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 10, 2019

Ohio’s active drilling rigs drop by 5 and are now down by more over the past year than all other states combined

oil prices were little changed over the past week, as early optimism about a US - China trade deal gave way to renewed economic uncertainly by the end of the week... after falling 3% to $55.80 a barrel on signs of global economic weakness the prior week, prices of US crude for April delivery initially rose 79 cents to $56.59 a barrel on Monday, as the U.S. and China were thought to be near a settlement of the trade dispute that's been threatening to reduce oil demand... after continuing higher early Tuesday, oil prices came under pressure after the restart of Libya's biggest oilfield and after a Chinese forecast of slower economic growth, and ended the day's trading 3 cents lower at $56.56 a barrel...oil prices turned ​down again on Wednesday,after EIA data showed an unexpectedly large increase in crude inventories, with oil settling 34 cents lower at $56.22 a barrel...oil prices retreated again early on Thursday, after the European Central Bank cut its economic growth forecast for the continent, but rose later to close 44 cents higher at $56.66 a barrel after new data showed that OPEC had cut its February oil output to the lowest in nearly four years....oil then sold off early on Friday on weak data from China, poor jobs figures in the U.S., and news that Norway’s sovereign wealth fund was divesting from the oil sector, with oil prices ​dropping more than $2 to a 3 week low of $54.52, but then pared much of th​os​e early losses after another decline in oil-drilling rigs suggested a slowing of domestic production, and ended down just 59 cents at $56.07 a barrel, thus managing to end the week a half-percent higher than where it began...

natural gas prices also managed to end a bit higher for the week, but with even less volatility than oil, as the ongoing cold outbreak was already a given and traders were limited to reacting to nuanced changes in the forecasts...hence, after falling two tenths of a cent on Monday, rising 2.7 cents on Tuesday, falling 4.3 cents Wednesday, rising 2.5 cents on Thursday, and a tenth of a penny on Friday, natural gas for April delivery ended the week at $2.865 per mmBTU, an increase of just six-tenths of a cent for the entire week...

the natural gas storage report for the week ending March 1st from the EIA indicated that the quantity of natural gas held in storage in the US fell by 149 billion cubic feet to 1,390 billion cubic feet over the week, which meant our gas supplies ended the period 243 billion cubic feet, or 14.9% below the 1,633 billion cubic feet that were in storage on March 2nd of last year, and 464 billion cubic feet, or 25.0% below the five-year average of 1,854 billion cubic feet of natural gas that have typically remained in storage at the beginning of March....this week's 149 billion cubic feet withdrawal from US natural gas supplies was in line with the consensus forecasts, but it was 40 billion cubic feet more than the average of 109 billion cubic feet of natural gas that have been withdrawn from US gas storage during the same winter week over the last 5 years.... 

natural gas storage facilities in the Eastern US saw a 43 billion cubic feet draw from their supplies over the week, well more than their average 31 billion cubic foot withdrawal during the same week over the past five years, and thus the region's gas supply deficit rose to 16.4% below average for this time of year, up from the 12.2% shortfall shown last week....meanwhile, natural gas supplies in the Midwest fell by 47 billion cubic feet, also higher than their normal 38 billion cubic feet regional pull for the date, as their supply deficit increased to 21.4% below the average for the beginning of March, up from 17.7% below normal last week...at the same time, the South Central region saw a 41 billion cubic feet drop in their natural gas supplies, well above their normal 27 billion cubic foot withdrawal, as their natural gas storage deficit increased from 20.8% to 23.5% below their five-year average for this time of year...on the other hand, only 6 billion cubic feet were pulled out of natural gas supplies in the mostly sparsely populated Mountain region, the same as the 6 billion cubic feet withdrawal during this same week over the last 5 years, but their gas supply deficit from normal still rose to 39.2%, up from 37.3% a week ago...finally, 10 billion cubic feet of natural gas were withdrawn from storage in the Pacific region, compared to the 9 billion cubic feet normally withdrawn from storage in those western states during the same week of winter, and as a result their natural gas supply deficit rose to 45.1% below normal for this time of year, up from 42.7% a week ago.... 

while the weekly report we've just reviewed obviously showed a greater than normal withdrawal of natural gas nationwide due to the colder than normal temperatures, the current week that will report next week is shaping up to be ​near ​a record for this time of year, which we can see from the graphic below:

March 9 2019 regional temperatures from Feb 22 to Mar 7

the above graphic, from the EIA's interactive natural gas storage dashboard, shows the daily average regional temperatures for each of the 5 regions covered by the storage report over the period from February 22nd through March 7th...in addition, it also color-codes each of those average daily temperatures to indicate how much above​ normal (tan)​ or below normal​ (blue)​ they are, as indicated by the legend at the bottom of the graphic...thus you can see for the week ending March 1st which we have just reviewed, average temperatures in the East ran between 38 and 49 degrees Fahrenheit, and most of those​ average​ temperatures were above normal, as indicated by the tan shading...we also see that each of the other regions other than the Pacific had two days of temperatures above during the period; February 23rd and 24th in the Midwest, February 23rd and 27th in the South, and February 28th and March 1st in the Mountain states...​so while it was colder than average nationally, there were a number of days that mitigated that cold​

however, when we look at the temperatures that have influenced natural gas withdrawals for the coming week's report, we can see that they have been much colder across the board, with the exception of the Pacific, which was still colder than normal each day nonetheless...included in that period were two days - March 4 and March 5 - in both the Midwest and South Central wherein ​average ​temperatures were more than 20 degrees below normal for those dates...in additon, temperatures in the East shift from above normal in the week to March 1st to below normal for the week following...so there's a good chance the next report will show one of the largest natural gas withdrawals on record for this late in the winter, if not the largest....

The Latest US Oil Supply and Disposition Data from the EIA

this week's US oil data from the US Energy Information Administration, reporting on the week ending March 1st, indicated a big rebound in our crude oil imports from last week's 23 year low​, accompanied by​ a moderate​ly large​ drop in our oil exports, and hence there was a large​ ​surplus ​of ​oil ​left ​to ​add to ​our commercial supplies of crude....our imports of crude oil rose by an average of 1,084,000 barrels per day to an average of 7,001,000 barrels per day, after falling by an average of 1,605,000 barrels per day to a 23 year low the prior week, while our exports of crude oil fell by an average of 556,000 barrels per day to 2,803,000  barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,198,000 barrels of per day during the week ending March 1st, 1,640,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was estimated to be unchanged at 12,100,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,298,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 15,990,000 barrels of crude per day during the week ending March 1st, 100,000 more barrels per day than the amount of oil they used during the prior week, while over the same period 1,008,000 barrels of oil per day were reportedly being added to the oil that's in storage in the US.....therefore, this week's crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 700,000 fewer barrels per day than the oil that was added to storage plus what refineries reported they used during the week....to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+700,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily 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"....an "unaccounted for oil" figure of that magnitude means that one or more of this week's oil stats is in error by a statistically significant amount (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)....  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports fell to an average of 6,663,000 barrels per day last week, now 11.7% less than the 7,549,000 barrel per day average that we were importing over the same four-week period last year.... the 1,008,000 barrel per day increase in our total crude inventories included an addition of 1,011,000 barrels per day to our commercially available stocks of crude oil, which was slightly offset by an initial 3,000 barrels per day withdraw​al​ from the oil stored in our Strategic Petroleum Reserve, probably front-running the administration's plan to sell 6 million barrels from the Strategic Petroleum Reserve between April and May to raise funds to modernize the facilities...this week's crude oil production was reported to be unchanged at a record 12,100,000 barrels per day because the rounded estimate for output from wells in the lower 48 states rose was unchanged at 11,600,000 barrels per day, while the 5,000 barrel per day decrease in Alaska's oil production to 486,000 barrels per day was not enough to make a difference in the rounded national total...last year's US crude oil production for the week ending February 23rd was at 10,369,000 barrels per day, so this reporting week's rounded oil production figure was 16.7% above that of a year ago, and 43.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...    

meanwhile, US oil refineries were operating at 87.5% of their capacity in using 15,990,000 barrels of crude per day during the week ending March 1st, up from 87.1% of capacity the prior week, but still lower than before heavy Venezuelan imports were cut off....the 15,990,000 barrels per day of oil that were refined this week was still the highest on record for the first of March, but essentially little changed from the 15,935,000 barrels of crude per day that were being processed during the week ending March 2nd, 2018, when US refineries were operating at 88.0% of capacity... 

with the increase in the amount of oil being refined, the gasoline output from our refineries was also higher, rising by 299,000 barrels per day to 9,852,000 barrels per day during the week ending March 1st, after our refineries' gasoline output had increased by 64,000 barrels per day the prior week....but even with that big increase in this week's gasoline output, our gasoline production was fractionally lower than the 9,923,000 barrels of gasoline that were being produced daily during the same week last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 103,000 barrels per day to 4,919,000 barrels per day, after that output had increased by 57,000 barrels per day the prior week....after that increase, this week's distillates production was more than 7.0% above the 4,596,000 barrels of distillates per day that were being produced during the week ending March 2nd, 2018.... 

despite the increase in our gasoline production, the supply of gasoline ​left ​in storage at the end of the week fell by 4,227,000 barrels to 250,714,000 barrels ​over the week to March 1st, after falling by 1,906,000 barrels over the prior week....our gasoline supplies fell again this week in part because the amount of gasoline supplied to US markets increased by 81,000 barrels per day to 9,062,000 barrels per day, after increasing by 181,000 barrels per day the prior week, and ​because our exports of gasoline rose by 96,000 barrels per day to 911,000 barrels per day, even as our imports of gasoline rose by 82,000 barrels per day to 555,000 barrels per day...after having set a record high six weeks ago, our gasoline inventories are now fractionally below last March 2nd's level of 251,029,000 barrels, while they remain roughly 3% above the five year average of our gasoline supplies at this time of the year...

even with the increase in our distillates production, our supplies of distillate fuels fell for the 17th time in twenty-four weeks, decreasing by 2,393,000 barrels to 135,986,000 barrels during the week ending March 1st, after our distillates supplies had decreased by 303,000 barrels over the prior week...our distillates supplies decreased by more this week than last because because our exports of distillates rose by 248,000 barrels per day to 1,362,000 barrels per day, while our imports of distillates fell by 85,000 barrels per day to 246,000 barrels per day, and because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 69,000 barrels per day to 4,145,000 barrels per day...with this week's inventory decrease, our distillate supplies ended the week more than 1.0% below the 137,426,000 barrels that we had stored on March 2nd, 2018, and fell to roughly 3% below the five year average of distillates stocks for this time of the year...

finally, with the big jump in our oil imports and the moderate​ly large​ drop in our ​oil ​exports, our commercial supplies of crude oil in storage increased for the sixth time in 7 weeks, rising by 7,069,000 barrels over the week, from 445,865,000 barrels on February 22nd to 452,934,000 barrels on March 1st...with weekly increases in 17 out of the last 24 weeks, our crude oil inventories are now roughly 4% above the recent five-year average of crude oil supplies for this time of year, and more than 35% above the prior 5 year (2009 - 2013) average of crude oil stocks for the first of March, with the disparity between those figures arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories had mostly been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of March 1st were 6.3% above the 425,906,000 barrels of oil we had stored on March 2nd of 2018, while remaining 14.3% below the 528,393,000 barrels of oil that we had in storage on March 3rd of 2017, and 7.7% below the 490,843,000 barrels of oil we had in storage on March 4th of 2016...     

This Week's Rig Count

US drilling activity slowed for the third week in a row and ​active rigs are now down 6% so far this year, as lower prices for both oil and natural gas ​and a large backlog of uncompleted wells ​continue to impact drilling decisions....Baker Hughes reported that the total count of rotary rigs running in the US fell by 11 rigs to 1027 rigs over the week ending March 8th, which was still 43 more rigs than the 984 rigs that were in use as of the March 9th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...  

the count of rigs drilling for oil fell by 9 rigs to 834 rigs this week, which was still 38 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 rigs to 193 natural gas rigs, which was just 5 more than the 188 natural gas rigs that were drilling a year ago, but way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...

drilling activity offshore in the Gulf of Mexico was unchanged at 22 rigs this week, which is up by 9 from the 13 rigs active in the Gulf a year ago, which was at a multiyear low at that time...the count of active horizontal drilling rigs decreased by 7 rigs to 904 horizontal rigs this week, which was still 56 more horizontal rigs active than the 848 horizontal rigs that were in use in the US on March 9th of last year, but was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....at the same time, the vertical rig count decreased by 4 rigs to 56 vertical rigs this week, which was also down by 5 rigs 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 unchanged at 67 directional rigs this week, which was still down from the 75 directional rigs that were operating on March 9th of 2018... 

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 8th, the second column shows the change in the number of working rigs between last week's count (March 1st) and this week's (March 8th) count, the third column shows last week's March 1st active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent weekend 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 the 9th of March, 2018...   

March 8 2019 rig count summary

as you can see, the 5 rig drop in Ohio's Utica shale accounted for almost half of this week's rig decrease, and it leaves Ohio down by 9 rigs from a year ago, the largest year over year decrease in drilling in any producing state, and one of only four states where drilling has decreased from a year ago...despite that Ohio drop, however, natural gas rigs were only down by ​two, ​because 3 rigs were added to those drilling in Pennsylvania's Marcellus, which is now up by 5 rigs from last year...in addition, while the Haynesville shows no net change in its rig count, one natural gas rig was added in the Haynesville in northern Louisiana, while one Haynesville natural gas rig was shut down in northeast Texas at the same time...​among oil rigs, ​the one rig drop shown for the Permian basin also masks a bit of underlying activity...Permian basin changes in Texas include the addition of 3 rigs in Texas Oil District 8, which corresponds to the core Permian Delaware, while single rigs were being pulled out of Texas Oil District 8A, which would correspond to the northern Permian Midland, and Texas Oil District 7C, or the southern Permian Midland...since Texas thus saw net addition of one Permian rig, the two rigs that were pulled out in New Mexico ​must have ​also been working the Permian Delaware...also not​e​ that other than the numbers shown above for the major producing states, Indiana also had a rig pulled out this week, but still has one remaining, up from a year ago. when there was no activity in the state....

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note:  there’s more here

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