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, March 25, 2018

in a dozen years of US fracking, new oil exports have exceeded all new oil production

oil prices rose to an eight week high this week, decoupling from the prices of US stock markets, which saw their worst week in more than two years, even as the same news events impacted both...US crude for April delivery started by falling 28 cents to $62.06 a barrel Monday, initially in tandem with a 1.5% drop in stocks, on fears of a potential trade war brought on by Trump's steel and aluminum tariffs...but oil prices then rose $1.34 as the April oil contract expired at $63.40 a barrel on Tuesday on fears that Trump would reimpose sanctions on Iran, thereby taking their oil exports off the market...then, in trading oil for May delivery on Wednesday, oil prices for that new front month contract rose $1.63 to $65.17 a barrel, after the EIA surprised traders by reporting an unexpected draw of crude oil from US inventories...oil prices then fell 87 cents to $64.30 a barrel on Thursday as Trump announced trade sanctions on China and China in turn retaliated against 128 American made products...however, oil prices then rallied again on Friday, rising $1.58 to an eight week high of $65.88 a barrel, after Trump appointed war criminal John Bolton, whose lies got us into Iraq and who now wants war with Iran and North Korea, as national security adviser, which oil analysts felt increased the likelihood that the U.S. would re-impose sanctions on Iran and thereby disrupt their oil flow...thus the price of the May oil contract gained $3.45, or 5.5% on the week, in the largest weekly increase for oil prices since mid-February...

meanwhile, natural gas prices drifted lower, even as cold weather forecasts lingered, as traders saw the heating season coming to a close....trading natural gas for April delivery all week, prices fell 3.7 cents on Monday, rose 2.4 cents on Tuesday, and then fell another 8.4 cents over the next three days to end the week down 3.6% at $2.591 per mmBTU, the lowest closing price in over a month...the week's natural gas storage report indicated that natural gas in storage in the US fell by 86 billion cubic feet to 1,446 billion cubic feet over the week ending Friday, March 16th, which left our gas supplies 667 billion cubic feet, or 31.6% lower than the 2,113 billion cubic feet that were in storage on March 17th of last year, and 329 billion cubic feet, or 18.5% below the five-year average of 1775 billion cubic feet typically in storage at the end of the eleventh week of the year....the average withdrawal of natural gas during the eleventh week of the year over the past 5 years has been 53 billion cubic feet, so this was the first time in 5 weeks that our natural gas withdrawals exceeded the norm, in what is still a warmer than average winter nationally...

Oil Exports vs Oil Production

this week i'd like to look at a few situations that i didn't have time for last week...the first of those regards our historical oil & oil products exports, which was inspired by the following graph that appeared on the EIA's blog Today in Energy on March 15th, and was subsequently featured as the "Chart of the Week" in the OilPrice Intelligence Report on March 20th

March 17 2018 crude oil exports through 2017

the above graph, from the EIA blogpost titled "U.S. crude oil exports increased and reached more destinations in 2017", shows average US oil exports annually in thousands of barrels per day from 1920 up until 2017...as that post informs us, "U.S. crude oil exports grew to an average of 1.1 million barrels per day (b/d) in 2017...nearly double the level of exports in 2016....supported by increasing U.S. crude oil production and expanded infrastructure."...as you can see, prior to 2016, our oil exports were negligible, because for 40 years there had been a ban on exporting US crude to any countries other than Canada and Mexico, who were exempt from that ban through the provisions of the North American Free Trade Agreement...however, after intense pressure from the oil industry, Congress included a provision to repeal that export ban in the bipartisan budget bill of December, 2015, Obama signed it, and the oil floodgates were opened...

since that graph only shows annual data till 2017, we'll also include a graph that shows weekly US oil exports right up to the current week's report....

March 21 1018 crude exports as of March 16th

the above graph of US crude oil exports was from the weekly package of oil graphs that John Kemp of Reuters emailed out on Wednesday, after the release of the weekly EIA report...it shows weekly US crude oil exports in thousands of barrels per day over the past 18 months, and also highlights the exact amount of our crude exports in thousands of barrels per day over a few select weeks going back to September 1st, when Gulf Coast ports were shut down by Hurricane Harvey...as you can see, our oil exports had only topped a million barrels per day a few times prior to that date...however, after the price of US crude fell to a 10% discount to the comparable international grade, US crude suppliers began to sell as much oil overseas as our pipeline and port infrastructure would allow, and as a result our oil exports have stayed above a million barrels per day since...so far in 2018, our exports of crude oil have average just under 1.5 million barrels per day, compared to well under 100,000 barrels per day in the earlier years of the aughts decade (as shown on the first chart above)...that means our crude exports have increased by more than 1.4 million barrels per day over the period that horizontal drilling & fracking has become the go-to method to increase oil production....now, hold onto that 1.4 million barrels per day increase in oil exports while we look at another graph...

March 24 2018 oil products exports thru March 16

the above graph accompanies the online EIA spreadsheet showing the weekly history of 'Total U.S. Exports of Petroleum Products', and shows our exports of such products in thousands of barrels per day...this is our exports of all the products that are produced by refining crude oil, including gasoline, diesel fuel, heat oil, jet fuel, residual fuels, propane/propylene and other petrochemical feedstocks...as you can see, prior to the advent of fracking, our exports of such products were consistently below 1 million barrels per day (see the spreadsheet)...however, starting around 2005, our exports of these products began to rise, and as you can see from the graph above, have been averaging over 5 million barrels per day over the past 6 months, after the brief spike lower when our refining and exporting was interrupted by last year's hurricanes...hence, our total exports of products that are made from oil has increased by more than 4 million barrels per day since fracking technology has added to our domestic supply...add the increase in our exports of crude to that, and we find that our total exports of crude oil and petroleum products has increased by an average of nearly 5.5 million barrels per day over the past dozen years...

so, let us next look at our oil production history, to see how much the output from US wells has increased over that same time frame....

March 24 2018 oil production thru March 16

the above graph accompanies the online EIA spreadsheet showing the weekly history of crude oil production from US wells, and it shows that production in thousands of barrels per day...here we can see that the oil output from legacy US oil wells was gradually decreasing in the early aughts, but save for the interruptions caused by hurricanes and similar acts of nature, stayed above 5 million barrels per day throughout that period...output from US wells then began to rise in the current decade as oil output from fracked wells was added to the conventional wells totals, and as of the most recent week topped 10.4 million barrels per day for the first time in history...thus we could estimate that output from US wells has increased by 5.3 million barrels per day over the past dozen years...but as we showed earlier in this exercise, the exports of that oil and the products from it has increased by 5.5 million barrels per day over the same period...what this simply and clearly demonstrates is that the entirety of increase in US oil production that has resulted from a dozen years fracking was not for the benefit of US consumers, but rather wholly and exclusively for the benefit of US oil companies, who've found it more profitable to supply foreign customers with oil and oil products, at the expense of the health and well being of the US citizens living in those areas where the dangerous and disruptive fracking has been taking place...

OPEC's Monthly Oil Market Report

i also want to quickly review OPEC's March Oil Market Report (covering February OPEC & global oil data), which was released on Wednesday of last week, and which is available as a free download....the first table from this report that we'll look at is from the page numbered 59 of that report (pdf page 67), 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...    

February 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC's oil output fell by 77,100 barrels per day in February to 32,186,000 barrels per day, from an January production total of 32,263,000 barrels per day, but that was a figure that was originally reported as 32,302,000 barrels per day, so their production for February was actually a 114,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month's revisions)...as you can tell from the far right column above, one of the main reasons that OPEC's February output fell by 77,100 barrels per day from the revised January figures was the decrease of 52,400 barrels per day in output from Venezuela, which continues to suffer from the effects of economic sanctions imposed by the US...in addition, oil output from the Emirates fell by 34,300 barrels per day and oil output from Iraq fell by 25,500 barrels per day...on the other hand, oil output from Nigeria rose by 24,900 barrels per day, which left them and Iraq as the only OPEC members whose production was well in excess what their pact calls for, as can be seen in the table below: 

February 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 February of this year, and the 2nd column shows the allocated daily production quota in millions of barrels of oil per day for each member, after they agreed to cut their oil output by 4% 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 400,000 barrels per day below quota, more than makes up for smaller amounts of over production by Nigeria and Iraq, and to a lesser extent, Iran and Libya...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from March 2016 to February 2018, and it comes from the page numbered 60 (pdf page 68) of the March 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...   

February 2018 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose to a record 98.20 million barrels per day in February, up by .37 million barrels per day from a January output total of 97.83 million barrels per day, which was revised up by .15 million barrels per day from the 97.66 million barrels per day global oil output for January that was reported a month ago...global oil output for February was also 2.32 million barrels per day higher than the 95.88 million barrels of oil per day that was being produced globally in February a year ago (see last March's OPEC report online (pdf) for the year ago data)... OPEC's February production of 32,186,000 barrels per day thus represented just 32.8% of what was produced globally, their lowest on record, down from a revised 33.0% in January, as oil output increases by US, Mexico, Norway, UK, Bahrain, Brazil and Kazakhstan were only partially offset by decreases in output from Canada and Russia...OPEC's February 2017 production was at 31,958,000 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 98,000 more barrels per day of oil than they were producing a year ago, during the second month that their production quotas were in effect, with the increase from last year 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..     

February 2018 OPEC report 2018 global oil demand

the table above comes from page 32 of the March OPEC Monthly Oil Market Report (pdf page 40), 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 February, which is their revised estimate of global oil demand for the first quarter of 2018...  

OPEC's estimate is that during the 1st quarter of this year, all oil consuming areas of the globe will be using 97.27 million barrels of oil per day, which is an upward revision from their prior estimate of 97.23 million barrels of oil per day (which we've circled in green).....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 98.20 million barrels per day during February, which means that there was a surplus of around 930,000 barrels per day in global oil production vis-a vis demand during the month...

meanwhile, the 0.15 million barrels per day upward revision to January's global output offset by the 0.04 million barrels of oil per day upward revision to 1st quarter demand means that our previously computed surplus for January should be revised .11 million barrels per day higher, and thus now stands at 540,000 barrels per day...hence, for the first two months of the year, oil production has exceeded supply by roughly 42.8 million barrels...on the other hand, cumulative global oil demand figures for 2017 were revised higher by 0.02 million barrels per day to 97.01 barrels per day (also circled in green) with this report, because of a 0.09 million barrels per day upward revision to 4th quarter demand figures...in round numbers, that means our previous estimate of a 193 million barrel oil shortfall for 2017 was about 8 million barrels too low, so we can now re-estimate that the global oil deficit for 2017 was approximately 201 million barrels...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending March 16th, indicated that due to another big drop in our oil imports and a big increase in refining, we needed to pull oil out of storage for the 2nd time in the past 8 weeks...our imports of crude oil fell by an average of 508,000 barrels per day to an average of 7,077,000 barrels per day during the week, after falling 418,000 barrels per day the prior week, while our exports of crude oil rose by an average of 86,000 barrels per day to an average of 1,573,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 5,504,000 barrels of per day during the week, 594,000 barrels per day less than out net imports during the prior week...at the same time, field production of crude oil from US wells rose by 26,000 barrels per day to a record high of 10,407,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,911,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,777,000 barrels of crude per day, 410,000 barrels per day more than they used during the prior week, while at the same time 375,000 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 working supply of oil from net imports, from oilfield production, and from storage was 491,000 barrels per day less than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+491,000) 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 possible reasons for that "unaccounted for" oil, is explained here)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports inched up to an average of 7,487,000 barrels per day, which was still 4.8% less than the 7,863,000 barrel per day average we imported over the same four-week period last year....the 375,000 barrel per day decrease in our total crude inventories all came from our commercial stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 26,000 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 6,000 barrel per day increase in output from Alaska...the 10,407,000 barrels of crude per day that were produced by US wells during the week ending March 16th were the highest on record, 14.0% more than the 9,129,000 barrels per day that US wells were producing during the week ending March 17th of last year, and 23.5% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 91.7% of their capacity in using those 16,777,000 barrels of crude per day, up from 90.0% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set eleven weeks earlier, as US refineries are just coming out of their pre-spring blend changeover and scheduled maintenance season....nonetheless, the 16,777,000 barrels of oil that were refined this week was a seasonal record, the most oil that refineries ever processed during February or March...while that elevated level of refining was still 4.7% less than the off-season record 17,608,000 barrels per day that were being refined during the last week of December 2017, it was 6.2% more than the 15,801,000 barrels of crude per day that were being processed during the week ending March 17th, 2017, when refineries, still wrapping up seasonal maintenance at that time, were operating at 87.4% of capacity....

even with the increase in the amount of oil being refined, gasoline output from our refineries was lower than the prior week, decreasing by 348,000 barrels per day to 9,932,000 barrels per day during the week ending March 16th, after our gasoline output had increased by 357,000 barrels per day during the week ending March 9th....as a result, our gasoline production was only 1.6% greater during the week than the 9,771,000 barrels of gasoline that were being produced daily during the week ending March 17th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 25,000 barrels per day to 4,503,000 barrels per day, after falling by 671,000 barrels per day over the prior 5 weeks...hence, that small increase still left the week's distillates production 6.8% lower than the 4,829,000 barrels of distillates per day than were being produced during the equivalent week of 2017....   

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 1,693,000 barrels to 243,065,000 barrels by March 16th, the third draw in a row, but just the fourth decrease in 19 weeks....our supplies were down even though our domestic consumption of gasoline fell by 318,000 barrels per day to 9,324,000 barrels per day, after rising by 782,000 barrels per day over the prior two weeks....at the same time, our exports of gasoline fell by 99,000 barrels per day to 686,000 barrels per day, while our imports of gasoline fell by 40,000 barrels per day to 564,000 barrels per day...so even after our gasoline supplies have increased during 15 of the last nineteen weeks, our gasoline inventories are now fractionally lower than last March 17th's level of 243,468,000 barrels, even as they are roughly 7.5% above the 10 year average of gasoline supplies for this time of the year...         

at the same time, our supplies of distillate fuels fell by 2,022,000 barrels to 131,044,000 barrels over the week ending March 16th, after falling by 4,360,000 barrels the prior week...our distillate inventories fell even though our exports of distillates fell by 495,000 barrels per day to 997,000 barrels per day, while our imports of distillates fell by 101,000 barrels per day to 122,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 85,000 barrels per day to 3,917,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 15.7% lower than the 155,393,000 barrels that we had stored on March 17th, 2017, and 7.1% lower than the 10 year average of distillates stocks at this time of the year…   

finally, with the drop in our oil imports and the increase in oil refining, we had to pull oil out of our commercial supplies of crude oil for the 11th time in 18 weeks and for the 36th time in the past year, as our commercial crude supplies decreased by 2,622,000 barrels, from 430,928,000 barrels on March 9th to 428,306,000 barrels on March 16th...hence, after sliding most of the past year, our oil inventories as of that date were 19.7% below the 533,110,000 barrels of oil we had stored on March 17th of 2017, and 14.6% lower than the 501,517,000 barrels of oil that we had in storage on March 19th of 2016, and 1.1% below the 425,047,000 barrels of oil we had in storage on March 20th of 2015, at a time when the US glut of oil had just begun to build...our oil supplies have now also dropped below their prior five year average for just the third time in 9 years, as the chart from Barron Energy below shows..   

March 23 2018 crude oil supplies as of March 17

This Week's Rig Count

US drilling activity increased for the 5th week in a row and for the 14th time in the past 20 weeks during the week ending March 23rd, a period of rising oil prices which has seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 995 rigs in the week ending on Friday, which was also 186 more rigs than the 809 rigs that were in use as of the March 24th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014... 

the number of rigs drilling for oil rose by 4 rigs to 804 rigs this week, which was 152 more oil rigs than were running a year ago, even as 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 1 rig to 190 rigs this week, which was also 35 more gas rigs than the 155 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...in addition, a single rig that was considered "miscellaneous" continued drilling this week, down from the two such "miscellaneous" rigs that were operating a year ago.

drilling in the Gulf of Mexico was unchanged at 13 rigs, still the lowest number of rigs working in the Gulf this century, & down by 5 rigs from the 18 rigs that were deployed in the Gulf of Mexico a year ago....at the same time, a rig which had been working on an inland lake in southern Louisiana was shut down this week, leaving three such inland waters rigs still active, down from the 4 inland waters rigs that were working in southern Louisiana a year earlier...

meanwhile, the week's count of active horizontal drilling rigs rose by 5 rigs to 870 horizontal rigs this week, which was also up by 197 rigs from the 673 horizontal rigs that were in use in the US on March 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 6 rigs to 63 vertical rigs this week, which was still down from the 78 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count was down by 6 rigs to 62 directional rigs this week, which was still up from the 58 directional rigs that were deployed on March 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 March 23rd, the second column shows the change in the number of working rigs between last week's count (March 16th) and this week's (March 23rd) count, the third column shows last week's March 16th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday of 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 March, 2017... 

March 23rd 2018 rig count summary

with the drilling increase in the Permian of west Texas exceeding the total increase nationally, it almost looks like this week is a return to the pattern of last spring, when drilling in the Permian surged while activity in the rest of the country stagnated...but you wouldn't guess from looking at the table above that the natural gas rig increase was in the Cana Woodford of Oklahoma, which happened to have 6 oil directed rigs shut down at the same time...that leaves the Cana Woodford with 57 oil rigs and two gas rigs, the largest natural gas deployment in that basin since February 2016...at the same time the Utica, which had gone from zero oil rigs seven weeks earlier to 8 oil rigs last week, saw one of those oil rigs shut down this week, while the Utica's natural gas rigs remained unchanged at 16 rigs...and in addition to the major producing states shown on the table above, Mississippi also saw a rig added this week, and now has 4 rigs running, which is the same number they had running last March 24th...

 

note:  there’s more here…

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