fell by 317,000 barrels per day to 4,326,000 barrels per day...even after this week’s inventory increase, however, our distillate supplies were still 14.3% lower at the end of the week than the 151,634,000 barrels that we had stored on December 23rd, 2016, and roughly 5.0% lower than the 10 year average of distillates stocks at this time of the year

finally, with US refineries using oil at a record pace, our commercial crude oil inventories fell for the 31st time in the past 38 weeks, decreasing by 4,609,000 barrels, from 436,491,000 barrels on December 15th to a 26 month low of 431,882,000 barrels on December 22nd ....while our oil inventories as of December 22nd were thus 11.1% below the 486,063,000 barrels of oil we had stored on December 23rd of 2016, and 5.1% lower than the 455,106,000 barrels of oil that we had in storage on December 25th of 2015, they were still 22.4% greater than the 352,979,000 barrels of oil we had in storage on December 26th of 2014, when the buildup to an oil glut in the US was just getting started... 

This Week's Rig Count

US drilling activity decreased for the second time in 8 weeks during the week ending December 29th, but all the changes over the past 4 weeks have really been insignificant....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rig to 929 rigs in the week ending on Friday, which was still 271 more rigs than the 658 rigs that were deployed as of the December 30th 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 unchanged at 747 rigs this week, which was still 222 more oil rigs than were running a year ago, while the week's oil rig count remained far below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations fell by 2 rigs to 182 rigs this week, which was still only 50 more gas rigs than the 132 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...

with the shutdown of a drilling platform offshore from Texas, drilling activity in the Gulf of Mexico was was down by 1 rig to 18 rigs this week, which was also down from the 22 rigs that were drilling from platforms in the Gulf of Mexico a year ago...the total national offshore count was also down 1 rig at 18 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, for a national total of 23 offshore rigs that were working last December 30th...

this week's count of active horizontal drilling rigs was down by 5 rigs to 796 horizontal rigs this week, but it was still up by 264 rigs from the 532 horizontal rigs that were in use in the US at the end of last year, but of course was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count was up by 1 rig to 65 vertical rigs this week, but that was still down from the 70 vertical rigs that were working during the same week last year....in addition, the directional rig count was up by 2 rigs to 68 rigs this week, which was also up from the 56 directional rigs that were deployed on December 30th 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 December 29th, the second column shows the change in the number of working rigs between last week's count (December 22nd) and this week's (December 29th) count, the third column shows last week's December 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 December, 2016...               

December 29 rig count summary

you'll notice that despite the decrease of two rigs targeting natural gas nationally, there was still a rig added in Ohio's Utica shale; at the same time, gas rigs were pulled out of the Haynesville in Texas at the Louisiana border, and out of two 'other' gas fields not named in Baker Hughes summaries...otherwise, the few changes you see on the tables above seem to be the extent of this week's changes, as it seems even most decisions in the oil fields were put on hold during the holiday week...

 

note: there’s more here..

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