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 4, 2018

natural gas supplies 18% below average, despite warm winter; offshore rig count drops to lowest on record

oil prices ended broadly lower this week, as tariffs on steel and aluminum imports announced by Mr. Trump led to fears of a global trade war, which would retard global economic activity and thus reduce demand for oil products...after rising 3.2% to an 18 day high of $63.55 a barrel last week, contract prices for oil to be delivered in April rose another 36 cents to a three week high of $63.91 a barrel on Monday, on strong U.S. demand and comments from the Saudis that they would continue to hold production crude well below their output cap...prices then turned lower on Tuesday on a jump in the US dollar and an anticipated rise in US crude stockpiles, with crude falling 90 cents to end the day at $63.01 a barrel...oil prices were then down for a second day on Wednesday after the EIA data showed a larger-than-expected increase in U.S. crude inventories and a surprisingly large jump in gasoline supplies, with the April oil contract price ending $1.37 lower at $61.64 a barrel...oil prices then fell 65 cents to $60.99 a barrel in a global market selloff on Thursday, following Trump's vow to impose stiff steel and aluminum tariffs, leading to fears of a trade war...oil prices then fell as low as $60.13 a barrel on Friday, but then moved higher after the report of a inconsequential rise in the oil rig count, closing the day with a gain of 26 cents at $61.25 a barrel, but still finishing the week 3.6% lower than the prior week's close.... 

on the other hand, natural gas prices, which tend to react more to weather forecasts than to politics, were up a bit on the week, but still remained near their 21 month lows...trading in the contract for March natural gas expired at $2.639 per mmBTU on Monday after rising 1.4 cents, while the April natural gas contract rose 2.9 cents to close at $2.686 per mmBTU on the same day...the April contract price then fell 0.3 cents to $2.683/MMBtu on Tuesday, and 1.6 cents to $2.667/MMBtu on Wednesday, generally on the persistence of milder than normal weather forecasts for March...natural gas prices were lower Thursday morning too, falling to as low as $2.642 per mmBTU, until the weekly natural gas storage report showed a smaller than normal withdrawal, which prompted a price spike of nearly 9 cents before prices settled back to close at 2.698, a gain of 3.1 cents on the day...prices then drifted three-tenths of a cent lower to close the week at $2.695 per mmBTU, for a gain of 3.78 cents or 1.4% for the week...

the week's natural gas storage report indicated that our natural gas in storage fell by 78 billion cubic feet to 1,682 billion cubic feet in the week ending Friday, February 23rd, which left our gas supplies 680 billion cubic feet, or 28.8% lower than the 2,362 billion cubic feet that was in storage on February 24th of last year, and 372 billion cubic feet, or 18.1% below the five-year average of 2,054 billion cubic feet for the eighth week of the year...the typical natural gas withdrawal for the eighth week of the year has averaged 118 billion cubic feet over the past 5 years, so the withdrawal during the cited week was 40 billion cubic feet below normal...despite two such smaller than normal withdrawals, however, our natural gas supplies are still the second lowest on record for this time of year, eclipsed only by the polar vortex winter of 2014...and our natural gas supplies have continued to erode despite what is now turning out to be a warmer than normal winter, as we will see on the graph below...

March 3 2018 seasonal heating demand up til February 23rd

the above graphic, which compares this year's heating requirements to the previous two years and to the historical norm, came from a package of natural gas graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out with his daily news on Friday...in this graph, the difference between normal heating demand and the cumulative heating demand for each of the past three heating seasons is shown daily over the span of a year, with the divergence in the current year shown as a solid yellow line, last year's divergence shown as a dashed yellow line, and with the divergence from normal of the 2015/2016 heating season shown as a dashed red line....note that all three graphs trend downward, or negative from zero, because all three years experienced warmer than normal temperatures, hence less heating degree days than normal, over their heating seasons...ie, if it had it been colder than normal nationally this year, the graph would be moving upwards, into a range above zero on the graph...however, for this year's solid yellow line, the downward trending pattern the graph traces generally describes a warmer than normal fall and winter except for January, when the graph moved solidly upward for three out of four weeks...but as the heading on the graph says, this year's cumulative heating demand has been 191 population-weighted heating degree days (PWHDD) below normal, compared to the much warmer prior two years that had heating requirements 570 PWHDD and 477 PWHDD below normal respectively...but while our heating requirements were below normal for this year, we have still had to pull much more natural gas out of storage than any other year on record, except for the "polar vortex" dominated winter of 2014, which we'll see in the next graph....

March 3 2018 natural gas in storage as of February 23rd

the above graph also came from the aforementioned package of graphs from John Kemp, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending February 23rd 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" period from January 2014 up until the end of 2017 as a yellow line, and the average of natural gas in storage over the 5 years preceding the same dates shown as a dashed blue line...at the same time, the light blue 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 years shown by the graph…thus the light shaded 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 middle of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the weather related heating needs during any given season...

as John Kemp notes on the top of this graph, our supplies of natural gas continue to be well below the 5 year average range and near the bottom of the overall range; in fact, if we check the Historical Record of Natural Gas in Working Underground Storage for the Lower 48 States, we see that 2014 was the only year on record to have less natural gas in storage as of the 4th weekend of February than the 1,682 billion cubic feet that we had as of this week's report....yet as we saw in the 1st graph above, our heating requirements so far this year have now been well below normal, so we know the reason that our supplies of natural gas are now well below average hasn't been the weather...rather it has been our increasing use of natural gas to generate electricity, and increasing liquefaction of natural gas (LNG) for export, (which has been as much as 3.2 billion cubic feet per day at the Sabine Pass export terminal alone) that have been responsible for drawing down our supplies of natural gas faster than our stagnant gas production can replace them...over a 167 day heating season, Sabine Pass alone takes over 534 billion cubic feet, or nearly one-quarter of our normal winter natural gas usage and converts it into LNG to be shipped to Europe and Asia...in addition to that, just this past week the Cove Point, Maryland facility saw it's first export cargo of LNG produced from Marcellus shale gas depart after some delay, so henceforth that facility will also be drawing another 0.8 billion cubic feet per day from our storage during the winter months, when production from the field is inadequate to meet our domestic demand...with LNG export facilities in Cameron, Elba Island and Corpus Christi all scheduled for completion by the end of next winter, we could see as much as half of our normal winter natural gas usage heading overseas by this time next year...

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 23rd, showed that a modest increase in our oil imports, along with a large drop in our oil exports, was enough for us to have oil left over to add to storage for the fourth time in five weeks...our imports of crude oil rose by an average of 261,000 barrels per day to an average of 7,282,000 barrels per day during the week, while our exports of crude oil fell by an average of 599,000 barrels per day to an average of 1,445,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,837,000 barrels of per day during the week, 860,000 barrels per day more than the record low net imports of the prior week...at the same time, field production of crude oil from US wells rose by 13,000 barrels per day to 10,283,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,120,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 15,882,000 barrels of crude per day, 49,000 barrels per day more than they used during the prior week, while at the same time 490,000 barrels of oil per day were being added to 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 and from oilfield production was 252,000 barrels per day less than what refineries reported they used plus what was added to storage during the week...to account for that disparity, the EIA needed to insert a (+252,000) 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)...

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 7,521,000 barrels per day, 8.1% less than the 8,185,000 barrel per day average we imported over the same four-week period last year....the 490,000 barrel per day increase in our total crude inventories included a 431,000 barrel per day addition of oil to our commercial stocks of crude oil and a,58,000 barrel per day addition to our Strategic Petroleum Reserve...this week's 13,000 barrel per day increase in our crude oil production included a 3,000 barrel per day increase in output from Alaska and a 10,000 barrel per day increase in output from wells in the lower 48 states...the 10,283,000 barrels of crude per day that were produced by US wells during the week ending February 23rd was the highest on record, 13.9% more than the 9,032,000 barrels per day that US wells were producing on February 24th of last year, and 22.0% 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 87.8% of their capacity in using 15,882,000 barrels of crude per day, down from 88.1% of capacity the prior week, and down from the wintertime record 96.7% of capacity set eight weeks earlier, as US refineries are now slowing down due to pre-spring blend changeover and scheduled maintenance...the 15,882,000 barrels of oil that were refined this week were 9.8% 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 1.4% more than the 15,664,000 barrels of crude per day that were being processed during the week ending February 24th, 2017, when refineries, undergoing seasonal maintenance, were operating at 86.0% of capacity....

even with the small increase in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 717,000 barrels per day to 9,391,000 barrels per day during the week ending February 23rd, after it had increased by 515,000 barrels per day the prior week....that decrease meant our gasoline production was 0.7% lower during the week than the 9,456,000 barrels of gasoline that were being produced daily during the week ending February 24th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 20,000 barrels per day to 4,469,000 barrels per day, after falling by 322,000 barrels per day the prior week...after those decreases, the week's distillates production was 6.0% lower than the 4,755,000 barrels of distillates per day than were being produced during the equivalent week of 2017....    

the big drop in our gasoline production notwithstanding, our supply of gasoline in storage at the end of the week still rose by 2,483,000 barrels to 251,817,000 barrels by February 23rd, the fifteenth increase in 16 weeks....our supplies increased because our exports of gasoline fell by 382,000 barrels per day to 536,000 barrels per day, while our imports of gasoline rose by 96,000 barrels per day to 446,000 barrels per day, and because our domestic consumption of gasoline fell by 142,000 barrels per day to 8,860,000 barrels per day...but even after fifteen increases in supplies in sixteen weeks, our gasoline inventories are still 1.6% lower than last February 24th's level of 255,889,000 barrels, even as they are now roughly 8.6% 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 960,000 barrels to 137,985,000 barrels over the week ending February 23rd, after falling by 2,422,000 barrels the prior week...that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 303,000 barrels per day to 3,921,000 barrels per day, while our exports of distillates rose by 38,000 barrels per day to 892,000 barrels per day and as our imports of distillates fell by 36,000 barrels per day to 207,000 barrels per day...after this week’s inventory decrease, our distillate supplies were 16.0% lower at the end of the week than the 164,208,000 barrels that we had stored on February 24th, 2017, and 2.8% lower than the 10 year average of distillates stocks at this time of the year…  

finally, with our oil imports increasing and our oil exports way down, we were able to add to our commercial supplies of crude oil for just the 5th time in 15 weeks and for the 14th time in the past 50 weeks, as our commercial crude supplies increased by 3,019,000 barrels, from 420,479,000 barrels on February 16th to 423,498,000 barrels on February 23rd....but even with that increase, our oil inventories as of that date ended the week 18.6% below the 520,184,000 barrels of oil we had stored on February 24th of 2017, and 13.0% lower than the 486,699,000 barrels of oil that we had in storage on February 26th of 2016, even as they were still 3.2% greater than the 410,246,000 barrels of oil we had in storage on February 27th of 2015, at a time when the US glut of oil had just begun to build... 

This Week's Rig Count

US drilling activity increased for 6th time in the past 9 weeks during the week ending March 2nd, a period which has seen the increases far exceed the few decreases, after an extended period of stable counts...Baker Hughes reported that the total count of active rotary rigs running in the US was up by 3 rigs to 981 rigs in the week ending on Friday, which was also 225 more rigs than the 756 rigs that were deployed as of the March 3rd 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 800 rigs this week, which was also 191 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 181 rigs this week, which was also 35 more gas rigs than the 146 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 3 rigs to 14 rigs for the week, which was down by 4 rig from the 18 rigs that were deployed in the Gulf of Mexico a year ago, and the least rigs working in the Gulf in Baker Hughes records going back to January 7, 2000, a time when there were 123 rigs drilling in the Gulf....meanwhile, two rigs began drilling from platforms on inland lakes in Louisiana this week, bringing the "inland waters" rig count up to 4 rigs, which was the same number of rigs on inland waters as on March 3rd of last year...

the week's count of active horizontal drilling rigs was up by 5 rigs to 847 horizontal rigs this week, which was also up by 214 rigs from the 633 horizontal rigs that were in use in the US on March 3rd 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 6 rigs to 75 directional rigs this week, which was also up from the 61 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 8 rigs to 59 directional rigs this week, which was also down from the 62 vertical rigs that were deployed on March 3rd 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 2nd, the second column shows the change in the number of working rigs between last week's count (February 23rd) and this week's (March 2nd) count, the third column shows last week's February 23rd 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 3rd of March, 2017...   

March 2 2018 rig count summary

there were also a number of changes this week that were not included in these tables, since the "other basins" category shows an increase of 5 oil rigs and one rig targeting natural gas....in addition to the oil rig decreases that are obvious in the Cana Woodford of Oklahoma, the Niobrara of the Rockies front range, the Permian of west Texas and the Williston of North Dakota, the 3 rigs that were shut down in the Gulf had also been targeting oil, and they were all off the Louisiana shore...on the other hand, an oil rig was added in the Eagle Ford of south Texas, where a natural gas directed rig was shut down, which nets as a "no change"...otherwise, the 2 rig increase in the Marcellus in Pennsylvania is the only other natural gas rig change among the major basins...Ohio drilling remained unchanged, with 16 rigs targeting wet gas formations and 7 rigs drilling for oil....then, other than the changes in the major oil and gas producing states shown above, Mississippi saw 3 rigs started during the week, after having shut down their only two active rigs the prior week...meanwhile, the only two rigs which had been deployed in Kentucky were shut down this week, leaving the state with no drilling activity, same as a year ago...and furthermore, the only rig that had been active in Illinois was also shut down this week; which was also a reduction from the single rig working the state on last March 3rd...

 

note:  there’s more here

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