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, October 11, 2020

oil & natural gas prices jump as Hurricane Delta shuts down Gulf production..

oil prices rose for the 2nd week in 6 this week, as a strike in Norway threatened that country's oil output and as a major hurricane shut down US Gulf production...after falling 8% to $37.05 a barrel last week on an increase of coronavirus cases globally and Trump's positive test, the contract price of US light sweet crude for November delivery opened 5 cents lower on Monday but quickly rallied more than 6%, driven by the announcement that Trump would be discharged from the hospital later that day, and settled with a gain of $2.17, or 5.9%, at $39.22 per barrel, supported by hopes for a new stimulus package and by an escalating oil workers' strike in Norway over pay...oil prices continued higher on Tuesday amid the supply disruptions in Norway, a new hurricane in the Gulf and Trump's return to the White House and finished $1.45 higher at $40.67 a barrel, but slipped in post-settlement trading after Trump said he was instructing his team not to negotiate a new stimulus package until after the election...oil prices then opened 2% lower on Wednesday and traded in a narrow range before closing ​down ​72 cents at $39.95 a barrel​, ​after the EIA reported a slightly larger-than-expected build in U.S. commercial crude inventories...but the November ​oil ​contract price opened higher and rallied again on Thursday as the impact of higher US crude inventories was negated by draws in product inventories and escalating supply disruptions in Norway and the Gulf of Mexico, a​nd prices went on to settle $1.24 or 3.1% higher at $41.19 a barrel, the higherst close in nearly 5 weeks, as hurricane Delta forced the shut-in of more than 90% of Gulf crude oil output...after opening higher, oil slipped more than 1% on Friday, after Norwegian oil firms struck a wage bargain with labour unions on Friday, ending ​the 10-day strike that had threatened to cut the country’s oil and gas output by close to 25%, with US crude falling 59 cents to $40.60 a barrel..​.​.even so, the U.S. benchmark crude price advanced more than 9% this week on the supply disruptions from Hurricane Delta​,​ and on optimism for a U.S. stimulus deal...

natural gas prices also rose this week, as exports rose and Hurricane Delta shut in Gulf production...after falling 13.1% to $2.438 per mmBTU last week on an increase in gas output and a forecast for reduced demand, the contract price of natural gas for November delivery opened higher on Monday and jumped 17.7 cents, or over 7%​,​ as LNG exports rose and traders worried production would be shut in again with another hurricane expected in the Gulf of Mexico​​...natural gas prices then gave up half of those gains on Tuesday, falling 9.5 cents to $2.520 per mmBTU as forecasts indicated milder weather and lower demand over the next two weeks than had been previously expected...but most of that ​loss ​was regained on Wednesday when gas rose 8.6 cents to $2.606 per mmBTU as producers shut Gulf of Mexico wells ahead of Hurricane Delta and as forecasts were revised to show larger-than-expected demand over the next two weeks...natural gas prices then inched up 2.1 cents on Thursday as the natural gas storage report was in line with the increase ​that ​analysts had forecast​,​ and then jumped 11.4 cents or 4.3% cents to $2.741 per mmBTU on Friday as Gulf Coast producers shut wells ahead of Hurricane Delta and on forecasts for colder weather and higher demand in mid October than was previously indicated...that left prices 12.4% ​higher ​on the week and at their highest since last November, ​although we should note that wintertime natural gas contracts almost always trade at higher prices than those during the rest of the year..

the natural gas storage report from the EIA for the week ending October 2nd indicated that the quantity of natural gas held in underground storage in the US increased by 75 billion cubic feet to 3,831 billion cubic feet by the end of the week, which left our gas supplies 444 billion cubic feet, or 13.1% greater than the 3,285 billion cubic feet that were in storage on October 2nd of last year, and 394 billion cubic feet, or 11.5% above the five-year average of 3,437 billion cubic feet of natural gas that have been in storage as of the 2nd of October in recent years....the 75 billion cubic feet that were added to US natural gas storage this week was a bit more than the forecast for a 71 billion cubic foot increase from an S&P Global Platts' survey of analysts, but it was below the average of 86 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years, and it was much lower than the 102 billion cubic feet that was added to natural gas 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 October 2nd showed that ​due to an increase in our oil imports and an increase in our oil production, we​ managed to add a bit of oil ​to our stored ​commercial ​supplies for the ​2nd time ​in the past eleven weeks and for the ​twenty-fourth time in thirty-eight weeks...our imports of crude oil rose by an average of 610,000 barrels per day to an average of 5,732,000 barrels per day, after falling by an average of 45,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 853,000 barrels per day to an average of 2,659,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,073,000 barrels of per day during the week ending October 2nd, 1,463,000 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 11,000,000 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 14,073,000 barrels per day during this reporting week...

meanwhile, US oil refineries reported they were processing 13,853,000 barrels of crude per day during the week ending October 2nd, 184,000 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 a net total of 92,000 barrels of oil per day were being pulled out of 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, from storage, and from oilfield production was 312,000 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 inserted a (-312,000) 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 that there must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed...moreover, since last week's fudge factor was +819,000 barrels per day, indicating a week over week difference of 1,131,000 barrels per day in the line 13 balance sheet adjustment, the difference ​between those errors ​means any week over week comparisons of oil supply and demand ​figures reported here ​a​re nonsense...however, 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 rose to an average of 5,258,000 barrels per day last week, which was still 18.9% less than the 6,486,000 barrel per day average that we were importing over the same four-week period last year....the 92,000 barrel per day net withdrawal from our total crude inventories was as 72,000 barrels per day were being added to our commercially available stocks of crude oil and 164,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is now being leased for commercial use, and hence the recent SPR additions and withdrawals should really be included in our commercial supplies....this week's crude oil production was reported to be 300,000 barrels per day higher at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 200,000 barrels per day to 10,500,000 barrels per day, and because a 16,000 barrels per day increase to 459,000 barrels per day in Alaska's oil production added another 100,000 barrels per day to the rounded national total​ (EIA math)​....last year's US crude oil production for the week ending October 4th was rounded to 12,600,000 barrels per day, so this reporting week's rounded oil production figure was 12.7% below that of a year ago, yet still 30.5% 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 77.1% of their capacity while using 13,853,000 barrels of crude per day during the week ending October 2nd, up from 75.8% of capacity during the prior week, but excluding the 2005 and 2008 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years...hence, the 13,853,000 barrels per day of oil that were refined this week were 11.5% fewer barrels than the 15,656,000 barrels of crude that were being processed daily during the week ending October 4th of last year, when US refineries were operating at 85.7% of capacity....

with the increase in the amount of oil being refined, gasoline output from our refineries was much higher, increasing by 630,000 barrels per day to 9,522,000 barrels per day during the week ending October 2nd, after our refineries' gasoline output had decreased by 423,000 barrels per day over the prior week (when refinery throughput had increased by 300,000 barrels per day)...​but​ 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 ​still ​ 5.1% less than the 10,081,000 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) increased by 174,000 barrels per day to 4,532,000 barrels per day, after our distillates output had decreased by 112,000 barrels per day to a three year low of 4,358,000 barrels per day over the prior week...even after this week's increase in distillates output, our distillates' production was 6.3% less than the 4,835,000 barrels of distillates per day that were being produced during the week ending October 4th, 2019....

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 14 weeks and for the 26th time in 36 weeks, falling by 1​,435,000 barrels to 226,747,000 barrels during the week ending October 2nd, after our gasoline supplies had increased by 683,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 367,000 barrels per day to 8,896,000 barrels per day, ​and because our exports of gasoline rose by 235,000 barrels per day to 903,000 barrels per day,​ ​ ​while our imports of gasoline rose by 117,000 barrels per day to 849,000 barrels per day...after the gasoline inventory drawdowns of recent weeks, our gasoline supplies were 0.9% lower than last October 4th's gasoline inventories of 228,763,000 barrels, but still close to the five year average of our gasoline supplies for this time of the year... 

meanwhile, with our distillates production still near a three year low, our supplies of distillate fuels decreased for the 9th time in 27 weeks and for the 30th time in 52 weeks, falling by 962,000 barrels to 171,796,000 barrels during the week ending October 2nd, after our distillates supplies had decreased by 3,184,000 barrels during the prior week....our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 213,000 barrels per day to 3,868,000 barrels per day, because our exports of distillates fell by 268,000 barrels per day to 1,031,000 barrels per day, while our imports of distillates rose by 89,000 barrels per day to 230,000 barrels per day....but even after this week's inventory decrease, our distillate supplies at the end of the week were still 34.9% above the 127,324,000 barrels of distillates that we had in storage on October 4th, 2019, and about 23% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil imports and the increase in our oil production, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) rose for the 7th time in the past seventeen weeks and for the 35th time in the past year, increasing by 501,000 barrels, from 492,426,000 barrels on September 25th to 492,927,000 barrels on October 2nd...after that increase, our commercial crude oil inventories were around 12% above the five-year average of crude oil supplies for this time of year, and about 49% above the prior 5 year (2010 - 2014) average of our crude oil stocks for the fourth 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 commercial crude oil supplies as of October 2nd were 15.8% above the 425,569,000 barrels of oil we had in commercial storage on October 4th of 2019, 20.2% more than the 409,951,000 barrels of oil that we had in storage on October 5th of 2018, and 6.6% above the 462,216,000 barrels of oil we had in commercial storage on September 29th of 2017... 

This Week's Rig Count

the US rig count rose for the 4th week in a row during the week ending October 9th, but for just the 6th time in the past 31 weeks, and hence it is still down by 66.1% over that thirty week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 3 to 269 rigs this past week, which was still down by 587 rigs from the 856 rigs that were in use as of the October 11th report of 2019, and was also 135 fewer rigs than the all time low prior to this year, and 1,660 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 increased by 4 rigs to 189 oil rigs this week, after increasing by 6 oil rigs the prior week, still leaving us with 519 fewer oil rigs than were running a year ago, and less than an 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 decreased by one to 73 natural gas rigs, which was also down by 70 natural gas rigs from the 143 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 only one such "miscellaneous" rig deployed...

The Gulf of Mexico rig count remained unchanged at 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and two drilling for oil offshore from Texas...that was 9 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when all 23 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 10 from the national offshore rig count of 24 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 on inland waters..

The count of active horizontal drilling rigs was up by 4 to 233 horizontal rigs this week, which was still 517 fewer horizontal rigs than the 750 horizontal rigs that were in use in the US on October 4th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was unchanged at 21 directional rigs this week, and those were down by 34 from the 55 directional rigs that were operating during the same week of last year....on the other hand, the vertical rig count was down by one to 15 vertical rigs this week, and those were down by 36 from the 51 vertical rigs that were in use on October 4th 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 October 9th, the second column shows the change in the number of working rigs between last week's count (October 2nd) and this week's (October 9th) count, the third column shows last week's October 2nd 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 11th of October, 2019...    

October 9 2020 rig count summary

once again, there were very few changes this week, with only ​five rig additions and two removals nationally....by checking the rig counts in the Texas part of Permian basin, we find that one rig was added in Texas Oil District 7C, which roughly aligns with the southern part of the Permian Midland, while 1 rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, thus leaving the rig count in the Texas Permian unchanged....since the national Permian basin rig count was up by one, that means that the rig that was added in New Mexico must have been set up to drill in the far western Permian Delaware, in order to balance the ​overall rig count on that basin...elsewhere in Texas, one rig was added in Texas Oil District 2, which accounts for the rig added in the Eagle Ford, and two more rigs were added in Texas Oil District 3, one in Washington county, and another in Brazoria county, both of which were horizontal rigs targeting an "other" formation, ie, not the Eagle Ford...other than those, the only other rig change nationally was the natural gas rig that was removed from Pennsylvania's Marcellus....

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note: there's more here...

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