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, September 12, 2021

natural gas prices at a 7 1/2 year high; US crude supplies at a 23 month low, gasoline supplies at a 22 month low

oil prices ended fractionally higher again this week, mostly due to falling US supplies of crude, gasoline, and distillates...after rising 0.8% to $69.29 a barrel last week as oil traders judged that Hurricane Ida's damage to oil production was marginally greater than the storm's damage to refining and to fuel demand, the contract price for US light sweet crude for October delivery fell below $69 a barrel in overseas trading on Labor Day after Saudi Arabia cut prices for its Asian customers, and as worries lingered following last week’s weaker-than-expected U.S. jobs data, and hence opened lower in New York on Tuesday, and continued sliding despite the ongoing disruption to supply in the wake of Hurricane Ida to settle 94 cents lower at $69.35 a barrel after Goldman Sachs trimmed their 2021 GDP forecast by 30 basis points, the Chinese services PMI saw its sharpest contraction in 16 months, and eurozone retail sales fell 2.3% month over month...but oil prices reversed those losses on Wednesday, rallying on ongoing Gulf of Mexico outages and widespread protests at oil ports in Libya to close 95 cents higher at $69.30 a barrel, after the EIA said it expected U.S. crude oil production to fall by 200,000 barrels per day in 2021, a bigger decline than their previous forecast...oil prices moved higher early Thursday after the American Petroleum Institute reported major across-the-board draws from U.S. commercial crude and refined product supplies, but then swung wildly ahead of the official inventory data following reports that China would release some of its strategic crude reserves, and settled $1.16, or 1.7% lower at $68.14 a barrel on the China news, despite the EIA's report of storm-induced draws from crude and fuel stockpiles...oil continued to trade in a choppy but range-bound manner early Friday, as a Biden/Xi phone call and an easing of the US dollar mitigated the impact of the Chinese move, but then rallied to settle 1.58 higher at $69.72 a barrel, supported by longer-than-expected production outages in the Gulf of Mexico and outsized drawdowns from domestic petroleum inventories in the wake of the storm...oil prices thus managed to eke out a 0.6% gain on the week, the 3rd weekly gain in a row, with trad​e​rs focused on the ongoing million barrel per day production shut-ins in the Gulf of Mexico, as more refineries ha​d fnally resumed operations nearly two weeks after Hurricane Ida tore through the region...

natural gas prices also rose during the holiday shortened week as three-fourths of Gulf production still remained shut in as the weekend approached... after rising 7.8% to $4.712 per mmBTU last week on an unseasonably low inventory build while hurricane Ida disrupted both production and exports, the contract price of natural gas for October delivery opened lower and fell more than 3% on Tuesday, as new forecasts projected milder weather and firms continued efforts to restart facilities along the Gulf Coast, with gas settling down 14.4 cents at $4.568 per mmBTU...but natural gas prices jumped on Wednesday, spiking to a 10% gain over $5 at one point, on a warmer than normal forecast for the eastern half of the nation, ​and closed 34.6 cents or 7.6% higher at $4.914 per mmBTU as traders mulled ongoing production outages in the Gulf, robust domestic demand, and intensifying competition for US LNG exports...natural gas prices rose another 11.7 cents to a 7 year closing high of $5.031 per mmBTU on Thursday, despite forecasts for less hot weather next week and a bigger than expected storage build, as hefty production outages lingered following Hurricane Ida, creating more uncertainty about whether U.S. supplies would be sufficient for the winter...but prices pulled back on Friday, slipping from their 7-year high despite record prices globally, and ending down 9.3 cents at $4.938 per mmBTU, as traders took profits following ​the frenzied rally that saw the front month contract surge more than 10% over the two prior trading sessions...despite that Friday retreat, natural gas prices slill finsihed 4.8% higher on the week, and ended with the highest weekly close since February 2014...

with a new interim high for natural gas prices, we'll include a graph of their history that takes in the last time prices have reached this level:

September 11 2021 natural gas prices

the above is a screenshot of the interactive natural gas price chart from barchart.com, which i have set to show front month natural gas prices monthly over the past 10 years, which means you're seeing the range of natural gas prices over that time as they were quoted by the media...this same chart can be reset to show prices of front month or individual monthly natural gas contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of natural gas prices for a single month, with weeks when prices rose indicated in green, and weeks when prices fell indicated in red, with the small sticks above or below each monthly bar representing the extent of the price change above or below the opening and closing price for the month in question....​likewise, the bars across the bottom show trading volume for the weeks in question, again with up weeks indicated by green bars and down weeks indicated in red...it's clear that prices have now risen well above the price spike during the November-December 2018 period, and it almost looks as if they are exceeding the 2014 highs​.​..but since this graph is monthly (necessitated due to the 10 year span it covers), th​os​e mid-February 2014 days when prices exceeded this week's prices aren't clearly shown...but if you go to the interactive 10 year graph itself at barchart.com, you can see that February 2014​ ​saw natural gas prices rise as high as $5.737 per mmBTU, well above this week's high...

the EIA's natural gas storage report for the week ending September 3rd indicated that the amount of working natural gas held in underground storage in the US rose by 52 billion cubic feet to 2,923 billion cubic feet by the end of the week, which left our gas supplies 592 billion cubic feet, or 16.8% below the 3,515 billion cubic feet that were in storage on September 3rd of last year, and 235 billion cubic feet, or 7.4% below the five-year average of 3,158 billion cubic feet of natural gas that have been in storage as of the 3rd of September in recent years...the 52 billion cubic foot increase in US natural gas in working storage this week was was well above the median forecast for a 33 billion cubic foot addition forecast by a S&P Global Platts' survey of analysts, but was less than the average addition of 65 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, as well as less than the 65 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 September 3rd indicated that after major decreases in our oilfield production, our refinery throughput, our oil imports and our oil exports due to Hurricane Ida, we needed to withdraw oil from our stored commercial crude supplies for the forteenth time in sixteen weeks, and for the 30th time in the past forty-two weeks….our imports of crude oil fell by an average of 531,000 barrels per day to an average of 5,810,000 barrels per day, after rising by an average of 183,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 698,000 barrels per day to an average of 2,342,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,468,000 barrels of per day during the week ending September 3rd, 167,000 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 was reportedly 1,500,000 barrels per day lower at 10,000,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 13,468,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 14,302,000 barrels of crude per day during the week ending September 3rd, 1,636,000 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 net average of 218,000 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 616,000 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 (+616,000) 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 omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…furthermore, since last week’s EIA fudge factor was at (+114,000) barrels per day, that means there was a 502,000 barrel per day difference in the EIA's crude oil balance sheet error from a week ago, ​and hence the week over week supply and demand changes indicated by this report are fairly useless..​.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 reasonably 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 6,154,000 barrels per day last week, which was still 12.2% more than the 5,492,000 barrel per day average that we were importing over the same four-week period last year…the 218,000 barrel per day net decrease in our crude inventories was all pulled out of our commercially available stocks of crude oil, while the quantity of oil stored in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be 1,500,000 barrels per day lower at 10,000,000 barrels per day because the EIA"s rounded estimate of the output from wells in the lower 48 states was 1,500,000 barrels per day lower at 9,600,000 barrels per day, while a 8,000 barrel per day increase in Alaska’s oil production to 412,000 barrels per day had no impact on the rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 23.7% below that of our pre-pandemic production peak, but 18.7% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 81.9% of their capacity while using those 14,302,000 barrels of crude per day during the week ending September 3rd, down from 91.3% of capacity the prior week, and way below normal utilization for late summer refinery operations…while the 14,302,000 barrels per day of oil that were refined this week were actually 11.9% more barrels than the 12,779,000 barrels of crude that were being processed daily during the storm and pandemic impacted week ending September 4th of last year, they were 18.3% below the 17,495,000 barrels of crude that were being processed daily during the week ending September 6th, 2019, when US refineries were operating at what was then a near normal 95.1% of capacity…

despite this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was higher, increasing by 237,000 barrels per day to 10,122,000 barrels per day during the week ending September 3rd, after our gasoline output had decreased by 364,000 barrels per day over the prior week.…while this week’s gasoline production was 13.3% higher than the 8,930,000 barrels of gasoline that were being produced daily over the same week of last year, it was 2.3% lower than the gasoline production of 10,360,000 barrels per day during the week ending September 6th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 625,000 barrels per day to 4,185,000 barrels per day, after our distillates output had decreased by 178,000 barrels per day over the prior week…after this week’s decrease, our distillates output was 4.8% less than the 4,398,000 barrels of distillates that were being produced daily during the week ending September 4th, 2020, and 21.6% below the 5,341,000 barrels of distillates that were being produced daily during the week ending September 6th, 2019..

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the thirteenth time in twenty-two weeks, and for the 27th time in forty-two weeks, falling by 7,215,000 to a twenty two month low of 219,999,000 barrels during the week ending September 3rd, after our gasoline inventories had increased by 1,290,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users rose by 30,000 barrels per day to 9,608,000 barrels per day and because our exports of gasoline rose by 268,000 barrels per day to 734,000 barrels per day, and because our imports of gasoline fell by 239,000 barrels per day to 899,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 5.1% lower than last September 4th's gasoline inventories of 231,905,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

meanwhile, with the big decrease in our distillates production, our supplies of distillate fuels also decreased for the fourteenth time in twenty-two weeks and for the 18th time in 38 weeks, falling by 3,141,000 barrels to​ ​133,586,000 barrels during the week ending September 3rd, after our distillates supplies had decreased by 1,732,000 barrels during the prior week….our distillates supplies fell week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 705,000 barrels per day to 3,685,000 barrels per day, because our imports of distillates fell by 224,000 barrels per day to 142,000 barrels per day and because our exports of distillates rose by 58,000 barrels per day to 1,090,000 barrels per day…after fourteen inventory decreases over the past twenty-two weeks, our distillate supplies at the end of the week were 24.0% below the 175,845,000 barrels of distillates that we had in storage on September 4th, 2020, and about 12% below the five year average of distillates stocks for this time of the year…

finally, with all major supply and demand metrics lower after Ida, our commercial supplies of crude oil in storage fell for the 19th time in the past twenty-nine weeks and for the 36th time in the past year, decreasing by 1,528,000 barrels over the week, from 425,395,000 barrels on August 27th to a 23 month low of 423,867,000 barrels on September 3rd, after our commercial crude supplies had decreased by 7,169,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still about 29% above the average of our crude oil stocks after the third week of August over the 5 years at the beginning of the past 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 and remained elevated for most of the year after that, our commercial crude oil supplies as of this September 3rd were still 15.3% less than the 500,434,000 barrels of oil we had in commercial storage on September 4th of 2020, but still 1.9% more than the 416,068,000 barrels of oil that we had in storage on September 6th of 2019, and 7.0% more than the 396,194,000 barrels of oil we had in commercial storage on September 7th of 2018… 

This Week's Rig Count

The number of drilling rigs active in the US increased for 43rd time out of the past 51 weeks during the week ending September 10th, but they were still 36.6% lower than the pre-pandemic rig count.... Baker Hughes reported that the total count of rotary rigs running in the US increased by six to 503 rigs this past week, which was also 249 more rigs the pandemic hit 254 rigs that were in use as of the September 11th report of 2020, but was still 1,426 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a 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 up by 7 to 401 oil rigs this week, after they had fallen by 16 oil rigs the prior week, but there are still 221 more oil rigs active now than were running a year ago, while they're still less than a quarter 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 fell by one to 101 natural gas rigs, which was still up by 30 natural gas rigs from the 71 natural gas rigs that were drilling during the same week a year ago, but still only 6.4% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as "miscellaneous' is still drilling in Kern county California, while a year ago there were three such "miscellaneous' rigs reported to be active...

Four of the oil rigs that had been shut down in the Gulf of Mexico as Hurricane Ida approached last week were restarted this week, but the Gulf rig count is still down by 11 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and three were deployed for oil in Texas waters….however, there are also 2 rigs drilling for natural gas off the shore of the Kenai peninsula in Alaska​ this week​, and hence the total national offshore rig count of 6 rigs is down by just 9 rigs from ​the ​15 offshore rigs ​runnng ​a year ago, when there was no drilling off our other coasts...

The count of active horizontal drilling rigs was down by 2 to 461 horizontal rigs this week, which was still more than double the 214 horizontal rigs that were in use in the US on September 11th of last year, but was just over a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….on the other hand, the vertical rig count was up by 3 to 26 vertical rigs this week, and those were also up by 7 from the 19 vertical rigs that were operating during the same week a year ago…..in addition, the directional rig count was up by 5 to 16 directional rigs this week, but those were still down by 5 from the 21 directional rigs that were in use on September 11th 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 September 10th, the second column shows the change in the number of working rigs between last week’s count (September 3rd) and this week’s (September 10th) count, the third column shows last week’s September 3rd 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 11th of September, 2020...

September 10 2021 rig count summary

the Louisiana rig count was up by four with the return of four rigs in the state's offshore waters this week​, and there were no changes elsewhere in the state...the Rigs by State file at Baker Hughes shows us that two rigs were added in Texas Oil District 8, which is the core Permian Delaware, that ​one rig was added in Texas Oil District 7B, which includes the easternmost county of the Permian Midland, and that another rig was added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, thus accounting for this week's Permian basin increase....also in Texas, an oil rig was shut down in Texas Oil District 2, which accounts for the Eagle Ford decrease we see above...in Oklahoma, we have the addition of an oil rig in the Cana Woodford​, the addition of another oil rig in the Mississippian basin​ and the shutdown of 2 oil rigs in the Ardmore Woodford, ​and hence the state shows no net change for the week....the addition of a rig in Utah was  in a basin not tracked by Baker Hughes, most likely in the Uintah, where other Utah drilling activity is centered...meanwhile, there were two natural gas rigs pulled out of the Marcellus in Pennsylvania, ​while a natural gas rig was added in a basin not tracked separately by Baker Hughes...

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note: there’s more here…

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