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 3, 2017

OPEC extends output cuts to end of 2018; US gasoline exports hit a record high

as was widely expected, OPEC oil ministers at their biannual meeting in Vienna on Thursday agreed to extend their reduced oil output quotas at the same level they've been at since the beginning of 2017 until the end of 2018; that was, in effect, a nine month extension of the production cut agreement already in place, since at their meeting at the end of May of this year they had agreed to extend the original 6 month agreement of November 2016 by 9 months, from June 2017 through March 2018...the only noteworthy change from the original pact was that Nigeria and Libya, who were previously exempt from the production limits because their oil output had already been reduced by civil strife, have now agreed to a combined cap of 2.8 million barrels per day, less than 100,000 barrels per day above their average output of the last two months, but quite a bit more than the 2.25 million barrels of oil per day the two countries were producing when the first production curtailment agreement was signed...the non-OPEC participants who were in the original pact, led by Russia, also agreed to hold their production at reduced levels, and, since Russian oil companies were reluctant to commit to production cuts for over a year into the future on concerns that an extension for the entirety of 2018 could prompt a spike in crude production in the US, OPEC also agreed to review this deal at their June meeting, with the possibility that they would adjust the agreement at that time, based on any changes in global market conditions they had not foreseen.... 

since the final disposition of this OPEC meeting was largely discounted by oil traders beforehand, the market reaction to the news from this meeting was fairly muted, and trading volumes were not out of the ordinary...oil prices did end 47 cents lower on the week, however, which as it turns out was the largest weekly price drop in 2 months, since oil prices have been in an extended rally over that entire period, and closed last week at a 2½-year high of $58.95 a barrel...from there, it was not unexpected to see oil prices fall 84 cents to $58.11 a barrel in profit taking on Monday, as doubts about the OPEC pact overcame the prior week's exuberance, and Keystone pipeline imports from Canada resumed...as jittery oil traders stayed on the sidelines awaiting the OPEC news, U.S. oil prices for January delivery then fell 12 cents on Tuesday and then another 69 cents to $57.30 a barrel on Wednesday, as the EIA reported that both gasoline and distillates supplies showed large increases...oil prices then yo-yoed in advance of the OPEC meeting Thursday morning, first rising, then falling below $57 a barrel before ending 10 cents higher at $57.40 a barrel on the news, with overseas prices seeing a larger 46 cent increase....US oil prices then rocketed to as high as $58.88 on Friday, but then retreated to close with a gain of 96 cents at $58.36 a barrel, as all US markets were rocked when former national security adviser Michael Flynn plead guilty to lying under oath and implicated Donald Trump for meddling in Russia while Obama was still president...

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 24th, showed a big drop in our oil imports (due to the Keystone shutdown) while our refineries were using oil at a record pace for this time of year, and hence we needed to pull quite a bit of oil out of storage to meet their needs...our imports of crude oil fell by an average of 544,000 barrels per day to an average of 7,329,000 barrels per day during the week, while our exports of crude oil fell by an average of 179,000 barrels per day to 1,412,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,917,000 barrels of per day during the week, 365,000 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 24,000 barrels per day to another record high of 9,682,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,599,000 barrels per day during the reported week... 

during the same week, US oil refineries were using 17,003,000 barrels of crude per day, 165,000 barrels per day more than they used during the prior week, while at the same time 828,000 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 576,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+576,000) 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 7,619,000 barrels per day, 1.7% less than the 7,748,000 barrels per day average imported over the same four-week period last year....the 828,000 barrel per day decrease in our total crude inventories included a 490,000 barrel per day withdrawal from our commercial stocks of crude oil and a 338,000 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 24,000 barrel per day increase in our crude oil production included a 20,000 barrel per day increase in output from wells in the lower 48 states, and a 4,000 barrels per day increase in output from Alaska....the 9,682,000 barrels of crude per day that were produced by US wells during the week ending November 24th was yet another new record high for US output, 10.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.3% more than the 8,699,000 barrels per day of oil that were being produced during the during the equivalent week a year ago...

US oil refineries were operating at 92.6% of their capacity in using those 17,003,000 barrels of crude per day, up from 91.3% of capacity the prior week, and above normal for this time of year...while the 17,003,000 barrels of oil that were refined this week were still 4.1% 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 at a record level for any week during the autumn months, 4.4% more than the 16,283,000 barrels of crude per day that were being processed during week ending November 25th, 2016, when refineries were operating at 89.8% of capacity, and 11.8% above the 10-year seasonal average for this time of the year... 

even with increase in the amount of oil refined, gasoline output from our refineries was 2.0% lower, decreasing by 210,000 barrels per day to 10,222,000 barrels per day during the week ending November 24th, after increasing by 580,000 barrels per day the prior week...that production was still 2.4% higher than the 9,986,000 barrels of gasoline that were being produced daily during the week ending November 25th last year, and a new high for any comparable November week on record....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 51,000 barrels per day from last week's November record to 5,284,000 barrels per day, which was still 1.3% more than the 5,216,000 barrels per day of distillates that were being produced during the the same week a year ago....    

with our gasoline production remaining elevated, our gasoline inventories at the end of the week rose by 3,627,000 barrels to 214,102,000 barrels by November 24th, primarily because our domestic consumption of gasoline fell by 871,000 barrels per day to 8,724,000 barrels per day at the same time, even as our exports of gasoline rose by 431,000 barrels per day to a record high 1,213,000 barrels per day, while our imports of gasoline rose by 12,000 barrels per day to 526,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 24 weeks, our gasoline inventories are still down by 11.7% from their pre-summer high of 242,444,000 barrels, and more than 5.3% below last November 25th's level of 226,123,000 barrels, even as they are still roughly 1.8% above the 10 year average of gasoline supplies for this time of the year...   

since our gasoline exports happened to jump to a record high this week, we'll include a graph below of what those exports look like historically...

November 30 2017 gasoline exports for November 24

the above graph comes from a Zero Hedge post on this week's EIA report, and it shows US gasoline exports in thousands of barrels per day from mid-2010 to the current week, with gasoline exports prior to July 2016 shown monthly, and gasoline exports after that date shown weekly; prior to 2010, our gasoline exports were negligible and were not tracked separately...as you can see, there is a seasonal pattern to gasoline exports, in that they rise during the fall and winter months, when domestic use of gasoline is at its lowest, and then fall back in the summer, when US demand is higher...although we've recently expressed concern, bordering on dire, about the elevated level of our distillates exports, this one week of record high gasoline exports is not yet that critical, especially during a week when our own supplies were near normal and rising...

meanwhile, with our distillates production still near record levels, our supplies of distillate fuels rose by 2,747,000 barrels to 127,779,000 barrels over the week ending November 24th, in just the third supply increase in thirteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 175,000 barrels per day to 3,882,000 barrels per day, and as our exports of distillates fell by 300,000 barrels per day to 1,130,000 barrels per day, while our imports of distillates fell by 70,000 barrels per day to 120,000 barrels per day...even after this week’s increase, our distillate inventories were still 17.1% lower at the end of the week than the 154,196,000 barrels that we had stored on November 25th, 2016, and 5.2% lower than the 10 year average of distillates stocks at this time of the year

finally, the big drop in our crude oil imports, combined with another increase in domestic refining demand, meant that our commercial crude oil inventories fell for the 27th time in the past 34 weeks, decreasing by 3,429,000 barrels, from 457,142,000 barrels on November 17th to 453,713,000 barrels on November 24th....while our oil inventories as of November 24th were 7.1% below the 488,145,000 barrels of oil we had stored on November 25th of 2016, and fractionally lower than the 457,212,000 barrels of oil that we had in storage on November 27th of 2015, they were still 30.9% greater than the 347,015,000 barrels of oil we had in storage on November 28th  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 last week's Thanksgiving holiday and resulting early report, this week's Baker Hughes rig count report for the week ending December 1st covers changes in drilling activity for the nine days from November 22nd to December 1st...for that period, they reported that drilling rig activity increased for the 4th week in a row, but for just the 7th time out of the last 18 weeks, as the active rig count rose by 6 rigs, from 923 rigs on November 22nd to 929 rigs on December 1st....that was also 332 more rigs than the 593 rigs that were deployed as of the December 2nd report last year, but still well 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 2 rigs to 749 rigs this week, which was also up by 272 oil rigs over the past year, while this week's oil rig 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 rose by 4 rigs to 180 rigs this week, which was still only 61 more gas rigs than the 119 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...

activity on two platforms that had been drilling in the Gulf of Mexico offshore from Louisiana was shut down this week, which reduced the Gulf of Mexico rig count to 20 rigs, which was still down from the 22 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 6 rigs to 792 rigs this week, which was up by 307 rigs from the 485 horizontal rigs that were in use in the US on December 2nd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, both the vertical rig count and the directional rig counts were unchanged at 66 rigs and 71 rigs respectively, with the vertical rig count also unchanged from a year ago, while the directional rig count was up from the 46 directional rigs that were working on December 2nd a year ago..

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 1st, the second column shows the change in the number of working rigs between last week's count (November 22nd) and this week's (December 1st) count, the third column shows last week's November 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 2nd of December, 2016...           

December 1 2017 rig count summary

as you can see, despite the 4 unit increase in rigs drilling for natural gas, the Marcellus and Utica rig counts remained unchanged, as did the corresponding rig counts for Ohio, Pennsylvania and West Virginia...of the new natural gas rigs, three were in the Haynesville, on the Texas side of the northwestern Lousiana border, and one was in an "other" unnamed basin; the rig that was shut down in the Dallas area Barnett shale was an oil rig, leaving the Barnett with 3 gas rigs and one oil rig remaining...otherwise, the above tables are pretty much indicative what changes in activity occurred this past week...

 

Note:  there’s more here

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