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, February 25, 2018

net US oil imports fall to lowest on record, OPEC report shows global oil glut growing again..

oil prices were higher for the second week in a row, pushing to an 18 day high on falling US oil inventories, troubles in Libya and Saudi jawboning...after a 4.2% jump to $61.68 a barrel the prior week, oil contracts for March delivery rose another 22 cents on Tuesday, on reports that oil inventories at the US crude pricing depot at Cushing, Oklahoma fell 2.1 million barrels to a 3 year low, with pricing for that contract expiring at $61.90 a barrel, a 2-week high...at the same time, the new front month crude contract for delivery in April rose 24  cents to $61.79 a barrel...now trading oil for April, oil prices fell 11 cents to $61.68 a barrel on Wednesday on expectations that the EIA report the next day would show rising crude inventories in the US...however, when that report unexpectedly showed the first decrease in US oil supplies in four weeks, oil prices rose $1.09, or about 1.8%, to close Thursday at $62.77 a barrel, with a weakening dollar contributing to the rally...oil prices then rose another 78 cents to end the week at $63.55 a barrel on Friday, on news of the shutdown of a major oilfield in Libya and Saudi comments that the OPEC effort to cut stockpiles had been successful...US oil prices for April thus ended the week with a gain of exactly $2.00, or 3.2%, settling at its highest level since February 5th...

natural gas prices were also higher for the week, largely on forecasts of a return to more seasonable winter weather for much of the US, with prices for March climbing from what was near an 18 month low last week by 5.8 cents on Tuesday and 4.3 cents on Wednesday, before falling back 2.5 cents on Thursday after the release of the weekly storage report, and then losing another nine-tenths of a cent on Friday to close the week with a gain of 6.7 cents, or 2.6%, at $2.625 per mmBTU, still well below the price most US gas producers need to break even...the week's natural gas storage report indicated that our natural gas in storage fell by 124 billion cubic feet to 1,760 billion cubic feet in the week ending Friday, February 16, 2018, which left our gas supplies 609 billion cubic feet, or 25.7% lower than the 2,369 billion cubic feet that was in storage on February 17th of last year, and 433 billion cubic feet, or 19.0% below the five-year average of 2,172 billion cubic feet for the seventh week of the year...the typical natural gas withdrawal for the seventh week of the year has averaged 145 billion cubic feet over the past 5 years, so the withdrawal during the cited week was 21 billion cubic feet below normal..

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending February 16th, showed that due to a large increase in our oil exports, along with a similarly large decrease in our oil imports, we had to pull crude oil out of storage for the first time in four weeks, despite the slowest oil refining since the hurricane related shutdowns...our imports of crude oil fell by an average of 867,000 barrels per day to an average of 7,021,000 barrels per day during the week, while our exports of crude oil rose by an average of 722,000 barrels per day to an average of 2,044,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 4,977,000 barrels of per day during the week, 1,589,000 barrels per day less than the net imports of the prior week and the lowest net imports since the EIA started keeping such records in 2001...at the same time, field production of crude oil from US wells fell by 1,000 barrels per day to 10,270,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,247,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 15,833,000 barrels of crude per day, 329,000 barrels per day less than they used during the prior week, while at the same time 330,000 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 256,000 barrels per day less than what refineries reported they used during the week..to account for that disparity, the EIA needed to insert a (+256,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"...(how this weekly oil data is gathered, and the likely reason for that "unaccounted" oil, is explained here)...since there was a 653,000 barrel per day change in that 'unaccounted for oil', from -352,000 barrels per day last week to +256,000 barrels per day this week, the week over week changes here are correspondingly unreliable...

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 7,808,000 barrels per day, 6.6% less than the 8,360,000 barrel per day average we imported over the same four-week period last year....the 330,000 barrel per day decrease in our total crude inventories came from a 231,000 barrel per day withdrawal from our commercial stocks of crude oil and a 99,000 barrel per day withdrawal of oil from our Strategic Petroleum Reserve, possibly part of the sale of oil reserves included in the recently passed bill to fund the government...this week's 1,000 barrel per day decrease in our crude oil production was due to an 11,000 barrel per day decrease in output from Alaska, which was partially offset by a 10,000 barrel per day increase in output from wells in the lower 48 states...the 10,270,000 barrels of crude per day that were produced by US wells during the week ending February 16th was 14.1% more than the 9,001,000 barrels per day that US wells were producing on February 17th of last year, and 21.9% 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 88.1% of their capacity in using 15,833,000 barrels of crude per day, down from 89.8% of capacity the prior week, and down from the wintertime record 96.7% of capacity set just seven weeks earlier, as US refineries are now into the pre-spring blend changeover and maintenance season...the 15,833,000 barrels of oil that were refined this week were 10.1% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, but were 3.7% more than the 15,271,000 barrels of crude per day that were being processed during the week ending February 17th, 2017, when refineries, undergoing seasonal maintenance, were operating at 84.3% of capacity....

even with the drop in the amount of oil being refined, gasoline production by our refineries was much higher, increasing by 515,000 barrels per day to 10,107,000 barrels per day during the week ending February 16th, after decreasing by 493,000 barrels per day the prior week....that increase meant our gasoline production was 7.2% higher for the week than the 9,429,000 barrels of gasoline that were being produced daily during the week ending February 17th of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 322,000 barrels per day to 4,489,000 barrels per day, after falling by 317,000 barrels per day the prior week...but even after that decrease, the week's distillates production was still fractionally higher than the 4,467,000 barrels of distillates per day than were being produced during the equivalent week of 2017....    

with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week rose by 261,000 barrels to 249,334,000 barrels by February 16th, the fourteenth increase in 15 weeks....that was even as our exports of gasoline rose by 279,000 barrels per day to 918,000 barrels per day, while our imports of gasoline fell by 288,000 barrels per day to 350,000 barrels per day, and while our domestic consumption of gasoline fell by 57,000 barrels per day to 9,002,000 barrels per day...but even after fourteen increases in fifteen weeks, our gasoline inventories are still 2.8% lower than last February 17th's level of 256,435,000 barrels, even as they are now roughly 7.3% above the 10 year average of gasoline supplies for this time of the year...       

meanwhile, with the week's drop in distillates production, our supplies of distillate fuels fell by 2,422,000 barrels to 138,945,000 barrels over the week ending February 16th, the fourth decrease in distillates supplies in the past ten weeks...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 42,000 barrels per day to 4,224,000 barrels per day, while our exports of distillates fell by 177,000 barrels per day to 854,000 barrels per day and as our imports of distillates rose by 7,000 barrels per day to 243,000 barrels per day...after this week’s inventory decrease, our distillate supplies were 15.9% lower at the end of the week than the 165,133,000 barrels that we had stored on February 17th, 2017, and 2.1% lower than the 10 year average of distillates stocks at this time of the year… 

finally, the big increase in our oil exports combined with a similarly large drop in our oil imports meant that our refineries had to pull oil out of our commercial supplies of crude oil for the 11th time in 14 weeks and for the 36th time in the past 49 weeks, as our commercial crude supplies decreased by 1,616,000 barrels, from 422,095,000 barrels on February 9th to 420,479,000 barrels on February 16th....with that drop occurring at a time of year when oil supplies are usually increasing, our oil inventories as of that date ended the week 18.9% below the 518,683,000 barrels of oil we had stored on February 17th of 2017, and 11.7% lower than the 476,325,000 barrels of oil that we had in storage on February 19th of 2016, even as they were still 5.1% greater than the 399,943,000 barrels of oil we had in storage on February 20th of 2015, at a time when US supplies of oil had just begun to increase...

OPEC's Monthly Oil Market Report

we also want to quickly review OPEC's February Oil Market Report (covering January OPEC & global oil data), which was released the week before last week, and which is available as a free download....the first table from this report that we'll look at is from page 69 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...    

January 2018 OPEC crude output via secondary sources (2)

as we can see from this table of official oil production data, OPEC oil output slipped by 8,100 barrels per day in January to 32,302,000 barrels per day, from an December production total of 32,310,000 barrels per day, but that was a figure that was originally reported as 32,416,000 barrels per day, so their production for December was effectively a 114,000 barrel per day decrease from previously reported figures (for your reference, here is the table of the official December OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, the main reasons that OPEC's January output fell by 8,100 barrels per day from revised December figures was the decrease of 47,300 barrels per day in output from Venezuela, which is suffering from the effects of economic sanctions imposed by the US...on the other hand, oil output from Iraq increased by 30,200 barrels per day, which leaves them and Nigeria as the only OPEC members whose production is well in excess what their pact calls for, as can be seen in the table below:  

January 2018 OPEC output vs quota 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 for January 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 country produced over or under their quota for the month...note that Venezuela alone, now 330,000 barrels per day below quota, more than makes up for smaller amounts of over production by other OPEC members...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from Febraury 2016 to January 2018, and it comes from page 70 of the February OPEC Monthly Oil Market Report....on this graph, 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...   

January 2018 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose to 97.66 million barrels per day in January, up by .35 million barrels per day from a December output total of 97.31 million barrels per day, which was revised down by .18 million barrels per day from the 97.49 million barrels per day global oil output for December that was reported a month ago...global oil output for January was also 1.49 million barrels per day higher than the 95.82 million barrels of oil per day that was being produced globally in January a year ago (see last February's OPEC report online (pdf) for the year ago data)... OPEC's January  production of 32,302,000 barrels per day thus represented 33.1% of what was produced globally, down from 33.2% in December, as oil output increases by Canada, Mexico, Norway, UK, Bahrain, Brazil and Kazakhstan were partially offset by decreases in output from the US, Malaysia, Oman, Russia and Azerbaijan....OPEC's January 2017 production was at 32,139,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding their new member Equatorial Guinea, are now producing 29,000 more barrels per day of oil than they were producing a year ago, during the first month that their production quotas went into effect, with the increase largely due to recoveries of oil production in Libya and Nigeria... 

the increase in global oil output that we can see in the above purple graph meant there was a surplus in the amount of oil being produced globally, as the next table from the OPEC report will show us..    

January 2018 OPEC report 2018 global oil demand

the table above comes from page 41 of the February OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2018 over the rest of the table...on the "Total world" line of the second column, we've circled in blue the figure that's relevant for January, which is their revised estimate of global oil demand for the first quarter of 2018...  

OPEC's estimate is that over the 1st quarter of this year, all oil consuming areas of the globe will using 97.23 million barrels of oil per day, which is an upward revision from their prior estimate of 97.17 million barrels of oil per day.....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, even after the OPEC and non-OPEC production cuts, the world's oil producers were producing 97.66 million barrels per day during January, which means that there was a surplus of around 430,000 barrels per day in global oil production vis-a vis demand during the month... 

global oil production estimates for December were also revised lower with this report, by 0.18 million barrels per day to 97.31 million barrels per day, while global demand figures for the 4th quarter were revised 0.09 million barrels per day higher at 98.29 million barrels per day; that now means there was a deficit of 980,000 barrels per day in December global oil output, which we had previously figured to be a global oil deficit of around 760,000 barrels per day...in addition, there was also a revision to oil demand estimates for 3rd quarter, which on a cumulative basis for the year worked out to be a 0.03 million barrels per day upward revision to 2017 oil demand (which we have circled in green)...in round numbers, that means our previous estimate of a 183 million barrel oil shortfall for 2017 was about 10 million barrels too low, a revision to 2017 that's almost enough to offset the 13.33 million barrels of oil surplus that we saw globally in January...

This Week's Rig Count

US drilling activity increased for just the 13th time in the past 30 weeks during the week ending February 23rd, but the rig count is still up by 20 over that span, as the increases have exceeded the decreases....Baker Hughes reported that the total count of active rotary rigs running in the US was up by 3 rigs to 978 rigs in the week ending on Friday, which was also 224 more rigs than the 754 rigs that were deployed as of the February 24th report of 2017, while it was still down by nearly half 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 1 rig to 799 rigs this week, which was also 197 more oil rigs than were running a year ago, while the week's oil rig count still remained well 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 increased by 2 rigs to 179 rigs this week, which was also 28 more gas rigs than the 151 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 from platforms in the Gulf of Mexico decreased by 1 rig to 17 rigs for the week, which was the same number of rigs that were deployed in the Gulf of Mexico a year ago...the total offshore US rig count last year was also at 17 rigs, same as this week's total...meanwhile, a rig began drilling from a platform on an inland lake in Louisiana this week, bringing the "inland waters" rig count up to 2 rigs, which was still down from 4 rigs on inland waters as of February 24th of last year...

the week's count of active horizontal drilling rigs was up by 3 rigs to 842 horizontal rigs this week, which was also up by 218 rigs from the 624 horizontal rigs that were in use in the US on February 24th 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 vertical rig count was up by 2 rigs to 67 vertical rigs this week, which up from the 61 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count was down by 2 rigs to 69 directional rigs this week, which was the same number of directional rigs that were deployed on February 24th 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 February 23rd, the second column shows the change in the number of working rigs between last week's count (February 16th) and this week's (February 23rd) count, the third column shows last week's February 16th 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 24th of February, 2017...  

February 23 2018 rig count summary

most of what's in the table above is pretty straight forward this week, although as usual Texas is problematic, with so many different basins in or extending into the state...the 2 rig increase in the Permian, however, seems to have been in New Mexico, because both Permian districts in Texas saw their rig counts decline...the one rig gain in Louisiana is net of the the inland lake increase, the offshore decrease, and the additional gas rig that started drilling in the Haynesville; another gas directed rig was added in the Utica, while 2 gas rigs were shut down in the Marcellus, one each in Pennsylvania and West Virginia...the net 2 rig increase for rigs targeting natural gas was from incremental additions in basins not tracked separately by Baker Hughes, so absent some digging through the individual logs, we'll have to leave those as unknown...and in addition to the changes in the major oil and gas producing states shown above, Mississippi saw both rigs which had been active in the state shut down last week, which is the first time on record there were no drilling rigs active in the state; on February 24th year ago, Mississippi drillers had three rigs deployed...

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note: there’s more here…

1 comment:

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