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 17, 2017

OPEC oil output at a 6 month low; global oil output at a 12 month high..

US oil prices ended slightly lower for the third week in a row this past week, but the major movement in oil prices was in the international markets, where North Sea Brent crude, the international benchmark, spiked to a two and a half year high on Tuesday, after a crack was discovered in the Forties pipeline, which carries about 40% of the North Sea's output to the UK, forcing its shutdown and the shutdown of the 80 offshore platforms it had been servicing...the same day, an explosion and fire at the Baumgarten natural gas hub in Austria near the Slovak border shut down what is one of the main distribution hubs of Russian natural gas in Europe, temporarily shutting off gas to parts of Germany, France, Hungary, Italy, Slovenia and Croatia, sending European natural gas prices to a six year high, and prompting a state of emergency in Italy, where gas prices jumped 150%...while the operator of the Austrian hub managed to quickly reroute gas supplies to most destinations in central Europe, the British pipeline is expected to be shut down for weeks for repair work, forcing closure of a major UK refinery...meanwhile, while natural gas was priced at $9.86 per mmBTU in Europe and at $9.61 per mmBTU for December and January deliveries to Japan, the benchmark price for natural gas in the US was falling to a 16 month low at $2.61 per mmBTU

we're going to start this week by reviewing OPEC's December Oil Market Report (covering November OPEC & global oil data), which was released on Wednesday of the past week, and which is available as a free download....the first table from this report that we'll look at is from page 64 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures...    

November 2017 OPEC crude output via secondary sources

as we can see from this table of official oil production data, OPEC oil output decreased by 133,500 barrels per day in November, to a six month low of 32,448,000 barrels per day, from an October production total of 32,581,000 barrels per day, a figure that was originally reported as 32,589,000 barrels per day (for your reference, here is the table of the official October OPEC output figures as reported a month ago, before this month's revisions)...as you'll note in the far right column above, the reasons that OPEC's output fell by 133,500 barrels per day in November was that the decrease of 108,700 barrels per day in output from Angola more than offset the 95,800 barrel per day increase in output from Nigeria, and that the Saudis, the Emirates and Venezuela all also saw sizable reductions in their oil output...the cutback in Angolan production now lowers their output to below their agreed to quota, leaving Iraq as the only OPEC member whose production is well in excess what their pact calls for, as can be seen in the table below:  

November 2017 OPEC production and targets as of October via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first eleven months of this year, and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as was agreed to at their November 2016 meeting, and the 3rd column shows how much each has averaged over or under their quotas for the ten months of this year that the OPEC pact to curtail production has been in effect...one minor clarification would be that Nigeria and Libya are no longer exempt from the pact, in that they have agreed to a combined output cap of 2.8 million barrels per day at the November 30th OPEC meeting two weeks ago...with a combined output of 2,983,000 barrels per day in November, they were obviously in excess of that new quota for one month, possibly as they overpumped in anticipation of having to throttle back in December...but as you can see from the above, most OPEC members are pretty close to meeting their commitment to cutting their production back 4%, except for Iraq, whose production has averaged nearly 2% higher than what they committed to...however, cuts in excess of what was agreed to by the Saudis, Venezuela, and other OPEC countries have more than made up for the 83,000 barrels per day that Iraq has been overproducing, so the organization as a whole has kept their commitment to reduce supply....  

for a visualization of how OPEC's cuts have progressed, we'll next include a longer term historical graph of their monthly oil output:

November 2017 OPEC oil production historical graph

the above graph, taken from the "OPEC November Oil Production" post at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the current 14 members of OPEC, for the period from January 2005 to November 2017, using the history of the same official data from secondary sources that we saw in the first table above...here we can obviously see that OPEC's November production of 32,448,000 barrels per day is lower than their production of the past five months, but up from earlier this year...but we can also see how their production spiked to a record last November, just before they announced their output cuts, giving them quite a bit of leeway to "reduce" production from those elevated levels, without ever having to fully cut back to the level they were producing at in late 2015 and early 2016...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from December 2015 to November 2017, and it comes from page 65 of the December OPEC Monthly Oil Market Report....the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...  

November 2017 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose to a 12 month high of 97.44 million barrels per day in November, up by .84 million barrels per day from a October total of 96.60 million barrels per day, which was revised .11 million barrels per day lower from the 96.71 million barrels per day global oil output for October that was reported a month ago...global oil output for November was also 0.60 million barrels per day higher than the 96.84 million barrels of oil per day that was being produced globally in November a year ago (see last December's OPEC report online (pdf) for the year ago data)... OPEC's November production of 32,448,000 barrels per day thus represented 33.3% of what was produced globally, down from their 33.7% share of October global output, as oil output increases by the US, Canada, Norway, the UK and Brazil more than made up for OPEC's decrease...OPEC's November 2016 production, excluding ex-member Indonesia, was at 33,131,000 barrels per day, so even after their production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are only producing 2.5% less oil than they were producing a year ago, at a time when they were producing at a record level...

  however, even after the increase in global oil output that we can see on the above graph, there was again a deficit in the amount of oil being produced globally, as the next table from the OPEC report will show us..  

November 2017 OPEC report global oil demand

the table above comes from page 38 of the Decmeber OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2016 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2017 over the rest of the table...on the "Total world" line of the fifth column, we've circled in blue the figure that's relevant for November, which is their estimate of global oil demand for the fourth quarter of 2017...  

OPEC's estimate is that over the 4th quarter of this year, all oil consuming areas of the globe will be using 98.08 million barrels of oil per day.....at the same time, as OPEC showed us in the oil supply section of this report and the summary supply graph above, after the OPEC and non-OPEC production cuts, the world's oil producers were only producing 97.44 million barrels per day during November, which means that there has been a shortfall of around 640,000 barrels per day in global oil production vis-a vis demand during the month... 

global oil production estimates for October were also revised lower with this report, to 96.60 million barrels per day, so that now means there was also a deficit of 1,480,000 barrels per day in October global output, which we had previously figured to be a global oil deficit of around 1,370,000 barrels per day...meanwhile, since there were no revisions to oil production or demand estimates for the prior months, that means the figures we computed for the previous months of this year remain as they were...those include a shortfall of 1,540,000 barrels per day in September global output, and a global shortfall of 1,630,000 barrels per day in August, when global oil production was even lower...

prior to that, we estimated a global oil deficit of 560,000 barrels per day in July, a global oil surplus of 850,000 barrels per day in June, a global oil deficit of 360,000 barrels per day in May, a global oil deficit of 670,000 barrels per day in April, a global surplus of 390,000 barrels per day in March and average surpluses over January and February of around 610,000 barrels per day....taken together, the data from these monthly OPEC reports means that after eleven months of OPEC production cuts, the global oil glut has been reduced by roughly 95.27 million barrels of oil since the 1st of the year, with most of that reduction coming over the past four months...more than 30.9 million barrels of that drawdown from global oil supplies came out of US oil inventories; last week we reported that US crude inventories had fallen to 448,103,000 barrels as of December 1st; that was down from the 479,012,000 barrels we had in storage on December 30th 2016, in the last report for last year...as we'll see, that draw out of US supplies also continued into early December, according to the latest EIA report...

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 8th, showed that our oil imports edged up as dilbit flows from Canada were restored, while our refineries slowed to using oil at a near normal pace for this time of year, but still found it necessary to pull oil out of storage to meet their needs...our imports of crude oil rose by an average of 161,000 barrels per day to an average of 7,363,000 barrels per day during the week, while our exports of crude oil fell by an average of 272,000 barrels per day to average 1,086,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,277,000 barrels of per day during the week, 433,000 barrels per day more than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 73,000 barrels per day to another record high of 9,780,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,057,000 barrels per day during the reporting week...  

during the same week, US oil refineries were using 16,952,000 barrels of crude per day, 243,000 barrels per day less than they used during the prior week, while at the same time 696,000 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 199,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+199,000) 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 fell to an average of 7,442,000 barrels per day, 3.3% less than the 7,697,000 barrels per day average imported over the same four-week period last year....the 696,000 barrel per day decrease in our total crude inventories came about on a 731,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 35,000 barrel per day addition of oil to our Strategic Petroleum Reserve, which was likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency...this week's 73,000 barrel per day increase in our crude oil production included a 65,000 barrel per day increase in output from wells in the lower 48 states, and a 8,000 barrels per day increase in output from Alaska....the 9,780,000 barrels of crude per day that were produced by US wells during the week ending December 8th was yet another new record high for US output, 11.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up 16.0% from the recent output nadir of 8,428,000 barrels per day produced during the last week of June 2016...

US oil refineries were operating at 93.4% of their capacity in using those 16,952,000 barrels of crude per day, down from 93.8% of capacity the prior week, still a bit above their normal pace for this time of year....the 16,952,000 barrels of oil that were refined this week was 4.4% less than the record 17,725,000 barrels per day that were being refined at the end of August, but still 2.9% more than the 16,474,000 barrels of crude per day that were being processed during week ending December 9th, 2016, when refineries were operating at 90.5% of capacity, and 10.4% above the 10-year seasonal average for this time of the year... 

even with the decrease in the amount of oil refined, gasoline output from our refineries was 4.5% higher, increasing by 371,000 barrels per day to 10,129,000 barrels per day during the week ending December 8th, after two equally inexplicable gasoline output drops in a row...that increase meant our gasoline production was 3.1% higher than the 9,828,000 barrels of gasoline that were being produced daily during the week ending December 9th of last year...on the other hand, our  refineries' production of distillate fuels (diesel fuel and heat oil) fell by 155,000 barrels per day to 5,247,000 barrels per day, down from last week's record high output...however, that was still 4.8% more than the 5,009,000 barrels per day of distillates 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 5,664,000 barrels to 226,546,000 barrels by December 1st, following a year-high 6,780,000 barrel jump in gasoline supplies the prior week...that was as our domestic consumption of gasoline rose by 196,000 barrels per day to 9,091,000 barrels per day, while our exports of gasoline fell by 163,000 barrels per day to 731,000 barrels per day, and while our imports of gasoline fell by 5,000 barrels per day to 483,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 26 weeks, our gasoline inventories are still down by 6.6% from their pre-summer high of 242,444,000 barrels, and down by 1.5% from last December 9th's level of 230,045,000 barrels, even as they are now roughly 4.1% above the 10 year average of gasoline supplies for this time of the year...   

meanwhile, with the drop in our distillates production, our supplies of distillate fuels fell by 1,370,000 barrels to 128,076,000 barrels over the week ending December 8th, the eleventh decrease in distillates supply in fifteen weeks...this week's drop was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 643,000 barrels per day to 4,380,000 barrels per day, even as our exports of distillates fell by 360,000 barrels per day to 1,212,000 barrels per day, while our imports of distillates rose by 4,000 barrels per day to 149,000 barrels per day...after this week’s decrease, our distillate inventories were thus 17.9% lower at the end of the week than the 155,935,000 barrels that we had stored on December 9th, 2016, and roughly 5.9% lower than the 10 year average of distillates stocks at this time of the year

finally, even with the week's increase in our oil imports and the decrease in our refining, our commercial crude oil inventories still fell for the 29th time in the past 36 weeks, decreasing by 5,117,000 barrels, from 448,103,000 barrels on December 1st to a 26 month low of 442,986,000 barrels on December 8th....while our oil inventories as of December 8th were thus 8.3% below the 483,193,000 barrels of oil we had stored on December 9th of 2016, and 3.4% lower than the 458,354,000 barrels of oil that we had in storage on December 11th of 2015, they were still 27.5% greater than the 347,466,000 barrels of oil we had in storage on December 12th of 2014, before the current oil glut in the US had really built up our crude supplies to above normal levels...  

This Week's Rig Count

US drilling activity decreased for the first time in 6 weeks during the week ending December 15th, with a drop in oil directed rigs responsible for the decrease, despite elevated oil prices...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 1 rig to 930 rigs in the week ending on Friday, which was still 293 more rigs than the 637 rigs that were deployed as of the December 16th 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 fell by 4 rigs to 747 rigs this week, which was still 237 more oil rigs that were running a year ago, while the week's oil rig count was 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 rose by 3 rigs to 183 rigs this week, which was still only 57 more gas rigs than the 126 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...

offshore drilling activity in the Gulf of Mexico and nationally was down by 1 rig to 19 rigs this week, which was also down from the 22 rigs deployed in the Gulf of Mexico and nationally a year ago....the count of active horizontal drilling rigs increased by 5 rigs to 801 horizontal rigs this week, which was up by 289 rigs from the 512 horizontal rigs that were in use in the US on December 16th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the directional rig count was down by 2 rigs to 69 rigs this week, which was still up from the 54 directional rigs that were working during the same week last year....likewise, the vertical rig count was down by 4 rigs to 60 vertical rigs this week, but that was also down from the 71 vertical rigs that were deployed on December 16th 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 15th, the second column shows the change in the number of working rigs between last week's count (December 8th) and this week's (December 15th) count, the third column shows last week's December 8th 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 9th of December, 2016...             

December 15 2017 rig count summary

as you can see from the above, the 3 rig increase of rigs targeting natural gas was all in the Marcellus and all in Pennsylvania, the second week in a row that the Marcellus has seen a three rig increase...it's possible the new drilling there was meant to coincide with the opening of several pipelines that would take natural gas away from this area; the original start date for the Rover was to be in December, but that was delayed when their drilling was shut down after several fluid spills...FERC just gave the Rover the go ahead this week, and in addition the Leach XPress pipeline, which originates near the PA border and will deliver gas to central Ohio and thence points south, is expected to commence service on January 1st...we should also note that outside of the major producing states listed in the first table above, a rig was also shut down in Montana this week, where one rig still remains active, which is nonetheless an increase from a year ago, when no rigs were working in Montana..

 

note: there’s more here

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