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 6, 2022

US oil supplies at a 17½ year low; total oil+products supplies at a 13½ year low after record exports

US oil supplies at a 17½ year low with SPR at a 34½ year low; gasoline exports at a 3½ year high; record exports of oil + products over 4 weeks leaves total oil + products supplies at a 13½ year low...

oil prices rose for a sixth consecutive week after China ended 3 months of lockdowns and after the EU banned 90% of Russian oil imports.. after rising 4.3% to $115.07 a barrel last week as the European embargo of Russian oil began to seem more likely. the contract price for US light sweet crude for July delivery rose 62 cents, or 0.5%, to $115.69 a barrel in overseas trading on Memorial Day as Shanghai allowed all its manufacturers to resume operations beginning in June and officials said Beijing’s Covid outbreak was under control and as Brent crude, the international oil benchmark passed $120 a barrel as traders waited to see whether a European Union meeting would reach an agreement on banning Russian oil imports...oil prices jumped early Tuesday after EU leaders reached an agreement late Monday to ban 90% of Russian crude and was trading at $118.46 per barrel by 8 a.m., and rose to as high as $119.98 per barrel before reversing course in mid-afternoon following an unsubstantiated report from The Wall Street Journal that OPEC was considering suspending Russia from the group's output agreement​,​ and settling at $114.67 a barrel, down 40 cents from Friday's close...oil prices advanced more than 1.5% in early trading Wednesday after Saudi Arabia hailed their oil-market cooperation with Russia in the OPEC+ alliance, but were unmoved by the American Petroleum Institute's report of a draw from crude oil inventories, and settled 59 cents higher at $115.26 a barrel, underpinned by a U.K. ban on providing insurance for waterborne Russian oil cargoes, further limiting their ability to circumvent Western sanctions...but oil prices plunged over $3 in early Asian trading on Thursday as traders took profits ahead of the monthly OPEC meeting amid reports that the Saudis were prepared to raise output beyond their pledged quotas, but rebounded in New York after the OPEC+ meeting ended quickly with an agreement for a less than expected 648,000 barrel per day output increase, and then extended their gains after the EIA reported a larger than expected draw from crude supplies and modest draws of gasoline and distillates to finish trading $1.61 higher at $116.87 a barrel, while NYMEX RBOB (gasoline) July futures surged 11.93 cents to a record high $4.1909 per gallon...oil prices moved higher again early Friday as the modest OPEC output increase failed to assuage concerns over a widening supply deficit​,​ and settled $2 higher at $118.87 a barrel amid widespread speculation that OPEC would not be able to even meet that modest production increase...oil prices thus ended 3.3% higher on the week, largely on supply concerns, with gains spearheaded by China's reopening following 3 months of Covid lockdowns and the European Union​'s​ embargo on Russian oil imports..

meanwhile, natural gas prices fell for the third time in thirteen weeks as June forecasts turned cooler...after finishing 6.7% higher at $8.727 per mmBTU after making a new 13½ year high three days last week, the contract price of natural gas for July delivery tumbled 58.2 cents, or nearly 7%, to $8.145 on Tuesday on higher dry gas production over pr​evious​ days and a bearish June temperature outlook from one of the weather forecast models...but July natural gas almost reversed that ​entire ​drop on Wednesday, with prices rising 55.1 cents to $8.696 per mmBTU, on a large drop in output and record power demand in Texas, with lower wind generation forcing switching to gas providing additional price support...however, natural gas prices wiped out early gains of more than 35 cents on Thursday to fall 21.1 cents to $8.485 per mmBTU, after the EIA reported a larger increase to gas inventories than had been expected....prices edged back up 3.8 cents to $8.523 per mmBTU on Friday on forecasts for lower output, higher LNG exports, and warmer weather than previously forecast over the next two weeks, but still ended 3.3% lower on the week..

The EIA's natural gas storage report for the week ending May 27th indicated that the amount of working natural gas held in underground storage in the US rose by 90 billion cubic feet to 1,902 billion cubic feet by the end of the week, which still left our gas supplies 397 billion cubic feet, or 17.3% below the 2,299 billion cubic feet that were in storage on May 27th of last year, and 337 billion cubic feet, or 15.3% below the five-year average of 2,239 billion cubic feet of natural gas that have been in storage as of the 27th of May over the most recent five years....the 90 billion cubic foot injection into US natural gas working storage for the cited week was more than the average forecast for a 87 billion cubic foot injection from an S&P Global Platts survey of analysts, while it was 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 less than the 109 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 May 27th indicated that a even after another big oil withdrawal from the SPR, we had to pull oil out of our stored commercial crude supplies for the 4th time in 9 weeks, and for the 27th time in the past 47 weeks, mostly because of a big decrease in oil supplies that could not be accounted for…our imports of crude oil fell by an average of 266,000 barrels per day to an average of 6,218,000 barrels per day, after falling by an average of 82,000 barrels per day during the prior week, while our exports of crude oil fell by 351,000 barrels per day to 3,990,000 barrels per day, after rising by 821,000 barrels per day to a 26 month high of 4,341,000 barrels per day during the prior week....together, that meant that our trade in oil worked out to a net import average of 2,228,000 barrels of oil per day during the week ending May 27th, 83,000 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 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 14,128,000 barrels per day during the cited reporting week…

Meanwhile, US oil refineries reported they were processing an average of 16,033,000 barrels of crude per day during the week ending May 27th, an average of 236,000 fewer 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 1,498,000 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 406,000 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 inserted a (+406,000) 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..... moreover, since last week’s unaccounted for oil factor was at (+1,225,000) barrels per day, that means there was a 819,000 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 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 1,498,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 941,325,000 barrels at the end of the week, our lowest oil inventory level since October 22nd, 2004, and thus a 17 1/2 year low….this week's oil inventory decrease came as 724,000 barrels per day were being pulled our commercially available stocks of crude oil, while 774,000 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 up until that time, as well as the previous 30,000,000 million barrel release from the SPR to address 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 129,555,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 22 months, and as a result the 526,592,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since June 19th, 1987, or nearly 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....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 6,385,000 barrels per day last week, which was still 7.3% more than the 5,951,000 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 even though the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 11,500,000 barrels per day, because Alaska’s oil production was 10,000 barrels per day lower at 450,000 barrels per day and thus subtracted 100,000 barrels per day from the final rounded national total (by the EIA's math, not mine)...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 92.6% of their capacity while using those 16,033,000 barrels of crude per day during the week ending May 27th, down from the 93.2% utilization rate of the prior week, but a fairly normal refinery utilization rate for early summer…the 16,033,000 barrels per day of oil that were refined this week were 2.8% more barrels than the 15,597,000 barrels of crude that were being processed daily during week ending May 28th of 2021, and 20.5% more than the 13,307,000 barrels of crude that were being processed daily during the week ending May 29th, 2020, when US refineries were operating at what was then a much lower than normal 71.8% of capacity during the first wave of the pandemic, but still 5.3% less than the 16,938,000 barrels that were being refined during the prepandemic week ending May 31st, 2019, when refinery utilization was at a fairly normal 91.8% for the last weekend of May...

Even with the decrease in the amount of oil being refined this week, gasoline output from our refineries was much higher, increasing by 545,000 barrels per day to 9,968,000 barrels per day during the week ending May 27th, after our gasoline output had decreased by 151,000 barrels per day over the prior week.…this week’s gasoline production was 4.2% more than the 9,566,000 barrels of gasoline that were being produced daily over the same week of last year, but 0.8% below our gasoline production of 10,049,000 barrels per day during the week ending May 31st, 2019, ie, during the year before the pandemic impacted gasoline output....on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 163,000 barrels per day to 4,984,000 barrels per day, after our distillates output had increased by 267,000 barrels per day over the prior week…but after other recent production increases, our distillates output was still 3.7% more than the 4,807,000 barrels of distillates that were being produced daily during the week ending May 28th of 2021, but 7.8% less that the 5,404,000 barrels of distillates that were being produced daily during the week ending May 31th, 2019...

Even with the big increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the sixteenth time in seventeen weeks, decreasing by 711,000 barrels to 218,996,000 barrels during the week ending May 27th, after our gasoline inventories had decreased by 482,000 barrels over the prior week....our gasoline supplies decreased again this week because the amount of gasoline supplied to US users increased by 179,000 barrels per day to 8,977,000 barrels per day, and because our exports of gasoline rose by 289,000 barrels per day to a 3 1/2 year high of 1,063,000 barrels per day, while our imports of gasoline rose by 43,000 barrels per day to 890,000 barrels per day....but even with 15 inventory drawdowns over the past 16 weeks, our gasoline supplies were still only 6.4% lower than last May 28th's gasoline inventories of 233,980,000 barrels, and 9% below the five year average of our gasoline supplies for this time of the year…

With the modest drop in our distillates production, our supplies of distillate fuels decreased for the 15th time in twenty weeks and for the 27th time in thirty-nine weeks, falling by 529,000 barrels to 106,392,000 barrels during the week ending May 27th, after our distillates supplies had increased by 1,657,000 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 102,000 barrels per day to 3,969,000 barrels per day, and because our exports of distillates rose by 229,000 barrels per day to 1,353,000 barrels per day, while our imports of distillates rose by 183,000 barrels per day to 263,000 barrels per day....after forty-two inventory withdrawals over the past fifty-nine weeks, our distillate supplies at the end of the week were 19.9% below the 132,802,000 barrels of distillates that we had in storage on May 28th of 2021, and about 24% below the five year average of distillates inventories for this time of the year…

With our exports of crude, gasoline and distillates all remaining high after recently hitting interim highs, i decided to check our total exports of oil and oil products compared to ​historical averges and ​prior week​s​...and while we weren't at a record this week, it turned out that the 4 week average of our total exports of crude oil and petroleum products was at an all time high of 9,826,000 barrels per day, eclipsing the record of 9.750,000 barrels per day set 5 weeks ago...and since it's a record high, we'll include a graph of that so you can see what it looks like...

Meanwhile, despite this week's big release of crude from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage fell for the 17th time in 27 weeks and for the 33rd time in the past year, decreasing by 5,068,000 barrels over the week, from 419,801,000 barrels on May 20th to 414,733,000 barrels on May 27th, after our commercial crude supplies had decreased by 1,019,000 barrels over the prior week…with this week’s decrease, our commercial crude oil inventories fell to about 15% below the most recent five-year average of crude oil supplies for this time of year, but were still 16.8% above the average of our crude oil stocks as of the last weekend of May 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 May 27th were 13.5% less than the 479,270,000 barrels of oil we had in commercial storage on May 28th of 2021, and were also 22.1% less than the 532,345,000 barrels of oil that we had in storage on May 29th of 2020, and 14.1% less than the 483,264,000 barrels of oil we had in commercial storage on May 31st 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 also 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, fell by 4,803,000 barrels this week, from 1,686,064,000 barrels on May 20th to 1,681,261,000 barrels on May 27th, after our total inventories had fallen by 5,315,000 barrels during the prior week....that left our total liquids inventories down by 107,172,000 barrels over the first 19 weeks of this year, and at the lowest since October 24th, 2008, or at a 13 1/2 year low, as you can see on the graph below... 

This Week's Rig Count

The number of drilling rigs running in the US was unchanged during the week ending June 3rd, after falling for the first time in 31 weeks the prior week, and still remains 8.4% below the prepandemic rig count, despite only falling seven times over the past 88 weeks.....Baker Hughes reported that the total count of rotary rigs drilling in the US remained at 727 rigs this past week, which was still 271 more rigs than 456 rigs that were in use as of the June 4th report of 2021, but was also 1,202 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 was unchanged at 574 oil rigs during this week, after rigs targeting oil had decreased by 2 during the prior week, ​while there are still 215 more oil rigs active now than were running a year ago, even as they still amount to just 35.7% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 16.0% 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 54 natural gas rigs from the 97 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 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 unchanged at fifteen rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana waters....that's two 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....and in addition to rigs offshore, we also have a water based directional rig, drilling for oil at a depth between 10,000 and 15,000 feet, inland in the Galveston Bay area, while during the same week of a year ago, there was also one such "inland waters" rig deployed...

The count of active horizontal drilling rigs was unchanged at 666 horizontal rigs this week, which was 251 more rigs than the 415 horizontal rigs that were in use in the US on June 4th of last year, but still 51.5% 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 unchanged at 36 directional rigs this week, and those were up by 11 from the 25 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 25 vertical rigs this week, while those were up by 9 from the 15 vertical rigs that were in use on June 4th 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 3rd, the second column shows the change in the number of working rigs between last week’s count (May 27th) and this week’s (June 3rd) count, the third column shows last week’s May 27th 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 4th of June, 2021...

​as you can see, there weren't many changes in drilling activity again this week...the oil rig pulled out of Oklahoma's Cana Woodford had to have been offset by a​ rig addition elsewhere in the state, since the state total remained unchanged...similarly, the rig removed from the DJ Niobrara chalk of the Rockies front range had to have been offset by a similar addition in either Colorado or Wyoming, ​while in addition, two more rigs were added in Wyoming in a basin or basins that Baker Hughes doesn't track...in like manner, the natural gas rig that was pulled out of the Haynesville shale had to have been offset by a rig addition in the same area, since the rig counts for both northern Louisiana and Texas Oil District 6 were unchanged....Texas did have a rig pulled out of Texas Oil District 8, which is area of the core Permian Delaware, but since the Permian rig count was unchanged, that rig also had to have been removed from a basin that Baker Hughes doesn't track...meanwhile, the North Dakota rig count was down one even though the Williston basin count was unchanged because a rig was added to Williston basin in Montana at the same time, where there are now 3 rigs drilling for oil...

+

+

+

note: there’s more here

No comments: