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, June 16, 2019

OPEC report shows 2nd quarter global oil output running a million barrels per day oil short of demand

oil prices fell for the 3rd week in four this week, despite an attack on oil product tankers near the Strait of Hormuz that had all the earmarks of a false flag operation by one of the US allies in the region...after rising nearly 1% to $53.99 a barrel last week on hopes for a resolution of a dispute with Mexico, US crude prices for July delivery opened higher and rose to $54.84 a barrel early Monday on hopes for an extension of the OPEC/Russia supply cut deal, but quickly reversed those gains on word that Russia was still undecided and ended 73 cents lower at $53.26 per barrel, as U.S.-China trade tensions continued to threaten demand for crude....oil prices then opened higher on Tuesday on Saudi assurances that OPEC+ would not let the oil market slide any further, but again faded near the close to end just 1 cent higher at $53.27 a barrel, as traders looked ahead to the American Petroleum Institute’s report scheduled for release after the market close....when that report showed another surprise build of US crude inventories oil prices tumbled in after hours trading and hence opened lower on Wednesday, and then fell steadily throughout the day after the EIA confirmed the surprise rise in US crude stocks, with oil ending down $2.13 at $51.14 per barrel as ongoing trade tensions between the United States and China further dampened the outlook for oil consumption growth...oil prices opened slightly lower Thursday and were falling up until reports of tanker explosions in the Gulf of Oman off Iran coast renewed fears about conflict in the Middle East following the tanker strikes last month and sent prices as much as 4.5% higher before settling $1.14 or 2.2% higher at $52.28 a barrel....oil prices then continued higher on Friday, initially adding 70 cents to Thursday's close, but slid through the afternoon to end just 23 cents, or 0.4% higher at $52.51 a barrel, as slowing economic conditions and an IEA forecast of slower demand growth overshadowed the ongoing tensions in the Middle East...so despite the clear threat to Middle East oil shipments, US oil prices still ended down 2.7% for the week in a continuation of a bearish trend that has seen prices fall 22% over the past 8 weeks...

natural gas prices, meanwhile, eased up from their 3 year lows of last week, with natural gas for July delivery rising first 2 cents on Monday and then 4.2 cents on Tuesday, as hotter weather forecasts helped extend a mild price rally...a 1.3 cent drop on Wednesday and a 6.1 cent drop after the storage report on Thursday were then mostly reversed by a 6.2 cent price jump on Friday to leave natural gas prices 5 cents higher on the week at $2.387 per mmBTU...

the natural gas storage report from the EIA for the week ending June 7th indicated that the quantity of natural gas held in storage in the US increased by 102 billion cubic feet to 2,088 billion cubic feet by the end of the week, which meant our gas supplies were 189 billion cubic feet, or 10.0% more than the 1,899 billion cubic feet that were in storage on June 8th of last year, while still 230 billion cubic feet, or 9.9% below the five-year average of 2,318 billion cubic feet of natural gas that have typically been in storage after the first week of June in recent years....this week's 102 billion cubic feet injection into US natural gas storage was at the low end of expectations, as most analysts had estimated an increase in supplies near 110 billion cubic feet, but was still higher than the average 92 billion cubic feet of natural gas that have been added to gas storage during the first week of June in recent years....the 981 billion cubic feet of natural gas that have been added to storage over the past 11 weeks has been the largest injection of gas into storage on record for any similar period this early in the injection season, probably about double the average 11 week build of the past decade, as the 712 billion cubic feet that were added during the same 11 weeks of 2014 was the only year that even appeared close...   

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 June 7th, showed that a modest decrease in our oil imports and and a modest increase in our oil refining resulted in a smaller increase in our stored crude supplies, but still the ninth increase in 12  weeks...our imports of crude oil fell by an average of 316,000 barrels per day to an average of 7,611,000 barrels per day, after rising by an average of 1,065,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 176,000 barrels per day to 3,122,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,489,000 barrels of per day during the week ending June 7th, 140,000 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 100,000 barrels per day lower at 12,300,000 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 16,789,000 barrels per day during this reporting week...

meanwhile, US oil refineries were reportedly using 17,064,000 barrels of crude per day during the week ending June 7th, 126,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 316,000 barrels of oil per day were being added to of the oil that's in storage in the US....hence, this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 590,000 barrels per day short of what was added to storage plus 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 (+590,000) 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 they label in their footnotes as "unaccounted for crude oil"....with that much oil unaccounted for, we have to figure one or more of this week's crude oil metrics are again off 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 was unchanged from last week at an average of 7,336,000 barrels per day last week, now 9.0% less than the 8,059,000 barrel per day average that we were importing over the same four-week period last year...the 316,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve was unchanged...this week's crude oil production was reported to be 100,000 barrels per day lower at 12,300,000 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 11,800,000 barrels per day, while a 2,000 barrel per day increase to 480,000 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 June 8th was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was roughly 12.8% above that of a year ago, and 45.9% 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 93.2% of their capacity in using 17,064,000 barrels of crude per day during the week ending June 7th, up from 91.8% of capacity the prior week, and finally back on par with the historical refinery utilization rate for this time of year....however, the 17,064,000 barrels per day of oil that were refined this week were still 2.5% below the 17,505,000 barrels of crude per day that were being processed during the week ending June 8th, 2018, when US refineries were operating at 95.7% of capacity....note that US refinery throughput had generally been in excess of 17 million barrels per day other than during the spring & fall maintenance seasons through most of the past two years up until the Venezuelan sanctions cut off the supply of heavy sour crude that US Gulf refineries are optimized for, and this week marks the first time refineries have processed over 17 million barrels per day since January 18th, suggesting a stabilization of the heavy crude supplies that those US refineries need...

with the increase in the amount of oil being refined, gasoline output from our refineries was similarly higher, increasing by 227,000 barrels per day to 10,276,000 barrels per day during the week ending June 7th, after our refineries' gasoline output had increased by 186,000 barrels per day the prior week....but even with those big increases in gasoline output, this week's gasoline production was still 1.7% less than the 10,451,000 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) fell by 165,000 barrels per day to 5,239,000 barrels per day, after our distillates output had increased by 222,000 barrels per day the prior week...but even with this week's decrease, the week's distillates production was still 2.5% more than the 5,111,000 barrels of distillates per day that were being produced during the week ending June 8th, 2018.... 

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the fourth week in a row but for just the 5th time in 17 weeks, increasing by 764,000 barrels to 234,913,000 barrels over the week to June 7th, after our gasoline supplies had increased by 3,205,000 barrels over the prior week....the increase in our gasoline supplies was reduced this week because the amount of gasoline supplied to US markets increased by 436,000 barrels per day to 9,877,000 barrels per day and because our imports of gasoline fell by 395,000 barrels per day to 700,000 barrels per day, while our exports of gasoline fell by 148,000 barrels per day to 531,000 barrels per day...after our gasoline supplies had reached an all time record high eighteen weeks ago, and then had fallen by nearly 13% over 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, our gasoline supplies have now recovered by more than 4% over the past 4 weeks and now are back to 2% above the five year average of our gasoline supplies at this time of the year, while still fractionally lower than last June 8th's inventory level of 236,763,000 barrels...

meanwhile, with the pullback in our distillates production, our supplies of distillate fuels fell for the 9th time in 13 weeks, decreasing by 1,000,000 barrels to 128,372,000 barrels during the week ending June 7th, after our distillates supplies had increased by 4,572,000 barrels over the prior week....our distillates supplies reversed & fell this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 981,000 barrels per day to 4,368,000 barrels per day, while our imports of distillates rose by 11,000 barrels per day to 123,000 barrels per day, and while our exports of distillates fell by 339,000 barrels per day to 1,137,000 barrels per day....but even after this week's inventory decrease, our distillate supplies were still 11.9% higher than the 114,693,000 barrels of distillate that we had stored on June 8th, 2018, even as they fell to 4% below the five year average of distillates stocks for this time of the year...

finally, even with lower oil imports and lower oil production, our commercial supplies of crude oil in storage still increased for the fifteenth time in 21 weeks, rising by 2,206,000 barrels, from 483,264,000 barrels on May 31st from 485,470,000 barrels on June 7th...with that increase, our crude oil inventories rose to nearly 8% above the recent five-year average of crude oil supplies for this time of year, and were roughly more than 38.5% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the first week of June, 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 June 7th were 12.3% above the 432,441,000 barrels of oil we had stored on June 8th, of 2018, but at the same time still 5.1% below the 511,546,000 barrels of oil that we had in storage on June 9th of 2017, and 3.1% below the 500,911,000 barrels of oil we had stored on June 10th of 2016...   

OPEC's Monthly Oil Market Report

next we're going to review OPEC's June Oil Market Report (covering May OPEC & global oil data), which was released on Thursday of this past week and is available as a free download, and hence it's the report we check for monthly global oil supply and demand data...the first table from this monthly report that we'll look at is from the page numbered 61 of that report (pdf page 71), 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 thus avert any potential disputes that could arise if each member reported their own figures...

May 2019 OPEC crude output via secondary sources

so, as we can see from this table of official oil production data, OPEC's oil output fell by 236,000 barrels per day to 29,876,000 barrels per day in May, from their revised April production total of 30,111,000 barrels per day...however that April figure was originally reported as 30,031,000 barrels per day, so that means their production for May was really just a 155,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official April OPEC output figures as reported a month ago, before this month's revisions)...

the largely involuntary Iranian output cuts of 227,000 barrels per day due to US sanctions on their exports was the primary reason for the cartel's output cut in May, as production cuts by the Saudis, by Nigeria, and by Venezuela were almost entirely offset by increases in output from Iraq, Angola and Gabon...that 94,000 barrels per day increase in the output from Iraq, however, now puts them well over the output allocations assigned to each member after their December 7th meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers, while the output from Nigeria also remains slightly above quota despite their May decrease, as can be seen in the table of as can be seen in the table of OPEC production allocations we've included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, and shows average daily production quota in millions of barrels of oil per day for each of the OPEC members for the first 6 months of this year, as was agreed to at their December 2018 meeting...note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by a civil war, are exempt from any production quotas, and that only Libya has been producing more than they did in the 4th quarter of 2018, as can be seen in the fifth column of the OPEC production table above...

the next graphic from the report that we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from June 2017 to May 2019, and it comes from page 62 (pdf page 72) of the June 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... 

May 2019 OPEC report global oil supply

despite the sizable decrease in OPEC's production from what they reported a month ago, their preliminary estimate indicates that total global oil production still rose by 0.04 million barrels per day to 98.26 million barrels per day in May, but that came after April's total global output figure was revised down by 600,000 barrels per day from the 98.82 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 270,000 barrels per day in May after that revision, with higher oil output from US, Kazakhstan, Azerbaijan, Canada and the UK the major reasons for the non-OPEC production increase.... the 98.26 million barrels per day produced globally in May was still 0.44 million barrels per day, or 0.4% higher than the revised 97.82 million barrels of oil per day that were being produced globally in May a year ago (see the June 2018 OPEC report (online pdf) for the originally reported May 2018 details)...with the decrease in OPEC's output, their May oil production of 29,876,000 barrels per day represented 30.4% of what was produced globally during the month, down from the revised 30.7% share they contributed in April....OPEC's May 2018 production was reported at 31,869,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year's total and new member Congo from this year's, are now producing 1,728,000 fewer barrels per day of oil than they were producing a year ago, when they accounted for 32.6% of global output, with a 1,459,000 barrel per day drop in output from Iran and a 651,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the year over year production increases of 269,000 barrels per day from Iraq, 219,000 barrels per day from Libya, and 196,000 barrels per day from the Emirates...  

despite the 40,000 barrels per day increase in global oil output that was seen during May, the 600,000 barrels per day downward revision to April's global output meant there was a large deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...  

global oil demand:

May 2019 OPEC report global oil demand

the table above came from page 36 of the May OPEC Monthly Oil Market Report (pdf page 46), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2019 over the rest of the table...on the "Total world" line in the third column, we've circled in blue the figure that's relevant for May, which is their revised estimate of global oil demand during the second quarter of 2019...

OPEC is estimating that during the 2nd quarter of this year, all oil consuming regions of the globe will use 99.24 million barrels of oil per day, which was revised 0.04 million barrels of oil per day higher than their estimate for the 2nd quarter a month ago....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world's oil producers were only producing 98.26 million barrels per day during May, which means that there was a shortfall of around 980,000 barrels per day in global oil production when compared to the demand estimated for the month...

in addition, the downward revision of 600,000 barrels per day to April's global output that's implied in this report, combined with the 40,000 barrels per day upward revision to 2nd quarter demand, means that the 380,000 barrels per day shortfall that we had figured for April based on last month's figures would now be revised to a deficit of 1,020,000 barrels per day....combined with deficit of 980,000 barrels per day in May, that means that for the 2nd quarter to date, global oil production has been running a million barrels per day short of what's need to cover demand...

note that in green we've also circled a downward revision of 290,000 barrels per day to first quarter demand...that means that the global deficit of 100,000 barrels per day we had previously figured for March would have to be revised to a global oil surplus of 190,000 barrels per day...similarly, the 350,000 barrel per day global oil output surplus we had for February would now be a 640,000 barrel per day global oil output surplus, and the 260,000 barrel per day global oil output surplus we has for January would be revised to a 550,000 barrel per day oil output surplus...still, despite those first quarter surpluses, it's evident that with the large deficits in April and May, oil producers are now running a sizable shortfall vis a vis global demand..

This Week's Rig Count

the US rig count fell for the 15th time in seventeen weeks over the week ending June 14th and was thus at another 16 month low, with the least drilling activity since February 2nd 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 6 rigs to 969 rigs this past week, which was also down by 90 rigs from the 1059 rigs that were in use as of the June 15th 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 1 rig to 788 rigs this week, which was also a new 16 month low, 75 fewer oil rigs than were running a year ago, and less than 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 fell by 5 rigs to 181 natural gas rigs, which was also down by 13 rigs from the 194 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...

with the addition of a rig offshore from Louisiana, the rig count in the Gulf of Mexico increased by 1 rig to 24 rigs this week, ending with a net of 22 rigs running offshore from Louisiana and 2 rigs deployed offshore from Texas....those totals are a 5 rig increase from the 19 rigs that were deployed in the Gulf in the same week a year ago, when 18 rigs were drilling in Louisiana waters and one was deployed offshore from Texas, and a 4 rig increase from the national total of 20 offshore rigs a year ago, when there was also a rig deployed in the waters offshore from Alaska at the time...

the count of active horizontal drilling rigs was down by 3 to 852 horizontal rigs this week, which was a new 15 month low for horizontal drilling and 80 fewer horizontal rigs than the 932 horizontal rigs that were in use in the US on June 15th of last year, and also well 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 down by 6 rigs to 68 directional rigs this week, but that was up by 1 rig from the 67 directional rigs that were operating during the same week of last year..... on the other hand, the vertical rig count was up by 3 rigs to 49 vertical rigs this week, but those were down from the 60 vertical rigs that that were in use on June 15th 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 June 14th, the second column shows the change in the number of working rigs between last week's count (June 7th) and this week's (June 14th) count, the third column shows last week's June 7th 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 15th of June, 2018...   

June 14 2019 rig count summary

as you can see from the above, drilling activity in most of the country was little changed except for in Texas, which saw one oil rig pulled out of the Eagle Ford in the south and 5 oil rigs pulled out of the Permian basin in the western part of the state...since six rigs were shut down in Texas Oil District 8, which would be the core Permian Delaware, while two rigs were started up in Texas Oil District 7C, or the southern Permian Midland basin, we have to assume that one of those start-ups was of a conventional well, not targeting the Permian itself...meanwhile, all 5 of the natural gas rigs that were idled this week came out of basins not tracked separately by Baker Hughes, and with no changes shown above other than In Wyoming and Alaska, we'd be hard pressed to speculate where those might have been...for those natural gas rigs not to show up as a change in the state totals, what had to have happened would be the startup of an oil rig and an offsetting natural gas rig at the same time in the same state​....states with both kinds of wells, such as Texas, Oklahoma, and Louisiana, are the most likely places for that kind of switch to have occurred​...if you're really interested, the Baker Hughes North America Rotary Rig Count Pivot Table (xls) has the individual well records over the last 8 years, but unless you know what you're looking for, you'd have to plan on spending ​quite ​some time with that file to find what you'd want to know...

+

+

note:  there’s more here

No comments: