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, September 13, 2020

US fields the lowest percentage of horizontal rigs and the highest percentage of vertical rigs in 3 years; distillates' output at a 3 year low

US oil prices fell for a second straight week this week after the Saudis & Emirates marked down their prices on oil exports to Asia and domestic crude supplies increased...after falling more than 7% to $39.77 a barrel in the first drop in five weeks on fears of a slowing recovery last week, the contract price of US light sweet crude for October delivery opened lower in New York trading on Tuesday and quickly tanked, reflecting a drop of more than 1.5% in overseas markets Monday after Saudi Arabia had made the deepest price cuts for crude supplies to Asia in five months over the holiday weekend...Tuesday's oil price continued lower to settle down $3.01, or 7.6%, at $36.76 a barrel, the lowest price since June, as equities also sold off amid growing demand concerns as Covid-19 continued to spread worldwide...oil prices recovered part of that loss Wednesday, rising $1.29, or 3.5%, to settle at $38.05 a barrel as the flurry of Tuesday's panic-stricken trading was absorbed and the market rebalanced, leading to a rebound...but the rebound was short-lived as oil prices opened lower Thursday after the API had reported an increase in US oil supplies and then continued falling when that surprise increase was confirmed by the EIA to settle down at 75 cents as $37.30 a barrel, as some traders interpreted those rising oil supplies as a sign of falling demand...October oil then traded in a narrow range on Friday and finished 3 cents higher at $37.33 a barrel, but still posted its second straight weekly decline, down 6.1% from last Friday's close, as crude stockpiles rose around the world and fuel demand failed to rebound to pre-coronavirus levels...

natural gas prices also finished lower for a second straight week on an early cold weather outbreak and rising gas supplies...after falling 2.6% to $2.588 per mmBTU last week on cooler temperatures and reduced demand, the contract price of natural gas for October delivery opened lower on Tuesday and tumbled along with oil prices on Covid19 related demand fears, finishing down 18.8 cents or 7% at $2.40 per mmBTU on an increase in gas output and forecasts for cooler weather and lower demand in late September, despite a post-Laura rebound in LNG exports and record pipeline exports to Mexico...with the same dynamic remaining in play, natural gas prices steadied and closed six-tenths of a cent higher on Wednesday, but then fell 8.3 cents to a four week low of $2.323 per mmBTU on Thursday on forecasts for cooler weather and less air conditioning demand next week than had been expected, following an EIA report on gas supplies showing that storage was filling quickly as cooler temperatures swept over swaths of the Lower 48....with unseasonable cold in place in the the mountains and plains, natural gas prices fell another 5.4 cents to a fresh four week low of $2.269 per mmBTU on Friday, thus ending the week about 12% lower, in their biggest weekly decline since March...

the natural gas storage report from the EIA for the week ending September 4th indicated that the quantity of natural gas held in underground storage in the US increased by 70 billion cubic feet to 3,525 billion cubic feet by the end of the week, which left our gas supplies 528 billion cubic feet, or 17.6% greater than the 2,997 billion cubic feet that were in storage on September 4th of last year, and 409 billion cubic feet, or 13.1% above the five-year average of 3,116 billion cubic feet of natural gas that have been in storage as of the 4th of September in recent years....the 70 billion cubic feet that were added to US natural gas storage this week were more than the forecast of a 64 billion cubic foot increase from an S&P Global Platts'' survey of analysts, but it was still less than the 80 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, while it was in line with the average of 68 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years..  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 4th showed that because our oil production and our oil imports partially recovered from hurricane Laura while our refinery throughput did not, we had surplus oil to add to our stored supplies for the first time in seven weeks and for the 6th time in the past fo​u​rteen weeks...our imports of crude oil rose by an average of 523,000 barrels per day to an average of 5,423,000 barrels per day, after falling by an average of 1,016,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 58,000 barrels per day to an average of 2,944,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,479,000 barrels of per day during the week ending September 4th, 581,000 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 was reportedly 300,000 barrels per day higher at 10,000,000 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 12,479,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 12,779,000 barrels of crude per day during the week ending September 4th, 1,089,000 fewer 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 a net of 247,000 barrels of oil per day were being added to the supplies of oil stored in the US....so based on that reported & estimated data, 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 547,000 barrels per day less than what was added to storage plus 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 inserted a (+547,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting there​ must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...but since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we'll continue to report them​ as published​, just as they're watched & believed to be 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 fell to an average of 5,492,000 barrels per day last week, which was 18.1% less than the 6,6694,000 barrel per day average that we were importing over the same four-week period last year....the rounded 247,000 barrel per day net addition to our total crude inventories was as 290,000 barrels per day were being added to our commercially available stocks of crude oil while 44,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is also being leased for commercial use, so by rights the recent SPR ​additions and withdrawals should be included in​ our​ commercial suppl​ies​....this week's crude oil production was reported to be 300,000 barrels per day higher at 10.000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 300,000 barrels per day to 9,500,000 barrels per day, while Alaska's oil production fell by 5,000 barrrels per day to 459,000 barrels per day but still added 500,000 barrels per day to the rounded national total....last year's US crude oil production for the week ending September 6th was rounded to 12,400,000 barrels per day, so this reporting week's rounded oil production figure was 19.4% below that of a year ago, yet still 18.6% 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 71.8% of their capacity while using 12,779,000 barrels of crude per day during the week ending September 4th, down from 76.7% of capacity during the prior week, and excluding the 2005 and 2008 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the last thirty years...hence, the 12,779,000 barrels per day of oil that were refined this week were 27.0% fewer barrels than the 17,495,000 barrels of crude that were being processed daily during the week ending September 6th of last year, when US refineries were operating at 95.1% of capacity....

with the big drop in the amount of oil being refined, gasoline output from our refineries was also much lower, decreasing by 604,000 barrels per day to 8,930,000 barrels per day during the week ending September 4th, after our refineries' gasoline output had increased by 16,000 barrels per day over the prior week...and since our gasoline production is still recovering from a multi-year low in the wake of this Spring's covid lockdown, this week's gasoline output was 13.8% less than the 10,360,000 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 381,000 barrels per day to a three year low of 4,398,000 barrels per day, after our distillates output had decreased by 343,000 barrels per day over the prior week...and after this week's big decrease in distillates output, our distillates' production was 17.7% less than the 5,341,000 barrels of distillates per day that were being produced during the week ending September 6th, 2019....

with the big decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 8th time in 10 weeks and for the 23rd time in 32 weeks, falling by 2,954,000 barrels to 231,905,000 barrels during the week ending September 4th, after our gasoline supplies had decreased by 4,320,000 barrels over the prior week...our gasoline supplies decreased by less this week even with the drop in production because the amount of gasoline supplied to US markets decreased by 396,000 barrels per day to 8,390,000 barrels per day, while our imports of gasoline fell by 3,000 barrels per day to 574,000 barrels per day and while our exports of gasoline rose by 140,000 barrels per day to 709,000 barrels per day....but even after the large gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 1.3% higher than last September 6th's gasoline inventories of 228,904,000 barrels, and roughly 3% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the big drop in our distillates production, our supplies of distillate fuels decreased for the sixth time in 23 weeks and for the 27th time in 48 weeks, falling by 1,675,000 barrels to 177,195,000 barrels during the week ending September 4th, after our distillates supplies had also decreased by 1,675,000 barrels during the prior week....our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 205,000 barrels per day to 3,713,000 barrels per day, and even as our exports of distillates fell by 182,000 barrels per day to 1,084,000 barrels per day, while our imports of distillates fell by 6,000 barrels per day to 160,000 barrels per day...but even after this week's inventory decrease, our distillate supplies at the end of the week were still 29.1% above the 136,226,000 barrels of distillates that we had in storage on September 6th, 2019, and about 20% above the five year average of distillates stocks for this time of the year...

finally, with the rebound​  in our oilfiled production and the increase in our oil imports, our commercial supplies of crude oil in storage rose for the 23rd time in thirty-four weeks and for the 37th time in the past year, increasing by 2,033,000 barrels, from 498,401,000 barrels on August 28th to 500,434,000 barrels on September 4th...after that increase, our commercial crude oil inventories were still around 14% above the five-year average of crude oil supplies for this time of year, and almost 54% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the first weekend of September, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories have generally been rising ​over the past two years, except for during the past two summers, after generally falling ​over the year and a half​ prior to ​September of 2018, our crude oil supplies as of September 4th were 20.3% above the 416,068,000 barrels of oil we had in commercial storage on September 6th of 2019, 26.3% more than the 396,194,000 barrels of oil that we had in storage on September 7th of 2018, and 8.2% above the 462,353,000 barrels of oil we had in commercial storage on September 1st of 2017...    

This Week's Rig Count

the US rig count fell for the first time in four weeks during the week ending September 11th, ​and​ it ​is now down by 68.1% over the recent 27 week drilling pullback....Baker Hughes reported that the total count of rotary rigs running in the US fell by 2 to 254 rigs this past week, which was also down by 632 rigs from the 886 rigs that were in use as of the September 13th report of 2019​.....​that was also 150 fewer rigs than the all time low prior to this year, and 1,675 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 their first attempt to put US shale out of business....

The number of rigs drilling for oil decreased by 1 rig to 180 oil rigs this week, after increasing by 1 oil rig the prior week, leaving us with 553 fewer oil rigs than were running a year ago, and less than a eighth 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 also decreased by one to 71 natural gas rigs, which was also down by 82 natural gas rigs from the 153 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the 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, three rigs classified as 'miscellaneous' continued to drill this week; one on the big island of Hawaii, one in Sonoma County, California​, and one in the Permian basin in Eddy County, New Mexico...a year ago, there were no such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count remained at 15 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and three drilling for oil offshore from Texas...that was 10 fewer Gulf rigs than the 25 rigs drilling in the Gulf a year ago, when all 25 Gulf rigs were drilling offshore from Louisiana...while there are no rigs operating off ​of ​other US shores at this time, a year ago there was​ also​ a rig deployed offshore from Alaska, so this week's national offshore count is down by 11 from the national offshore rig count of 26 a year ago...also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling in inland waters..

The count of active horizontal drilling rigs was down by 6 to 214 horizontal rigs this week, which was also 562 fewer horizontal rigs than the 776 horizontal rigs that were in use in the US on September 13th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the directional rig count was up by 1 to 21 directional rigs this week, but those were still down by 36 from the 57 directional rigs that were operating during the same week of last year....in addition, the vertical rig count rose by 3 to 19 vertical rigs this week, but those were still down by 34 from the 53 vertical rigs that were in use on September 13th of 2019....as of this week, 84.3% of all US drilling is being done by horizontal rigs, which is the lowest percentage horizontal rig deployment since September 8th, 2017....on the other hand, 7.5% of US drilling is ​now ​being done by vertical rigs, and that's the highest percentage vertical rig deployment since the same date..

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 September 11th, the second column shows the change in the number of working rigs between last week's count (September 4th) and this week's (September 11th) count, the third column shows last week's September 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count 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 13th of September, 2019...    

September 11 2020 rig count summary

there were ​a few ​more changes this week than is evident from just looking at the above tables....checking the rig counts in the Texas part of Permian basin, we find that 5 rigs were added in Texas Oil District 8, which is the core Permian Delaware, while 4 rigs were pulled out of Texas Oil District 7C, which roughly aligns with the southern ​part of the ​Permian Midland, and another rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, ​thus ​leaving the Texas ​rig ​count ​in the ​Permian​ ​unchanged...since the national Permian basin rig count was down by one, that means that the rig that was pulled out of New Mexico must have been drilling in the far western Permian Delaware, to balance the national rig count on that basin...elsewhere in Texas, a rig was pulled out of Texas Oil District 6 near the Louisiana border, which thus accounts for the decrease in the Haynesville shale basin we see above...in addition to that natural gas rig ​removal from the Haynesville shale, two more natural gas rigs were ​also ​pulled out of West Virginia's Marcellus this week, which you also see above...however, the national natural gas rig count was only down by one because a ​​vertical rig was set up to drill for natural gas in a shallow formation in Kanawha county, West Virginia that was not targeting the Marcellus, and another rig targeting natural gas began drilling in Andrews County, Texas, one of the Texas Oil District 8 additions in the Permian basin we noted previously, and the only Permian rig targeting natural gas that is active at this time...

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note: there's more here...

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