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, February 28, 2021

record drops in US oil output, US oil exports, & distillates' output; 2nd largest natural gas supply drop on record; oil prices highest since 2019..

natural gas supplies see 2nd largest drop on record as US burns 15% of inventories in one week; oil prices hit highest since 2019 as US oil exports drop most on record, oil production drop matches record; distillates' output drops most on record to an 11 year low; oil refining and distillate exports drop most since Hurricane Harvey; refinery utilization at a 40 month low; gasoline output falls by most in 46 weeks to lowest in 38 weeks; gasoline demand falls most in 43 weeks to a 39 week low...

oil prices moved higher this week as US oil output remained sharply curtailed in the wake of freeze damage to Texas production...after falling fractionally to $59.24 a barrel last week after the Texas freeze shut down US refineries and reduced demand for oil, the contract price of US light sweet crude for March delivery opened higher on Monday, the last day of trading for that contract, as the slow return to normal served as a reminder of the tight supply situation before the deep freeze, and climbed nearly 4% on news that damaged installations on between 2 million to 4 million barrels per day of oil output could be kept offline longer than expected to close $2.25, or 3.8% higher at $61.49 a barrel, while the more widely-traded April oil contract was up $2.44, or 4.1%, at 61.70 a barrel...with the contract price of US light sweet crude for April delivery now being quoted, oil prices jumped by more than $1 early on Tuesday and briefly hit $63 a barrel on reports that southern US shale oil producers would take at least two weeks to restart more than 2 million barrels per day of crude output, as frozen pipes and power supply interruptions slowed their recovery but reversed and settled 3 cents lower at $61.67 a barrel as concerns about the pace of the U.S. economic recover kept gains in check...oil prices then tumbled Tuesday evening after the API reported a surprise increase in US crude and gasoline inventories and thus opened 38 cents lower on Wednesday, but rallied after EIA data showed a big drop in crude output after the freeze had disrupted production last week and closed $1.55 higher at a 13 month high of $63.22 a barrel...oil prices were mixed on Thursday, with U.S. crude edging up while global prices fell as Texas refineries restarted production after last week’s freeze and US prices settled 31 cents higher at $63.53 a barrel, their highest close since 2019, on assurances from the Fed that U.S. interest rates would remain low...but oil prices tumbled on Friday as a collapse in bond prices led to gains in the U.S. dollar, driving oil prices lower and as expectations grew that with oil prices at pre-pandemic highs, more supply would come back to the market, with US crude settling $2.03 lower at $61.50 a barrel, but still posting a 3.8% gain on the week and an 18% increase for the month..

on the other hand, natural gas prices fell every day this week as production resumed and temperatures moderated....after rising 5.4% to $3.069 per mmBTU last week as demand for heating far outstripped the freeze-off curtailed supply, the contract price of natural gas for March delivery opened nearly 6 cents lower on Monday and tumbled to an 11.6 cent loss at $2.953 per mmBTU as production appeared to be quickly recovering from the Arctic blast, and warming weather models provided a headwind to prices...natural gas prices fell another 7.4 cents on Tuesday as warmer weather allowed producers to return more wells to service and restart pipelines that had been frozen during last week’s extreme cold, and then fell another 2.5 cents on warmer weather on Wednesday, as trading in the March contract expired with natural gas priced at a two week low of $2.854 per mmBTU....the natural gas contract for April delivery, which had ended last week priced at $2.991 per mmBTU and fallen to $2.795 per mmBTU by Wednesday close, fell another 1.8 cents to $2.777 per mmBTU on Thursday, as last week's withdrawal of natural gas from storage failed to surpass the record 359 billion cubic feet draw reported by EIA in January 2018...April gas prices held steady through most of Friday on increasingly warm weather outlooks for March, and ended 0.6 cents lower at $2.771 per mmBTU, the seventh lower close in a row, as the April contract finished 7.4% lower on the week, while the benchmark natural gas price still managed to climb 8% for the month ...

the natural gas storage report from the EIA for the week ending February 19th indicated that the amount of natural gas held in underground storage in the US fell by 338 billion cubic feet to 1,943 billion cubic feet by the end of the week, which left our gas supplies 298 billion cubic feet, or 13.3% below the 2,241 billion cubic feet that were in storage on February 19th of last year, and 161 billion cubic feet, or 7.7% below the five-year average of 2,104 billion cubic feet of natural gas that have been in storage as of the 19th of February in recent years....the 338 billion cubic feet that were drawn out of US natural gas storage this week was the 2nd largest withdrawal on record, and was more than the average forecast of a 333 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was more than double the 145 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 120 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 February 19th indicated that because the big drops in our oil exports and our oil refining associated with last week's freeze off were greater than the big drops in our oil production and oil imports, we had a small surplus of oil left to add to our stored commercial crude supplies for the third time in the past fourteen weeks and for the 13th time in the past thirty-seven weeks.... our imports of crude oil fell by an average of 1,299,000 barrels per day to an average of 4,599,000 barrels per day, the largest drop in 32 weeks, after rising by an average of 41,000 barrels per day during the prior week, while our exports of crude oil fell by a record average of 1,548,000 barrels per day to 2,314,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,285,000 barrels of per day during the week ending February 19th, 249,000 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 decreased by a record 1,100,000 barrels per day to 9,700,000 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 11,985,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 12,230,000 barrels of crude per day during the week ending February 19th, 2,589,000 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 184,000 barrels of oil per day were being added to the supplies of oil stored in the US....so looking at that 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 429,000 barrels per day less than what 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 plugged a (+429,000) 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 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 5,715,000 barrels per day last week, which was 13.3% less than the 6,589,000 barrel per day average that we were importing over the same four-week period last year.....the 184,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 1,100,000 barrels per day lower at 9,700,000 barrels per day, matching the largest drop on record, because the rounded estimate of the output from wells in the lower 48 states was 1,100,000 barrels per day lower at 9,200,000 barrels per day, while a 17,000 barrel per day decrease to 481,000 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 February 21st was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 25.4% below that of a year ago, yet still 15.1% above 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 68.6% of their capacity while using those 12,230,000 barrels of crude per day during the week ending February 19th, down from 83.1% of capacity during the prior week, and among the lowest refinery utilization rates in the last 30 years...hence, the 12,230,000 barrels per day of oil that were refined this week were 23.6% fewer barrels than the 16,008,000 barrels of crude that were being processed daily during the week ending February 21st of last year, when US refineries were operating at an also low 87.9% of capacity...

with the drop in the amount of oil being refined, the gasoline output from our refineries was lower for the 9th time in 14 weeks, decreasing by 1,295,000 barrels per day to 7,736,000 barrels per day during the week ending February 19th, after our gasoline output had increased by 375,000 barrels per day over the prior week...with that drop in production, this week's gasoline output was 21.0% lower than the 9,797,000 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 a record 953,000 barrels per day to an eleven year low of 3,621,000 barrels per day, after our distillates output had decreased by 86,000 barrels per day over the prior week...with distillates' production thus depressed, that output was 25.3% less than the 4,846,000 barrels of distillates that were being produced daily during the week ending February 21st, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 12th time in fifteen weeks, and for 15th time in 31 weeks, but was up by just 12,000 barrels to 257,096,000 barrels during the week ending February 19th, after our gasoline inventories had increased by 672,000 barrels over the prior week...our gasoline supplies increased this week despite the production drop because the amount of gasoline supplied to US users decreased by 2,200,000 barrels per day to a nine month low of 7,207,000 barrels per day, even as our imports of gasoline fell by 139,000 barrels per day to 531,000 barrels per day, while our exports of gasoline fell by 59,000 barrels per day to 517,000 barrels per day.....after this week's inventory increase, our gasoline supplies were 0.3% higher than last February 21st's gasoline inventories of 256,387,000 barrels, and about 1% above the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the record decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 26 weeks and for the 29th time in the past year, falling by 4,969,000 barrels to 152,715,000 barrels during the week ending February 19th, after our distillates supplies had decreased by 3,422,000 barrels during the prior week....our distillates supplies fell by more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 522,000 barrels per day to 3,932,000 barrels per day, and even though our exports of distillates fell by 270,000 barrels per day to a 41 month low of 701,000 barrels per day, while our imports of distillates fell by 59,000 barrels per day to 303,000 barrels per day...but even after this week's inventory decrease, our distillate supplies at the end of the week were still 10.3% above the 138,472,000 barrels of distillates that we had in storage on February 21st, 2020, and about 3% above the five year average of distillates stocks for this time of the year...

finally, with the the big drops in our oil exports and our refinery throughput, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) ended the week higher for the 9th time in the past thirty-one weeks, and for the 29th time in the past year, increasing by 1,285,000 barrels, from 461,757,000 barrels on February 12th to 463,042,000 barrels on February 19th...after that increase, our commercial crude oil inventories remained near the five-year average of crude oil supplies for this time of year, but were about about 36% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the third weekend of February, 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 to record highs during the lockdowns this spring after generally rising over the past two years, except for during the 10 weeks prior to this one 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 February 19th were 4.4% more than the 443,335,000 barrels of oil we had in commercial storage on February 21st of 2020, 3.8% above the 445,865,000 barrels of oil that we had in storage on February 22nd of 2019, and also 10.1%  more than the 420,479,000 barrels of oil we had in commercial storage on February 16th of 2018...   

This Week's Rig Count

The US rig count rose for the 22nd time over the past 24 weeks during the week ending February 26th, but it still remains down by 49.3% from what it was 50 weeks ago....Baker Hughes reported that the total count of rotary rigs running in the US was up by 5 to 402 rigs this past week, which was still down by 388 rigs from the 790 rigs that were in use as of the February 28th report of 2020, and was also still 2 fewer rigs than the all time low rig count prior to 2020, and 1,527 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 309 oil rigs this week, after falling by 1 oil rig the prior week, leaving us with 369 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 increased by 1 rig to 92 natural gas rigs, which was still down by 18 natural gas rigs from the 110 natural gas rigs that were drilling a year ago, and 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 two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count increased by 1 to 17 rigs this week, with 15 of those rigs now drilling for oil in Louisiana's offshore waters and 2 drilling for oil in Alaminos Canyon offshore from Texas...that was 5 fewer Gulf of Mexico rigs than the 22 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, 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....while Gulf rig increased this week, the last rig that had been drilling through an inland body of water in southern Louisiana was concurrently shut down, while a year ago there remained one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 3 to 359 horizontal rigs this week, which was just over half of the 708 horizontal rigs that were in use in the US on February 28th 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 1 to 25 vertical rigs this week, but those were still down by 11 from the 36 vertical rigs that were operating during the same week a year ago....in addition, the directional rig count was up by 2 rig to 18 directional rigs this week, but those were also down by 28 from the 46 directional rigs that were in use on February 28th 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 26th, the second column shows the change in the number of working rigs between last week's count (February 19th) and this week's (February 26th) count, the third column shows last week's February 19th 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 28th of February, 2020..    

February 26 2021 rig count summary

there were just a few fairly straightforward rig changes again this week....checking 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 7C, which includes the southern counties of the Permian Midland basin, while one rig was pulled out of Texas Oil District 8, which corresponds to the core Permian Delaware, and hence there was a net increase of 3 rigs in the Texas Permian....since the national Permian rig count was up by 4, that means that the rig that was added in New Mexico ​must​ have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian increase...meanwhile, that increase of 3 rigs in the Texas Permian also accounts for the entire Texas increase, since there were no other rig count changes elsewhere in Texas...in Louisiana, the offshore rig addition was offset by the oil rig pulled off an inland lake to net the zero change you see above, and the changes in those three states account for all of this week's oil rig activity....meanwhile, all of this week's natural gas rig changes took place in the Marcellus shale, where two natural gas rigs were added in Pennsylvania while one natural gas rig was pulled out of the Marcellus in West Virginia...

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note: there's more here...

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