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, April 4, 2021

US refinery utilization at a 53 week high, gasoline production at a 25 week high

oil prices rose for the first time in four weeks, despite an OPEC decision to increase output, as the new US infrastructure plan is expected to increase demand for oil...after falling 0.7% to $61.42 a barrel last week as new Covid infections and lockdowns increased worldwide, the contract price of US light sweet crude for May delivery opened lower on Monday on news that the container ship that had blocked oil traffic for nearly a week in the Suez Canal had been refloated, but reversed to finish 59 cents or 1% higher at $61.56 a barrel after Reuters reported that Russia would support stable oil output ahead of a meeting with the OPEC later in the week...but oil prices fell on Tuesday as the Suez Canal was cleared and traders focused on the upcoming OPEC+ meeting and the impact of Covid-19 on oil demand in Europe, and finished $1.01 or 1.6% lower at $60.55 a barrel, as near-term risks to the demand recovery story emerged with setbacks to economic reopening plans worldwide...oil prices opened lower on Wednesday after the American Petroleum Institute reported surprisingly large crude inventory build, but reversed to show a 1% gain by midday after the EIA reported a modest inventory withdrawal, before reversing again to tank 2% before the close after France announced it would start a month-long lockdown in the face of another Covid surge, as oil prices ended $1.39 lower on the day at $59.16 a barrel....however, oil prices jumped at the open and moved sharply higher on Thursday, despite the news that OPEC+ had reached a deal to gradually ease production cuts from May, as traders took heart in their incremental increases over three months and reacted to the announcement Biden's vast infrastructure plan that includes investments in roads, railways, and clean energy that would all take copius quantites of oil and asphalt to build, as oil closed $2.29 higher at $61.45 a barrel, and with the markets closed on Good Friday, thus finished the week's trading with a modest 0.8% gain...

natural gas prices also rose fractionally this week as LNG exports remained at record levels and the weekly storage report showed a smaller inventory build than had been expeccted...after rising 0.9% to $2.557 per mmBTU last week on strong LNG exports and a bullish storage report, the contract price of natural gas for April delivery opened fractionally higher on its last day of trading on Monday and continued rising to finish trading 2.9 cents higher at $2.586 per mmBTU, on record LNG exports and on forecasts for slightly higher heating demand over the coming week...with the contract price of natural gas for May delivery moving to the top of the board on Tuesday, natural gas quotes fell 3.0 cents to $2.623 per mmBTU, even as exports climbed higher, as a weakening weather outlook and the anticipation of an inventory increase kept natural gas prices in check...natural gas futures fell again on Wednesday, slipping 1.5 cents to $2.608 per mmBTU, as traders mulled domestic demand weakness and the potential for a bearish government inventory report on the next day... however, when Thursday's natural gas storage report came in a bit below market expectations, natural gas prices bounced 2% and went on to settle 3.1 cents higher at $2.639 per mmBTU, as the initial price momentum faded as traders struggled to make sense of the accompanying revision....thus the daily natural gas quotes saw a 3.2% gain on the week as the front month shifted from April to May, while the May contract itself ended the week 0.8% higher, having closed last week at $2.619 per mmBTU...

the natural gas storage report from the EIA for the week ending March 26th indicated that the amount of natural gas held in underground storage in the US rose by 14 billion cubic feet to 1,764 billion cubic feet by the end of the week, after gas in storage for the week ending March 19th was revised 4 billion cubic feet higher to 1750 billion cubic feet...that left our gas supplies 225 billion cubic feet, or 11.3% below the 1,989 billion cubic feet that were in storage on March 26th of last year, and 36 billion cubic feet, or 2​.​0% below the five-year average of 1,800 billion cubic feet of natural gas that have been in storage as of the 26th of March in recent years....the 14 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 19 billion cubic foot addition from an S&P Global Platts survey of analysts, while it contrasted with the 20 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 24 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 March 26th indicated that after a big increase in our oil exports and another big increase in our oil refining, we finally need to withdraw oil from our stored commercial crude supplies for the first time in six weeks and for the 23rd time in the past thirty-six weeks....our imports of crude oil rose by an average of 523,000 barrels per day to an average of 6,145,000 barrels per day, after rising by an average of 299,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 693,000 barrels per day to an average of 3,174,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,971,000 barrels of per day during the week ending March 26th, 170,000 fewer barrels per day than the net of our imports minus our exports during the prior week...over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,100,000 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 14,071,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 14,941,000 barrels of crude per day during the week ending March 26th, 552,000 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 net of 125,000 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 745,000 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 plugged a (+745,000) 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 there must have been a error or errors of that magnitude in this week's 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 they're 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 5,686,000 barrels per day last week, which was 9.4% less than the 6,279,000 barrel per day average that we were importing over the same four-week period last year... the 125,000 barrel per day net withdrawal from our crude inventories was due to a 125,000 barrel per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged....this week's crude oil production was reported to be 100,000 barrels per day higher at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,700,000 barrels per day, while a 10,000 barrel per day decrease to 445,000 barrels per day in Alaska's oil production subtracted 100,000 barrels per day the rounded national total (EIA's math)....last year's US crude oil production for the week ending March 27th was rounded to 13,000,000 barrels per day, so this reporting week's rounded oil production figure was 14.6% below that of a year ago, yet still 31.7% 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 83.9% of their capacity while using those 14,941,000 barrels of crude per day during the week ending March 26th, up from 81.6% of capacity during the prior week, and the highest refinery utilization in 53 weeks, which appears to reflect utilization​ during ​the last week before the Covid slowdown...however, the 14,941,000 barrels per day of oil that were refined this week were just fractionally higher than the 14,898,000 barrels of crude that were being processed daily during the week ending March 27th of last year, when US refineries were operating at a seasonal low 82.3% of capacity...

with the increase in the amount of oil being refined, the gasoline output from our refineries was higher for the 8th time in 20 weeks, increasing by 762,000 barrels per day to a twenty-five week high of 9,339,000 barrels per day during the week ending March 26th, after our gasoline output had decreased by 300,000 barrels per day over the prior week...as a result, this week's gasoline production was 25.3% higher than the 7,456,000 barrels of gasoline that were being produced daily over the same week of last year, but still 6.3% lower than the March 13 2020 pre-pandemic high of 9.972,000 barrels per day ....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 137,000 barrels per day to 4,738,000 barrels per day, after our distillates output had increased by 1,703,000 barrels per day from a twenty-six year low of 2,898,000 barrels per day over the prior three weeks...but even after that four week rebound in our distillates' production, this week's distillates output was still 4.6% lower than the 4,966,000 barrels of distillates that were being produced daily during the week ending March 27th, 2020...

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the sixth time in twenty weeks, and for 19th time in 37 weeks, falling by 1,735,000 barrels to 230,544,000 barrels during the week ending March 26th, after our gasoline inventories had increased by 204,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 275,000 barrels per day to 8,891,000 barrels per day, and because our exports of gasoline rose by 108,000 barrels per day to 541,000 barrels per day, and because our imports of gasoline fell by 320,000 barrels per day to 619,000 barrels per day...after this week's inventory decrease, our gasoline supplies were 6.6% lower than last March 27th's gasoline inventories of 246,806,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the recovery in our distillates production, our supplies of distillate fuels increased for the 3rd time in 10 weeks and for the 11th time in thirty-one weeks, rising by 2,542,000 barrels to 144,095,000 barrels during the week ending March 26th, after our distillates supplies had increased by 3,806,000 barrels during the prior week....our distillates supplies managed to rise this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 521,000 barrels per day to 4,113,000 barrels per day, because our exports of distillates fell by 426,000 barrels per day to 703,000 barrels per day, while our imports of distillates fell by 223,000 barrels per day to 664,000 barrels per day...after this week's inventory increase, our distillate supplies at the end of the week were 17.9% above the 122,248,000 barrels of distillates that we had in storage on March 27th, 2020, and rose to about 4% above the five year average of distillates stocks for this time of the year...

finally, with the increase in our oil exports and the recovery in our refinery throughput, our commercial supplies of crude oil in storage fell for the 12th time in the past twenty weeks and for the 24th time in the past year, decreasing by 876,000 barrels, from 502,711,000 barrels on March 19th to 501,835,000 barrels on March 26th...after this week's modest decrease, our commercial crude oil inventories remained 6% above the most recent five-year average of crude oil supplies for this time of year, and w​as still nearly 49% above the average of our crude oil stocks as of the fourth week of March ​over the 5 years ​at the beginning of th​is decade, 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​ past two ​and a half ​years​,​ except for ​summers and ​during the 10 weeks prior to the Texas freeze, after generally falling from a record high over the year and a half prior to September of 2018, our commercial crude oil supplies as of March 26th were 7.0% more than the 469,193,000 barrels of oil we had in commercial storage on March 27th of 2020, 11.6% more than the 449,521,000 barrels of oil that we had in storage on March 29th of 2019, and also 18.0% more than the 425,332,000 barrels of oil we had in commercial storage on March 16th of 2018...       

This Week's Rig Count

Note: this week's rig count was released on Thursday in advance of the Good Friday market holiday, so it only covers 6 days...nonetheless, the rig count rose for the 26th time over the past 29 weeks​,​ and by the most since January 15th​,​ during the week ending April 1st, but it still remains down by 47.3% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was up by 13 to 430 rigs this past week, which was still down by 234 rigs from the 664 rigs that were in use as of the April 3rd report of 2020, and was 1,499 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 13 rigs to 331 oil rigs this week, after rising by 9 oil rigs the prior week, ​still ​leaving us with 225 fewer oil rigs than were running a year ago, and 20.6% 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 down by one to 91 natural gas rigs, which was also down by 9 natural gas rigs from the 100 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, there are now two rig​s​ classified as 'miscellaneous' drilling this week, one in the ​middle of the ​Permian basin in MIdland county Texas, and the other in Lake County, California, while a year ago there were also two such "miscellaneous" rigs deployed...

The Gulf of Mexico rig count was up by 2 to 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana's offshore waters and 2 continuing to drill for oil in Alaminos Canyon offshore from Texas...that was 4 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, and one rig was drilling for natural gas in the West Delta field, also offshore from Louisiana...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 11 to 391 horizontal rigs this week, which was still down by 202 rigs from the 593 horizontal rigs that were in use in the US on April 3rd 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 directional rig count was up by 4 rigs to 19 directional rigs this week, but those were still down by 22 from the 41 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was down by 2 to 20 vertical rigs this week, and those were down by 10 from the 30 vertical rigs that were in use on April 3rd 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 April 1st, the second column shows the change in the number of working rigs between last week's count (March 26th) and this week's (April 1st) count, the third column shows last week's March 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 3rd of April, 2020..    

April 1 2021 rig count summary

this is the first week in a while where the new activty has been so widespread, rather than ​largelu limited to the Permian...checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that one rig was added in Texas Oil District 8A, which encompasses the northernmost counties of the Permian Midland basin, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which thus means there was no change in the rig count in the Texas Permian this week...since the national Permian rig count was up by 3, that means that all three rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian increase....elsewhere in Texas, there was one rig added in Texas Oil District 1, another rig added in Texas Oil District 2, and yet another a rig added in Texas Oil District 3, any two of which could have been the rigs added in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state...at the same time, there was also a rig added in Texas Oil District 6, which doesn't appear to have been targeting that region's Haynesville shale, since the Haynesvile was down by ​the​ single​ rig pulled out in northern Lousiana...Louisiana's rig count is still up by one, however, because of the two oil rigs added in th​at state's offshore waters...elsewhere, two oil rigs were added in Oklahoma, including one in the Granite Wash, two more oil rigs were added in a Utah basin not named by Baker Hughes, more than likely the Uinta, and an oil rig was added in Colorado, which apparently wasn't targeting the state's DJ Niobrara chalk...for ​changes in ​natural gas rigs, we have the rig that was removed from Louisiana's Haynesville shale, and another rig that was pulled out of West Virginia's Marcellus, while a rig was added in Pennsylvania's Marcellus at the same time...

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note: there's more here...

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