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, May 24, 2020

well completions fell 34.1% in April, leaving a 10.8 month backlog of DUC wells; horizontal drilling at a 14 year low

oil prices moved higher for a 4th consecutive week this week on a large drop in US crude supplies and ​on ​a continued easing of restrictions imposed in the wake of the coronavirus crisis....after rising 19% to $29.43 per barrel last week after the Saudis announced addition production cuts and the EIA reported the first drop in US crude supplies in sixteen weeks, the contract price of US light sweet crude for June delivery opened higher on Monday, a day before WTI June contract expiry, initially​ rose over 11% in ​​thin trading before settling $2.39 higher at $31.82 a barrel as production cuts and the easing of stay-at-home restrictions continued to support prices...with most traders already closed out of their June oil positions on fears that prices might again go negative, the June contract then expired another 68 cents higher at $32.50 on Tuesday, while the more actively traded July oil contract, which had ended last week priced at $29.52 and rose $2.13 on Monday, rose 31 cents on Tuesday to settle at $31.96 a barrel...with the price of WTI oil for July delivery now being quoted, oil prices extended their gains early Wednesday after the American Petroleum Institute reported a surprisingly large draw from US crude supplies, and then moved higher still to close up $1.53 at $33.49 a barrel on signs of improving demand after the EIA had confirmed the large drop in US crude supplies...prices then rose 43 cents to $33.92 a barrel on Thursday, the highest ​oil price since March, supported by lower U.S. crude inventories, OPEC-led supply cuts and recovering demand as governments eased restrictions imposed in the wake of the coronavirus pandemic...however, oil prices tumbled along with global equities on Friday on rising tensions between China and Washington over Hong Kong's autonomy and ended 67 cents, or 2% lower at $33.25 a barrel, as doubts set in about how quickly fuel demand would recover from the coronavirus crisis...despite the Friday selloff, oil prices still posted their fourth straight week of increases, with the July oil contract finishing with a 12.6% gain on the week..

​meanwhile, ​natural gas prices moved higher for the first time in four weeks as natural gas production fell to meet lower demand.. after falling 9.7% to $1.646 per mmBTU on milder weather and virus related demand destruction last week, the contract price of natural gas for June delivery opened 8 cents higher on Monday and surged to a 12.5% increase on a larger than expected production cut before pulling back to close 13.7 cents or 8% higher at $1.783 per mmBTU as producers shut wells and slashed spending on new oil drilling, ​thus ​reducing the associated gas output... gas prices ​then ​rose another 4.7 cents or 2.6% on Tuesday on a continuing slowdown in gas output to settle at $1.830 per mmBTU, their highest close since May 7th....however,  prices fell back 5.9 cents or 3% on Wednesday as government lockdowns to stop the spread of coronavirus reduced demand for the fuel and for exports, and then fell another 6.1 cents to $1.710 per mmBTU​ ​on Thursday after the EIA's latest storage data underwhelmed natural gas traders...natural gas prices then saw a modest 2.1 cent bump on Friday ahead of the holiday weekend to to finish at $1.731 per mmBTU, on forecasts for warmer weather and rising cooling demand through the first week of June, to end with a 5.2% gain on the week..

the natural gas storage report from the EIA for the week ending May 15th indicated that the quantity of natural gas held in underground storage in the US rose by 81 billion cubic feet to 2,503 billion cubic feet by the end of the week, which left our gas supplies 779 billion cubic feet, or 45.2% higher than the 1,724 billion cubic feet that was in storage on May 15th of last year, and 407 billion cubic feet, or 19.4% above the five-year average of 2,096 billion cubic feet of natural gas that has been in storage as of the 15th of May in recent years....the 81 billion cubic feet that were added to US natural gas storage this week matched the consensus forecast for a 81 billion cubic feet increase from a survey of analysts by S&P Global Platts, but was below the 87 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and also below the 101 billion cubic feet addition of natural gas to storage during the corresponding week of 2019... 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending May 15th showed that due to a​ big increase in the amount of oil being ​used by our ​refine​ries, we had to withdraw oil from our stored commercial supplies of crude oil for the second time in 17 weeks​,​ and for the tenth time in the past thirty-six weeks...our imports of crude oil fell by an average of 194,000 barrels per day to an average of 5,197,000 barrels per day, after falling by an average of 321,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 286,000 barrels per day to an average of 3,239,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,958,000 barrels of per day during the week ending May 15th, 92,000 more barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells fell by 100,000 barrels per day to 11,500,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,458,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 12,903,000 barrels of crude per day during the week ending May 15th, 521,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA's surveys indicated that 443,000 barrels of oil per day were being withdrawn from the supplies of oil stored in the US....so based on that data, 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 998,000 barrels per day more than what our oil refineries reported they used during the week....to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (-998,000) 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", thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...however, since the media treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill for oil, we'll continue to report them, just as they're watched & believed as accurate by most everyone in the industry...(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) indicate that the 4 week average of our oil imports rose to an average of 5,401,000 barrels per day last week, now 24.6% less than the 7,166,000 barrel per day average that we were importing over the same four-week period last year....the 433,000 barrel per day net withdrawal from our total crude inventories came as 712,000 barrels per day were being withdrawn from our commercially available stocks of crude oil, while 269,000 barrels per day were being added to our Strategic Petroleum Reserve....this week's crude oil production was reported to be down by 100,000 barrels per day to 11,500,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 11,100,000 barrels per day, while a 15,000 barrel per day decrease in Alaska's oil production to 423,000 barrels per day had no impact on the rounded national total....last year's US crude oil production for the week ending May 17th was rounded to 12,200,000 barrels per day, so this reporting week's rounded oil production figure was about 5.7% below that of a year ago, yet still 36.4% 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 69.4% of their capacity in using 12,903,000 barrels of crude per day during the week ending May 15th, up from 67.9% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years...hence, the 12,903,000 barrels per day of oil that were refined this week were 22.2% fewer barrels than the 16,578,000 barrels of crude that were being processed daily during the week ending May 17th, 2019, when US refineries were operating at a seasonally typical 89.9% of capacity....

even with the increase in the amount of oil being refined, gasoline output from our refineries was somewhat lower, decreasing by 331,000 barrels per day to 7,166,000 barrels per day during the week ending May 15th, after our refineries' gasoline output had increased by 792,000 barrels per day over the prior week....but since we​'​re still near multi-year lows in gasoline production, our gasoline output this week was 27.5% lower than the 9,883,000 barrels of gasoline that were being produced daily over the same week of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 88,000 barrels per day to 4,804,000 barrels per day, after our distillates output had decreased by 190,000 barrels per day over the prior week...after this week's decrease in distillates output, our distillates' production was 7.7% less than the 5,206,000 barrels of distillates per day that were being produced during the week ending May 17th, 2019....

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the first time in 4 weeks and for the 5th time in 16 weeks, rising by 2,830,000 barrels to 255,724,000 barrels during the week ending May 15th, after our gasoline supplies had decreased by 3,513,000 barrels over the prior week...our gasoline supplies ​increased this week because the amount of gasoline supplied to US markets decreased by 608,000 barrels per day to 6,790,000 barrels per day, even as our exports of gasoline rose by 70,000 barrels per day to 244,000 barrels per day while our imports of gasoline rose by 40,000 barrels per day to 526,000 barrels per day....after this week's inventory increase, our gasoline supplies were 11.8% higher than last May 17th's gasoline inventories of 228,740,000 barrels, and roughly 10% above the five year average of our gasoline supplies for this time of the year...  

even with the decrease in our distillates production, our supplies of distillate fuels increased for the seventh time in 18 weeks and for the 12th time in 33 weeks, rising by 3,831,000 barrels to 158,832,000 barrels during the week ending May 15th, after our distillates supplies had increased by 3,511,000 barrels over the prior week....our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 150,000 barrels per day to 3,668,000 barrels per day, and because our imports of distillates rose by 129,000 barrels per day to 322,000 barrels per day, while our exports of distillates rose by 145,000 barrels per day to 911,000 barrels per day....after this week's inventory increase, our distillate supplies at the end of the week were 25.6% above the 126,415,000 barrels of distillates that we had stored on May 17th, 2019, and about 19% above the five year average of distillates stocks for this time of the year...

finally, with increased refining and lower oil imports and crude production, our commercial supplies of crude oil in storage fell for the second time in seventeen weeks and for the twentieth time in the past 52 weeks, decreasing by 4,972,000 barrels, from 531,476,000 barrels on May 8th to 526,494,000 barrels on May 15th...but since we had just completed a run of 15 straight increases and three record increases over past 7 weeks, our crude oil inventories are still 10% above the five-year average of crude oil supplies for this time of year, and almost 48% above the prior 5 year (2010 - 2014) average of crude oil stocks as of the middle of 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, and continued rising from there....since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of May 15th were 10.4% above the 476,775,000 barrels of oil we had in commercial storage on May 17th of 2019, 20.2% above the 438,132,000 barrels of oil that we had in storage on May 18th of 2018, and 2.0% above the 516,340,000 barrels of oil we had in commercial storage on May 19th of 2017...  

furthermore, if we take the total of our commercial oil supplies and the stores of all the refined product made from oil, we find those supplies are now at a record high of 1,399,920,000 barrels, 9.2% more than the 1,281,538,000 barrel total of a year ago... 

This Week's Rig Count

the US rig count fell for the 11th week in a row during the week ending May 22nd, and is now down by 59.9% over that eleven week period....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 21 rigs to 318 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940, down by 665 rigs from the 983 rigs that were in use as of the May 24th report of 2019, and 1,611 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business....

the number of rigs drilling for oil decreased by 21 rigs to 258 oil rigs this week, after falling by 34 oil rigs the prior week, leaving oil rig activity at its lowest since July 10, 2009, which was also 560 fewer oil rigs than were running a year ago, and less than a sixth 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 79 natural gas rigs, but was still down by 107 natural gas rigs from the 186 natural gas rigs that were drilling a year ago, and less than a twentieth of modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008...in addition to those rigs drilling for oil & gas, two rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, and one in Lake County, California... a year ago, there were no such "miscellaneous" rigs deployed..

the Gulf of Mexico rig count was unchanged at 12 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana's offshore waters...that's ten fewer rigs than the rig count in the Gulf a year ago, when 20 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters...there are no rigs operating offshore elsewhere at this time, nor were there a year ago, so the Gulf rig count is equivalent to the national rig count, just as it has been since the onset of this past winter...

the count of active horizontal drilling rigs decreased by 22 rigs to 285 horizontal rigs this week, which was the fewest horizontal rigs active since May 26, 2006, and hence is a 14 year low for horizontal drilling...it was also 578 fewer horizontal rigs than the 863 horizontal rigs that were in use in the US on May 24th of last year, and about a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was down by 2 to 8 vertical rigs this week, and those were down by 43 from the 51 vertical rigs that were operating during the same week of last year....on the other hand, the directional rig count increased by 3 to 25 directional rigs this week, but those were still down by 44 from the 69 directional rigs that were in use on May 24th of 2019....

the details on this week's changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes...the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 22nd, the second column shows the change in the number of working rigs between last week's count (May 15th) and this week's (May 22nd) count, the third column shows last week's May 15th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same 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 24th of May, 2019...    

May 22 2020 rig count summary

as you can see, this weeks basin totals show a decrease of 19 rigs, which is 3 short of the number of horizontal rigs removed nationally this week, which would mean that three this week's horizontal drilling removals were from "other" shale basins not tracked separately by Baker Hughes...checking the rig losses in the Texas part of Permian basin, we find that 10 rigs were pulled out of Texas Oil District 8, while the rig count in other Texas Permian basins remained unchanged...since the national Permian rig total was down by 13 rigs, that means that the 3 rigs that were pulled out in New Mexico must have been drilling in the western Permian Delaware, to account for the overall Permian reduction of 13 rigs...elsewhere in Texas, two rigs were pulled out of Texas Oil District 1, which could account for the 2 rig reduction in Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state...in other states, the two rigs that were pulled out of North Dakota had been drilling in the Williston basin, home of the Bakken shale, and the two rigs that were pulled out of Colorado probably had been drilling in the Denver-Julesburg Niobrara chalk, while the 2 rigs removed from Wyoming were probably pulled from one of those "other" shale basins not tracked separately by Baker Hughes...meanwhile, the only changes in natural gas rigs this week were in the Marcellus, where one rig was pulled out of Pennsylvania, while another rig started drilling in West Virginia, leaving both the Marcellus and the national natural gas rig counts unchanged...

DUC well report for April

Monday of this past week saw the release of the EIA's Drilling Productivity Report for May, which includes the EIA's April data for drilled but uncompleted ​oil and gas wells in the 7 most productive shale regions....for the first time in fourteen months, this report showed a increase in uncompleted wells nationally in April, as both the drilling of new wells and completions of drilled wells decreased, but completions decreased by more.....for the 7 sedimentary regions covered by this report, the total count of DUC wells increased by 13 wells, rising from a revised 7,604 DUC wells in March to 7,617 DUC wells in April, which is still 11.8% fewer DUCs than the 8,636 wells that had been drilled but remained uncompleted as of the end of April of a year ago...this month's DUC increase occurred as 718 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during April, down by 272 from the 990 wells that were drilled in March and the lowest number of wells drilled since December 2016, while 705 wells were completed and brought into production by fracking, a decrease of 365 well completions from the 1,070 completions seen in March, and down from the 1,281 completions seen in April of last year, and also the lowest number of completions since December 2016....at the April completion rate, the 7,617 drilled but uncompleted wells left at the end of the month represents a 10.8 month backlog of wells that have been drilled but are not yet fracked, up from the 7.1 month DUC well backlog of a month ago...

oil producing regions saw a net DUC well increase in April, while natural gas producing regions still saw a net DUC well decrease...the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico increased by 28, from 3,436 DUC wells at the end of March to 3,464 DUCs at the end of April, as 333 new wells were drilled into the Permian, while 305 wells in the region were being fracked....at the same time, DUC wells in the Bakken of North Dakota increased by 10, from 888 DUC wells at the end of March to 898 DUCs at the end of April, as 67 wells were drilled into the Bakken in April, while 57 of the drilled wells in that basin were being fracked...in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies' front range increased by 7 to 460, as 83 Niobrara wells were drilled in April while 76 Niobrara wells were completed...meanwhile, there was an increase of 1 DUC well in the Eagle Ford of south Texas, from 1,356 DUC wells at the end of March to 1,357 DUCs at the end of April, as 99 wells were drilled in the Eagle Ford during April, while 98 already drilled Eagle Ford wells were completed...but on the other hand, DUCs in the Oklahoma Anadarko decreased by 25, falling from 691 at the end of March to 666 DUC wells at the end of April, as 33 wells were drilled into the Anadarko basin during April while 58 Anadarko wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 9 wells, from 536 DUCs at the end of March to 527 DUCs at the end of April, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 80 of the already drilled wells in the region were fracked....on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 1 to 245, as 32 wells were drilled into the Haynesville during April, while 31 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of April, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 21 wells to 6,845 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 8 wells to 772 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there’s more here

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