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, March 7, 2021

fuel supplies drop most on record as US oil refining collapses, leading to largest ever jump in oil supplies

refinery utilization at an all time low, 10% lower than it's ever been; oil refined is least on record; record jum​p in oil inventories, record drop in gasoline inventories; distillates production at a 26 year low, distillates inventories drop most in 18 years;  largest jump in oil imports in 39 weeks

oil prices jumped this week after OPEC and other producers committed to holding their oil output steady through the end of April...after rising 3.8% to $61.50 a barrel in volatile trading last week as US oil output remained sharply curtailed in the wake of freeze damage to Texas production, the contract price of US light sweet crude for April delivery opened higher on Monday and initially rose more than 2% on progress on a huge U.S. stimulus bill and on hopes for improving oil demand as ​more ​vaccines are rolled out, but later tumbled to a loss of 86 cents at $60.64 a barrel on fears that Chinese crude consumption was slowing and that OPEC might increase global supply at a meeting later this week...oil prices then opened lower on Tuesday and extended those losses on worries over a possible supply increase from OPEC to close down 89 cents, or 1.5%, at $59.75 a barrel, its lowest close since Feb​ruary​ 19th, after OPEC Secretary General Mohammad Barkindo said the outlook for oil demand was looking more positive, particularly in Asia, ostensibly telegraphing an oil production increase...oil prices opened lower again on Wednesday after the API reported a surprise increase in crude inventories, but then reversed and rallied to a $1.53 increase at $61.28 a barrel after the EIA report showed a record drop in domestic fuel inventories in the wake of the deep freeze that ​had ​shuttered refineries in several states last week...oil prices were down more than 1% again early Thursday, but then surged more than 7% to the highest in nearly two years after the OPEC+ alliance surprised traders with its decision to keep their output unchanged, signaling a tighter crude market in the months ahead, before settling with a $2.55 increase at $63.83 a barrel​,​ as Saudi Arabia even said it would extend its voluntary oil output cut of 1 million barrels per day ​in the months ahead ​before gradually phasing it out...oil prices continued to surge on Friday following a stronger-than-expected U.S. jobs report and the decision by OPEC + not to increase oil supplies in April and settled $2.26 higher at $66.09 a barrel, thus finishing the week with an increase of 7.5% at the highest level since April 2019...

natural gas prices, on the other hand, finished lower after gas inventories fell much less than had been expected...after falling every day last week to a 4 week low of $2.771 per mmBTU as frozen production resumed and temperatures moderated, the contract price of natural gas for April delivery opened 1% higher on Monday, but only managed to hold a six-tenth cent gain at $2.777 per mmBTU at the close on forecasts for seasonally milder weather and lower heating demand through March...natural gas prices rallied again early Tuesday, climbing on LNG export momentum and hints of increased heating demand in mid-March. and held on to a 6.2 cent gain at $2.839 per mmBTU, but the brief rally's momentum faded Wednesday and prices fell 2.3 cents to $2.816 per mmBTU...prices then tumbled Thursday despite a recovery in LNG exports after a surprisingly anemic storage withdrawal caught traders off guard and left prices 7.0 cents lower at $2.746 per mmBTU...disappointment in the weak storage withdrawal carried into Friday as traders anticipated the spring 'shoulder season' when gas storage is refilled, and natural gas prices fell another 4.5 cents to $2.701 mmBTU and thus ended the week at a 5 week low, 2.5% lower than the prior week's close...

the natural gas storage report from the EIA for the week ending February 26th indicated that the amount of natural gas held in underground storage in the US fell by 98 billion cubic feet to 1,845 billion cubic feet by the end of the week, which left our gas supplies 277 billion cubic feet, or 13.1% below the 2,122 billion cubic feet that were in storage on February 26th of last year, and 178 billion cubic feet, or 8.8% below the five-year average of 2,032 billion cubic feet of natural gas that have been in storage as of the 26th of February in recent years....the 98 billion cubic feet that were drawn out of US natural gas storage this week was far less than the average forecast of a 137 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was also ​much ​less than 145 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, but was more than the average withdrawal of 81 billion cubic feet of natural gas that have 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 26th indicated that because of a big drop in our oil refining and a big jump in our oil imports, we had the largest surplus of oil on record left to add to our stored commercial crude supplies, which increased for the fourth time in the past fifteen weeks and for the 13th time in the past thirty-seven weeks.... our imports of crude oil jumped by an average of 1,692,000 barrels per day to an average of 3,941,000 barrels per day, the largest jump in 39 weeks, after falling by an average of 1,299,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 37,000 barrels per day to 2,351,000 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 26th, 1,655,000 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 increased by 300,000 barrels per day to 10,000,000 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 13,941,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 9,903,000 barrels of crude per day during the week ending February 26th, 2,237,000 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 record 3,080,000 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 957,000 barrels per day more 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 (-957,000) 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....​ ​moreover​, since last week's fudge factor was at +429,000 barrels per day, there was a 1,386,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, which means the week over week supply and demand changes we have just transcribed are 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 5,661,000 barrels per day last week, which was 12.8% less than the 6,459,000 barrel per day average that we were importing over the same four-week period last year.....the ​record ​3​,​080,000 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 300,000 barrels per day higher at 10.000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 300,000 barrels per day higher at 9,500,000 barrels per day, while a 17,000 barrel per day decrease to 464,000 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 28th was rounded to 13,100,000 barrels per day, so this reporting week's rounded oil production figure was 23.7% below that of a year ago, yet still 18.7% 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 56.0% of their capacity while using those 9,903,000 barrels of crude per day during the week ending February 26th, down from 68.6% of capacity during the prior week, ​and the ​lowest refinery utilization rate on record...hence, the 9,903,000 barrels per day of oil that were refined this week were​ also the least on record, 36.9% fewer barrels than the 15,696,000 barrels of crude that were being processed daily during the week ending February 28th of last year, when US refineries were operating at an also low 86.9% of capacity...

even with the drop in the amount of oil being refined, the gasoline output from our refineries was higher for the 6th time in 15 weeks, increasing by 565,000 barrels per day to 8,301,000 barrels per day during the week ending February 26th, after our gasoline output had decreased by 1,295,000 barrels per day over the prior week...​but ​even with that ​partial ​rebound in gasoline production, this week's gasoline output was 14.9% lower than the 9,757,000 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 723,000 barrels per day to an twenty-six year low of 2,898,000 barrels per day, after our distillates output had decreased by a record 953,000 barrels per day to an eleven year low of 3,621,000 barrels per day over the prior week...with distillates' production thus depressed, that output was 37.7% less than the 4,648,000 barrels of distillates that were being produced daily during the week ending February 28th, 2020...

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 4th time in sixteen weeks, and for 17th time in 33 weeks, falling by a record 13,624,000 barrels to 243,472,000 barrels during the week ending February 26th, after our gasoline inventories had increased by 12,000 barrels over the prior week...our gasoline supplies decreased this week despite the production jump because the amount of gasoline supplied to US users increased by 941,000 barrels per day to 8,148,000 barrels per day, even as our imports of gasoline rose by 74,000 barrels per day to 605,000 barrels per day, while our exports of gasoline fell by 24,000 barrels per day to 493,000 barrels per day...after this week's big inventory decrease, our gasoline supplies were 3.4% lower than last February 28th's gasoline inventories of 252,048,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the second straight big decrease in our distillates production, our supplies of distillate fuels decreased for the 19th time in 27 weeks and for the 29th time in the past year, falling by a 9,719,000 barrels to 142,996,000 barrels during the week ending February 26th, the largest drop in 18 years, after our distillates supplies had decreased by 4,969,000 barrels during the prior week....our distillates supplies fell by even more this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 144,000 barrels per day to 3,788,000 barrels per day, in part because our exports of distillates rose by 119,000 barrels per day to 820,000 barrels per day, while our imports of distillates rose by 18,000 barrels per day to 321,000 barrels per day...but even after this week's​ big​ inventory decrease, our distillate supplies at the end of the week were still 6.3% above the 134,464,000 barrels of distillates that we had in storage on February 28th, 2020, while they fell to about 2% below the five year average of distillates stocks for this time of the year...

finally, with the the big jump in our oil imports and and the record low in 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 10th time in the past thirty-two weeks, and for the 29th time in the past year, increasing by a record 21,563,000 barrels, from 463,042,000 barrels on February 19th to 484,605,000 barrels on February 26th...after that record increase, our commercial crude oil inventories rose to 3% above the five-year average of crude oil supplies for this time of year, and about about 40% above the prior 5 year (2011 - 2015) average of our crude oil stocks as of the end 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 spring lockdowns of last year after generally rising over the prior two years, except for during the 10 weeks prior to the last two 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 26th were 9.1% more than the 444,119,000 barrels of oil we had in commercial storage on February 28th of 2020, 7.0% more than the 452,934,000 barrels of oil that we had in storage on March 1st of 2019, and also 13.8%  more than the 425,906,000 barrels of oil we had in commercial storage on March 2nd of 2018...   

This Week's Rig Count

The US rig count rose for the 23rd time over the past 25 weeks during the week ending March 5th, but it still remains down by 49.2% from what it was a year ago....Baker Hughes reported that the total count of rotary rigs running in the US was up by 1 to 403 rigs this past week, which was still down by 390 rigs from the 793 rigs that were in use as of the March 6th report of 2020, and was also still one less rig than the all time low rig count prior to 2020, and 1,526 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 1 rig to 309 oil rigs this week, after rising by 4 oil rigs the prior week, leaving us with 372 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 92 natural gas rigs, which was still down by 17 natural gas rigs from the 109 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 3 to 14 rigs this week, with 12 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 9 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 ​totals are equal to the Gulf rig counts.....

The count of active horizontal drilling rigs was up by 3 to 362 horizontal rigs this week, which was down by 346 rigs from the 708 horizontal rigs that were in use in the US on March 6th 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 directional rig count was down by 2 rigs to 16 directional rigs this week, and those were also down by 35 from the 51 directional rigs that were operating during the same week a year ago....meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, and those were also down by 9 from the 34 vertical rigs that were in use on March 6th 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 March 5th, the second column shows the change in the number of working rigs between last week's count (February 26th) and this week's (March 5th) count, the third column shows last week's February 26th 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 6th of March, 2020..    

March 5th 2021 rig count summary

although they're not all obvious, we have a few more rig changes this week than in recent weeks....checking first for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that there were 3 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, and one rig added in Texas Oil District 8A, which includes the northern counties of the Permian Midland basin, which means there was a net increase of 4 rigs in the Texas Permian....since the national Permian rig count was only up by 3, that means that the rig that was removed in New Mexico must have been pulled out of the farthest west reaches of the Permian Delaware, to balance the national Permian total....elsewhere in Texas, there was a rig pulled out of Texas Oil District 1, there were 2 rigs added in Texas Oil District 2, and there was a rig pulled out of Texas Oil District 4, some or all of which could have been offsetting changes in the Eagle Ford shale that could net to no ​net ​change and hence wouldn't show up in the table above...there was such an offsetting change that isn't evident in the Barnett Shale in Texas Oil District 7B, where a natural gas rig was pulled out and an oil rig was added while the ​basin's ​rig count remained unchaged....there was also a rig added in the panhandle in Texas Oil District 10, which apparently was not in the Granite Wash, since that basin shows no change...other states showing changes include Louisiana, where 3 rigs were pulled out of the state's Gulf waters while one rig was added in the northern part of the state that ​apparenly ​wasn't in the Haynesville. and North Dakota, where one rig was pulled out of the Bakken shale in the Williston basin...meanwhile, there was a natural gas rig added in an "other' basin that Baker Hughes doesn't track, which more than likely was one of the Texas or Louisiana rigs in a basin that we couldn't easily pin down either..

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