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 22, 2021

record jump in oil exports to most since March; oil supplies at 47 ​week low; DUC well backlog falls to 12.5 months

US oil prices finished lower for the first time in three weeks last week, despite a 5% price spike midweek, as the same deep freeze that shut off US oil production also shut down US refineries, reducing demand for oil....after rising 4.6% to a thirteen month high of $59.47 a barrel last week on progress towards a US economic stimulus package and on a big drop in US crude inventories, the contract price of US light sweet crude for March delivery rose in holiday trading on Monday after the Saudis said they had intercepted an explosive-laden drone fired by the Yemeni Houthis, and thus opened 51 cents higher on Tuesday and rose to as high as $60.95 a barrel as a deep freeze shut wells and refineries in Texas, and held above $60 to settle with a gain of 58 cents at $60.05 a barrel, as traders tried to assess the impact the country’s cold blast would ultimately have on the oil supply and demand balance...oil prices jumped more than $1 a barrel on Wednesday, as the Texas freeze shut down oil production across the state, with the unusually cold weather expected to hamper output for days or even weeks, and settled $1.09 higher at $61.14 a barrel after fading during the day’s session when Dow Jones reported that Saudi Arabia planned to boost oil output in the coming months...oil prices extended the day's gains in Wednesday evening trading after the American Petroleum Institute reported a larger than expected draw from crude stocks and opened higher on Thursday, and then jumped to a dollar plus gain after the EIA reported a crude production drop and an even larger draw from inventories in the week before the storm, but then tumbled to settle 62 cents lower at $60.52 a barrel amid talk of a possible OPEC+ output increase as traders began to cash in on this week’s “freeze trade" that had sent crude prices higher than they might have otherwise been...oil prices opened lower and slid as much as 2% in early trade on Friday on worries that refineries shut by the big freeze would take some time to revive operations and dent crude demand and held below $60 before settling down $1.28 at $59.24 a barrel and posting a fractional loss for the week as traders resigned to the likelihood that Saudi Arabia would roll back some of their output cuts in light of higher prices...

natural gas prices also retreated late in the week but held on to solid gains, as demand for heating far outstripped the cold-curtailed supply...after rising 1.7% to $2.912 per mmBTU last week as forecasts for bitter cold over most of the continental US threatened the natural gas supply surplus, the contract price of natural gas for March delivery opened 4% higher on Tuesday and climbed to a 7.5% gain at $3.129 per mmBTU as large swaths of the U.S. struggled with subzero temperatures and rolling blackouts hit several states and next-day gas in Oklahoma surged to as high as $999.00 per mmBTU...prices rose another 9 cents or 3% to $3.219 per mmBTU on Wednesday as record low temps continued to wreak havoc on gas supplies while fueling soaring demand for heating...natural gas opened higher again on Thursday, but reversed course after the EIA reported a smaller-than-expected draw from storage and forecasts called for a reprieve from the Arctic blast and closed 13.7 cents lower at $3.082 per mmBTU....after another day of volatile trading on Friday natural gas prices settled 1.3 cents lower at $3.069 per mmBTU, as traders tried to digest the long-term implications of the week’s crippling Arctic blast, but still finished 5.4% higher on the week..

the natural gas storage report from the EIA for the week ending February 12th indicated that the amount of natural gas held in underground storage in the US fell by 237 billion cubic feet to 2,281 billion cubic feet by the end of the week, which left our gas supplies 105 billion cubic feet, or 4.4% below the 2,386 billion cubic feet that were in storage on February 12th of last year, but 57 billion cubic feet, or 2.6% above the five-year average of 2,224 billion cubic feet of natural gas that have been in storage as of the 12th of February in recent years....the 237 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast of a 251 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, but much more than the 141 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 142 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 12th indicated that because of a record jump in our oil exports, we had to withdraw oil from our stored commercial crude supplies for the eleve​nth time in the past thirteen weeks and for the 24th time in the past thirty-six weeks.... our imports of crude oil rose by an average of 41,000 barrels per day to an average of 5,898,000 barrels per day, after falling by an average of 650,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 1,245,000 barrels per day to​ a ​47 ​week ​high of ​3,862,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,036,000 barrels of per day during the week ending February 12th, 1,204,000 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 decreased by 200,000 barrels per day to 10,800,000 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 12,836,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,819,000 barrels of crude per day during the week ending February 12th, 27,000 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 total of 1,058,000 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 925,000 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 (+925,000) 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....furthermore, since last week's fudge factor was at (-420,000) barrels per day, there was a 1,345,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, which renders the week over week supply and demand changes we have just transcribed ​nonsense....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 5,831,000 barrels per day last week, which was 13.0% less than the 6,700,000 barrel per day average that we were importing over the same four-week period last year.....the 1,058,000 barrel per day withdrawal from our crude inventories was due to a 1,037,000 barrels per day withdrawal from our commercially available stocks of crude oil, and a 21,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which is being leased for commercial purposes....this week's crude oil production was reported to be 200,000 barrels per day lower at 10,800,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day lower at 10,300,000 barrels per day, while a 9,000 barrel per day decrease to 498,000 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 14th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 16.9% below that of a year ago, yet still 28.1% 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 83.1% of their capacity while using those 14,819,000 barrels of crude per day during the week ending February 12th, up from 83.0% of capacity during the prior week...however, since US refinery utilization had averaged the lowest on record through 2020 and has barely recovered, the 14,819,000 barrels per day of oil that were refined this week were still 8.6% fewer barrels than the 16,210,000 barrels of crude that were being processed daily during the week ending February 14th of last year, when US refineries were operating at an also low 89.4% of capacity...

with the increase in the amount of oil being refined, the gasoline output from our refineries was higher for the 5th time in 13 weeks, increasing by 375,000 barrels per day to 9,031,000 barrels per day during the week ending February 12th, after our gasoline output had increased by 236,000 barrels per day over the prior week...but 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 5.2% lower than the 9,525,000 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 86,000 barrels per day to 4,574,000 barrels per day, after our distillates output had increased by 38,000 barrels per day over the prior week...and since our distillates' production is also recovering from a three year low, that output was 5.7% less than the 4,852,000 barrels of distillates that were being produced daily during the week ending February 14th, 2020...

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 10th time in thirteen weeks, and for 14th time in 31 weeks, rising by 672,000 barrels to 257,084,000 barrels during the week ending February 12th, after our gasoline inventories had increased by 4,259,000 barrels over the prior week...our gasoline supplies increased by less this week because the amount of gasoline supplied to US users increased by 550,000 barrels per day to 8,407,000 barrels per day, even as our exports of gasoline fell by 161,000 barrels per day to 576,000 barrels per day, while our imports of gasoline rose by 13,000 barrels per day to 670,000 barrels per day....but even after this week's inventory increase, our gasoline supplies were still 0.8% lower than last February 14th's gasoline inventories of 259,078,000 barrels, but about 1% above 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 17th time in 25 weeks and for the 29th time in the past year, falling by 3,422,000 barrels to 157,684,000 barrels during the week ending February 12th, after our distillates supplies had decreased by 1,732,000 barrels during the prior week....our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 146,000 barrels per day to 4,454,000 barrels per day, and because our exports of distillates rose by 15,000 barrels per day to 971,000 barrels per day while our imports of distillates rose by 6,000 barrels per day to 362,000 barrels per day...but even after this week's inventory decrease, our distillate supplies at the end of the week were still 12.2% above the 140,587,000 barrels of distillates that we had in storage on February 14th, 2020, and about 6% above the five year average of distillates stocks for this time of the year...

finally, with the record jump 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 22nd time in the past thirty weeks, but for just the 23rd time in the past year, decreasing by 7,257,000 barrels, from 469,014,000 barrels on February 5th to 461,757,000 barrels on February 12th, the lowest oil inventory level since March 20th...after that decrease, our commercial crude oil inventories were back to near the five-year average of crude oil supplies for this time of year, but still about 36% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the second 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 during the lockdowns this spring after generally rising over the past two years, except for during the past 10 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 February 12th were still 4.3% more than the 442,883,000 barrels of oil we had in commercial storage on February 14th of 2020, 1.6% above the 454,512,000 barrels of oil that we had in storage on February 15th of 2019, and also 9.4% more than the 422,095,000 barrels of oil we had in commercial storage on February 9th of 2018...  

This Week's Rig Count

The US rig count was unchanged over the week ending February 19th, after rising 21 times out of the p​rior 22 weeks, while it still remains half of what it was 49 weeks ago....Baker Hughes reported that the total count of rotary rigs running in the US remained at 397 rigs this past week, which was still down by 394 rigs from the 791 rigs that were in use as of the February 21st report of 2020, and was also  still 7 fewer rigs than the all time low rig count prior to 2020, and 1,532 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 298 oil rigs this week, after rising by 7 oil rigs the prior week, leaving us with 374 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 90 natural gas rigs, which was still down by 19 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 decreased by 1 to 16 rigs this week, with 14 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 6 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....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, while a year ago there was one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 1 to 345 horizontal rigs this week, which was still less than a half of the 714 horizontal rigs that were in use in the US on February 21st 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 also up by 1 to 24 vertical rigs this week, but those were still down by 8 from the 32 vertical rigs that were operating during the same week a year ago....on the other hand, the directional rig count was down by 2 rig to 16 directional rigs this week, and those were also down by 29 from the 45 directional rigs that were in use on February 21st 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 19th, the second column shows the change in the number of working rigs between last week's count (February 12th) and this week's (February 19th) count, the third column shows last week's February 12th 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 21st of February, 2020..    

February 19 2021 rig count summary

as you can see​,​ there were just a few 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 2 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 8A, which encompasses the northern counties of the Permian Midland basin, thus accounting for the 1 rig increase both in Texas and in the Permian nationally....other changes nationally include the oil rig that was pulled out offshore from Louisiana, an oil rig addition in North Dakota's Williston basin, and an oil rig pulled out of an Alaskan basin that Baker Hughes does not identify...meanwhile, this week's natural gas rig addition was in the Permian, the first natural gas rig in that basin in 22 weeks, while the Permian saw no net increase in oil rigs for the first time in 5 weeks...

DUC well report for January

Tuesday of this past week saw the release of the EIA's Drilling Productivity Report for February, which includes the EIA's January data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 19th time in the past twenty-three months in January, as completions of drilled wells and drilling of new wells both increased, but still remained far below the prepandemic levels....for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 159 wells, falling from 7,334 DUC wells in December to 7,177 DUC wells in January, which was also 12.2% fewer DUCs than the 8,176 wells that had been drilled but remained uncompleted as of the end of January of a year ago...this month's DUC decrease occurred as 417 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during January, up from the 373 wells that were drilled in December, while 576 wells were completed and brought into production by fracking, up from the 545 completions seen in December, but down by nearly half from the 1,087 completions seen in January of last year....at the January completion rate, the 7,177 drilled but uncompleted wells left at the end of the month represents a 12.5 month backlog of wells that have been drilled but are not yet fracked, down from the 15.2 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by a completion rate that is one-third of the previous norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in January, and again there were no basins reporting DUC increases...the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 38, from 3,506 DUC wells at the end of ​December to 3,468 DUCs at the end of January, as 187 new wells were drilled into the Permian, while 225 wells in the region were completed...at the same time, DUC wells in the Niobrara chalk of the Rockies' front range fell by 36, decreasing from 503 at the end of December to 467 DUC wells at the end of January, as 40 wells were drilled into the Niobrara chalk during January, while 76 Niobrara wells were being fracked....in addition, DUCs in the Eagle Ford of south Texas decreased by 27, from 990 DUC wells at the end of December to 963 DUCs at the end of January, as 41 wells were drilled in the Eagle Ford during January, while 68 already drilled Eagle Ford wells were completed...there was also a decrease of 24 DUC wells in the Bakken of North Dakota, where DUC wells fell from 769 at the end of December to 745 DUCs at the end of January, as 20 wells were drilled into the Bakken during January, while 44 of the drilled wells in that basin were being fracked...meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko decreased by 20, falling from 666 at the end of December to 646 DUC wells at the end of January, as 21 wells were drilled into the Anadarko basin during January, while 41 Anadarko wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 9 wells, from 577 DUCs at the end of December to 568 DUCs at the end of January, as 66 wells were drilled into the Marcellus and Utica shales during the month, while 75 of the already drilled wells in the region were fracked....at the same time, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 5 to 320, as 42 wells were drilled into the Haynesville during January, while 47 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of January, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 145 wells to 6,289 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 14 wells to 888 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...   

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