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, February 6, 2023

natural gas prices at 25 month low after largest monthly drop in 22 years; rig count down most in 31 months

natural gas prices are at a 25 month low after the largest one month drop in 22 years; commercial crude oil inventories are at a 19 month high; rig count falls by the most in 31 months

US oil prices fell for a second straight week after fears of higher interest rates were exacerbated by a much stronger than expected jobs report..   after falling 2.4% to $79.68 a barrel last week on rising inventories and disappointment in Europe's proposals to restrict Russian fuel exports, the contract price for the benchmark US light sweet crude for March delivery initially jumped in Asian trading on early Monday, after a drone attack had targeted Iran and as China pledged to promote a consumption recovery, but then turned lower over uncertainty ahead of the ​coming meetings of the OPEC+ group and the US Fed, and settled down $1.78 at $77.90, the lowest in three weeks, pressured by a firmer U.S. dollar and risk-off sentiment in financial markets, as traders turned cautious ahead of this week's two day Fed meeting beginning the next day...oil prices followed stocks lower early Tuesday, as the U.S. Dollar Index advanced for a third straight session and ​as ​traders positioned ahead of policy meetings by the Fed and European Central Bank, where officials were expected to signal more rate hike​s​ for 2023, but then rebounded from​ their earlier lows and moved higher, drawing support from a weakening dollar​,​ and from data showing that demand for U.S. crude and petroleum products had risen in November, ​and ​settled​ 97 cents higher at $78.87 a barrel...​​oil prices held their gains in overnight trading even after the American Petroleum Institute reported across the board inventory increases and opened higher on Wednesday, then flipped between modest gains and losses in pre-inventory report trading, first rallying to a high of $79.73, and then trading back to within Tuesday’s trading range following the news that OPEC+’s Joint Ministerial Monitoring Committee recommended making no changes to​ the group's output policy, but turned decidedly south after EIA data showed big builds in crude oil, gasoline and distillate inventories​,​ and settled $2.46 lower at $76.41 a barrel after the Fed signaled further rate increases were needed to lower inflation to its 2% target....oil prices rose in early Asian trading on Thursday after the Fed's modest rate hike sent the US dollar lower, but then eased in US afternoon trading after the dollar bounced off a seven-month low on the back of expectations that global central banks would soften the path of interest rate increases this year after the European Central Bank, the Bank of England, and the Bank of Canada​ all lifted their lending rates to the highest level in almost two decades and settled 53 cents lower at $75.88 a barrel...oil prices were little changed early Friday ahead of the release of the U.S. employment report, which was expected to show job growth slowed further at the start of the year amid rising interest rates, but then tumbled after reported job increases came in three times expectations, raising fears of higher interest rates in response and settled $2.49 or 3.3% lower at $73.39 a barrel as the dollar rocketed higher, making commodities priced in the U.S. currency costlier for non-dollar holders....oil prices thus finished nearly 7.9% lower for the week, amid uncertainties over how well demand from China would fare in February, after their crude imports were assessed at 10.98 mbpd in January, down from December's 11.37 mbpd and November's 11.42 mbpd...

US natural gas prices also finished lower for the eighth consecutive week as traders looked past a polar outbreak to warmer weather through mid-February... after falling 6.2% to $2.849 per mmBTU last week as winter gas supplies held above normal and traders bet against a prospective Freeport export restart, the contract price of US natural gas for March delivery opened 17 cents lower on Monday, as updated forecasts over the weekend reduced the duration of the polar conditions expected to ​arrive later in the week​,​ and settled 17.2 cents lower at a 21 month low of $2.677 per mmBTU after trading in a narrow range on strong gas production and expectations for mild mid-February weather...after opening lower with wintry conditions moving across the Midwest, natural gas again traded in a narrow range Tuesday and settled seven-tenths of a cent higher at $2.684 per mmBTU, but still ended January with the largest monthly decline in 22 years...after opening higher Wednesday as output was on track to drop about 4.0 billion cubic feet per day as winter storms froze off oil and gas wells in Texas, Oklahoma, New Mexico and Pennsylvania, prices again moved lower to settle down 21.6 cents at $2.468 per mmBTU as traders brushed off the temporary declines in production related to the freeze-offs and instead focused on a quick warm-up expected for the weekend...after moving gradually higher following a storage report that was in line with estimates, gas prices again back off their gains on Thursday to settle 1.2 cents lower at $2.4​56 per mmBTU​ ​on the prospect of warmer weather coming next week...March gas prices slipped another 4.6 cents to settle at a 25 month low of $2.410 per mmBTU on Friday as forecasts showed February was poised to c​continue the same warm-​weather themes that had collapsed prices winter-to-date, and thus finished 15.4% lower on the week...

with natural gas prices finishing at a 25 month low after falling in January by the most in any month in 22 years, we'll include a graph of how those prices have moved over the past three years...

the above is a screenshot of the interactive natural gas price chart from barchart.com, which i have set to show front month natural gas prices ​weekly over the past ​three years, which means you're seeing the range of natural gas prices over that time as they were quoted by the media...this same chart can be reset to show prices of front month or individual monthly natural gas ​futures ​contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each...each bar in the graph above represents the range of natural gas prices for a single ​week, with​ ​weeks when prices rose indicated in green, and weeks  when prices fell indicated in red, with the small sticks above or below each weekly bar representing the extent of the price change above or below the opening and closing price for the week​ ​in question...notice that we've highlighted​ prices for the week of​ December 28, 2020, which was the last time natural gas prices were this low....also not​​e that natural gas prices had briefly spike​d​ above $10/mmBTU on August 22nd, so they've fallen by more than three-quarters to $2.41/mmBTU in less than 6 months...moreover, they had been as high as $7/mmBTU ​as recently as 8 weeks ago, so they've fallen more than 65% in that short time... the steepness of th​e ​recent drop in prices is ​quite ​visually evident...

The EIA's natural gas storage report for the week ending January 27th indicated that the amount of working natural gas held in underground storage in the US fell by 151 billion cubic feet to 2,583 billion cubic feet by the end of the week, after the decrease for the week ending January 20th was revised from -91 billion cubic feet to -86 billion cubic feet ...that left our natural gas supplies 222 billion cubic feet, or 9.4% above the 2,361 billion cubic feet that were in storage on January 27th of last year, and 163 billion cubic feet, or 6.7% more than the five-year average of 2,420 billion cubic feet of natural gas that were in storage as of the 27th of January over the most recent five years….the 151 billion cubic foot withdrawal from US natural gas working storage for the cited week was more than was expected by a Reuters survey of analysts, whose average forecast called for a 142 billion cubic feet withdrawal of gas, but it was much less than the 261 billion cubic feet that were pulled out of natural gas storage during the corresponding week of 2022, and also less than the average 181 billion cubic feet of natural gas that have typically been withdrawn from our natural gas storage during the same winter 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 January 27th indicated that after a big increase in our oil imports and a big decrease in our oil exports, we had surplus oil left to add to our stored commercial crude supplies for the 6th consecutive weekly increase, and for the 25th time in the past 41 weeks, despite an unusual increase in oil demand that could not be accounted for... Our imports of crude oil rose by an average of 1,378,000 barrels per day to average 7,283,000 barrels per day, after falling by an average of 956,000 barrels per day during the prior week, while our exports of crude oil fell by 1,215,000 barrels per day to average 3,492,000 barrels per day, which combined meant that the net of our trade in oil worked out to a net import average of 3,791,000 barrels of oil per day during the week ending January 27th, 2,593,000 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 12,200,000 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 15,991,000 barrels per day during the January 27th reporting week…  

Meanwhile, US oil refineries reported they were processing an average of 14,961,000 barrels of crude per day during the week ending January 27th, an average of 19,000 fewer barrels per day than the amount of oil that our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that an average of 591,000 barrels of oil per day were being added to the supplies of oil stored in the US. ​  ​So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending January 27th appear to indicate that our total working supply of oil from net imports and from oilfield production was 438,000 barrels per day more than what was added to storage plus 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 [-438,000] 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 an omission or error of that size in this week’s oil supply & demand figures that we have just transcribed.... Furthermore, since last week’s “unaccounted for crude oil” was at [+1,659,000] barrels per day, that means there was a 2,097,000 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, thus rendering those comparisons meaningless.... However, since most everyone treats these weekly EIA reports as gospel, and since these weekly figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,599,000 barrels per day last week, which was 1.0% more than the 6,534,000 barrel per day average that we were importing over the same four-week period last year. This week's 591,000 barrel per day increase in our overall crude oil inventories was all added to our commercially available stocks of crude oil, while the amount of oil in our Strategic Petroleum Reserve remained unchanged.. This week’s crude oil production was reported to be unchanged at 12,200,000 barrels per day because the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,700,000 barrels per day, while Alaska’s oil production was 1,000 barrels per day higher at 451,000 barrels per day and had no impact on the 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 6.8% below that of our pre-pandemic production peak, but was 25.8% 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 85.7% of their capacity while using those 14,961,000 barrels of crude per day during the week ending January 27th, down from their 86.1% utilization rate during the prior week, and below normal utilization for late January. The 14,961.000 barrels per day of oil that were refined this week were 1.9% less than the 15,497,000 barrels of crude that were being processed daily during week ending January 28th of 2022, and 6.3% less than the 15,972,000 barrels that were being refined during the prepandemic week ending January 31st, 2020, when our refinery utilization was ​also ​at a below normal 87.4% for late January ...

Even with a modest decrease in the amount of oil being refined this week, the gasoline output from our refineries was quite a bit higher, increasing by 612,000 barrels per day to 9,443,000 barrels per day during the week ending January 27th, after our gasoline output had decreased by 34,000 barrels per day during the prior week. This week’s gasoline production was also 9.2% more than the 8,650,000 barrels of gasoline that were being produced daily over the same week of last year, while 4.6% less than the gasoline production of 9,903,000 barrels per day during the prepandemic week ending January 31st, 2020. Similarly, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 100,000 barrels per day to 4,692,000 barrels per day, after our distillates output had decreased by 9,000 barrels per day during the prior week. With that, our distillates output was 2.0% more than the 4,602,000 barrels of distillates that were being produced daily during the week ending January 28th of 2022, but still 5.7% less than the 4,976,000 barrels of distillates that were being produced daily during the week ending January 31st 2020...

With the big increase in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the tenth time in twelve weeks and for the 13th time in 25 weeks, increasing by 2,576,000 barrels to 234,598,000 barrels during the week ending January 27th, after our gasoline inventories had increased by 1,763,000 barrels during the prior week. Our gasoline supplies rose again this week even though the amount of gasoline supplied to US users rose by 348,000 barrels per day to 8,491,000 barrels per day, while our imports of gasoline rose by 48,000 barrels per day to 501,000 barrels per day, and while our exports of gasoline rose by 33,000 barrels per day to 893,000 barrels per day.. But even after 10 recent gasoline inventory increases, our gasoline supplies were still 6.2% below last January 28th's gasoline inventories of 250,037,000 barrels, and about 7% below the five year average of our gasoline supplies for this time of the year…

With the increase in our distillates production, our supplies of distillate fuels ​increased for the 1st time in 5 weeks, and for the 2​5th time over the past year, rising by 2,320,000 barrels to 117,590,000 barrels during the week ending January 27th, after our distillates supplies had decreased by 507,000 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, decreased by 186,000 barrels per day to 3,692,000 barrels per day, and because our exports of distillates fell by 225,000 barrels per day to 981,000 barrels per day, while our imports of distillates fell by 7,000 barrels per day to 313,000 barrels per day... After a run of fifty-six inventory withdrawals over the past ninetyone weeks, our distillate supplies at the end of the week were were 4.2% below the 122,744,000 barrels of distillates that we had in storage on January 28th of 2022, while about 17% below the five year average of distillates inventories for this time of the year...

Meanwhile, with a big increase in our oil imports and a big decrease in our oil exports, our commercial supplies of crude oil in storage rose for the 13th time in 25 weeks and for the 23rd time in the past year, increasing by 4,140,000 barrels over the week, from 448,548,000 barrels on January 20th to 452,688,000 barrels on January 27th, after our commercial crude supplies had increased by 533,000 barrels over the prior week. After recent big oil supply increases following the Christmas refinery freeze offs, our commercial crude oil inventories were at a 19 month high, about 4% above the most recent five-year average of commercial oil supplies for this time of year, and ​also ​about 42% above the average of our available crude oil stocks as of the last weekend of January 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 after our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, and then jumped again after February 2021's winter storm Uri froze off US Gulf Coast refining, our commercial crude supplies as of this January 27th were 9.0% more than the 415,143,000 barrels of oil we had in commercial storage on January 28th of 2022, but 4.8% less than the 475,659,000 barrels of oil that we had in storage during the 2nd Covid surge on January 22nd of 2021, while 4.1% more than the 435,009,000 barrels of oil we had in commercial storage on January 31st of 2020…

Finally, with ​the SPR at a 39 year low and our supplies of all products made from oil trending near multi-year lows over the recent months, we are also continuing to watch the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR for a sense of the big picture.. After the commercial crude, gasoline, and distillate inventory increases we've already noted for this week, 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 1,597,000 barrels this week barrels this week, from 1,605,596,000 barrels on January 20th to 1,607,193,000 barrels on January 27th, after our total inventories had increased by 3,989,000 barrels during the prior week. Even after four straight increases, our total petroleum liquids inventories were still down by 510,450,000 barrels, or by 24.1% from their early pandemic high, and are just 1.8% off their recent 18 1/2 year low...

This Week's Rig Count

The number of drilling rigs active in the US decreased for the 12th time over the prior 27 weeks during the week ending February 3rd, and by the most since June 19th 2020, and is now 4.3% below the prepandemic level, despite increasing in 94 of the past 123 weeks...Baker Hughes reported that the total count of rotary rigs drilling in the US fell by 12 to 759 rigs over the past week, which was still 146 more rigs than the 613 rigs that were in use as of the February 4th report of 2022, but was 1,170 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 decreased by 10 to 599 oil rigs during the past week, after the number of rigs targeting oil had decreased by 4 during the prior week, but there are still 102 more oil rigs active now than were running a year ago, even as they amount to just 37.2% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, while they are now down 12.3% from the prepandemic oil rig count….at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 to 158 natural gas rigs, which was still up by 42 natural gas rigs from the 116 natural gas rigs that were drilling during the same week a year ago, even as they were only 9.8% 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: one of those was a directional rig drilling to between 5,000 and 10,000 feet on the big island of Hawaii, while the other was a directional rig drilling to between 5,000 and 10,000 feet into a formation in Lake county California that Baker Hughes doesn't track....While we haven't seen any details on either of those wells, in the past we've identified various "miscellaneous" rig activity as being for exploration, for carbon dioxide storage, and for utility scale geothermal projects....a year ago, there were were no such "miscellaneous" rigs running...

The offshore rig count in the Gulf of Mexico decreased by ​one to twelve rigs this week, with all of those drilling in Louisiana's offshore waters....that Gulf rig count is now down by 4 from the 16 Gulf rigs running a year ago, when 15 Gulf rigs were drilling for oil offshore from Louisiana and one was deployed for oil offshore from Texas....since there aren't any rigs drilling off our other coasts at this time, the Gulf rig count is equal to the national offshore count..

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

The count of active horizontal drilling rigs was down by 5 to 700 horizontal rigs this week, which was still 145 more rigs than the 555 horizontal rigs that were in use in the US on February 4th of last year, but just 50.9% of the record 1,374 horizontal rigs that were drilling on November 21st of 2014....in addition, the directional rig count was down by 7 to 38 directional rigs this week, while those still were up by 4 from the 34 directional rigs that were operating during the same week a year ago…meanwhile, the vertical rig count was unchanged at 21 vertical rigs this week, which was down by 3 from the 24 vertical rigs that were in use on February 4th of 2022…

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 February 3rd, the second column shows the change in the number of working rigs between last week’s count (January 27th) and this week’s (February 3rd) count, the third column shows last week’s January 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 February, 2022...

as you might guess from the dearth of changes shown in the basin count table, most of this week's rig drop was in basins not tracked by Baker Hughes; that includes the three rigs pulled out of Wyoming, possibly from the Powder River or Green River basins, the two rigs pulled out of California, and the rigs pulled out of Alaska (which had been drilling on the North Slope), Utah (which had been drilling in the Uintah basin), Louisiana, (which had been drilling offshore), and Colorado, where most rigs are drilling in the DJ Niobrara chalk...meanwhile, checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin, we find that there was a rig added in Texas Oil District 8, which overlies the core Permian Delaware, but that there was a rig pulled out of Texas Oil District 7C, which includes the southernmost counties in the Permian Midland, and that three more rigs were pulled out of Texas Oil District 8A, which overlies the northernmost counties in the Permian Midland...since the Permian basin count shows an increase of two natural gas rigs and a decrease of five oil rigs, that means there was a natural gas rig added and an oil rig pulled out of one of those district that offset each other and didn't show up in the totals...meanwhile, since the rig counts in other Texas districts were unchanged, that means the rig pulled out of the Granite Wash basin had been drilling in Oklahoma, adjacent to the Texas panhandle, and since the Oklahoma rig count is unchanged, that means an offsetting rig had to have been added in Oklahoma, in a basin not tracked by Baker Hughes...lastly, since the Permian saw an increase of two natural gas rigs, four natural gas rigs had to have been removed from elsewhere, and in this week's case, all came out of basins not tracked by Baker Hughes, most likely those in Wyoming and Utah, since the other removals we've noted were​ most likely all oil rigs...

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Note:  there’s more here..

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