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, October 10, 2021

oil price is highest since 2014; natural gas price fell from 12 year high after largest inventory increase in 16 months; gasoline exports at a 26 month low…

Oil prices finished higher for the 7th straight week after OPEC decided to only add the minimum to global supplies in the coming months....after rising 2.6% to $75.88 a barrel last week as rising global demand amid tight supplies more than offset higher US inventories, the contract price for US light sweet crude for November delivery jumped early on Monday after reports emerged that the Joint Ministerial Monitoring Committee of the OPEC+ alliance had recommended that oil producers stick to their current plan and ease their cuts by just 400,000 barrels per day, and then rocketed to a 7 year high after OPEC and other producers doubled down on their earlier plans to increase oil output at a gradual rate, before settling $1.74 higher at $77.62 a barrel, still the highest closing price since 2014...the oil price rally on the OPEC decision continued on Tuesday, with the November contract price rising another $1.31 to another 7 year high at $78.93 a barrel, with crude prices also supported by a Goldman forecast that power generation could add an extra 650,000 barrels a day to oil demand this winter as record global natural gas prices incentivize power generators to switch from gas to oil....however, oil prices dipped in overnight trading after the American Petroleum Institute reported the 2nd straight week of unexpected inventory builds, and then slid from its prior seven year high early Wednesday on that API report, and on Saudi Arabia's decision to cut nearly all of its November crude prices for Asia, European and U.S.-bound cargoes, and then went on to settle $1.50 or 2% lower at $77.43 a barrel, after the EIA confirmed the API's report of higher inventories and Russian President Vladimir Putin indicated that his country would ramp up natural gas exports to help stabilize European energy markets...oil prices extended thier losses from the previous session on Thursday, falling below $75 a barrel, after Energy Secretary Jennifer Granholm said the US was considering selling oil from its strategic reserves, and as Russia said it was ready to stabilise the natural gas market, but rallied in the afternoon to settle 87 cents higher at $78.30 a barrel after the U.S. Department of Energy walked back their plans for an SPR release and an export ban and after Biden's national security adviser urged energy suppliers to lift flows to meet demand, saying that the United States is concerned about their failure to do so....oil prices continued rising overnight with the return of China to the markets, and opened 56 cents higher in New York on Friday, and then jumped to over $80 a barrel for the first time since October 2014 on a retreat in the U.S. dollar index, triggered by a weaker-than-expected September employment report, before settling $1.05 higher on the day at $79.35 a barrel, as the global energy crunch boosted U.S. prices to their highest in almost seven years as big power users struggled to meet demand....oil prices thus finished the week with a 4.6% increase, at their highest since October 31st, 2014

With several news sites citing a "7 year high" for oil prices on Monday, Tuesday, and again on Friday, we'll put up a longer term oil price graph to see what that looks like....

October 8 2012 oil prices

The above is a screenshot of the current interactive oil price chart from barchart.com, which i have set to show front month oil prices monthly over the past 10 years, which means you're seeing the same oil prices that were quoted by the media....this same chart can be reset to show prices of front month or 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 for each...each bar in the graph above represents the range of oil prices for a single month, with months when prices rose indicated in green, with the opening price at the bottom of the bar and the closing price at the top, and months when prices fell indicated in red, with the opening price at the top of the bar and the closing price at the bottom, while the small barely visible sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the month in question....likewise, the bars across the bottom show trading volume for the front month oil contract, for the months in question, again with up months indicated by green bars and down months indicated in red....

To find the month when oil prices were last as high as this week's, i've maneuvered my cursor to the month when prices were last at the $80 a barrel level we saw on Friday of this week...that turned out to be November 2014, which you can see by the readout of that month which has been generated by my cursor in small red print at the upper left of the graph, and which shows that the 'crude light' oil contract for December 2014 (CLZ14) opened that month priced at $80.59 a barrel, and closed that month priced at $66.16 a barrel....while that would seem to indicate that oil saw prices above this week's high of $80.11 a barrel early in November of 2014, i'd note that the Wall Street Journal affiliate website Marketwatch puts the date at October 31st, 2014...it could be that they are citing a different oil contract than the CLZ14 contract this graph shows for November...whatever the case, while one could say oil prices were at a 7 year high, we can see that the last time oil prices were as high at they were this week was just short of seven years ago...

Meanwhile, natural gas prices finished lower for the first time in the past eight weeks on the largest increase in US natural gas inventories in over a year....after rising 8.1% to $5.619 per mmBTU last week as natural gas shortages in Europe and Asia drove​ their​ prices to record levels, the contract price of natural gas for November delivery opened higher on Monday and rose 14.7 cents to $5.766 per mmBTU​,​ on forecasts that power generators would burn more of the fuel during the week than was previously expected, as lingering heat was still expected to keep A/C demand high in some parts of the country...US prices then surged 54.6 cents or 9.5% to $6.312  per mmBTU on Tuesday, as prices in Europe rocketed over 21% for November gas and ​by ​23% for December gas to fresh record highs, on worries European countries would not have enough natural gas stored for winter, as China and other Asian LNG buyers bid up prices for available cargoes...while US prices opened higher again on Wednesday, they quickly dropped 63.7 cents or over​ by more than​ 10% to $5.675 per mmBTU, after Vladimir Putin said Russia was ready to pump more gas to help stabilize European energy markets and US traders shifted focus back to domestic markets, where expectations were that supplies had grown more than normal for a fourth week in a row​....​ ​however, even after the EIA reported more natural gas had been added to storage than anyone had expected, natural gas prices ended Thursday virtually unchanged, settling up just two-tenths of a cent at $5.677 per mmBTU...US natural gas prices then slid 11.2 cents to $5.565 per mmBTU on Friday, on a drop in global gas prices and on forecasts for mild weather to keep heating demand at a minimum through late October, thus ending 1.0% l​ower for the week...

The EIA's natural gas storage report for the week ending October 1st indicated that the amount of working natural gas held in underground storage in the US rose by 118 billion cubic feet to 3,288 billion cubic feet by the end of the week, which ​still ​left our gas supplies 532 billion cubic feet, or 13.9% below the 3,820 billion cubic feet that were in storage on October 1st of last year, and 176 billion cubic feet, or 5.1% below the five-year average of 3,464 billion cubic feet of natural gas that have been in storage as of the1st of October in recent years...the 118 billion cubic foot increase in US natural gas in working storage this week was the largest weekly addition to storage since June 19th of last year, was more than the forecast for a 111 billion cubic foot addition ​from a survey of analysts ​queried ​by S&P Global Platts, and well more than the average addition of 81 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, and also well more than the 75 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 October 1st indicated that after an increase in our oil imports, a big drop in our oil exports, and an increase in our oilfield production, we had surplus oil to add oil to our stored commercial crude supplies for the second time in nine weeks and for the thirteenth time in the past forty-six weeks….our imports of crude oil rose by an average of 483,000 barrels per day to an average of 6,552,000 barrels per day, after rising by an average of 87,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 906,000 barrels per day to an average of 2,114,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,921,000 barrels of per day during the week ending October 1st, 1,389,000 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 200,000 barrels per day higher at 11,300,000 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​ have​ total​ed​ an average of 16,221,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 15,744,000 barrels of crude per day during the week ending October 1st, 330,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 204,000 barrels of oil per day were being added to 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 and from oilfield production was 273,000 barrels per day more than what was added to storage plus 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 (-273,000) 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 balance sheet 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...moreover, since last week’s unaccounted for oil was at (+1,310,000) barrels per day, there was an 1,583,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes indicated by this report nonsense….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 rose to an average of 6,453,000 barrels per day last week, which was 22.7% more than the 5,258,000 barrel per day average that we were importing over the same four-week period last year…the 204,000 barrel per day net increase in our crude inventories came as 335,000 barrels per day were added to our commercially available stocks of crude oil, while 131,000 barrels per day were pulled out from our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 200,000 barrels per day higher at 11.300,000 barrels per day because the EIA"s rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,900,000 barrels per day, while a 10,000 barrel per day increase in Alaska’s oil production to 448,000 barrels per day had no impact on the reported 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 13.7% below that of our pre-pandemic production peak, but 34.1% 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 89.6% of their capacity while using those 15,744,000 barrels of crude per day during the week ending October 1st, up from 88.1% of capacity the prior week, and near normal utilization for early autumn refinery operations…the 15,744,000 barrels per day of oil that were refined this week were 13.7% more barrels than the 13,853,000 barrels of crude that were being processed daily during the pandemic impacted week ending October 2nd of last year, and ​also ​0.6% more than the 15,656,000 barrels of crude that were being processed daily during the week ending September 27th, 2019, when US refineries were operating at what was then a below normal 85.7% of capacity in the wake of tropical storm Imelda…

even with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was lower, decreasing by 523,000 barrels per day to 9,366,000 barrels per day during the week ending October 1st, after our gasoline output had increased by 246,000 barrels per day over the prior week.…this week’s gasoline production was 1.6% less than the 9,522,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.0% lower than the gasoline production of 10,066,000 barrels per day during the week ending October 4th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 130,000 barrels per day to 4,778,000 barrels per day, after our distillates output had increased by 194,000 barrels per day over the prior week…after this week’s increase, our distillates output was 5.4% more than the 532,000 barrels of distillates that were being produced daily during the week ending October 2nd, 2020, while still 1.2% below the 4,835,000 barrels of distillates that were being produced daily during the week ending October 4th, 2019..

despite the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the twelfth time in twenty-six weeks, and for the 20th time in forty-five weeks, rising by 193,000 barrels to 221,809,000 barrels during the week ending October 1st, after our gasoline inventories had increased by 193,000 barrels over the prior week...our gasoline supplies increased by more this week even though the amount of gasoline supplied to US users rose by 28,000 barrels per day to 9,427,000 barrels per day because our imports of gasoline rose by 99,000 barrels per day to 1,088,000 barrels per day while our exports of gasoline fell by 321,000 barrels per day to a sixteen ​month low of 404,000 barrels per day…even after this week’s inventory increase, our gasoline supplies were 0.7% lower than last October 2nd's gasoline inventories of 226,747,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year…

meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the sixth time in eight weeks and for the 17th time in 26 weeks, falling by 396,000 barrels to 129,331,000 barrels during the week ending October 1st, after our distillates supplies had increased by 384,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 392,000 barrels per day to 4,365,000 barrels per day, while our imports of distillates fell by 2,000 barrels per day to 298,000 barrels per day, and even though our exports of distillates fell by 152,000 barrels per day to 768,000 barrels per day…but after seventeen inventory decreases over the past twenty-six weeks, our distillate supplies at the end of the week were 24.7% below the 171,796,000 barrels of distillates that we had in storage on October 2nd, 2020, and about 11% below the five year average of distillates stocks for this time of the year…

meanwhile, with the increase in our oil imports and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the sixth time in the past twenty weeks and for the 17th time in the past year, increasing by 2,345,000 barrels over the week, from 418,542,000 barrels on September 24th to 420,887,000 barrels on October 1st, after our commercial crude supplies had increased by 4,578,000 barrels the prior week…after this week’s increase, our commercial crude oil inventories remained about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still 26.3% above the average of our crude oil stocks at the beginning of October 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 October 1st were 14.6% less than the 492,927,000 barrels of oil we had in commercial storage on October 2nd of 2020, and are now 1.1% less than the 425,569,000 barrels of oil that we had in storage on October 4th of 2019, but still 2.6% more than the 409,951,000 barrels of oil we had in commercial storage on October 5th of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil still near multi year lows, we'll continue to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by​ an inconsequential​ 114,000 barrels this week, from 1,851,676,000 barrels on September 24th to 1,851,562,000 barrels on October 1st, after they had risen 10,049,000 barrels from a six year low the prior week..

This Week's Rig Count

The number of drilling rigs active in the US increased for 47th time out of the past 55 weeks during the week ending October 8th, but they still ​remained ​32.6% below the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by five to 533 rigs this past week, which was also 264 more rigs the pandemic hit 269 rigs that were in use as of the October 9th report of 2020, but was still 1,396 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 5 to 433 oil rigs this week, after oil rigs had risen by 7 oil rigs the prior week, and there are 240 more oil rigs active now than were running a year ago, while they still amount to just 26.5% the 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 99 natural gas rigs, which was still up by 26 natural gas rigs from the 73 natural gas rigs that were drilling during the same week a year ago, but still only 6.2% 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' continues to drill in Kern county California, while a year ago there were three such "miscellaneous' rigs reported to be active...

The Gulf of Mexico rig count was down by 1 rig to ten rigs this week, which is ​also short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with nine of this week's Gulf rigs drilling for oi in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas....the Gulf rig count is also down by 4 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….in addition, one of the two rigs that had been drilling for natural gas off the shore of the Kenai peninsula in Alaska was shut down this week, and hence this week's total national offshore rig count of 11 rigs is down by two from last week and down by three rigs from the 14 offshore rigs running a year ago, when there was no drilling off Alaska or off our other coasts...

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississipp​i​, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was up by 9 to 483 horizontal rigs this week, which was more than double the 233 horizontal rigs that were in use in the US on October 9th of last year, but was just 35.2% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the vertical rig count was down by 4 to 28 vertical rigs this week, but those were still up by 13 from the 15 vertical rigs that were operating during the same week a year ago….at the same time, the directional rig count was unchanged at 22 directional rigs this week, and those are now up by 1 from the 21 directional rigs that were in use on October 9th 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 October 8th, the second column shows the change in the number of working rigs between last week’s count (October 1st) and this week’s (October 8th) count, the third column shows last week’s October 1st 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 9th of October, 2020...

October 8 2021 rig count summary

as you can see, that modest 5 rig increase masked a ​somewhat ​larger number of changes across several states and basins....checking theRigs by State file at Baker Hughes for changes in the Texas Permian basin, we find that we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, while one rig was removed from Texas Oil District 8A, which includes the northern counties of the Permian Midland, thus netting out to a three rig increase in the Texas Permian, ​and ​thus accounting for ​the ​changes in the Permian basin​ ​this week....elsewhere in Texas, we also have a rig added in Texas Oil District 4, which would account for this week's Eagle Ford shale increase, and also bring the Texas rig count change up to +4, as we see on the state table above...the rig added in California was deployed in a basin that Baker Hughes doesn't track, as was the rig added in Oklahoma, and since Alaska's count shows no change despite the offshore rig shutdown, we have to assume a land based rig was concurrently added elsewhere in the state, also in a basin that Baker Hughes keep track of....meanwhile, the oil rig removed from the Gulf of Mexico accounts for the rig decrease in Louisiana...the remaining changes were ​all ​to natural gas rigs in the Appalachain basin and netted out to no change in gas rigs​ this week​; two natural gas rigs were added in the Marcellus in West Virginia, while a single natural gas rig was removed from the Marcellus in Pennsylvania, and another natural gas rig was shut down in Ohio's Utica shale...

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note: there’s more here

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