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

Monday, May 13, 2019

unprecedented natural gas restocking continues; US gasoline imports at a 6 year high; rig count at a 14 month low…

oil prices ended lower for the third week in a row, as a resumption of the trade war between the US and China cast a pall over the markets and overshadowed the impact of tightening global supplies stemming from US sanctions on Iranian and Venezuelan oil exports...after falling 2.2% to $61.94 a barrel on a big build in US oil supplies last week, contract prices of US crude for June delivery initially crashed to a one month low of $60.04 a barrel on Monday morning, after Trump reignited the trade war by tweeting that tariffs on $200 billion of Chinese goods would jump from 10 to 25 percent on Friday, but rebounded later in the day and settled 31 cents higher at $62.25 per barrel after the US deployed an aircraft carrier strike group and a bomber task force to the Middle East to confront Iran...however, oil prices tumbled again on Tuesday, as the US-China trade war intensified and stoked concerns over global growth, with crude prices falling 85 cents or 1.4% to a 5-week low of $61.40....nonetheless, oil prices popped right back up on Wednesday after the EIA reported a surprise draw from US supplies and went on to finish 1.2% higher at $62.12, even as escalating U.S.-Chinese trade tensions limited oil's gains...however, oil prices fell on the trade dispute again on Thursday, despite falling inventories, tumbling to as low as $60.92 a barrel before steadying near the close to end down 41 cents at $61.70 a barrel...oil prices were then little changed on Friday, closing down 4 cents at $61.66 a barrel, even as Trump 's tariff hike on Chinese goods took effect and kept tensions high between the world's two largest economies...hence, for the week oil prices ended down just 28 cents, or less than half a percent, as tight supply factors offset the impact of the renewed US-China trade dispute..

natural gas prices, meanwhile, trended somewhat higher, with the contract for June delivery of natural gas rising 5.2 cents over the week to finish at $2.619 per mmBTU, as both the 6 to 10 day outlook and the 8 to 14 day outlook from the Climate Prediction Center continued to indicate building warmth in the Southeast and colder than normal in the Intermountain West and northern tier, which would suggest greater air conditioning demand in the former and more heating demand in the later...however, despite just such a temperature setup over the prior week, which you can see on the map of temperature anomalies for week ending May 2nd below, the injection of surplus natural gas into storage was still well above normal for this time of year...

May 11 2019 temperature anomalies over the week ending May 2nd(source)

the natural gas storage report for the week ending May 3rd from the EIA indicated that the quantity of natural gas held in storage in the US increased 85 billion cubic feet to 1,547 billion cubic feet by the end of the week, which meant our gas supplies were 128 billion cubic feet, or 9.0% more than the 1,419 billion cubic feet that were in storage on May 4th of last year, while ​still 303 billion cubic feet, or 16.4% below the five-year average of 1,850 billion cubic feet of natural gas that have typically been in storage as of the first weekend in May in recent years....this week's 85 billion cubic feet injection into US natural gas storage was close to the median estimate of a 87 billion cubic foot increase indicated by a Bloomberg survey of analysts, while it was somewhat more than the 72 billion cubic feet of natural gas that are normally added to gas storage during the same week of spring....this was the eighth week in a row that we've either seen injections above normal or withdrawals below normal, and concludes a 4 week period where the injections into storage have averaged just under one hundred billion cubic feet per week, unprecedented for this time, or really​ for​ any time of year...moreover, the early June weather outlook appears to show it will be a colder than normal period nationally, delaying the onset of air conditioning electric consumption, suggesting that the 100 billion cubic foot injection pace might continue well into the next month...

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 May 3rd, showed that due to a drop in our oil imports and a ​major ​shift ​from unaccounted for crude supply to unaccounted for demand, we had to withdraw oil from our commercial supplies of crude for the second time in seven weeks...our imports of crude oil fell by an average of 721,000 barrels per day to an average of 6,693,000 barrels per day, after rising by an average of 1,325,000 barrels per day over the prior two weeks, while our exports of crude oil fell by an average of 289,000 barrels per day to 2,322,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,371,000 barrels of per day during the week ending May 3rd, 432,000 fewer 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 reported to be down by 100,000 barrels per day to 12,200,000 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 16,571,000 barrels per day during this reporting week...

meanwhile, US oil refineries were using 16,405,000 barrels of crude per day during the week ending May 3rd, 41,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that 690,000 barrels of oil per day were being withdrawn from oil 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, from oilfield production, and from storage was 856,000 barrels per day more than what the oil 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 (-856,000) 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"....with a switch in the unaccounted oil figure from +685,000 last week to -856,000 this week, we have to figure that both weeks' crude oil metrics are in error by statistically significant amounts, and that week over week comparisons are ​essentially ​meaningless... (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 still rose to an average of 6,812,000 barrels per day last week, 15.6% less than the 8,068,000 barrel per day average that we were importing over the same four-week period last year...the 690,000 barrel per day decrease in our total crude inventories included 566,000 barrels per day that were withdrawn from our commercially available stocks of crude oil, and a 124,000 barrel per day withdrawal from the oil stored in our Strategic Petroleum Reserve​, part of a release from the reserves intended to blunt the ​Gulf crude ​short​age resulting from the Venezuelan oil export​ sanctions​​​...this week's crude oil production was reported to be 100,000 barrels per day lower at 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,700,000 barrels per day, while a 1,000 barrel per day decrease to 476,000 barrels per day in Alaska's oil production was not enough to impact the ​final ​rounded national total...last year's US crude oil production for the week ending May 4th was at 10,703,000 barrels per day, so this reporting week's rounded oil production figure was 14.0% above that of a year ago, and 44.8% 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 88.9% of their capacity in using 16,405,000 barrels of crude per day during the week ending May 3rd, down from 89.2% of capacity the prior week, and below the historical refinery utilization rate for ​this time of year....similarly, the 16,405,000 barrels per day of oil that were refined this week were still a bit less than the 16,486,000 barrels of crude per day that were being processed during the week ending May 4th, 2018, when US refineries were operating at 90.4% of capacity... 

even with the decrease in the amount of oil being refined, gasoline output from our refineries was still somewhat higher, increasing by 202,000 barrels per day to 10,129,000 barrels per day during the week ending May 3rd, after our refineries' gasoline output had increased by 146,000 barrels per day the prior week....with that increase in gasoline output, this week's gasoline production was finally 1.5% more than the 9,974,000 barrels of gasoline that were being produced daily during the same week last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 39,000 barrels per day to 5,089,000 barrels per day, after that distillates output had increased by 64,000 barrels per day the prior week...but even after this week's decrease, the week's distillates production was 1.9% more than the 4,993,000 barrels of distillates per day that were being produced during the week ending May 4th, 2018.... 

even with the increase in our gasoline production, the supply of gasoline in storage at the end of the week fell for the eleventh time in 12 weeks, decreasing by 596,000 barrels to 226,147,000 barrels over the week to May 3rd, after gasoline supplies had fallen by 917,000 barrels over the prior week....our gasoline supplies fell because the amount of gasoline supplied to US markets increased by 643,000 barrels per day to 9,871,000 barrels per day, after decreasing by 181,000 barrels per day the prior week, while our imports of gasoline rose by 344,000 barrels per day to a 70 month high of 1,114,000 barrels per day, and while our exports of gasoline fell by 197,000 barrels per day to 491,000 barrels per day....after having reached an all time record high fifteen weeks ago, our gasoline supplies are now 4.1% lower than last May 4th's inventory level of 235,804,000 barrels, and remain roughly 2% below the five year average of our gasoline supplies at this time of the year...

with the decrease in our distillates production, our supplies of distillate fuels fell for the 25th time in thirty-two weeks, decreasing by 159,000 barrels to 125,563,000 barrels during the week ending May 3rd, after our distillates supplies had decreased by 1,307,000 barrels over the prior week...the draw on our distillates supplies was much smaller this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 319,000 barrels per day to 3,896,000 barrels per day, and because our imports of distillates rose by 48,000 barrels per day to 111,000 barrels per day, ​while our exports of distillates rose by 164,000 barrels per day to 1,327,000 barrels per day...but even after this week's inventory decrease, our distillate supplies were still 9.1% higher than the 115,038,000 barrels of distillate that we had stored on May 4th, 2018, even as they remain roughly 5% below the five year average of distillates stocks for this time of the year...

finally, with lower oil production and falling oil imports, our commercial supplies of crude oil in storage decreased for the fifth time in 16 weeks, falling by 3,963,000 barrels over the week, from 470,567,000 barrels on April 26th to 466,604,000 barrels on May 3rd....that still left our crude oil inventories near the recent five-year average of crude oil supplies for this time of year, while they also remained about a third higher than the prior 5 year (2009 - 2013) average of crude oil stocks ​as of the first weekend in May​, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally 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 May 3rd were 7.6% above the 433,758,000 barrels of oil we had stored on May 4th of 2018, but at the same time still 10.7% below the 522,525,000 barrels of oil that we had in storage on May 5th of 2017, and 8.2% below the 508,487,000 barrels of oil we had stored on May 6th of 2016...    

This Week's Rig Count

the US rig count was down again this past week and hence ​fell to a​ 1​4 month low in continuing the recent slide that has seen drilling rig activity decrease eleven out of the last 12 weeks.....Baker Hughes reported that the total count of rotary rigs running in the US fell by 2 rigs to 988 rigs over the week ending May 10th, which was also down by 57 rigs from the 1045 rigs that were in use as of the May 11th report of 2018, and quite a bit below 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 2 rigs to 805 rigs this week, which was also 39 fewer oil rigs than were running a year ago, and barely half of 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 was unchanged at 183 natural gas rigs, which was still down by 16 rigs from the 199 natural gas rigs that were drilling a year ago, and 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 20 rigs this week, which was the same number of rigs that were active in the Gulf a year ago...the number of active horizontal drilling rigs was down by 1 to 872 horizontal rigs this week, which was also 46 fewer horizontal rigs than the 918 horizontal rigs that were in use in the US on May 11th of last year, and well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014.....in addition, the vertical rig count was also down by 1 rig to 45 vertical rigs this week, which was also down from the 55 vertical rigs that were in use during the same week of last year....meanwhile, the directional rig count was unchanged at 71 directional rigs this week, which was still down by 1 from the 72 directional rigs that were operating on May 11th 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 oil & gas 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 May 10th, the second column shows the change in the number of working rigs between last week's count (May 3rd) and this week's (May 10th) count, the third column shows last week's May 3rd active rig count, the 4th column shows the change between the number of rigs running on Friday and the number 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 11th of May, 2018...      

May 10 2019 rig count summary

this week's major oil rig decrease was​ in​ New Mexico, and it appear that 3 of the 4 rigs that were shut down in the state had been operating in the Permian, because two Permian rigs were added in Texas, one each in Texas Oil District 7C, or the southern Permian Midland basin, and in Texas Oil District 8A, or the northern Permian Midland basin...the three rigs that were added in California were also likely targeting oil, since the natural gas rig count elsewhere balances, although we can't be sure without digging through the North America Rotary Rig Count Pivot Table (xls), which lists the details on each rig deployment individually...for rigs​ ​targeting natural gas, two were added in Pennsylvania's Marcellus, while Pennsylvania saw a natural gas rig pulled out of the Utica shale at the same time....the national natural gas rig count remained unchanged, however, because the Denver-Julesburg Niobrara chalk had a natural gas rig that had been operating in Wyoming pulled out at the same time​, and all rigs remaining in the Niobrara are now drilling for oil...we should also note that in addition to the rig changes for major producing states shown above, Alabama drillers added a rig and are now operating two, also an increase from the single rig they had deployed a year ago, while Mississippi saw two rigs shut down and has two still drilling, which is down from the 3 rigs that were running in Mississippi a year ago...

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