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, June 6, 2021

oil prices at new 31 month high; refinery utilization and throughput at post pandemic highs

oil prices rose for the fifth week in the past six and finished at a 31 month high on ongoing OPEC+ production restraint and on falling US crude supplies...after rising 4.3% to $66.32 a barrel last week as strong US economic data fed optimism on the outlook for fuel demand, the contract price of US light sweet crude for July delivery rose 0.9% in off market trading on Memorial Day on growing optimism that fuel demand would grow in the next quarter, and hence opened higher on Tuesday, boosted by Chinese data showing that their factory activity grew at its fastest pace this year in May, and then jumped 4% to $68.87 a barrel, the highest since October 2018, when the OPEC+ alliance forecast a tightening global crude market, before giving up over a dollar of the early gains to settle $1.40 higher at $67.72 a barrel...but oil prices opened higher again on Wednesday, and rose steadily throughout the day to finish $1.11 higher at $68.83 a barrel after OPEC and allied producers decided to only gradually restore global supplies, with with reports that there would be a delay in supply from Iran due to the slow pace of talks with the US also contributing...prices rallied in off hours late Wedesday after the API reported a big draw from crude supplies and then jumped 1% early Thursday after the EIA confirmed the sizable crude inventory draw, but fell back quickly to close 2 cents lower at $68.81 a barrel as traders became concerned that the data also showed showed domestic gasoline supplies rising by the most since early April...however, the oil price rally resumed Friday as expectations for a demand pick-up from summer activity began to come to fruition and on news that nonfarm payrolls in the U.S. increased by 559,000 jobs last month, as July oil rose 81 cents to settle at $69.62 a barrel, thus finishing the week nearly 5% higher, and at the highest level since October 2018...

since we now have clearly reached a new interim high for oil prices, we'll include a longer term graph of prices so you can see how that has developed...

June 5 2021 oil prices

the above is a screenshot of the interactive oil price chart from barchart.com, which i have set to show front month oil prices weekly over the past 5 years, which means you're seeing prices as they were quoted in the media; that same chart can be reset to show prices of individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month...the bars across the bottom show trading volume for the weeks in question, with down weeks indicated by red bars and up weeks indicated in green...note that since this graph shows closing prices, it does not show how prices briefly drop to negative $40 in April, when the OPEC agreement broke down during a squabble between Russia and the Saudis...

meanwhile, natural gas prices rose for the eighth time in nine weeks on forecasts for hot weather and high AC demand during the first half of June...after rising 0.3% to $2.986 per mmBTU last week on higher prices overseas and on a bullish shift the weather forecasts, the contract price of natural gas for July delivery opened 5 cents higher on Tuesday on a notably warmer outlook for June temperatures, and rose 11.8 cents, or 4.0%, to settle at $3.104 per mmBTU, their highest close since May 17th....however, natural gas prices retreated a bit ​on ​Wednesday, as a majority of the previously reported production decline ​had ​recovered by midweek, with the July contract settling 2.9 cents lower at $3.075 per mmBTU...another large injection of gas into storage and reduced intensity in projected June heat put another hit on prices Thursday, as natural gas settled down 3.4 cents to $3.041 per mmBTU...but prices recovered late Friday after midday forecasts called for hotter weather over the next two weeks than was previously expected, with gas prices rising 5.6 cents to $3.097 per mmBTU, thus finishing 3.7% higher for the week...

the natural gas storage report from the EIA for the week ending May 28th indicated that the amount of natural gas held in underground storage in the US rose by 98 billion cubic feet to 2,313 billion cubic feet by the end of the week, which still left our gas supplies 386 billion cubic feet, or 14.3% below the 2,699 billion cubic feet that were in storage on May 28th of last year, and 61 billion cubic feet, or 2.6% below the five-year average of 2,374 billion cubic feet of natural gas that have been in storage as of the 28th of May in recent years....the 98 billion cubic feet that were added to US natural gas storage this week was above the average forecast of a 87 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also a bit above the average addition of 96 billion cubic feet of natural gas that have typically been injected into natural gas storage during the fourth week of May over the past 5 years, as well as just above the 95 billion cubic feet that were added to natural gas storage during the corresponding week of 2020...   

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending May 28th showed that after a decrease in our oil imports and a decrease​ ​in our crude production, we needed to withdraw oil from our stored commercial crude supplies for the seventh time in the past fifteen weeks and for the 29th time in the past forty-five weeks....our imports of crude oil fell by an average of 641,000 barrels per day to an average of 5,631,000 barrels per day, after falling by an average of 138,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 889,000 barrels per day to an average of 2,544,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,087,000 barrels of per day during the week ending May 28th, 248,000 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 reportedly fell 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 13,887,000 barrels per day during this reporting week... 

meanwhile, US oil refineries reported they were processing 15,597,000 barrels of crude per day during the week ending May 28th, 358,000 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 818,000 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 892,000 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 (+892,000) 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 reports 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 rose to an average of 5,951,000 barrels per day last week, which was 0.7% less than the 5,992,000 barrel per day average that we were importing over the same four-week period last year... the 818,000 barrel per day net withdrawal from our crude inventories included a 93,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commerical purposes, and a 726,000 barrel per day withdrawal from our designated commercially available stocks of crude oil....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 10,400,000 barrels per day, while an 8,000 barrel per day decrease in Alaska's oil production to 440,000 barrels per day had no impact on the rounded national total...our prepandemic record high US crude oil production was at a rounded 13,100,000 barrels per day during the week ending March 13th 2020, so this week's reported oil production figure was 17.6% below that of our production peak, 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 88.7% of their capacity while using those 15,597,000 barrels of crude per day during the week ending May 28th, up from 87.0% the prior week, and the highest refinery utilization since Feb 14th of last year...while the 15,597,000 barrels per day of oil that were refined this week were 17.2% higher than the 13,307,000 barrels of crude that were being processed daily during the pandemic impacted week ending May 29th of last year, they were still 7.9% below the 16,938,000 barrels of crude that were being processed daily during the week ending May 31st, 2019, when US refineries were operating at a still fairly low 91.8% of capacity...

even with this week's increase in the amount of oil being refined, the gasoline output from our refineries decreased by 182,000 barrels per day to 9,566,000 barrels per day during the week ending May 28th, after our gasoline output had decreased by 5,000 barrels per day over the prior week...while this week's gasoline production was 23.0% higher than the 7,779,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 4.1% lower than the March 13th 2020 pre-pandemic high of 9,974,000 barrels per day, and 4.8% below the gasoline production of 10,049,000 barrels per day during the week ending May 31st, 2019....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) increased by 142,000 barrels per day to 4,807,000 barrels per day, after our distillates output had increased by 112,000 barrels per day over the prior week...while the pandemic pullback of last year didn't appear to impact distillates' production, this week's distillates output was still 2.0% more than the 4,714,000 barrels of distillates that were being produced daily during the week ending May 29th, 2020...

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the seventh time in nine weeks, and for the 21st time in twenty-nine weeks, rising by 1,499,000 barrels to 233,980,000 barrels during the week ending May 28th, after our gasoline inventories had decreased by 1,745,000 barrels over the prior week...our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 333,000 barrels per day to 9,146,000 barrels per day, and because our exports of gasoline fell by 173,000 barrels per day to 560,000 barrels per day, while our imports of gasoline fell by 101,000 barrels per day to 933,000 barrels per day...even after this week's inventory increase, our gasoline supplies were 9.2% lower than last May 29th's gasoline inventories of 257,795,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year... 

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased for the first time in eight weeks and for the 11th time in 24 weeks, rising by 3,720,000 barrels to 132,802,000 barrels during the week ending May 28th, after our distillates supplies had decreased by 3,013,000 barrels during the prior week....our distillates supplies finally rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 648,000 barrels per day to 3,813,000 barrels per day, ​and because our imports of distillates rose by 243,000 barrels per day to 516,000 barrels per day​ ​while our exports of distillates rose by 70,000 barrels per day to 978,000 barrels per day....but after seven consecutive inventory decreases prior to this week, our distillate supplies at the end of the week were still 23.8% below the 174,261,000 barrels of distillates that we had in storage on May 29th, 2020, and about 8% below the five year average of distillates stocks for this time of the year...

finally, with the increase in our refining and decrease in our oil imports, our commercial supplies of crude oil in storage fell for the 18th time in the past twenty-nine weeks and for the 26th time in the past year, decreasing by 5,079,000 barrels, from 484,349,000 barrels on May 21st to 479,270,000 barrels on May 28th, after our crude supplies had decreased by 1,662,000 barrels the prior week....after this week's decrease, our commercial crude oil inventories were about 3% below the most recent five-year average of crude oil supplies for this time of year, but were still about 35% above the average of our crude oil stocks as of the the fourth week of May over the 5 years at the beginning of this 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 Covid lockdowns of last spring, our commercial crude oil supplies as of May 28th were 10.0% less than the 532,345,000 barrels of oil we had in commercial storage on May 29th of 2020, and 0.8% less than the 483,264,000 barrels of oil that we had in storage on May 31st of 2019, but still 10.3% more than the 434,512,000 barrels of oil we had in commercial storage on May 25th of 2018...       

This Week's Rig Count

The US rig count fell for just the 4th time over the past 38 weeks during the week ending June 4th, but it's still down by 42.5% from the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US was down by 1 to 456 rigs this past week, which was still up by 172 rigs from the pandemic hit 284 rigs that were in use as of the June 5th report of 2020, but was still 1,473 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 an attempt to put US shale out of business....

The number of rigs drilling for oil was unchanged at 359 oil rigs this week, after rising by 3 oil rigs the prior week, which is now 153 more oil rigs than were running a year ago, but still just 22.3% 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 1 to 97 natural gas rigs, which was still up by 21 natural gas rigs from the 76 natural gas rigs that were drilling a year ago, but still just 6.0% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008....

The Gulf of Mexico rig count was down by 1 to 13 rigs this week, with all 13 of those rigs drilling for oil in Louisiana's offshore waters....that was the same number of Gulf of Mexico rigs that were drilling in the Gulf a year ago, when again all 13 Gulf rigs were drilling for oil 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...however, in addition to those rigs offshore, a rig continued to drill through an inland lake in St Mary parish Louisiana this week, whereas there were no such "inland waters" rigs running a year ago...

The count of active horizontal drilling rigs was unchanged at 415 horizontal rigs this week, which was still up by 162 rigs from the 253 horizontal rigs that were in use in the US on June 5th of last year, but less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the directional rig count was down by 2 to 25 directional rigs this week, which was still up by 1 from the 24 directional rigs that were operating during the same week a year ago....on the other hand, the vertical rig count was up by one to 16 vertical rigs this week, and those were also up by 9 from the​ ​7 vertical rigs that were in use on June 5th 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 June 4th, the second column shows the change in the number of working rigs between last week's count (May 28th) and this week's (June 4th) count, the third column shows last week's May 28th 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 5th of June, 2020..    

June 4 2021 rig count summary

as you can see, there were just a few changes this week...checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that two oil rigs were pulled out of Texas Oil District 8, which is the core Permian Delaware, while another rig was pulled out from Texas Oil District 8A, which encompasses the northern counties of the Permian Midland, which thus gives us a net decrease of three rigs in the Texas Permian....since the Permian basin only saw a one rig decrease nationally, that means that the two rigs that were added in New Mexico had to have been set up to drill in the far west reaches of the Permian Delaware, to account for the national Permian basin change...elsewhere in Texas, we find that a rig was added in Texas Oil District 6, which accounts for the Haynesville shale increase, but that there was no change in Texas Oil District 10, which means that the two Granite Wash rigs that were pulled out this week had to have been drilling across the panhandle border in Oklahoma...elsewhere in Oklahoma, we have the addition of an oil rig in the Ardmore Woodford, and another rig addition in a basin that Baker Hughes doesn't name, leaving Oklahoma with no net change...at the same time, the oil rig that was pulled out of Louisiana's Gulf waters was the only change in that state...meanwhile, natural gas rigs were down by one despite the Haynesville shale increase because the last natural gas rig that had been deployed in the Permain was pulled out this week, while one of the two remaining Eagle Ford natural gas rigs was also shut down, while an Eagle Ford oil rig was started up in its place, thus leaving the Eagle Ford showing no net rig change from a week ago..

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