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, April 8, 2018

US oil supplies drop on record crude exports, new drilling at a 3 year high as active rigs top a thousand.

oil prices tumbled with equity markets over the past week, as the Trump administration doubled down on their tariff threats against China, and the specter of a full-scale trade war spooked the markets...after sliding 1.3% to close last week at $64.94 a barrel, US oil prices for May delivery fell $1.93, or nearly 3%, to a two-week low of $63.01 a barrel on Monday, following stocks lower after China retaliated against US tariffs on Chinese steel and aluminum, heightening concerns over a broadening trade war between the U.S. and China...however, oil prices then rebounded 50 cents to $63.51 a barrel on Tuesday as traders shifted their attention back to the oil supply situation and the week's expected draw from US crude inventories....oil prices then fell 14 cents to $63.37 a barrel on Wednesday, as a surprisingly large draw in U.S. crude supplies offset an early drop to lower prices after China proposed a further broad range of tariffs on U.S. exports...with US stock markets rebounding on Thursday, oil prices rose 17 cents to $63.54 a barrel, as Saudi Arabia unexpected hiked their crude prices, even as oil's gain was curbed by strength in the dollar....on Friday, however, Trump threatened an additional $100 billion in tariffs on Chinese goods, sending stocks plummeting 767 points, with oil prices following stocks lower, ending the day down $1.48 at $62.06 a barrel, for a net loss of $2.88 a barrel, or 4.4% for the week...

meanwhile, natural gas prices were also lower for the week, even as they appeared to remain immune to geopolitical influences...after rising to $2.733 per mmBTU on the forecast of colder weather last week, natural gas contract prices for May delivery fell 5 cents $2.683 per mmBTU on Monday, after a report that US natural gas output averaged 78.3 billion cubic feet per day over the prior three calendar days, up by 400 million cubic feet per day from the 77.9 billion cubic feet per day output averaged over March...natural gas prices then rose 1.4 cents on Tuesday and 2.1 cents on Wednesday on the persistence of colder than normal temperature forecasts for the northern half of the country, but then gave all those gains up in falling 4.3 cents to $2.675 per mmBTU on Thursday, on what was seen to be a bearish natural gas storage report, wherein the actual withdrawal of 20 billion cubic feet was less than the median forecast of a 26 billion cubic feet draw...so even though natural gas prices recovered 2.6 cents to $2.701 mmBTU on Friday on that cold April forecast, they still ended the week 3.2 cents lower than the prior week's close...

the week's natural gas storage report indicated that natural gas in storage in the US fell by 29 billion cubic feet to 1,354 billion cubic feet over the week ending March 30th, which left our gas supplies 697 billion cubic feet, or 34.0% lower than the 2,051 billion cubic feet that were in storage on March 31st of last year, and 347 billion cubic feet, or 20.4% below the five-year average of 1701 billion cubic feet typically in storage at the end of March...however, 9 billion cubic feet of this week's decrease was a non-flow-related adjustment to working gas stocks in the South Central Nonsalt region, and hence the actual withdrawal of gas from storage for consumption was 20 billion cubic feet....the average withdrawal of natural gas during the last week of March over the past 5 years has been 28 billion cubic feet, so this week's actual usage fell 8 billion cubic feet short of the norm, even though reported gas in storage fell more than the average amount... 

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 30th, showed that due to a big jump in our oil exports and a modest drop in our oil imports, we saw the largest drop in our crude oil supplies in twelve weeks...our imports of crude oil fell by an average of 250,000 barrels per day to an average of 7,898,000 barrels per day during the week, after rising by 1,071,000 barrels per day the prior week, while our exports of crude oil rose by an average of 597,000 barrels per day to a record average of 2,175,000 barrels per day, which meant that our effective trade in oil over the week worked out to a net import average of 5,723,000 barrels of per day during the week, 847,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 27,000 barrels per day to a record high of 10,460,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,183,000 barrels per day during the reporting week..

during the same week, US oil refineries were using 16,936,000 barrels of crude per day, 141,000 barrels per day more than they used during the prior week, while at the same time 660,000 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 93,000 barrels per day less than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+93,000) 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"... (the details on 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 fell to an average of 7,677,000 barrels per day, which was 3.4% less than the 7,947,000 barrel per day average we imported over the same four-week period last year....the 660,000 barrel per day withdrawal from our total crude inventories was all taken from our commercially available stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 27,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states, and a 2,000 barrel per day increase in output from Alaska...the 10,460,000 barrels of crude per day that were produced by US wells during the week ending March 30th were the highest on record, 13.7% more than the 9,199,000 barrels per day that US wells were producing during the week ending March 31st of last year, and 24.1% 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 93.0% of their capacity in using those 16,936,000 barrels of crude per day, up from 92.3% of capacity the prior week, but still down from the wintertime record 96.7% of capacity set during the last week of 2017, as US refineries are still ramping up after their pre-spring blend changeover and scheduled maintenance season....nonetheless, the 16,936,000 barrels of oil that were refined this week was a seasonal record, the most oil that US refineries have ever processed during February or March...while that elevated level of refining was still 3.8% 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 3.1% more than the 16,429,000 barrels of crude per day that were being processed during the week ending March 31st, 2017, when refineries were operating at 90.8% 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 190,000 barrels per day to 10,115,000 barrels per day during the week ending March 30th, after our gasoline output had increased by 373,000 barrels per day during the week ending March 23rd....nonetheless, our gasoline production was still 6.2% greater during the week than the 9,515,000 barrels of gasoline that were being produced daily during the week ending March 31st of last year....however, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 172,000 barrels per day to 5,016,000 barrels per day, after rising by 341,000 barrels per day during the prior week....hence, that increase meant the week's distillates production was fractionally higher than the 4,967,000 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 1,116,000 barrels to 238,477,000 barrels by March 30th, the fifth draw from supplies in a row, but just the sixth decrease in 21 weeks....our gasoline supplies fell as our domestic consumption of gasoline fell by 5,000 barrels per day to 9,203,000 barrels per day, after falling by 116,000 barrels per day the prior week, and even though our exports of gasoline fell by 133,000 barrels per day to 966,000 barrels per day, while our imports of gasoline rose by 76,000 barrels per day to 761,000 barrels per day...with our gasoline supplies now down 5 weeks in a row, our gasoline inventories are fractionally lower than last March 31st's level of 239,103,000 barrels, even as they are roughly 7.2% above the 10 year average of gasoline supplies for this time of the year...         

with the increase in distillate's production, our supplies of distillate fuels rose by 537,000 barrels to 129,491,000 barrels over the week ending March 30th, after falling by 8,472,000 barrels over the prior three weeks...our distillate inventories rose because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 488,000 barrels per day to 3,887,000 barrels per day, even as our exports of distillates rose by 233,000 barrels per day to 1,151,000 barrels per day, while our imports of distillates fell by 51,000 barrels per day to 99,000 barrels per day...but even after this week’s inventory increase, our distillate supplies still ended the week 15.0% lower than the 152,374,000 barrels that we had stored on March 31st, 2017, and roughly 7.2% lower than the 10 year average of distillates stocks at this time of the year…    

finally, to cover the big increase in our oil exports, we had to take oil out of our commercial supplies of crude oil for the 12th time in 20 weeks and for the 37th time in the past year, as our commercial crude supplies decreased by 4,617,000 barrels, from 429,949,000 barrels on March 23rd to 425,332,000 barrels on March 30th....hence, after falling most of the past year, our oil inventories as of March 30th were 20.6% below the 535,543,000 barrels of oil we had stored on March 31st of 2017, 14.7% lower than the 498,598,000 barrels of oil that we had in storage on April 1st of 2016, and 5.4% below the 449,662,000 barrels of oil we had in storage on March 27th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years... 

since our crude oil exports are the major reason for our falling supplies, and since this week saw a record high for those exports, we'll include here a graph of those exports over the past year and a half...

April 4 2018 crude exports as of March 30

the above graph of recent US crude oil exports came 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 our exports were choked off as 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 in the wake of the hurricanes, US crude suppliers began to sell as much oil overseas as they could, and as a result our oil exports have stayed above a million barrels per day since...oil exports from the US are being sold from supplies benchmarked to the price of WTI, the light sweet grade of oil that's quoted daily...for the week ending March 30th, when these record exports were recorded, US light crude prices were quoted between $63.72 and $66.55 a barrel, with an average of around $65.25...at the same time, Brent crude, the similar North Sea grade of oil that serves as the international benchmark, was being quoted between $68.78 and $71.05 a barrel, with an average price of just under $70 a barrel...so it's clear that even after accounting for shipping costs of as much as $2 a barrel, US oil producers are incentivized to sell as much of our oil into international markets as our pipeline and port infrastructure will allow for...

This Week's Rig Count

US drilling activity increased for the sixth time in seven weeks and for 15th time in the past 22 weeks during the week ending April 6th, a period of higher oil prices that 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 10 rigs to 1003 rigs in the week ending on Friday, topping 1000 rigs for the first time since April 2nd, 2015...that was also 164 more rigs than the 839 rigs that were in use as of the April 7th 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 increased by 11 rigs to 808 rigs this week, which was also 136 more oil rigs than were running a year ago, while it was still 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 was unchanged at 194 rigs this week, which was 29 more gas rigs than the 165 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...however, one of the rigs that was listed as "miscellaneous" was shut down this week, so now there is just one such "miscellaneous" rigs active, down from the 2 "miscellaneous" rigs that were operating a year ago.

the count of drilling rigs working in the Gulf of Mexico was unchanged at 12 rigs, still the lowest number of rigs working in the Gulf or offshore nationally in Baker Hughes records dating back to 1968, & down by 10 rigs from the 22 rigs that were deployed in the Gulf of Mexico a year ago....the count of active horizontal drilling rigs increased by 14 rigs to 884 horizontal rigs this week, which was also up by 189 rigs from the 695 horizontal rigs that were in use in the US on April 7th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count increased by 3 rigs to 63 directional rigs this week, which was still down from the 71 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was down by 7 rigs to 56 vertical rigs this week, which was also down from the 73 vertical rigs that were deployed on April 7th 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 April 6th, the second column shows the change in the number of working rigs between last week's count (March 30th) and this week's (April 6th) count, the third column shows last week's March 30th 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 7th of April, 2017...   

April 6th 2018 rig count summary

you've probably noticed the two rig increase in the Utica shale; that increase holds no surprises this week, as both of those new rigs are targeting natural gas, with one of those in Ohio and the other in Pennsylvania, where there are now two rigs targeting the Utica for natural gas in Beaver county, PA...however, Pennsylvania was down a rig this week because two of their Marcellus rigs were shut down, while drilling the Marcellus was down by only one rig with the addition of another Marcellus natural gas directed rig in West Virginia...the natural gas rig count was unchanged, however, because two rigs targeting gas in the Cana Woodford of Oklahoma were switched out for two rigs targeting oil, while another rig targeting natural gas started up in an unnamed basin...also missing from the above tables were 5 new rigs targeting oil that were started up in "other basins", at least one of which was the Unitah of Utah, were there were at least 3 horizontal and two directional rigs working as of April 6th....meanwhile, other than the changes for the major oil & gas producing states shown above, Alabama's only working rig was shut down this week, down from 2 rigs a year ago and marking the first time there was no activity in the state since January 13, 2017, while Mississippi had a rig added and now has 5 deployed, the same as they had working a year ago...

 

note:  there’s more here

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