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, January 15, 2017

US oil imports highest since Sept 2012, oil refining at all time high, US rigs down, global rigs up, Canadian rigs up 110

the OPEC inspired oil rally finally ran out of steam this week, as oil prices retreated for the first time in 5 weeks, and by the most in 11 weeks...after closing at $53.99 a barrel last Friday, oil prices fell all day long on Monday, after news of record-high exports from Iraq's southern crude terminals spread doubt about the effectiveness of the OPEC production cuts, leading to a reversal of speculative bets by hedge funds and other money managers, which ultimately pushed crude for February delivery $2.03 lower, as it ended the day at $51.96 a barrel....crude prices continued to slump on Tuesday as oil production from Nigeria jumped and Kuwait's oil minister suggested other non-compliance with OPEC's cuts, and went on to close at $50.82 a barrel, after the announcement that the US will sell 8 million barrels of oil from the Strategic Petroleum Reserve later this month, with delivery in February....oil prices then steadied on Wednesday morning and then turned around to rise more than $1.50 Wednesday afternoon, despite the EIA report of massive builds in supplies of oil, gasoline and distillates and the largest jump in US oil production in 20 months, after the Saudi oil minister said they cut oil production to below 10 million barrels per day and planned to cut deeper cut in February, which would put them more than 100,000 barrels per day below their promised target and 625,000 barrels per day below their recent output high...after closing Wednesday at $52.25 a barrel, oil prices continued rising on that Saudi news Thursday and closed higher at $53.01 a barrel, before the doubts about OPEC compliance crept back in on Friday, and oil prices then dropped back to close the week at $52.37 a barrel, 3.0% lower than last week's close, amid concerns about the biggest drop in Chinese exports since 2009 and what impact that slowdown would have on their demand for crude...

natural gas prices, on the other hand, made a round trip this week, diving to their lowest level since mid-November on Monday, and then regaining most of the prior week's losses over the rest of the week...after rising to a high of $3.93 per mmBTU on the Wednesday after Christmas, natural gas prices had slid more than 45 cents last week to $3.285 per mmBTU, after forecasts for an arctic cold spell faded...facing further forecasts of warmer than anticipated weather conditions for January, natural gas prices fell another 18.2 cents on Monday of this week, ending at $3.103 per mmBTU...that drop was almost completely reversed on Tuesday, as natural gas prices rose 17.5 cents to close at $3.278 per mmBTU, on the possibility of cooler temperatures late January to early February...natural gas prices then reversed again to edge lower on Wednesday, closing at $3.224 per mmBTU, as exceptionally warm weather continued to weigh on the market....natural gas prices then jumped 16.2 cents on Thursday, closing the day at $3.386 per mmBTU, after the EIA's Weekly Natural Gas Storage Report indicated a larger than expected drop of 151 billion cubic feet (Bcf) of gas in storage during the week ending January 6th, which left our natural gas supplies at 3,160 billion cubic feet, 10.3% lower than a year ago but still close to the 5 year average for the fist week in January...natural gas then opened 2 cents lower on Friday as traders incorporated milder weather into their forecasts, but then went on to close more than 3 cents higher at $3.419 per mmBTU, as a couple of weather models added some risk that heating demand could return to seasonal averages by the end of the month...

The Latest Oil Stats from the EIA

this week's oil data for the week ending January 6th from the US Energy Information Administration indicated a jump to a 4 year high in our imports of crude oil and a increase to a new record high in our oil refining, which was still not enough to use all those extra oil imports, leaving our supplies of crude oil quite a bit higher than the prior week...our imports of crude oil rose by an average of 1,869,000 barrels per day to an average of 9,052,000 barrels per day during the week, the most oil we've imported since September, 2012, while at the same time our exports of crude oil rose by an average of 41,000 barrels per day to an average of 727,000 barrels per day, which meant that our effective imports netted out to 8,325,000 barrels per day for the week...at the same time, our crude oil production rose by 176,000 barrels per day to an average of 8,946,000 barrels per day, which means the daily supply of crude oil from imports and wells totaled 17,271,000 barrels per day during the week, 2 million barrels more than the prior week...

refineries reportedly used 17,107,000 barrels of crude per day during the week, an increase of 418,000 barrels per day from the last week of 2016, while at the same time, 585,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we consumed or stored 421,000 more barrels of oil per day than were accounted for by our increased oil imports and production…therefore, the EIA inserted that phantom 421,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out...the EIA footnote to that line 13 says that number represents "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...as you know, we've been calling that number that's inserted to make oil balance the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports rose to an average of 8.2 million barrels per day, now 6.3% higher than the same four-week period last year...our crude oil production for the week ending January 6th was 3.0% lower than the 9,227,000 barrels of crude that we produced during the week ending January 8th of last year, and 6.9% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015...interestingly, this week's big oil production increase all came by way of the lower 48, as Alaskan production was down by 14,000 barrels per day...that suggests that oil prices over $50 a barrel the past 7 weeks has been bringing on additional completions of DUC (drilled, but uncompleted) wells..

US refineries operated at 93.6% of capacity in using those 17,107,000 barrels of crude per day, up from 92.0% of capacity the prior week, to hit a utilization level only reached once in 2016, during the first week of September during 2016...during the same week last year, refineries had consumed 684,000 fewer barrels of crude per day than they did this week, while running at 91.2% of capacity...gasoline production from US refineries rose by 199,000 barrels per day to 9,666,000 barrels per day during the week ending January 6th, which was 9.6% more than the 8,820,000 barrels per day of gasoline produced during the week ending January 8th a year ago, and 5.9% more than the 9,125,000 barrels per day of gasoline produced during the week ending January 9th, 2015, as there is normally a slowdown in gasoline output at this time of year...meanwhile, refineries' output of distillate fuels (diesel fuel and heat oil) actually fell by 5,000 barrels per day to 5,324,000 barrels per day, following the prior week's record high for distillates production...thus our distillates production was still up by 11.8% from the 4,760,000 barrels per day that was being produced during the week ending January 8th last year, and 4.2% higher than the 5,108,000 barrels per day of distillates produced during the same week of 2014...     

with the increase in our gasoline production, the EIA reported that our gasoline supplies rose by 5,023,000 barrels to 240,473,000 barrels as of December 30th, for a two week jump of 13.33 million barrels in our gasoline inventories...that was as our domestic consumption of gasoline rose by just 5,000 barrels per day from last week's one year low to 8,470,000 barrels per day, and as our gasoline imports fell 39,000 barrels per day to 683,000 barrels per day while our gasoline exports fell by 15,000 barrels per day to 981,000 barrels per day...even with the back to back large increases, however, our gasoline inventories as of January 6th were little changed from 240,434,000 barrels of gasoline that we had stored on January 8th of last year or the 240,334,000 barrels of gasoline we had stored on January 9th of 2015..

in addition to the near record two week jump in gasoline supplies, our supplies of distillate fuels also rose, increasing by 8,356,000 barrels to 170,041,000 barrels by January 6th, following the prior week's increase of 10,051,000 barrels, which looks to be the largest two week jump in distillates supplies on record...the amount of distillates supplied to US markets, a proxy for our consumption, was up from last weeks record low by 175,000 barrels per day to 2,792,000 barrels per day, but still remained well below normal, while our exports of distillates fell 165,000 barrels per day to 1,035,000 barrels per day, which was somewhat below the average of last year....after the two weeks of oversized increases, our distillate inventories are now 2.7% higher than the distillate inventories of 165,554,000 barrels of January 8th last year, and 21.6% above the distillate inventories of 139,851,000 barrels of January 9th, 2015…

finally, even though we refined a record amount of crude oil, our oil imports were even higher, and as a result our inventories of surplus crude oil rose by 4,097,000 barrels to 483,109,000 barrels by January 6th, a level which was was still  5.7% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 7.1% more crude oil in storage than the 451,190,000 barrels we had stored January 8th of 2016, and 36.4% more crude than the 354,195,000 barrels of oil we had in storage on January 9th of 2015... furthermore, even though our supplies of residual fuel oil fell by 627,000 barrels to 41,846,000 barrels and our supplies of propane/propylene fell by 4,464,000 barrels to 79,659,000 barrels during this same week, our total supplies of crude and refined products rose by 13,436,000 barrels to 2,030,421,000 barrels during the week ending January 6th, the largest weekly increase since the week ending April 3rd of 2015...

This Week's Rig Count

US drilling activity slowed down for the first time in 11 weeks during the week ending January 13th, in what seems to be a chance anomaly rather than a basic change in drilling intentions...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 6 rigs to 659 rigs in the week ending this Friday, which was still up by 9 rigs from the 650 rigs that were deployed as of the January 15th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...at the same time, drilling activity in Canada rose by 110 rigs, from 205 rigs a week ago to 315 rigs this week, an increase of more than 50%, which left them well ahead of last year's 227 rig deployment...

rigs drilling for oil in the US decreased by 7 rigs to 522 rigs during the week, only the 2nd retreat in oil drilling in the past 28 weeks...but oil drilling is still up from the 515 oil directed rigs that were working in the US on January 15th last year, while down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...Canadian oil drilling increased by 89 rigs to 170 rigs, which was way up from the 110 oil rigs deployed in Canada on January 15th of 2016...at the same time, the count of US drilling rigs targeting natural gas formations increased by 1 rig to 136 rigs, which has now pushed US natural gas drilling above the 135 natural gas rigs that were in use a year ago, while it was still way down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... Canadian rigs targeting natural gas increased by 21 rigs to 144 rigs, also up from the 117 natural gas rigs running in Canada a year earlier...one US rig and one Canadian rig that were classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

another drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 24, still down from 26 rigs working in the Gulf a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 25 rigs, also down from last year's offshore US total of 26...however, the last platform that had been drilling through an inland lake in southern Louisiana was shut down this week, so there are now no active rigs in the inland waters category remaining, down from 1 rig on inland waters a year ago..

the number of horizontal drilling rigs working in the US increased by 3 rigs to 537 rigs this week, which is now up from the 511 horizontal rigs that were in use in the US on January 15h last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, two directional rigs were added to those active, increasing the directional rig count to 59, which was still down from the 62 directional rigs that were deployed during the same week last year...however, the vertical rig count fell by 11 rigs to 63 rigs as of January 13th, which left the vertical rig count down from last year's deployment of 77 vertical rigs...

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of January 13th, the second column shows the change in the number of working rigs between last week's count (January 6th) and this week's (January 13th) count, the third column shows last week's January 6th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for January 15th of 2016...       

January 13 2017 rig count summary

as you can see from the tables above, the US drilling pullback was fairly widespread, with 6 different states (plus Alabama) and 8 different basins seeing rigs shut down...but as we saw from the Canadian count increase, there does not seem to be a fundamental or economic reason for US drillers to be shutting down rigs this week, so until we hear.otherwise, we've got to consider this week's report anomalous, an odd circumstance wherein several drillers in several states just happened to be shutting down rigs at the same time...at least Ohio was included in that, as we're now back down to 19 rigs, which was still up from 13 rigs a year ago...and as we mentioned, Alabama, which is not included above, also shed a rig this week, and now they have none, an improvement from a year ago, when they had one rig deployed..

International Rig Counts for December

Baker Hughes also released the international rig counts for December earlier this week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end....Baker Hughes reported that an average of 1,772 rigs were drilling for oil and natural gas around the globe in December, which was up from the 1,678 rigs that were drilling around the globe in November, but down from the 1,969 rigs that were working globally in December of last year...increased North American drilling again accounted for most of the global increase, as the average US rig count rose from 580 rigs in November to 634 rigs in December, which was still down from the average of 714 rigs that were working in the US in December a year ago, while the average Canadian rig count rose from 173 rigs in November to 209 rigs in December, which was also up from the 160 Canadian rigs that were deployed in December a year earlier....outside of Northern America, the International rig count rose by 4 rigs to 929 rigs in November, which was still down from 1,095 rigs a year ago, as increases in drilling in Latin America and Eastern Asia more than offset a decrease in Middle East activity.. 

drilling activity in the Middle East fell for the 8th time over the past 12 months, as the countries included in this region pulled out a net of 4 rigs, reducing their active rig average to 376 rigs for the month, which was also down from the 422 rigs deployed in the Middle East a year earlier....OPEC member Kuwait cut back from 47 rigs to 44, which was still up from the 43 rigs the Kuwaitis were running a year ago...the Saudis reduced their active rig fleet from 127 rigs to 125, which was also down from the 129 rigs the Saudis were running in December last year, but still up from the 112 rigs they were running in November of 2014, before their attempt to flood the global market...Dubai, an emirate in the United Arab Emirates, also cut their rig count by 2 rigs to 2, also down from 4 rigs in December a year ago...Oman, who is not an OPEC member but who has committed to a production cut of 45,000 barrels a day, also reduced their drilling by 2 rigs, from 61 rigs in November to 59 rigs in December, which left them well below the 73 rigs they were running in December a year ago...on the other hand, Egypt, who is not an OPEC number and who has not agreed to output cuts, added 2 rigs in December and thus had 24 rigs active, which was still down from the 44 rigs they were running a year earlier...in addition, OPEC members Qatar and Abu Dhabi both added a rig; that brought Qatar up to 10 rigs, also up from 7 a year earlier, and brought Abu Dhabi up to 48 rigs, which was still one less than their year ago total...and Israel, who's never had more than 1 rig running over the past two years, started up one rig in December, their first drilling activity since February...  

meanwhile, a three rig increase in the Latin American region masked a number of variances in the member states...the region saw its active rig count increase from 181 rigs in November to 184 in December, as their offshore count rose from 28 rigs to 32, while overall drilling was still down from 270 rigs in December of 2015, largely because the region had idled 92 rigs over the first 6 months of 2016...Brazilian and Colombian drillers, neither of whom are party to the production cuts, both added 3 rigs during the month; for Brazil, that brought their active rig count back up to 13 rigs, which was still down from the 38 rigs deployed in Brazil a year earlier, while for Columbia, their count rose to 19 rigs, up from the 12 rigs they had running a year earlier...OPEC member Ecuador and non-OPEC member Chile both added 2 rigs; for Ecuador, that lifted their active rig count to 7 rigs, up from 2 rigs a year earlier, while the Chilean count rose to 4 rigs, up from the 1 rig they were running a year earlier...OPEC member Venezuela started up one more rig and thus had 52 rigs running, still down from 70 rigs a year earlier, as did non-aligned drillers in Bolivia and Peru, where the rig counts rose to 5 rigs and 1 rig respectively, unchanged from a year ago for Bolivia but down from 2 rigs a year ago for Peru....Mexico, who has agreed to cut their oil output by 100,000 barrels a day, also added a rig; they now have 19 rigs active, which is well down from the 42 rigs they were running last December...almost offsetting all of those increases, however, was Argentina, where they cut their drilling activity from 70 rigs down to 59 rigs...that was down from 91 rigs a year ago, and from over 100 active rigs in Argentina in every prior month of 2015

in addition, drilling activity in the Asia-Pacific region increased by 4 rigs to 192 rigs in December, even as their offshore deployment fell from 92 rigs to 87, which was down from the 198 rigs working the region a year earlier, which only included 76 working offshore at that time....Australia added 5 rigs, bringing their total to 9 rigs active nationwide, which was still down from the 16 they were running a year earlier...Thailand and Indonesia both added 2 rigs, bringing their counts up to 12 rigs and 16 rigs respectively, which was down from 4 rigs last year for Thailand  and down from 25 rigs last year for Indonesia...the Philippines also started a rig, after having no activity in November, but they were still down from the 4 rigs they had deployed a year ago...on the other hand, China shut down 3 offshore rigs, leaving 25 offshore, same as they had running last December...at the same time, Brunei shut down both of the rigs they had active, while a year ago they had just one, and India reduced their rig count from 177 to 116 rigs, which was still up from the 100 rigs working in India a year earlier....

drilling activity also increased in Europe, rising by 2 rigs to 99 rigs, which was down from the 114 rigs working in Europe a year ago at this time, as their offshore drilling increased from 33 rigs to 35, same as they had offshore a year ago...the offshore increases were of one rig each offshore from Norway and the U.K., which brought the offshore counts in those countries up to 16 rigs and 11 rigs respectively, down from 17 last December for Norway but up from 9 offshore rigs a year ago for the U.K....other European countries adding land based rigs were Hungary and Albania, both of which increased to 2 rigs, same as each had a year earlier...meanwhile, both Bulgaria and the Netherlands shut down a rig; for Bulgaria, that left them with no drilling, down from 2 rigs a year earlier, and for the Netherlands, that left them with 2 rigs active, down from 4 rigs a year ago...

lastly, the African continent saw a net decrease of 1 rig in to 78 rigs in December, which left them down from the 91 rigs working in Africa last year at this time...the Congo Republic shut down all 3 rigs they had active in November, which was also their rig count a year ago...OPEC members Nigeria and Algeria shut down 1 rig each, leaving 4 rigs still drilling in Nigeria, down from 8 rigs a year ago, and leaving 52 rigs still working in Algeria, still up from 49 rigs a year ago....meanwhile, four African nations added 1 rig each: OPEC member Angola, Cameroon, Liberia and Kenya...that brought Angola back up to 4 rigs, still down from last year's 11; brought Cameroon back to 1 rig, same as a year ago, and brought Kenya back up to 11 rigs, same as a year earlier, while the new rig working in Liberia was their first drilling in 2 and a half years....finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China's offshore area, with an average of 25 rigs active in December, were included in the Asian totals here...



note: there's more here:

Wednesday, January 11, 2017

Trump and Russia


Sunday, January 8, 2017

record distillates production, year high jump in gasoline & distillates supplies, drilling rigs now up from a year ago, et al

oil prices rose for the 4th week in a row this week, but only after clawing back from an opening day nosedive...after closing December 2016 at $53.72 a barrel, US oil prices shot up to well above $55 a barrel in early trading on Tuesday morning, hitting an 18 month high on the first day of the agreed to oil production cuts by OPEC and non-OPEC oil producers, as Arab media reported that Kuwait and Oman had cut their crude output...however, with other news from other OPEC members not forthcoming, oil traders grew nervous, and oil prices turned sharply lower by that afternoon, as the February contract price tumbled nearly $3 in a few hours before closing at $52.33 a barrel, a two week low...the OPEC rally resumed on Wednesday, and oil prices were further propelled higher to close at $53.20 a barrel after the American Petroleum Institute reported a 7.4 million barrel draw on U.S. crude oil inventories, the largest drop in US oil supplies since September...oil prices then slid on Thursday morning, as official US oil data showed a surprisingly large increase in U.S. gasoline and distillate inventories, but news that Saudi Arabia had cut production as they had agreed to sent prices back up in the afternoon, and they went on to close at $53.76 a barrel....oil prices then opened lower on Friday, after the release of weak economic reports on US employment and trade, but rose again on further signs of OPEC compliance, to end the week at 53.99 a barrel, up slightly from where it started...oil prices have thus increased 19.4% since the November 30th OPEC meeting, and will probably stay at these elevated levels as long as the OPEC/NOPEC production cuts are on the table...

natural gas prices, on the other hand, have no cartel controlling the supply, and when the weather forecast turns against them, as it did this week, natural gas prices plunge...you might recall that on Wednesday of last week, natural gas prices for January hit a two year high of $3.93 per mm-BTU (million British thermal units) before that contract expired, and then the February contract eventually fell to close the week at $3.743 per mmBTU...well, over the three day weekend, the long range weather forecast changed to indicate a shorter severe cold snap followed by much warmer winter temperatures, and as a result, natural gas prices opened the new year lower and dove 12% on Tuesday to end the day at $3.327 per mmBTU...that weather related price drop extended into Wednesday, as natural gas prices fell another 6 cents to close at a six-week low of $3.267 per mmBTU...gas prices then steadied on Thursday, closing the day at $3.273 per mmBTU,after the EIA's Weekly Natural Gas Storage Report indicated a decline of 49 billion cubic feet (Bcf) of gas in storage for the week ending December 30th, which left our gas supplies at 3,311 billion cubic feet, 9.9% less than a year ago...gas prices then closed higher for the second day in a row on Friday, rising 1.2 cents, or 0.4%, at $3.285 per mmBTU, after recovering after trading as low as $3.214/mmBtu earlier in the session...NOAA's climate prediction center continues to show expectations for a warmer than normal winter for much of the densely populated eastern areas of the country, so unless that should change, we'd expect natural gas prices will remain under pressure...

The Latest Oil Stats from the EIA

this week's reports on oil from the US Energy Information Administration were released on Thursday and are for the week ending December 30th...in the last week of 2016, our imports of crude oil were almost a million barrels per day lower than the prior week, while our refineries were consuming more oil than in any week since Labor Day, and hence they needed to draw a large amount of crude oil from storage to meet their needs...our imports of crude oil fell by an average of 984,000 barrels per day to an average of 7,183,000 barrels per day during the week, our lowest oil imports since the interruption cause by Hurricane Matthew...at the same time, our exports of crude oil rose by an average of 59,000 barrels per day to an average of 686,000 barrels per day, the 2nd most ever, which meant that our effective imports netted out to 6,497,000 barrels per day for the week...meanwhile, our crude oil production rose by 4,000 barrels per day to an average of 8,770,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled just 15,267,000 barrels per day for the week...

refineries reportedly used 16,689,000 barrels of crude per day during the week, an increase of 123,000 barrels per day from the week before Christmas, while at the same time, 1,007,000 barrels of oil per day were being pulled out of oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we still consumed 415,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that phantom 415,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out...the EIA footnote to that line 13 calls it "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...as you know, we've been calling that balance number the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports fell to an average of 7.8 million barrels per day, now just 0.5% higher than the same four-week period last year....our crude oil production for the week ending December 30th was still 4.9% lower than the 9,219,000 barrels of crude we produced during the week ending January 1st of last year, and 8.7% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015...

US refineries operated at 92.0% of capacity in using those 16,557,000 barrels of crude per day, up from 91.0% of capacity the prior week, but still down from 92.5% of capacity during the same week a year ago, even though they refined 37,000 more barrels of crude per day this week than they did during the same week last year...however, gasoline production from those refineries fell by 1,071,000 barrels per day to 9,467,000 barrels per day during the week ending December 30th, from last week's record high of 10,537,000 barrels per day...nonetheless, this week's gasoline production was still 8.0% more than the 8,766,000 barrels per day of gasoline produced during the week ending January 1st a year ago, and 8.8% more than the 8,701,000 barrels per day of gasoline produced during the week ending January 2nd, 2015, so there's apparently a normal slowdown in gasoline refining at this time of year...and at the same time that gasoline output was falling, refineries' output of distillate fuels (diesel fuel and heat oil) was rising by 372,000 barrels per day to 5,329,000 barrels per day, which was a new record high for distillates production...thus our distillates production was up by 7.1% from the 4,976,000 barrels per day that was being produced during the week ending January 1st last year, and 2.9% higher than the 5,180,000 barrels per day of distillates produced during the same week of 2014...     

however, even with that big drop in our gasoline production, the EIA reported that our gasoline supplies rose by 8,307,000 barrels to 227,143,000 barrels as of December 30th, the biggest one week jump in gasoline inventories since last January, as our domestic consumption of gasoline fell by 813,000 barrels per day to 8,465,000 barrels per day, which was likewise our lowest gasoline consumption since last January...also contributing to this week's jump in our gasoline supplies was a 288,000 barrel per day increase to 722,000 barrels per day in our gasoline imports, while at the same time our gasoline exports fell by 153,000 barrels per day from last week's record high of 1,149,000 barrels per day...that increase kept our gasoline inventories as of December 30th 1.5% higher than the 231,996,000 barrels of gasoline that we had stored on January 1st of last year, while they were still 0.7% below the 237,163,000 barrels of gasoline we had stored on January 2nd of 2015..

moreover, at the same time as our gasoline supplies were jumping by 8.3 million barrels, our supplies of distillate fuels were also rising, increasing by 10,051,000 barrels to 152,378,000 barrels by December 30th...in addition to record refinery production, a major factor in that increase of distillates supplies was a 1,175,000 barrel per day drop to 2,792,000 barrels per day in the amount of distillates supplied to US markets, a proxy for consumption...now, that seems to be some kind of anomaly, because that's the lowest product supplied number for distillates since the week ending April 19, 1999, and we have seen a similar drop in that metric at this time of year each of the last 5 years...nonetheless, that, combined with record production of distillates and a 216,000 barrels per day drop from last week's record high of 1,416,000 barrels per day our exports of distillates, meant that we saw the largest one week jump in distillates supplies in two years...since both gasoline supplies and distillate supplies saw such large jumps this week, we'll include a graph here that will help us see what's going on...

January 7 2017 invenories as of December 30th

the two bar graphs above, taken from the Zero Hedge coverage of this week's EIA report, show the weekly change in gasoline and distillate inventories for each week of the last 3 years, with the bar graph for gasoline inventories on top and the bar graph for distillate inventories below that....within each graph, each red or green bar represents a weekly change in inventories over the past 3 years, with green bars indicating an addition to that inventory during the reference week, and red representing a withdrawal from that inventory for that week, with the size of the bars indicating the volume in barrels of the addition or withdrawal...in addition, a heavy green arrow has been added to each chart to indicate the number of weeks that have elapsed since an inventory addiction large as the current one has occurred ....thus on the gasoline graph we can see that large volumes of gasoline are typically added to storage during the winter months of November through February, while smaller withdraws from storage are made most weeks during the summer driving season...so this week's increase in gasoline supplies was not that unusual at all, as increases to gasoline inventories of that magnitude were obviously typical in each of the last three winters...we have a similar seasonality, but less regular, for distillate storage and withdrawal as shown in the lower graph...since refineries tend to step up distillate production during the winter months to meet heat oil demand, wintertime withdrawals aren't as severe as they otherwise might be, and when that increased winter distillates output coincides with a week of weak demand such as we saw this week, all that extra distillate production ends up heading for storage....thus we have the largest addition to distillate inventories since the 2nd week of January 2015, which leaves us with 1.4% more distillate inventories than we had on January 1st last year, and 18.1% above the distillate inventories of 136,926,000 barrels on January 2nd, 2015...…

finally, the big drop in our oil imports, combined with the increase in refining, meant that we had to pull crude oil out of storage to meet the refiner's needs, and hence our inventories of crude oil fell by 7,051,000 barrels to 479,012,000 barrels by December 30th, which was the lowest level for our crude supplies since February 19th of last year, and  6.4% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 6.2% more crude oil in storage than the 450,956,000 barrels we had stored at the beginning of 2016, and 37.2% more crude than the 348,806,000 barrels of oil we had in storage on January 2nd of 2015...    

This Week's Rig Count

US drilling activity increased for the 10th week in a row and for the 15th time in the past 16 weeks during the week ending January 6th, although the pace of increase remains modest compared to that of the weeks immediately following the OPEC deal...Baker Hughes reported that the total count of active rotary rigs running in the US rose by 7 rigs to 665 rigs by this Friday, which was up by 1 from the 664 rigs that were deployed as of the January 8th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 4 rigs to 529 rigs during the week, which was the most oil drilling rigs that have been in use since December 4th of 2015, as oil drilling activity has only retreated once in the past 27 weeks...oil drilling is now up from the 516 oil directed rigs that were working in the US on January 8th last year, but down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 135 rigs, which still left active gas rigs down from the 148 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... one rig that was classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

a single drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 23, still down from 27 offshore rigs a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 24 rigs, also down from last year's offshore total of 27...the number of working horizontal drilling rigs increased by 2 rigs to 534 rigs this week, which is now up from the 519 horizontal rigs that were in use in the US on January 8th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, four vertical rigs were added to those active, increasing the vertical rig count to 74, which was down from the 81 vertical rigs that were deployed during the same week last year..in addition, the directional rig count rose by 1 rig to 57 rigs as of January 6th, which still left the directional rig count down from last year's deployment of 64 directional rigs...

once again, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of January 6th, the second column shows the change in the number of working rigs between last week's count (December 30th) and this week's (January 6th) count, the third column shows last week's December 30th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for January 8th of 2016...       

January 6th 2017 rig count summary

we do have an unusual change this week, in that 5 rigs were pulled out of the Granite Wash of the Texas-Oklahoma panhandle region, yet it's hard to tell where they came from at a glance, since the Oklahoma rig count is unchanged and the Texas rig count is up three...looking at the details on drilling in the individual Texas oil districts, we see that drilling in district 10, which is the panhandle region, was down from 11 rigs to 6 rigs, so that question is solved  ...in addition, it also appears that at least one of the 3 rig increase in New Mexico was in the Wolfcamp, in the western part of the Permian, since Texas details only shows a 2 rig increase in that basin...note that yet another gas-directed rig was also added in Ohio's Utica shale...that brings the Utica shale rig count up to 21, up from 14 a year ago...we could therefore say that with a 50% year over year increase, drilling in the Utica shale is increasing faster than in any other basin in the US, since the 58 rig increase in the Permian only represents a 28% jump...also note that of the states not shown among the major producers above, Indiana saw two rigs pulled out this week, leaving one still active in the state, whereas a year ago they had none, while Illinois drillers added a rig, their first activity in a while, which is still down from the 2 rigs that were deployed in Illinois last January 8th..



note: there's more here..

Sunday, January 1, 2017

an 18 mo high for oil, a 2 year high for nat gas; record gasoline production, but gasoline and distillates supplies down on record exports

prices for both oil and natural gas reached interim highs on Wednesday of this week before sliding lower, in trading volume that was about one-third of normal....after closing last week at $53.02 a barrel, prices for US oil rose steadily after the markets opened on Tuesday, closing 1.7% higher at $53.90 a barrel, as traders focused on the OPEC and non-OPEC production cuts that are set to begin next week...the OPEC inspired rally continued into Wednesday, with prices hitting $54.33 a barrel before getting knocked back when the American Petroleum Institute’s weekly report showed a 4.2 million barrel increase in commercial crude oil inventories, instead of the expected 1.5 million-barrel drawdown, but oil still closed at an 18-month high of $54.06 a barrel...prices continued to slide on Thursday, even though the EIA reported a much smaller 614,000 barrel increase in oil supplies, and ended the day down 29 cents at $53.77 a barrel...prices slipped again on Friday, amid profit taking before the long weekend, closing at $53.72 a barrel, and thus ended the year up 45%, in the largest annual increase since 2009...

prices for natural gas, meanwhile, rose from last week's close of $3.662 per mmBTU (million British thermal units) to $3.761 per mmBTU on Tuesday, as cold weather consumption continued to eat into inventories, with heating degree days running 11 percent above average and seasonal natural gas consumption up 21 percent from last year's levels...gas prices rose sharply again Wednesday, as forecasts called for even colder weather, with the expiring contract for January gas delivery increasing 16.9 cents, or 4.49%, to settle at a two year high of $3.93 per mm-BTU, while the more actively traded February contract rose 13.2 cents, or 3.51%, to close at $3.898 a mm-BTU....now trading for February delivery, natural gas prices wobbled on Thursday, even though the EIA's Weekly Natural Gas Storage Report showed that natural-gas stockpiles shrank by 237 billion cubic feet to 3360 billion cubic feet last week, which left our natural gas supplies 10.9% below the level of a year earlier, and 2.3% below the 5 year average for this time of year…prices then went on to close down 9.6 cents, or 2.5% lower, at $3.802 per mmBTU, as moderating weather forecasts had traders pulling back from prior price highs...natural gas prices then extended their decline on Friday, closing down roughly 1.4% at $3.743 per mmBTU, but were still up 59% for the year, in their largest annual increase since 2005..

The Latest Oil Stats from the EIA

this week's reports on oil for the week ending December 23rd from the US Energy Information Administration indicated a modest drop in our imports of crude from last week's elevated levels, while refining also fell back to below seasonal levels, which still left us with a small surplus of crude at the end of the week...our imports of crude oil fell by an average of 304,000 barrels per day to an average of 8,167,000 barrels per day during the week, after rising by 1,111,000 barrels per day the prior week...at the same time, our exports of crude oil rose by an average of 70,000 barrels per day to an average of 627,000 barrels per day, which meant that our effective imports netted out to 7,540,000 barrels per day for the week...meanwhile, our crude oil production fell by 20,000 barrels per day to an average of 8,766,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled 16,306,000 barrels per day for the week...

refineries reportedly used 16,557,000 barrels of crude per day during the week, a decrease of 101,000 barrels per day from the week ending the 16th, while at the same time, 88,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA figures seem to indicate that we ended up with 339,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that 339,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out...the EIA footnote to that line 13 calls it "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...as you know, we've been calling that number the EIA's weekly fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports rose to an average of 8.075 million barrels per day, now 2.4% higher than the same four-week period last year....our crude oil production for the week of December 23rd was 4.7% lower than the 9,202,000 barrels of crude we produced during the week ending December 25th of last year, and 8.8% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015...

US refineries operated at 91.0% of capacity in using those 16,557,000 barrels of crude per day, down from 91.5% of capacity the prior week and down from 92.6% of capacity during the same week a year ago, as they also refined 125,000 less barrels of crude per day than they did during the same week last year...nonetheless, gasoline production from those refineries rose by 387,000 barrels per day to a record high of 10,537,000 barrels per day during the week ending December 23rd, which was 6.2% more than the 9,921,000 barrels per day of gasoline produced during the week ending December 25th a year ago, and 3.4% more than the 10,195,000 barrels per day of gasoline produced during the week ending December 26th, 2014, which was also an all time record for gasoline output at that time...at the same time, refineries' output of distillate fuels (diesel fuel and heat oil) fell by 165,000 barrels per day to 4,957,000 barrels per day during the week ending December 23rd, which was still up a bit from the 4,927,000 barrels per day that was being produced during the week ending December 25th last year, but 6.6% lower than the 5,307,000 barrels per day of distillates produced during the same week of 2014...     

however, even with the record high in our gasoline production, the EIA reported that our gasoline supplies fell by 1,593,000 barrels to 227,143,000 barrels as of December 23rd, even as our domestic consumption of gasoline was little changed at 9,278,000 barrels per day...while our gasoline imports fell by 13,000 barrels per day to 434,000 barrels per day, our gasoline exports rose by 354,000 barrels per day to a record high of 1,149,000 barrels per day, which was only the 3rd time in history that our gasoline exports topped 1 million barrels per day...nonetheless, our gasoline inventories as of December 23rd were still 2.6% higher than the 221,420,000 barrels of gasoline that we had stored on December 25th of last year, but 0.8% lower than the 229,048,000 barrels of gasoline we had stored on December 26th of 2014...since our gasoline exports have suddenly jumped to heretofore unheard of levels, we'll include a graph of what that looks like below...

December 30 2016 gasoline exports for December 23

the above graph was taken from an article on this week's EIA report at Zero Hedge, and it shows weekly gasoline exports since late August and a staggered monthly estimate of our gasoline exports before that time, as the EIA itself only reported monthly estimates before then...you can see that for most of this year, our gasoline exports were in the 400,000 barrel per day range, never exceeding 500,000 barrels per day....however, as of September, our gasoline exports began to rise in a volatile manner, ultimately topping and remaining above 800,000 barrels per day since November...now we've topped 1,100,000 barrels per day of gasoline exports in two out of the last three weeks, and as a result our domestic supplies of gasoline continue to be drawn down, even as our refineries are producing gasoline at record levels...

moreover, at the same time as our gasoline supplies were being drawn down for export, so too were our supplies of distillate fuels, which fell by 1,881,000 barrels to 155,935,000 barrels by December 23rd, as our exports of distillates rose by 284,000 barrels per day to a record high of 1,416,000 barrels per day...now, unlike gasoline, exports of distillates over 1 million per day is not uncommon, as we've typically exported large quantities of distillates to Europe, where they use diesel powered automobiles, while importing gasoline from them, which European refineries had produced in excess of their needs...but still, we are now exporting distillates at record levels, and as a result what was once our large surplus of distillates has fallen 1.0% below the distillate inventories of 153,110,000 barrels of December 25th last year, while they still remain 20.6% above the distillate inventories of 125,721,000 barrels of December 26th, 2014…

finally, even though our oil imports fell from the prior week's elevated level, with the pullback in refining they were still enough to boost our inventories of crude oil by 614,000 barrels to 486,063,000 barrels by December 23rd,which was still 5.1% below the April 29th record of 512,095,000 barrels...but we still ended the week with 6.8% more crude oil in storage than the 455,106,000 barrels we had stored as of the same weekend a year earlier, and 37.7% more crude than the 352,979,000 barrels of oil we had in storage on December 26th of 2014...   

This Week's Rig Count

US drilling activity increased for the 9th week in a row and for the 14th time in the past 15 weeks during the week ending December 30th, although the pace of increase slowed from the double digit rig gains we saw in the prior three weeks....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 658 rigs by this Friday, which was still down from the 698 rigs that were deployed as of the December 31st report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 2 rigs to 525 rigs during the week, which was the most oil drilling rigs that have been in use since December 31st last year, as oil drilling activity has only retreated once in the past 26 weeks...but oil drilling was still down from the 536 oil directed rigs that were working in the US on that date last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 132 rigs, which still left active gas rigs down from the 162 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... one rig that was classified as miscellaneous also remained active, in a change from a year ago, when no such miscellaneous rigs were deployed...

two offshore platforms that had been drilling in the Gulf of Mexico last week were shut down this week, leaving the Gulf of Mexico rig count at 25 rigs, down from 22 Gulf rigs a year ago...another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 23 rigs, also down from last year's offshore total of 25...the number of working horizontal drilling rigs increased by 6 rigs to 532 rigs this week, which was still down from the 549 horizontal rigs that were in use in the US on December 31st last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, a single vertical rig was added to those active, increasing the vertical rig count to 70, which was down from the 89 vertical rigs that were deployed during the same week last year...meanwhile, the directional rig count fell by 2 rigs to 56 rigs as of  December 30th, which left the directional rig count down 4 rigs from last December 31st's deployment of 60 directional rigs...

once again, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of December 30th, the second column shows the change in the number of working rigs between last week's count (December 23rd) and this week's (December 30th) count, the third column shows last week's December 23rd active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for December 31st  of 2015...      

December 30 2016 rig count summary

obviously there were few changes this week, with oilfield activity probably slowed down by the holiday week...of the major producing states, only Kansas saw its lone rig shut down, while all the increases in drilling occurred in the states where most of the drilling was already taking place…note that Louisiana only netted zero because the two rigs that were pulled out of the Gulf of Mexico offset 2 land based rigs that were added in the southern part of the state...the basins seeing drilling increases were mostly the usual suspects, the Permian and Eagle Ford of Texas, the Granite Wash of the Texas-Oklahoma panhandle region, the Williston basin or Bakken shale in North Dakota, and the Cana Woodford of Oklahoma, home of the newer STACK and SCOOP plays...and other than what's shown in the table above, only Alabama saw its rig count drop from 2 rigs last week to 1 rig this week, unchanged quantitatively from a year ago, even though a year ago the only rig active in Alabama was offshore from the state, in its Gulf waters...



note: there's more here...

Tuesday, December 27, 2016

If You Think Jesus Was White, Here Are Five Reasons You’re Wrong (from @Truthdig)

If You Think Jesus Was White, Here Are Five Reasons You’re Wrong (from @Truthdig)



: Given the alarming rise of white nationalism in the United States and the ways in which it is often entangled with Christian nationalism, it is worthwhile remembering exactly whose birth was commemorated Sunday.
- 2016/12/26

Sunday, December 25, 2016

oil rigs at a 2016 high, distillates use at a 23 month high, a 6 year high drawdown of natural gas, etc

oil prices were generally higher this week on half of normal trading volume, as many traders apparently took an early holiday vacation...after closing last week at $51.90 a barrel, the contract for US oil for January delivery rose 22 cents on Monday to settle at $52.12 a barrel, while the more-active February contract rose 11 cents to $53.06 a barrel, as news of the assassination of the Russian ambassador to Turkey brought out fears of political instability in the Middle East...with trading in the January oil contract expiring on Tuesday at $52.23 a barrel, the February contract rose 24 cents, or 0.5%, to $53.30 a barrel, on forecasts of a large draw in U.S. crude supplies that would give credence to the belief that the oil glut was ending, and a bigger than expected inventory draw as reported by the American Petroleum Institute...however, oil prices fell 1.5% on Wednesday when the EIA reported that US crude inventories had actually increased, and ultimately closed down 81 cents at $52.49 a barrel...crude prices resumed their upward march on Thursday on strong U.S. economic data, a pause in the U.S. dollar rally, and optimism that crude producers would abide by an agreement to limit output, and closed up 46 cents at $52.95 a barrel...prices then drifted a bit higher on light trading, not even reacting to the 3rd consecutive double digit jump in the oil rig count, and closed the week at $53.02 a barrel, a price quote not comparable to last week's because it's now referencing a different contract month...

it might be worth it to take a closer look at the oil futures market, since we've just been through a week when the reference month for the widely quoted "price of oil" changed, and the price of oil jumped nearly a dollar a barrel as a result...over the past two years, we've often mentioned in passing that future contract prices for oil were higher than were current prices, whether we were referencing contango trading, which had made it profitable to buy and store oil, or whether we were talking about the economics of completing wells at a given price...but while we've linked to pages of those futures price quotes, i don't think we've never shown them, and i wouldn't expect that most of you would have had the time to follow all the links that i've used in these mailings...so today we'll just copy part of a page showing quotes for the first handful of oil futures quotes, and explain what it shows...

December 24 2016 oil futures

the above table, which shows oil futures prices for the next 14 months, comes from barchart.com, who calls themselves a "provider of market data solutions for individuals and businesses"...technically, each line on that table shows Friday's trading in a contract to deliver West Texas Intermediate grade (WTI) oil to (or to buy WTI oil from) the depot at Cushing Oklahoma for one month in the future, as noted in the blue parenthesis in the first column... the contracts are further identifiable by the 5 digit ticker symbol, wherein CL is the symbol for WTI light crude oil (the US benchmark oil), the next letter is a symbol for the month (ie, G=February, H=March, etc), and the last two digits are the year...the 2nd column has Friday's closing price for each of those contracts, and the 3rd column has the change in price from Thursday to Friday for each contract...note that this is just a small part of the list; the page i took this from includes monthly oil futures quotes going out to 2022, and then quotes for December and June through the year 2025..

the "price of oil" that's given in the media (and which we quote) is always for the current front month, which in this week's case was for January on Monday and Tuesday, and for February thereafter...you'll see there's also a cash price listed, CLY00 at $52.98 a barrel, but note that there's a zero in the volume column, because no one bought oil for cash on Friday, which we'd expect to be the case on most days, and that's why that cash price is never quoted...in an over-simplification of the practice, oil refineries will contract for their oil needs based on these futures prices many months or years in the future, just as oil well drillers will contract to sell their future production at some future date based on these prices, and thus whatever price changes occur between now and that time in the future will thus not affect them, because they've got their selling price locked in...thus though Friday's quoted price of oil was $53.02 a barrel, a hypothetical fracker who may been planning to start drilling after the first of the year might not be able to schedule a fracking crew until April, and thus might contract to sell his expected initial output in May, at prices of $55.24 a barrel...of course, the reality is more complex, as a driller in the Bakken who must ship by rail may receive a well head price that is a set steep discount from WTI, and may engage in much more complicated hedging strategies than simple selling oil futures contracts for given months, but the underlying pricing principle is the same...it's also important to remember what we showed last January; that it's not the oil users or the oil producers who set the price, it's the oil traders in New York,.because daily oil trading for just one oil contract in New York has been running well more than 100 times the amount of oil produced in the entire US daily, and because daily oil trading for just one contract in New York electronically swaps more than twice the quantity of oil that exists anywhere above ground in the entire country, oil producers have no real say in what price they'll receive for their oil, nor do refiners in what price they'll ultimately pay.

* * * * *

we missed coverage of natural gas prices last week, so we'll pick up on what happened to them over the past two weeks now...when we looked at natural gas prices two weeks ago, they had just run up almost $1 per mmBTU (million British thermal units) to $3.75 per mmBTU in a month's time, as the the warmest Fall in US weather history was giving way to forecasts of a colder than normal La Nina winter...but no sooner than we sounded the alarm on that price spike, natural gas prices began to fall back, dropping 23.9 cents to $3.507 per mmBTU on Monday of last week, and then dropping lower for three out of the next four days to end last week at $3.415 per mmBTU...that collapse continued early this week, as natural gas prices fell to $3.392 per mmBTU on Monday, then to $3.263 per mmBTU on Tuesday, as increasingly milder weather forecasts continued to weigh on the market...but it appears someone got wind of the Thursday natural gas storage report on Wednesday, because nat gas prices spiked 18.1 cents, or 5.5% in the first hour of trading on rumors of an inventory draw in a range between 197 and 210 billion cubic feet, and went on to close up 27.9 cents at $3.542 per mmBTU...that natural gas storage report did indeed showed we had to pull 209 billion cubic feet of natural gas out of storage to meet our heating needs during the week ending December 16th, the biggest withdrawal for the week since 2010, which left us with 3,597 billion cubic feet of gas left, 5.9% less than a year earlier, a warm week which only required a 32 billion cubic feet withdraw...gas prices then went on to close $3.538 per mmBTU on Thursday and $3.662 per mmBTU on Friday, which you can see in the graph below..

December 24 2016 natural gas prices

again, this familiar graph shows the contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in January at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...as we made note of two weeks ago, January natural gas futures are invariably higher than for the other months, and if we navigate to the page of natural gas futures prices similar to the oil futures table above we find that May prices for natural gas are more than 20 cents lower than January's, and most natural gas prices after April 2018 are below $3 per mmBTU, so it does a fracker no good to start drilling now on these temporary higher January prices, facing the inability to contract for sale at prices at these levels in the out months, and the likelihood that prices will be much lower in the future...

btw, you might have noted that i've been reluctant to ascribe a reason for most gas prices moves, simply because such large price moves for such small changes in expectations seem irrational to me...as RBN Energy explained the natural gas markets last week, "natural gas inventory—as reported by the EIA each week—is regarded as an ever-present bellwether for price direction in the natural gas market. Gas market participants and analysts train their eyes on weather forecasts—and the constant daily, or even intraday, revisions to the forecasts—along with natural gas flow data and other fundamental factors to see how they might change the storage picture.."

The Latest Oil Stats from the EIA

this week's oil data for the week ending December 16th from the US Energy Information Administration indicated a big jump in our imports of crude and a modest increase in our refining, but not enough to use all those extra imports, leaving our supplies of crude oil somewhat higher than the prior week...our imports of crude oil rose by an average of 1,111,000 barrels per day to an average of 8,471,000 barrels per day during the week, while at the same time our exports of crude oil rose by an average of 72,000 barrels per day to an average of 557,000 barrels per day, which meant that our effective imports netted out to 7,914,000 barrels per day for the week...at the same time, our crude oil production fell by 10,000 barrels per day to an average of 8,786,000 barrels per day, which means the daily supply of oil from imports and wells totaled 16,700,000 barrels per day...refineries reportedly used 16,658,000 barrels of crude per day during the week, an increase of 184,000 barrels per day from the week ending the 9th...but at the same time, 322,000 barrels of oil per day were being added to storage facilities in the US, virtually reversing the 366,000 barrels of oil per day of stored oil that was used up in the prior week...

thus, this week's EIA figures seem to indicate that we ended up with 280,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that 280,000 barrels per day into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance...the EIA footnote to that line 13 calls it "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil."...as you know, we've been calling that number the EIA's weekly fudge factor...

from that same weekly Petroleum Status Report we find that the 4 week average of our oil imports rose to an average of 7.9 million barrels per day, now 0.9% higher than the same four-week period last year, which has also become somewhat meaningless as our weekly oil imports rise and fall on the order of a million barrels per day....our oil production for the week of the 16th was 4.3% lower less that the 9,179,000 barrels of crude we produced during the week ending December 18th of last year, and 8.6% below our record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...

US refineries operated at 91.5% of capacity in using those 16,658,000 barrels of crude per day, up from 90.5% the prior week and up from 91.3% during the same week a year ago, as they also refined 190,000 more barrels of crude per day than they did during the same week last year...gasoline production from those refineries rose by 322,000 barrels per day to 10,150,000 barrels per day during the week ending December 16th, which was 8.6% more than the 9,346,000 barrels per day of gasoline produced during the week ending December 18th a year ago, but just 2.3% more than the 9,920,000 barrels per day of gasoline produced during the week ending December 19th 2014...at the same time, refineries' output of distillate fuels (diesel fuel and heat oil) rose by 113,000 barrels per day to 5,122,000 barrels per day during the week ending December 16th, which was 3.7% higher than the 4,938,000 barrels per day that was being produced during the week ending December 18th last year, but 2.2% lower than the 5,236,000 barrels per day of distillates produced during the same week of 2014...     

even with the week's increases in gasoline and distillates production, however, supplies of both reportedly dropped...our gasoline supplies fell by 1,309,000 barrels to 228,736,000 barrels as of December 16th, as our domestic consumption of gasoline increased by 395,000 barrels per day to 9,269,000 barrels per day, our gasoline imports fell by 177,000 barrels per day to 447,000 barrels per day, and our gasoline exports fell by 336,000 barrels per day from last week's record high of 1,131,000  barrels per day...nonetheless, our gasoline inventories as of December 16th were still 3.7% higher than the 220,495,000 barrels of gasoline that we had stored on December 18th of last year, and 1.2% higher than the 226,097,000 barrels of gasoline we had stored on December 19th of 2014....at the same time, our distillate fuel inventories fell by 2,420,000 barrels to 155,935,000 barrels by December 16th, as with the sudden burst of arctic weather our consumption of distillates rose by 519,000 barrels per day to 4,549,000 barrels per day during the week ending December 16th , the most distillates we've used in any week since January 23rd, 2015....nonetheless, our distillate inventories remained 1.5% higher than the distillate inventories of 151,315,000 barrels of December 18th last year, and 24.0% above the distillate inventories of 123,847,000 barrels of December 12th, 2014…

finally, mostly due to the big jump in our oil imports, our inventories of crude oil rose by 2,563,000 barrels to 485,449,000 barrels by December 16th, still 5.2% below the April 29th record of 512,095,000 barrels...and we thus ended the week with 7.3% more crude oil in storage than the 452,477,000 barrels we had stored as of the same weekend a year earlier, and 36.8% more crude than the 354,733,000 barrels of oil we had in storage on December 19th of 2014...   

This Week's Rig Count

drilling activity rose for the 13th time in the past 14 weeks during the week ending December 23rd, as ongoing higher prices for gas and oil underpinned increased fracking of completed wells....Baker Hughes reported that the total count of active rotary rigs running in the US rose by another 16 rigs to 653 rigs by this Friday, which was still down from the 700 rigs that were deployed as of the Wednesday December 23rd report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 13 rigs to 523 rigs during the week, which was the most oil drilling rigs that have been in use in any week this year, as oil drilling activity has only retreated once in the past 25  weeks...but oil drilling was still down from the 538 oil directed rigs that were working in the US on December 23rd last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 129 rigs, which still left active gas rigs down from the 162 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008...one rig that was classified as miscellaneous also remained active, in contrast to a year ago, when no such miscellaneous rigs were deployed...

two offshore platforms began drilling in the Gulf of Mexico this week, both offshore from Louisiana, which brought the Gulf of Mexico rig count up to 24, same as a year ago...at the same time, another drilling operation began in the offshore waters of Alaska, which means the total US offshore count of 25 rigs has surpassed last year's offshore count of 24...the number of working horizontal drilling rigs increased by 14 rigs to 526 rigs this week, which was still down from the 554 horizontal rigs that were in use in the US on December 23rd last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, 4 directional drilling rigs were added, increasing the directional rig count to 58, which was down from the 60 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count fell by 2 rigs to 69 rigs as of December 23rd, which left the vertical rig count down from last December 23rd's deployment of 86 vertical rigs...

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of December 23rd, the second column shows the change in the number of working rigs between last week's count (December 16th) and this week's (December 23rd) count, the third column shows last week's December 16th active rig count, the 4th column shows the change in the number of rigs running this Friday from the Wednesday before Christmas 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 case was for December 23rd of 2015...      

December 23 2016 rig count summary

there's not much that's particularly noteworthy in this week's state or basin rig variances...once again, the increase of 4 rigs in the Permian was the most in the country, but that's still down from the 12 rigs Permian drillers added last week or the 11 rigs they added the week before...the 262 rigs now working in the Permian is now almost double the 137 rigs that were drilling there during the last week of May, and the 125 rigs they've added over the ensuing 29 weeks thus accounts for nearly 60% of the 212 horizontal drilling rig increase that's occurred nationally since then...Oklahoma topped he Texas addition this week by adding 6 rigs, with 2 of those targeting the Cana Woodford, and 1 in the Ardmore Woodford, the first rig working in that basin since September 23rd...i'll assume you've all also noticed there was also a rig addition in the Utica; that means we now have 20 rigs running, up from 16 rigs a year ago, with one of those Utica rigs just across the state line in PA...changes not shown on the tables above include the addition of another rig in Indiana, where there are now 3 rigs running, up from none a year ago, Mississippi, where they shut down 1 rig and now have 2 rigs active, down from 5 rig a year ago, and Illinois, where their last active rig was shut down this week, while a year ago they had two...



note: there's more related news here...