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 14, 2018

one cold snap burns 11.5% of US natural gas supplies; 8 more weeks like that and our gas storage will be totally empty

the cold week that we saw at the beginning of this month set quite an amazing record for US natural gas supplies, and put an exclamation point on our concerns about the natural gas that we're exporting...in the first week of the new year, or more specifically over the week that ended on January 5th, the demand for natural gas was so great that we had to use nearly eleven and a half percent of all the natural gas that was in storage in the US, in addition to everything that was produced by US wells during the week, to meet the needs of heating, industry, power generation, and contracted exports...as you know, on Thursday of every week (except on holidays), the EIA publishes the Weekly Natural Gas Storage Report, which reports on the amount of natural gas in storage in each of the 5 energy regions and in total as of the prior Friday...this week, that report showed that we had withdrawn a record 359 billion cubic feet of natural gas from storage during the week, an all time high by more than 25% over the previous record gas withdrawal...since not many of you would follow a link to it, we'll just include the lead table from that natural gas storage report here now, and explain what happened:

January 13 2018 natural gas storage report of Jan 11 for Jan 5

the above is a copy of the initial table from this week's Natural Gas Storage Report, covering the changes of natural gas in US storage for the week ending January 5th...the first column of numbers shows the amount of natural gas in billions of cubic feet that was left stored in each US region and naturally as of January 5th; the 2nd column shows the amount of natural gas in billions of cubic feet that had been stored as of a week earlier, ie as of December 29th, and the 3rd column shows the change between the two...then, in the columns on the right, we have similar totals of natural gas in storage during the same week a year ago, and the 5 year averages for this time of year....thus, we see that the US started the week with 3,126 billion of cubic feet of natural gas in storage, and by the end of the week that had fallen to 2,767 billion of cubic feet, which means we used 11.5% of all the natural gas we had in the entire country in just one short week...with just 2,767 billion of cubic feet left at the end of the week, it means quite simply that if we continue using natural gas from storage at the same 359 billion cubic feet rate that we used it this week, we'll run out of it in 8 weeks, completely. there will be no natural gas left in the entire country. period.

next, we'll show you a chart of our natural gas supplies over time so you can see how this week's drop stands out...

January 13 2018 natural gas supplies as of January 5

the above graph also comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas in storage in the lower 48 states over the period from December 2015 up to the week ending January 5th 2018 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the two years shown by the graph…thus the grey area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the end of September, falling through the winter, and usually bottoming out at the end of March, depending of course on the weather during any given year...we started the 2017-18 heating season with our supplies roughly 5% below normal, short of 3,800 billion cubic feet, and with this big drop in the first week of 2018, about half of our normal range of winter supplies are already gone, and we are now tracking the 5-year minimum of the polar vortex year of 2014, which is indicated by the bottom of the grey shading...

we can also see by the blue line above that the quantity gas we had stored throughout 2016 was at a record high for each week during the year, up until October, when US natural gas supplies topped 4 trillion cubic feet for the first time in history...gas supplies then dropped from that record to nearly normal by the end of December, at which time we felt that shouldn't have happened in a warmer than normal winter...by March of this past year, based on John Kemp's data that showed heating demand was 17% below normal for the year, we warned that we were not covering our natural gas needs from production, even while winter temperatures were above normal, and that something would have to give if we ever saw a colder than normal winter...

to the best of my knowledge, the EIA does not publish weekly natural gas production figures, or how much gas comes out of US wells each week...they do publish monthly natural gas production figures, however, with a couple month lag for the time it takes them to compile accurate data....looking at that data, we can see that over the first 10 months of 2017, US natural gas production totaled 22,113 billion cubic feet, or an average of 2,211.3 billion cubic feet per month....there are 304 days during the first ten months of the year, so that means our average daily natural gas production was 72.74 billion cubic feet during 2017...multiplying that by 7 gives us a average weekly natural gas production of 509.18 billion cubic feet for the first ten months of the year...if that average held through to the end of the year, that suggests that during the week ending January 5th, we used that 509 billion cubic feet of production, plus the 359 billion cubic feet of natural gas we took out of storage, for an approximate total of 868 billion cubic feet of natural gas for the week ending January 5th...put another way, by using 868 billion cubic feet during that week, we were using 70% more natural gas than what we were producing...

this week's record drawdown really got started on New Year's Day, when the US set a record for natural gas consumption...the EIA commemorated that record with a blog post, titled Cold weather, higher exports result in record natural gas demand which included a couple graphics which we think will be useful in explaining what happened...

January 13 2018 record nat gas demand week of  Jan 5

as we noted, the above graphic comes from the EIA post titled Cold weather, higher exports result in record natural gas demand, which explains the record natural gas usage in the US on New Year's day...on the left half of that graphic, the EIA presents a very tight graph showing US natural gas consumption daily from the beginning of 2013 to the end of 2017...of course, one can't discern any daily amounts on such a small graph, but they highlight the previous record of 143.3 billion cubic feet of natural gas that were used on January 7th, 2014, which was topped by the 150.7 billion cubic feet of natural gas that were used on New Year's day of this year....not coincidentally, that brown graph shows our natural gas exports in a darker shade across the bottom of the graphic...

on the right of that brown graph, the EIA presents a bar graph that highlights the differences in natural gas usage between the old single day record and the new one set on New Year's day...the blue part of each bar represents the portion of the day's natural gas consumption that was used for heating, and it's pretty obvious that heating use was greater on January 7th 2014 than on January 1st of this year...next, the yellow part of each bar is that portion of each day's natural gas consumption that was used for power generation, and here the 2018 record clearly tops the power usage of old record in 2014...industrial usage of natural gas, shown in green, may have also been greater on 1/1/18 than on 1/7/14, but not by much..."other" usage of gas, shown in brown, was also quite close...but the big difference, shown in cherry red and sangria at the top of the bars, is our natural gas exports, by pipeline to Mexico and as LNG by tanker to destinations world wide, that really put this week's record gas demand over the top...

from here, the shortfalls during winter can only get worse....for instance, earlier this year, the EIA projected that natural gas for power generation would increase by 8% in 2018...that would add nearly 3 billion cubic feet more to daily demand...but the real issue going forward is going to be increasing LNG exports, which, based on those liquefaction facilities already under construction, could easily triple by the end of next winter...since much of the natural gas that the power plants and the LNG exporters will be using is already under contract at the near record low prices that natural gas has been quoted at over the past few years, it will be the residential and commercial users that will be paying the higher prices that the coming shortage of natural gas will precipitate...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, also details for the week ending January 5th, and showed a pullback in operations at US refineries from the record pace of recent weeks, but also an equally large drop in oil production from US wells, which meant we again had to pull oil out of storage to meet our needs...our imports of crude oil fell by an average of 308,000 barrels per day to an average of 7,658,000 barrels per day during the week, while our exports of crude oil fell by an average of 460,000 barrels per day to an average of 1,015,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,643,000 barrels of per day during the week, 152,000 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 290,000 barrels per day to 9,492,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,135,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 17,323,000 barrels of crude per day, 282,000 barrels per day less than they used during the prior week, while 707,000 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 481,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+481,000) 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 7,863,000 barrels per day, now 4.3% less than the 8,218,000 barrels per day average imported over the same four-week period last year....the 707,000 barrel per day decrease in our total crude inventories was entirely from our commercial stocks of crude oil, as inventories in our Strategic Petroleum Reserve remained unchanged... this week's 290,000 barrel per day decrease in our crude oil production was due to a 293,000 barrel per day decrease in output from wells in the lower 48 states, possibly due to severe weather in North Dakota, while oil output from Alaska, where it was warm, increased by 3,000 barrels per day....the 9,492,000 barrels of crude per day that were produced by US wells during the week ending January 5th was still 8.2% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.6% 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 95.3% of their capacity in using those 17,323,000 barrels of crude per day, down from the record 96.7% of capacity the prior week, but still above normal for this time of year....the 17,323,000 barrels of oil that were refined this week were 2.3% less than the record 17,725,000 barrels per day that were being refined at the end of August of this year, but were 1.3% more than the 17,107,000 barrels of crude per day that were being processed during the first week of 2017, when refineries were operating at 93.6% of capacity....

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 157,000 barrels per day to 9,526,000 barrels per day during the week ending January 5th, after falling by 562,000 barrels per day....that drop also left our gasoline production 1.5% lower than the 9,666,000 barrels of gasoline that were being produced daily during the week ending January 6th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 301,000 barrels per day to 5,291,000 barrels per day, after rising 386,000 barrels per day to new record highs over the prior two weeks...that decrease left the week's distillates production fractionally lower than the 5,329,000 barrels of distillates per day that were being produced during the the first week of 2017....   

even with the decrease in our gasoline production, our gasoline inventories at the end of the week rose by 4,135,000 barrels to 237,322,000 barrels by January 5th, their ninth increase in a row...that was as our domestic consumption of gasoline rose by 164,000 barrels per day from last week's 10 month low to 8,814,000 barrels per day, and as our exports of gasoline fell by 149,000 barrels per day to 804,000 barrels per day, while our imports of gasoline fell by 85,000 barrels per day to 264,000 barrels per day....however, even after nine consecutive builds, our gasoline inventories are still down by 2.1% from their pre-summer high of 242,444,000 barrels, and down by 1.3% from last January 6th's level of 240,473,000 barrels, even as they are roughly 5.4% above the 10 year average of gasoline supplies for this time of the year...      

likewise, in spite of the drop in our distillates production, our supplies of distillate fuels rose by 4,254,000 barrels to 143,088,000 barrels over the week ending January 5th, following a year high increase of 8,899,000 barrels the prior week...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 67,000 barrels per day to 3,655,000 barrels per day, and as our exports of distillates rose by 341,000 barrels per day to 1,203,000 barrels per day, while our imports of distillates rose by 46,000 barrels per day to 175,000 barrels per day... even after this week’s inventory increase, however, our distillate supplies were still 15.9% lower at the end of the week than the 170,041,000 barrels that we had stored on January 6th, 2017, and roughly 1% lower than the 10 year average of distillates stocks at this time of the year… 

finally, despite the slowdown in oil used in refining, the coincident drop in our crude oil production meant that our commercial crude oil inventories fell again, for the 33rd time in the past 40 weeks, decreasing by 4,948,000 barrels, from 424,463,000 barrels on December 29th to a 28 month low of 419,515,000 barrels on January 5th....while our oil inventories as of January 5th were thus 13.2% below the 483,109,000 barrels of oil we had stored on January 6th of 2017, and 7.0% lower than the 451,190,000 barrels of oil that we had in storage on January 8th of 2016, they were still 18.4% greater than the 354,195,000 barrels of oil we had in storage on January 9th of 2015, before the US oil glut became a headline issue... 

This Week's Rig Count

US drilling activity increased for the tenth time in the past 24 weeks during the week ending January 12th, but this week the increase was by the most for any week since May 19th....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 15 rigs to 939 rigs in the week ending on Friday, which was also 280 more rigs than the 659 rigs that were deployed as of the January 13th 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 rose by 10 rigs to 752 rigs this week, which was also 230 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 rose by 5 rigs to 187 rigs this week, which was 51 more gas rigs than the 136 natural gas rigs that were drilling a year ago, but 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 increased by 2 rigs to 19 rigs this week, but that was still down from the 24 rigs that were drilling from platforms in the Gulf of Mexico a year ago...the total national offshore count was the same, also up two rigs to 19 rigs for 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 6 rigs from the 25 offshore rigs that were working last January 13th...

this week's count of active horizontal drilling rigs was up by 7 rigs to 805 horizontal rigs this week, and also up by 268 rigs from the 537 horizontal rigs that were in use in the US on January 13th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the directional rig count was up by 8 rigs to 72 directional rigs this week, which was also up from the 59 directional rigs that were working during the same week last year....meanwhile, the vertical rig count wasunchanged at 62 vertical rigs this week, but that was down from the 63 vertical rigs that were deployed on January 13th 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 the 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 12th, the second column shows the change in the number of working rigs between last week's count (January 5th) and this week's (January 12th) count, the third column shows last week's January 5th 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 13th of January, 2017...               

January 12 2018 rig count summary

it seems odd that Texas drilling pulled back, even as the country saw the largest increase in drilling in more than half a year...when oil & gas drilling first started coming back after prices stabilized in mid-2016, Texas drilling, especially in the Permian basin, accounted for half the new rigs...now Texas drilling has stalled, while Permian basin work seems to have moved across the border to New Mexico...

 

note: there's more here...

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