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 29, 2021

SPR at a 18 yr low, gasoline supplies at 48 mo low, distillate supplies at 23 mo low; total inventories at an 82 month low...

oil prices drop 13% on new Covid variant; Strategic Petroleum Reserve at a 18 year low as US plans further withdrawals; another 48 month low for gasoline inventories; a 23 month low for distillate inventories, and an 82 month low for total inventories...

oil prices fell nearly 10% this week, their fifth decrease in a row, as the discovery of a new Covid variant sent global equity and commodity markets tumbling on Friday....after the contract price for US light sweet crude for December delivery fell 5.6% to $76.10 a barrel last week on heavy profit-taking ahead of potential release of strategic oil reserves, trading in that oil contract expired, and this week's oil trading opened with the contract for US light sweet crude for January priced at $75.75, down 19 cents from last week's close, which then fell more than $1, as expanded C​ovid​-19 restrictions across European Union fueled demand fears...however, oil prices reversed course by midday on speculation that OPEC would respond to any coordinated oil reserves release to settle 81 cents higher at $76.75 a barrel on reports that OPEC+ would adjust plans to raise oil production if large consuming countries released crude from their reserves or if the coronavirus pandemic dampened demand (note that AP incorrectly reported "oil for January delivery rose 65 cents to $76.75 a barrel", referencing the increase from last week's closing price for December oil, and that error was widely repeated elsewhere)...oil prices erased early losses and jumped on Tuesday morning following the announcement from the U.S. that it would make available 50 million barrels of oil from the Strategic Petroleum Reserve and ended $1.75, or 2.5% higher at $78.50 a barrel as traders dismissed Biden's plan to lower prices and instead assessed the risks from the expect OPEC response...oil prices first softened in early trading on Wednesday after industry data from the American Petroleum Institute reported that U.S. commercial crude and gasoline inventories unexpectedly increased last week, but then edged higher following the release of EIA data showing domestic production rose to 11.5 million barrels per day (bpd), offsetting larger-than-expected drawdown from fuel supplies, only to fade near the close and settle 11 cents lower at $78.39 a barrel as the US dollar hit a 17 year high, and as traders awaited OPEC+’s response to the coordinated release of strategic reserves by several countries...oil prices slid more than 1% early Friday after the holiday on concerns that a global supply surplus could swell in the first quarter following that US led coordinated release of crude reserves and then tumbled more than $6 or nearly 9% midday, hitting a two-month low as a new COVID-19 variant spooked traders and added to concerns that a supply surplus could swell in the first quarter and settled down by $10.24, or more than 13% lower at $68.15 a barrel, the largest daily drop since April 2020 (when oil prices had fallen below $0) amid a broad sell-off in global markets, as the new Covid-19 strain sparked fears that demand would slow just as supply was to increase...that Friday selloff left oil prices down more than 10.4% on the week, while the January contract, which had ended last week priced at $75.94, finished almost 10.3% lower...

meanwhile, natural gas prices moved higher for the 11th time in 15 weeks on forecasts for higher domestic heating demand, as global gas​ ​prices also ​pushed higher....after rising 5.6% to $5.065 per mmBTU last week as global prices hit new highs and forecasts turned colder, the contract price of natural gas for December delivery opened more than 3% lower on Monday and tumbled to settle down 27.6 cents near an 11 week low​ of $4.789 per mmBTU,​ on forecasts for milder than normal weather over the next two weeks, near record U.S. output, and a decline in European gas prices....but US prices recovered quickly Tuesday and rallied to close 17.8 cents or 3.7% higher at $4.96.7 per mmBTU as a sharp increase in global gas prices kept demand for US LNG exports near record highs...prices completed the recovery of Monday's losses on Wednesday, rising 10.1 cents or 2% to $5.068  per mmBTU on forecasts for cooler weather and an increase in heating demand over the next two weeks, as the EIA reported the first withdrawal of natural gas from storage of the 2021-22 heating season...natural gas prices then soared 37.9 cents to $5.447 per mmBTU on Friday on forecasts for higher heating demand than was previously expected, thus finishing the week 7.5% higher, the largest weekly jump in almost 2 months, as trading in the December natural gas contract expired....

The EIA's natural gas storage report for the week ending November 19th indicated that the amount of working natural gas held in underground storage in the US fell by 21 billion cubic feet to 3,644 billion cubic feet by the end of the week, the first withdrawal of the season, which left our gas supplies 320 billion cubic feet, or 8.1% below the 3,943 billion cubic feet that were in storage on November 19th of last year, and 58 billion cubic feet, or 1.6% below the five-year average of 3,681 billion cubic feet of natural gas that have been in storage as of the 19th of November ​over the most recent years...the 21 billion cubic foot withdrawal from US natural gas working storage this week was just below the average forecast for a 23 billion cubic foot withdrawal from a S&P Global Platts survey of analysts, but it was almost double the 11 billion cubic feet ​​that were pulled from natural gas storage during the corresponding week of 2020, while it was less than half of the average withdrawal of 44 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 19th showed that a big drop in our oil exports, a modest increase in our oil imports, a modest withdrawal of oil from our Strategic Petroleum Reserve and incrementally higher oilfield production together meant we had a little surplus oil to add to our stored commercial crude supplies for the seventh time in nine weeks and for the twelfth time in the past thirty-four weeks….our imports of crude oil rose by an average of 245,000 barrels per day to an average of 6,436,000 barrels per day, after rising by an average of 83,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 1,021,000 barrels per day to an average of 2,605,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,831,000 barrels of per day during the week ending November 19th, 1,266,000 more 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 higher at 11,500,000 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 15,331,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,640,000 barrels of crude per day during the week ending November 19th, an average of 243,000 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 89,000 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 220,000 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 (+220,000) 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...and since last week’s EIA fudge factor was at (+668,000) barrels per day, that means there was a 448,000 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 week's 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 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)….

This week's 89,000 barrel per day net decrease in our crude oil inventories came as 145,000 barrels per day were added to our commercially available stocks of crude oil while 235,000 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...including the 16,797,000 barrels per day drawdown from the Strategic Petroleum Reserve under that emergency program, a total of 51,642,000 barrels per day have been removed from the Strategic Petroleum Reserve for a series of other "emergencies" over the past 16 months, and as a result the amount of oil in our Strategic Petroleum Reserve has fallen to an 18 year low of 604,505,000 barrels per day, as repeated tapping of our emergency supplies for political expediency or to “pay for” other programs have already drained those supplies over the past dozen years...with the BIden administration's announcement this week that another 50 million barrels of oil will be released to incentivize continued use of American gas guzzlers, we will now initiate weekly coverage of the SPR storage status on this blog...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,227,000 barrels per day last week, which was 18.5% more than the 5,253,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,500,000 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 higher at 11,100,000 barrels per day, while a 5,000 barrel per day increase in Alaska’s oil production to 449,000 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 still 12.2% below that of our pre-pandemic production peak, but 36.4% 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 88.6% of their capacity while using those 15,640,000 barrels of crude per day during the week ending November 19th, up from 87.9% of capacity the prior week, but still a bit below normal utilization for late-autumn refinery operations…the 15,640,000 barrels per day of oil that were refined this week were 9.7% more barrels than the 14,263,000 barrels of crude that were being processed daily during the pandemic impacted week ending November 20th of last year, but 4.4% less than the 16,334,000 barrels of crude that were being processed daily during the week ending November 22nd, 2019, when US refineries were operating at what was then also a bit below normal 89.3% of capacity...

With the increase in the amount of oil being refined this week, the gasoline output from our refineries was also higher, increasing by 177,000 barrels per day to 10,099,000 barrels per day during the week ending November 19th, after our gasoline output had decreased by 132,000 barrels per day over the prior week.…this week’s gasoline production was also 14.1% more than the 8,850,000 barrels of gasoline that were being produced daily over the same week of last year, and a bit more than the gasoline production of 10,065,000 barrels per day during the week ending November 22nd, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 58,000 barrels per day to 4,784,000 barrels per day, after our distillates output had decreased by 26,000 barrels per day over the prior week…despite the recent decreases, our distillates output was 4.3% more than the 4,587,000 barrels of distillates that were being produced daily during the week ending November 20th, 2020, but 5.7% less than the 5,075,000 barrels of distillates that were being produced daily during the week ending November 22nd, 2019..

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week decreased for the tenth time in thirteen weeks, and for the nineteenth time in thirty-one weeks, falling by 603,000 barrels to another 48 month low of 211,393,000 barrels during the week ending November 19th, after our gasoline inventories had decreased by 707,000 barrels to a 48 month low over the prior week...our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 93,000 barrels per day to 9,334,000 barrels per day, and because our imports of gasoline fell by 340,000 barrels per day to 843,000 barrels per day, while our exports of gasoline fell by 223,000 barrels per day to 608,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 8.1% lower than last November 20th's gasoline inventories of 230,147,000 barrels, and about 6% 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 eleventh time in thirteen weeks and for the 23nd time in 33 weeks, falling by 1,968,000 barrels to a 23 month low of 121,717,000 barrels during the week ending November 19th, after our distillates supplies had decreased by 824,000 barrels to a 19 month low during the prior week….our distillates supplies fell by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 41,000 barrels per day to 4,350,000 barrels per day, and because our exports of distillates rose by 151,000 barrels per day to 1,007,000 barrels per day while our imports of distillates rose by 93,000 barrels per day to 332,000 barrels per day....and after twenty-three inventory decreases over the past thirty-three weeks, our distillate supplies at the end of the week were 14.7% below the 142,632,000 barrels of distillates that we had in storage on November 13th, 2020, and about 8% below the five year average of distillates stocks for this time of the year…

Meanwhile, with this week's drop in our oil exports, the increase in our oil imports, and the withdrawal of oil from our Strategic Petroleum Reserve more than offsetting the increase in refinery demand, our commercial supplies of crude oil in storage rose for the tenth time in the past twenty-six weeks and for the 19th time in the past year, increasing by 1,017,000 barrels over the week, from 433,003,000 barrels on November 12th to 434,020,000 barrels on November 19th, after our commercial crude supplies had decreased by 2,101,000 barrels over the prior week…after this week’s increase, 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 about 27% above the average of our crude oil stocks as of the third 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 19th were 11.2% less than the 488,721,000 barrels of oil we had in commercial storage on November 20th of 2020, and are now 4.0% less than the 451,952,000 barrels of oil that we had in storage on November 22nd of 2019, and 3.7% less than the 450,485,000 barrels of oil we had in commercial storage on November 23rd of 2018…

Finally, with our inventory of crude oil and our supplies of all products made from oil all at or near 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 7,620,000 barrels this week, from 1,830,012,000 barrels on November 12th to 1,822,392,000 barrels on November 19th, which is our lowest level of total US inventories since January 23rd, 2015, and are therefore at a 82 month low...

This Week's Rig Count

The number of drilling rigs active in the US increased for the 53rd time during the past 62 weeks with this week's report, which only covers the five days ending Wednesday, November 24th, due to the Thanksgiving holiday....Baker Hughes reported that the total count of rotary rigs running in the US increased by six to 569 rigs over that period, which was also 249 more rigs than the pandemic hit 310 rigs that were in use as of the November 25th report of 2020, but was also still 1,360 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 6 to 467 oil rigs during this period, after they had increased by 7 oil rigs the prior week, and there are now 226 more oil rigs active now than were running a year ago, even as they still amount to just 29.0% 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 25 natural gas rigs from the 77 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….note that 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, 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 still 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 513 horizontal rigs this week, which was 81.3% more than the 283 horizontal rigs that were in use in the US on November 25th of last year, but was ​62.7%​ less than the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the directional rig count was down by one to 34 directional rigs this week, but those were still up by 12 from the 22 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was unchanged at 22 vertical rigs this week, and those were up by 7 from the 15 vertical rigs that were in use on November 25th 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 24th, the second column shows the change in the number of working rigs between last week’s count (November 19th) and this week’s (November 24th) count, the third column shows last week’s November 19th 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 25th of November, 2020...

as you can see, this week's change was driven by the four rig increase in North Dakota, which were all oil directed rigs targeting the Bakken shale in the Williston basin...however, the Williston count was only up by 3 because a Williston rig was removed from Montana at the same time...next, checking the Texas Permian basin in the Rigs by State file at Baker Hughes, we find that two 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 the overall two rig increase in the Texas Permian, and matching the national count shown... elsewhere in Texas, we find that a rig was added in Texas Oil District 5, but that a rig was pulled out of Texas Oil District 6 at the same time...both of those rigs could have been targeting the Haynesville​ shale​, since that basin shows an increase of one oil rig and a decrease of two natural gas rigs, with no obvious activity in the Haynesville shale region of Louisiana...whatever the case, the natural gas rig count was still unchanged this week because a natural gas rig was added to the Marcellus in Pennsylvania, and another natural gas rig was added to a basin that Baker Hughes doesn't track...

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note: there’s more here

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