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, July 7, 2019

coolest June in 15 years contributes to largest spring natural gas storage injection on record..

oil prices fell for the first time in three weeks as oil traders "sold on the news" that OPEC + Russia had agreed to extend their production cuts for another 9 months, through March of 2020...after rising 2% to $58.47 a barrel on a big drop in US crude supplies last week, the price of US WTI crude for August delivery opened 80 cents higher and traded above $60 for the first time in over 5 weeks on Monday morning after Saudi Arabia, Russia and Iraq all backed an extension of supply cuts ahead of the OPEC meeting in Vienna, but gave up a substantial portion of its early gains in the afternoon to close up just 62 cents, or 1.1%, at $59.09 a barrel...after opening higher on Tuesday, oil prices resumed their late Monday selloff on worries that a weakening global economy would dent demand outweighed the OPEC supply cuts, and then plunged sharply after the pre-OPEC decision price level was breached to end down $2.84, or 4.8%, to $56.25 a barrel on the sense that the OPEC pact was the bare minimum they could have done to control supplies...oil prices recovered part of those losses on Wednesday, first on an API report of a larger-than-expected in U.S. crude oil inventories, and then on a rally in equities and a drop in the oil rig count, with prices finishing $1.09 higher at $57.34 a barrel...oil prices were lower in overseas trading on the 4th of July holiday and that price weakness carried into early US trading Friday, but prices later rose after Iran threatened to seize a British ship after British forces had seized an Iranian tanker in Gibraltar, and closed 17 cents higher at $57.51 a barrel...but despite those gains late in the week, the Tuesday selloff still left prices down 1.6% on the week, following increases over the prior two weeks...

natural gas prices, meanwhile, rose for a second week, as a notably hotter shift in the weather pattern drove out the shorts and promised to increase power burn demand...natural gas for August delivery initially fell 4.1 cents to $2.267 per mmBTU on Monday, as June had finished as the coolest since 2004, and then slipped another 2.7 cents on Tuesday before rising 5 cents on Wednesday with the early release of the natural gas storage report, and then rising 12.8 cents, or nearly 5% to $2.418 per mmBTU on Friday as a broad upper level ridge set up over the central and eastern U.S. and was expected to produce above-average temperatures going well into next week...

the natural gas storage report from the EIA for the week ending June 28th indicated that the quantity of natural gas held in storage in the US increased by 89 billion cubic feet to 2,390  billion cubic feet by the end of the week, which meant our gas supplies were 249 billion cubic feet, or 11.6% more than the 2,141 billion cubic feet that were in storage on June 28th of last year, while still 152 billion cubic feet, or 6.0% below the five-year average of 2,542 billion cubic feet of natural gas that have been in storage after the fourth week of June in recent years....this week's 89 billion cubic feet injection into US natural gas storage was higher than the average consensus estimate for a 79 billion cubic feet injection in an S&P Global Platts survey, and was much higher than the average 70 billion cubic feet of natural gas that have been added to gas storage during the fourth week of June in recent years, the 16th consecutive such above average injection....the 1,283 billion cubic feet of natural gas that have been added to storage over the past 14 weeks has been the largest injection of gas into storage on record for any similar period of the injection season, as the 1,033 billion cubic feet that were added during the same 14 weeks of 2014 (when June was also unusually cool) is the only year that even appears close...as you know, we've been calling this injection pace record setting and unprecedented for several weeks now, and this week the EIA finally jumped on the bandwagon with a blog post saying the same thing, albeit without the first injection in late March that we've been including in our seasonal totals...

we'll include the latest temperature anomaly map from the EIA's natural gas storage dashboard as a preliminary image before showing you a bar graph on natural gas weighted degree days for June, which have contributed to that record setting pace...

July 6th 2019 temperature anomalies thru June 27

as you can see, the above map color-codes the temperature anomalies over the lower 48 states for the week ending June 27th, and with a preponderance of blue coloring, we can tell that most of the US except for the southeast saw below normal temperatures for the week in question.... several times over the past six months​, ​we've included​ a copy of​ the weekly update of this temperature map as a means of indicating the influence that above or below temperatures had on natural gas consumption, and hence on the amount of natural gas left in storage...while everyone probably understands that below normal temperature for the last week of June would mean less use of air conditioning, the implications of such a map haven't been quite so clear earlier in the year, when the northern parts of the country may still have been heating their homes while the southern tier of states might be turning on the air conditioning at the same time....utilities and traders in natural gas follow a much more precise metric to determine the impact of temperature changes on natural gas consumption, which is shown in the bar graph below...

July 2nd 2019 JUNE_GWDD

the above graph, copied from the Monday blog post at Bespoke Weather, shows gas weighted degree days (GWDD) for the month of June from 1981 to to 2019, with 2019 on the left and the oldest years oddly on the right....gas weighted degree days, or GWDDs, are a population weighed metric which includes both heating degree days and cooling degree days in the same sum...heating degree days are a measure of how many degrees a given day​ falls below ​a average daily temperature ​at which ​it is figured that ​heating is necessary (typically 65 degrees), while cooling degree days measure how many degrees ​temperatures rise ​above ​a base average temperature whe​rein it's thought cooling ​would be necessary​ on a given day...for example, if the mean daily temperature for a northern US city is 55F, that city would have 10 heating degree days for that date; if, on the other hand, a southern US city experienced a mean temperature of 80F on that same day, that city would show 15 cooling degree days for that day...averaging the number of degrees days of either type for each​ US population center​, weighted by population, and adding them together for the 30 days of June, yields the metric shown on the bar graph above...

thus we can see that for June of 2019, the population weighted GWDDs fell short of 250 and was the lowest since 2004, meaning that the demand for natural gas for both heating and cooling during the month was the lowest in 15 years...while degree days are not an exact science, as both heating and cooling needs are determined by more than just the average outdoor temperature, they give us, and utilities, a reasonable estimate of expected demand for natural gas and electricity on a given day, and by extension, over a given period... 

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 changes over the week ending June 28th, showed that a big drop in our oil exports combined with a jump in our oil imports meant there was a much smaller withdrawal of oil from our stored crude supplies than last week, even as it was just the 6th withdrawal​ of oil​ in 14 weeks...our imports of crude oil rose by an average of 929,000 barrels per day to an average of 7,585,000 barrels per day, after falling by an average of 812,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 780,000 barrels per day to 2,990,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,595,000 barrels of per day during the week ending June 28th, 1,709,000 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 reported to be 100,000 barrels per day higher at 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 16,795,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,290,000 barrels of crude per day during the week ending June 28th, 47,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a​n average of 155,000 barrels of oil per day were being withdrawn from the supplies of oil stored 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, from oilfield production, and from storage was 340,000 barrels per day short of what our 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 (+340,000) 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"...(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 7,330,000 barrels per day last week, now 13.1% less than the 8,438,000 barrel per day average that we were importing over the same four-week period last year...the 155,000 barrel per day decrease in our total crude inventories was all pulled out of our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged...this week's crude oil production was reported to be 100,000 barrels per day higher at 12,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 11,800,000 barrels per day, while a 27,000 barrel per day decrease to 427,000 barrels per day in Alaska's oil production then lowered the final rounded national total by 100,000 [sic]....last year's US crude oil production for the week ending June 22nd was rounded to 10,900,000 barrels per day, so this reporting week's rounded oil production figure was roughly 11.9% 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 94.2% of their capacity in using 17,290,000 barrels of crude per day during the week ending June 28th, unchanged from 94.2% of capacity the prior week, and a fairly normal refinery utilization rate for this time of year....however, the 17,290,000 barrels per day of oil that were refined this week were still 2.1% below the 17,653,000 barrels of crude per day that were being processed during the week ending June 29th, 2018, when US refineries were operating at 97.1% of capacity....

even with ​just a modest decrease in the amount of oil being refined, gasoline output from our refineries was much lower, decreasing by 564,000 barrels per day to 9,948,000 barrels per day during the week ending June 28th, after our refineries' gasoline output had increased by 649,000 barrels per day over the prior four weeks....with that large drop in gasoline output, this week's gasoline production was 3.5% less than the 10,311,000 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) rose by 31,000 barrels per day to 5,336,000 barrels per day, after our distillates output had decreased by 66,000 barrels per day the prior week....so even with this week's increase, the week's distillates production was still 2.3% less than the 5,463,000 barrels of distillates per day that were being produced during the week ending June 29th, 2018.... 

with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week fell for the 3rd week in a row and for the 15th time in 19 weeks, decreasing by 1,583,000 barrels to 230,642,000 barrels over the week to June 28th, after our gasoline supplies had decreased by 996,000 barrels over the prior week...the draw from our gasoline supplies increased even though our exports of gasoline fell by 376,000 barrels per day to 563,000 barrels per day, as our imports of gasoline fell by 280,000 barrels per day to 536,000 barrels per day, while the amount of gasoline supplied to US markets increased by 26,000 barrels per day to 9,492,000 barrels per day...after our gasoline supplies had reached an all time record high twenty-one weeks ago, they then fell by nearly 13% over the next 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, and hence ​they ​are still 3.8% lower than last June 29th's inventory level of 239,691,000 barrels, ​while remain​ing​ near the five year average of our gasoline supplies at this time of the year...

with the increase in our distillates production, our supplies of distillate fuels rose for the 5th time in the past 16 weeks, increasing by 1,408,000 barrels to 126,788,000 barrels during the week ending June 28th, after our distillates supplies had decreased by 2,441,000 barrels over the prior week....our distillates supplies managed to increase this week because our exports of distillates fell by 314,000 barrels per day to 1,405,000 barrels per day and because our imports of distillates rose by 65,000 barrels per day to 98,000 barrels per day, and because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 140,000 barrels per day to 3,828,000 barrels per day....after this week's inventory increase, our distillate supplies were 7.9% higher than the 117,557,000 barrels of distillate that we had stored on June 29th, 2018, even as they remained 6% below the five year average of distillates stocks for this time of the year...

however, even with the big drop in our oil exports and a big increase in our oil imports, our commercial supplies of crude oil in storage fell for a third week in a row and for the ninth time in 24 weeks, decreasing by 1,085,000 barrels, from 469,576,000 barrels on June 21st to 468,491,000 barrels on June 28th...​but ​even with that decrease, our crude oil inventories remained roughly 5% above the recent five-year average of crude oil supplies for this time of year, and 36.3% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the end 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 28th were still 12.1% above the 417,881,000 barrels of oil we had stored on June 29th of 2018, but at the same time ​were ​6.8% below the 502,914,000 barrels of oil that we had in storage on June 30th of 2017, and 5.1% below the 493,718,000 barrels of oil we had stored on July 1st of 2016...   

This Week's Rig Count

the US rig count fell for the 17th time in 20 weeks during the week ending July 5th, after being unchanged during the prior week, and is now down by 11% so far this year....Baker Hughes reported that the total count of rotary rigs running in the US fell by 4 rigs to 963 rigs this past week, which was also down by 89 rigs from the 1052 rigs that were in use as of the July 6th report of 2018, and ​less than half of 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 5 rigs to 788 rigs this week, which was also 75 fewer oil rigs than were running a year ago, and ​quite a bit 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 increased by 1 rig to 174 natural gas rigs, which was still down by 13 rigs from the 187 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on August 29th, 2008...in addition, a rig classified as miscellaneous continued to drill in Sandusky county Ohio this week, ​while there were 2 ​such ​"miscellaneous rig​s​" running a year ago, when Cabot Oil & Gas was drilling 2 exploratory wells into the Knox formation in Ohio...

the rig count in the Gulf of Mexico decreased by 2 to 24 rigs this week, as two rigs that had been drilling off the coast of Louisiana were shut down...that le​ft 22 rigs running offshore from Louisiana and 2 rigs deployed offshore from Texas, still up by 6 rigs from the 18 rigs that were deployed in the Gulf in the same week a year ago, when 17 rigs were drilling in Louisiana waters and one was deployed offshore from Texas...however, a year ago there was also a rig drilling offshore from Alaska, while all of this week's offshore activity was in the Gulf of Mexico...

the count of active horizontal drilling rigs was down by 1 to 839 horizontal rigs this week, which was another 16 month low for horizontal drilling and 91 fewer horizontal rigs than the 930 horizontal rigs that were in use in the US on July 6th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was down by 2 rigs to 66 directional rigs this week, and those were down a rig from the 67 directional rigs that were operating during the same week of last year....at the same time, the vertical rig count was down by 1 rig to 58 vertical rigs this week, but those were still up from the 55 vertical rigs that that were in use on July 6th 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 July 5th, the second column shows the change in the number of working rigs between last week's count (June 28th) and this week's (July 5th) count, the third column shows last week's June 28th 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 6th of July, 2018...     

July 5th 2019 rig count summary

the 4 rig decrease in Louisiana is pretty straightforward; 2 of those were pulled out of the Gulf, while another 2 came out of the Haynesville shale in the northwest quarter of the state...for the 5 rig decrease in Oklahoma, however, there were 4 oil rigs pulled out of the Cana Woodford, while 2 rigs began drillig for natural gas in the same basin, ​in ​the first drilling for natural gas in the Cana Woodford since March of 2018...hence, three more Oklahoma rigs were shut down in basins not tracked separately by Baker Hughes​ which are not shown above​...for New Mexico, it appears that all three rigs were added in the Permian, because 2 horizontal rigs were pulled out of Texas Oil District 8, which would be the core Permian Delaware, while Texas Oil District 7C, ​or ​the southern Permian Midland​,​ saw one rig start up, so for the Permian to show a two rig increase, three had to have been added in New Mexico...this week's natural gas drilling nets out pretty easily too; while two natural gas rigs were shut down in Louisiana's Haynesville, two were started up in the Cana Woodford, and another one began drilling in West Virginia's Marcellus..

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note: there's more here...