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

Monday, November 22, 2021

gasoline supplies at a 48 mo low, distillate supplies at a 19 mo low; total inventories at a 79 mo low; DUC backlog at 5.9 months as completions slip…

gasoline supplies at a 48 month low, distillate supplies at a 19 month low; total inventories of oil and all oil products at a 79 month low; DUC backlog at 5.9 months as completions slip; record low DUCs in Appalachia, the Bakken, the Eagle Ford, and the Niobrara chalk..

US oil prices fell for the fourth straight week this week, and have now retraced almost a third of their two month rally to a seven year high on October 26th...after falling 0.6% to $80.79 a barrel last week on forecasts of lower demand and as Biden threatened OPEC, the contract price for US light sweet crude for December delivery opened lower and fell more than 1.5% in early trading on Monday, as traders were spooked by a surge in Covid-19 infections across Europe that had prompted several governments in the region to bring back quarantine restrictions, but recovered to settle 9 cents higher at $80.88 a barrel, even as Brent, the international benchmark crude, lost 12 cents,as traders questioned whether crude supplies would increase and whether demand would be pressured by the recent surge in prices or rising COVID-19 cases...oil prices then pushed higher in early trading on Tuesday after the International Energy Agency (IEA) failed to lower its 2021 global oil demand outlook, projecting that "bourgeoning gasoline and jet fuel consumption underpinned by the reopening of international air travel would offset renewed quarantine measures", but turned lower to settle down 12 cents at $80.76 a barrel. as prospects of tight inventories worldwide were offset by forecasts of a production increase in coming months and concerns over rising coronavirus cases in Europe...oil prices fell right out of the gate on Wednesday on fears the US and China would jointly release oil stores from the strategic reserves of the two countries, with losses deepening by late morning despite an EIA report showing U.S. commercial crude oil inventories had unexpectedly decreased and that gasoline supplies had dropped, and settled $2.40 lower at $78.36 a barrel after the IEA and OPEC both warned of impending oversupply, and as COVID-19 cases in Europe increased the downside risks to demand, and as a Biden request that the Federal Trade Commission investigate oil companies for price manipulation further soured sentiment...however, oil prices rallied early Thursday as prices below $80 lured bargain hunters back into the market and drove December crude 65 cents higher to $79.01 a barrel, as traders assessed the potential impact of a coordinated release from OECD petroleum oil reserves, with the Biden administration reportedly calling for a joint action among oil-consuming countries to lower energy prices ahead of the winter months....but oil prices plunged by 3% again early on Friday as Europe dealt with rising Covid cases by returning to lockdowns and other restrictions, which traders feared would weigh on oil demand, and then tumbled again after a brief midday rally sputtered to finish $2.91 lower at $76.10 a barrel, as trading in December crude expired at a 7 week low, with that contract falling 5.8% this week alone...

natural gas prices, on the other hand, moved higher for the 10th time in 14 weeks, as global prices hit new highs and forecasts turned colder....after falling 13.1% to $4.791 per mmBTU last week on falling prices in Europe and on forecasts for mild weather heading into winter, the contract price of natural gas for December delivery opened more than 2% higher on Monday on forecasts for colder weather and higher heating demand over the next two weeks than had been expected and continued rising to settle 22.6 cents higher at $5.017 per mmBTU on lower domestic output and on strong demand for exports...gas prices continued rising Tuesday, adding 16.0 cents to settle at $5.177 per mmBTU, on soaring prices in Europe and strong demand for LNG, after a German regulator suspended its certification of Russia’s recently completed Nord Stream 2 pipeline...but US natural gas prices gave up most of the week's gain on Wednesday, despite record gas prices in Asia and a 27% jump in European prices over the prior three days, falling 36.1 cents or 7% to $4.816 per mmBTU, on an ongoing increase in natural gas production and on forecasts for a decline in heating demand over the coming week...natural gas prices edged back up 8.6 cents to $4.902 about 2% on Thursday as LNG exports climbed to near record highs as the sixth liquefaction train at Cheniere's Sabine Pass export plant in Louisiana continued to ramp up, and then rose 16.3 cents more to $5.065 on Friday, lifted by ongoing robust levels of U.S. exports and expectations for stronger weather-driven demand, to finish 5.7% higher on the week...

The EIA's natural gas storage report for the week ending November 12th indicated that the amount of working natural gas held in underground storage in the US rose by 26 billion cubic feet to 3,644 billion cubic feet by the end of the week, which still left our gas supplies 310 billion cubic feet, or 7.8% below the 3,954 billion cubic feet that were in storage on November 12th of last year, and 81 billion cubic feet, or 2.2% below the five-year average of 3,725 billion cubic feet of natural gas that have been in storage as of the 12th of November in recent years...the 26 billion cubic foot increase in US natural gas in working storage this week was more than the average forecast for a 22 billion cubic foot addition from a S&P Global Platts survey of analysts, and it was close to the 28 billion cubic feet that were added to natural gas storage during the corresponding week of 2020, but it contrasts with the average withdrawal of 12 billion cubic feet of natural gas that have typically been pulled out 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 November 12th showed that a big jump in our oil exports and a modest decrease in our oil prouduction meant we had to pull oll out out of our stored commercial crude supplies for the second time in eight weeks and for the twenty-second time in the past thirty-three weeks….our imports of crude oil rose by an average of 83,000 barrels per day to an average of 6,191,000 barrels per day, after falling by an average of 63,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 573,000 barrels per day to an average of 3,626,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 2,565,000 barrels of per day during the week ending November 12th, 490,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day lower at 11,400,000 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 totaled an average of 13,965,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,397,000 barrels of crude per day during the week ending November 12th, an average of 32,000 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 764,000 barrels of oil per day were being pulled out 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 668,000 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 plunked a (+668,000) 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....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 oil wells, we’ll continue to report this data just as it's published, and just as it's 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 6,181,000 barrels per day last week, which was 15.3% more than the 5,361,000 barrel per day average that we were importing over the same four-week period last year…the 764,000 barrel per day net decrease in our crude inventories came as 300,000 barrels per day were pulled out of our commercially available stocks of crude oil and 464,000 barrels per day of oil were pulled out of our Strategic Petroleum Reserve, apparently still 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 100,000 barrels per day lower at 11,400,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,000,000 barrels per day, while a 1,000 barrel per day increase in Alaska’s oil production to 443,000 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 13.0% below that of our pre-pandemic production peak, but 35.3% 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...

US oil refineries were operating at 87.9 of their capacity while using those 15,397,000 barrels of crude per day during the week ending November 12th, up from  86.7% of capacity the prior week, but still a little below normal utilization for mid-autumn refinery operations…the 15,397,000 barrels per day of oil that were refined this week were 11.4% more barrels than the 13,841,000 barrels of crude that were being processed daily during the pandemic impacted week ending November 13th of last year, but 6.3% less than the 16,435,000 barrels of crude that were being processed daily during the week ending November 15th, 2019, when US refineries were operating at what was then also a bit below normal 89.5% of capacity...

Despite the increase in the amount of oil being refined this week, the gasoline output from our refineries was somewhat lower, decreasing by 132,000 barrels per day to 9,922,000 barrels per day during the week ending November 12th, after our gasoline output had decreased by 122,000 barrels per day over the prior week.…this week’s gasoline production was still 9.4% more than the 9,064,000 barrels of gasoline that were being produced daily over the same week of last year, but 1.3% less than the gasoline production of 10,053,000 barrels per day during the week ending November 15th, 2019….similarly, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 26,000 barrels per day to 4,842,000 barrels per day, after our distillates output had increased by 35,000 barrels per day over the prior week…despite the week's decrease, our distillates output was 13.3% more than the 4,275,000 barrels of distillates that were being produced daily during the week ending November 13th, 2020, but 5.5% less than the 5,124,000 barrels of distillates that were being produced daily during the week ending November 15th, 2019..

With the decrease in our gasoline production, our supplies of gasoline in storage at the end of the week decreased for the ninth time in twelve weeks, and for the eighteenth time in thirty weeks, falling by 707,000 barrels to a 48 month low of 211,996,000 barrels during the week ending November 12th, after our gasoline inventories had decreased by 1.555,000 barrels over the prior week...our gasoline supplies decreased by less this week because the amount of gasoline supplied to US users fell by 18,000 barrels per day to 9,241,000 barrels per day, and because our imports of gasoline rose by 236,000 barrels per day to 823,000 barrels per day, while our exports of gasoline fell by 2,000 barrels per day to 831,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 7.0% lower than last November 13th's gasoline inventories of 227,967,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year…

With the decrease in our distillates production, our supplies of distillate fuels decreased for the tenth time in twelve weeks and for the 22nd time in 32 weeks, falling by 824,000 barrels to a 19 month low of 123,685,000 barrels during the week ending November 5th, after our distillates supplies had decreased by 2,613,000 barrels during the prior week….our distillates supplies fell by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 70,000 barrels per day to 4,350,000 barrels per day, because our exports of distillates fell by 390,000 barrels per day to 849,000 barrels per day while our imports of distillates fell by 39,000 barrels per day to 239,000 barrels per day....but after twenty-two inventory decreases over the past thirty-two weeks, our distillate supplies at the end of the week were 14.2% below the 144,073,000 barrels of distillates that we had in storage on November 13th, 2020, and about 5% below the five year average of distillates stocks for this time of the year…

Meanwhile, with this week's big increase in our oil exports, our commercial supplies of crude oil in storage fell for the sixteenth time in the past twenty-five weeks and for the 32nd time in the past year, decreasing by 2,101,000 barrels over the week, from 435,104,000 barrels on November 5th to 433,003,000 barrels on November 12th, after our commercial crude supplies had increased by 1,002,000 barrels over the prior week…after this week’s decrease, our commercial crude oil inventories remained around 7% below the most recent five-year average of crude oil supplies for this time of year, but were still almost 27% above the average of our crude oil stocks as of the first weekend of November 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 November 12th were 11.5% less than the 489,475,000 barrels of oil we had in commercial storage on November 13th of 2020, and are now 3.9% less than the 450,380,000 barrels of oil that we had in storage on November 15th of 2019, and 3.1% less than the 446,908,000 barrels of oil we had in commercial storage on November 16th of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil at multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that total oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by 12,121,000 barrels this week, from 1,842,133,000 barrels on November 5th to 1,830,012,000 barrels on November 12th, which is our lowest level of total US inventories since February 13th, 2015, and are therefore at a 79 month low...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 52nd time out of the past 61 weeks during the week ending November 19th, but they remained 29.0% below the pre-pandemic rig count....Baker Hughes reported that the total count of rotary rigs running in the US increased by seven to 563 rigs this past week, which was also 253 more rigs than the pandemic hit 310 rigs that were in use as of the November 13th report of 2020, but was also still 1,366 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 461 oil rigs this week, after they had increased by 4 oil rigs the prior week, and there are now 230 more oil rigs active now than were running a year ago, even as they still amount to just 28.7% of 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 102 natural gas rigs, which was still up by 26 natural gas rigs from the 76 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….last year's rig count also included 3 rigs that Baker Hughes had classified as "miscellaneous', while there are no such "miscellaneous' rigs deployed this week...

The Gulf of Mexico rig count was unchanged at fifteen rigs this week, but up from the 14 rigs that were deployed in the Gulf the week before Hurricane Ida approached, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and two more drilling for oil in Alaminos Canyon, offshore from Texas....the Gulf rig count is now up by three rigs from the twelve rigs in the Gulf a year ago, when 11 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil in Texas waters…since there is now no drilling off our other coasts, nor was there a year ago, the Gulf rig count is equal to the national offshore totals..

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 Mississippi, 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 7 to 508 horizontal rigs this week, which was 86.8% more than the 272 horizontal rigs that were in use in the US on November 20th of last year, but was just 37% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the directional rig count was unchanged at 35 directional rigs this week, and those were up by 15 from the 20 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was also unchanged at 22 vertical rigs this week, and those were up by 4 from the 18 vertical rigs that were in use on November 20th 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 November 19th, the second column shows the change in the number of working rigs between last week’s count (November 12th) and this week’s (November 19th) count, the third column shows last week’s November 12th 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 20th of November, 2020...

once again, this week's change was driven by the seven rig increase in Texas, so checking Texas first in the Rigs by State file at Baker Hughes, we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, and that rig counts in the other Texas Permian districts were unchanged, thus indicating a overall four rig increase in the Texas Permian...since the national Permian rig count was up by six, that means that both of the rigs that were added in New Mexico were set up to drill in the western Permian Delaware...elsewhere in Texas, we find that two rigs were pulled out of Texas Oil District 1, but that a rig was added in Texas Oil District 2, and three more rigs were added in Texas Oil District 4...since all those districts include part of the Eagle Ford shale, some combination of the changes shown there account for the decrease of one oil rig and the increase of two natural gas rigs in that basin, which now has 37 oil rigs and 5 natural gas rigs deployed....meanwhile, yet another rig was added in Texas Oil District 6, which accounts for the natural gas rig increase in the Haynesville shale, since the rig count in the Haynesville in adjacent Louisiana was unchanged...elsewhere, there was an oil rig removed from the DJ Niobrara chalk, which had been drilling in either Colorado or Wyoming, but since the rig counts in both of those states were unchanged, that means that an oil rig was concurrently added in whichever state the Niobrara rig was pulled from, in a basin not covered by Baker Hughes...meanwhile, for natural gas rigs, which ended the week unchanged, we have the two rigs added in the Eagle Ford, another added in the Haynesville shale, also in Texas, and one more in West Virginia, in the Marcellus...at the same time, two natural gas rigs were pulled out of Ohio's Utica shale, another was pulled out of the Permian basin, which saw a 7 oil rig increase, and yet another natural gas rig was removed from an "other" basin that Baker Hughes doesn't track...

DUC well report for October

Monday saw the release of the EIA's Drilling Productivity Report for November, which includes the EIA's October data for drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions....that data showed a decrease in uncompleted wells nationally for the 17th month in a row, as both completions of drilled wells and drilling of new wells remained well below the pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 222 wells, falling from 5,326 DUC wells in September to 5,104 DUC wells in October, which was also 38.1% fewer DUCs than the 8,239 wells that had been drilled but remained uncompleted as of the end of October of a year ago...this month's DUC decrease occurred as 649 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, up from the 635 wells that were drilled in September, while 871 wells were completed and brought into production by fracking, down from the 879 completions seen in September, but up from the pandemic hit 609 completions seen in October of last year, but still down by 19.1% from the 1,076 completions of October 2019....at the October completion rate, the 5,104 drilled but uncompleted wells left at the end of the month represents a 5.9 month backlog of wells that have been drilled but are not yet fracked, down from the 6.1 month DUC well backlog of a month ago, a ratio that is now near that of the year prior to the pandemic, despite a completion rate that is still around a quarter below the pre-pandemic norm...

both oil producing regions and natural gas producing regions saw DUC well decreases in October, and none of the major basins reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 107, from 1,812 DUC wells at the end of September to 1,705 DUCs at the end of October, as 295 new wells were drilled into the Permian during October, while 402 wells in the region were being fracked...at the same time, DUCs in the Eagle Ford shale of south Texas decreased by 35, from 833 DUC wells at the end of September to a record low of 798 DUCs at the end of October, as 62 wells were drilled in the Eagle Ford during October, while 97 already drilled Eagle Ford wells were completed....in addition, there was also a decrease of 29 DUC wells in the Bakken of North Dakota, where DUC wells fell from 541 at the end of September to a record low of 512 DUCs at the end of October, as 42 wells were drilled into the Bakken during September, while 71 of the drilled wells in the Bakken were being fracked....meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 13, falling from 812 at the end of September to 799 DUC wells at the end of October, as 43 wells were drilled into the Anadarko basin during October, while 56 Anadarko wells were completed....in addition, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 87, falling from 375 at the end of September to a record low 368 DUC wells at the end of October, as 90 wells were drilled into the Niobrara chalk during August, while 97 Niobrara wells were being fracked....

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 24 wells, from 557 DUCs at the end of September to a record low of 533 DUCs at the end of October, as 69 wells were drilled into the Marcellus and Utica shales during the month, while 93 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by seven to 389 DUCs, as 48 wells were drilled into the Haynesville during October, while 55 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of October, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 191 wells to 4,182 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 31 wells to 922 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

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note: there’s more here…

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