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, October 3, 2022

US oil supplies at a 19½ year low; gasoline supplies at a 10 month low; total oil + oil products supplies at a 14 year low

US oil supplies are at a new 19½ year low; SPR is at a new 38 year low; gasoline supplies are at a 10 month low; total oil + oil products supplies are lowest in nearly 14 years…

oil prices finished higher for the first time in five weeks as Hurricane Ian disrupted Gulf of Mexico production and the EIA reported across the board inventory drawdowns....after falling 7.1% to an eight month low of $78.74 a barrel last week as oil traders began to price in the effects of a monetary policy induced recession, the contract price for the benchmark US light sweet crude for November delivery fell in Asian trading on Monday on fears of lower fuel demand from an expected global recession sparked by rising global interest rates, and as a surging US dollar would limit the ability of non-dollar consumers to purchase crude, and the​n​ slid $2.03, or more than 2% in the New York session to settle at a nine month low of $76.71 a barrel, pressured by a strengthening dollar as traders awaited details on new sanctions on Russia...however, oil prices bounced off that low early Tuesday amid a sharp pullback in the U.S. Dollar, while Hurricane Ian was forecast enter the eastern Gulf of Mexico and potentially disrupt at least some oil operations in offshore Gulf waters, and settled $1.79 or 2% higher at $78.50 a barrel, supported by new production curbs in the Gulf of Mexico ahead of Hurricane Ian and on a softening in the U.S. dollar index....oil prices moved higher still in evening trading after the American Petroleum Institute reported an unexpected draw on gasoline inventories over the prior week, and were up modestly in early trading Wednesday as traders assessed limited disruption to Gulf of Mexico oil production as Hurricane Ian drew closer to a Florida landfall, even as the U.S. dollar strengthened...oil then extended its gains after the EIA reported a surprise draw on crude supplies and then rallied in Wednesday​ ​afternoon trading as Hurricane Ian led to a slowdown in production in the Gulf of Mexico and ended up $3.65, or 4.7% higher, ​at $82.15 a barrel as the U.S. dollar weakened and fuel inventory figures showed larger-than-expected drawdowns amid a rebound in demand...oil prices continued higher in mid-morning trading Thursday as traders assessed new geopolitical risks stemming from a suspected sabotage attack on the Nord Stream 1 and 2 pipelines that had triggered a military warning from NATO, but then turned lower in afternoon trading on a stronger dollar and settled 92 cents lower at $81.23 a barrel as equities also fell after several Fed officials signaled the central bank would continue raising interest rates until clear evidence emerges that inflation was abating, despite the growing risks of that policy causing a deep downturn for the economy in the process...oil prices moved lower in early trading on Friday, after new data showed China's factory activity was contracting at a sharper pace than ​in ​previous​ months amid concerns over rapidly deteriorating global demand growth​,​ hammered by both high inflation and by aggressive rate hikes from several central banks. and then dropped on the news that OPEC's oil output rose in September to its highest since 2020, surpassing their pledged hike for the month to settle $1.74, or 2.1% lower at $79.49 barrel....while that clos​ing price still left oil prices 1.0% higher for the week, they still finished 11% lower for the month and 25% lower for the 3rd quarter...

Meanwhile, natural gas prices finished lower for a sixth consecutive week on hurricane related demand destruction and on another above normal ​​addition to storage...after falling 12.1% to $6.828 per mmBTU last week on the largest inventory increase of the year, the contract price of US natural gas for October delivery clawed back into the green Monday amid estimates of record output and potential threats to production in the form of a hurricane en route to Florida, and settled 7.5 cents higher at $6.903 per mmBTU, while the November contract price inched 2.2 cents higher to $7.014​ ​per mmBTU​...​.however, natural gas tumbled nearly 4% on Tuesday on forecasts for milder weather over the next two weeks, and as analysts noted storms were more likely to cut demand than supply​,​ since they knock out power and can ​also ​cause export terminals to ​be ​shut down, and ​settled 25.2 cents lower at $6.651 per mmBTU... natural gas prices retreated further in early trading Wednesday as Hurricane Ian bore down on Florida, but turned higher as global gas prices surged following a series of undersea explosions on the Nord Stream pipelines delivering Russian gas to Europe, as the gas contract for October expired 21.7 cents, or 3.3% higher at $6.868 per mmBTU while the contract price of US natural gas for November delivery gained 19.5 cents to settle at $6.955 per mmBTU....with the markets now quoting the price of November gas, natural gas prices fell on Thursday after the EIA reported the second straight injection of 103 billion cubic feet of natural gas into storage, matching the prior week's largest build of the season, and settled 8.1 cents lower at $6.874 per mmBTU​,​ as power outages in the wake Hurricane Ian reduced the amount of gas needed to produce electricity...natural gas prices gave up another 10.8 cents on Friday to settle at $6.766 per mmBTU​, ​as Hurricane Ian hit the Carolinas after knocking out power to over 2.6 million in Florida, and thus finished 0.9% lower on the week, while the natural gas contract for November delivery, which had closed last week at $6.992 per mmBTU, finished the week 3.2% lower...

The EIA's natural gas storage report for the week ending September 23rd indicated that the amount of working natural gas held in underground storage in the US rose by 103 billion cubic feet to 2,977 billion cubic feet by the end of the week, which still left our gas supplies 180 billion cubic feet, or 5.7% below the 3,157 billion cubic feet that were in storage on September 23rd of last year, and 306 billion cubic feet, or 9.3% below the five-year average of 3,283 billion cubic feet of natural gas that were in storage as of the 23rd of September over the most recent five years....the 103 billion cubic foot injection into US natural gas working storage for the cited week was above ​the ​forecast for an injection of 94 billion cubic feet from a Reuters poll of analysts, and was more than the 86 billion cubic feet that were added to natural gas storage during the corresponding week of 2021, and also well more than the average injection of 77 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....

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 23rd indicated that after a big jump in our oil exports, a decrease in our oil imports, and smaller withdrawal of oil from our SPR​ than last week, we needed to pull oil out of our stored commercial crude supplies for the 4th time time in 9 weeks, and for the 25th time in the past 44 weeks, despite a drop in our oil refining and a big jump in oil supplies that could not be accounted for....Our imports of crude oil fell by an average of 498,000 barrels per day to average 6,449,000 barrels per day, after rising by an average of 1,155,000 barrels per day during the prior week, while our exports of crude oil rose by 1,106,000 barrels per day to average 4,646,000 barrels per day, which together meant that the net of our trade in oil worked out to an import average of 1,803,000 barrels of oil per day during the week ending September 23rd, 1,604,000 fewer barrels per day than the net of our imports minus our exports during the prior week. Over the same period, production of crude from US wells was reportedly 100,000 barrels per day lower at 12,000,000 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 averaged a total of 13,803,000 barrels per day during the September 23rd reporting week…

Meanwhile, US oil refineries reported they were processing an average of 15,751,000 barrels of crude per day during the week ending September 23rd, an average of 604,000 fewer barrels per day than the amount of oil tha​t our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net average of 684,000 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, the crude oil figures from the EIA for the week ending September 23rd appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 1,264,000 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 (+1,264,000) 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 omission or error of that magnitude in this week’s oil supply & demand figures that we have just transcribed... moreover, since last week’s EIA fudge factor was at (+26,000) barrels per day, that means there was a 1,237,000 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 changes to supply and demand from that week to this one that are indicated by this week's report are off by that much, rendering them useless...but 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 684,000 barrel per day decrease in our overall crude oil inventories left our oil supplies at 853,142,000 barrels at the end of the week, which was our lowest total oil inventory level since March 14st, 2003, and therefore at a new 19 1/2 year low.….Our oil inventories decreased this week as an average of 31,000 barrels per day were being pulled out of our commercially available stocks of crude oil, while 654,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve. That draw on the SPR was another installment of the emergency withdrawal under Biden's "Plan to Respond to Putin’s Price Hike at the Pump" (sic), that was intended to supply 1,000,000 barrels of oil per day to commercial interests over a six month period up to the midterm elections in November, in the hope of keeping gasoline and diesel fuel prices from rising, at least up until then, and was apparently down by 548,000 barrels per day from two weeks ago because the administration is now attempting to use the Strategic Petroleum Reserve to manipulate prices on a weekly basis....Including the administration's initial 50,000,000 million barrel SPR release earlier this year, their subsequent 30,000,000 barrel release, and other withdrawals from the Strategic Petroleum Reserve under recent release programs, a total of 233,564,000 barrels of oil have now been removed from the Strategic Petroleum Reserve over the past 26 months, and as a result the 422,583,000 barrels of oil still remaining in our Strategic Petroleum Reserve is now the lowest since July 27th, 1984, or at a 38 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 SPR releases. ​The total 180,000,000 barrel drawdown of the current release program, now scheduled to run​ ​through November, will remove almost a third of what remained in the SPR when the program started, 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 rose to an average of 6,492,000 barrels per day last week, which was 5.6% more than the 6,147,000 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 lower at 12,000,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,600,000 barrels per day, while Alaska’s oil production was 3,000 barrels per day higher at 434,000 barrels per day but had 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 8.4% below that of our pre-pandemic production peak, but was 23.7% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021...

US oil refineries were operating at 90.6% of their capacity while using those 15,751,000 barrels of crude per day during the week ending September 23rd, down from their 93.6% utilization rate during the prior week, and a refinery utilization rate that's a bit below the normal range for mid-September. ​ ​The 15,751,000 barrels per day of oil that were refined this week were still 2.2% more than the 15,415,000 barrels of crude that were being processed daily during week ending September 24th of 2021 (after Hurricane Ida), but 1.7% less than the 16,017,000 barrels that were being refined during the prepandemic week ending September 27th, 2019, when our refinery utilization was at 86.4%, also below the normal range for mid September...

Even with the decrease in the amount of oil being refined this week, the gasoline output from our refineries was still higher, increasing by 166,000 barrels per day to 9,625,000 barrels per day during the week ending September 23rd, after our gasoline output had increased by 6,000 barrels per day during the prior week. This week’s gasoline production was still 2.7% less than the 9,889,000 barrels of gasoline that were being produced daily over the same week of last year, and 4.5% below the gasoline production of 10,081,000 barrels per day during the week ending September 27th, 2019, ie, during the year before the pandemic impacted US gasoline output. On the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 278,000 barrels per day to 4,958,000 barrels per day, after our distillates output had increased by 217,000 barrels per day during the prior week. Even with that decrease, our distillates output was 6.7% more than the hurricane impacted 4,648,000 barrels of distillates that were being produced daily during the week ending September 24th of 2021, and 3.0% more than the 4,813,000 barrels of distillates that were being produced daily during the week ending September 27th 2019...

Even with the increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the 6th time in 8 weeks; and for the 26th time out of the past thirty-four weeks, decreasing by 2,422,000 barrels to a 10 month low of 212,188,000 barrels during the week ending September 23rd, after our gasoline inventories had increased by 1,570,000 barrels during the prior week. Our gasoline supplies fell this week because the amount of gasoline supplied to US users rose by 503,000 barrels per day to 8,825,000 barrels per day, while our imports of gasoline fell by 250,000 barrels per day to 525,000 barrels per day and while our exports of gasoline fell by 204,000 barrels per day to 985,000 barrels per day. After 26 gasoline inventory drawdowns over the past 33 weeks, our gasoline supplies were 4.3% lower than last September 24th's gasoline inventories of 221,809,000 barrels, and about 6% below the five year average of our gasoline supplies for this time of the year…

After the decrease in our distillates production, our supplies of distillate fuels decreased for the 7th time in 19 weeks and for the 31st time in the past year, falling by 2,891,000 barrels to 114,359,000 barrels during the week ending September 23rd, after our distillates supplies had increased by 1,230,000 barrels during the prior week. Our distillates supplies fell this week on the production decrease and because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 769,000 barrels per day to 4,178,000 barrels per day, while our exports of distillates fell by 471,000 barrels per day to 1,287,000 barrels per day, and while our imports of distillates fell by 13,000 barrels per day to 94,000 barrels per day.. After forty-nine inventory withdrawals over the past seventy-five weeks, our distillate supplies at the end of the week were 11.8% below the 129,727,000 barrels of distillates that we had in storage on September 24th of 2021, and about 20% below the five year average of distillates inventories for this time of the year...

Meanwhile, after the big jump in our oil exports and the decrease in our oil imports, our commercial supplies of crude oil in storage fell for the 11th time in 23 weeks and for the 30th time in the past year, decreasing by 215,000 barrels over the week, from 430,774,000 barrels on September 16th to 430,559,000 barrels on September 23rd, after our commercial crude supplies had increased by 1,141,000 barrels over the prior week. After that small ​decrease, our commercial crude oil inventories were still ​only ​about 2% below the most recent five-year average of crude oil supplies for this time of year, but about 30% above the average of our crude oil stocks as of the fourth weekend of September 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. And even though our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after last year's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this September 23rd were 2.9% more than the 418,542,000 barrels of oil we had in commercial storage on September 24th of 2021, while 12.6% less than the 492,426,000 barrels of oil that we had in storage on September 25th of 2020, and 1.9% more than the 422,642,000 barrels of oil we had in commercial storage on September 27th of 2019…

Lastly, with our inventories of crude oil and our supplies of all products made from oil near multi-year lows over the most recent months, we are continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR. With the across the board inventory decreases we've already noted for this week, 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 13 468,000 barrels this week, from 1,667,020,000 barrels on September 16th to 1,653,552,000 barrels on September 23rd, after our total inventories had risen by 2,344,000 barrels during the prior week. That left our total liquids inventories down by 134,881,000 barrels over the first 35 weeks of this year, and at the lowest level since October 3rd, 2008, or virtually at a 14 year low...

This Week's Rig Count

The number of drilling rigs running in the US rose for the fourth time in nine weeks, and for the 85th time over the past 105 weeks during the week ending September 30th, but they're still 3.5% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by 1 ​rig ​to 765 rigs this past week, which was also 237 more rigs than the 528 rigs that were in use as of the October 1st report of 2021, but was 1,164 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 increased by 2 to 604 oil rigs during the past week, after the number of rigs targeting oil had increased by 3 during the prior week, and there are 176 more oil rigs active now than were running a year ago, even as they amount to just 37.5% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 11.6% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 159 natural gas rigs, which was still up by 60 natural gas rigs from the 99 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.9% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….other than those rigs targeting oil and natural gas, Baker Hughes reports that two "miscellaneous" rigs continued drilling this week: a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, and a vertical rig drilling more than 15,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track....in the past, we've identified various "miscellaneous" as being exploratory, for carbon dioxide storage, and for utility scale geothermal projects...a year ago, there were was only one such "miscellaneous" rig running...

The offshore rig count in the Gulf of Mexico was unchanged at 15 rigs this week, with all of this week's Gulf rigs drilling for oil in Louisiana's offshore waters....that's higher than the 11 Gulf rigs running a year ago in the wake of Hurricane Ida...in addition to rigs drilling in the Gulf, we still have an offshore directional rigs drilling to between 5,000 and 10,000 feet for natural gas in the Cook Inlet of Alaska, while a year ago, there were two rigs drilling offshore from Alaska...

In addition to rigs running offshore, there are also four water based rigs​ still drilling through inland bodies of water this week; those include a directional rig drilling to between 10,000 and 15,000 feet, inland in Galveston Bay, Texas, a directional rig drilling for oil to between 5,000 and 10,000 feet in Cameron Parish, Louisiana; a directional rig targeting oil at a depth greater than 15,000 feet drilling through a lake on Grand Isle, Louisiana, and a directional rig drilling for oil in Terrebonne Parish, Louisiana, also at a depth greater than 15,000 feet...a year ago, there were two rigs drilling on inland waters...

The count of active horizontal drilling rigs was up by 3 to 696 horizontal rigs this week, which was ​also 222 more rigs than the 474 horizontal rigs that were in use in the US on October 1st of last year, but just over half of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....on the other hand, the vertical rig count was down by 2 to 23 vertical rigs this week, which was also down by 9 from the 32 vertical rigs that were operating during the same week a year ago…meanwhile, the directional rig count was unchanged at 46 directional rigs this week, and those were up by 24 from the 22 directional rigs  that were in use on October 1st 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 September 30th, the second column shows the change in the number of working rigs between last week’s count (September 23rd) and this week’s (September 30th) count, the third column shows last week’s September 23rd 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 1st of October, 2021...

let's look at the natural gas changes first this week, since drilling in the Marcellus shale was up by three rigs, even as the national natural gas rig count was down by one...that 3 rig Marcellus increase came as 4 natural gas rigs were added in West Virginia's Marcellus, while a natural gas rig was pulled out of Pennsylvania's Marcellus at the same time...elsewhere, another natural gas rig was removed from the Utica shale in Ohio, while 3 natural gas rigs were pulled out of Oklahoma's Arkoma Woodford at the same time...Oklahoma also accounts for the oil rig pulled out of the Mississippian shale, but the state's overall rig count was only down by one with the addition of an oil rig in the Cana Woodford, another oil rig added in the Ardmore Woodford, and the addition of an oil rig in a basin elsewhere in Oklahoma that Baker Hughes doesn't track at the same time...

next, to figure out what happened in New Mexico, we'll first check the Rigs by State file at Baker Hughes for the changes in Texas Permian...there we find that there were three oil rigs removed from Texas Oil District 8, which covers the core Permian Delaware, but that there was an oil rig added inTexas Oil District 7B, which includes the easternmost county of the Permian Midland...hence, those changes indicate a 2 rig decrease in the Texas Permian, and since the national Permian basin rig count was unchanged, we can conclude that the two rigs added in New Mexico were set up to drill in the far west Permian Delaware....

elsewhere in Texas, there was a rig removed from Texas Oil District 1, while there was rig added in Texas Oil District 4, which were most likely offsetting changes in the Eagle Ford shale, where the rig count remained at 72, while there was an oil rig added in North Dakota's Williston basin, but the Williston rig count remained unchanged as a Williston oil rig was removed from Montana at the same time...

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