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, August 11, 2019

oil prices fall into bear market; natural gas prices bounce off a 39 month low; rig count falls to a 19 month low..

oil prices fell nearly 8% to a 7 month low on a worsening of the US-China trade war early this past week, but then recovered three-quarters of that decline by week end on reports that the Saudis were on the phone with the Russians in an attempt to stop the price slide...after ending 1% lower at $55.66 a barrel last week on the Thursday Trump tweet announcing new tariffs on China, the contract price of US crude for September delivery opened trading lower on Monday as China had let its currency depreciate to 7 yuan to the dollar in response to Trump's tariffs, but its losses were limited by a draw from inventories at the Cushing, Oklahoma delivery hub for that contract, as US prices ended down just 93 cents at $54.69 a barrel even as global oil prices fell more than $2 on the currency war news...oil prices fell sharply for second day on Tuesday, tracking a volatile stock market, with US crude ending down $1.06 at $53.63 a barrel, even as Brent crude, the global benchmark, slid into a bear-market in falling more than 20% from its late-April peak...oil prices then plunged further on Wednesday after the EIA reported a surprise increase in US crude and gasoline supplies, with US crude ending down nearly 5% at $51.09 a barrel, while Brent crude fell $2.71 to $56.23 a barrel, an eight-month low....however, oil prices jumped on Thursday due to a firmer yuan and expectations of more OPEC cuts, with US crude ending 2.5% higher at $52.54 a barrel on reports that the Saudis phoned other oil producers to devise a policy response to halt the price slide...prices jumped again on Friday, supported by a drop in European oil inventories and expectations of more OPEC output cuts, despite an International Energy Agency report that demand growth was at its lowest since 2008, with US crude finishing the session $1.96, or 3.7% higher at $54.50 a barrel, the largest one-day gain in nearly a month...but despite that 2 session surge, US WTI prices still ended the week down 2% from last week's close, while Brent crude finished 5.4% lower at $58.53, with both benchmarks having entered a bear market earlier in the week...

natural gas prices, meanwhile, ended the week little changed, after falling to a 39 month low on Monday...after falling for a third week in a row and hitting 38 month lows twice last week before ending at $2.121 per mmBTU, the natural gas contract for September delivery fell 5.1 cents to a 39 month low of $2.070 per mmBTU on Monday, following a weekend report that US dry gas production had hit an all-time high of 90.4 billion cubic feet per day, thus topping 90 billion cubic feet per day for the first time in US history...prices rebounded 4.1 cents on Tuesday on strong power burns and a forecast for hotter than normal weather for the next 15 days, but backed off from that bullish news and still fell 2.8 cents on Wednesday...a slightly smaller than expected addition to storage moved prices 4.5 cent higher on Thursday, but they again fell back to a intraday low of $2.064 per mmBTU on Friday before ending the week at $2.119 per mmBTU, just two-tenths of a cent lower than the previous week's close...

the natural gas storage report for the week ending August 2nd from the EIA indicated that the quantity of natural gas held in storage in the US increased by 55 billion cubic feet to 2,689 billion cubic feet by the end of the week, which meant our gas supplies were 343 billion cubic feet, or 14.6% more than the 2,346 billion cubic feet that were in storage on August 2nd of last year, while still 111 billion cubic feet, or 4.0% below the five-year average of 2,800 billion cubic feet of natural gas that have been in storage as of the 2nd of August in recent years....this week's 55 billion cubic feet injection into US natural gas storage was a bit below the consensus forecast of a 57 billion cubic feet injection by analysts surveyed by S&P Global Platts , while it was well above the average 43 billion cubic feet of natural gas that have been added to gas storage during the same week of the summer over the past 5 years, the 19th such above average storage build in the last 21 weeks... the 1,511 billion cubic feet of natural gas that have been added to storage over the 19 weeks of this injection season remains as the largest injection of gas into storage on record for any prior similar period of the gas injection season...   

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending August 2nd indicated the first increase in US crude inventories in 8 weeks, despite a big jump in our refinery throughput, because of an increase in our crude oil imports and a drop in our oil exports, accompanied a major shift of unaccounted for crude from the demand side to the supply side of the oil balance sheet....our imports of crude oil rose by an average of 485,000 barrels per day to an average of 7,148,000 barrels per day, after falling by an average of 365,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 709,000 barrels per day to an average of 1,865,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,283,000 barrels of per day during the week ending August 2nd, 1,194,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, the production of crude oil from US wells was reported to be 100,000 barrels per day higher than the prior week 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 17,583,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly using 17,777,000 barrels of crude per day during the week ending August 2nd, 786,000 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 341,000 barrels of oil per day were being added to 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 and from oilfield production was 535,000 barrels per day less than what what was added to storage and 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 (+535,000) 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"....since last week's unaccounted for crude was on the demand side at -512,000, that means there was a week over week swing of 1,047,000 barrels per day in the unaccounted for portion of the oil balance sheet, ​or that this week's week over week comparisons ​were distorted by more than a million barrels of missing crude per day (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 6,918,000 barrels per day last week, which was 14.9% less than the 8,129,000 barrel per day average that we were importing over the same four-week period last year...the 341,000 barrel per day increase in our total crude inventories was all added to 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 12,300,000 barrels per day even though the rounded estimate of the output from wells in the lower 48 states was unchanged at 11,800,000 barrels per day because a 9,000 barrels per day increase to 453,000 barrels per day in Alaska's oil production raised the final rounded national production total by 100,000 barrels per day (EIA"s math, not mine)...last year's US crude oil production for the week ending August 3rd was rounded to 10,800,000 barrels per day, so this reporting week's rounded oil production figure was 13.9% 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 96.4% of their capacity in using 17,777,000 barrels of crude per day during the week ending August 2nd, up from 93.0% of capacity the prior week, a refinery utilization rate that has been​ fairly​ typical for mid summer in recent years....the 17,777,000 barrels per day of oil that were refined this week were 1.0% above the 17,598,000 barrels of crude per day that were being processed during the week ending August 3rd, 2018, when US refineries were operating at 96.6% of capacity....

even with the big increase in the amount of oil being refined, gasoline output from our refineries was ​only a bit higher, increasing by 5,000 barrels per day to 10,421,000 barrels per day during the week ending August 2nd, after our refineries' gasoline output had increased by 327,000 barrels per day the prior week....even so, this week's gasoline production was 5.1% higher than the 9,913,000 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) rose by 122,000 barrels per day to 5,286,000 barrels per day, after our distillates output had decreased by 55,000 barrels per day the prior week....​with this week's increase, our distillates production was 0.9% more than the 5,237,000 barrels of distillates per day that were being produced during the week ending August 3rd, 2018.... 

with our gasoline production little changed, our supply of gasoline in storage at the end of the week rose for the second time in 8 weeks and for the 6th time in twenty-four weeks, rising by 4,437,000 barrels to 235,172,000 barrels over the week to August 2nd, after our gasoline supplies had fallen by 1,791,000 barrels over the prior week....our gasoline supplies increased this week as our imports of gasoline rose by 100,000 barrels per day to 1,217,000 barrels per day while our exports of gasoline fell by 32,000 barrels per day to 777,000 barrels per day, and while the amount of gasoline supplied to US markets increased by 92,000 barrels per day to 9,651,000 barrels per day...after this week's increase, our gasoline supplies were fractionally higher than last August 3rd's inventory level of 233,868,000 barrels, and have now risen to roughly 4% above 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 9th time in the past 21 weeks, increasing by 1,529,000 barrels to 137,451,000 barrels during the week ending August 2nd, after our distillates supplies had decreased by 894,000 barrels over the prior week...our distillates supplies increased this week because our imports of distillates jumped by 150,000 barrels per day to 253,000 barrels per day while our exports of distillates fell by 75,000 barrels per day to 1,435,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 1,000 barrels per day to 3,886,000 barrels per day....after this week's inventory increase, our distillate supplies were 9.6% higher than the 125,423,000 barrels of distillates that we had stored on August 3rd, 2018, but still around 1% below the five year average of distillates stocks for this time of the year...

finally, with higher oil imports and much lower oil exports, our commercial supplies of crude oil in storage rose for the first time in eight weeks but for the sixteenth time in 29 weeks, increasing by 2,385,000 barrels, from 436,545,000 barrels on July 26th to 438,930,000 barrels on August 2nd ...after that increase, our crude oil inventories were roughly 2% above the five-year average of crude oil supplies for this time of year, and were 31.0% higher than the prior 5 year (2009 - 2013) average of crude oil stocks for the 1st Friday of August, 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 had generally been rising since this past Fall up until the recent 8 weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of August 2nd were still 7.7% above the 407,389,000 barrels of oil we had stored on August 3rd of 2018, but at the same time were 7.7% below the 475,437,000 barrels of oil that we had in storage on August 4th of 2017, and 11.0% below the 492,969,000 barrels of oil we had in commercial storage on August 5th of 2016... 

This Week's Rig Count

the US rig count fell for the 22nd time in 25 weeks during the week ending August 9th, and is now down by 13.8% year to date....Baker Hughes reported that the total count of rotary rigs running in the US fell by 8 rigs to a new 19 month low of 934 rigs this past week, down by 123 rigs from the 1057 rigs that were in use as of the August 10th 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 6 rigs to 764 rigs this week, which was an 18 month low for oil rigs, 105 fewer 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 decreased by 2 rigs to 169 natural gas rigs, which was down by 17 rigs from the 186 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 this week, which was one less than the 2 "miscellaneous" rigs drilling a year ago...

the rig count in the Gulf of Mexico was up by 1 to 23 rigs this week, as another Gulf rig began operating off the shore of Louisiana...that brought the offshore Louisiana count up to 23, making for an increase of 5 Gulf of Mexico rigs from the 18 rigs that were deployed in the Gulf in the same week a year ago, when 16 rigs were drilling in Louisiana waters and two were deployed offshore from Texas...in addition, there continues to be two rigs deployed off the coast of Alaska this week, same number as were drilling off the Alaskan shore a year ago, for a total US offshore rig count of 25, up from the total of 20 offshore rigs that were deployed a year ago..

the count of active horizontal drilling rigs was down by 2 to 817 horizontal rigs this week, which was the least horizontal rigs deployed since February 2nd, 2018 and hence also a new 18 month low for horizontal drilling...it was also 107 fewer horizontal rigs than the 924 horizontal rigs that were in use in the US on August 10th 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 also down by 2 to 65 directional rigs this week, but those were up from the 6​4 directional rigs that were operating during the same week of last year... at the same time, the vertical rig count was down by 4 to 52 vertical rigs this week, and that was down by 17 from the 69 vertical rigs that were in use on August 10th of 2018...

the details on this week's changes in drilling activity by state and by ​major ​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 August 9th, the second column shows the change in the number of working rigs between last week's count (August 2nd) and this week's (August 9th) count, the third column shows last week's August 2nd 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 10th of August, 2018...     

August 9 2019 rig count summary

once again, the most significant changes in drilling activity were outside of Texas, with the 4 rigs that were pulled out of Alaska not even showing up on the major US basin table above...in Oklahoma, the 3 rigs that were shut down in the Cana Woodford were apparently offset by a rig increase in the Granite Wash near the Texas panhandle, since Texas Oil District 10, where the Granite Wash stretches into Texas, only added one rig...the 2 rig decrease in the Haynesville also appears to have been split between states, as northern Louisiana only saw one rig pulled out, while Texas Oil District 6, which includes the western reaches of the Haynesville, also saw one rig shut down this week...however, there were no rig changes in the Texas Permian, so both of the rigs added in that basin were added in New Mexico, in the western-most reaches of the Permian Delaware...while the 2 rig decrease in the Haynesville ​appears to adequately explain the national natural gas rig count decrease, one of the rigs added in the Granite Wash happened to be targeting natural gas, while a natural gas rig in an 'other' not tracked separately by Baker Hughes was concurrently shut down...

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note: there's more here...

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