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

Monday, February 1, 2021

largest crude withdrawal since July leaves oil supplies lowest since March; distillates demand at a 47 week high

oil prices finished fractionally lower for the third time in 13 weeks this week, as increasing coronavirus concerns outweighed a large drop in crude inventories.....after falling 15 cents or 0.3% to $52.27 a barrel last week on a surprise crude inventory increase, the contract price of US light sweet crude for March delivery opened lower on Monday as renewed Covid-19 lockdowns raised fresh concerns about global fuel demand, but recovered to close 50 cents higher at $52.77 a barrel as optimism around U.S. stimulus plans and supply concerns boosted prices...oil prices moved higher with European markets early Tuesday amid reports of a blast in Saudi Arabia, but faded to close 16 cents lower at $52.61 a barrel as rising coronavirus deaths fed worries about the global demand outlook...oil prices rose toward $53 a barrel in off-market trading late Tuesday after the American Petroleum institute reported inventories fell more than expected and opened higher on Wednesday, and then surged after the EIA reported the biggest draw from crude supplies since July, but could only hang on to part of its gain, as crude prices settled just 24 cents, or 0.5%, higher at $52.85 per barrel on persistent concerns that the pandemic would continue to hurt fuel demand...oil prices slid on Thursday as the impact of a weaker dollar and lower crude inventories couldn't offset concerns that delays to vaccine rollouts and new travel curbs would depress demand, and settled 51 cents or 1% lower at $52.34 a barrel, as the South African mutant coronavirus was reported to have reached the U.S...oil prices edged lower on Friday alongside a broader market decline, as new data showed the recovery in consumption remained uncertain, and closed down 14 cents at $52.20 a barrel, thus posting a small 0.1% loss on the week, but still ending January's trading more than 7% higher than where it started the year...

meanwhile, natural gas prices finished modestly higher, as an outbreak of much colder temperatures reappeared in the weather forecasts....after falling 10.6% to $2.446 per mmBTU last week as expectations of a period of polar weather petered out, the contract price of natural gas for February delivery opened 4% higher on Monday on substantial increases in expected heating demand over the weekend and a new bout of winter weather moving into the Midwest and finished 15.6 cents, or 6.4% higher at $2.602 per mmBTU...February gas prices added 5.4 cents more on Tuesday, as traders absorbed news of weather forecasts shifting even colder, increasing the likelihood of robust heating demand into early February...natural gas rallied for a third day on Wednesday on intensifying winter weather and renewed momentum in LNG demand, and closed 10.4 cents or 4% higher at $2.760 per mmBTU as trading in the February gas contract expired...with reports now quoting the contract price of natural gas for March delivery, which had closed at 2.702 per mmBTU on Wednesday after rising 24.6 cents earlier in the week, natural gas prices fell 3.8 cents to $2.664 per mmBTU on Thursday, following a bearish storage report and a change in a key weather model pointing to lighter heating demand than was previously expected...with the cloud of the bearish storage report still hanging over markets, March gas fell another 10.0 cents on Friday to end the week at $2.564 per mmBTU, ​but ​still finish​ed 4.4% ​above the prior week's closing price..

the natural gas storage report from the EIA for the week ending January 22nd indicated that the amount of natural gas held in underground storage in the US fell by 128 billion cubic feet to 2,881 billion cubic feet by the end of the week, which left our gas supplies 78 billion cubic feet, or 2.8% higher than the 2,803 billion cubic feet that were in storage on January 22nd of last year, and 244 billion cubic feet, or 9.3% above the five-year average of 2,637 billion cubic feet of natural gas that have been in storage as of the 22nd of January in recent years....the 128 billion cubic feet that were drawn out of US natural gas storage this week was somewhat less than the average forecast of a 136 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and quite a bit less than both the 170 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 176 billion cubic feet of natural gas that have typically been pulled out of 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 January 22nd showed that because of a large drop in our oil imports and a big jump in our oil exports, we had to withdraw a correspondingly large quantiity of oil from our stored commercial crude supplies for the 8th time in the past ten weeks and for the 19th time in the past twenty-seven weeks.... our imports of crude oil fell by an average of 981,000 barrels per day to an average of 5,064,000 barrels per day, after falling by an average of 194,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 1,104,000 barrels per day to 3,355,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,709,000 barrels of per day during the week ending January 22nd, 2,085,000 fewer 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 100,000 barrels per day lower at 10,900,000 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 12,609,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,721,000 barrels of crude per day during the week ending January 22nd, 39,000 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 1,416,000 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 43,000 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 (+696,000) 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 balance sheet fudge factor that they label in their footnotes as "unaccounted for crude oil", thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA figures as gospel and since these figures 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 5,679,000 barrels per day last week, which was 13.9% less than the 6,594,000 barrel per day average that we were importing over the same four-week period last year.....the 1,416,000 barrel per day net withdrawal from our crude inventories was due to a 1,416,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day lower at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 10,400,000 barrels per day, while a 3,000 barrel per day increase to 509,000 barrels per day in Alaska's oil production had no impact on the rounded national total....last year's US crude oil production for the week ending January 24th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 16.2% below that of a year ago, yet still 29.3% 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 81.7% of their capacity while using those 14,721,000 barrels of crude per day during the week ending January 22nd, down from 82.5% of capacity during the prior week... and ​since ​US refinery utilization had averaged the lowest on record through 2020​ and has barely recovered​, the 14,721,000 barrels per day of oil that were refined this week were still 9.2% fewer barrels than the 15,924,000 barrels of crude that were being processed daily during the week ending January 24th of last year, when US refineries were operating at an also low 87.2% of capacity...

with the decrease in the amount of oil being refined, the gasoline output from our refineries was lower for the 7th time in 10 weeks, decreasing by 212,000 barrels per day to 8,673,000 barrels per day during the week ending January 22nd, after our gasoline output had increased by a record 1,373,000 barrels per day over the prior week...but since our gasoline production was still recovering from a multi-year low in the wake of this Spring's covid-related lockdowns, this week's gasoline output​ ​was still 5.3% lower than the 9,158,000 barrels of gasoline that were being produced daily over the same week of last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) decreased by 11,000 barrels per day to 4,518,000 barrels per day, after our distillates output had decreased by 132,000 barrels per day over the prior week....and since our distillates' production was also just coming off a three year low, that output was 9.3% less than the 4,979,000 barrels of distillates that were being produced daily during the week ending January 24th, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 7th time in ten weeks, and for 12th time in 29 weeks, rising by 2​,​469,000 barrels to 247,686,000 barrels during the week ending January 22nd, after our gasoline inventories had decreased by a modest 259,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 279,000 barrels per day to 7,833,000 barrels per day, while our exports of gasoline rose by 73,000 barrels per day to 804,000 barrels per day, and while our imports of gasoline fell by 39,000 barrels per day to 465,000 barrels per day....even after this week's inventory increase, our gasoline supplies were 5.2% lower than last January 24th's gasoline inventories of 261,235,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 2nd time in 9 weeks and for the 29th time in the past year, falling by 815,000 barrels to 163,662,000 barrels during the week ending January 22nd, after our distillates supplies had increased by 457,000 barrels during the prior week....our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 479,000 barrels per day to a 47 week high of 4,300,000 barrels per day, even as our exports of distillates fell by 294,000 barrels per day to 808,000 barrels per day, while our imports of distillates rose by 14,000 barrels per day to 474,000 barrels per day....​and ​even after this week's inventory decrease, our distillate supplies at the end of the week were 12.5% above the 144,747,000 barrels of distillates that we had in storage on January 24th, 2020, and about 8% above the five year average of distillates stocks for this time of the year...

finally, with the big decrease in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) fell for the 21st time in the past thirty-three weeks, for the 23rd time in the past year, and by the most since July 24th, decreasing by 9,910,000 barrels, from 486,563,000 barrels on January 15th to 476,653,000 barrels on January 22nd, the lowest stores since March 27th...but even after that big decrease, our commercial crude oil inventories were about 5% above the five-year average of crude oil supplies for this time of year, and about 43% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the fourth weekend of January, 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 had generally been rising over the past two years, except for ​during ​​the past 7 weeks and 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 January 22nd were still 10.4% more than the 431,654,000 barrels of oil we had in commercial storage on January 24th of 2020, 6.9% above the 445,025,000 barrels of oil that we had in storage on January 25th of 2019, and also 13.9% more than the 418,359,000 barrels of oil we had in commercial storage on January 26th of 2018...  

This Week's Rig Count

The US rig count rose for the 19th time in the past twenty weeks during the week ending January 29th, but for just the 21st time in the past 46 weeks, and hence it is still down by 51.6% over that forty-four week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 6 to 384 rigs this past week, which was still down by 406 rigs from the 790 rigs that were in use as of the January 31st report of 2020, and was also still 20 fewer rigs than the all time low rig count prior to 2020, and 1,545 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 6 rigs to 295 oil rigs this week, after rising by 2 oil rigs the prior week, still leaving us with 380 fewer oil rigs than were running a year ago, and still less than a fifth 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 88 natural gas rigs, which was still down by 24 natural gas rigs from the 112 natural gas rigs that were drilling a year ago, and still just 5.5% 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 or gas, one rig classified as 'miscellaneous' continued to drill in Lake County, California this week, while a year ago there were three such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was unchanged at 16 rigs this week, with 15 of those rigs drilling for oil in Louisiana's offshore waters and one drilling for oil offshore from Texas...that was 5 fewer Gulf of Mexico rigs than the 21 rigs drilling in the Gulf a year ago, when 19 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas...since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week's national offshore rig figures are equal to the Gulf rig counts....however, in addition to those rigs drilling in the Gulf, 3 rigs continue to drill through inland bodies of water this week, one in Lafourche Parish, south of New Orleans, another in St Mary parish, farther west along the southern Louisiana coast, and another in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 6 to 344 horizontal rigs this week, which was still 367 fewer horizontal rigs than the 711 horizontal rigs that were in use in the US on January 31st of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was up by four rigs to 22 vertical rigs this week, and those were still down by 12 from the 34 vertical rigs that were operating during the same week a year ago....​on the other hand, the directional rig count was down by four to 18 directional rigs this week, and those were still also by 27 from the 45 directional rigs that were in use on January 31st of 2020....

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 January 29th, the second column shows the change in the number of working rigs between last week's count (January 22nd) and this week's (January 29th) count, the third column shows last week's January 22nd active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday 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 31st of January, 2020..    

January 29 2021 rig count summary

it looks like we just have a handful of fairly straightforward changes this week...checking first for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that there were 6 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, and another rig added in Texas Oil District 8A, which encompasses the northern counties of the Permian Midland basin, and hence the Permian basin in Texas saw a net increase of 7 rigs this week...since the national Permian rig count was up by 4, that means that all three of the rigs that were pulled out in New Mexico must have come from the far west reaches of the Permian Delaware, to account for the national net Permian basin rig increase...elsewhere in Texas, there was a rig added in Texas Oil District 2, while a rig was pulled out of Texas Oil District 1, which left the Eagle Ford rig count unchanged, and the total Texas rig count at 7...other rig activity this week included an oil rig that was added North Dakota's Williston basin, and rigs that were added in Wyoming and Oklahoma in "other" basins that Baker Hughes doesn't name, while a rig was pulled out from another such unnamed basin in Alaska at the same time..

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