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, June 13, 2022

oil & natgas hit 13 year highs; US oil supplies at a 17½ year low, SPR at a 35 year low; refinery utilization highest since 2019

oil & natural gas prices hit 13 year highs; US oil supplies at a 17½ year low & SPR at a 35 year low; refinery utilization highest since 2019, refinery throughput highest in 17 months; gasoline supplies at a 6 month low even with gasoline imports at a 46 week high

oil prices rose for a seventh consecutive week as record high fuel prices showed no signs of dampening demand... after rising 3.3% to $118.87 a barrel last week as China ended their lockdowns and the EU banned 90% of Russian oil imports, the contract price for US light sweet crude for July delivery jumped to over $120 a barrel in early trading Monday, after Saudi Aramco unexpectedly raised its selling prices for oil to Asia, sparking concerns over tightening global supplies, but faded in afternoon trading to settle 37 cents lower at $118.50 per barrel, as traders weighed risks of a potential US recession against supply disruptions in Russia and Libya....but oil prices moved higher again on Tuesday, on reports of an expected demand recovery in China and settled 91 cents higher at a three month high of $119.41 a barrel, as traders anticipated that the weekly US inventory data would show commercial crude oil inventories had declined again...oil prices then dipped in after hours trading after the American Petroleum Institute unexpectedly reported a crude inventory build, but moved higher early Wednesday despite the likely rise in U.S. oil supplies, on the easing of Chinese lockdowns and on a possible strike by Norwegian oil workers, and then jumped to a 13 week high after the EIA reported US demand for gasoline kept rising despite record pump prices, and on expectations China's oil demand would rise amid supply concerns in several countries, and settled $2.70 higher at $122.11 a barrel, after the EIA's monthly Short-Term Energy Outlook forecasted that oil prices would stay above $100 per barrel through the whole year....however, oil prices pulled back early Thursday as renewed Covid-19 controls in parts of Shanghai outweighed the robust demand for refined fuels in the US, but still hovered near three-month highs before settling 60 cents lower at $121.51 a barrel, with RBOB (gasoline) and ULSD (diesel) futures advancing more than 1.5%, supported by low inventory levels in the US and globally, as summer travel demand was seen recovering to pre-pandemic highs....oil prices moved higher in early trading Friday ahead of the release of the consumer price index, which was expected to show persistently high inflation continued in May amid an ongoing surge in prices for retail gasoline. but turned lower after the report as traders weighed the impact of China’s bumpy return from its virus curbs and settled down 84 cents on the session at $120.67 a barrel as higher than expected inflation had suggested even more aggressive rate hikes that sent the dollar flying, making commodities priced in the greenback, including crude, costlier for non-holders of the currency...oil prices still managed a 1.5% increase on the week, with the week ending closing price the highest since 2008, on signs of persistent shortages despite the Chinese lockdowns, more OPEC supply and the US SPR release....

natural gas prices also reached their highest level since 2008 this week before falling back, as a rally on record high temperatures was cut off after an explosion at an LNG export terminal...after falling 3.3% to $8.523 per mmBTU last week as June forecasts ​had ​turned cooler, the contract price of natural gas for July delivery opened almost 6% higher on Monday and rose 79.9 cents to a 13 year high ​of ​$9.322 per mmBTU, on record power demand in Texas, and on forecasts for hotter weather and higher demand than had been expected, while pipeline maintenance concurrently impacted supplies...prices eased a bit on Tuesday, slipping 2.9 cents to $9.293 per mmBTU, as an early rally faded as traders took profits while low wind power forced Texas ​power ​generators to burn more gas to keep the air conditioners running...however, natural gas prices plunged 59.4 cents or 6% to $8.699 per mmBTU on Wednesday on news of an explosion at the Freeport liquefied natural gas (LNG) export terminal on the Texas coast...​however, despite the loss of demand from that plant, prices moved higher again on Thursday on ongoing record power demand in Texas, a smaller-than-usual storage build, rising spot gas prices, low wind power and a decline in gas production for the month.and settled 26.4 cents higher at $8.963 per mmBTU...but prices eased 11.3 cents to $8.850 per mmBTU on Friday, as traders continued to weigh the implications of a potentially prolonged outage at the Freeport LNG terminal, which would make the gas intended for export available for domestic consumption or ​lead to storage increases...but prices still ended 3.8% higher on the week, albeit off 47.2 cents or 5.1% from Monday’s close....

The EIA's natural gas storage report for the week ending June 3rd indicated that the amount of working natural gas held in underground storage in the US rose by 97 billion cubic feet to 1,999 billion cubic feet by the end of the week, which still left our gas supplies 398 billion cubic feet, or 16.6% below the 2,299 billion cubic feet that were in storage on June 3rd of last year, and 340 billion cubic feet, or 14.5% below the five-year average of 2,339 billion cubic feet of natural gas that have been in storage as of the 3rd of June over the most recent five years....the 97 billion cubic foot injection into US natural gas working storage for the cited week was close to the average forecast for a 96 billion cubic foot injection from an S&P Global Platts survey of analysts, and just a bit less than the average injection of 100 billion cubic feet of natural gas that had typically been added to our natural gas storage during the same week over the past 5 years, and also a bit less than the 98 billion cubic feet that were added to natural gas storage during the corresponding week of 2021...  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 3rd indicated that after a major drop in our oil exports and another big oil withdrawal from the SPR, we had oil left to add our stored commercial crude supplies for the 6th time in 10 weeks, and for the 21st time in the past 48 weeks, even after an increase in demand that could not be accounted for…our imports of crude oil fell by an average of 64,000 barrels per day to an average of 6,154,000 barrels per day, after falling by an average of 266,000 barrels per day during the prior week, while our exports of crude oil fell by 1,758,000 barrels per day to 2,232,000 barrels per day, after falling by 351,000 barrels per day during the prior week, which meant that our trade in oil worked out to a net import average of 3,922,000 barrels of oil per day during the week ending June 3rd, 1,694,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude from US wells was reportedly unchanged at 11,900,000 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 15,822,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,387,000 barrels of crude per day during the week ending June 3rd, an average of 355,000 more barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 749,000 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 storage, from net imports and from oilfield production was 184,000 barrels per day more 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 inserted a (-184,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed.....however, since last week’s unaccounted for oil factor was at (+406,000) barrels per day, that means there was a 590,000 barrel per day difference between this week's balance sheet error and 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 pretty 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)….

week's 749,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 936,081,000 barrels at the end of the week, our lowest oil inventory level since October 15th, 2004, and therefore a 17 1/2 year low….our oil inventory decreased this week even though 289,000 barrels per day were being added to our commercially available stocks of crude oil, because 1,036,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve at the same time....that draw on the SPR would now include the initial emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump", that is expected to supply 1,000,000 barrels of oil per day to commercial interests from now up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising further at least up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address initial Russian supply related shortfalls, and the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption.... including other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 136,826,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 22 months, and as a result the 519,323,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since March 27th, 1987, or at a 35 year low, as repeated tapping of our emergency supplies for non-emergencies or to pay for other programs had already drained those supplies considerably over the past dozen years, even before the Biden administration's releases....so now, the total 180,000,000 barrel drawdown expected over the next six months will remove almost a third of what remains in the SPR, and leave us with what would be less than a 20 day supply of oil at today's consumption rate...

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,357,000 barrels per day last week, which was still 1.9% more than the 6,238,000 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 unchanged at 11,900,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48  states was unchanged at 11,500,000 barrels per day, and as Alaska’s oil production was 5,000 barrels per day lower at 445,000 barrels per day andand has no impact on the final rounded national total...US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 9.2% below that of our pre-pandemic production peak, but was 41.2% 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 94.2% of their capacity while using those 16,387,000 barrels of crude per day during the week ending June 3rd, up from the 92.6% utilization rate of the prior week, and the highest refinery utilization rate since December 2019the 16,387,000 barrels per day of oil that were refined this week were the most since January 2020, and 2.9% more barrels than the 15,925,000 barrels of crude that were being processed daily during week ending June 4th of 2021, but still 4.0% less than the 17,064,000 barrels that were being refined during the prepandemic week ending June 7th, 2019, when refinery utilization was at a fairly normal 93.2% for the first weekend of June...

With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 73,000 barrels per day to 9,968,000 barrels per day during the week ending June 3rd, after our gasoline output had increased by 545,000 barrels per day over the prior week.…this week’s gasoline production was 6.5% more than the 9,431,000 barrels of gasoline that were being produced daily over the same week of last year, but 2.3% below our gasoline production of 10,276,000 barrels per day during the week ending June 7th, 2019, ie, during the year before the pandemic impacted US gasoline output....at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 17,000 barrels per day to 5,001,000 barrels per day, after our distillates output had decreased by 169,000 barrels per day over the prior week…but after other recent production increases, our distillates output was still 1.7% more than the 4,918,000 barrels of distillates that were being produced daily during the week endingJune 4th of 2021, but 4.5% less than the 5,239,000 barrels of distillates that were being produced daily during the week ending June 7th, 2019...

Even with the recent increases in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the seventeenth time in eighteen weeks, decreasing by 812,000 barrels to a six month low of 218,184,000 barrels during the week ending June 3rd, after our gasoline inventories had decreased by 711,000 barrels over the prior week....our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 222,000 barrels per day to 9,199,000 barrels per day, even as our exports of gasoline fell by 106,000 barrels per day to 957,000 barrels per day, and as our imports of gasoline rose by 286,000 barrels per day to a 46 week high of 1,176,000 barrels per day....after 17 inventory drawdowns over the past 18 weeks, our gasoline supplies were 9.5% lower than last June 4th's gasoline inventories of 241,026,000 barrels, and 10% below the five year average of our gasoline supplies for this time of the year…

With the small increase in our distillates production, our supplies of distillate fuels increased for the 6th time in twenty-one weeks and for the 13th time in forty weeks, rising by 2,592,000 barrels to 108,984,000 barrels during the week ending June 3rd, after our distillates supplies had decreased by 529,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 319,000 barrels per day to 3,650,000 barrels per day, and because our exports of distillates fell by 152,000 barrels per day to 1,201,000 barrels per day, while our imports of distillates fell by 43,000 barrels per day to 220,000 barrels per day....but after forty-two inventory withdrawals over the past sixty weeks, our distillate supplies at the end of the week were 20.6% below the 137,214,000 barrels of distillates that we had in storage on June 4th of 2021, and about 23% below the five year average of distillates inventories for this time of the year…

Meanwhile, after this week's big release of crude from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage rose for the 11th time in 28 weeks and for the 20th time in the past year, increasing by 2,025,000 barrels over the week, from 414,733,000 barrels on May 27th to 416,758,000 barrels on June 3rd, after our commercial crude supplies had decreased by 5,068,000 barrels over the prior week…after this week’s increase, our commercial crude oil inventories remained roughly 15% below the most recent five-year average of crude oil supplies for this time of year, but were still 17% above the average of our crude oil stocks as of the first weekend of June 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 spring 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude oil supplies as of this June 3rd were 12.1% less than the 474,029,000 barrels of oil we had in commercial storage on June 4th of 2021, and were also 22.5% less than the 538,065,000 barrels of oil that we had in storage on June 5th of 2020, and 14.2% less than the 485,470,000 barrels of oil we had in commercial storage on June 7th of 2019…

Finally, with our inventories of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, rose by 3,682,000 barrels this week, from 1,681,261,000 barrels on May 27th to 1,684,943,000 barrels on June 3rd, after our total inventories had fallen by 4,803,000 barrels during the prior week....that still left our total liquids inventories down by 103,490,000 barrels over the first 23 weeks of this year, and less than 4 million barrels from a 13 1/2 year low..

This Week's Rig Count

The number of drilling rigs running in the US rose for the 1st time in three weeks and for the 75th time over the prior 89 weeks during the week ending June 10th, but still remained 7.6% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 6 to 733 rigs this past week, which was still 272 more rigs than 461 rigs that were in use as of the June 11th report of 2021, but was also 1,196 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 market with oil in an attempt to put US shale out of business….

The number of rigs drilling for oil increase​d​ by 580 oil rigs during this week, after rigs targeting oil were unchanged during the prior week, ​and there are ​now 215 more oil rigs active now than were running a year ago, even as they still amount to just 36.0% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 15.1% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 151 natural gas rigs, which was up by 55 natural gas rigs from the 96 natural gas rigs that were drilling during the same week a year ago, even as they were still only 9.4% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes continues to show two "miscellaneous" rigs still active; one is a rig drilling vertically for a well or wells intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...a year ago, there were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico was down by one to fourteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's still one more than the count of offshore rigs that were active in the Gulf a year ago, when all 13 Gulf rigs were drilling for oil offshore from Louisiana…in addition to rigs drilling in the Gulf, we also have an offshore rig drilling in the Cook Inlet of Alaska, where natural gas is being targeted at a depth greater than 15,000 feet, while year ago, there were no offshore rigs other than those deployed in the Gulf of Mexico....

in addition to rigs offshore, we now have 3 water based rigs drilling through inland bodies of water this week​, up from one a week ago​...the legacy rig is a directional rig, drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, while we have two new directional inland water rigs drilling for oil in Terrebonne Parish, Louisiana, one of which is targeting a formation greater than 15,000 feet in depth, while the other is shown drilling to between 10,000 and 15,000 feet... during the same week of a year ago, there was just one such "inland waters" rig deployed...

The count of active horizontal drilling rigs was up by two to 668 horizontal rigs this week, which was 248 more rigs than the 420 horizontal rigs that were in use in the US on June 11th of last year, but still 51.4% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014....at the same time, the directional rig count was up by two to 38 directional rigs this week, and those were up by 14 from the 24 directional rigs that were operating during the same week a year ago…​in additiom, the vertical rig count was also up by two to 27 vertical rigs this week, while those were up by 10 from the 17 vertical rigs that were in use on June 11th of 2021….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 10th, the second column shows the change in the number of working rigs between last week’s count (June 3rd) and this week’s (June 10th) count, the third column shows last week’s June 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 June, 2021..

to figure out what the 5 rig increase in New Mexico was, we first check the Rigs by State file at Baker Hughes for the changes in the Texas Permian basin...there we find that there was a rig pulled out of Texas Oil District 8, which includes the core Permian Delaware, and that there were 2 rigs pulled out of Texas Oil District 7C, which includes the southern counties of the Permian Midland, and that there were 3 rigs pulled out of Texas Oil District 7B, which includes the easternmost Permian Midland, but that there were 3 rigs added in Texas Oil District 8A, which covers the northern counties of the Permian Midland at the same time...since that leaves us with the possibility that the Texas Permian count could have been down by 3 rigs, we can't say for sure that all 5 New Mexico rigs were in the western Permian Delaware in the southeast corner of that state...at any rate, one of the ​rig ​additions ​​we have just noted was not targeting the Permian, and the only way to find out which would be to tediously check the​ hundreds of relevant​ individual well records in the North America Rotary Rig Count Pivot Table from Baker Hughes...

elsewhere in Texas, we find that five rigs were added in Texas Oil District 1, but that three rigs were pulled out of Texas Oil District 2 and another rig was pulled out of Texas Oil District 3...at least two of the District 1 rigs were in the Eagle Ford, to account for the increase shown above, while others could have also been, if some of the rigs concurrently removed from other basins were also targeting the Eagle Ford...again, to find out which, one would need to check the individual well records in the North America Rotary Rig Count Pivot Table, which provides county level details.....Texas also had a rig added in Texas Oil District 9, which was apparently targeting a basin that Baker Hughes doesn't track....meanwhile, in activity outside of Texas, a rig was added in Utah's Uintah basin, which Baker Hughes doesn't track, despite the presence of 14 oil and gas rigs in that basin, while the one rig increase in the Louisiana rig count came about after the two inland waters rigs were added in Terrebonne Parish were offset by the rig pulled out of the state's offshore waters..

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