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, May 13, 2018

oil prices hit 42 month high on Trump's Iran sanctions; another record for US oil production, another big drop in US distillate supplies…

oil prices hit fresh 42 month highs three times this week before falling back a bit on Friday, in a rally that was mostly a reaction to Trump's abrogation of the 2015 seven nation pact with Iran, which had placed limits on their nuclear power program in exchange for lifting international sanctions....US oil prices topped $70 a barrel for the first time since November 2014 in rising $1.01 to $70.73 a barrel on Monday, boosted by news of more trouble for Venezuelan oil and the likelihood that Trump would re-impose sanctions on Iran in his speech planned for the next day...however, oil prices crashed over 4% to $67.63 a barrel on Tuesday morning, including a 3% drop in just 7 minutes, after CNN erroneously reported that Trump would not withdraw the US from the Iran pact, but prices recovered by the close to end down just $1.67 at $69.06 a barrel, when it became clear that Trump would repudiate the Obama administration's Iran deal and impose 'powerful' sanctions on Iran, including punishing any foreign companies that would do business with them....US oil prices then climbed steadily on Wednesday, rising $2.08 to another 3 1/2-year high of $71.14 a barrel, after it became clear that the US would quit the Iran pact, while the EIA reported a larger-than-expected drawdown of U.S. oil inventories...oil prices rose as high as $71.89 a barrel on Thursday morning before traders moved into to take profits, as the market digested the likely impact of the new Iran sanctions, with oil still ending the day 22 cents higher $71.36 a barrel, yet another 3 1/2 year high...oil prices then fell 66 cents in a see-saw session on Friday, retreating to close at $70.70 a barrel after rising as high as $71.63 earlier, after US allies, including Great Britain, reiterated their support for the Iran nuclear pact and the Saudis said they'd happily plug the hole left in global oil supplies by the loss of Iranian crude....US crude for June delivery thus gained just 98 cents, or 1.4% for the week in their 2nd straight weekly climb, while North Sea Brent for July, the international benchmark, saw prices rise $2.25, or 3.0% over the week to close at $77.12 a barrel, after trading as high as $78 a barrel on Thursday...

since we have a new 42 month high for oil prices, and since it's been a while since we looked at a graph of their trajectory, we'll include one here today..

May 12 2018 - oil prices past 2 years

the above graph is a Saturday afternoon screenshot of the live interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the graph represents oil prices for one week of oil trading between the 2nd last week of 2015 and May 11th of this year, with green bars representing weeks when the price of oil went up, and red bars representing the weeks when the price of oil went down...for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the weekly close is at the bottom of the bar...also faintly visible on this "candlestick" style graph are the feint grey "wicks" above and below each bar, to indicate trading prices during each week that were above or below the opening to closing price range for that week...

by going back more than two years, we were able to capture on this graph the thirteen year low that US oil prices fell to during the second week of February 2016, when oil prices briefly touched $26.21 a barrel...prices at that level caused record shutdowns of US drilling operations, which culminated in a record rig count low in May of that year, and resulted in the bankruptcies of 123 North American oil and gas producers over a two year period...however, even though the exploitation companies were going bankrupt, very few of them were being liquidated, as for the most part, their stockholders lost everything, their bondholders became the new stockholders, the creditors got screwed, and the frackers kept fracking...subsequently, after nearly doubling from that low by the end of May 2016, oil prices traded in a range between $42 and $54 a barrel for the next 18 months before they began the steady climb to where they are today...

natural gas prices ended the week higher as well, mostly on the back of a 7.7 cent jump to a two week high of $2.814 per mmBTU on Thursday, that came after the EIA's report on gas in storage showed a smaller than expected addition to supplies...the natural gas storage report from the EIA indicated that natural gas in storage in the US rose by 89 billion cubic feet to 1,432 billion cubic feet over the week ending May 4th, still leaving our gas supplies 836 billion cubic feet, or 47.6% lower than the 2,295 billion cubic feet that were in storage on May 5th of last year, and 520 billion cubic feet, or 26.6% below the five-year average of 1,952 billion cubic feet of natural gas that are typically in storage at the first weekend in May...analysts had forecast a 94 to 96 billion cubic foot addition to storage, so while the 89 billion cubic foot addition fell short of expectations, it was nonetheless well above the 49 billion cubic feet of gas that was added to storage over the week ending May 5th last year, and above the average 75 billion cubic foot surplus of natural gas typically added to storage during the first week in May...

since we've now turned the corner on the natural gas storage season, we'll take a look at what that supply situation looks like:

May 11 2018 natural gas supplies as of May 4

the above graph came from a package of natural gas graphs that John Kemp, senior energy analyst and columnist with Reuters, mailed out on Friday morning, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending May 4th 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" from the period shown by the red graph as a yellow line, which would thus be from January 2014 up until the end of 2017, and the average of natural gas in storage over the 5 years preceding those same dates shown as a dashed blue line...at the same time, the light blue shaded background shows us the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the graph…thus the light shaded area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the middle of October, falling through the winter, and usually bottoming out at the end of March...this year, however, saw smallish withdrawals of gas from storage for the first three reports in April, pushing supplies that much further below normal...so while our gas supplies are now increasing as little of it is being consumed for heating, they are still well below the 5 year average as indicated by the dark dashed line, and not only the lowest of any time since 2014, but also the 2nd lowest for any week in May for as long as these weekly records have been kept...we will now be watching to see if these gas supplies trend back to normal over the next 5 months, such that we can head into the next heating season with adequate supplies...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending May 4th, indicated that due to big drop in our oil imports, we had to pull oil out of our commercial crude supplies to meet refinery needs for the sixth time in the past fifteen weeks...our imports of crude oil fell by an average of 1,226,000 barrels per day to an average of 7,323,000 barrels per day during the week, after rising by 1,339,000 barrels per day over the prior three weeks, while our exports of crude oil fell by an average of 271,000 barrels per day to an average of 1,877,000 barrels per day during the week, which meant that our effective trade in oil over the week ending the 4th worked out to a net import average of 5,446,000 barrels of per day during the week, 955,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 84,000 barrels per day to a record high of 10,703,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,149,000 barrels per day during the reporting week...

meanwhile, US oil refineries were using 16,486,000 barrels of crude per day during the week ending May 4th, 75,000 barrels per day less than they used during the prior week, while at the same time 415,000 barrels of oil per day were reportedly pulled out of oil storage in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 78,000 more barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (-78,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,068,000 barrels per day, which was 1.0% less than the 8,152,000 barrel per day average we imported over the same four-week period last year...the 415,000 barrel per day reduction in our total crude inventories included a 314,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 101,000 barrel per day decrease of the oil in our Strategic Petroleum Reserve, possibly a sale of oil mandated by this year's federal budget...this week's 84,000 barrel per day increase in our crude oil production included a 91,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 7,000 barrel per day increase in output from Alaska...the 10,703,000 barrels of crude per day that were produced by US wells during the week ending May 4th were once again the highest on record, 14.9% more than the 9,314,000 barrels per day that US wells were producing during the week ending May 5th of last year, and up by 27% from the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

US oil refineries were operating at 90.4% of their capacity in using 16,486,000 barrels of crude per day during the week ending May 4th, down from 91.1% of capacity the prior week, and down from the seasonal high of 93.5% of capacity during the first week of April....the 16,486,000 barrels of oil that were refined this week were the least oil processed since the first week of March, down 6.4% from the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, and 1.6% less than the 16,759,000 barrels of crude per day that were being processed during the week ending May 5th, 2017, when refineries were operating at 91.5% of capacity....

with the decrease in the amount of oil that was refined this week, gasoline output from our refineries was correspondingly lower than the prior week, decreasing by 71,000 barrels per day to 9,974,000 barrels per day during the week ending May 4th, after our refineries' gasoline output had increased by 159,000 barrels per day during the week ending April 27th.... with that decrease, our gasoline production was fractionally lower during the week than the 10,052,000 barrels of gasoline that were being produced daily during the week ending May 5th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 2,000 barrels per day to 4,993,000 barrels per day, after rising by 18,000 barrels per day the prior week....that left the week's distillates production fractionally higher than the 4,956,000 barrels of distillates per day than were being produced during the week ending May 5th, 2017....    

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week fell by 2,174,000 barrels to 235,804,000 barrels by May 4th, the seventh decrease in 10 weeks, but just the 8th decrease in 26 weeks, as gasoline inventories, as usual, were being built up over the winter months...our gasoline supplies fell this week because our domestic consumption of gasoline rose by 685,000 barrels per day to 9,775,000 barrels per day, and because our imports of gasoline fell by 120,000 barrels per day to 803,000 barrels per day, while our exports of gasoline fell by 320,000 barrels per day to 581,000 barrels per day...after this week's decrease, our gasoline inventories finished 2.2% lower than last May 5th's level of 241,082,000 barrels, even as they are now roughly 10.3% above the 10 year average of gasoline supplies for this time of the year...          

meanwhile, with this week's distillates production again little changed, our supplies of distillate fuels fell by 3,791,000 barrels to 115,038,000 barrels over the week ending May 4th, the 8th decrease in nine weeks, after falling by 9,428,000 barrels over the prior three weeks...our distillate inventories fell again because while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 178,000 barrels per day to 4,307,000 barrels per day, our exports of distillates rose by 213,000 barrels per day to 1,356,000 barrels per day, while our imports of distillates rose by 52,000 barrels per day to 128,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 22.7% below the 148,768,000 barrels that we had stored on May 5th, 2017, and roughly 16.1% lower than the 10 year average of distillates stocks for this time of the year

finally, because our oil imports fell while our oil exports remained elevated, our commercial supplies of crude oil decreased for the 8th time in 2018 and for the 35th time in the past year, as our commercial crude supplies fell by 2,197,000 barrels during the week, from 435,955,000 barrels on April 27th to 433,758,000 barrels on May 4th...hence, after falling most of the past year, our oil inventories as of May 4th were 17.0% below the 522,525,000 barrels of oil we had stored on May 5th of 2017, 14.7% lower than the 508,487,000 barrels of oil that we had in storage on May 6th of 2016, and 4.0% below the 451,888,000 barrels of oil we had in storage on May 8th of 2015, during a period when the US glut of oil had already begun to build from the nearly stable supply levels of prior years...  

This Week's Rig Count

US drilling activity increased for the 11th time in the past twelve weeks and for 20th time in the past 27 weeks during the week ending May 11th, a period of higher oil prices that has consequentially seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 13 rigs to 1045 rigs over the week ending on Friday, which was also 160 more rigs than the 885 rigs that were in use as of the May 12th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC officially began their attempt to flood the global oil market...

the number of rigs drilling for oil increased by 10 rigs to 844 rigs this week, which was also 132 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations increased by 3 rigs to 199 rigs this week, which was 27 more gas rigs than the 172 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, there are also two active rigs that are listed as "miscellaneous", up from the 1 "miscellaneous" rig that was operating a year ago....

drilling activity in the Gulf of Mexico increased by one rig to 20 rigs rig this week, which is the same number of rigs that were drilling in the Gulf of Mexico a year ago...however, a year ago there was also a rig drilling offshore from Alaska, so the total offshore count of 21 rigs of last May 12th is one more than this week's offshore total....at the same time, another rig began drilling through an inland lake in southern Louisiana this week, where there are now three such inland waters rigs working, still down from the 4 rigs that were deployed on inland waters a year ago..

the count of active horizontal drilling rigs increased by 5 rigs to 918 horizontal rigs this week, which was the most horizontal rigs active since February 27, 2015, and 176 more horizontal rigs than the 742 horizontal rigs that were in use in the US on May 12th 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 increased by 8 rigs to 72 directional rigs this week, which was also up from the 66 directional rigs that were in use during the same week of last year... meanwhile, the vertical rig count was unchanged at 55 rigs this week, which was down from the 77 vertical rigs that were deployed on May 12th of 2017...

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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 11th, the second column shows the change in the number of working rigs between last week's count (May 4th) and this week's (May 11th) count, the third column shows last week's May 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 5th of May, 2017...      

May 11 2018 rig count summary

in a bit of a reversal of last week's 6 rig increase on the New Mexico side of the Permian basin, this week's Permian increase was all on the Texas side of the border, where 7 rigs were added in Texas's Permian districts, while at the same time 4 New Mexico rigs were shut down, 2 of which don't appear to have been in that basin...elsewhere, the three rig increase in Oklahoma appears include one each in the Cana Woodford, the Mississippian lime, and the Granite Wash, which also extends into the Texas panhandle...in addition, the three rig increase in Colorado was likely all in the Denver-Julesburg Niobrara chalk, as a Wyoming rig that was likely working that basin was concurrently shut down during the same week....meanwhile, 3 natural gas directed rigs were added in the Eagle Ford of south Texas, where an oil rig was shut down at the same time, leaving the rig deployment in the Eagle Ford at 12 gas rigs and 66 oil rigs...obviously, another natural gas rig was also deployed in West Virginia's Marcellus at the same time, while the national gas rig increase remained at 3 as a single gas rig in an "other' unnamed basin was shut down at the same time...

 

note:  there’s more here

Sunday, May 6, 2018

distillate fuel supplies at a 45 month low, down 21% from a year ago; horizontal drilling at a 38 month high

US oil prices approached $70 a barrel in climbing to a new 42 month high this week, while international oil prices as represented by North Sea Brent crude breached the $75 a barrel level early in the week and again on Friday before closing at $74.87...after edging 30 cents lower to $68.10 a barrel over the prior week, contracts for June delivery of US crude rose from a session low of $67.17 a barrel to close 47 cents higher at $68.57 a barrel on Monday, after Israeli Prime Minister Netanyahu presented what he described as new evidence that Iran had lied about its nuclear capabilities, which spooked oil traders into thinking the Iran nuclear deal was in jeopardy...however, oil prices fell $1.32 or 2.5% to $67.25 a barrel on Tuesday, after the US dollar strengthened and Netanyahu's revelations were widely debunked...oil prices then turned higher again on Wednesday, rising 68 cents to $67.93 a barrel, after the Fed held US interest rates steady and expressed confidence in higher prices and the International Monetary Fund threatened to expel Venezuela and cut its funding for its failure to provide adequate economic data...oil prices added another 50 cents on Thursday to close at $68.43 a barrel, boosted by OPEC production cuts and the potential for new U.S. sanctions against Iran, with further gains limited by growing U.S. crude inventories...with growing concerns over the economic crisis in Venezuela and the May 12th deadline for Trump's approval of the Iran treaty looming, US oil prices pushed up to as high as $69.97 on Friday before settling at $69.72 a barrel, a three and half year closing high and an increase of $1.62 or 2.4% for the week....

    natural gas prices, on the other hand, were lower 4 out of 5 days this week, but still remained in the narrow 10 cent price band that they've been stuck in since mid-March, as the expected first addition to supplies this year was greater than expected...after falling 8 tenths of a cent on Monday, US natural gas prices for June delivery rose 3.9 cents on Tuesday, then fell a total of 9.1 cents over the next three days to end the week at $2.711 per mmBTU, down 6 cents, or 2.2%, from the prior week's close....the natural gas storage report from the EIA released on Thursday indicated that natural gas in storage in the US rose by 62 billion cubic feet to 1,343 billion cubic feet over the week ending April 27th, which left our gas supplies 903 billion cubic feet, or 40.2% lower than the 2,246 billion cubic feet that were in storage on April 28th of last year, and 534 billion cubic feet, or 28.4% below the five-year average of 1,877 billion cubic feet typically in storage at the end of April....the forecasts had been for a 52 billion cubic foot addition to storage, but while the 62 billion cubic feet actually added beat that, it was still below the 68 billion cubic feet of gas that was added to storage over the week ending April 28th last year, and the 69 billion cubic foot surplus of natural gas normally added to storage during the last week of April...

    The Latest US Oil Data from the EIA

    this week's US oil data from the US Energy Information Administration, covering the week ending April 27th, indicated that due to an increase our oil imports, a decrease in our oil exports, and pullback in the amount of oil used by our refineries, we had surplus oil to add to our commercial crude supplies for the ninth time in the past fourteen weeks...our imports of crude oil rose by an average of 80,000 barrels per day to an average of 8,549,000 barrels per day during the week, after rising by 1,259,000 barrels per day over the prior two weeks, while our exports of crude oil fell from last week's record by an average of 183,000 barrels per day to an average of 2,148,000 barrels per day during the week, which meant that our effective trade in oil over the week ending the 27th worked out to a net import average of 6,401,000 barrels of per day during the week, 263,000 barrels per day more than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 33,000 barrels per day to a record high of 10,619,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 17,020,000 barrels per day during the reporting week...

    meanwhile, US oil refineries were using 16,561,000 barrels of crude per day during the week ending April 27th, 60,000 barrels per day less than they used during the prior week, while at the same time 824,000 barrels of oil per day were being added to oil storage in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 365,000 fewer barrels per day than what refineries reported they used during the week plus what was reportedly being added to storage...to account for that disparity, the EIA needed to insert a (+365,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this)...

    further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,400,000 barrels per day, which was 2.2% more the 8,216,000 barrel per day average we imported over the same four-week period last year...the 824,000 barrel per day addition to our total crude inventories included a 888,000 barrel per day increase in our commercially available stocks of crude oil, partially offset by a 64,000 barrel per day decrease of the oil in our Strategic Petroleum Reserve, possibly a sale of oil mandated by this year's federal budget...this week's 33,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states and a 8,000 barrel per day increase in output from Alaska...the 10,619,000 barrels of crude per day that were produced by US wells during the week ending April 27th were the highest on record, 14.3% more than the 9,293,000 barrels per day that US wells were producing during the week ending April 21st of last year, and up by 26% from the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

    US oil refineries were operating at 91.1% of their capacity in using 16,561,000 barrels of crude per day during the week ending April 27th, actually up from 90.8% of capacity the prior week, but still down from the off-season record 96.7% of capacity set during the last week of 2017...the 16,561,000 barrels of oil that were refined this week were the least oil processed since the first week of March, down 5.9% from the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, and 3.6% less than the 17,177,000 barrels of crude per day that were being processed during the week ending April 28th, 2017, when refineries were operating at 93.3% of capacity....

    even with the decrease in the amount of oil that was refined this week, gasoline output from our refineries was higher than the prior week, increasing by 159,000 barrels per day to 10,045,000 barrels per day during the week ending April 27th, after our refineries' gasoline output had decreased by 308,000 barrels per day during the week ending April 20th.... with that increase, our gasoline production was 2.7% greater during the week than the 9,783,000 barrels of gasoline that were being produced daily during the week ending April 28th of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 18,000 barrels per day to 4,995,000 barrels per day, after falling by 117,000 barrels per day the prior week....however, even with that increase, the week's distillates production was still 2.1% less than the 5,101,000 barrels of distillates per day than were being produced during the week ending April 28th, 2017....   

    with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose by 1,171,000 barrels to 237,978,000 barrels by April 27th, just the third increase in 9 weeks, but the 18th increase in 25 weeks, as gasoline inventories are normally built up over the winter months...our gasoline supplies rose as our domestic consumption of gasoline rose by 7,000 barrels per day to 9,090,000 barrels per day, and as our imports of gasoline rose by 27,000 barrels per day to 923,000 barrels per day, while our exports of gasoline rose by 110,000 barrels per day to 901,000 barrels per day...but even with this week's increase, our gasoline inventories are still 1.3% lower than last April 28th's level of 241,232,000 barrels, even as they are now roughly 11.2% above the 10 year average of gasoline supplies for this time of the year...         

    meanwhile, even with this week's small increase in distillates production, our supplies of distillate fuels fell by 3,900,000 barrels to 118,829,000 barrels over the week ending April 27th, the 7th decrease in eight weeks, after falling by 5,628,000 barrels the prior two weeks...our distillate inventories fell again because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 736,000 barrels per day to 4,485,000 barrels per day, even as our exports of distillates fell by 581,000 barrels per day from last week's record high to 1,143,000 barrels per day, while our imports of distillates fell by 47,000 barrels per day to 76,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 21.0% lower than the 150,355,000 barrels that we had stored on April 28th, 2017, and roughly 13.8% lower than the 10 year average of distillates stocks at this time of the year…with our distillate supplies approaching a 4 year low, we'll take a quick look at a graph of what that looks like, compared to recent history:

    May 2 2018 distillate supplies as of April 27

    in the graph above, copied from the weekly Petroleum Status Report (pdf), the blue line shows the recent track of US distillate inventories in millions of barrels over the period from June 2016 to April 27, 2018, while the grey shaded area represents the range of distillate inventories in millions of barrels as reported weekly by the EIA over the 5 years prior to the time of year shown by the blue line, ie, on the extreme left of the graph, the grey shaded area shows shows the 5 year range of distillate inventories back to June 2011, while on the right side of the graph, the grey shaded area shows shows the 5 year range of distillate inventories back to May 2013...as we can see by the blue line, as recently as February 2017 our distillate supplies were at an all time high, but in the 14 months since then, they've fallen to a 45 month low, largely because we've been exporting diesel fuel at a record pace...only at the end of the polar vortex winter of 2014 were our distillate fuel supplies lower than they are now, then due to the exceptionally large use of heat oil...

    finally, because of the increase our oil imports and the decrease in our oil exports, we were able to add to our commercial supplies of crude oil for the 10th time in 2018 and for the 17th time in the past year, as our commercial crude supplies increased by 6,218,000 barrels during the week, rising from 429,737,000 barrels on April 20th to 435,955,000 barrels on April 27th...however, after falling most of the past year, our oil inventories as of April 27th were still 17.4% below the 527,772,000 barrels of oil we had stored on April 28th of 2017, 14.9% lower than the 512,095,000 barrels of oil that we had in storage on April 29th of 2016, and 4.0% below the 458,181,000 barrels of oil we had in storage on May 1st of 2015, during a period when the US glut of oil had already begun to surge from the stable levels of prior years...   

    This Week's Rig Count

    US drilling activity increased for the tenth time in the past eleven weeks and for 19th time in the past 26 weeks during the week ending May 4th, a period of higher oil prices that has consequentially seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 11 rigs to 1032 rigs in the week ending on Friday, which was also 155 more rigs than the 877 rigs that were in use as of the May 5th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market...

    the number of rigs drilling for oil increased by 9 rigs to 834 rigs this week, which was also 131 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations increased by 1 rigs to 196 rigs this week, which was 23 more gas rigs than the 173 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one rig began drilling that was listed as "miscellaneous", and there are now two such miscellaneous rigs deployed, up from the 1 "miscellaneous" rig that was operating a year ago.

    drilling activity in the Gulf of Mexico increased by one rig to 19 rigs rig this week, which is up from the 18 rigs drilling in the Gulf of Mexico a year ago...however, a year ago there was also a rig drilling offshore from Alaska, so the total offshore count of 19 rigs is the same as that of last May 5th...on the other hand, three of the platforms which had been drilling on inland lakes in southern Louisiana were shut down this week, leaving just 2 remaining, down from the 5 rigs that were deployed on inland waters a year ago..

    the count of active horizontal drilling rigs increased by 12  rigs to 913 horizontal rigs this week, which was the most horizontal rigs active since February 27, 2015, and 179 more horizontal rigs than the 734 horizontal rigs that were in use in the US on May 5th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the vertical rig count also increased by 3 rigs to 55 vertical rigs this week, which was still down from the 76 vertical rigs that were in use during the same week of last year... on the other hand, the directional rig count was down by 4 rigs to 64 rigs this week, which was also down from the 67 directional rigs that were deployed on May 5th of 2017...

    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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of May 4th, the second column shows the change in the number of working rigs between last week's count (April 27th) and this week's (May 4th) count, the third column shows last week's April 27th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 5th of May, 2017...     

    May 4 2018 rig count summary

    as we can see from the basin table above, once again the Permian basin increase of 6 rigs accounted for the lion's share of this week's oil drilling increase, but in this week's case it was not in Texas, as New Mexico saw the 6 rig increase while the drilling in the Permian districts of Texas was unchanged...meanwhile, the single rig targeting natural gas was added in the Haynesville; as you can see, rig counts in both the Marcellus and Utica shale were unchanged...and in addition to the major producing states shown above, Mississippi saw two of their 5 rigs shut down this week, but at 3 rigs their count is still up from the 1 rig that was working the state a year ago, while Florida saw the first drilling rig operating in the state since August 2015...

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    on Tuesday of this week, the EIA's daily blog "Today in Energy" had some interesting and informative graphs accompanying their post titled U.S. crude oil production efficiency continues to improve that tie in to our discussion last week about why the number of rigs drilling for any given week has become decoupled from expected oil production at some future date...since we're segueing this from the weekly rig count discussion, we'll start with their graph showing the historical rig counts in each of the major US shale oil basins...

    May 2 2018 rig count by region

    as noted, the above graph came from the EIA post titled U.S. crude oil production efficiency continues to improve, and it shows the average number of rigs deployed monthly over the 11 years from the beginning of 2007 to the end of 2017, with the map insert providing a color coded key to the graph...as you can see, drilling in the Permian basin of west Texas and southeast New Mexico shown in brown has always led the nation in the number of horizontal rigs deployed, but early on drilling in the other basins was a larger contributor to the total...however, after OPEC knocked US drilling down to historical lows in 2016, new drilling in the Permian has far outnumbered that of everywhere else...for instance, if we look back at this week's rig count table for an exact number, we see that there were 458 rigs deployed in the Permian as of May 4th, which was a bit over half of all the horizontal rigs deployed national as of that date...

    next, we'll include the graph from that same post that shows what the average first month of oil production in each of those regions has looked like over time...

    May 2 2018 first month of oil production

    again, this graph came from the EIA blogpost titled U.S. crude oil production efficiency continues to improve, and it shows how that production has continue to improve by graphing the average first month of oil production in barrels per day for each of the major producing oil shale basins from 2007 to 2017, again color coded by basin as the map insert indicates...here we can see that up until mid 2009, first month oil production for all US basins other than the Bakken had averaged below 50 barrels per day, as the frackers were only partially successful at exploiting those basins early on...subsequently, first month production from the Eagle Ford of south Texas began to rise, and by the end of 2017, the average well in the Eagle Ford was also producing over 600 barrels per day during its first month of operation...other basins have been slower to increase output, but as you can see, first month output from the Permian has now risen from around 100 barrels per day in mid 2013 to over 500 barrels per day by the end of 2017...the reasons for the higher production per well are many-fold, but it's primarily due to longer horizontal laterals, multi-stage fracking in 50 stages or more, and using much more sand than previously, typically several thousand pounds of sand per foot of lateral, which is driven into the shale layer by water pressures at 10,000 pounds per square inch...using these techniques, the frackers are not merely fracturing the rock, but pulverizing it, and leaving enough sand between the fragments that a large percentage of the embedded oil and gas can escape...

    the last graph from the that post we'll include shows the historical well output over time for each of the oil producing regions therein discussed...

    May 2 2018 oil production by month of operation

    again, from that same EIA blogpost, this graphic actually includes 5 graphs, one for each of the major shale oil producing basins discussed, with the graphs again color coded by the adjacent map...the key to this graphic is in the series of years shown below the US map, which shows the relative darkness of each year as it's graphed in color in the individual maps...all 5 graphs above are constructed in the same manner; each graph has 5 production graph lines within it, one for each year since 2013, with 2013 being the lightest shade and 2017 being the darkest....each annual line then shows the average production of fracked wells for that given year for each month that oil wells started that year have been in operation...thus, for example, in the middle top graphic above for the Bakken, the lightest yellow line shows the average production record of all Bakken wells that were fracked and began producing oil in 2013, so by following along that line, we can see that in the first month 2013 Bakken wells began to produce, their output averaged around 330 barrels of oil per day, but by the time the 2013 Bakken wells were 12 months old, their production dropped to below 150 barrels per day, and by the time they were 24 months old, their production had slipped to below 100 barrels per day....go out to the end of that light yellow 2013 line, and we see that production of those 2013 wells had slipped to around 40 barrels per day by the 60th month of operation, and presumably continues to deplete further to this day...(NB: my numbers are estimates based on eyeballing the graphs; actual data behind the graphs was not supplied)

    if we then look at the 2014 yellow line, we see a bit higher production than in 2013; wells started that year produced around 380 barrels per day the first month, were producing over 150 barrels per day by the 12th month, and over 100 barrels per day in the 24th month...likewise, there continues to be greater output for each year thereafter in that Bakken graph until we come to the top graph, for wells drilled in 2017, which start with an initial production of around 680 barrels per day the first month, and are still producing 340 barrels per day by the 12th month, or more than the 2013 wells averaged at the beginning of their production...the point that we're making here is that there is no set relationship between the number of rigs drilling wells and expected oil production...however, we will continue to review the rig count because the drilling of new wells is the most obvious evidence of the environmental impact of the exploration and exploitation industry..

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    note:  there’s more here…

    Sunday, April 29, 2018

    Midwest gas supplies down 58% from a year ago; new record highs for exports of crude oil, distillates, and total exports...

    oil prices were down less than half a percent over the past week, as geopolitical concerns competed with supply fundamentals for oil traders' attention...after increasing more than 10% over the prior 10 sessions and closing at $68.40 a barrel last week, US crude oil contracts for June delivery rebounded from a $1.26 drop on Monday morning to finish 24 cents higher at a new 42 month high of $68.64 a barrel, as oil traders feared renewed U.S. sanctions could curtail Iran's oil output and reduce global supplies...prices then dropped 94 cents to $67.70 a barrel on Tuesday, after speeches by Trump and French President Macron telegraphed an agreement on an Iran nuclear deal...however, geopolitical concerns returned to the markets after Venezuela imprisoned Chevron employees for treason on Wednesday, and oil prices subsequently rose 35 cents to $68.05 a barrel, despite a surprising increase in US crude supplies...oil prices rose another 14 cents to $68.19 a barrel on Thursday, as the risk of renewed sanctions on Iran and plunging Venezuelan output offset the effects of a strong dollar...while international oil prices continued to move higher on Iran concerns on Friday, US prices slipped 9 cents to end the week at $68.10 a barrel, 30 cents lower than their previous weekly close, thus logging their first decrease in three weeks...

    natural gas prices, meanwhile, were little changed this week, with the June contract ending Friday at a $2.771 per mmBTU, just four-tenths of a cent higher than it closed the previous week, despite a larger than expected withdrawal of gas from storage...the now expired May natural gas contract, on the other hand, was up every day it traded, ending 8.2 cents higher at $2.821 per mmBTU on Thursday, before the June contract became the front month on Friday and fell 6.8 cents...the natural gas storage report from the EIA released on Thursday indicated that natural gas in storage in the US fell by 18 billion cubic feet to 1,281 billion cubic feet over the week ending April 20th, which left our gas supplies 897 billion cubic feet, or 41.2% lower than the 2,178 billion cubic feet that were in storage on April 20th of last year, and 527 billion cubic feet, or 29.1% below the five-year average of 1,808 billion cubic feet typically in storage after the third week of April....the forecasts had been for a 12 billion cubic foot withdrawal, which still would have been unusual for this time of year; normally, the third week of April sees a 60 billion cubic foot surplus of natural gas, which is then injected into storage; last year, there were 71 billion cubic feet of gas added to storage over the week ending April 20th...since the Midwest has been taking the brunt of the withdrawals lately, we'll include a table from that report showing the differences in regional natural gas supply...

    April 28 2018 natural gas storage report April 20 week

    the above table is the initial summary table from the EIA's Weekly Natural Gas Storage Report for the week ending April 20th; the first column shows the quantity of natural gas in storage in billions cubic feet for each US region and nationally the week ending April 20th; the second column shows the natural gas in storage for each US region and nationally the week ending April 13th, and the next column shows the change between the two...on the right, under 'Historical Comparisons', they show the billions cubic feet of natural gas in storage for each US region and nationally as of April 20th of last year, and then the average of natural gas in storage for each US region and nationally for the 3rd week in April over the past 5 years...thus we can see that of this week's 18 billion cubic foot withdrawal, 17 billion cubic feet came out of storage in the Midwest, as we would expect, recalling that week, as well as most of April, has seen cooler than normal weather in this region...that left regional gas supplies at 211 billion cubic feet, or 58.0% lower than the 502  billion cubic feet that were in storage in the Midwest on April 20th of last year, and 42.7% below the five-year average of 368 billion cubic feet typically in Midwest storage after the third week of April...

    the issue here is not that we're going to run short of natural gas this year anymore, since it's almost certain that the next week will see a surplus, and hence an increase in gas in storage...the question is whether enough natural gas can be added back to storage over the coming months to get our supplies back up to normal by mid-October, when the next heating season begins...that's what we'll be watching as the natural gas injection season progresses...

    The Latest US Oil Data from the EIA

    this week's US oil data from the US Energy Information Administration, covering the week ending April 20th, indicated equally large increases in both our oil imports and in our oil exports, but because of a big pullback in the amount of oil used by our refineries, we were able to add oil to our commercial crude supplies for the eighth time in the past thirteen weeks...our imports of crude oil rose by an average of 539,000 barrels per day to an average of 8,469,000 barrels per day during the week, after falling by 720,000 barrels per day the prior week, while our exports of crude oil rose by an average of 552,000 barrels per day to a record high average of 2,331,000 barrels per day during the week, which meant that our effective trade in oil over the week ending the 20th worked out to a net import average of 6,138,000 barrels of per day during the week, 43,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 46,000 barrels per day to a record high of 10,586,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,724,000 barrels per day during the reporting week...

    meanwhile, US oil refineries were using 16,621,000 barrels of crude per day during the week ending April 20th, 328,000 barrels per day less than they used during the prior week, while at the same time 205,000 barrels of oil per day were being added to oil storage in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 102,000 fewer barrels per day than what refineries reported they used during the week plus what was reportedly added to storage...to account for that disparity, the EIA needed to insert a (+102,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this)...

    further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,237,000 barrels per day, which was 1.5% more the 8,113,000 barrel per day average we imported over the same four-week period last year...the 205,000 barrel per day addition to our total crude inventories included a 310,000 barrel per day increase in our commercially available stocks of crude oil, partially offset by a 105,000 barrel per day decrease the oil in our Strategic Petroleum Reserve, possibly a sale mandated by this year's federal budget...this week's 46,000 barrel per day increase in our crude oil production included a 33,000 barrel per day increase in output from wells in the lower 48 states and a 13,000 barrel per day increase in output from Alaska...the 10,540,000 barrels of crude per day that were produced by US wells during the week ending April 20th were the highest on record, 14.3% more than the 9,265,000 barrels per day that US wells were producing during the week ending April 21st of last year...

    since our crude oil production has been hitting new record highs virtually every week this year, it's worth taking a look at a graph of what those production increases looks like compared to the recent historical trend...

    April 26th 2018 crude oil production as of April 20th

    the above graph was copied from a zero hedge review of this week's EIA petroleum status report, and it shows our weekly crude oil production in thousands of barrels per day on the right scale from the beginning of 2015 in blue...it also shows the weekly US rig count on the left scale over that same period in green, with dates for those rig counts shifted forward 3 months from the oil production dates in an attempt to line up weekly production with the number of rigs that were drilling three months prior in any given week...however, the fact is that the number of rigs drilling at any point in time has little to do with future oil production anymore, for a couple of reasons...first, drilling during any week in preparation for fracking does not bring that well into production in any given time-frame...as we saw with the DUC well report last week, there was a 6.4 month backlog of drilled but uncompleted wells in the US in March, a total which has been rising for fairly continuously for two years...completions of those wells, which would bring them into production, has been progressing at an increasing pace, irregardless of the changes in the weekly rig count...another reason that the number of rigs has little to do with the ultimate oil output is that horizontal wells are getting much larger, and are being fracked in an increasing number of stages...just this week, ConocoPhillips set a new record for horizontal drilling with a lateral of 21,478 feet, or more than four miles long...other producers are using up to 2 unit trains (~100 cars each) of sand and fracking in as many as 80 stages...these new fracks in longer laterals are a far cry from from the few stages fracking in 5000 foot laterals common just a few years ago, and hence mean considerably more production from each well when they are completed, without any increase in the number of rigs in use...

    so, ignoring the rig count, the above graph clearly shows how our oil production has been spiking over the past several months, exceeding 10 million barrels per day for the first time during the week ending February 2nd, and topping 10.5 million barrels per day just 9 weeks later...at 10,586,000 barrels per day, our oil production is now up by 25.6% from the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016, with an increase of 804,000 barrels per day year to date, or up 8.2% from the 9,782,000 barrel per day oil production of December 30th...at that rate we'd see an increase of over 2.5 million barrels per day this year alone...putting that into a bit of perspective, the OPEC oil production cuts of 1.2 million barrels per day have been less than half of that...

    returning to our EIA data, US oil refineries were operating at 90.8% of their capacity in using those 16,621,000 barrels of crude per day during the week ending April 20th, down from 92.4% of capacity the prior week, and down from the off-season record 96.7% of capacity set during the last week of 2017...the 16,621,000 barrels of oil that were refined this week were the least oil processed since the first week of March, down 5.6% from the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, and 3.8% less than the 17,285,000 barrels of crude per day that were being processed during the week ending April 21st, 2017, when refineries were operating at 94.4% of capacity....

    with the decrease in the amount of oil being refined, gasoline output from our refineries was much lower than the prior week, decreasing by 308,000 barrels per day to 9,886,000 barrels per day during the week ending April 20th, after our refineries' gasoline output had increased by 54,000 barrels per day during the week ending April 13th....but even with that large decrease, our gasoline production was still 1.8% greater during the week than the 9,710,000 barrels of gasoline that were being produced daily during the week ending April 21st of last year....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 117,000 barrels per day to 4,977,000 barrels per day, after falling by 162,000 barrels per day the prior week....hence, that decrease meant the week's distillates production was 1.7% less than the 5,063,000 barrels of distillates per day than were being produced during the week ending April 21st, 2017....    

    however, even with the drop in our gasoline production, our supply of gasoline in storage at the end of the week rose by 806,000 barrels to 236,807,000 barrels by April 20th, just the second increase in 8 weeks, but the 17th increase in 24 weeks, as gasoline inventories are typically built up over the winter months...our gasoline supplies rose because our domestic consumption of gasoline fell by 744,000 barrels per day from last week's record to a below normal 9,083,000 barrels per day, and because our imports of gasoline rose by 191,000 barrels per day to 896,000 barrels per day, even as our exports of gasoline rose by 144,000 barrels per day to 791,000 barrels per day...but even with this week's increase, our gasoline inventories are still 1.8% lower than last April 21st's level of 241,041,000 barrels, even as they are now roughly 9.2% above the 10 year average of gasoline supplies for this time of the year...          

    meanwhile, with this week's decrease in distillates production, our supplies of distillate fuels fell by 2,611,000 barrels to 122,729,000 barrels over the week ending April 20th, the 6th decrease in seven weeks, after falling by 3,017,000 barrels the prior week...our distillate inventories fell again because our exports of distillates rose by 439,000 barrels per day to a record high 1,724,000 barrels per day despite that lower production, while our imports of distillates rose by 20,000 barrels per day to 123,000 barrels per day, and while the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 607,000 barrels per day to 3,749,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 18.7% lower than the 148,266,000 barrels that we had stored on April 21st, 2017, and roughly 9.6% lower than the 10 year average of distillates stocks at this time of the year…     

    finally, despite the jump to a record high by our oil exports, we were still able to add to our commercial supplies of crude oil for the 9th time in 2018 and for the 17th time in the past year because of the increase in our imports and the reduced oil consumption by our refineries, as our commercial crude supplies increased by 2,170,000 barrels during the week, rising from 427,567,000 barrels on April 13th to 429,737,000 barrels on April 20th ...however, after falling most of the past year, our oil inventories as of April 13th were still 18.7% below the 528,702,000 barrels of oil we had stored on April 21st of 2017, 15.6% lower than the 509,311,000 barrels of oil that we had in storage on April 22nd of 2016, and 6.2% below the 458,181,000 barrels of oil we had in storage on April 24th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years...   

    since our oil exports have hit yet another record this week, we will again include the latest updated chart of their trajectory over the past 20 months..

    April 25th 2018 crude oil exports as of April 20th

    the above graph came from the weekly package of oil graphs that John Kemp of Reuters emailed out on Wednesday, and it shows weekly US crude oil exports in thousands of barrels per day over the past 20 months, and also highlights the exact amount of our crude exports in thousands of barrels per day over a few select weeks going back to September 1st, when our exports were choked off as Gulf Coast ports were shut down by Hurricane Harvey...as you can see, our oil exports had only topped a million barrels per day a few times prior to that date...however, after the price of US crude fell to a 10% discount to the comparable international grade in the wake of the hurricanes, US crude suppliers began to sell as much oil overseas as they could, and as a result our oil exports have stayed above a million barrels per day since...as of Friday, US WTI (West Texas Intermediate) crude for June was selling at $68.10 a barrel, while June North Sea Brent, the international benchmark crude of an equivalent grade, was selling at $74.64 a barrel, so it's evident that US oil traders will be pulling down large windfall profits to sell US crude into the international markets in the months going forward, even after paying the roughly $2 a barrel transport costs...

    with the record for crude exports occurring the same week as a record for distillates exports and an increase in our gasoline exports, it shouldn't be much of a surprise that our total exports of oil and the products made from it were also at a record high, eclipsing the old export record by nearly 10%, and that's what the next graph shows:

    April 28 2018 total oil n products exports as of April 20th

    this is the graph that accompanies the EIA spreadsheet for "Weekly U.S. Exports of Crude Oil and Petroleum Products" which gives us the weekly totals in thousands of barrels per day of all our exports of oil and all products made from oil, including gasoline, distillates, fuel oil, and petrochemical precursors...we exported 8,332,000 barrels per day of such oil & oil products during the week ending April 20th, obviously a new record, up from 6,725,000 barrels per day the prior week, and 39.4% more than the 5,979,000 barrels per day that were being exported during the same week a year earlier...

    This Week's Rig Count

    US drilling activity increased for the ninth time in the past ten weeks and for 18th time in the past 25 weeks during the week ending April 27th, a period of higher oil prices that has consequentially seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 8 rigs to 1021 rigs in the week ending on Friday, which was also 151 more rigs than the 870 rigs that were in use as of the April 28th report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014... 

    the number of rigs drilling for oil increased by 5 rigs to 825 rigs this week, which was also 128 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations was increased by 3 rigs to 195 rigs this week, which was 24 more gas rigs than the 171 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, there is also a rig drilling currently that is listed as "miscellaneous", unchanged from last week, but down from the 2 "miscellaneous" rigs that were operating a year ago.

    drilling activity in the Gulf of Mexico was unchanged at 18 rigs rig this week, while the year ago offshore totals fell, which meant that the total Gulf count and total offshore count is now 1 rig higher than the 17 offshore rigs deployed a year ago...this week also saw a rig set up to drill through an inland lake in Louisiana, where there are now 5 such rigs working, up from the 4 rigs deployed on inland waters during the week ending April 28th of a year ago..

    the count of active horizontal drilling rigs increased by 12  rigs to 901 horizontal rigs this week, which was 171 more horizontal rigs than the 730 horizontal rigs that were in use in the US on April 28th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014... on the other hand, the directional rig count was down by 2 rigs to 68 rigs this week, which was still up from the 63 directional rigs that were in use during the same week of last year....at the same time, the vertical rig count also decreased by 2 rigs to 52 vertical rigs this week, which left their count down from the 77 vertical rigs that were deployed on April 28th of 2017...

    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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of April 27th, the second column shows the change in the number of working rigs between last week's count (April 20th) and this week's (April 27th) count, the third column shows last week's April 20th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Thursday the 28th of April, 2017...     

    April 27 2018 rig count summary

    it's a bit of a surprise to see this week's increase led by the 9 rig increase in the Cana Woodford of Oklahoma, as drilling in that basin has been stagnant to lower over recent months, after it rose to 74 rigs in the middle of November, while drilling elsewhere had been on the increase...all those were oil rigs, as was the rig addition in the Ardmore Woodford, while the rig added in the Arkoma Woodford was targeting natural gas...meanwhile, the increase of two natural gas rigs in Ohio's Utica shale was offset by natural gas rig shutdowns in Pennsylvania's Marcellus and Arkansas' Fayetteville...other natural gas rig increases came in the Haynesville of northern Louisiana and in an "other" basin not tracked separately by Baker Hughes...note that other than the major producing states shown above, Nevada also saw a rig added this week and now has two; up until 7 weeks ago, Nevada had gone over a year with no drilling at all...

     

    note:  there’s more here..

    Sunday, April 22, 2018

    natural gas supplies now 38.3% below those of a year ago; DUC well report shows 6.4 month backlog of unfracked wells

    oil prices were higher again this week, and they might have reached $70 a barrel for the first time in three and a half years had not Trump tweeted against them on Friday...after jumping nearly 9% to a 41 month high of $67.38 a barrel on widespread war fears last week, US oil prices for May delivery sunk $1.17 to $66.22 a barrel on Monday, as news over the weekend made it clear that the weekend missile strikes against Syria were likely just a one-off event, and that a direct US - Russia military confrontation had been avoided...oil prices then recovered 30 cents to $66.52 a barrel on Tuesday, bolstered by a strong stock market and concern that possible renewed U.S. sanctions against Iran would impact global oil supplies...prices then jumped nearly 3% on Wednesday, topping $68 for the first time in more than three years and closing up $1.95 at $68.47 a barrel, after the Saudis indicated an oil price target of $80 or even $100, and the EIA reported that U.S. stockpiles fell across the board....oil prices were up more than a dollar again on Thursday morning, hitting highs not seen since November 2014, before pulling back from that three-and-a-half-year high and closing down 18 cents at $68.29 a barrel, after oil ministers meeting in Saudi Arabia said that the global glut of crude supplies has nearly vanished....oil prices then dropped to as low as $67.50 on Friday morning, after Trump criticized OPEC, tweeting "Looks like OPEC is at it again,” “Oil prices are artificially Very High! No good and will not be accepted!” but later stabilized to close up 9 cents at $68.38 a barrel, after OPEC ministers pushed back, saying prices were not artificially inflated, and that they had no specific price objective in stabilizing oil markets...oil prices thus posted a second straight weekly gain as the May contract expired on Friday, while the new front month contract for June oil closed up 7 cents at $68.40 a barrel, for a 1.6% gain on the week...

    natural gas prices for May, on the other hand, were little changed over the week, rising 1.7 cents on Monday, falling 1.4 cents on Tuesday, inching up a tenth of a cent on Wednesday, then falling 7.9 cents on Thursday despite a surprisingly large draw from gas supplies, but then gaining that entire 7.9 cents back on Friday to end the week four-tenths of cent higher at $2.739 per mmBTU, or roughly $2.84 a thousand cubic feet....the week's natural gas storage report from the EIA indicated that natural gas in storage in the US fell by 36 billion cubic feet to 1,299 billion cubic feet over the week ending April 13th, which left our gas supplies 808 billion cubic feet, or 38.3% lower than the 2,107 billion cubic feet that were in storage on April 14th of last year, and 449 billion cubic feet, or 25.7% below the five-year average of 1,748 billion cubic feet typically in storage after the second week of April...that large of a withdrawal was unexpected, and any withdrawal of gas from storage in April is unusual, as the heating season officially ended on March 31st with 1,351 billion cubic feet of natural gas in storage in the US, the lowest level at the end of winter since 2014 and the 2nd lowest amount of gas in storage as that date in the short history of the storage report...however, after that official end of the natural gas withdrawal season, we've now seen two more weeks of draw downs, which we're able to see quite clearly in the following graph...

    April 19 2018 nat gas in storage as of April 13 via Kemp

    the above graph came from the twitter feed of John Kemp, senior energy analyst and columnist with Reuters, and it shows the quantity of natural gas in storage, in billions of cubic feet, in the lower 48 states over the period from January 2015 up to the week ending April 13th 2018 as a red line, the quantity of natural gas in storage in the lower 48 states over the "prior year" from the period shown by the graph, which would thus be from January 2014 up until the end of 2017 as a yellow line, and the average of natural gas in storage over the 5 years preceding those same dates shown as a dashed blue line...at the same time, the light blue shaded background shows us the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the years shown by the graph…thus the light shaded area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the middle of October, falling through the winter, and usually bottoming out at the end of March, fluctuating of course depending on the temperature related heating needs during any given season...

    however, we can see that the red line for this year's natural gas supplies has continued to fall over the past two weeks, while the blue-dashed average of gas in storage, and the yellow line for last year's gas in storage had already turned higher by mid-April...the 36 billion cubic foot drop in supplies referenced by this report compares to an average 38 billion cubic foot build in supplies for the typical second week in April, and the 47 billion cubic feet of natural gas that was added to storage in the week ending April 14th of last year...in fact, if we check the Historical Record of Natural Gas in Working Underground Storage for the Lower 48 States, we can't find any year where there has been a withdrawal of natural gas from storage as late in the year as the 2nd week of April...even the polar vortex of 2014 saw natural gas supplies inch up at the end of March, and saw an increase of 49 billion cubic feet of gas in storage by the week ending April 18th of that year...moreover, the week ending April 20th this year, not yet reported or shown above, is at risk of another withdrawal, since the past week has seen another arctic weather outbreak over the eastern half of the country, where natural gas consumption is the highest...but whatever happens this week, however, it's clear that we will start this year's natural gas injection season with a large deficit...

    The Latest US Oil Data from the EIA

    this week's US oil data from the US Energy Information Administration, covering the week ending April 13th, was almost a reversal of the prior week's, in that it showed that due to a big drop in our oil imports and a big jump in our oil exports, our refineries had to pull oil out of our commercial crude supplies for the fifth time in the past twelve weeks...our imports of crude oil fell by an average of 720,000 barrels per day to an average of 7,930,000 barrels per day during the week, after rising by 752,000 barrels per day the prior week, while our exports of crude oil rose by an average of 544,000 barrels per day to an average of 1,749,000 barrels per day during the week, after falling by 970,000 barrels per day the prior week, which meant that our effective trade in oil over the week ending the 13th worked out to a net import average of 6,181,000 barrels of per day during the week, 1,264,000 barrels per day less than our net imports during the prior week...at the same time, field production of crude oil from US wells rose by 15,000 barrels per day to a record high of 10,540,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,721,000 barrels per day during the reporting week..

    during the same week, US oil refineries were using 16,949,000 barrels of crude per day, 70,000 barrels per day less than they used during the prior week, while at the same time 153,000 barrels of oil per day were being pulled out of oil storage facilities in the US....consequently, this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 75,000 fewer barrels per day than what refineries reported they used during the week...to account for that disparity, the EIA needed to insert a (+75,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this)...

    further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports actually rose to an average of 8,157,000 barrels per day, which was 2.7 more the 7,941,000 barrel per day average we imported over the same four-week period last year, the first time our 4 week average imports topped the year ago averages this year....the 153,000 barrel per day withdrawal from our total crude inventories was all taken from our commercially available stocks of crude oil, as oil stocks in our Strategic Petroleum Reserve were unchanged...this week's 15,000 barrel per day increase in our crude oil production included a 25,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 10,000 barrel per day decrease in output from Alaska...the 10,540,000 barrels of crude per day that were produced by US wells during the week ending April 13th were the highest on record, 13.9% more than the 9,252,000 barrels per day that US wells were producing during the week ending April 14th of last year, and 25.1% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June, 2016...

    US oil refineries were operating at 92.4% of their capacity in using those 16,949,000 barrels of crude per day, down from 93.5% of capacity the prior week, and and down from the off-season record 96.7% of capacity set during the last week of 2017....hence, the 16,949,000 barrels of oil that were refined this week were 3.7% less than the off-season record of 17,608,000 barrels per day that were being refined during the last week of December 2017, but were statistically unchanged from the 16,938,000 barrels of crude per day that were being processed during the week ending April 14th, 2017, when refineries were operating at 92.9% of capacity....

    even with the modest decrease in the amount of oil being refined, gasoline output from our refineries was higher than the prior week, increasing by 54,000 barrels per day to 10,204,000 barrels per day during the week ending April 13th, after our refineries' gasoline output had increased by 35,000 barrels per day during the week ending April 6th....that increase meant that our gasoline production was 4.2% greater during the week than the 9,794,000 barrels of gasoline that were being produced daily during the week ending April 14th of last year....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 162,000 barrels per day to 5,094,000 barrels per day, after rising by 753,000 barrels per day over the prior three weeks....still, that decrease meant the week's distillates production was 1.1% less than the 5,150,000 barrels of distillates per day than were being produced during the week ending April 14th, 2017....    

    even with the modest increase in our gasoline production, our supply of gasoline in storage at the end of the week fell by 2,968,000 barrels to 235,967,000 barrels by April 13th, the sixth decrease in 7 weeks, but just the 7th decrease in 23 weeks, as gasoline is typically added to storage over the winter months...our gasoline supplies fell because our domestic consumption of gasoline rose by 548,000 barrels per day to a record high of 9,857,000 barrels per day, even while our exports of gasoline fell by 142,000 barrels per day to 647,000 barrels per day, and while our imports of gasoline rose by 50,000 barrels per day to 705,000 barrels per day...with this week's decrease, our gasoline inventories are now 0.7% lower than last April 14th's level of 237,672,000 barrels, even as they remain roughly 7.8% above the 10 year average of gasoline supplies for this time of the year...         

    since we have a new record high for domestic gasoline consumption this week, we'll include a graph of the recent history of that metric...

    April 18 2018 gasoline supplied week of April 13

    the above graph came from a package of oil graphs on this report that John Kemp mailed out on Wednesday, and it shows gasoline supplied to US markets in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our gasoline usage for any given date shown in the light blue shaded area, and the median of our gasoline consumption, or the middle 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 gasoline supplied for each week in 2017 traced weekly by a yellow line, and our year to date gasoline consumption for 2018 represented by the red graph...as John notes at the top, that red line shows that gasoline supplied rose to a record high of 9.68 million barrels per day with this week's report, which is especially notable in that it happened in April, when as you can see, the summer months are usually the highest months for gasoline consumption...note that this 'gasoline product supplied' number does not necessarily mean that driving increased by that much, as it represents deliveries of gasoline to wholesalers, rather than retail sales, which nonetheless would not have set a record unless retail sales to drivers had demanded a restocking by gasoline wholesalers..

    meanwhile, with this week's decrease in distillate's production, our supplies of distillate fuels fell by 3,017,000 barrels to 125,340,000 barrels over the week ending April 13th, the 5th decrease in six weeks and the largest drop since the beginning of January...our distillate inventories fell because the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 186,000 barrels per day to 4,356,000 barrels per day, and because our imports of distillates fell by 22,000 barrels per day to 103,000 barrels per day, while our exports of distillates fell by 75,000 barrels per day to 1,285,000 barrels per day...after this week’s inventory decrease, our distillate supplies ended the week 15.5% lower than the 148,266,000 barrels that we had stored on April 14th, 2017, and roughly 7.4% lower than the 10 year average of distillates stocks at this time of the year…    

    finally, due to the drop in our oil imports and the jump in our oil exports, we had to take oil out of our commercial supplies of crude oil for the 7th time in 2018 and for the 36th time in the past year, as our commercial crude supplies decreased by 1,071,000 barrels, from 428,638,000 barrels on April 6th to 427,567,000 barrels on April 13th...hence, after falling most of the past year, our oil inventories as of April 13th were 19.7% below the 532,343,000 barrels of oil we had stored on April 14th of 2017, 15.7% lower than the 507,312,000 barrels of oil that we had in storage on April 15th of 2016, and 6.3% below the 456,271,000 barrels of oil we had in storage on April 17th of 2015, at a time when the US glut of oil had already begun to surge from the stable levels of prior years...  

    This Week's Rig Count

    US drilling activity increased for the eighth time in the past nine weeks and for 17th time in the past 24 weeks during the week ending April 20th, a period of higher oil prices that has consequentially seen the rig increases far exceed the few decreases...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 1013 rigs in the week ending on Friday, which was also 156 more rigs than the 857 rigs that were in use as of the April 21st report of 2017, while it was still down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014... 

    the number of rigs drilling for oil increased by 5 rigs to 820 rigs this week, which was also 132 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the number of drilling rigs targeting natural gas formations was unchanged at 192 rigs this week, which was just 25 more gas rigs than the 167 natural gas rigs that were drilling a year ago, but way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, there is also a rig drilling currently that was listed as "miscellaneous", unchanged from last week, but down from the 2 "miscellaneous" rigs that were operating a year ago.

    new drilling began from 2 more platforms in the Gulf of Mexico this week, increasing current drilling activity in the Gulf to 18 rigs, which was still 2 rigs less than were working in the Gulf, or anywhere offshore, a year ago...meanwhile, the count of active horizontal drilling rigs increased by 6 rigs to 889 horizontal rigs this week, which was 171 more horizontal rigs than the 718 horizontal rigs that were in use in the US on April 21st 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 unchanged at 70 rigs this week, which was still up from the 60 directional rigs that were in use during the same week of last year....on the other hand, the vertical rig count decreased by 1 rig to 54 vertical rigs this week, which was also down from the 79 vertical rigs that were deployed on April 21st of 2017...

    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 the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of April 20th, the second column shows the change in the number of working rigs between last week's count (April 13th) and this week's (April 20th) count, the third column shows last week's April 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and as of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Thursday the 21st of April, 2017...      

    April 20 2018 rig count summary

    obviously, this was another week when the whole increase in drilling was in the Permian of west Texas, while rigs the rest of the country were just shifting around like chickens in a barnyard...the largest decrease resulting from that shifting was in the Cana Woodford of Oklahoma, which was down 4 rigs to 61 rigs, which nonetheless only subtracted 1 from the Oklahoma total, as rigs were evidently added elsewhere in the state, likely including the two rigs added in the Mississippian lime near the Kansas border...note that drilling in the Utica shale was down by two rigs this week, both of which were targeting natural gas, one in Pennsylvania and one in Ohio...despite that, the natural gas directed rig count remained unchanged because two natural gas rigs were added in the Eagle Ford of south Texas, where one oil rig was shut down at the same time...that left the Eagle Ford with 68 oil rigs, and 8 drilling for natural gas...also note that other than the major producing states shown above, both Alabama and Indiana had rigs start up this week...for Alabama, that single rig is still down from the two rigs working in the state a year ago, while for Indiana, their new rig represents the first drilling the state has seen since February of 2017...

    DUC well report for March

    Monday of this week saw the release of the EIA's Drilling Productivity Report for April, which includes the EIA's March data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...we last looked at this monthly report in August of last year, when they consolidated their reporting on the Utica shale and the Marcellus into a single geographic unit labeled 'the Appalachia region", while at the same time initiating coverage on the Anadarko region, which includes 24 Oklahoma and 5 Texas counties, and which includes the STACK and SCOOP reservoirs in the Woodford shale, and the Granite Wash tight sands band transversing the Oklahoma Texas Panhandle border....the productivity report itself gets little coverage, as some writers are put off by the seemingly exact projections of yield per rig for the month ahead, which are inaccurate in themselves in that the action of drilling does not yield product until the wells are fracked, which could be months later...nonetheless, the data on drilled but uncompleted wells (DUCs) gives us a good idea of how many wells are being drilled, how many are being completed, and the backlog of those left to complete in each basin...

    for March, this report once again showed a large increase in uncompleted wells nationally, mostly because of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, but also because of modest growth in uncompleted wells in the Eagle Ford of south Texas...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 94, from 7,598 wells in February to 7,692 wells in March, the eighteenth consecutive monthly increase in uncompleted wells, and hence again the highest number of such unfracked wells in the history of this report....that was as 1291 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) and 1197 wells were completed and brought into production by fracking...hence, at the March completion rate, the 7,692 drilled but uncompleted wells left at the end of March represent a 6.4 month backlog of wells that have been drilled but not yet fracked...

    as has been the case for most of the past two years, the March DUC increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 122, from 2,922 DUC wells in February to 3,044 DUCs in March, as 566 new wells were drilled into the Permian but only 444 wells in the region were fracked...at the same time, DUC wells in the Eagle Ford of south Texas rose by 22, from 1,485 DUC wells in February to 1,507 DUCs in March, as 182 wells were drilled in the Eagle Ford during March, while 160 Eagle Ford wells were completed...meanwhile, DUC wells in the Anadarko region rose by 4, from 991 DUC wells in February to 995 DUCs in March, as 141 wells were drilled in the Anadarko region in March while 137 drilled wells in the basin were completed....in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by one to 175, as 54 wells were drilled into the Haynesville, while 53 Haynesville wells were fracked during the same period....on the other hand, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 15 wells, from 764 DUCs in February to 749 DUCs in March, as 104 wells were drilled into the Marcellus and Utica shales, while 119 of the already drilled wells in the region were fracked...meanwhile, DUC wells in the Niobrara chalk of the Rockies front range decreased by 39 to 506, as just 144 Niobrara wells were drilled while 183 Niobrara wells were being fracked...lastly, DUC wells in the Bakken of North Dakota decreased by 1 to 716, as 100 wells were drilled into the Bakken while 101 Bakken wells were fracked...

    thus, for the month of March, DUCs in the 5 oil basins tracked by in this report (ie., Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 108 wells to 6,768 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by 14 wells to 924 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...

     

    note:  there’s more here…