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

Thursday, September 22, 2016

Sunday, September 18, 2016

this week’s Ohio Supreme Court rulings, another record for refined products supplies, et al

before we start on the regular fracking patch news, we should take note of two rulings which were handed down by the Ohio Supreme Court this week that relate to fracking in Ohio....in the first, the Court ruled in favor of Secretary of State Jon Husted and against the citizen petitions to establish a charter form of county government that had been advanced by groups in Athens, Meigs and Portage counties, news of which we've been carrying as it developed over the past several months, wherein local election boards had ruled against the petitions, ultimately throwing the decisions to the Secretary of State...this was basically a replay of the rulings of last summer that we covered in two posts, wherein county charter government proposals in Athens, Fulton and Medina were ruled off the November 2015 ballot...

the second Supreme Court ruling involved, as best i can determine, 16 cases that had been brought in regards to the state’s Dormant Mineral Act, wherein the court ruled on three of those cases, while the remaining cases were disposed of based on the authority of those initial three decisions...to cut to the chase, the question being decided was who owns the mineral rights to a property, the surface land owner, or the mineral rights holder, after decades of extraction inactivity at the site...i gather that the Ohio Dormant Mineral Act, Ohio Revised Code § 5301.56, sets forth that ownership of mineral rights would transfer to the owner of the surface property after said mineral rights would deem to be abandoned...however, the court ruled that this transfer is not automatic, ie, that the surface owner must bring a quiet title action to obtain a judicial decree that a mineral interest has been abandoned, and otherwise, as in the cases being ruled on this week, the mineral rights holder would retain those long dormant rights...thus, in the lead case, Corban v. Chesapeake, the court found that an Ohio man who had inherited 164.5 acres in Harrison County could not prevent Chesapeake from drilling on his land, even though the property had been purchased by his family 57 year ago from a coal company, since that company had retained rights to the oil and gas deposits...thus, it would appear that all of those properties in our part of the state that have at one time had gas or drilling on them would be subject to fracking in the future, without any additional compensation the surface landowners...that would seem to include all the farms that had wells drilled on them in the gas boom of the mid-1980s, when everyone with a piece of land in this part of the county thought they were the reincarnation of J.R. Ewing, and that would be the case even if said farms have since been sold and been subsequently developed as residential properties...now, there are several links to this ruling here, including two from law journals, so i'd welcome anyone with a law background to further clarify what this ruling means for those who might own or who have purchased such a property in this part of the state, because eventually we're going to want to know that...

in other news, oil prices fell more than 6% this week, despite two days that saw prices rise, as global oil glut concerns overwhelmed the impact of other news & rumors...after closing last week at $45.88 a barrel, oil prices rose nearly one percent on Monday, supported by a weaker dollar and a broad-based market rally, and closed up 41 cents at 46.29 a barrel...but oil prices fell steadily all day Tuesday, after OPEC raised its 2017 forecast of non-OPEC oil supplies and the Paris based International Energy Agency (IEA) published its September Oil Market Report, which forecast demand for oil would only grow 1.3 million barrels per day this year, or 100,000 barrels per day less than their prior estimate...after falling 3% on that news to close at $44.90 a barrel on Tuesday, oil prices then fell another 3% on Wednesday to close at $43.58 a barrel on news that oil shipments from both Libya and Nigeria would soon be resuming, exacerbating the oil glut...oil prices then rose roughly 0.8% to $43.91 on Thursday when gasoline prices rose 5.1% after a major rupture of the Colonial Pipeline, which transports 1.2 million barrels of gasoline a day from Texas to New Jersey, spilled the fuel near Birmingham Alabama, closing the pipeline and thus threatening gasoline supplies to 6 states...oil prices then resumed their slide on Friday after a report from Goldman Sachs forecast that crude would continue to trade within the $45-50 band over the next 12 months, and that any price increase above $50 was highly unlikely, comparing the current period to the 12 year stretch in the 1990s, when oil traded around $20 a barrel....oil prices thus closed the week at $43.03 a barrel, 6.2% lower than last Friday's close..

The Latest Oil Stats from the EIA

this week's oil stats for the week ending September 9th from the US Energy Information Administration indicated that our oil imports returned to recent levels after last week's storm related interruptions, that refinery throughput eased from the near record levels of last week, and that a relatively small drawdown of crude oil inventories was more than offset by a six and a half million barrel increase in supplies of refined products...however, this week's crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung back to +513,000 barrels per day, after last week's -169,000 barrels per day, which meant that 513,000 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... we've now seen a large positive adjustment in 11 out of the last 12 weeks, and as a result this year's cumulative daily average of that weekly statistical adjustment has risen to a positive 101,000 barrels per day, a significant 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...   

this week's EIA data also showed that production of crude oil from US wells rose by 35,000 barrels per day to an average of 8,493,000 barrels per day during the week ending September 9th, as output of Alaskan oil rose by 30,000 barrels per day and production from the lower 48 states was 5,000 barrels per day higher, the second small increase in continental US production in a row....that still left the week's domestic oil production 6.8% lower than the 9,117,000 barrels we produced during the week ending September 11th of last year, and 11.6% off 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 September 9th was also still 726,000 barrels per day lower than what we were producing at the beginning of this year...  

during the same week, the EIA reported that our imports of crude oil rose by an average of 993,000 barrels per day to an average of 8,062,000 barrels per day, 12.1% more than the 7,189,000 barrels of oil per day we imported during the week ending September 11th a year ago...the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) remained at an average of 10.2 million barrels per day, 10.1% higher than the same four-week period last year... at the same time our exports of crude oil fell by an average of 83,000 barrels per day to an average of 418,000 barrels per day during the week ending  September 9th, well down from the oil export record of 698,000 barrels per day we saw during the week ending August 26th...combined, that meant our net imports were 1,076,000 higher than last week...

meanwhile, the amount of crude oil used by US refineries fell by an average of 200,000 barrels per day to an average of 16,730,000 barrels of crude per day during the week ending September 9th, as the US refinery utilization rate fell to 92.9% for that week, down from 93.7% of capacity the prior week, and down from the refinery utilization rate of 93.1% logged during the week ending September 11th last year...refining on the glutted east coast fell by 54,000 barrels per day as the refinery utilization rate there fell back to 85.5% from last week's 89.6%, while the Gulf coast refineries also took in 116,000 less barrels of crude per day than they did last week...nonetheless, the amount of crude refined this week nationally was still 1.3% more than the 16,513,000 barrels of crude per day US refineries used during the week ending September 11th last year, and 2.6% more than the equivalent week in 2014, as refining for “the summer driving season” now comes to a close with the passing of the labor day weekend ...   

the 200,000 barrel per day drop in crude oil being refined, combined with the beginning of the seasonal switch in refinery processes, led to a 273,000 barrel per day drop in our refineries’ production of gasoline, which fell to 9,900,000 barrels per day during the week ending September 9th, the lowest gasoline output since the second week of June...still, that was 7.1% higher than our gasoline output of 9,247,000 barrels per day during the week ending September 11th last year, and 7.9% 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 98,000 barrels per day to 4,933,000 barrels per day during the week ending September 9th....that left our distillates output 2.8% less than the 5,076,000 barrels per day that was being produced during the same week last year, but still a bit more than the 4,910,000 barrels per day of distillates production of the equivalent week of 2014...  

however, even with the slowdown in gasoline production, our gasoline inventories rose by 567,000 barrels to 228,360,000 barrels as of September 9th, as our gasoline imports rose by 43,000 barrels per day to 650,000 barrels per day and as our domestic demand for gasoline fell by 189,000 barrels per day to 9,406,000 barrels per day, confirming that driving really did tail off after Labor Day...that left this week's gasoline inventories 5.0% higher than the 217,387,000 barrels of gasoline that we had stored on September 11th last year, and 8.4% higher than the 210,738,000 barrels of gasoline we had stored on September 12th of 2014...at the same time, our distillate fuel inventories rose by 4,619,000 barrels to 162,754,000 barrels by September 9th, which was the largest one week build of distillate inventories since January 8th of this year...that put our distillate inventories 5.7% above the distillate inventories of 153,963,000 barrels of September 11th last year, and 27.4% above the distillate inventories of 127,772,000 barrels of September 12th, 2014...  

end of the week inventories of most other major refined products were higher as well....our stockpiles of propane/propylene rose by 1,963,000 barrels to 98,51,000 barrels last week, which meant they were 3.5% above last year's September 11th record high of 97,693,000 barrels, and 30.5% higher than the propane/propylene inventories of the same weekend in 2014...inventories of kerosene type jet fuel rose by 908,000 barrels to 42,749,000 barrels as of September 9th, 4.1% above our jet fuel stockpiles of 41,077,000 barrels on September 11th last year, and 10.8% higher than our 38,596,000 barrels of jet fuel supplies we had stored on September 12th of 2014...in addition, our stockpiles of residual fuel oils rose by 997,000 barrels to 40,583,000 barrels as of September 9th, up 4.1% from the 38,988,000 barrels we had stored a year earlier, and 11.3% higher than the 36,463,000 barrels of residual fuel oils we had stored on September 12th of 2014....and while inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) fell by 439,000 barrels to 150,681,000 barrels as of September 9th, they remained 14.0% higher than the 132,196,000 barrels we had stored as of September 11th last year, and 15.0% higher than the equivalent week in 2014...adding all the refined products together, we find that they rose by 6,571,000 barrels over the week ending September 9th, to another new record high, just as we've seen them do almost every week this year...

lastly, the expected rebound in our oil supplies after Hurricane Hermine curtailed last week's East Coast and Gulf imports did not materialize, and therefore refineries and exporters found in necessary to withdraw 559,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 9th fell to 510,798,000 barrels...but that was still 12.0% higher than the 455,894,000 barrels of oil we had stored as of September 11th, 2015, and 41.0% higher than the 362,271,000 barrels of oil we had stored on September 12th of 2014, so the two weeks of inventory drawdowns barely put a dent in our oversupply of crude.... 

This Week's Rig Count

US drilling activity fell for the 3rd time in the past 16 weeks during the week ending September 16th, following the prior string of 39 weeks back to August 21, 2015 wherein 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 506 rigs as of Friday, which was also down from the 842 rigs that were deployed as of the September 18th 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 rose by 3 rigs to 416 rigs this week, and they’re now up by 100 rigs since the May 27th nadir; however, that was still down from the 644 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...meanwhile, the count of drilling rigs targeting natural gas formations fell by 3 rigs to 89 rigs this week, which was also down from the 198 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...the week also saw the removal of 1 rig that was classified as miscellaneous, still leaving a single miscellaneous rig in play, still up from a year ago when there were no miscellaneous rigs deployed....  

two additional drilling platforms were deployed in the Gulf of Mexico this week, both of which were offshore from Louisiana...that bought the Gulf of Mexico and the total US offshore count up to 20 rigs, down from 29 rigs drilling in the Gulf and a total of 31 rigs working offshore nationally a year ago...at the same time, there was also a rig removed that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count back to 4 rigs, which was down from 5 rigs on inland waters a year earlier...

the number of working horizontal drilling rigs fell by 2 rigs this week after rising by only 1 rig last week, which left the count of active horizontal rigs at 394 rigs, which was down from the 664 horizontal rigs that were in use on September 18th 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 was unchanged at 64 rigs this week, which was down from the 119 vertical rigs that were drilling in the US during the same week last year, while the directional drilling rig count was also unchanged at 48 rigs, which was also down from the 83 directional rigs that were deployed during the same week last year...     

the details on this week's changes in drilling activity by state and by 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 US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 16th, the second column shows the change in the number of working rigs between last week (September 9th) and this week (September 16th), the third column shows last week's September 9th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September 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 September 18th of 2015:      

September 16 2016 rig count summary

there's really not much to see here this week, is there?  Oklahoma saw three rigs added, with one obviously in the Ardmore Woodford and another in the Cana Woodford, but those came after they had pulled out 4 rigs last week, which we suspected may have been in reaction to the record setting 5.8 earthquake they'd seen in that region the Saturday before...Louisiana was down two rigs despite the 2 additions in the Gulf, and we can account for part of that by the inland lake rig shutdown and the rig pulled out of the Haynesville, which also accounts for one of the gas directed rigs pulled out...we should also note that a single rig was also pulled out of Alabama, where 1 rig remains, and out of Idaho, where there are now none, which aren't shown on the state table above...otherwise, there were 2 more rigs added in the Permian, which by itself accounts for 70 of the oil rigs that have been added since the end of April...thus, without the Permian, there wouldn't be much of a drilling recovery to speak of at all...

 

note: there's more news here..

Sunday, September 11, 2016

refining at a 13 month high, oil imports at 11 month low as Hermine leads to largest drop in oil supplies in 17 years; global rigs for August

oil prices were remarkably volatile this past week, as we saw two price spikes of nearly 5%, each followed by price retreats of almost the same magnitude...early on Monday morning, a holiday in the US markets, news of a meeting between Russian ol minister Alexander Novak and his Saudi counterpart Khalid al-Falih.was announced, and prices for US oil, which had drifted from last week's close of $44.44 a barrel to near $44.10 a barrel in European and US off-market trading, suddenly spiked up by more than $2 in the first few hours of trading, briefly hitting $46.53 a barrel on production freeze speculations, only to crash right back down to near where they started the day after the joint statement from the meeting was released, which only said that the parties agreed to work together on stabilizing the oil market, with no specifics...then, with the official US markets open on Tuesday, US crude slipped back to below $44 a barrel in the morning, on news of Saudi budget cuts, before gradually recovering in the afternoon to end the day down 7 cents, or 0.2% lower than the prior Friday, to close at $44.38 a barrel on the New York Mercantile Exchange...prices continued to meander on Wednesday morning, then spiked over to $46 a barrel in the afternoon, after the American Petroleum Institute reported a 12 million barrel drawdown from our stockpiles of crude, against market expectations of a million barrel increase in supplies...after closing Wednesday at $45.50 a barrel, oil prices hovered in that range early Thursday until the EIA report, delayed a day because of the holiday, showed a 14.5 million draw down in our supplies of crude, the largest weekly crude-supply drop since 1999, which sent oil prices soaring 4.7%, to close Thursday at a two-week high of $47.62 a barrel...then on Friday, as traders realized the big drop in supplies was likely just a temporary aberration caused by the hurricane of that week, and as hopes for a production freeze faded, oil prices gave up most of Thursday's gains and closed down $1.74 at 45,88 a barrel, or 3.7% lower on the day, but up 3.2% for the week..

The Latest Oil Stats from the EIA

as we noted, the oil data for the week ending September 2nd from the US Energy Information Administration indicated that our supplies of oil and gasoline nosedived, as our oil imports fell to an 11 month low on tropical storm related shipping disruptions on the east coast and in the Gulf of Mexico and an unrelated shutdown of the Houston ship channel...furthermore, this week's crude oil fudge factor needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung to -169,000 barrels per day, down from + 233,000 barrels per day last week, which meant that 169,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final consumption or inventory figures....that breaks the string of 10 weeks wherein we'd seen a large positive adjustment each week, and lowers this year's cumulative daily average of that weekly statistical adjustment to a positive 90,000 barrels per day, which means that on average this year, 90,000 more barrels of oil per day were showing up in our final consumption and inventory figures than were accounted for by our production or import figures.... 

after we reported last week that our imports had hit a 47 month high during the week ending August 26th, the EIA reported this week that our imports of crude oil fell from there by 1,848,000 barrels per day to an average of 7,069,000 barrels per day during the week ending September 2nd, the least oil we've imported in any week since the 7,068,000 barrels per day we imported during the week ending October 19th last year....although this week's crude imports were 5.2% lower than the 7,459,000 barrels of oil per day we imported during the week ending September 4th last year, the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) was still at an average of 8.2 million barrels per day, 7.4% higher than the same four-week period last year... 

at the same time, EIA data showed that production of crude oil from US wells fell by 30,000 barrels per day, from an average of 8,488,000 barrels per day during the week ending August 26th to an average of 8,458,000 barrels per day during the week ending September 2nd, as output of Alaskan oil fell by 45,000 barrels per day while production from the lower 48 states was 15,000 barrels per day higher...why there wasn't also a curtailment in domestic production due to the storms is a mystery to me, since we know from last week's Baker Hughes data that a large percentage of Gulf of Mexico platforms were shut down during this same week... at any rate, this week's nominal output drop left the week's domestic oil production down by 7.4% from the 9,135,000 barrels we produced during the week ending September 4th of last year, 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 September 2nd was thus 761,000 barrels per day lower than what we were producing at the beginning of this year...  

meanwhile, the amount of crude oil used by US refineries jumped by an average of 315,000 barrels per day to an average of 16,930,000 barrels of crude per day during the week ending September 2nd, which was the most oil we've refined in 13 months and our 3rd highest refinery throughput in history...that was as the US refinery utilization rate rose to 93.7% for the week, up from 92.6% of capacity during the week ending August 26th, and up from the 90.9% refinery utilization rate during the week ending September 4th last year..refining on the glutted east coast rose by 40,000 barrels per day as the refinery utilization rate there rose from 86.7% to 89.6%, while the Midwest refineries picked up the slack with a 98.4% utilization rate and Gulf coast refineries took in 165,000 more barrels of crude per day than they did last week...as a result, the amount of crude refined this week nationally was 5.1% more than the 16,110,000 barrels of crude per day US refineries used during the week ending September 4th last year, and 3.7% more than the equivalent week in 2014, being that we're at a time of year that crude refining normally tails off, as “the summer driving season” apparently comes to a close with the labor day weekend ...   

with more oil being refined, our refinery production of gasoline rose by 152,000 barrels per day to an average of 10,173,000 barrels per day during the week ending September 2nd, which was the 5th highest gasoline output in any week on record, and 6.1% higher than our gasoline production during the equivalent week of 2015...at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 58,000 barrels per day to 5,031,000 barrels per day during week ending the 2nd, which was 237,000 barrels per day, or 4.9% higher than our distillates production during the same week of 2015...    

however, even with the near record output of gasoline, our gasoline inventories fell for second week in a row, dropping by 4,211,000 barrels to 227,793,000 barrels as of September 2nd, the largest one week drop in gasoline supplies since mid-March....that was as our imports of gasoline fell by 225,000 barrels per day to a 21 week low of 607,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 84,000 barrels per day to 9,595,000 barrels per day, apparently in one last consumption surge before the holiday... nonetheless, this week's gasoline supplies were still 6.2% higher than the 214,547,000 barrels of gasoline that we had stored on September 4th last year, and 7.3% higher than our gasoline supplies of September 5th, 2014, and thus our gasoline stores are still categorized as "well above the upper limit of the average range" for this time of year.. 

meanwhile, our distillate fuel inventories rose by 3,382,000 barrels to 158,135,000 barrels as of September 2nd, which pushed our distillate inventories to a level 4.8% above the then 4 year high of 150,903,000 barrels of September 4th last year, and 24.0% above the distillate inventories of 127,493,000 barrels of September 5th, 2014... that increase thus changed the EIA characterization of our distillate inventories to "above the upper limit of the average range for this time of year"

lastly, after that big 1.848 million barrel per day drop in oil imports, refineries found it necessary to withdraw 14,513,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 2nd fell to 511,357,000 barrels, the largest one week drop in oil supplies since the week ending January 1st 1999...from where we sit, it's impossible to tell if that drop in supplies is just a one week aberration or not, and whether that supply will be restored in the weeks ahead, once all the ships that were forced to anchor offshore come in and unload...even so, this week's 511,357,000 barrels of crude supplies is still 11.7% higher higher than the 457,998,000 barrels of oil we had stored as of September 4th, 2015, and 42.6% higher than the 358,598,000 barrels of oil we had stored on September 5th of 2014.... 

This Week's Rig Counts

whereas this week's EIA oil data for September 2nd was impacted by the movement of hurricane Hermine through the eastern Gulf of Mexico and up the East Coast, this week's rig count report for the week ending September 9th was influenced by the reversal of last week's storm impacts...Baker Hughes reported that the total count of active rotary rigs running in the US was up by 11 rigs to 508 rigs as of Friday, which was still down from the 848 rigs that were working as of the September 11th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014... the count of rigs drilling for oil rose by 7 rigs to 414, which was down from the 652 oil directed rigs running a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 4 to 92, which was still down from the 196 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...  

while last week we saw 7 platforms that had been drilling offshore in the Gulf of Mexico shut down, this week saw the startup of 8 such platforms, all of which are logged in as being offshore of Louisiana...thus, without the temporary hurricane effect, we have the net addition of one Gulf of Mexico rig over two weeks, bringing the Gulf count and the total offshore nationally up to 18 rigs, which is down from 29 rigs drilling in the Gulf and a total of 31 rigs offshore nationally a year ago...

meanwhile, the count active horizontal drilling rigs was up by 1 rig to 396 rigs this week, which was still down from the 652 horizontal rigs that were in use on September 11th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, 6 more directional rigs were also added, bringing the directional rig count up to 48 rigs, which still was down from the 81 directional rigs that were in use at the end of the same week a year earlier...in addition, the vertical rig count was up by 4 rigs to 64 rigs, which was still down from the 119 vertical rigs that were up and running in the US 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 US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 9th, the second column shows the change in the number of working rigs between last week (September 2nd) and September 9th, the third column shows last week's September 2nd rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September 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 September 11th of 2015:     

September 9 2016 rig count summary

from the state table we see that the biggest change is the restarting of 8 rigs in Louisiana, 7 of which had just been shut down a week earlier...elsewhere, Texas added 4 rigs, none of which were horizontal by the looks of the basin count, while Oklahoma saw 4 rigs shut down, possibly as a result of the earthquake and subsequent shutdown of the injection wells, leaving frackers with no place to dispose of their wastewater, which in Oklahoma amounts to ten times the quantity of oil they produce...also note the addition of another rig in the Utica in Ohio, and two more nearby, in the Marcellus in West Virginia...otherwise, changes in activity in the shale basins was pretty subdued, as would be supported the addition on just one horizontal rig, a stat which sometimes masks much more activity when we peel back the details...so all in all, an uneventful week, once we get past the return of drilling to the eastern Gulf of Mexico…

International Rig Counts for August

this week also saw the monthly release of the international rig counts for August, 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 1547 rigs were drilling for oil and natural gas around the globe in August, which was up from the 1,481 rigs that were drilling around the globe in July but down from the 2,226 rigs that were working globally in August of last year...increased North American drilling again accounted for the global increase, as the average US rig count rose from 449 rigs in July to 481 rigs in August, which was still down from the average of 849 rigs working in the US in August a year ago, while the average Canadian rig count rose from 94 rigs in July to 129 rigs in August, again still down from the 206 Canadian rigs that were deployed in August a year earlier....outside of Northern America, the International rig count fell by a single rig to 937 rigs in August, which was also down from 1,118 rigs a year ago, as a pullback in drilling in the Middle East region offset small increases elsewhere..

drilling activity in the Middle East fell for the 6th time in the past 8 months, as countries included in this region idled a net of 11 rigs, leaving an average of 379 rigs still drilling, which was down from the 393 rigs deployed in the Middle East a year earlier....the largest regional drilling cutback was in Pakistan, where their active rig count dropped from 29 rigs in July to 21 rigs in August, with the idling of 6 rigs targeting oil and 2 rigs targeting natural gas; however, that drop only left the Pakistanis two rigs shy of the 23 rigs they were running a year ago, as the 30 rigs they had active in June was their most in the recent record...meanwhile, Qatar saw the idling of 2 of the 7 rigs they had active in July; the 5 rigs they had running in August was down from 9  rigs a year earlier...at the same time, both the Saudis and the Iraqis saw their rig count drop by a single rig; the Saudis went from a total of 125 rigs in July to 124 in August with the idling of 3 rigs targeting natural gas and the start up of 2 rigs targeting oil, while the Iraqis, who only have oil rigs deployed, dropped from 39 rigs to 38....while that left Iraq down from the 48 rigs they were running last August, the Saudi count was up from 120 rigs a year earlier, and up from the 106 rigs they had working in August of 2014...meanwhile, Abu Dhabi was the lone Middle East country to add a rig; they now have 48, which is up from the 38 rigs they had deployed a year ago...

while the Middle East was cutting back, the Asia-Pacific region added 8 rigs and thus had 194 rigs deployed in August, up from the 186 drilling rigs working in July, but down from the 220 rigs working the region a year earlier, as the Asia-Pacific offshore rig count also rose by four rigs to 92...Australia doubled their active rig count from 3 rigs to 6 in August, but they were still down from the 15 rigs they had working a year earlier...India, Indonesia, and Thailand each added two rigs in August; for India, that brought them back to 115 rigs, the same as they had working a year earlier, for Indonesia, it brought them back to 19 rigs, which was still down from the 25 they were using last August, while for Thailand, their count rose to 13 rigs, which was still short of the 15 rigs they had in use a year earlier...in addition, Malaysian drillers also added a rig, giving them 4 rigs active, which was down from 9 rigs in August of 2015...on the other hand, Brunei cut back from 2 rigs to 1, the same as a year earlier, while the Japanese idled their lone active rig, leaving none, same as year ago...at the same time, the rig count offshore from China dropped from 28 rigs to 26, which was still up from 25 rigs in August of 2015...

meanwhile, the Latin American countries netted an increase of 1 rig, after adding 8 rigs in July, in the region's only increases this year; prior to July, the region had idled 92 rigs over the first 6 months of 2016…in August, Latin America drillers averaged 187 rigs, which included 37 offshore, down from the average of 319 rigs, which included 53 offshore rigs, that were active in Latin America in August of 2015....that single rig increase masked a lot of changes in the individual countries, however, as Brazil, Mexico and Venezuela each added 3 rigs in August...for Brazil, that increase brought them up to 18 rigs, which was still down from the 39 rigs they had in use a year earlier; for Mexico, their increase brought them back up to 26 rigs, which was down from 41 rigs a year earlier and down from the 81 rigs they were running in August of 2014, and for Venezuela, it brought them back to 53 rigs in August, still down from 72 rigs a year earlier...in addition, Colombian drillers added 2 rigs and now have 8 rigs working, but that's still way down from the 30 rigs they were using last year at this time...offsetting those increases, Argentina's drillers idled 7 rigs in August, after they had started up 9 rigs in July, which left them with 65 active rigs, down from the 108 rigs that were drilling in Argentina a year earlier...3 other Latin American counties idled one rig: Bolivia cut their count to 4 rigs, which was still up from last years 2 rigs, while Chile cut back to 3 rigs, same as as a year ago, and Trinidad cut back to 3 rigs, down from last year's 6 rigs..

elsewhere, countries in Africa reduced their net activity by 1 rig in August, leaving 81 rigs still in drilling, down from the 96 rigs working the African continent last year at this time...Angola shut down 1 rig, leaving 4 rigs, which was down from the 8 rigs that they had active a year earlier...Morocco and Tunisia both shut down the only rigs they had active, a cut from 1 rig in Morocco and 2 in Tunisia a year earlier...meanwhile, both Algeria and Nigeria added rigs; that brought the Algerian count up to 56, also up from 52 rigs a year earlier, and brought the Nigerian count back to 6 rigs, down from 9 rigs a year earlier...

and lastly, the net rig count in Europe increased by 2 to 96 rigs in August, which was down from the 109 rigs working in Europe a year ago at this time...Poland saw their rig count double from 4 rigs to 8, which was up from 7 rigs a year earlier...Romania added 2 rigs, so the 5 rigs they were running in August was the same as they had active a year earlier...Turkey also added 2 rigs, and at 31 rigs rigs in August they were up from the 28 rigs they had active a year earlier...both Germany and the Netherlands increased their drilling activity from 2 rigs in July to 3 rigs in August; for the Germans, it was up from 1 a year earlier, while for the Dutch, that was down from last year's 7 rigs...on the other hand, Norway cut its drilling activity from 20 rigs to 17, still up from 16 rigs a year earlier, and the Czechs idled both of the rigs they had been running over the past 12 months... elsewhere, UK offshore was cut back from 10 rigs to 9, down from 12 platforms offshore a year ago, and Hungary shut down 1 rig, leaving 1 rig, down from 2 rigs a year earlier.....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 26 rigs active in August, down from 28 from July, were included in the Asian totals here...   



note: two stories dominated the US fracking patch news this week; the first was that Oklahoma experienced a 5.8 earthquake, the largest in state history, near the national oil depot in Cushing, which currently stores 64 million barrels of crude, and subsequently shut down 54 injection wells operating in the region...the other story involved the standoff between the Standing Rock Sioux of the Dakotas and those who would build a crude oil pipeline under their water supply... that situation escalated last weekend after the Sioux's injunction to stop construction was ignored and sacred Sioux burial grounds were bulldozed...over 5000 have gathered, including Green Party presidential candidate Jill Stein, who spray painted a bulldozer and faces charges...for at least a dozen links to the big OK quake story, and more than that on the Dakota Access / Sioux confrontation (including videos), go here...

Sunday, September 4, 2016

oil imports at a 47 month high, oil exports at a record high, stockpiles of oil & products also at another record high

oil prices fell $4.48 a barrel, or almost 10%, over the first 4 days of this past week, then recovered by almost 3% from there on Friday, after a weak jobs report decreased the likelihood of a Fed September interest rate hike, meaning the dollar would remain weak, thus boosting prices for internationally traded commodities like oil...after closing the prior week at $47.64 a barrel, oil fell 66 cents a barrel, or 1.4% on Monday to close at $46.98, on prospects of peace in Nigeria and expectations that crude stockpiles rose for a 2nd week in a row...after moving up slightly on Tuesday morning, oil prices then dropped a dollar a barrel in the afternoon after the American Petroleum Institute reported a modest crude buildup and a 3 million barrel addition to distillates stockpiles, more than 10 times what was expected, leaving oil prices at $46.35 a barrel at the close...on Wednesday it was more of the same, as oil prices fell 3% to close at $44,70 a barrel after EIA data showed a larger-than-expected weekly buildup of crude and distillate stockpiles and a smaller-than-expected drawdown of gasoline supplies...that report brought the reality of the oversupply glut back into focus, driving US crude prices down another $1.54, or 3.4%, to settle at $43.16 a barrel at the close of trading Thursday...Friday then brought a Putin interview with Bloomberg in which he said he’d like OPEC and Russian producers of half of the world’s oil, to reach a deal to freeze supply, which brought out the buyers hopeful for a OPEC deal, who then drove oil prices up $1.28 a barrel in spite of a rising rig count, to close the week at $44.44 a barrel...

since a lot has happened since we last looked at a graph of oil prices, we'll include one here now...

September 3rd 2016 oil prices

the graph above shows the daily prices per barrel over the past 3 months for the October contract of the US benchmark oil, West Texas Intermediate (WTI) as traded for delivery at the Cushing Oklahoma depot...when we last looked at this graph, September oil contracts had just completed a two week run-up from around $39 a barrel to $48.50, and it looked like $50 a barrel oil was a certainty...but the rally ran out of steam last week, and then October contract prices started falling when last week's reports showed building gluts of oil and all of its products...this week, oil prices were in virtual freefall during all the high volume hours, while the volume of trading underlying the price recovery on Friday was not very convincing...fundamentals would seem to call for $40 oil, but until the OPEC - Russian freeze issue is resolved one way or the other, we can expect more volatility like we've seen here going forward...

The Latest Oil Stats from the EIA

as we mentioned, the oil data for the week ending August 26th from the US Energy Information Administration showed increases in our supplies of oil and of distillates, as our oil imports rose to a 47 month high, and as our refinery operations slowed, in keeping with the approaching end of summer...meanwhile, this week's crude oil fudge factor needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was at +233,000 barrels per day, down from 523,000 barrels per day last week, but which still meant that 233,000 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...the EIA did announce that as of this week, they're shifting to real time reporting of oil exports as provided by U.S. Customs, which should improve the weekly reporting somewhat; previously, they'd been estimating exports based on monthly export data published by the U.S. Census Bureau, and the numbers in that series always looked like they'd been woven out of whole cloth...nonetheless, we've now seen 10 weeks in a row with a large positive oil adjustment, bringing this year's cumulative daily average of that weekly statistical adjustment to a positive 97,000 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...  

so, with that new accurate data this week, the EIA reported that our exports of crude oil rose by an average of 21,000 barrels per day to an average of 698,000 barrels per day during the week ending August 26th, which is a new high in the EIA records, not really unexpected since restrictions on US oil exports were only lifted earlier this year...ie, while our oil exports are up 46.3% from the 477,000 barrels per day we were exporting a year ago, at that time only exports to Canada and Mexico were permitted.....but while our exports were up 21,000 barrels per day, the EIA also reported that our imports of crude oil for the week ending August 26th rose by an average of 275,000 barrels per day to an average of 8,917,000 barrels per day, which was the most oil we've imported in any week since September 14th of 2012....this week's oil imports were also 13.5% more than the 7,855,000 barrels of oil per day we imported during the week ending August 28th a year ago, and the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) averaged more than 8.5 million barrels per day, 11.4% higher than the same four-week period last year...  

the EIA also reported that our field production of crude oil fell by 60,000 barrels per day to an average of 8,488,000 barrels per day during the week ending August 26th, as output of Alaskan oil fell by 10,000 barrels per day and production from the lower 48 states was 50,000 barrels per day lower...that left the week's domestic oil production down by 7.9% from the 9,218,000 barrels we produced during the week ending August 28th of 2015, and 11.7% 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 26th is now 731,000 barrels per day lower than what we were producing at the beginning of this year...  

meanwhile, the amount of that crude oil used by US refineries fell by an average of 64,000 barrels per day to an average of 16,615,000 barrels of crude per day during the week ending August 26th, even though the US refinery utilization rate rose to 92.8% for that week, up from 92.5% of capacity during the week ending the 19th, but the same as the refinery utilization rate during the week ending August 28th last year..refining on the glutted east coast increased by a nominal 18,000 barrels per day, but the refinery utilization rate there remained depressed at 86.7%, in contrast to last year's 96.2% east coast capacity utilization...nonetheless, crude refined this week nationally was still 1.4% more than the 16,389,000 barrels of crude per day US refineries used during the week ending August 28th last year, and 1.3% more than the equivalent week in 2014, so we can see that crude refining normally tails off at this time of year, as the summer driving season comes to a close with the labor day weekend ...  

with the drop in crude being refined, US refineries production of gasoline slipped by 14,000 barrels per day to 10,021,000 barrels per day during week ending August 26th, which was still 222,000 more barrels per day, or 2.6% above the 9,799,000 barrels of gasoline per day being produced during the week ending August 28th last year, and 4.7% more than our gasoline production of 9,572,000  barrels per day during the week ending August 29th, 2014....and even with the operations cutback, east coast refineries still managed to produce an average of 3,294,000 barrels of gasoline per day, 18,000 barrels per day more than last week and 1.2% more than a year earlier....concurrently, refinery output of distillate fuels (diesel fuel and heat oil) rose by 124,000 barrels per day to 4,973,000 barrels per day during the week ending August 26th, which lifted our distillates output to 1.0% more that the distillates production of 4,923,000 barrels per day during the week ending August 28th of last year, while it still lagged the distillates output of 5,080,000 barrels per day during the week ending August 29th 2014 by 2.1% ......       

with the modest downturn in gasoline production, our gasoline inventories fell by 691,000 barrels to 232,004,000 barrels as of August 26th, which was still less than the normal late August drawdown...that was as our gasoline imports rose by 31,000 barrels per day to 832,000 barrels per day and as domestic demand for gasoline fell by 148,000 barrels per day to 9,511,000 barrels per day...that left this week's gasoline inventories 8.3% higher than the 214,163 ,000 barrels of gasoline that we had stored on August 28th last year, and 10.5% higher than the 209,992,000 barrels of gasoline we had stored on August 29th of 2014...meanwhile, our distillate fuel inventories rose by 1,496,000 barrels to 154,753,000 barrels by August 26th, which left our distillate inventories 3.2% above the distillate inventories of 149,951,000 barrels of August 28th last year, and 24.8% above the distillate inventories of 122,794,000 barrels of August 29th, 2014...  

end of the week inventories of the other major refined products were mixed....our stockpiles of propane/propylene rose by 2,375,000 barrels to 98,51,000 barrels last week, which meant they were 2.2% above the 96,344,000 barrels stored as of August 28th last year, and 29.4% higher than the propane/propylene inventories of the same weekend in 2014...inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) other than propane/propylene rose by 1,684,000 barrels to 149,770,000 barrels as of August 26th, 17.5% higher than the 127,428,000 barrels we had stored as of August 28th last year, and 14.2% higher than the equivalent week in 2014...but inventories of kerosene type jet fuel fell by 717,000 barrels to 41,034,000 barrels as of August 26th, 3.5% below our jet fuel stockpiles of 42,546,000 barrels on August 28th last year, but 18.5% higher than our 34,636,000 barrels of jet fuel supplies we had stored on August 29th of 2014...and stockpiles of residual fuel oils fell by 467,000 barrels to 40,026,000 barrels as of August 26th, a bit below the 40,161,000 barrels we had stored a year earlier, but 9.5% higher than the 36,541,000 barrels of residual fuel oils we had stored on August 29th of 2014...

and of course, with the near record oil 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 2,276,000 barrels to 525,870,000 barrels as of August 26th, the 5th oil inventory increase in 6 weeks, at a time of year when oil stockpiles are usually being used up....thus we ended up with 15.5% more crude oil in storage than the 455,428,000 barrels we had stored as of the same weekend a year earlier, and 46.2% more crude oil than the 359,570,000 barrels we had stored on August 29th of 2014... 

lastly, adding the barrels of oil products inventories to the amount of crude oil in storage, we find the aggregate of our Total Crude Oil and Petroleum Products Supplies (not including the Strategic Petroleum Reserve) to be at a record high of 1,404,679,000 barrels, up by 4,503,000 barrels from last week....that's the 24th new record high for total supplies set in 2016, and we've now set new records for total supplies 9 consecutive weeks in a row, adding a total of 32.8 million barrels of oil and oil products to the record we already had stored over that 9 week stretch....that leaves our total supply up by 115.77 million barrels, or 9.0% from a year ago, and 24.9% higher than the total supplies of 1,124,415,000 that we had stored two years earlier on the same weekend..

This Week's Rig Count

the rig count for the week ending September 2nd was impacted by the movement of hurricane Hermine through the eastern Gulf of Mexico, and therefore a number of the oil platforms that we'll see were shutdown this week will likely be up and running again next week, so it wont be until then that we can get a firm count on rigs in the area...even so, Baker Hughes reported that the total count of active rotary rigs running in the US rose by 8 rigs to 497 rigs as of Friday, the 12th increase in 14 weeks and a 7 month high...still, the total count was down by 367 rigs from the 864 rigs that were deployed as of the September 4th 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 up by just 1 rig this week at 407, but was still down from the 662 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 rose by 7 rigs to 88 rigs this week, which was the largest increase in gas rigs since 8 gas directed rigs were added during the week ending April 24th 2015, and probably the largest percentage increase in gas rigs this century ...but gas rigs were still down from the 202 natural gas rigs that were drilling on September 4th a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there also remained two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from none the same week a year ago...  

seven of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico were shut down this week, with no indication in the Baker Hughes data as to the reason, which we nonetheless suspect was due to the hurricane in the Gulf, which was said to have idled 11% of Gulf production, which we'll likely see in the EIA data next week...that still left 10 rigs active in the Gulf of Mexico and offshore nationally at the week's end, down from 31 rigs drilling in the Gulf and a total of 33 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 5 rigs, which was up from 4 inland waters rigs a year earlier..

in an indication of what was going on away from the Gulf, the number of working horizontal drilling rigs rose by 16 rigs this week, which brought the count of active horizontal rigs up to 395 rigs, which was still down from the 659 horizontal rigs that were in use on September 4th 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 dropped by 2 rigs to 60 rigs this week, which was exactly half of the 120 vertical rigs that were drilling in the US during the same week last year...meanwhile, the directional drilling rig count fell by 6 rigs to 42 rigs, which was down from the 85 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 September 2nd, the second column shows the change in the number of working rigs between August 26th and September 2nd, the third column shows last week's August 26th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September 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 September 4th of 2015:     

September 2 2016 rig count summary

the first thing that sticks out in the tables above is the shut down of 7 offshore rigs in Louisiana, most of which we believe to be due to the hurricane...otherwise, it's a fairly normal week in that Texas saw an increase of 4 rigs, and the 2 Texas basins, the Permian of west Texas and the Eagle Ford in the south, both saw increases of 3 rigs...but right offhand, we can only account for 3 of the 7 new gas directed rigs that were started up this week; there were two rigs added in the Marcellus, and one in the Utica, but since the Utica rig did not increase the Ohio count, we'd have to guess that was a Utica shale well in Pennsylvania...furthermore, since Pennsylvania only saw two additional rigs, we have to believe one of the new Marcellus rigs was set up in West Virginia...that still leaves 4 gas rigs unaccounted for....pulling up the historical data by basin from Baker Hughes (XLS), we see there are 5 gas wells in the Eagle Ford, but none of those are new...but it does appear that a gas rig was added in the Haynesville of Louisiana, while an oil rig was shut down there, which appears as a net no change above...the other 3 gas directed rigs appear to have been set up in basins not listed above, as the gas rig count in the "others" category rose from 23 rigs to 26 rigs as of September 2nd...both Wyoming and Oklahoma are thus suspect, with increases of 4 rigs in each state, as N. Dakota, the only other state with an increase, added an oil rig in the Williston basin...



note: there's more here...

Tuesday, August 30, 2016

Rights group blasts U.S. “hypocrisy” in “vast flood of weapons” to Saudi Arabia

Rights group blasts U.S. “hypocrisy” in “vast flood of weapons” to Saudi Arabia, despite war crimes - Salon.com
“One of the unspoken legacies of the Obama administration is the extraordinary uptake in the amount of U.S. weapons and military aid that are provided to major U.S. allies like Saudi Arabia, Israel and Egypt that have terrible records when it comes to human rights,” explained Sunjeev Bery in an interview with Salon.

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...