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 8, 2021

oil prices at one year high; US oil supplies at a 45 week low; oil imports at 30 week high

oil prices rose every day this week while rallying to a one year high​,​ on ongoing OPEC production cuts and on an economic stimulus package making its way through Congress....after inching down 0.1% to $52.20 a barrel last week as increasing coronavirus concerns outweighed a large drop in crude inventories, the contract price of US light sweet crude for March delivery opened lower on Monday amid news of patchy vaccine rollouts and new coronavirus variants, but rebounded off the​ day's​ lows to settle $1.35 higher at $53.55 a barrel, supported by expected drawdowns from the Cushing depot, a sudden rise in winter fuel demand amid colder weather, and further talks about new stimulus checks...oil prices rose more than 2% again on Tuesday, on signs​ that​ the world’s biggest oil producers were heeding to their agreement not to overproduce​,​ and settled with a $1.21 gain at $54.76 per barrel, after touching a session high of $55.26, the highest in a year...oil prices extended their gains overnight, with WTI topping $56 for the first time in a year, after the American Petroleum Institute reported a significant draw from crude inventories, and then opened higher and continued to rally Wednesday, closing up 93 cents to $55.69 a barrel after OPEC and its allies pledged to continue reducing global crude inventories...oil prices were up for a fourth straight session on Thursday, buoyed by expectations that OPEC and their allies' commitment to cut output would contribute to tighter global supplies of crude, with March oil rising 54 cents to $56.23 a barrel with prices also buoyed by stronger U.S. equities as global oil inventories from China to the U.S. continued to decline...oil prices rose more than 1% again on Friday as U.S. stock markets hit record highs on signs of progress toward more economic stimulus and settled up 62 cents at $56.85, after reaching $57.29 a barrel, its highest since January 22nd of last year....US crude prices thus rose around 9% on the week, but global prices fell short of the $60 per barrel mark targeted by oil bulls, suggesting the market may be overbought in the short-term and could consolidate, even if it hits that high point...

natural gas prices also posted large gains this week after jumping 11% on monday, on forecasts for continuing below normal temperatures through the end of the month.....after rising 4.4% to $2.564 per mmBTU last week after an outbreak of much colder temperatures reappeared in the weather forecasts., the contract price of natural gas for March delivery opened 12% higher at $2.868 per mmBTU on Monday​ morning​ as a major winter snowstorm battered the Northeast and forecasts suggested much colder weather over the next two weeks than was previously expected​,​ and held on to settle 11% or 28.6 cents higher at $2.850 per mmBTU...after volatile trading after the latest run of the European weather model erased a decent chunk of the projected demand, natural gas prices settled a half cent lower on Tuesday, and then fell 5.6 cents to $2.789 per mmBTU on Wednesday on forecasts for less heating demand next week than had been previously expected...however, natural gas surged 14.6 cents or almost 5% on Thursday after the natural gas storage report pointed to a shrinking surplus and LNG exports continued to be strong...but natural gas prices gave up half of that gain on Friday, falling 7.2 cents to $2.863 per mmBTU after the European weather model trended a bit milder for the upcoming week and also stalled the frigid cold’s arrival in the South and East by a few days, but still finished the week with an 11.7% gain.. ..

the natural gas storage report from the EIA for the week ending January 29th indicated that the amount of natural gas held in underground storage in the US fell by 192 billion cubic feet to 2,689 billion cubic feet by the end of the week, which left our gas supplies 41 billion cubic feet, or 1.5% higher than the 2,648 billion cubic feet that were in storage on January 29th of last year, and 198 billion cubic feet, or 7.9% above the five-year average of 2,491 billion cubic feet of natural gas that have been in storage as of the 29th of January in recent years....the 192 billion cubic feet that were drawn out of US natural gas storage this week was a bit less than the average forecast of a 195 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, but more than the 155 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, and also more than the average withdrawal of 146 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 29th indicated that despite a big jump in our oil imports, we still had to withdraw a modest amound of oil from our stored commercial crude supplies for the ninth time in the past eleven weeks and for the 20th time in the past twenty-eight weeks.... our imports of crude oil rose by an average of 1,443,000 barrels per day to an average of 6,507,000 barrels per day, after falling by an average of 981,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 128,000 barrels per day to 3,483,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,024,000 barrels of per day during the week ending January 29th, 1,315,000 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 unchanged 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​ appears to​ total an average of 13,924,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,641,000 barrels of crude per day during the week ending January 29th, 80,000 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 142,000 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 575,000 barrels per day less 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 (+575,000) 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 rose to an average of 5,964,000 barrels per day last week, which was 9.2% less than the 6,565,000 barrel per day average that we were importing over the same four-week period last year.....the 142,000 barrel per day net withdrawal from our crude inventories was due to a 142,000 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 unchanged at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,400,000 barrels per day, while a 1,000 barrel per day decrease to 508,000 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 31st was rounded to 12,900,000 barrels per day, so this reporting week's rounded oil production figure was 15.5% 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 82.3% of their capacity while using those 14,641,000 barrels of crude per day during the week ending January 22nd, up from 81.7% of capacity during the prior week...however, since US refinery utilization had averaged the lowest on record through 2020 and has barely recovered, the 14,641,000 barrels per day of oil that were refined this week were still 8.3% fewer barrels than the 15,972,000 barrels of crude that were being processed daily during the week ending January 31st of last year, when US refineries were operating at an also low 87.4% of capacity...

with the decrease in the amount of oil being refined, the gasoline output from our refineries was lower for the 8th time in 11 weeks, decreasing by 253,000 barrels per day to 8,420,000 barrels per day during the week ending January 29th, after our gasoline output had decreased by 212,000 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-related lockdowns, this week's gasoline output was still 15.0% lower than the 9,903,000 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) increased by 104,000 barrels per day to 4,622,000 barrels per day, after our distillates output had decreased by 11,000 barrels per day over the prior week....but since our distillates' production is also just coming off a three year low, that output was 7.1% less than the 4,976,000 barrels of distillates that were being produced daily during the week ending January 31st, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 8th time in eleven weeks, and for 13th time in 30 weeks, rising by 4,467,000 barrels to 252,153,000 barrels during the week ending January 29th, after our gasoline inventories had increased by 2,469,000 barrels over the prior week...our gasoline supplies increased by more this week because the amount of gasoline supplied to US users decreased by 63,000 barrels per day to 7,770,000 barrels per day, and because our exports of gasoline fell by 24,000 barrels per day to 780,000 barrels per day, and because our imports of gasoline rose by 103,000 barrels per day to 568,000 barrels per day....but even after this week's inventory increase, our gasoline supplies were 3.4% lower than last January 31st's gasoline inventories of 261,144,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the 3rd time in 10 weeks and for the 29th time in the past year, but just by 9,000 barrels to 162,838,000 barrels during the week ending January 29th, after our distillates supplies had decreased by 815,000 barrels during the prior week....our distillates supplies fell this week even as the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 102,000 barrels per day to 4,300,000 barrels per day, because our exports of distillates rose by 134,000 barrels per day to 943,000 barrels per day while our imports of distillates rose by 44,000 barrels per day to 518,000 barrels per day....and even after this week's inventory decrease, our distillate supplies at the end of the week were still 13.7% above the 143,235,000 barrels of distillates that we had in storage on January 31st, 2020, and about 8% above the five year average of distillates stocks for this time of the year...

finally, even with the big jump in our oil imports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) fell for the 22nd time in the past thirty-four weeks, and for the 23rd time in the past year, decreasing by 994,000 barrels, from 476,653,000 barrels on January 22nd to 475,659,000 barrels on January 29th, again the lowest inventory level since March 27th...but even after that decrease, our commercial crude oil inventories were about 4% above the five-year average of crude oil supplies for this time of year, and about 42% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the end 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 jumped this spring after generally rising over the past two years, except for during the past 8 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 29th were still 9.3% more than the 435,009,000 barrels of oil we had in commercial storage on January 31st of 2020, 6.4% above the 447,207,000 barrels of oil that we had in storage on February 1st of 2019, and also 13.2% more than the 420,254,000 barrels of oil we had in commercial storage on February 2nd of 2018... 

This Week's Rig Count

The US rig count rose for the 20th time in the past twenty-one weeks during the week ending February 5th, but for just the 22nd time in the past 47 weeks, and hence it is still down by 50.6% over that forty-seven week period....Baker Hughes reported that the total count of rotary rigs running in the US rose by 8 to 392 rigs this past week, which was still down by 398 rigs from the 790 rigs that were in use as of the February 7th report of 2020, and was also still 12 fewer rigs than the all time low rig count prior to 2020, and 1,537 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 299 oil rigs this week, after rising by 6 oil rigs the prior week, still leaving us with 377 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 also rose by 4 rigs to 92 natural gas rigs, which was still down by 19 natural gas rigs from the 112 natural gas rigs that were drilling a year ago, and still just 5.7% 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 14 of those rigs drilling for oil in Louisiana's offshore waters and now 2 drilling for oil in Alaminos Canyon offshore from Texas...that was 7 fewer Gulf of Mexico rigs than the 23 rigs drilling in the Gulf a year ago, when 20 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, another rig was drilling for natural gas in the West Delta field 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, one rig continues to drill through an inland body of water in Lafourche Parish, south of New Orleans, after two ​other inland waters rigs were shut down this week... a year ago, there were no rigs drilling on US inland waters..

The count of active horizontal drilling rigs was up by 10 to 344 horizontal rigs this week, which was​ still​ less than a half of the 711 horizontal rigs that were in use in the US on February 7th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014...on the other hand, the vertical rig count was down by 2 to 20 vertical rigs this week, and those were still also down by 13 from the 33 vertical rigs that were operating during the same week a year ago....meanwhile, the directional rig count was unchanged at 18 directional rigs this week, and those were also down by 28 from the 46 directional rigs that were in use on February 7th 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 February 5th, the second column shows the change in the number of working rigs between last week's count (January 29th) and this week's (February 5th) count, the third column shows last week's January 29th 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 7th of February, 2020..    

February 5 2021 rig count summary

again, 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 4 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, and three more rigs added in Texas Oil District 7C, which encompasses the southern counties of the Permian Midland basin, and hence the Permian basin in Texas saw a net increase of 7 rigs this week, which also accounts for all of the land based rig changes in Texas...since the national Permian rig count was up by 6, that means that the rig that was pulled out in New Mexico must have come from the far west reaches of the Permian Delaware, to account for the net national Permian basin rig increase...elsewhere, there was a rig pulled out of the Cana Woodford in Oklahoma, while a rig was concurrently added in Oklahoma in a basin that Baker Hughes doesn't identify...finally,​ to account for the 4 natural gas rig additions this week, two were added in Ohio's Utica​ shale​, and two more were added in northern Louisiana's Haynesville shale...the Louisiana rig count remains unchanged, however, due to the shutdown of an oil rig offshore, and one which had been drilling through an inland body of water in Saint Mary parish​ in southern Louisiana​...

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note: there's more here...

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