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 10, 2017

US oil supplies drop to 25 month low, distillates production at a record high…

oil prices ended lower for the second week in a row this week, but still remain well above the average break-even prices for most US shale basins, and hence remain at a level that will only encourage further exploitation...after falling a mere 47 cents from a two and a half year high last week, contracts to buy or sell US light crude in January fell 89 cents to end at $57.47 a barrel on Monday, on concerns that higher prices would encourage growth of domestic crude production, as evidenced by the growing US rig count...oil prices then recouped some of those losses on Tuesday, rising 15 cents to $57.62 a barrel, in anticipation that the weekly reports from the API and EIA would show another sizable drop in U.S. crude supplies....while both reports did show decreases in excess of 5 million barrels of crude oil supplies, both reports simultaneously showed surprisingly sharp increases in U.S. inventories of refined fuels, with gasoline supplies seeing the largest increase since January, which thus precipitated a selloff in crude contracts, with oil prices ending Wednesday down $1.66, or 3%, at a three week low of $55.96 a barrel...oil prices then returned to the plus side on Thursday, rising 73 cents, or 1.3%, to settle at $56.69 a barrel, with the rally attributed to a threatened strike in Nigeria, which prompted traders who had sold oil they didn't own on Wednesday to cover their trades and buy it back...oil prices then rose another 67 cents on Friday, on reports of a jump in Chinese crude imports and a Platts report that OPEC production had hit a 6 month low in November, as oil still closed the week 1.7% lower than last week at $57.36 a barrel....


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 1st, showed that our oil imports remained lower than recent weeks, likely due to the Keystone pipeline shutdown, while our refineries were using oil at a record pace for this time of year, and therefore they again found it necessary to pull quite a bit of oil out of storage to meet their needs...our imports of crude oil fell by an average of 127,000 barrels per day to an average of 7,202,000 barrels per day during the week, while our exports of crude oil fell by an average of 54,000 barrels per day to 1,358,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,844,000 barrels of per day during the week, 73,000 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 25,000 barrels per day to another record high of 9,707,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,551,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 17,195,000 barrels of crude per day, 192,000 barrels per day more than they used during the prior week, while at the same time 1,151,000 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 493,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+493,000) 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 7,576,000 barrels per day, 4.9% less than the 7,963,000 barrels per day average imported over the same four-week period last year....the 1,151,000 barrel per day decrease in our total crude inventories included an 801,000 barrel per day withdrawal from our commercial stocks of crude oil and a 350,000 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 25,000 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 5,000 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 December 1st was yet another new record high for US output, 10.7% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.6% more than the 8,697,000 barrels per day of oil that were being produced during the during the equivalent week a year ago...

US oil refineries were operating at 93.8% of their capacity in using those 17,195,000 barrels of crude per day, up from 92.6% of capacity the prior week, thus operating a bit above their normal pace for this time of year...while the 17,195,000 barrels of oil that were refined this week were still 3.0% less than the record 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 outside of the summer months, 4.7% more than the 16,417,000 barrels of crude per day that were being processed during week ending December 2nd, 2016, when refineries were operating at 90.4% of capacity, and 11.7% 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 4.5% lower, decreasing by 464,000 barrels per day to 9,758,000 barrels per day during the week ending December 1st, the second significant drop in a row...that meant out gasoline production was 1.6% lower than the 9,913,000 barrels of gasoline that were being produced daily during the week ending December 2nd of last year...on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 118,000 barrels per day to a record high of 5,402,000 barrels per day, eclipsing the record set two weeks ago...that was also 6.3% more than the 5,083,000 barrels per day of distillates that were being produced during the the same week a year ago....   

even with the drop in our gasoline production, our gasoline inventories at the end of the week rose by 6,780,000 barrels to 220,882,000 barrels by December 1st, the largest jump in gasoline supplies since the third week in January of this year...that was as our exports of gasoline fell by 319,000 barrels per day from last week's record high to 894,000 barrels per day, while our imports of gasoline fell by 38,000 barrels per day to 488,000 barrels per day, and as our domestic consumption of gasoline rose by 171,000 barrels per day to 8,895,000 barrels per day at the same time...however, with significant gasoline supply withdrawals in 15 out of the last 25 weeks, our gasoline inventories are still down by 8.9% from their pre-summer high of 242,444,000 barrels, and down by 3.8% from last December 2nd's level of 229,548,000 barrels, even as they are still roughly 3.4% above the 10 year average of gasoline supplies for this time of the year...  

meanwhile, with our distillates production at a record high, our supplies of distillate fuels rose by 1,667,000 barrels to 129,446,000 barrels over the week ending December 1st, in just the fourth increase in distillates supply in fourteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 145,000 barrels per day to 3,737,000 barrels per day, and as our exports of distillates rose by 442,000 barrels per day to 1,572,000 barrels per day, while our imports of distillates rose by 25,000 barrels per day to 145,000 barrels per day...even after this week’s increase, our distillate inventories were still 17.4% lower at the end of the week than the 156,697,000 barrels that we had stored on December 2, 2016, and 5.1% lower than the 10 year average of distillates stocks at this time of the year

finally, with oil imports remaining below normal while refining continued at a seasonal record pace, our commercial crude oil inventories fell for the 28th time in the past 35 weeks, decreasing by 5,160,000 barrels, from 453,713,000 barrels on November 24th to 448,103,000 barrels on December 1st....since that's now the least amount of oil we've had in commercial storage in more than two years, since the week ending October 23rd, 2015, we'll include a graph that will show the trajectory that brought us to this low point:

December 8 2017 crude oil supplies as of December 1st

on the above graph, taken from the EIA's This Week in Petroleum Oil Section, the blue line shows the recent track of US oil inventories over the period from December 4th, 2015 to December 1st 2017, while the grey shaded area represents the range of US oil inventories millions of barrels as reported weekly by the EIA over the prior 5 years for any given time of year…thus the grey area also shows us the normal range of US oil inventories as they fluctuate from season to season, typically with a high in the springtime, before the summer driving season, and a low in the fall...and as you can see by the blue line, that pattern continued into early this year, where we were announcing a record glut of oil almost weekly up until the week ending March 24th, 2017, when our oil supplies topped out at 535,543,000, an increase of almost 68% from the early 2014 low of 319,079,000 barrels...however, as you can also see by following the blue line, our oil supplies have been falling since, and at 448,103,000 barrels are now 19.5% below their March 24 high...still, while our oil inventories as of December 1st were 7.6% below the 485,756,000 barrels of oil we had stored on December 2nd of 2016, and 1.2% lower than the 453,553,000 barrels of oil that we had in storage on December 4th of 2015, they were still 28.6% greater than the 348,313,000 barrels of oil we had in storage on December 5th of 2014, before the oil glut in the US had really built our crude supplies up to above normal levels...      

This Week's Rig Count

US drilling activity increased for the 5th week in a row, but for just the 8th time out of the last 19 weeks during the week ending December 8th, with only oil directed rigs seeing a small increase...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 2 rigs to 931 rigs in the week ending on Friday, which was also 307 more rigs than the 624 rigs that were deployed as of the December 9th report in 2016, while that 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 rose by 2 rigs to 751 rigs this week, which was also an increase of 253 oil rigs over the past year, 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 was unchanged at 180 rigs this week, which was only 55 more gas rigs than the 125 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 elsewhere nationally was unchanged at 20 rigs this week, which was down from the 22 rigs deployed in the Gulf of Mexico and nationally a year ago...however, there was a new drilling platform that started up on a lake in southern Louisiana this week, where there are now two such drilling platforms deployed, up from the one working on inland waters a year ago...

the count of active horizontal drilling rigs increased by 4 rigs to 796 rigs this week, which was up by 293 rigs from the 503 horizontal rigs that were in use in the US on December 9th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was unchanged at 71 rigs this week, which was still up from the 51 directional rigs that were working during the same week last year....on the other hand, the vertical rig count was down by 2 rigs to 64 vertical rigs this week, which was also down from the 70 vertical rigs that were deployed on December 9th 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 8th, the second column shows the change in the number of working rigs between last week's count (December 1st) and this week's (December 8th) count, the third column shows last week's December 1st 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 8 2017 rig count summary

as you can see from the above, the small net change in the number of rigs running masked considerable activity in several different states and basins this week, with the number of increases just barely eclipsing the number of decreases over the period...what is certainly most notable was the 4 rig decrease in drilling in Ohio, which may include the shut down of a non-shale vertical rig, since the net decrease in the 3 state area of Ohio, Pennsylvania and West Virginia is not reflected in the change in Marcellus and Utica activity...the 26 rigs still working in Ohio are the least since July 2nd, as are the 27 rigs that remained deployed in the Utica shale, probably reflective of natural gas prices which have remained below the average break-even price for the region and have trended lower all year...meanwhile, in addition to the major producing states shown in the first table above, Kansas also saw its only working rig shut down this week, leaving none, down from a year ago, when there was one rig active in the state...

 

Note:  there’s more here

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