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, November 19, 2017

OPEC cuts and rising demand reducing global oil supply; US distillates supply falling despite seasonal record production..

oil prices finally fell this week, for the first time in the past six weeks, but a rally on Friday put the downturn in jeopardy until the last hour of trading...after trading just off a two year high most of last week, US oil for December delivery added another 2 cents a barrel on Monday, closing at $56.76 a barrel, as the ongoing geopolitical tension from the Saudi royal purge and regional saber rattling offset concerns about rising US output...oil prices then tumbled $1.06 to $55.70 a barrel on Tuesday, after the International Energy Agency in Paris lowered its forecast for demand by 100,000 barrels a day for 2017 and 2018, more than offsetting OPEC's prior forecast of higher demand...oil prices were then down another 37 cents to $55.33 a barrel on Wednesday, after the EIA reported an unexpected increase in crude oil and gasoline stockpiles, along with record crude production...oil prices ended lower again after a choppy session on Thursday, on ongoing concerns about growing U.S. production and inventories, despite expectations that OPEC would extend a supply-cut deal when they meet in Vienna at the end of the month, closing down another 19 cents at $55.14 a barrel...oil prices then rallied and rose steadily on Friday, after Saudi Arabia's energy minister Khalid al-Falih reiterated that further production cuts are necessary to continue rebalancing the market, with oil prices trading as high as $56.68 a barrel before closing up $1.41, or 2.6%, to finish the week at $56.55 a barrel, down just 21 cents from the prior month's close...

with the likelihood of further OPEC production cuts moving oil prices again, we'll start by reviewing OPEC's November Oil Market Report (covering October OPEC & global oil data), which was released on Monday of this past week....the first table from this report that we'll look at is from page 64 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures...   

October 2017 OPEC crude output via secondary sources

as we can see from this table of official oil production data, OPEC oil output decreased by 150,900 barrels per day in October, to 32,589,000 barrels per day, from a September production total of 32,740,000 barrels per day, a figure that was originally reported as 32,748,000 barrels per day (for your reference, here is the table of the official September OPEC output figures before this month's revisions)...as you'll note in the far right column above, the main reason that OPEC's output fell by 150,900 barrels per day was the 131,000 barrel per day drop in oil output from Iraq; also contributing was a 54,400 barrel per day decrease in output from Nigeria and a 43,600 barrel per day decrease in output from Venezuela, who's crude output was at a 28-year low...on the other hand, note the 69,800 barrel per day increase in output from Angola, which was thus producing well above their agreed to quota...and other than Angola, Iraq's oil output is again above their agreed quota, despite October's big cutback, as can be seen in the table below: 

November 2017 OPEC production and targets as of October via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first ten months of this year, and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as was agreed to at their November 2016 meeting, and the 3rd column shows how much each has averaged over or under their quotas for the ten months of this year that the OPEC pact to curtail production has been in effect...as you can see from the above, most OPEC members are pretty close to meeting their commitment to cutting their production back 4%, except for Iraq, whose production has averaged nearly 2% higher than what they committed to...however, cuts in excess of what was agreed to by the Saudis, Venezuela, and other OPEC countries have more than made up for the 83,000 barrels per day that Iraq has been overproducing, so the organization as a whole has kept their commitment to reduce supply....

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from November 2015 to October 2017, and it comes from page 65 of the November OPEC Monthly Oil Market Report....the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...

October 2017 OPEC report global supply

OPEC's preliminary data indicates that total global oil production rose to 96.71 million barrels per day in October, up by .53 million barrels per day from a September total of 96.18 million barrels per day, which was revised .32  million barrels per day lower from the 96.50 million barrels per day global oil output for September that was reported a month ago...global oil output for October was still 0.39 million barrels per day higher than the 96.32 million barrels of oil per day that was being produced globally in October a year ago (see last November's OPEC report for the year ago data)... OPEC's October production of 32,589,000 barrels per day represented 33.7% of what was produced globally, down from their revised 34.0% share of September global output, as oil output increases by Mexico, Norway, the UK, Brazil, Canada, Malaysia and China more than made up for OPEC's decrease...OPEC's October 2016 production, excluding ex-member Indonesia, was at 32,921,000 barrels per day, so even after their production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are only producing 1.0% less oil than they were producing a year ago, at a time when they were considered to be producing flat out...

however, even after the increase in global oil output that we can see on the above graph, there was again a deficit in the amount of oil being produced globally, in part due to an upward revision of the OPEC estimate of global demand for oil, as the next table from the OPEC report will show us.. 

October 2017 OPEC report global oil demand

the table above comes from page 37 of the October OPEC Monthly Oil Market Report, and it shows regional and total oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally quarterly over 2017 over the rest of the table...on the "Total world" line of the fifth column, we've circled in blue the figure that's relevant for October, which is their estimate for global oil demand for the fourth quarter of 2017... 

OPEC's estimate is that over the 4th quarter of this year, all oil consuming areas of the globe will be using 98.08 million barrels of oil per day, which is an upward revision from their prior 4th quarter estimate of 97.91 million barrels of oil per day.....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, after the OPEC and non-OPEC production cuts, the world's oil producers were only producing 96.71 million barrels per day during October, which means that there was a shortfall of around 1,370,000 barrels per day in global oil production vis-a vis demand during the month...

also note that we have highlighted the estimates for the first 3 quarters of 2017 for global demand in green, so as to point out the other revisions that came with this report, which means our previous computations of global surplus or deficit oil for the past 9 months should also be revised...global oil demand for the third quarter was revised 230,000 barrels per day higher, to 97.72 million barrels per day, while demand for the second quarter was revised 70,000 barrels per day higher, to 96.28 million barrels per day, and global demand for the first quarter was revised 80,000 barrels per day higher, to 95.67 million barrels per day...

global oil production estimates for September were concurrently revised lower, to 96.18 million barrels per day, so that now means there was also a deficit of 1,540,000 barrels per day in September global output, which we had previously figured to be a global oil deficit of around 990,000 barrels per day...with higher demand estimates for the third quarter, the August global shortfall would now be revised up to 1,630,000 barrels per day, while July's global oil production of 97.16 million barrels per day would be 560,000 barrels per day less than the new 3rd quarter demand figure of 97.72 barrels per day...

with the caveat that we've now revised figures for prior months this year several times, and hence increasing the chance of a dumb arithmetic error, the 70,000 barrels per day upward revision to second quarter demand reduces the June global surplus that we had computed to 850,000 barrels per day, and increases the May deficit to 360,000 barrels per day, and increases the April global oil deficit to 670,000 barrels per day...prior to that the global oil surplus during March would now be revised down to 390,000 barrels per day, and average surpluses over January and February would be reduced to around 610,000 barrels per day....taken together, this reports data means that after ten months of OPEC production cuts, the global oil glut has been reduced by roughly 72.66 million barrels of oil since the 1st of the year, up from the global deficit of 27.4 million barrels for 9 months that we had computed based on last month's figures...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending November 10th, indicated another a substantial increase in our oil refining, which was more than matched by an increase in imports, and hence we managed to have a modest amount oil left to store for the 2nd week in a row....our imports of crude oil rose by an average of 521,000 barrels per day to an average of 7,898,000 barrels per day during the week, while our exports of crude oil rose by 260,000 barrels per day to 1,129,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,769,000 barrels of per day during the week, 261,000 barrels per day more than the net imports of the prior week...at the same time, field production of crude oil from US wells rose by 25,000 barrels per day to another record high of 9,645,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,414,000 barrels per day during the reported week...

during the same week, US oil refineries were using 16,639,000 barrels of crude per day, 334,000 barrels per day more than they used during the prior week, while over the same period 164,000 barrels of oil per day were being added to oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 389,000 fewer barrels per day than what refineries reported they used and what was added to storage during the week...to account for that discrepancy, the EIA needed to insert a (+389,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, a metric that is labeled in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,742,000 barrels per day, still 2.8% less than the 7,969,000 barrels per day average imported over the same four-week period last year....the 164,000 barrel per day increase in our total crude inventories came about on a 265,000 barrel per day addition to our commercial stocks of crude oil, which was partially offset by a 101,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was included in a Federal budget deal 25 months ago...this week's 25,000 barrel per day increase in our crude oil production included a 20,000 barrel per day increase in output from wells in the lower 48 states and a 5,000 barrels per day increase in output from Alaska....the 9,645,000 barrels of crude per day that were produced by US wells during the week ending November 10th was another new record high for US output, 10.0% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.1% more than the 8,681,000 barrels per day of oil we produced during the during the equivalent week a year ago...

US oil refineries were operating at 91.0% of their capacity in using those 16,639,000 barrels of crude per day, up from 89.6% of capacity the prior week, about par for this time of year... the 16,639,000 barrels of oil that were refined this week were still 6.1% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, even as they were 3.2% more than the 16,126,000 barrels of crude per day that were being processed during week ending November 11th, 2016, when refineries were operating at 89.2% of capacity, and more than 10% above the 10-year seasonal average for this time of year...

even with increase in the amount of oil refined, gasoline output from our refineries was 3.0% lower, decreasing by 315,000 barrels per day to 9,852,000 barrels per day during the week ending November 10th, which was also 3.0% lower than the 10,152,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 32,000 barrels per day to 5,231,000 barrels per day, which was a record for any week in November, and 5.0% more than the 4,984,000 barrels per day of distillates that were being produced during the week ending November 11th last year....  

our lower gasoline production notwithstanding, our gasoline inventories at the end of the week still rose by 894,000 barrels to 210,431,000 barrels by November 10th, after falling by 12,788,000 barrels over the prior three weeks, as our domestic consumption of gasoline fell by 324,000 barrels per day to 9,172,000 barrels per day, even as our exports of gasoline rose by 212,000 barrels per day to 844,000 barrels per day, while our imports of gasoline fell by 56,000 barrels per day to 349,000 barrels per day...however, with significant gasoline supply withdrawals in 15 out of the last 22 weeks, our gasoline inventories are still down by 13.2% from the pre-summer high of 242,444,000 barrels, and 5.1% below last November 11th's level of 221,709,000 barrels, even as they are still roughly 1% above the 10 year average of gasoline supplies for this time of the year...  

even with the increase in our distillates production, our supplies of distillate fuels fell by 799,000 barrels to 124,763,000 barrels over the week ending November 10th, the tenth decrease in eleven weeks, after falling by 3,359,000 barrels the prior week...the smaller drawdown occurred because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 457,000 barrels per day to 4,029,000 barrels per day, even as our exports of distillates rose by 198,000 barrels per day to 1,477,000 barrels per day, while our imports of distillates rose by 75,000 barrels per day to 161,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 16.2% lower than the 148,912,000 barrels that we had stored on November 11th, 2016, and 6.7% lower than the 10 year average of distillates stocks at this time of the year

finally, with a big increase in oil imports coming while our oil production was at a record high, our commercial crude oil inventories rose for the 7th time in the past 32 weeks, increasing by 1,854,000 barrels, from 457,143,000 barrels on November 3rd to 458,997,000 barrels on November 10th....while our oil inventories as of November 10th were 6.4% below the 490,284,000 barrels of oil we had stored on November 11th of 2016, they were still fractionally higher than the 455,074,000 barrels of oil that we had in storage on November 13th of 2015, and 31.6% greater than the 348,758,000 barrels of oil we had in storage on November 6th of 2014, at a time when the buildup of our oil glut was just getting started...   

This Week's Rig Count

US drilling activity increased 5th time in the past 16 weeks during the week ending November 17th, but in contrast to last week, when only oil drilling increased, this week only saw new rigs targeting natural gas...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 8 rigs to 915 rigs in the week ending on Friday, which was also 327 more rigs than the 588 rigs that were deployed as of the November 18th report in 2016, while it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was unchanged at 738 rigs this week, which was still up by 267 oil rigs over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations was rose by 8 rigs to 177 rigs this week, which was still only 61 more gas rigs than the 116 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

drilling began from 3 addition platforms in the Gulf of Mexico offshore from Louisiana this week, which increased the Gulf of Mexico rig count to 21 rigs, which was still down from the 23 rigs active in the Gulf of Mexico a year ago...since there were no other offshore rigs active other than those in the Gulf either this week or a year ago, those Gulf counts are also the same count as the total US offshore count...

the count of active horizontal drilling rigs was unchanged at 764 rigs this week, which left them up by 306 rigs from the 470 horizontal rigs that were in use in the US on November 18th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, the directional rig count was up by 2 rigs to 76 rigs this week, which was also up from the 52 directional rigs that were working during the same week last year....in addition, the vertical rig count was up by 6 rigs to 63 vertical rigs this week, which was still down from the 66 vertical rigs that were deployed on November 18th of 2016...

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 pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 17th, the second column shows the change in the number of working rigs between last week's count (November 10th) and this week's (November 17th) count, the third column shows last week's November 10th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 18th of November, 2016...          

November 17 2017 rig count summary

there's not much on the tables above that can explain how 8 rigs targeting natural gas were added this week, while the horizontal rig count remained unchanged at the same time...we would have thought that the rig that was added in Ohio's Utica, for instance, would have been one of the new natural gas rigs, but that's not the case, since that rig is targeting oil, in only the third week of Utica oil drilling since May of 2016...the Haynesville, of northwest Louisiana and adjacent Texas, which has seen more oil drilling recently, did add two natural gas rigs this week, as all 40 of their rigs are now back to targeting gas...the other 6 natural gas rigs are in Baker Hughes's "other" category, wherein the basins and locations are not named...based on the Texas and Louisiana state counts, however, we would guess that most of the new natural gas rigs are in those two states or the adjacent Gulf, and are most likely conventionally drilled vertical wells...note that other than the major producing states shown above, Mississippi also saw a rig added this week, and now they have two rigs active, same as they had on November 18th a year ago..

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note:  there’s more here

Sunday, November 12, 2017

US oil production at a record high, distillate supplies are becoming critical, turmoil in the Middle East, et al

oil prices spiked to a new two year high on Monday on turmoil in Saudi Arabia*, but even though they drifted lower the rest of the week as the chaotic news was digested, they still ended higher for the fifth consecutive week, in what is now the longest rally this year....US oil prices for December rose $1.71 a barrel, the largest price jump this year, to a 2 year high of $57.35 a barrel on Monday, on a spate of news out of Saudi Arabia, that included the announcement of the coerced resignation of Lebanon's prime minister Saad al-Harir, the interception of a missile from Yemen that had targeted the International Airport in the Saudi capital of Riyadh, and what is being called a purge of the Saudi aristocracy by Crown Prince Muhammed bin Salman, starting with the arrest of dozens of wealthy business elites and 11 of his royal cousins, and including such billionaire notables as Prince Alwaleed bin Talal, known in the US for his playboy lifestyle and his large holdings of Citigroup, 21st Century Fox and Twitter...as chaotic news continued to come out of the region, oil prices climbed to an intraday high of $57.61 a barrel on Tuesday, a 28 month high, before falling to close at $57.20 a barrel, when some of the worst geopolitical fears surrounding the weekend's news dissipated...oil prices then fell 39 cents to $56.81 a barrel on Wednesday after the EIA report showed a surprise increase in crude stocks and record US oilfield production, suggesting the glut might persist longer than previously thought...crude prices then regained most of that loss on Thursday, rising 36 cents to $57.17 a barrel, after the Saudis announced plans to cut their crude exports by 120,000 barrels per day in December while simultaneously ordering their citizens to leave Lebanon, threatening yet another proxy war with Iran...prices continued to rise slowly on Friday morning and were at one point 18 cents higher, but then slid in the afternoon to close down 43 cents at $56.74 a barrel, after Baker Hughes reported that U.S. drillers had added the most oil rigs in a week since June, suggesting that current record output would continue to grow....oil prices thus ended the week $1.10 a barrel, or nearly 2% higher than the prior week's close, in their fifth-straight week of gains...

* NB: more than 3 dozen articles on the turmoil in the Middle East can be  found at the end of this post on Focus on Fracking

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending November 3rd, showed that even with a substantial increase in our oil refining, and a decrease in oil imports, we still managed to have some oil left for storage, mostly due to a huge drop in our oil exports.....our imports of crude oil fell by an average of 194,000 barrels per day to an average of 7,377,000 barrels per day during the week, while our exports of crude oil fell by 1,264,000 barrels per day to 869,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,508,000 barrels of per day during the week, 1,070,000 barrels per day more than net imports during the prior week...at the same time, field production of crude oil from US wells rose by 67,000 barrels per day to record high of 9,620,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,128,000 barrels per day during the reported week...

during the same week, US oil refineries were using 16,305,000 barrels of crude per day, 290,000 barrels per day more than they used during the prior week, while over the same period 222,000 barrels of oil per day were being added to oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 399,000 fewer barrels per day than what refineries reported they used and what was added to storage during the week...to account for that discrepancy, the EIA needed to insert a (+399,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, a metric that is labeled in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 7,639,000 barrels per day, still 0.6% more than the 7,695,000 barrels per day average imported over the same four-week period last year....the 222,000 barrel per day addition to our total crude inventories all went into commercial facilities, as oil stored in our Strategic Petroleum Reserve was unchanged from the prior week...this week's 67,000 barrel per day increase in our crude oil production included a 65,000 barrel per day increase in output from wells in the lower 48 states and a 2,000 barrels per day increase in output from Alaska....the 9,620,000 barrels of crude per day that were produced by US wells during the week ending November 3rd was a new record high for US output, 9.7% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 10.7% more than the 8,522,000 barrels per day of oil we produced during the during the equivalent week a year ago...since we have a new record for US oil output, we'll include a long term graph of that here:

November 9 2017 US oil output for Nov 3rd

the above graph, taken from a post on this week's EIA report at Zero Hedge, shows oil production from US wells in thousands of barrels per day, weekly since 1985, with this week's record high clearly called out...notice that we had hit a three and a half year low in oil production just 4 weeks earlier, when Hurricane Nate shut in Gulf of Mexico and nearby land production, creating that odd jumble at the current end of the graph, not unlike the oil production downturns in 2005 caused by Hurricanes Katrina and Rita, or the 2008 out disruption caused by Hurricane Gustav...

returning to the week ending November 3rd, US oil refineries were operating at 89.6% of their capacity in using those 16,305,000 barrels of crude per day, up from 88.1% of capacity the prior week, a bit stronger than the normal pace for the end of the fall maintenance period...however, the 16,305,000 barrels of oil that were refined this week were still 8.0% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, even as they were 3.1% more than the 15,817,000 barrels of crude per day that were being processed during week ending November 4th, 2016, when refineries were operating at 87.1% of capacity, and more than 10% above the 10-year seasonal average...

even with increase in the amount of oil refined, gasoline output from our refineries was little changed, decreasing by 20,000 barrels per day to 10,167,000 barrels per day during the week ending November 3rd, which was also 2.8% lower than the 10,456,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 163,000 barrels per day to 5,199,000 barrels per day, which was 8.7% more than the 4,784,000 barrels per day of distillates that were being produced during the week ending November 4th last year....  

with our gasoline production little changed, our gasoline inventories at the end of the week fell by 3,312,000 barrels to 209,537,000 barrels by November 3rd, after falling by 9,476,000 barrels over the prior two weeks, as our domestic consumption of gasoline rose by 35,000 barrels per day to 9,496,000 barrels per day, and as our exports of gasoline fell by 135,000 barrels per day to 732,000 barrels per day, while our imports of gasoline also fell by 135,000 barrels per day to 405,000 barrels per day...with significant gasoline supply withdrawals in 15 out of the last 21 weeks, our gasoline inventories are now down by 13.6% from June 9th's level of 242,444,000 barrels, and 5.2% below last November 4th's level of 220,963,000 barrels, even as they are still roughly 1.0% above the 10 year average of gasoline supplies for this time of the year...  

even with the increase in our distillates production, our supplies of distillate fuels fell by 3,359,000 barrels to 125,562,000 barrels over the week ending November 3rd, the ninth decrease in ten weeks, after falling by just 320,000 barrels the prior week...that was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 952,000 barrels per day to 4,486,000 barrels per day, even as our exports of distillates fell by 406,000 barrels per day from last week's record high to 1,279,000 barrels per day, while our imports of distillates fell by 51,000 barrels per day to 86,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 15.5% lower than the 148,602,000 barrels that we had stored on November 4th, 2016, and 6.5% lower than the 10 year average for distillates stocks for this time of the year…we'll also include a chart of what that looks like, since it appears our supplies of distillates are becoming critically low heading into winter...

November 8 2017 distillate supplies as of November 3rd

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the median of our distillates inventory, or the midpoint of the 10 year daily range, traced by the blue dashes over each day of the year...the graph also shows the number of barrels of distillates we had stored for each week in 2016 traced weekly by a yellow line, with our 2017 year to date distillates supplies for each week traced in red...notice in the light blue shaded area that there is normally a seasonality to distillates supplies, as they're normally built up during the summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heat oil is greatest...however, this summer, when supplies of distillates should have been increasing like they have every other year, they were falling all summer instead, largely because we have been exporting our distillates at a record pace, with some recent weeks seeing as much as 40% of our production going overseas...but in the US, we never deny the oil companies their profits, even if the margin of safety for our own use gets precariously narrow...thus we are heading into what looks like it will be a colder than normal winter with much lower than normal supplies of heat oil in storage, which is now likely to result in a shortage of heat oil and correspondingly higher prices in the US, sometime before the heating season comes to a close....

lastly, with our oil production at a record high while our oil exports were sharply lower, our commercial crude oil inventories rose for the just the 6th time in the past 31 weeks, increasing by 2,237,000 barrels, from 454,906,000 barrels on October 27th to 457,143,000 barrels on November 3rd...while our oil inventories as of October 27th were still 5.7% below the 485,010,000 barrels of oil we had stored on November 4th of 2016, they were a half percent higher than the 454,822,000 barrels in of oil that were in storage on November 6th of 2015, and 32.1% greater than the 346,150,000 barrels of oil we had in storage on November 6th of 2014, as the buildup of oil supplies was just getting started...  

This Week's Rig Count

US drilling activity increased for the 1st time in 6 weeks and for 4th time in the past 15 weeks during the week ending November 10th, as only oil rigs were added this past week...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 9 rigs to 907 rigs in the week ending on Friday, which was also 339 more rigs than the 568 rigs that were deployed as of the November 11th report in 2016, while it was still well less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 9 rigs to 738 rigs this week, in just their 3rd increase in 14 weeks and, which put the count of active oil rigs up by 286 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations was unchanged at 169 rigs this week, which was just 54 more gas rigs than the 115 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

activity offshore remained unchanged this week, with 18 rigs active in the Gulf of Mexico, down from the 21 rigs drilling in the Gulf a year ago....the count of active horizontal drilling rigs rose by 12 rigs to 764 rigs this week, their first increase in 6 weeks, putting them up by 319 rigs from the 457 horizontal rigs that were in use in the US on November 11th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the directional rig count was up by 1 rig to 74 rigs this week, which was also up from the 52 directional rigs that were working during the same week last year...on the other hand, the vertical rig count was down by 5 rigs to 57 vertical rigs this week, which was also down from the 59 vertical rigs that were deployed on November 11th of 2016...

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 pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 10th, the second column shows the change in the number of working rigs between last week's count (November 3rd) and this week's (November 10th) count, the third column shows last week's November 3rd active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 11th of November, 2016...         

November 10 2017 rig count summary

as you can see from the above tables, most of this week's rig increase was concentrated in Oklahoma's Cana Woodford basin, more popularly known by the acronym of the SCOOP - STACK play...that 7 rig increase was the largest for that basin since February 3rd, as it was not a major participant in this year's first half rig increase, which was led by drilling in the Permian of west Texas...also note that although the Permian did see a 6 rig increase this week, Texas saw a 4 rig decrease, all of which were outside of the major basins highlighted by Baker Hughes...the Permian district in Texas did see a three rig increase, while New Mexico saw an increase of 4 rigs, so one of those seven new rigs in the region was not targeting the Permian...lastly, note that there was also a rig pulled out of the Utica shale, while the Ohio and Pennsylvania rig counts were unchanged at 29 rigs and 31 rigs respectively...the best i can figure as to what happened there was that one rig was shut down in the Marcellus in West Virginia, while one rig was added in the Marcellus of Pennsylvania, while at the same time a Pennsylvania rig targeting the Utica shale was shut down...that would leave both the Marcellus and Pennsylvania rig counts unchanged, while showing one rig decreases in West Virginia and in the Utica, which is what we see...

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note:  there’s more here

Sunday, November 5, 2017

oil exports and distillates exports set new records; oil prices at a two year high

US oil prices rose for the 4th week in a row over the past week, blowing through a two year high on Friday after Baker Hughes reported the largest drop in oil rigs since last year....after rising 4.3% last week to a 6 month high of $53.90 a barrel, contracts for US crude for December rose another 25 cents to an eight month high of $54.15 on Monday on further expectations that those OPEC-led production cuts would be extended beyond March...prices then rose 23 cents more on Tuesday, on analyst's reports that the spike in U.S. crude exports over recent weeks would push US crude prices even higher...oil prices then slipped 8 cents to $54.30 a barrel on Wednesday, largely because the EIA's report of a drop in US crude supplies was not as great as has been expected, based on the prior day's report from the American Petroleum Institute...oil prices then returned to the upside on Thursday, increasing 24 cents to $54.54 a barrel, bolstered by indications that OPEC-led output cuts had tightened the market and drained inventories...while oil prices were mixed on Friday morning, they then spiked up more than 2% in the afternoon after the rig count report showed the largest drop in oil rigs this year, with oil closing up $1.10 on Friday at $55.64 a barrel, ending the week with an increase of $1.74 a barrel, a gain of 3.2% on last week's price..

below, i've copied a graph to show this week's drop in the rig count, and the rough relationship between the price of oil and the number of rigs deployed drilling for oil over time...

November 4 2017 rig count vs WTI price

the above graph was copied from a short post on Friday at Zero Hedge titled "US Oil Rig Count Drops Most Since May 2016 To 5-Month Lows", and it shows the oil rig count, as per Baker Hughes, as a blue graph from roughly mid-April to the present, and then below that, in the form of a red bar graph, the weekly change in the count of the rig count, with an increase in oil rigs represented by a red bar pointing upward from the "0" line, and a decrease in oil rigs represented by a red bar pointing downward from the "0" line...thus this week's decrease of 8 oil rigs is the largest decrease in oil rigs since mid May 2016...the chart also indicates with a charcoal grey line price of WTI, or West Texas Intermediate, the US benchmark price of oil, pulled forward on the graph three months ahead of the rig count dates (calling prices "lagged" is probably a misnomer - it's the drilling that lags)...mislabeling of the graph notwithstanding, what they do show is the rough relationship between the price of oil and the rig count, with it taking about three months for a change in the price of oil to be reflected in the number of active oil rigs; by pulling the price graph forward three months, they're showing that the current downturn in oil drilling is in response to the drop of the price of oil to the $45 a barrel range in August....what that relationship thus portends in light of this week's two year high in oil prices, however, is a return to the oilfields by the drillers sometime around February (lagged 3 months because it takes roughly that long to line up and contract for a rig and a crew and get them in place from the time that the decision to go ahead is made)

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending October 27th, showed a large drop in our oil imports while our oil exports rose to a record level, and hence there was a sizable withdrawal of oil from storage to meet the needs of our refineries, which saw little change in throughput from the prior week....our imports of crude oil fell by an average of 552,000 barrels per day to an average of 7,571,000 barrels per day during the week, while our exports of crude oil rose by 209,000 barrels per day to a record 2,133,000 barrels per day, which meant that our effective imports netted out to an average of 5,438,000 barrels per day during the week, 761,000 barrels per day less than during the prior week...at the same time, field production of crude oil from US wells rose by 46,000 barrels per day to an average of 9,553,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,991,000 barrels per day during the reported week...

at the same time, US oil refineries were using 16,015,000 barrels of crude per day, 10,000 barrels per day less than they used during the prior week, while over the same period 461,000 barrels of oil per day were being withdrawn from oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production and from storage was 563,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+563,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,699,000 barrels per day, statistically unchanged from the 7,695,000 barrels per day average imported over the same four-week period last year....the total 461,000 barrel per day withdrawal from our total crude inventories came about on a 348,000 barrel per day withdrawal from our commercial stocks of crude oil and a 113,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 46,000 barrel per day increase in our crude oil production included a 43,000 barrel per day increase in output from wells in the lower 48 states and a 3,000 barrels per day increase in output from Alaska....the 9,553,000 barrels of crude per day that were produced by US wells during the week ending October 20th was 8.9% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.1% more than the 8,522,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 0.6% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015... 

US oil refineries were operating at 88.1% of their capacity in using those 16,015,000 barrels of crude per day, up from 87.8% of capacity the prior week, a fairly normal pace for a fall seasonal maintenance period...the 16,015,000 barrels of oil that were refined this week were 9.6% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, but were still 3.7% more than the 15,448,000 barrels of crude per day that were being processed during week ending October 28th, 2016, when refineries were operating at 85.2% of capacity...

even with little change in the amount of oil refined, gasoline output from our refineries was higher, increasing by 251,000 barrels per day to 10,187,000 barrels per day during the week ending October 27th, which was also 3.7% higher than the 9,824,000 barrels of gasoline that were being produced daily during the comparable week a year ago....in addition, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 241,000 barrels per day to 5,036,000 barrels per day, which was 8.0% more than the 4,662,000 barrels per day of distillates that were being produced during the week ending October 28th last year....  

even with the increase in our gasoline production, our gasoline inventories at the end of the week fell by 4,020,000 barrels to 212,849,000 barrels by October 27th, after falling by 5,456,000 barrels the prior week, as our domestic consumption of gasoline rose by 147,000 barrels per day to 9,461,000 barrels per day, as Americans continue to burn far more gasoline than they did last year...meanwhile our exports of gasoline fell by 139,000 barrels per day to 767,000 barrels per day, while our imports of gasoline rose by 307,000 barrels per day to 540,000 barrels per day...with significant gasoline supply withdrawals in 14 out of the last 20 weeks, our gasoline inventories are now down by 12.2% from June 9th's level of 242,444,000 barrels, and 4.9% below last October 28th's level of 223,804,000 barrels, even as they are still roughly 2.7% above the 10 year average of gasoline supplies for this time of the year...  

with our distillates production little changed, our supplies of distillate fuels fell by just 320,000 barrels to 128,921,000 barrels over the week ending October 27th, the eighth decrease in nine weeks, after falling by 5,246,000 barrels the prior week...that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 567,000 barrels per day to 3,534,000 barrels per day, and as our exports of distillates rose by 237,000 barrels per day to a record 1,685,000 barrels per day, while our imports of distillates rose by 4,000 barrels per day to 137,000 barrels per day...after this week’s decrease, our distillate inventories ended the week 14.4% lower than the 150,550,000 barrels that we had stored on October 28th, 2016, and 6.5% lower than the 10 year average for distillates stocks for this time of the year…if the forecast La Nina materializes, we will see a shortage of heat oil this winter...

finally, with our oil exports hitting a new record high while our oil imports were dropping, our commercial crude oil inventories fell for the 25th time in the past 30 weeks, decreasing by 2,435,000 barrels, from 457,341,000 barrels on October 20th to 454,906,000 barrels on October 27th...while our oil inventories as of October 27th were 5.7% below the 482,578,000 barrels of oil we had stored on October 28th of 2016, they were still 1.5% higher than the 447,994,000 barrels in of oil that were in storage on October 30th of 2015, and 30.4% greater than the 348,935,000 barrels of oil we had in storage on October 31st of 2014...

since the major story in the oil data continues to be our ongoing record exports, we'll again include this week's graph of them so you can see how much they've jumped...

November 1  2017 crude oil exports for Oct 27

the above graph comes from a weekly emailed package of oil graphs from John Kemp of Reuters, and shows weekly US crude oil exports in thousands of barrels per day over the past 14 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over each of the past 9 weeks...it's clear that our oil exports over the last 6 weeks have breached new levels never seen before, as US drillers would rather sell their oil overseas when the international price continues to be a large premium over the domestic price...

and even while this week our exports were at a record 2,133,000 barrels per day, an article from Reuters appearing at the Christian Science Monitor discussed the logistics of our exporting as much as 3.5 million barrels a day...with total US crude production currently at 9.5 million barrels a day, if we plan to export 3.5 million barrels a day, that will only leave 6 million barrels of our production a day for our own use.....with US refineries typically using 16 to 17 million barrels per day of crude, 3.5 million barrels of exports would mean we'll have to import more than 10 million barrels each day to meet our needs...

now, here's the kicker, right from the scripture of 'the wisdom of markets'...exports from the US are being sold benchmarked to the price of WTI, right now around $55.64 a barrel...but what we import is benchmarked to Brent at $62.07, or to the OPEC basket price, which closed the week at $58.49...so every barrel crude that we export ends up being replaced by more expensive foreign oil...where is the wisdom in that?

This Week's Rig Count

US drilling activity decreased for the 5th week in a row and for 11th time in the past 14 weeks during the week ending November 3rd, with both oil and natural gas rigs seeing cutbacks...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 11 rigs to 898 rigs in the week ending on Friday, which was still 329 more rigs than the 569 rigs that were deployed as of the November 4th report in 2016, while it was well less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil decreased by 8 rigs to 729 rigs this week, their 11th decrease in 13 weeks and, as we noted earlier, the largest drop in oil drilling since May 2016...that still left active oil rigs up by 279 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 3 rigs to 169 rigs this week, which was the smallest natural gas rig deployment since April 21st and just 52 more gas rigs than the 117 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

two oil platforms that had been drilling offshore from Louisiana were shut down this week, leaving just 18 rigs active in the Gulf of Mexico, down from the 21 rigs drilling in the Gulf a year ago....the count of active horizontal drilling rigs was down by 5 rigs to 764 rigs this week, which was the smallest number of horizontal rigs active since May 19th...however, the week's horizontal deployment was still up by 305 rigs from the 459 horizontal rigs that were in use in the US on November 4th of last year, while down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....in addition, the vertical rig count was also down by 5 rigs to 61 vertical rigs this week, which was still up from the 58 vertical rigs that were working during the same week last year....at the same time, the directional rig count was down by 1 rig to 73 rigs this week, which was still up from the 52 directional rigs that were deployed on November 4th of 2016...

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 pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of November 3rd, the second column shows the change in the number of working rigs between last week's count (October 27th) and this week's (November 3rd) count, the third column shows last week's October 27th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 28th of November, 2016...        

November 3 2017 rig count summary

as we can see from the difference between the two tables above, this week saw a much larger turnover of rigs on a state basis than would be indicated by the total rig count or by the major basin counts in the second table...despite overall drilling being down by 11 rigs this week, Colorado saw the addition of 4 rigs, Texas added 3 more, and Alaska added two, and only two of those 9 rig increases - in the Niobrara and the Permian - show up in the major basin count variances...similarly, while Oklahoma shed eight rigs, only the single rig decline in the Ardmore Woodford and the 2 rig decline in the Arkoma Woodford are shown in the second table...furthermore, one would think that the 3 rig drop in the Haynesville would account for the 3 natural gas rigs that were shut down, but that's not the case; there had been two oil rigs working in the Haynesville, and now they're both gone; all 38 Haynesville rigs now target gas...the other two natural gas shutdowns were in the Arkoma Woodford...moreover, in addition to the changes shown in the state table above, Alabama also had one rig shut down, and now has just one, which is still up from a year ago, when they had none; Mississippi had two rigs shut down and also have just one left, down from two a year ago; Nebraska saw the lone rig that was started last week shut back down, which had been the only drilling in the state over the past year; while Montana saw a rig start up for the first time in 1 weeks, while a year ago they had none...

 

note: there's more here

Sunday, October 29, 2017

US oil & oil products exports at a record high, wiping out a decade of US oil production gains (and then some)

in lieu of a detailed review of how oil prices moved this week, i'll just include a quick graph to show you how they moved...as you see below, US oil prices for December were up $2.33 a barrel, or about 4.3%, to a 6 month high of $53.90 a barrel...news that the Saudis and the Russians want to extend their production cuts fueled the increase...at the same time, North Sea Brent futures for December rose $3.07 a barrel, more than 5%, to $60.44 a barrel, a two year high...thus the international premium for light sweet crude oil remains more than 12% over that of similar US crude, continuing to underpin the drive by those with holdings of US oil to export it overseas...

October 28th 2017 oil prices

i want to start today with a few graphs that i intended to write about last week, but couldn't because my internet service was down, and hence i was unable to access any of the supporting data...the point that i want to make with these graphs is very simple; the entire increase in oil output that has resulted since the advent of widespread fracking has gone overseas, whether directly or as a downstream product; all the gains, if there are any, have accrued to the exploitation companies, the refiners, and the shippers; not one drop of oil has been added to the supply of US consumers...

i'll start by showing you the graph of recent US crude & product exports that made that clear to me...

October 18 2017 oil & oil products exports

the above graph was copied from the October 18th post at "Today in Energy", the daily blog of the Energy Information Administration (EIA), which was titled "Crude oil and petroleum product exports reach record levels in the first half of 2017"...it shows our total crude and oil product exports in millions of barrels per day over the period from January 1st 2010 to June 30th of this year in a stacked graph, wherein monthly crude exports are shown in maroon, other liquids exports are shown in cerulean blue, propane exports are shown in navy, gasoline exports are shown in chocolate, distillate exports are shown in caramel and other refined products, which includes chemical feedstocks, are shown in sepia, with the top of the colored area for any given month thus showing the total of all oil and oil product exports for that month...the spreadsheet of the EIA"s monthly data shown on that chart is here, and the breakdown by type of product exported is here, which will be the sources of any amounts we'll refer to subsequently...

what we can see from that chart is that at the beginning of 2010, before the advent of widespread fracking, our total crude and oil product exports were under 2 million barrels per day, and they have gradually increased over the period until the first half of this year, when they were averaging over 6 million barrels per day, with the high mark on the chart representing our 6,443,000 barrel per day of exports in February...

next, we'll look at a graph which will illustrate the change in our crude oil output over the same period....

October 27 2017 US oil production as of Oct 20

the above graph is from the webpage of the EIA spreadsheet of our weekly crude oil production totals, and it shows the oil output from US wells, in thousands of barrels per day, from late 1999 until October 20th of this year...comparing our monthly crude production to the same periods we cited above for our gross exports, we find that our crude oil production was averaging around 5.4 million barrels per day at the beginning of 2010, and that it had grown to an average of over 9.4 million barrels per day by mid 2015, before falling back due to lower prices, only to recover to just below those levels in recent months (ignoring the weeks when production was shut in due to hurricanes, which we'll consider to be an aberration for this exercise...

so, what we find when we compare the data shown by these two graphs is that our total exports of crude and oil products increased by over 4 million barrels per day in the first seven and a half years of this decade, while the production of oil from US has increased by almost the same amount over that same span....that means that the entirety of the increase that has accrued to US oil production during this period of widespread fracking, has, on a barrels of oil or products basis, ending up on ships or pipelines heading out of this country...understand we're not saying that all fracked oil is exported, as some of our oil exports no doubt comes from conventional wells, while some of our refined products exports were refined from oil first imported from overseas, but that on a net basis, the increase in oil from fracking has matched, barrel for barrel, by an increase in our exports of oil and oil products...

furthermore, notice that the first chart we included above only included export data up until the end of June...in recent months, however, the balance has shifted further towards exports, and we are now exporting much more crude oil and refined products than our increased production can account for, which we'll also show by way of a few graphs...we'll start with a graph of our weekly crude oil exports over the past year....

October 26 2017 crude oil exports for Oct 20

the above graph comes from a weekly emailed package of oil graphs distributed by John Kemp, senior energy analyst and columnist with Reuters...it shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 8 weeks...what we can see from this graph is that our weekly crude oil exports were quite volatile over the first half of this year, generally over 500,000 barrels per day, but occasionally jumping to as high as 1,200,000 or 1,300,000 barrels per day...the average of our crude oil exports for the first six months of this year was 918,000 barrels per day....however, since US crude has been selling at a 10% to 12% discount to the international price of oil, our exports have jumped to an average of 1,693,000 barrels per day over the past 5 weeks, a pace we believe will continue for the foreseeable future, since contract prices for US oil several months out are similarly discounted...

next, we have a graph which shows those crude oil exports combined with oil products exports over the past year, which serves to update the picture shown in the initial EIA graph, which only covers the year to June...

October 26 2017 crude and products exports for Oct 20

the above graph, from a Zero Hedge post on this week's EIA report, shows weekly gasoline exports from the US in black, weekly distillates exports from the US in blue, and the weekly total of all crude oil and oil products exports in green over the past year, up until the week ending October 20th...it should be immediately clear that as of the most recent week, our total oil & products exports hit a new record of 7,663,000 barrels per day, beating the previous record of 7,023,000 barrels set three weeks earlier by more than 9%...during the same week, our exports of distillates were at 1,576,000 barrels per day, just short of the distillates export record of 1,612,000 barrels per day set just two weeks earlier...and while our gasoline exports weren't a record, the 906,000 barrels of gasoline we exported per day was the most gasoline we've exported since the week ending January 13th...

returning to the comparison we made with the initial two graphs in this series, oil production from US wells during the week ending October 20th was at 9,507,000 barrels per day, or about 4.1 million barrels per day more than our January 2010 baseline...our record gross exports of 7,663,000 barrels per day, on the other hand, were about 5.7 million barrels per day higher than January 2010 gross exports....so although this is only one week's data, and likely an outlier, our gross exports of oil and products over time are now rising much faster than our field production of oil, the so-called fracking boom notwithstanding...that's a pace which is clearly unsustainable, but seems destined to continue until such time as US prices rise to those of the rest of the world, which may take a severe domestic shortage to achieve....

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending October 20th, showed large increases in both our oil imports and our domestic production of oil, enough so that a small amount of surplus oil could be returned to storage, despite a large increase in the amount of oil used by US refineries at the same time....our imports of crude oil rose by an average of 640,000 barrels per day to an average of 8,123,000 barrels per day during the week, while our exports of crude oil rose by 126,000 barrels per day to a near record 1,924,000 barrels per day, which meant that our effective imports netted out to an average of 6,199,000 barrels per day during the week, 514,000 barrels per day more than during the prior week...at the same time, field production of crude oil from US wells rose by 1,101,000 barrels per day to an average of 9,507,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,706,000 barrels per day during the reported week... 

at the same time, US oil refineries were using 16,025,000 barrels of crude per day, 586,000 barrels per day more than they used during the prior week, while during the same period 77,000 barrels of oil per day were being added to oil storage facilities in the US....hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports and from oilfield production was 396,000 fewer barrels per day than what refineries reported they used plus what was added to storage during the week...to account for that discrepancy, the EIA needed to insert a (+396,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,609,000 barrels per day, 3.2% above the imports of the same four-week period last year....the total 77,000 barrel per day addition to our total crude inventories came about on a 122,000 barrel per day addition to our commercial stocks of crude oil, which was partially offset by a 45,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 1,101,000 barrel per day increase in our crude oil production was due to a 1,109,000 barrel per day surge in output from wells in the lower 48 states, as production came back after Hurricane Nate, while output from Alaska fell by 8,000 barrels per day at the same time...the 9,507,000 barrels of crude per day that were produced by US wells during the week ending October 20th was 8.4% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 11.8% more than the 8,504,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 1.1% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...  

US oil refineries were operating at 87.8% of their capacity in using those 16,025,000 barrels of crude per day, up from 84.5% of capacity the prior week, a fairly normal pace for a fall seasonal maintenance period...the 16,025,000 barrels of oil that were refined this week were 9.6% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck at the end of August, but were still 3.0% more than the 15,552,000 barrels of crude per day that were being processed during week ending October 21st, 2016, when refineries were operating at 85.5% of capacity...

despite the pickup in US oil refining, gasoline output from our refineries was lower, decreasing by 95,000 barrels per day to 9,936,000 barrels per day during the week ending October 20th, which was still 1.0% higher than the 9,837,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 11,000 barrels per day to 4,795,000 barrels per day, which was 5.7% more than the 4,536,000 barrels per day of distillates that were being produced during the week ending October 21st last year....   

with the decrease in our gasoline production, our end of the week gasoline inventories fell by 5,456,000 barrels to 216,869,000 barrels by October 20th, the first drop in gasoline inventories in 5 weeks...the size of the decrease was exacerbated by a 270,000 barrel per day increase to 906,000 barrels per day in our exports of gasoline, while our imports of gasoline fell by 457,000 barrels per day to 233,000 barrels per day, the least gasoline we've imported since November 5 1995...also contributing to the decrease in our supplies, our domestic consumption of gasoline rose by 178,000 barrels per day to 9,314,000 barrels per day at the same time...with significant gasoline supply withdrawals in 13 out of the last 19 weeks, our gasoline inventories are now down by 10.5% from June 9th's level of 242,444,000 barrels, and 4.0% below last October 14th's level of 226,011,000 barrels, even as they are still roughly 4.8% above the 10 year average of gasoline supplies for this time of the year...   

with our distillates production little changed, our supplies of distillate fuels fell by 5,246,000 barrels to 129,241,000 barrels over the week ending October 20th, the seventh decrease in eight weeks...that large drop in our supplies was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 624,000 barrels per day to 4,101,000 barrels per day, and because our exports of distillates rose by 237,000 barrels per day to a near record 1,576,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 133,000 barrels per day...after this week’s large increase, our distillate inventories ended the week 15.2% lower than the 152,378,000 barrels that we had stored on October 21st, 2016, and 7.2% lower than the 10 year average for distillates stocks for this time of the year…if the forecast La Nina materializes, we will see a shortage of heat oil this winter...

finally, with the big rebound in our oil production and the large increase in our oil imports, our commercial crude oil inventories rose for just the 5th time in the past 29 weeks, increasing by 856,000 barrels, from 456,485,000 barrels on October 13th to 457,341,000 barrels on October 20th...while our oil inventories as of October 20th were still 2.3% below the 468,158,000 barrels of oil we had stored on October 21st of 2016, they were 2.1% higher than the 447,994,000 barrels in of oil that were in storage on October 23rd of 2015, and 31.2% greater than the 348,475,000 barrels of oil we had in storage on October 24th of 2014...

This Week's Rig Count

US drilling activity decreased for the 4th week in a row and for 10th time in the past 13 weeks during the week ending October 27th, with this week's cutbacks entirely in rigs targeting natural gas...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 4 rigs to 909 rigs in the week ending on Friday, which was still 352 more rigs than the 557 rigs that were deployed as of the October 28th report in 2016, while it was less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 1 rig to 737 rigs this week, only their 2nd increase in 12 weeks, which meant active oil rigs were up by 296 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by 5 rigs to 172 rigs this week, which was the smallest natural gas rig deployment since May 12th and just 58 more gas rigs than the 114 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

the count of rigs drilling offshore was unchanged at 20 rigs this week, as 20 platforms remained active in the Gulf of Mexico, down from the 21 in the Gulf and one offshore from Alaska a year ago...however, one of the working Gulf rigs was moved from offshore Louisiana to offshore of Texas, where there are now 2 rigs drilling, up from one rig offshore from Texas a year earlier.... 

the count of active horizontal drilling rigs was down by 2 rigs to 769 rigs this week, which was the smallest number of horizontal rigs active since May 26th...however, that was still up by 319 rigs from the 450 horizontal rigs that were in use in the US on October 28th of last year, while down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was down by 6 rigs to 74 rigs this week, which was still up from the 54 directional rigs that were deployed during the same week last year.....on the other hand, the vertical rig count was up by 4 rigs to 66 vertical rigs this week, which was also up from the 53 vertical rigs that were working on October 28th of 2016......

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 pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of October 20th, the second column shows the change in the number of working rigs between last week's count (October 13th) and this week's (October 20th) count, the third column shows last week's October 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 21st of October, 2016...        

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 pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of October 27th, the second column shows the change in the number of working rigs between last week's count (October 20th) and this week's (October 27th) count, the third column shows last week's October 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 28th of October, 2016...        

October 27 2017 rig count summary

other than the changes inidcated for the major producing states shown in the first table above, a rig also started drilling in Nebraska this week, which was the first drilling seen in that state since early July of last year...

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note: there’s more here…