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, January 7, 2018

oil prices hit 3 year high, natgas prices fall despite the cold, US refining and distillates production tops last week's records

oil prices pushed to a 3 year high over the first three days of trading this week, but then fell back almost 1% on profit taking on Friday....after closing out 2017 at a two and a half year high of $60.42 a barrel, US crude for February delivery pushed 32 cents higher to a new high early Tuesday before settling 5 cents lower at $60.37 a barrel, as the damaged pipelines in Libya and the UK restarted and the EIA reported that U.S oil production increased to the highest level in more than four decades in October...oil prices then surged nearly $2 on Wednesday after the Iranian's regime's response to domestic economic protests left 21 dead, but then pulled back to end the session with a increase of $1.26, or 2.1 percent, at $61.63 a barrel, its highest closing price since December 2014...oil prices then added to that interim record on Thursday, closing above $62 a barrel for the first time in more than three years, after the EIA reported that U.S. crude supplies shrank by the most since August, with oil prices ending up 38 cents at $62.01 a barrel after trading as high as $62.21...oil prices then retreated on Friday, giving up 57 cents to close at $61.44, as tensions in Iran subsided, oil traders cashed in their profits, and rising U.S. production and weaker refined products demand weighed on the market...for the week, prices ended $1.02, or 1.7% higher, their 4th higher weekly close in a row...

natural gas prices also took an interesting ride this week, especially in light of the record cold outbreak over the Midwest and densely populated eastern US... after hitting a 16 month low at 2.592 per mmBTU on the Thursday before Christmas, natural gas prices rose as expected during the record cold outbreak of Christmas week, finishing at $2.953 on December 29th...however, the nationally quoted futures price for February delivery stalled after rising 10.3 cents to $3.056 on Tuesday and then fell every other day this week, and ended down 15.8 cents at $2.795 per mmBTU, 5.4% lower than it started the week...meanwhile, at the same time that February natural gas futures were falling on the NYMEX, spot prices for power generation reached a record $175.00 per million British thermal units in New York, with other trading hubs in New York and New England seeing prices exceeding $100 per mmBTU...however, since the futures prices did not rise on those local shortages, there would be no way to write contracts for natural gas at those higher prices, and hence no opportunity for the drillers to participate in those prices....since we haven't been doing a very consistent job of tracking natural gas prices, we'll include a graph of their recent trajectory so you can see how their decline has transpired..

January 6 2018 natural gas prices

the above graph shows the daily closing contract price over the last year for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in February at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...as you can see, the contract for February natural gas prices had been sliding since mid-November after holding in the $3.20 to $3.40 per mmBTU range over most of the summer, and crashed to below $2.60 before the cold weather set in...generally, there are only two factors that move domestic gas prices, the amount of gas in storage and the weather...according to the Weekly Natural Gas Storage Report from the EIA, natural gas in storage was at 3,126 billion cubic feet as of Friday, December 29th, a net decrease of 206 billion cubic feet from the previous week...that left natural gas supplies 5.8% below where they were at the end of last year, and also 5.8% below their average level for this time of year...some are anticipating another draw of as much as 300 billion cubic feet when the report for the week just ended is released....if gas in storage being that much below normal with this kind of weather doesn't raise natural gas prices, it's hard to imagine what can...

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 29th, showed that because of an increase in our oil exports, and because US refineries were running at a record pace for this time of year, the amount of oil left in storage in the US fell by the most in 5 months...our imports of crude oil fell by an average of 27,000 barrels per day to an average of 7,966,000 barrels per day during the week, while our exports of crude oil rose by an average of 265,000 barrels per day to an average of 1,475,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,491,000 barrels of per day during the week, 292,000 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 28,000 barrels per day to 9,782,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,273,000 barrels per day during the reporting week...

during the same week, US oil refineries were using 17,608,000 barrels of crude per day, 210,000 barrels per day more than they used during the prior week, while at the same time 1,009,000 barrels of oil per day were being pulled out of 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 326,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+326,000) 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 7,789,000 barrels per day, just 0.1% less than the 7,795,000 barrels per day average imported over the same four-week period last year....the 1,009,000 barrel per day decrease in our total crude inventories came about on a 1,060,000 barrel per day withdrawal from our commercial stocks of crude oil, which was partially offset by a 51,000 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 28,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states, and a 3,000 barrels per day increase in output from Alaska....the 9,754,000 barrels of crude per day that were produced by US wells during the week ending December 29th was 11.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 16.1% above the interim 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 96.7% of their capacity in using those 17,608,000 barrels of crude per day, up from 95.7% of capacity the prior week, and the highest capacity utilization on record for any week outside of the summer driving season....the 17,608,000 barrels of oil that were refined this week were only 0.7% less than the record 17,725,000 barrels per day that were being refined at the end of August of this year, and were 5.5% more than the 16,689,000 barrels of crude per day that were being processed during week ending December 30th, 2016, when refineries were operating at 92.0% of capacity, and roughly 14.3% above the 10-year seasonal average of oil refined at this time of the year... 

despite the increase in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 562,000 barrels per day to 9,682,000 barrels per day during the week ending December 29th, after increasing by 181,000 barrels per day during the prior week...part of this week's decrease was due to a 280,000 barrel per day swing in the weekly adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components, while the record also shows there is typically a large drop in gasoline production at the end of each year....thus, even with this week's large decrease, our gasoline production was still 2.3% higher than the 9,467,000 barrels of gasoline that were being produced daily during the week ending December 30th of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 116,000 barrels per day at the same time to a new record high of 5,592,000 barrels per day, after rising 270,000 barrels per day to a record the prior week...that meant the week's distillates production was 4.9% higher than the prior record 5,329,000 barrels of distillates per day that were being produced during the the last week of 2016....   

in spite of the big drop in our gasoline production, our gasoline inventories at the end of the week rose by 4,813,000 barrels to 233,187,000 barrels by December 29th, their eighth increase in a row...that was because our domestic consumption of gasoline also dropped, by 835,000 barrels per day to 8,650,000 barrels per day, a decrease in demand for gasoline that's consistent with previous holiday week lulls at the end of the year...at the same time, our exports of gasoline rose by 91,000 barrels per day to 953,000 barrels per day, while our imports of gasoline fell by 39,000 barrels per day to 349,000 barrels per day....however, with significant gasoline supply withdrawals throughout the summer months, our gasoline inventories are still down by 3.8% from their pre-summer high of 242,444,000 barrels, and down nearly 1% from last December 30th's level of 235,450,000 barrels, even as they are roughly 5.4% 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 8,899,000 barrels to 129,935,000 barrels over the week ending December 29th, the largest increase in distillates supply in a year but just the seventh increase in eighteen weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 738,000 barrels per day to 3,588,000 barrels per day, and as our exports of distillates fell by 371,000 barrels per day to a 16 week low of 862,000 barrels per day, while our imports of distillates fell by 110,000 barrels per day 129,000 barrels per day... even after this week’s inventory increase, however, our distillate supplies were still 14.1% lower at the end of the week than the 161,685,000 barrels that we had stored at the end of 2016, but now were less than 1% lower than the 10 year average of distillates stocks at this time of the year… 

finally, with higher oil exports and US oil refining at a near record pace, our commercial crude oil inventories fell for the 32nd time in the past 39 weeks, decreasing by 7,419,000 barrels, from 431,882,000 barrels on December 22nd to a 27 month low of 424,463,000 barrels on December 29th......since that's now the least amount of oil we've had in commercial storage since the week ending September 18th, 2015, we'll include a graph that will show how our once excessive glut of oil in storage has evaporated... 

January 6 2018 crude oil supplies as of December 29

on the above graph, taken from the EIA's This Week in Petroleum Crude Oil Section, the blue line shows the recent track of US oil inventories over the period from June 3rd, 2016 to December 29th 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 the 2 years from June 2016 to June 2018…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 oil supply pattern continued into early this year, where we seeing a record supply of oil almost weekly up until the week ending March 31st, 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 424,463,000 barrels are now 20.7% below their March 31st high...there are two reasons that our oil supplies have been dropping so fast; first, that we've been refining more of that oil than ever before, and second, that we've been exporting more of our domestic production than ever before (we continued to import 7.9 million barrels per day in 2017, essentially unchanged from the 7.9 million barrels per day we imported during 2016)...so to illustrate those reasons for our drop in oil supplies, we'll include graphs of that refinery usage and oil exports over the period in question....

January 4 2018 refinery throughput for December 29

this graph of refinery throughput came from the package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out on Thursday; it 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...you can clearly see that this year's oil refining (red) has been beating what were the record or near record levels of last year (yellow) by a large margin since the beginning of April, except for during the disruptions to refining resulting from this year's hurricanes, setting several records for US refining on the way... 

January 6th 2017 crude exports as of December 29

the above graph of US crude oil exports was also from a weekly package of oil graphs that John Kemp of Reuters emailed two weeks ago; i've just added the data points for the two most recent weeks to bring it up to date...as it now stands, this graph now shows weekly US crude oil exports in thousands of barrels per day over the past 16 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over several of the past 17 weeks...recall that US oil exports had been illegal for 40 years, after the OPEC oil embargo had left us short of fuel...that oil export ban was lifted in December of 2015, and as you see through most of 2016 our oil exports stayed under 700,000 barrels per day...from then, until September of 2017, our oil exports had only topped a million barrels per day five times...however, since the hurricane disruption to shipping, there's been a premium for international oil of 10% to 12% over the price of equivalent grades of US crude, encouraging US crude suppliers to sell as much oil overseas as they could, and as a result our oil exports have stayed above a million barrels per day since...

as a result of these record oil exports and record refining, then, our oil inventories as of December 29th were 11.4% below the 479,012 ,000 barrels of oil we had stored at the end of 2016, and 5.9% lower than the 450,956,000 barrels of oil that we had in storage on January 1st of 2016...however, our crude supplies at year end were still 21.7% greater than the 348,806,000 barrels of oil we had in storage on January 2nd of 2015, 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 decreased for the third time in 9 weeks during the week ending January 5th, and by the most for any week in that period....Baker Hughes reported that the total count of active rotary rigs running in the US fell by 5 rigs to 925 rigs in the week ending on Friday, which was still 259 more rigs than the 665 rigs that were deployed as of the January 6th report of 2017, 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 5 rigs to 742 rigs this week, which was still 213 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 remained unchanged at 182 rigs this week, which was only 47 more gas rigs than the 135 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 activity in the Gulf of Mexico was was down by 1 rig to 17 rigs this week, which was also down from the 23 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 17 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, which means this week's national offshore total is down 7 rigs from the 24 offshore rigs that were working last January 6th...in addition, a drilling platform which had been drilling through an inland lake in Louisiana was also shut down this week, leaving the inland waters rig count at just 1 rig, the same as a year ago...

this week's count of active horizontal drilling rigs was up by 2 rigs to 798 horizontal rigs this week, and also up by 264 rigs from the 534 horizontal rigs that were in use in the US on January 6th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count was down by 3 rigs to 62 vertical rigs this week, and that was also down from the 74 vertical rigs that were working during the same week last year....meanwhile, the directional rig count was down by 4 rigs to 64 rigs this week, which was still up from the 57 directional rigs that were deployed on January 6th of 2017...

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 January 5th, the second column shows the change in the number of working rigs between last week's count (December 29th) and this week's (January 5th) count, the third column shows last week's December 29th 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 6th of January, 2017...               

January 5th 2018 rig count summary

notice that the basin variances table doesn't show us much this week; part of the reason for that is that there were few changes in horizontal drilling work, while at the same time Baker Hughes has neglected to add other basins to their coverage for several years, leaving us blind to the changes in those basins, unless we were to dig through the records for individual wells included in Baker Hughes' North America Rotary Rig Count Pivot Table (xls)...we do know, though, that Louisiana accounted for 6 rig shutdowns, and the summary does break out Louisiana drilling into 4 categories; offshore, which was down 1 rig to 16 rigs, inland waters, which was also down 1 to 1 rig, northern Louisiana land rigs, which are mostly in the Haynesville shale, also down 1 rig to 38 rigs, and southern Louisiana land rigs, which are mostly drilling conventional wells, down 3 rigs to 1 rig this week...

 

note:  there’s more here

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