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

Sunday, August 28, 2016

total supplies of everything oil jump 6.6 million barrels to another new record as rig count drops

oil prices bounced around this week and ended somewhat lower, as news of increasing international oil production and the building domestic product glut dampened speculative buying on the unlikely prospect of an OPEC-Russian production freeze...the 7 day price rally that helped push prices up over 22% from their lows in the first three weeks of August ended on Monday, as forced short squeeze buying came to an end amid news of increased Chinese, Iraqi and Nigerian exports, sending the expiring September WTI oil contract down 3% to close at $47.05 a barrel, while the new October oil contract fell $1.70, or 3.5% to close at $47.41 a barrel...oil production freeze talk returned to the fore on Tuesday, on reports that Iran was 'sending positive signals' that it may support an OPEC attempt to support prices as October oil, now the widely quoted front month contract, closed up 69 cents at $48.10 a barrel, despite a report from the American Petroleum Institute that crude oil stockpiles had increased by nearly 4.5 million barrels, the biggest buildup in 4 months...oil prices were then slammed on Wednesday and closed down $1.33 at $46.77 a barrel after the EIA reported increased inventories across the entire oil and oil products complex, even though their 2.5 million barrel build of crude was 2 million less than the API had telegraphed less than 24 hours earlier...oil prices then returned to the plus column on Thursday, rising 56 cents to $47.33 a barrel, on positive economic reports and further cooperative statements from Iran’s oil minister...oil rose again on Friday after an Iranian TV report that Yemeni forces had fired ballistic missiles at Saudi oil facilities and held on to most of those gains to close the week 1.8% lower at $47.64 a barrel, after Baker Hughes reported the U.S. oil rig count was unchanged for the week....

The Latest Oil Stats from the EIA

as mentioned, the oil data for the week ending August 19th from the US Energy Information Administration showed increases in inventories of oil and of all major refined products, exacerbated by oil imports that were near a 4 year high, even as refineries returned to operating at a seasonable level...however, this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +523,000 barrels per day, which meant that 523,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, so we have to again take this week's data with a large grain of salt...that's now the 9th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 93,000 barrels per day, a reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn't showing up in the final consumption or inventory figures... 

at any rate, the EIA reported that our imports of crude oil rose by an average of 449,000 barrels per day to an average of 8,738,000 barrels per day during the week ending August 19th, which was the second most oil we've imported in any week since October 19th of 2012....this week's imports were more than 1.44 million barrels per day, or 21.7%, more than the 7,199,000 barrels of oil per day we imported during the week ending August 21st a year ago, and the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.5 million barrels per day, 13.3% higher than the same four-week period last year... 

at the same time, our field production of crude oil fell by 49,000 barrels per day to an average of 8,548,000 barrels per day during the week ending August 19th, as a 6,000 barrel per day increase in Alaskan oil production was offset by a 55,000 barrel per day drop in production from the lower 48 states...that left the week's oil production down by 8.5% from the 9,337,000 barrels we produced during the week ending August 21st of 2015, and 11.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...our oil production for the week ending August 21st is now 671,000 barrels per day lower than we what were producing at the beginning of this year...  

meanwhile, crude oil used by US refineries dropped by an average of 186,000 barrels per day to an average of 16,679,000 barrels of crude per day during the week ending August 19th, as the US refinery utilization rate fell to 92.5% for that week, down from 93.5% of capacity the prior week, and down from the refinery utilization rate of 94.5% logged during the week ending August 21st last year...the drop in refining was entirely due to a 244,000 barrel per day drop in oil used on the Gulf Coast, where refineries were slowed by flooding in Louisiana and a refinery fire in Texas....product bound east cost crude oil refining actually rose by 60,000 barrels per day, though their capacity utilization only rose 85.5%, in contrast to a 94.4% capacity utilization rate of a year ago, when a glut of products was not a problem...nationally, the amount of crude oil refined this week was 21,000 barrels more than the 16,658,000 barrels of crude per day US refineries used during the week ending August 21st last year, and 1.6% more than the equivalent week in 2014... 

the 186,000 barrel per day drop in crude oil being refined in turn led to a 155,000 barrels per day drop in our refineries’ production of gasoline, which fell to 10,035,000 barrels per day during the week ending August 19th...still, that was 2.6% higher than our gasoline output of 9,782,000 barrels per day during the week ending August 21st last year, and 9.6% higher than the gasoline production of the equivalent week of 2014....at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 90,000 barrels per day to 4,849,000 barrels per day during the week ending August 19th....that left our distillates output 1.4% less than the 4,906,000 barrels per day that was being produced during the same week last year, and 1.3% less than the distillates production of the equivalent week of 2014... 

even with production of both gasoline and distillates down however, supplies of both left over at the end of the week were higher than last week, as were supplies of all other major refined products...our gasoline inventories rose by 36,000 barrels to 232,695,000 barrels as of August 19th, as our gasoline imports rose by 191,000 barrels per day to 801,000 barrels per day...that left this week's gasoline inventories 8.5% higher than the 214,434,000 barrels of gasoline that we had stored on August 21st last year, and also 9.6% higher than the 212,314,000 barrels of gasoline we had stored on August 22nd of 2014...similarly, our distillate fuel inventories rose by 122,000 barrels to 153,257,000 barrels by August 19th, which left our distillate inventories 2.3% above the distillate inventories of 149,836,000 barrels of August 21st last year, and 24.8% above the distillate inventories of 122,794,000 barrels of August 22nd, 2014...  

inventories of all other major products rose as well....our stockpiles of propane/propylene rose by 2,391,000 barrels to 96,135,000 barrels last week, which meant they were 0.4% above the then record high of 95,724,000 set during the week of August 21st last year, and 28.7% higher than the propane/propylene inventories of the same week in 2014...inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) other than propane/propylene rose by 2,628,000 barrels to 148,086,000 barrels as of August 19th, 17.2% higher than the 126,335,000 barrels we had stored as of August 21st last year, and 15.6% higher than the equivalent week in 2014...inventories of kerosene type jet fuel rose by 102,000 barrels to 41,751,000 barrels as of August 19th, not up much from our jet fuel stockpiles of 41,694,000 barrels on August 21st last year, but 20.3% higher than our 34,719,000 barrels of jet fuel supplies we had stored on August 22nd of 2014...and stockpiles of residual fuel oils rose by 1,443,000 barrels to 40,493,000 barrels as of August 19th, 1.9% higher than the 39,719,000 barrels we had stored a year earlier, and 11.7% higher than the 36,248,000 barrels of residual fuel oils we had stored on August 22nd 2014...

lastly, with the big jump in imports and the refinery slowdown, our inventories of crude oil that has yet to be refined into any of the above products also rose, increasing by 2,501,000 barrels to 523,594,000 barrels as of August 19th, the 4th oil inventory increase in 5 weeks...thus we ended up with 16.2% more crude oil in storage than the 450,761,000 barrels we had stored as of the same weekend a year earlier, and 45.3% more crude oil than the 360,475,000 barrels we had stored on August 22nd of 2014...

tying it all together, the chart below, from Zero Hedge, shows the aggregate of all oil and oil products we had in storage for every week since the beginning of 1990; it's a compact version of the interactive graph that accompanies the EIA's Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page...as of August 19th, our total stockpiles of oil and oil products set a new record at 1,400,176,000 barrels, the 23rd new record high set in 2016, and 6,613,000 barrels more than the record set for this metric last week...we've now set new records for total supplies 8 weeks in a row, adding a total of 28.3 million barrels of oil and oil products to what we already have stored over that 8 week stretch....you might also note from that chart that our 1.4 billion barrels of total supply is now more than 30% higher than the 2010 to 2014 average, and 40% higher than the 1 billion barrel average of the decade before that...

August 24 2016 total EIA inventory for week ending August 19

This Week's Rig Counts

US drilling activity fell for only the 2nd time in the past 13 weeks during the week ending August 26th, following the prior string of 39 weeks where the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 489 rigs as of Friday, which was also down from the 877 rigs that were deployed as of the August 28th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil was unchanged this week at 406, but was still down from the 675 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 2 rigs to 81 rigs this week, which ties the previous all time low for natural gas rigs set 3 weeks earlier on August 5th -- prior to this year, there is no record of less than 150 natural gas rigs deployed in the US in any week...gas rigs were also down from the 202 natural gas rigs that were drilling on August 28th year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs deployed....  

one of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico was shut down this week, leaving 17 still active in the Gulf of Mexico and offshore nationally at week end, down from 29 rigs drilling in the Gulf and a total of 30 rigs offshore nationally a year ago...however, there was also another rig set up to drill through an inland lake in southern Louisiana, which brought the inland waters rig count up to 4 rigs, which was the same as a year earlier...

the number of working horizontal drilling rigs fell by 3 rigs this week after rising by 7 rigs last week, which left the count of active horizontal rigs at 379 rigs, which was still down from the 672 horizontal rigs that were in use on August 28th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the vertical rig count dropped by 2 rigs to 62 rigs this week, which was down from the 125 vertical rigs that were drilling in the US during the same week last year...meanwhile, the directional drilling rig count rose by 3 rigs to 48 rigs, which was still down from the 80 directional rigs that were deployed during the same week last year...     

the details on this week's changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 26th, the second column shows the change in the number of working rigs between August 19th and August 26th, the third column shows the August 19th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week's case was August 28th of 2015:    

August 26 2016 rig count summary

once again, the Permian basin of western Texas shows the only significant increase in the rig count this week, as has typically been the case during the 13 weeks that oil drilling has generally been on the increase...on the other hand, there were two rigs removed from the Denver-Julesburg-Niobrara chalk of the Rockies front range, the first pullback of that magnitude in that basin since February; the rig count there had previously climbed from 12 to 18 over the prior three months...also note the removal of a single rig from the Utica of Ohio, where 13 rigs remain active, down from 20 rigs a year ago...also, not shown on the state table above was the decrease from 3 rigs to 2 rigs in Alabama, which brings them back to the same level of drilling activity as they saw a year ago, and the increase from 3 rigs to 4 rigs in Mississippi, which is also an increase from the 3 rigs working in Mississippi as of August 28th a year ago…

 

note: there's more here...

Sunday, August 21, 2016

oil production up by the most since last May, total supplies of oil & oil products at another record high..

oil prices rose with little interruption this week, largely on the ongoing talk about a possible Russian - OPEC agreement to freeze their oil output, although a falling US dollar (which makes internationally traded goods more expensive here) and a large drawdown of crude oil and gasoline inventories didn't help...the best way to see what happened price-wise is to start with a graph, because that picture of spiking prices goes a long way towards showing us all we really need to know...

August 20th 2016 oil prices

the graph above, which should be familiar to you by now, shows the daily prices per barrel over the past 3 months for the September contract of the US benchmark oil, West Texas Intermediate (WTI) as traded at the Cushing Oklahoma depot...Friday's $48.52 a barrel closing price for that oil contract is now up 22.8% from the $39.51 a barrel interim low price seen at the close on Tuesday, August 2nd, while it's still 2.3% below the $49.88 a barrel price seen for the August contract on July 1st...note that the light red and green bars across the bottom of the graph show the trading volume for that contract each day, wherein green bars indicate days when the price rose, and red bars indicate days when the price fell...but while we've seen the oil price rise 7 days in a row, a fairly impressive rally, note that the height of the bars indicate below average levels of trading for every day this week except Thursday...that's a fair indication that it's not big players like major refiners buying oil who are driving this price rise, but rather a collection of smaller oil traders we might think of as bored Pokemon-Go players, who are buying oil contracts in the absence of sellers because that's what they do...also note that September trading for Brent oil, the international benchmark, has already expired, and the international contract for October delivery is now trading $50.88 a barrel, as it's been holding a few dollars above the US price for several months now...

The Latest Oil Stats from the EIA

this week's oil data for the week ending August 12th from the US Energy Information Administration indicated a surprising jump in our production of crude oil, a return to near recent normal levels of oil imports after 3 weeks near 4 year highs, an large increase in oil refining to seasonal levels, and thus a decrease in crude oil inventories, as well as another drop in gasoline inventories... however, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was + 394,000 barrels per day, which means that 394,000 more barrels per day showed up in our final consumption and inventory figures than were accounted for by our production or import figures, meaning one or several of this week's metrics were incorrect by that amount, errors which are typically due to miscues in reporting or gathering that data...that's now the 8th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 80,000 barrels per day, which means a lot of oil or refined products have been turning up in the data, the sources for which haven't been accounted for...of course, this indicates that this weekly crude oil data is unreliable and will need to be revised later, but it's the weekly data that the markets react to, hence influencing the price of oil and hence ultimately decisions to drill or frack..

at any rate, according to the EIA. domestic production of crude oil from US wells rose by 152,000 barrels per day to an average of 8,597,000 barrels per day during the week ending August 12th, which was our largest one-week jump in oil output since the week ending May 22nd of 2015...moreover, only 52,000 barrels per day of that increase came from Alaska, as the lower 48 saw a 100,000 barrel per day increase to 8,120,000 per day...that increase strongly suggests that a number of those DUC oil wells (drilled but uncompleted) that we looked at 2 weeks ago were likely completed, fracking that may have been set in motion by oil prices near $50 a the end of June....hence our oil production this week was only 8.0% below the 9,348,000 barrels we produced during the week ending August 14th of 2015, and 10.5% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...

the EIA also reported that our imports of crude oil fell by an average of 211,000 barrels per day to an average of 8,193,000 barrels per day during the week ending August 12th, the least oil we've imported since the week ending July 15th....nonetheless, this week's imports were still more than 1.9% more than the 8,138,000 barrels of oil per day we imported during the week ending August 14th a year ago, while the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) stayed at the 8.4 million barrel per day level, 11.5% above the same four-week period last year...    

meanwhile, the amount of crude oil used by US refineries rose by 268,000 barrels per day to an average of 16,865,000 barrels of crude per day during the week ending August 12th...that was as the US refinery utilization rate rose to 93.5% during the week, up from 92.2% of capacity during the week ending August 5th but still below the refinery utilization rate of 95.1% logged during the week ending  August 14th 2015...crude oil refining on the product glut bound east coast was down by 1000 barrels per day as their utilization rate oddly rose to 84.2%, but their throughput was still 12.8% below a year ago, when east coast refineries were being operated at 93.5% of capacity...nationally, crude oil refined this week was a half percent more than the 16,775,000 barrels of oil per day US refineries processed during the week ending August 14th last year, and was 2.7% more than the equivalent week in 2014...  

with the increase in refining, our refineries’ production of gasoline rose by 182,000 barrels per day to an average of 10,280,000 barrels per day during the week ending August 12th, just 9,000 barrels per day short of the gasoline output record we set during the week ending June 17th...still, that was only 0.3% higher than our gasoline output of 10,248,000 barrels per day during the week ending August 14th last year, which was the high for 2015 gasoline production...at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also jumped, rising by 200,000 barrels per day to 4,939,000 barrels per day during the week ending August 12th....that brought our distillates output to within 2.6% of the 5,072,000 barrels per day that was being produced during the same week last year...

even with the near record output of gasoline, however, our gasoline inventories fell again, dropping by 2,724,000 barrels to 232,659,000 barrels as of August 12th, which was again well above the normal summertime drawdown...contributing to this week's gasoline shortfall was a 320,000 barrel per day drop in our gasoline imports to 610,000 barrels per day, while the amount of gasoline supplied to US markets slipped by an inconsequential 7,000 barrels per day to 9,762,000 barrels per day...nonetheless, this week's gasoline inventories were still 9.3% higher than the 212,774,000 barrels of gasoline that we had stored on August 14th last year, and also 9.1% higher than the 213,274,000 barrels of gasoline we had stored on August 15th of 2014, so our gasoline supplies still remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..         

even as our gasoline inventories dropped, our distillate fuel inventories rose by 1,939,000 barrels to 153,155,000 barrels by August 12th, as our demand for distillates fell 8.9% to 3,488,000 barrels per day during the week...that increase in supplies brought our distillate inventories to a level 3.2% above the distillate inventories of 148,400,000 barrels of the 14th of August last year, and 26.0% above the distillate inventories of 121,542,000 barrels of August 15th, 2014, which the EIA characterized as "near the upper limit of the average range for this time of year"... 

  with our crude oil imports lower and our refinery consumption of crude higher, we needed to draw oil out of storage to meet that need, and hence our stocks of crude oil in storage fell by 2,508,000 barrels to 521,093,000  barrels....nonetheless, we still ended the week with 14.2% more oil in storage than the 456,213,000 barrels we had stored as of the same weekend a year earlier, and 43.7% more oil than we had stored on August 15th of 2014....since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it's pretty obvious that our current crude oil supplies of 521.1 million barrels also remain "well above the upper limit of the average range" for this time of year..."     

now, as we mentioned in opening, that 2.5 million barrel drop in crude supplies and the 2.7 million barrel drop in gasoline supplies were widely seen as contributing to this week's oil price rally...oil prices jumped about 50 cents a barrel right after the Wednesday EIA release, then spiked another $1 a barrel on Thursday morning after the inventory data was digested...oil traders apparently see those drops in supply as evidence that the oil glut which drove prices down is being alleviated...however, the day traders in oil apparently can't see past the oil and gasoline numbers, because they ignored the 1.9 million barrel increase in distillates supply, the 1.8 million barrel increase in propane/propylene inventories, the 552,000 barrel increase in residual fuels supply, and a 2.2 million barrel increase in "other oils", which includes unfinished oils, road oil, and natural gas plant liquids...add them all together, it meant that total commercial petroleum inventories were still up 1.3 million barrels for the week, which is a record high, as you can clearly see on the graph below... 

August 18 2016 Total Commercial Oil and Petroleum Inventories for August 12

the above graph, from the EIA, is a static version of the interactive graph that accompanies the EIA's Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page...this graph takes crude oil, natural gas liquids, and all the products produced from them and adds them together, for a weekly total of all commercial supplies, amounts for which are all listed separately and in total on the EIA's Total Stocks of Crude Oil and Petroleum Products page...for the week ending August 12th, this total rose to 1,393,563,000 barrels, a new record high that was 1,320,000 barrels more than the previous week...in fact, so far in just this year alone we have set and eclipsed 22 new record highs of this total supply metric, almost a continuous weekly increase except for during May, when the total dropped by less than a million barrels each week...but we've now set new records for total supplies 7 weeks in a row, adding a total of 21.7 million barrels of oil and oil products to what we already have stored over that 7 week stretch....

This Week's Rig Count

drilling activity rose again during the week ending August 19th, for the 11th time in the last 12 weeks, following a prior string of 39 weeks wherein the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 10 rigs to 491 rigs as of Friday, which was still down from the 885 rigs that were deployed as of the August 21st report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 10 rigs to 406, which was still down from the 674 oil directed rigs that were in use the same week last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations was unchanged at 83 rigs, which was down from the 211 natural gas rigs that were drilling on August 21st year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs drilling ....  

included in this week's totals was the startup of new drilling from a platform offshore from Louisiana in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 18 rigs, which was still down from 31 Gulf of Mexico rigs a year ago...since the Gulf rigs are the only offshore rigs going right now, 18 is also the count for the US total offshore, which is down from 32 offshore drillers at this time last year...

meanwhile, the number of working horizontal drilling rigs increased for the 10th time in the past dozen weeks, rising by 7 rigs to 382, which still was down from the 677 horizontal rigs that were in use on August 21st of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count increased by 2 rigs to 64 rigs, which was still down from the 130 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was up by 1 rig to 41 rigs, which was down from the 78 directional rigs that were in use during the same week last year... 

details on this week's changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 19th, the second column shows the change in the number of working rigs between August 12th and August 19th, the third column shows the August 12th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week's case was August 21st of 2015:   

August 19 2016 rig count summary

once again, the increase of 7 rigs in the Permian basin of west Texas underpinned this week's rig count increase, but this week showed some other notable activity; an increase of 3 rigs in central Oklahoma's Cana Woodford basin, and an increase of 3 rigs in the Marcellus, apparently by adding 2 rigs in Pennsylvania and 1 rig in West Virginia...since those Marcellus rigs were almost certainly natural gas directed, we have to guess that 3 conventional natural gas rigs were removed elsewhere, to account for the unchanged gas rig count...the drop of two rigs to 27 in the Williston basin, home of the Bakken shale, is also a surprise; that count from Baker Hughes has not been consistent with the daily rig count released by the North Dakota Department of Mineral Resources, which shows 32 rigs as of this weekend...

note: there's more here...

Sunday, August 14, 2016

oil prices up on new OPEC production freeze rumors; rig count up most in a year, the biggest % jump in 23 years...

oil prices rose more than 6.4% this week and are now up nearly 14% from the low they hit the prior Tuesday, largely on renewed rumors that OPEC might negotiate a freeze of oil production at current levels...recall we've been through these rumors before, when Russia and OPEC ministers talked the same game before their April meeting in Doha, and subsequently pushed oil prices up 50% from their February lows, only to have the Saudis refuse to participate and ultimately increase their production ...this time a September meeting of oil producers is planned in Algeria, and Russia will be there (although they've dismissed the freeze rumors so far), and the same agents responsible for the March freeze talk are spreading it again, and the market is reacting, despite record Saudi production, Iraqi contracts to increase theirs, and indications that Oman will not even attend...still, it's obviously in the interest of OPEC's spokesmen, the Russians, and those in the US with oil interests to push oil prices up by keeping the rumor alive, so we may be in for an extended period of volatile oil markets as they respond to the latest "news" of this freeze talk...

so, despite the ongoing glut in oil and oil products, US oil contract prices for September jumped right out of the gate on those rumors Monday, rising by $1.22, or 2.9%, to close at $43.02 a barrel...they opened higher on Tuesday, but slid in the afternoon to close at $42.77 a barrel after the American Petroleum Institute reported a 2.09 million barrel increase in crude supplies, the biggest jump in in 3 months...prices continued to fall on Wednesday despite the EIA"s report of a crude supply increase of half that much, and settled at $41.71 a barrel, as traders focused on an even larger build of inventories at Cushing, the oil depot on which US prices are based...oil prices then jumped over $2 a barrel, or 5%, on Thursday morning, after comments from the Saudi oil minister about possible action to stabilize prices, and closed at $43.49 a barrel, in their largest one-day jump since April...the upward price momentum carried into Friday as prices barely skipped a beat on news of the largest jump in American oil rigs in a year, and they thus added another $1 to close the week at $44.49 a barrel...

The Latest Oil Stats from the EIA

the oil data for the week ending August 5th from the US Energy Information Administration indicated a modest drop in our oil imports from the prior week's near 4 year high, a corresponding drop in the amount of crude being refined by domestic refineries, a modest increase in the amount of crude we stored, and larger than normal seasonal drops in our gasoline and distillate inventories, which were offset by increases in stores of other petroleum products...however, this week's crude oil fudge factor the EIA included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +575,000 barrels per day, which meant that 575,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures...that's now the 7th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 70,000 barrels per day, which means a lot of oil & products are turning up, where the sources haven't been accounted for...i really dont have any idea why that adjustment has so dramatically reversed from earlier this year, when much of what we had appeared to have produced or imported each week did not show up in the final weekly consumption or inventory figures; one would think that aberrant data gathering would at least show a fairly consistent error in one direction or another ... 

domestic production of crude oil from US wells was down by just 15,000 barrels per day to an average of 8,445,000 barrels per day during the week ending August 5th, as Alaskan production fell 2,000 barrels per day and output from the lower 48 fell by 13,000 barrels per day...that left us down by 774,000 barrels per day from what we what were producing at the beginning of this year, and our oil production this week was 10.1% below the 9,395,000 barrels we produced during the week ending August 7th of 2015, and 12.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...

at the same time, our imports of crude oil, the other major source of our domestic crude supply, fell to an average of 8,404,000 barrels per day during the week ending August 5th, dropping by 334,000 barrels per day from the 45 month high average of 8,738,000 barrels per day we imported during the week ending July 29th.... however, that was still 11.0% more than the 7,496,000 barrels per day we were importing during the same week of last year, and our 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf) has now increased to the 8.4 million barrel per day level, 11.5% above the same four-week period last year...   

meanwhile, crude oil used by US refineries dropped by an average of 255,000 barrels per day to an average of 16,597,000 barrels of crude per day during the week ending August 5th, as the US refinery utilization rate fell to 92.2% for that week, down from 93.3% of capacity the prior week, and down from the refinery utilization rate of 96.1% logged during the week ending August 7th last year...although east cost crude oil refining fell by 64,000 barrels per day and their capacity utilization fell to 80.6%, the largest pullback of 171,000 barrels per day was seen by Midwest refiners, whose utilization rate fell from 97.7% to 93.4%...nationally, crude oil refined this week was 2.5% less than the 17,029,000 barrels of crude per day US refineries used during the week ending August 7th last year, but still 1.2% more than the equivalent week in 2014...

even with the drop in oil being refined, however, US refineries production of gasoline still increased by 106,000 barrels per day to 10,098,000 barrels per day during week ending August 5th, which was also up by 105,000 barrels per day, or 1.1% more than the 9,993,000 barrels of gasoline per day being produced during the week ending August 7th last year, as east coast refineries still managed to produce an average of 3,321,000 barrels of gasoline per day, 50,000 barrels per day more than the prior week and 3.4% more than a year earlier....however, refinery output of distillate fuels (diesel fuel and heat oil) fell by 201,000 barrels per day to 4,739,000 barrels per day during the week ending August 5th, which left our distillates output 7.9% below the distillates production of 5,148,000 barrels per day during the week ending August 7th of last year......      

even with the decent increase in gasoline production, our gasoline inventories fell again, dropping by 2,807,000 barrels to 235,383,000 barrels as of August 5th, which was about twice the normal weekly summertime decrease...that was despite a 293,000 barrel per day jump in our gasoline imports, from 637,000 barrels per day the prior week to 930,000 barrels per day during the week ending August 5th, as the amount of gasoline supplied to US markets barely inched up by 17,000 barrels per day to 9,769,000 barrels per day....in addition, gasoline exports look to be stable, although accurate data for that lags, so i have no idea where all that gasoline production and those gas imports went...nonetheless, this week's gasoline inventories were still 9.2% higher than the 215,482,000 barrels of gasoline that we had stored on August 7th  last year, and also 10.7% higher than the 212,689,000 barrels of gasoline we had stored on August 8th of 2014, so our gasoline supplies still remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..     

meanwhile, our distillate fuel inventories fell by 1,959,000 barrels to 151,196,000 barrels as of August 5th, which left them just 2.3% above the distillate inventories of 147,806,000 on the 7th of August last year, but still 23.4% above the distillate inventories of 122,502,000 barrels of August 8th, 2014...in this case, there was nearly a 10% increase in demand for distillates, from 3,605,000 barrels per day during the week ending July 29th, to 3,937,000 barrels per day during the reporting week, that accounted for the drawdown of supplies, and thus the EIA has changed the characterization of our distillates supply to "near the upper limit of the average range for this time of year"...

finally, with both crude oil imports and refinery consumption of that crude down by similar magnitudes, we again ended the week with a surplus of oil, and hence our stocks of crude oil in storage rose by 1,055,000 barrels to 523,601,000 barrels, the 3rd increase of more than a million barrels in a row...as a result, we ended the week with 14.8% more oil in storage than the 455,275,000 barrels we had stored as of the same weekend a year earlier, and 42.9% more oil than we had stored on August 8th of 2014....since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it goes without saying that our current crude oil supplies of 523.6 million barrels also remain "well above the upper limit of the average range" for this time of year..."     

This Week's Rig Count

the Friday US rig count was up by the most in one week since July 24th 2015 as US drilling activity increased for the 10th time out of the last 11 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 17 rigs to 481 rigs as of August 12th, which was still down from the 884 rigs that were deployed as of the August 14th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 15 rigs to 396, which was still down from the 672 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were deployed on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 2 rigs to 83 rigs this week, which was down from the 211 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs working this week that were classified as miscellaneous, unchanged from last week but up by 1 miscellaneous rig from the same week a year ago....this week's 3.66% increase in rigs was the largest percentage increase in drilling since 30 drilling rigs were added to the prior week's 641 rigs on May 28th, 1993..

the number of working horizontal drilling rigs increased for the 9th time in the past 11 weeks, rising by 13 rigs to 375, which still was down from the 676 horizontal rigs that were in use on August 14th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count increased by 4 rigs to 62 rigs, which was still down from the 127 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was unchanged at 44 rigs, which was down from the 81 directional rigs that were deployed during the same week last year...

details on this week's changes in drilling activity by state and shale basin are included in our screenshot of that part of the rig count summary from Baker Hughes which shows those changes below...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 12th, the second column shows the change in the number of working rigs between August 5th and August 12th, the third column shows the August 5th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was August 14th of 2015:   

August 12 2016 rig count summary

once again, we see that the lions share of this week's increased activity occurred in the Permian basin of western Texas, where 12 rigs were added, which contributed to the 13 rig increase in Texas....and again, outside of that area, the changes were pretty subdued, with no state or shale basin seeing a change in activity greater than 1 rig...we should note that the Utica shale had a rig added, and hence the count for both the Utica and for Ohio increased to 14 rigs...in other states not listed above, Alabama again saw another rig added, and now they have 3 active, which is an increase of 2 rigs from the 1 rig they had active a year ago, while Illinois saw one of the 3 rigs they had running shut down this week, leaving them two, also up from just 1 rig a year ago...



note: there's more here...

Sunday, August 7, 2016

John Mccain's 1969 "Tokyo Rose" Propaganda Recording Released

oil imports at 45 month high, gas drilling at all time low, DUC wells at 2300, global rig count rising again

contract prices for US oil fell by more than 5% the first two days of this past week, then rallied by 5.8% over the next two, and finally slipped a little on Friday to end the week up less than a half percent from where they started...after closing last week at down nearly 6% to $41.60 a barrel, oil prices extended their slump on Monday on news of record production from the OPEC countries, falling hourly to below $40 a barrel by mid-afternoon, only steadying in the last hour to close the day at $40.06 a barrel...prices seemed to be in a freefall on Tuesday morning as they fell below $39.30 a barrel before noon, but rebounded a bit to close at 39.51 a barrel after the American Petroleum Institute reported an unexpected 1.3 million barrel drawdown of inventories at Cushing Oklahoma, the storage depot on which US oil contract prices are based...prices were then up by 3% to close at $40.83 a barrel on Wednesday after the EIA reported a larger than expected 3.3 million barrel draw of gasoline inventories...then on Thursday, short covering kicked in push oil $1,10 higher, or 2.7%, to close at $41.93 a barrel, as those who sold oil they didn't own on Tuesday were forced to buy oil to cover their commitments...prices then opened lower on Friday, but pared losses to close the week at $41,80 a barrel, after Baker Hughes reported the number of U.S. oil rigs rose for a sixth straight week....

The Latest Oil Stats from the EIA

as mentioned, the oil data for the week ending July 29th from the US Energy Information Administration showed an unusually large draw from our stored supply of gasoline, which was offset by additions to inventories of most other refined products as well as crude, which couldn't help but increase in the face of oil imports that were near a 4 year high, even though refineries returned to operating at a more seasonable level...however, this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again positive, at +533,000 barrels per day, which meant that 533,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, so we have to again take this week's data with a large grain of salt...that's now the 6th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 53,000 barrels per day, a reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported did not show up in the final consumption or inventory figures...

the EIA reported that our imports of crude oil rose by an average of 301,000 barrels per day to an average of 8,738,000 barrels per day during the week ending July 22nd, the most oil we've imported in any week since the week ending October 19th of 2012....this week's imports were more than 1.5 million barrels per day, or 21.7%, more than the 7,180 ,000 barrels of oil per day we imported during the week ending July 31st a year ago, and the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.3 million barrels per day, 10.4% higher than the same four-week period last year...

at the same time, our field production of crude oil fell for the first time in four weeks, as oil output from US wells was down by 55,000 barrels per day to an average of 8,460,000 barrels per day during the week ending July 29th, entirely on a 55,000 barrel per day drop in production from Alaska (oil production from the lower 48 states did not decrease for the first time since January)...however, the overall drop in output still left the week's oil production down by more than a million barrels per day, or down by 10.6% from the 9,465,000 barrels we produced during the week ending July 31st of 2015, and 12.0% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...our oil production for the week ending July 29th was thus 759,000 barrels per day lower than we what were producing at the beginning of this year... 

meanwhile, the amount of crude oil used by US refineries rose by 266,000 barrels per day to an average of 16,852,000 barrels of crude per day during the week ending July 29th...that was as the US refinery utilization rate rose to 93.3% during the week, up from 92.4% of capacity during the week ending July 22nd but down from the refinery utilization rate of 96.1% logged during the week ending July 31st 2015, the high for the year...crude oil refining on the product glut bound east coast rose by 83,000 barrels per day as their utilization rate rose to 84.9%, but their throughput was still 10.4% below a year ago, when east coast refineries were being operated at 97.1% of capacity...nationally, crude oil refined this week was still 1.3% less than the 17,075,000 barrels of oil per day US refineries processed during the week ending July 31st last year, but was 2.8% more than the equivalent week in 2014... 

even with the increase in refining, however, our refineries’ production of gasoline slipped from the levels of last week, dropping by 76,000 barrels per day to an average of 9,992,000 barrels per day during the week ending July 29th...that was still a few barrels per day higher than the 9,984,000 barrels per day of gasoline produced in the same week last year, but still the lowest in 5 weeks...at the same time, refinery output of distillate fuels (diesel fuel and heat oil) increased, rising by 22,000 barrels per day to 4,940,000 barrels per day during the week ending July 29th....that still left distillates output 1.7% below the 5,025,000 barrels per day that was being refined the same week last year, which itself was the lowest distillates output for that month...production of jet fuel was higher, however, rising from 1,688,000 barrels per day last week to 1,759,000 barrels per day during the week, in keeping with news reports that east coast refineries were switching production to such products for which the margins were more profitable...

with the modest drop in our output of gasoline we might expect a small drop in gasoline supplies at this time of year, but the EIA reported that our gasoline inventories fell by 3,262,000 barrels to 238,190,000 barrels as of July 29th, the first drop in 5 weeks and the largest drop since the 2nd week in April...partially precipitating the drawdown from gasoline inventories was a 232,000 barrel per day decrease in our gasoline imports to 637,000 barrels per day, our lowest gasoline imports since March, and also 22.5% less than the 822,000 barrels of gasoline we imported during the same week a year earlier...rumor has it that the gasoline tankers which were backed up in New York harbor waiting to unload have moved on down the coast, so we may see a surge in gasoline imports shortly....nonetheless, this week's gasoline inventories were still 9.9% higher than the 216,733,000 barrels of gasoline that we had stored on July 31st  last year, and also 11.4% higher than the 213,849,000 barrels of gasoline we had stored on August 1st of 2014... so our gasoline supplies still remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..    

even as our gasoline inventories dropped, our distillate fuel inventories rose by 1,152,000 barrels to 153,155,000 barrels on July 29th, now well above our distillate inventories of 148,939,000 on the 1st of July...since our distillate inventories have continued to run far above the normal level since this winter, our distillate inventories as of July 22nd are now 5.8% higher than the 144,812,000 barrels of distillates we had stored as of July 31st last year, and 22.6% higher than our distillates supplies as of August 1st 2014, and thus they are also considered "above the upper limit of the average range" for this time of year...     

finally, with the big jump in imports being more than our refineries could use, we ended up with 1,413,000 more barrels of oil than we needed this week, which was subsequently added to our stocks of crude in storage, and hence our crude oil inventories rose to 522,546,000 barrels as of July 29th, the 2nd sizable increase in a row....thus we ended up with 14.8% more oil in storage than the 455,275,000 barrels we had stored as of the same weekend a year earlier, and 42.9% more oil than we had stored on August 1st of 2014....since our oil supplies first topped 500 million early this year, and first topped 400 million in January of 2015, it goes without saying that our crude oil supplies also remain "well above the upper limit of the average range" for this time of year..."    

This Week's Rig Count

US drillers netted an addition of just one rig in the week ending August for the 2nd week running, but that still meant the total rig count has risen 9 out of the last ten weeks, following a prior string of 39 weeks where the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 1 to 464 rigs as of Friday, which was still down from the 884 rigs that were deployed as of the August 7th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 7 rigs to 381, which was still down from the 670 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 5 rigs to 81 rigs this week, which breaks the previous record for the all time low for natural gas rigs set on June 3rd....gas rigs were also down from the 213 natural gas rigs that were drilling on August 7th year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008; prior to this year, there is no record of less than 150 natural gas rigs deployed in the US in any week...there were also two rigs drilling this week that were classified as miscellaneous, down by 1 rig from last week but up from the single miscellaneous rig that was drilling the same week a year ago....  

two of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico were shut down this week, leaving 17 still active in the Gulf of Mexico and offshore nationally at week end, down from 37 rigs drilling in the Gulf and a total of 38 rigs offshore nationally a year ago...the number of working horizontal drilling rigs rose by 8 rigs this week after falling by 3 last week, as the count of active horizontal rigs rose 362 rigs, which was still down from the 672 horizontal rigs that were in use on August 7th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the vertical rig count dropped by 3 rigs to 58 rigs this week, which was down from the 129 vertical rigs that were drilling in the US during the same week last year, and the directional rig count fell by 4 rigs to 44 rigs, which was down from the 83 directional rigs that were deployed during the same week last year...      ...      

for the details on which states and which shale basins saw changes in drilling activity this past week, we'll again include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 5th, the second column shows the change in the number of working rigs between July 29th and August 5th, the third column shows the July 29th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was August 7th of 2015:  

August 5 2016 rig count summary

here we can see that we can practically account for the entire increase in horizontal drilling by the increases in the Permian and the Eagle Ford, the two major shale basins in Texas...that Permian increase might also account for the 2 rig increase in New Mexico, as that basin straddles the state border...note that the 4 rig drop in Louisiana includes the two rigs that were pulled out of the Gulf of Mexico...otherwise, the rest of the country was fairly stable, with no more than one rig added or taken down any where else...not shown above was the increase from 1 rig to 2 in Alabama, which brings them back to the same level of drilling activity as they saw a year ago…

as you've probably noticed, we've been including the highs for drilling as we cover this report weekly, since the Baker Hughes reports only show the year ago data, and a year ago the rig count was already cut in half from the prior year...but even as our rig count has risen 9 out of the last ten weeks, at 464 rigs it's still less than one quarter of the 1929 rigs that were in use the week before the 2014 Thanksgiving OPEC meeting that precipitated this oil bust...still, oil production is down less than 10% from then, and only down 12% from the peak, and this week we saw the national oil output stabilize, which one wouldn't have thought would happen with only a quarter as many new wells being drilled...moreover, a lot of the wells that have been drilled over the past year haven't even been completed, and hence aren't yet even producing, as we can see in this bar graph below...

July 2016 DUC inventory

the above graph comes from a press release from Rystad Energy, a Norwegian company that bills themselves as "an independent oil and gas consulting services and business intelligence data firm"...in the graph above, each bar represents the number of "drilled but uncompleted" or DUC oil wells in the US, which you can see has been clearly rising….this is happening because fracking, the most expensive part of the operation, is being held off until prices rise...within each bar, the number of DUC wells or the given month from each major oil shale basin in color coded, with red representing the number of Eagle Ford DUC wells, beige representing the number of Bakken DUC wells, grey representing the drilled but not fracked wells in the Permian basin, pink representing the DUC well inventory in the Niobrara of the Rockies, and silver representing the DUC oil wells in the rest of the US...what we can see here is that the number of uncompleted wells has grown monthly through this entire period of record low drilling levels, meaning that some number of the low level of wells drilled we've seen in recent weeks are not going to the fracking stage where additional production would be forthcoming...thus we now have roughly 2300 oil wells, with over 600 in each of the major oil shale plays, waiting for such time as the drillers feel the price is right, when the wells will be completed and production will begin, almost certainly adding to the oil glut when that happens...thus, this is a shadow oil inventory that can be brought forth in as little as a few weeks, depending on the availability of equipment and fracking crews...and with this much of a backlog of drilled but incomplete wells, it's not likely many drillers will feel pressure to increase the number of new wells they'd be drilling anytime soon..

International Rig Counts for July

Friday also saw the monthly release of the international rig counts for July, which unlike the weekly count, is an average of the number of rigs running in each country during the month, rather than the total of those rig drilling at month end....Baker Hughes reported that an average of 1481 rigs were drilling for oil and natural gas around the globe in July, which was up from the 1,407 rigs that were drilling around the globe in June but down from the 2,167 rigs that were working globally in July of last year...increased North American drilling again accounted for most of the global increase, as the average US rig count rose from 417 rigs in June to 449 rigs in July, which was still down from the average of 866 rigs working in the US in July a year ago, while the average Canadian rig count rose from 63 in June to 94 rigs in July, again still down from the 183 Canadian rigs that were deployed in July a year earlier....outside of Northern America, the International rig count rose by 11 rigs to 938 in July, which was also down from 1,118 rigs a year ago, as every region of the globe except Africa saw an increase in drilling activity for the month...

drilling in the Middle East increased for only the 2nd month this year, as the region's activity was up by a single rig to an average of 390, which nonetheless was only down by 1 rig from the 391 rigs deployed in the Middle East a year earlier...288 of the rigs working in the region were targeting oil, up from 284 in June, while the regional gas rig count fell by 3 to 102...the Middle East did see the addition of 3 rigs working offshore, increasing the offshore count to 52, which was also up from the 49 rigs the region had working offshore in July a year ago....the largest drilling activity increase was in Kuwait, where their active rig count rose by 3 rigs, from 44 to 47 rigs, which was also up by 3 from the 44 rigs working in Kuwait last year at this time....both Egypt and Saudi Arabia also added a rig in July; for Egypt, that gave them 27 working rigs, down from 42 rigs a year earlier, while for the Saudis, the increase brought them up to 125 active rigs, which was also up from the 123 rigs the Saudis had deployed last July...the Saudis have been averaging a deployment of 125 rigs over the past year, which is up from their average of 105 rigs in 2014, but roughly 2/3rds of their new drilling has been for natural gas; they now have 56 rigs targeting that resource...Middle East countries seeing a drilling pullback in July included Iraq, where their active rig count fell by 2 to 39, which was also down from the 44 rigs active in Iraq a year ago, and Oman and Pakistan, which each saw one rig idled...that left Oman with 65 rigs, down from 67 a year earlier, and left Pakistan with 29 rigs, which was up from the 23 rigs working there last year...

meanwhile, the Latin American countries added 8 rigs in July in the region's first increase this year; previously, the region had idled 92 rigs over the prior 6 months…Latin America drillers averaged 186 rigs in July, which included 33 offshore, down from the total of 313 rigs, which including 54 offshore rigs, that were active in Latin America in July of 2015....Argentina alone accounted for the regional increase, as they added 9 rigs to give them an average of 72 active rigs, which was nonetheless down from the 106 rigs that were in use in Argentina a year ago...in addition, Mexican drillers added 3 rigs to give them 23, down from 45 a year ago, and Brazil also added one rig, giving them 15 active in July, down from 37 rigs a year earlier...on the other hand, Venezuela idled 3 more rigs, after shutting down 7 rigs in June and 9 in May, and they're thus down to 50 active rigs, from the 70 rigs that were deployed in Venezuela in July of last year...other Latin American countries shutting down a single rig each included Bolivia, now with 5 rigs, Columbia, now with 6 rigs, Ecuador, now with 4 rigs, and Trinidad, which now has 4 rigs, down from 8 a year ago..

at the same time, the Asia-Pacific region had 186 drilling rigs working in July, up from the 182 rigs working in June, but down from the 214 rigs working the region a year earlier, with the Asia-Pacific offshore count rising by two rigs to 88...an increase of 5 rigs to 113 rigs in India accounted for the regional increase, while India's count is still down from 116 rigs a year ago...Indonesia also added a rig, but at 17 they're still down from 22 rigs a year earlier, while the addition of a rig in the Philippines brought them up to 2, still down from 3 rigs last July...Malaysia idled 2 rigs and now has 3 active, down from 6 rigs a year ago, and Thailand cut back one rig, leaving 11 active, down from 18 a year earlier...

elsewhere, countries in Africa shut down 5 rigs in July, leaving 82 still in drilling, down from the 94 rigs working the African continent last year at this time...Angola accounted for 4 rigs of that decrease, as they were down to 5 rigs in July, which was also down from the 8 rigs that they had active a year earlier...Kenya shut down 1 rig, leaving 10, also 1 rig fewer than they were running a year earlier...the Congo and the Ivory Coast also shut down one rig each, leaving both countries with one rig remaining, essentially unchanged from a year earlier...meanwhile, two rigs were added in Algeria, which now has 55 rigs deployed, up from 50 last July....

lastly, the rig count in Europe increased by 3 to 94 rigs in July, which was down from the 108 rigs working in Europe a year ago at this time...Norway, with an increase of 4 rigs to 20, more than accounted for the continent's increase, as their rig count is now the same as last July...the UK also added an offshore rig, bringing their offshore count up to 10, which was down from 12 rigs a year earlier, and Iceland also set up a lone rig; a year ago, they had none...meanwhile, Denmark, Germany and Italy each shut down a rig, leaving Denmark without any, down from 3 working rigs a year earlier, leaving Germany with 2 rigs, up from none last July and leaving Italy with 3 rigs, still up from 4 a year ago....finally, note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China's offshore area, with an average of 28 rigs active in July, down 1 from June, is included in the Asian totals here...   

note: there's more here...

Thursday, August 4, 2016

Hillary, Queen of War: The Road Map Ahead for a NeoLibCon Wahhabi Zionist Lovefest by Pepe Escobar

.......... The Three Harpies; Hillary Clinton, Flournoy and – the most terrifying words in the English language – Secretary of State Victoria Nuland, the possible lethal trio in charge of foreign policy under a Clinton Three administration.     
This is in fact PNAC (the Project for a New American Century) on steroids, with echoes of the warlike 1992 US Defense Planning Guidance disguised under the soothing rhetoric of benevolent hegemony and “rules-based international order”. If the Trump campaign managed to restrain his motormouth and/or motortweet instincts and focus on what this warmongering opus means for the US and the world at large they would strike a chord with millions of undecided US voters...........

READ MORE

The Nominee

Say hello to Southeast Asia’s New Silk Roads by Pepe Escobar

READ MORE

Sunday, July 31, 2016

oil majors see earnings crash, gasoline supplies at another seasonal record, crude supplies rise first time this summer

oil prices fell every day this week until Friday, at which time they steadied and recovered half of Thursdays loss, but still ended down 5.9% for the week, and down nearly 15% for July, the largest one month drop in a year...after falling to close at $44.19 a barrel last week largely on worries about the gasoline glut, oil opened lower and fell more than a dollar to close Monday at $43.13 a barrel, after the CEO of Vitol, one of the world's largest physical traders of oil, said he expected the oil glut to last two more years...oil then fell to close at a three month low of $42.92 a barrel on Tuesday as hedge funds began unloading their record speculative position in oil....prices were then driven another dollar lower on Wednesday after the weekly EIA report indicated not only another surprise increase in gasoline supplies, but also the first weekly increase in domestic-crude inventories in 10 weeks...oil prices then fell another 54 cents in the first hour of trading on Thursday, and drifted lower from there to close at $41.14 a barrel...oil then steadied Friday morning and rose in the afternoon to close the week at  $41.60 a barrel, apparently relieved that the Baker Hughes rig count showed a negligible increase in new drilling...

Oil Majors Report Second Quarter Results+

this week saw the first batch of 2nd quarter reports to shareholders from the major international oil companies, which for the most part showed much poorer earnings than a year ago, and which were generally worse than analysts had expected...recall that when we looked at these reports in earlier quarters, it was the small independent drillers that were piling up the big losses and going bankrupt, while the vertically integrated oil majors, which were also seeing losses in the exploration and exploitation segments of their business, were saved by profits from their refining operations that in some cases more than doubled, as they benefited from some the widest margins on refined products in history...now, with the glut of gasoline and all other refined products, prices for those products have fallen as well, and refining margins shrank even as oil prices rose during the April through June period...hence, the oil majors are not only seeing reduced profits or losses in their oil field operations, but they're also barely making anything on the refining side of their business as well...

for BP, that resulted in their third straight quarterly loss, as the British oil giant reported on Tuesday that it posted a $2.25 billion net loss in the second quarter of 2016, which also included some inventory writedowns and additional charges related to the Deepwater Horizon; their earning from operations fell 45% to $720 million, down from $1.3 billion in the same quarter a year earlier, as profit margins at its refineries were at their lowest levels since 2010...reporting two days later, BP rival Royal Dutch Shell reported their profits plunged more than 70% to $1.05 billion, down from $3.76 billion in second-quarter 2015; they reported that their earnings were impacted by the decline of oil, gas, and LNG prices; a depreciation step-up from the BG acquisition; and weaker refining conditions, as revenues of $58,415 million were below the consensus estimate of $65,464 million.

also on Thursday, ConocoPhillips reported larger-than-expected loss of $1.1 billion on 2nd quarter revenue of $5.58 billion as revenues fell 36% from a year earlier to $5.58 billion, against analysts revenue expectations of $6.62 billion...then on Friday, ExxonMobil reported its profits crashed 59% to a 17 year low of just $1.7 billion as exploration and drilling profits plunged by 82%...also on Friday, Chevron surprised analysts by posting a loss of 1.5 billion for the second quarter, compared with earnings of $571 million in second-quarter 2015, as it reported $2.8 billion in impairments and non-cash charges, as revenues from its exploration and exploitation businesses were expected to be insufficient to cover costs...

The Latest Oil Stats from the EIA

as we mentioned, this week's release of oil data for the week ending July 22nd from the US Energy Information Administration showed unseasonably large increases in our stored supply of both crude oil and gasoline; that was largely due to a big jump in oil imports and the mix of products coming out of refineries, because oil consumption by refineries dropped to below seasonal levels...at the same time, this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was +550,000 barrels per day, which meant that 550,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, errors which are typically due to shortfalls in reporting or gathering that data...that's the 5th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 36,000 barrels per day...during much of this this year, that adjustment had been negative, meaning much of what we had appeared to have produced or imported did not show up in the final consumption or inventory figures....that statistical aberration has now completely reversed..

our field production of crude oil rose for the 3rd week in a row, as oil output from US wells rose by 21,000 barrels per day to an average of 8,515,000 barrels per day during the week ending July 15th, entirely on a 33,000 barrel per day increase in production from Alaska...but oil production from the lower 48 states was down just 12,000 barrels per day, a slowing in the rate of decline...but even with production up 3 weeks in a row, our oil output still remained 704,000 barrels per day below the pace we saw at the beginning of this year, which was also 9.5% lower than the 9,413,000 barrels we produced during the week ending July 24th of 2015, and 11.4% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year... 

at the same time, the EIA reported that our imports of crude oil rose by an average of 303,000 barrels per day to an average of 8,437,000 barrels per day during the week ending July 22nd, just 2,000 barrels per day shy of the 42 week high for oil imports we saw during the week ending June 17th....this week's imports were nearly 900,000  barrels per day, or 11.8% more than the 7,545,000 barrels of oil per day we were importing during the week ending July 24th a year ago, while the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.2 million barrels per day, 8.7% above the same four-week period last year...

meanwhile, crude oil usage by US refineries dropped by 277,000 barrels per day to an average of 16,586,000 barrels of crude per day in this week's report...that was as the US refinery utilization rate fell to 92.4% for the week ending July 22nd, down from 93.2% of capacity the prior week and down from the refinery utilization rate of 95.1% logged during the week ending July 24th last year...crude oil refining fell by 95,000 barrels per day on the east coast, and was now at a level 12% below a year ago, indicating that the New York area products glut is having an impact on refinery operations there...nationally, crude oil refined this week was just over 1.0% less than the 16,762,000 barrels per day US refineries used during the week ending July 24th last year, and on a par with the equivalent week in 2014... 

even with the drop in oil being refined, however, US refineries production of gasoline still inched up by 18,000 barrels per day to 10,068,000 barrels per day during week ending July 22nd, as east coast refineries still managed to produce an average of 3,316,000 barrels of gasoline per day, 67,000 barrels per day more than the prior week and 4.2% more than a year earlier....that increase meant that this week's gasoline production was 4.0% greater than the 9,681,000 barrels per day of gasoline produced during the equivalent week a year ago, despite the refinery slowdown....however, refinery output of distillate fuels (diesel fuel and heat oil) did drop during this week, falling by 86,000 barrels per day to 4,918,000 barrels per day during the week ending July 22nd...that left our distillates output 3.5% below the distillates production of 5,096,000 barrels per day during the week ending June 24th of last year......          

with the incremental increase in gasoline production, our gasoline inventories rose again, increasing by 452,000 barrels to 241,452,000 barrels as of July 22nd, the 5th increase in the past 6 weeks, at a time of year when our gasoline supplies are usually being used up...in fact, since July 15th had seen the highest summertime level for gasoline supplies in the EIA's weekly records, July 22nd just topped that record by 452,000 barrels, and that happened even as the amount of gasoline supplied to US markets rose by 12,000 barrels per day to a near record of 9,797,000 barrels per day itself...to see what this buildup of gasoline supplies looks like historically, we'll include another one of the EIA's weekly 5 year graphs:

July 29 2016 gasoline inventory for July 22

in the graph above, which was sourced from page 12 of the EIA's weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of US gasoline inventories over the period from December 2014 to July 22nd,, 2016, while the grey shaded area represents the range of US gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, thus showing us the normal range of US gasoline inventories as they fluctuate from season to season, normally falling during the driving season every summer and rising in winter...note that gasoline inventories first rose out of that prior trend in January of this year, and by February had set a new record high...then, instead of falling rapidly during the spring as it had in prior years, this year gasoline inventories remained elevated throughout the spring, and once they started rising 6 weeks ago, it didn't take much for them to hit a record for this time of year...gasoline inventories thus ended this week 11.8% higher than the 215,922,000 barrels of gasoline that we had stored on July 24th last year, and also 10.6% higher than the 218,236,000 barrels of gasoline we had stored on July 25th of 2014... thus our gasoline supplies remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..   

meanwhile, our distillate fuel inventories fell by 780,000 barrels to 152,003,000 barrels on July 22nd, which left them still well above the distillate inventories of 148,939,000 on the 1st of July...since our distillate inventories have continued to run far above the normal level since our warm winter reduced US heat oil consumption, our distillate inventories as of July 22nd were still 5.5% higher than the 148,939,000 barrels of distillates we had stored as of July 24th last year, and 20.0% higher than our distillates supplies as of July 25th 2014, and thus they are still characterized as "above the upper limit of the average range" for this time of year...     

finally, as our refineries failed to keep pace with our increased level of imports, we found ourselves with 1,671,000 more barrels of oil than we needed this week, which was subsequently added to our stocks of crude in storage, and hence our crude oil inventories rose to 521,133,000 barrels as of July 22nd, the first increase in oil stocks in 10 weeks....that meant we ended up with 13.4% more oil in storage than the 459,682,000 barrels we had as of the same weekend a year earlier, and 41.9% more oil than we had stored on July 25th of 2014....since our oil supplies first topped 500 million early this year, and first topped 400 million in January of 2015, it goes without saying that our crude oil supplies also remain "well above the upper limit of the average range" for this time of year..."    

This week's rig counts

even though it was just by one more rig, US drilling activity increased for the 8th week out of the past 9 weeks during the week ending July 29th, even as oil prices fell....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 1 to 463 rigs as of Friday, which was still down from the 874 rigs that were deployed as of the July 31st report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 3 rigs to 374, which was still down from the 664 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by two rigs to 86 this week, which was also down from the 209 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also three rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the single miscellaneous rig that was drilling the same week a year ago....  

even with the negligible overall increase, another rig was added offshore from Texas in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 19 rigs, which was still down from 34 Gulf of Mexico rigs a year ago...however, the offshore platform that had been working off the Cook Inlet in Alaska was shut down, which left the total offshore count unchanged at 19, which was also down from 34 offshore a year earlier...at the same time, there was a single new rig that started drilling through an inland lake in southern Louisiana, which brought the inland waters rig count up to 4, which was still down from the 5 rigs that were deployed drilling on inland waters at the end of the same week last year...  

the number of working horizontal drilling rigs fell for the 2nd time in 9 weeks, as the count of active horizontal rigs dropped by 3 rigs to 354 rigs, which also was down from the 664 horizontal rigs that were in use on July 31st of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, 4 more directional rigs were added, bringing the directional rig count back up to 48, which was still down from the 84 directional rigs that were in use at the end of the same week a year earlier...meanwhile, the vertical rig count was unchanged at 61 rigs this week, which was down from the 126 vertical rigs that were drilling in the US during the same week last year...     

for the details on which states and which shale basins saw changes in drilling activity this past week, we'll again include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of July 29th, the second column shows the change in the number of working rigs over the last week, the third column shows last week's July 22nd rig count, the 4th column shows the change in the number of rigs running from the equivalent week in July a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was July 31st of 2015:  

July 29 2016 rig count summary

here we can see that the change in the overall rig count that the press characterized as 'negligible' masks quite a bit of activity across the nation...for instance, even though the Texas rig count was down by 3 rigs to 214, drilling in the Permian basin in the western part of the state still increased by 4 active rigs, as 3 rigs were idled that had been working in the Barnett shale near Dallas, and another 2 rigs in the Eagle Ford of south Texas were also shut down...also note that Ohio saw its rig count rise by 1 rig to 13 with the addition of another rig in the Utica, while the Marcellus dropped a rig by virtue of pulling 2 rigs from West Virginia and adding 1 rig in Pennsylvania...also note that Mississippi, which is not included among major producing states above, saw the addition of a rig this week, bringing the state count up to 3 rigs....Mississippi also had 3 rigs deployed on July 31st of 2015....



note: there's more here...