US oil price at a 7 year high; largest US oil inventory build in 7 months; global oil shortage at 2,400,000 barrels per day​

oil prices at a 7 year high; largest US oil inventory build in 7 months; gasoline imports at an 8 month low; global oil shortage at 2,400,000 barrels per day​ as OPEC output is ​375,000 barrels per day short of​ quota​

Oil prices rose for an 8th straight week as global shortages of coal and natural gas were expected to lead to increased demand for oil….after rising 4.6% to $79.35 a barrel last week after OPEC decided to only add the minimum to global supplies in the coming months, the contract price for US light sweet crude for November delivery rallied in early trading Monday, initially jumping by more than 3% to trade at a seven-year high of $82.18 a barrel, driven by concerns over deepening fuel shortages across major global economies, as accelerated gas-to-oil switching in power generation boosted the outlook for oil demand, before giving up more than half of the early gains to settle $1.17 higher at $80.52 a barrel, still the first close above $80 since October 2014, as a growing power crisis from Europe to Asia boosted demand for oil ahead of winter…oil prices moved higher again early Tuesday, propelled by concerns over a quickly tightening global oil market, as OPEC and Russia-led partners stuck with their agreement to only gradually roll back their production cuts next month, even as global stockpiles of coal and natural gas were running low before winter. but pulled back after the International Monetary Fund trimmed their global economic growth forecast, and settled with just a 12 cent gain for the day at $80.64 a barrel, as a tight market brought about by robust demand and limited supply continued to lend buoyancy to oil prices…oil prices pulled back further in early trading Wednesday, after data from the EU showed their industrial production fell sharply at the end of the third quarter, pressured by supply-chain bottlenecks and a record run in electricity prices, and settled 20 cents lower at $80.64 a barrel, as traders assessed OPEC’s skepticism around the strength of crude demand even after oil prices had hit their highest since 2014….oil prices then moved higher again early Thursday after a mixed inventory report from the American Petroleum Institute, but pared their gains following EIA data that showed US oil inventories had increased more than expected and that refiners had sharply scaled back run rates amid softer demand for both gasoline and distillate fuels, but rallied again in afternoon trading to close 87 cents higher at $81.31 a barrel after Saudi Arabia dismissed calls for additional OPEC+ supply and the International Energy Agency warned that shortages of natural gas in Europe and Asia were boosting demand for oil, deepening what was already a sizable supply deficit in crude markets…the oil rally continued into Friday on global shortages of natural gas and coal supplies that were expected to add 500,000 barrels per day (bpd) to global oil demand over the coming months, and never looked back to finish 97 cents higher at a 7 year high of $82.28 a barrel, boosted by forecasts of an oil supply deficit over the next few months, as the easing of coronavirus-related travel restrictions spurred additional demand. thus logging a 3.7% gain on the week, with the global benchmark price for Brent crude scoring longest streak of weekly gains since 1999….

Since oil prices appear to be pretty close to a 7 year high, we’ll again put up a long term graph and take a look..

October 16 2021 oil prices

The above is a screenshot of the current interactive oil price chart from barchart.com, which i have again set to show front month oil prices monthly over the past 10 years, which means you’re seeing the same oil prices that were quoted by the media….this interactive chart can also be reset to show prices of front month or individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month for each…each bar in the graph above represents the range of oil prices for a single month, with months when prices rose indicated in green, with the opening price at the bottom of the bar and the closing price at the top, and months when prices fell indicated in red, with the opening price at the top of the bar and the closing price at the bottom, while the small sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the month in question….meanwhile, the bars across the bottom show trading volume for the front month oil contract, for the months in question, again with up months indicated by green bars and down months indicated in red…

it’s pretty clear and has been widely cited that this weeks oil prices were the highest since October 2014….to find out when in October, we converted that interactive oil graph to show daily prices, and then tediously scrolled the daily price graph back to 2014…looking for a daily closing price higher than this week’s $82.28 a barrel, we arrived at October 21st, 2014, when the November 2014 oil contract opened at $81.86 a barrel and closed at $82.49….the next day, oil closed at $80.52 and was below $80 by the end of the month, where it remained until last week…so this week’s closing price is actually 6 days short of a seven year high, and though it has traded higher off-market since (it’s now at $83.09), it’s closing prices in New York trading on which price records are based..

meanwhile, natural gas prices fell for a second week, following their seven week surge to a twelve year high, as mild weather lowered demand and allowed for surplus gas to be stored before winter…after falling 1% to $5.565 per mmBTU last week on the largest increase in US natural gas inventories in 16 months, the contract price of natural gas for November delivery opened higher on Monday on cooler-trending weather models, but reversed course once the trading session got underway to settle 22.0 cents or 4% lower at a two-week low of $5.345 per mmBTU, on rising gas output and on forecasts that milder than normal weather would continue through late October, allowing utilities inject more gas into storage than usual ahead of the winter…after trading lower early Tuesday, the November contract turned higher after the midday forecast called for cooler weather, and the Cove Point LNG export plant returned from a maintenance outage, boosting the amount of gas that our LNG export plants consumed, and settled with a gain of 16.0 cents at 5.505 per mmBTU….another cooler turn in the latest weather models lifted natural gas prices again on Wednesday, as prices settled 8.5 cents higher at $5.590, and then rose 9.7 cents to $5.687 per mmBTU during Thursday’s session, on a smaller-than-expected storage build, lower gas output, rising LNG exports, higher global gas prices, and a report that La Nina conditions had developed, portending a cold and wet winter for the US….but US natural gas prices turned lower and fell almost 5% on Friday, following a 9% drop in global gas prices, on forecasts the weather in the US would remain mostly mild through the end of October, setting down 27.7 cents at $5.410 per mmBTU and thus ending 2.8% lower for the week…

The EIA’s natural gas storage report for the week ending October 8th indicated that the amount of working natural gas held in underground storage in the US rose by 81 billion cubic feet to 3,369 billion cubic feet by the end of the week, which still left our gas supplies 501 billion cubic feet, or 12.9% below the 3,870 billion cubic feet that were in storage on October 8th of last year, and 174 billion cubic feet, or 4.9% below the five-year average of 3,543 billion cubic feet of natural gas that have been in storage as of the 8th of October in recent years…the 81 billion cubic foot increase in US natural gas in working storage this week was lower than the forecast for a 89 billion cubic foot addition from a survey of analysts queried by S&P Global Platts, but close to the average addition of 79 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, but still well above the the 75 billion cubic feet that were added to natural gas storage during the corresponding week of 2020…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 8th indicated that even after a decrease in our oil imports and an increase in our oil exports, a concurrent ​​​drop in our oil refining​ and a jump in our unaccounted for oil​ meant we had surplus oil to add oil to our stored commercial crude supplies for the third time in ten weeks and for the fourteenth time in the past forty-seven weeks….our imports of crude oil fell by an average of 1,041,000 barrels per day to an average of 5,994,000 barrels per day, after rising by an average of 483,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 400,000 barrels per day to an average of 2,514,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,480,000 barrels of per day during the week ending October 8th, 1,441,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,400,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 14,841,000 barrels per day during the cited reporting week… 

meanwhile, US oil refineries reported they were processing an average of 15,061,000 barrels of crude per day during the week ending October 8th, 684,000 fewer  barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 755,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 936,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+936,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…moreover, since last week’s unaccounted for oil was at (-273,000) barrels per day, there was an 1,209,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes indicated by this report nonsense….however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be reasonably accurate by most everyone in the industry….(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) indicate that the 4 week average of our oil imports rose to an average of 6,512,000 barrels per day last week, which was 22.2% more than the 5,327,000 barrel per day average that we were importing over the same four-week period last year…the rounded 755,000 barrel per day net increase in our crude inventories came as 870,000 barrels per day were added to our commercially available stocks of crude oil, while 114,000 barrels per day were pulled out from our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11.400,000 barrels per day even though the EIA”s rounded estimate of the output from wells in the lower 48 states was unchanged at 10,900,000 barrels per day because a 4,000 barrel per day increase in Alaska’s oil production to 452,000 barrels per day added 100,000 barrels per day to the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 13.0% below that of our pre-pandemic production peak, but 35.2% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 86.7% of their capacity while using those 15,061,000 barrels of crude per day during the week ending October 8th, down from 89.6% of capacity the prior week, and below normal utilization for early autumn refinery operations…the 15,061,000 barrels per day of oil that were refined this week were still 10.9% more barrels than the 13,577,000 barrels of crude that were being processed daily during the pandemic impacted week ending October 9th of last year, but 2.4% less than the 15,436,000 barrels of crude that were being processed daily during the week ending October 11th, 2019, when US refineries were operating at what was then also a below normal 83.1% of capacity, due to flooding in the wake tropical storm Imelda…

even with this week’s decrease in the amount of oil being refined, the gasoline output from our refineries was higher, increasing by 239,000 barrels per day to 9,605,000 barrels per day during the week ending October 8th, after our gasoline output had decreased by 523,000 barrels per day over the prior week.…this week’s gasoline production was 4.0% more than the 9,240,000 barrels of gasoline that were being produced daily over the same week of last year, but 3.9% lower than the gasoline production of 9,998,000 barrels per day during the week ending October 11th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 72,000 barrels per day to 4,706,000 barrels per day, after our distillates output had increased by 130,000 barrels per day over the prior week…after this week’s decrease, our distillates output was still 10.2% more than the 4,269,000 barrels of distillates that were being produced daily during the week ending October 9th, 2020, and fractionally more than the 4,688,000 barrels of distillates that were being produced daily during the week ending October 11th, 2019..

despite the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the first time in four weeks, and for fifteenth time in twenty-seven weeks, and for the 26th time in forty-six weeks, falling by 1,958,000 barrels to 223,107,000 barrels during the week ending October 8th, after our gasoline inventories had increased by 3,256,000 barrels over the prior week…our gasoline supplies decreased this week even though the  amount of gasoline supplied to US users fell by 241,000 barrels per day to 9,186,000 barrels per day because our imports of gasoline fell by 545,000 barrels per day to an eight month low of 542,000 barrels per day, and because our exports of gasoline rose by 295,000 barrels per day to 699,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 0.9% lower than last October 9th’s gasoline inventories of 225,121,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year…

with the decrease in our distillates production, our supplies of distillate fuels also decreased for the seventh time in nine weeks and for the 18th time in 27 weeks, falling by 24,000 barrels to 129,307,000 barrels during the week ending October 8th, after our distillates supplies had decreased by 396,000 barrels during the prior week….our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 433,000 barrels per day to 3,932,000 barrels per day, because our imports of distillates fell by 108,000 barrels per day to 190,000 barrels per day, and because our exports of distillates rose by 200,000 barrels per day to 968,000 barrels per day…after eighteen inventory decreases over the past twenty-seven weeks, our distillate supplies at the end of the week were 21.4% below the 164,551,000 barrels of distillates that we had in storage on October 9th, 2020, and about 9% below the five year average of distillates stocks for this time of the year…

meanwhile, even with the decrease in our oil imports and the increase in our oil exports, our commercial supplies of crude oil in storage rose for the eighth time in the past twenty-nine  weeks and for the 18th time in the past year, increasing by 6,088,000 barrels over the week, from 420,887,000 barrels on October 1st to 426,975,000 barrels on October 8th, after our commercial crude supplies had increased by 2,345,000 barrels over the prior week…even after this week’s increase, which was the largest in seven months, our commercial crude oil inventories remained about 6% below the most recent five-year average of crude oil supplies for this time of year, but were still about 28% above the average of our crude oil stocks at the second weekend of October over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this October 8th were 12.7% less than the 489,109,000 barrels of oil we had in commercial storage on October 9th of 2020, and are now 1.8% less than the 434,850,000 barrels of oil that we had in storage on October 11th of 2019, but still 2.5% more than the 416,441,000 barrels of oil we had in commercial storage on October 12th of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil still near multi year lows, we’ll continue to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR….we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, rose by 4120,000 barrels this week, from 1,851,562,000 barrels on October 1st to 1,855,682,000 barrels on October 8th, and they are now up by 14,055,000 barrels from the six year low of three weeks earlier…

OPEC’s October Oil Market Report

Wednesday of this week saw the release of OPEC’s October Oil Market Report, which covers OPEC & global oil data for September, and hence it gives us a picture of the global oil supply & demand situation in the second month after ‘OPEC+’ agreed to increase their output by 400,000 barrels per day monthly from the previously agreed to July level, which was part of the fifth production quota policy reset they’ve made over the past year and a half, all in response to the pandemic-related slowdown and subsequent recovery…we again want to caution that the oil demand estimates made by OPEC herein, while the course of the Covid-19 pandemic still remains uncertain in most countries around the globe, should be considered as having a much larger margin of error than we’d expect from this report during stable and hence more predictable periods..

the first table from this monthly report that we’ll check is from the page numbered 50 of this month’s report (pdf page 60), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures…

September 2021 OPEC crude output via secondary sources

As we can see on the bottom line of the above table, OPEC’s oil output increased by 486,000 barrels per day to 27,328,000 barrels per day during September, up from their revised August production total of 26,842,000 barrels per day…however, that August output figure was originally reported as 26,762,000 barrels per day, which therefore means that OPEC’s August production was revised 80,000 barrels per day higher with this report, and hence OPEC’s September production was, in effect, a 566,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official August OPEC output figures as reported a month ago, before this month’s revision)…

According to the agreement reached between OPEC and the other oil producers at their Ministerial Meeting on July 18th, the oil producers party to that agreement were to raise their output by a total of 400,000 barrels per day in September, which would include an increase of roughly 250,000 barrels per day from the OPEC members listed above…however, as you can see from the above table, OPEC’s increase of 486,000 barrels per day was far more than that….we can also see that production increases of 156,000 barrels per day from the Saudis, 139,000 barrels per day from the Saudis, and 84,000 barrels per day from Iraq were the major factors in OPEC’s September output increase….however, most of Nigeria’s output increase is just a recovery from August, when their production fell by 89,000 barrels per day, and when OPEC’s output was already 684,000 barrels per day short of what they were expected to produce…hence the excessive increase in OPEC’s September output still leaves the cartel more than 110% in compliance with the agreement they made with Russia and other producers…

Recall that last year’s original oil producer’s agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June of last year, but that initial agreement had been extended to include July 2020 at a meeting between OPEC and other producers on June 6th, 2020….then, in a subsequent meeting in July of last year, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August and subsequent months, which thus became the agreement that governed OPEC’s output for the rest of 2020…the OPEC+ agreement for this January’s production, which was later extended to include February and March and then April’s output, was to further ease their supply cuts by 500,000 barrels per day to 7.2 million barrels per day from that original baseline…then, during a difficult meeting on April 1st of this year, OPEC and the other oil producers that are aligned with them agreed to incrementally adjust their oil production higher each month over the next three months, taking their agreement through July….production levels for August and the following months were to be determined by a July 1st meeting, but that meeting was adjourned on July 2nd due to a dispute between the UAE and the Saudis over reference production levels, and a subsequent attempt to restart that meeting on July 5th was called off….so it wasn’t until July 18th that a tentative compromise addressing August quotas was worked out, allowing oil producers in aggregate to increase their production by 400,000 barrels per day in August and later months, and boosting reference production levels for the UAE, the Saudis, Iraq and Kuwait beginning in April 2022…

OPEC arrived at the production quotas for August and September of this year by repeatedly adjusting the original 23%, or 9.7 million barrel per day cut from the October 2018 baseline that they first agreed to for May and June 2020, first to a 7.7 million barrel per day reduction from the baseline for the remainder of 2020, then to a 7.2 million barrel per day production cut from the baseline for the first four months of this year, which was actually raised to an 8.2 million barrel per day reduction after the Saudis unilaterally committed to cut their own production by a million barrels per day during February, March, and then later during April of this year….under the prior agreement, OPEC’s production cut in April was at 4,564,000 barrels per day from the October 2018 baseline, which was lowered to 3,650,000 barrels per day from the baseline with the latest agreement, which thus set the July production quota for the “OPEC 10” at 23,033,000 barrels per day, with war torn Libya and US sanctioned producers Iran and Venezuela exempt from the production cuts imposed by this agreement….for OPEC and the other producers to increase their output by 400,000 barrels per day from that July level, each producer would be allowed to increase their production by just over 1% per month…for the ten members of OPEC who agreed to impose cuts on themselves, that would mean their August output quota would be roughly 23,275,000 barrels per day, and then roughly 23,525,000 barrels per day in September….therefore, the 23,150,000 barrels those 10 OPEC members produced in September were 375,000 barrels per day short of what they were expected to produce, with Nigeria, Angola and the Saudis accounting for the most of the shortfall..

The next graphic from this month’s report that we’ll highlight shows us both OPEC’s and worldwide oil production monthly on the same graph, over the period from October 2019 to September 2021, and it comes from page 51 (pdf page 61) of OPEC’s October Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC’s monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale….

September 2021 OPEC report global oil supply

Including this month’s 486,000 barrel per day increase in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global liquids production increased by a rounded 610,000 barrels per day to average 95.93 million barrels per day in September, a reported increase which apparently came after August’s total global output figure was revised down by 370,000 barrels per day from the 95.69 million barrels per day of global oil output that was estimated for August a month ago, as non-OPEC oil production rose by a rounded 120,000 barrels per day in September after that revision, driven by increases in production in non-OECD countries, particularly Russia, while output in the OECD countries decreased by 430,000 barrels per day​, with drop in the oil output from North America due to Hurricane Ida largely responsible for the non-OPEC production decrease in September…

After that increase in September’s global output, the 95.93 million barrels of oil per day that were produced globally during the month were 5.34 million barrels per day, or 5.9% more than the revised 90.59 million barrels of oil per day that were being produced globally in September a year ago, which was the second month after OPEC and other producers agreed to reduce their output cuts from 9.7 million barrels per day to 7.7 million bpd (see the October 2020 OPEC report (online pdf) for the originally reported September 2020 details)…with this month’s relatively large increase in OPEC’s output, their September oil production of 27,328,000 barrels per day rose to 28.5% of what was produced globally during the month, an increase of 0.3% from their revised 28.2% share of the global total in August, which itself was revised up from 28.0%, on this month’s upward revision to OPEC’s August output and downward revision to global totals….OPEC’s September 2020 production was reported at 24,106,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,222,000 barrels per day, or 13.4% more barrels per day of oil this September than what they produced a year earlier, when they accounted for 26.6% of global output…

Even after the increases in OPEC’s and global oil output that we’ve seen in this report, the amount of oil being produced globally during the month fell far short of the expected global demand, as this next table from the OPEC report will show us..

September 2021 OPEC report global oil demand

The above table came from page 26 of the OPEC October Oil Market Report (pdf page 36), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and OPEC’s estimate of oil demand by region and globally, quarterly over 2021 over the rest of the table…on the “Total world” line in the fourth column, we’ve circled in blue the figure that’s relevant for September, which is their estimate of global oil demand during the third quarter of 2021… OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe were using an average of 98.33 million barrels of oil per day, which as you can see in the green ellipse above, is a rounded 0.13 million barrels per day downward revision from the 98.46 million they had estimated for the 3rd quarter a month ago, which still reflects a bit of coronavirus related demand destruction compared to 2019, when global demand averaged over 101 million barrels per day during the summer months….but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were only producing 95.93 million barrels million barrels per day during September, which would imply that there was a shortage of around 2,400,000 barrels per day in global oil production in September when compared to the demand estimated for the month…

in addition to figuring that September oil shortage implied by this report, the downward revision of 370,000 barrels per day to August’s global oil output that’s implied in this report, combined with the 130,000 barrels per day downward revision to 3rd quarter demand that we’ve circled in green, means that the 2,770,000 barrels per day global oil output shortage we had previously figured for August would now be revised to a shortage of 3,020,000 barrels per day….similarly, the 130,000 barrels per day downward revision to 3rd quarter demand means that the shortage of 2,730,000 barrels per day we had previously figured for July would have to be revised to a shortage of 2,600,000 barrels per day…

Note that in green we’ve also circled a downward revision of 260,000 barrels per day to second quarter demand, a quarter when there was also a shortage of oil being produced globally…. but based on that downward revision to demand, our previous estimate that there was a shortage of 920,000 barrels per day in June would now be revised to a 660,000 barrels per day shortage, the oil shortage of 2,250,000 barrels per day that we had previously figured for May would have to be revised to a shortage of 1,990,000 barrels per day, & the 2,600,000 barrels per day global oil output shortage we had previously figured for April would have to be revised to a shortage of 2,600,000 barrels per day…

Also note that in green we have also circled a modest downward revision of 40,000 barrels per day to OPEC’s previous estimate of first quarter demand….for March, that means that the global oil output surplus of 200,000 barrels per day we had previously figured for March would now be revised to a surplus of 240,000 barrels per day… similarly, the downward revision to first quarter demand means that the 810,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 770,000 barrels per day, and that the global oil output surplus of 410,000 barrels per day we had previously figured for January would now be revised to a surplus of 450,000 barrels per day, in light of that 40,000 barrel per day downward revision to first quarter demand…

You might also note that we have also circled a 60,000 barrel per day upward revision to 2020’s demand circled in orange….while we’re not inclined to go back and recompute the figures for each month of last year in light of that revision, suffice it to say that the quantities of oil produced globally during the pandemic of 2020 averaged over 3 million barrels per day more than anyone wanted, and that an average 6,000 barrels per day upward revision to global demand during that period would be a drop in the bucket in comparison…

This Week’s Rig Count

The number of drilling rigs active in the US increased for 48th time out of the past 56 weeks during the week ending October 15th, but they were still 31.5% below the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by ten to 543 rigs this past week, which was also 261 more rigs the pandemic hit 282 rigs that were in use as of the October 16th report of 2020, but was still 1,386 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 12 to 445 oil rigs this week, after they had risen by 5 oil rigs the prior week, and there are now 240 more oil rigs active now than were running a year ago, while they still amount to just 27.7% the high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was down by 1 to 98 natural gas rigs, which was still up by 2​4 natural gas rigs from the 7​4 natural gas rigs that were drilling during the same week a year ago, but still only 6.1% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….meanwhile, the Kern county California horizontal rig that Baker Hughes had classified as “miscellaneous’ was shut down this week, and no other such “miscellaneous’ rigs are currently deployed, wh​ich cntrasts to a year ago​, when​ there were three such “miscellaneous’ rigs reported to be active…

The Gulf of Mexico rig count was up by two rigs to twelve rigs this week, which is still short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with eleven of this week’s Gulf rigs drilling for oil in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas….the Gulf rig count is also ​still ​down by 2 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….in addition, the last rig that had been drilling for natural gas off the shore of the Kenai peninsula in Alaska was shut down this week, and there is no drilling off our other coasts, and hence the national rig count of 12 is down from 14 a year ago, when there was also no drilling off Alaska or off our other coasts…

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was down by 2 to 481 horizontal rigs this week, which was still more than double the 240 horizontal rigs that were in use in the US on October 1​6th of last year, but was just 35.0% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the vertical rig count was up by 2 to 30 vertical rigs this week, and those were also up by ​9 from the ​2​1 vertical rigs that were operating during the same week a year ago….at the same time, the directional rig count was up by 10 at 32 directional rigs this week, and those are now up by ​11 from the 21 directional rigs that were in use on October ​16th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 October 15th, the second column shows the change in the number of working rigs between last week’s count (October 8th) and this week’s (October 15th) count, the third column shows last week’s October 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend 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 the 16th of October, 2020…

October 15 2021 rig count summary

the increase of 10 directional rigs is a surprise, but the only way i know of we’d be able to find out where they were would be to dig through the individual well records in the North America Rotary Rig Count Pivot Table (Feb 2011 – Current) (xls); Baker Hughes doesn’t aggregate trajectory data by basin….so ​today ​we’ll again start by checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin, ​where ​we find that two rigs were added in Texas Oil District 8, which is the core Permian Delaware, and one rig was added in Texas Oil District 7C, which includes the southern counties in the Permian Midland, while one rig was removed from Texas Oil District 8A, which includes the northern counties of the Permian Midland, thus netting out to a two rig increase in the Texas Permian​…since the national Permian basin rig count was only up by one, that means that the rig that had been drilling in New Mexico was pulled out of the westernmost Permian Delaware….

elsewhere in Texas, there were two rigs added in Texas Oil District 2, which would account for this week’s Eagle Ford shale increase, while one rig was removed from Texas Oil District 1, which also could have been an Eagle Ford rig, if both of the District 2 additions were targeting that basin…there was also rig was added in Texas Oil District 7B, which could have been targeting a far eastern Permian Delaware county if one of the other rigs wasn’t, while a rig was pulled out of Texas Oil District 6, which would account for the Haynesville shale decrease..

elsewhere, the two rigs added in the Cana Woodford account for the Oklahoma rig increase, while the 2 rigs added in the Gulf account for the Louisiana increase; the state’s land based rigs were unchanged…meanwhile, the two rigs added in California were deployed in a basin that Baker Hughes doesn’t track, but they likely account for two of directional rigs added this week, given the state’s folded geology, and we know that two land based rigs were also added in Alaska, given the ​Alaskan ​offshore rig that was shut down…

this week’s changes to natural gas rigs include the rig pulled out the Haynesville in Texas, a ​gas ​rig pulled out of Ohio’s Utica shale, and a natural gas rig pulled out of Oklahoma’s Arkoma Woodford, where the basin count remained unchanged because an oil rig was added ​there ​at the same time… natural gas rigs were only down one nationally because two new natural gas rigs were deployed in a basin ​or basins ​that Baker Hughes doesn’t track…

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September’s consumer price and producer price indexes, and retail sales; August’s business inventories and JOLTS

Major reports released this past week included the September Consumer Price Index, the September Producer Price Index, and the September Import-Export Price Index from the Bureau of Labor Statistics, the Retail Sales report for September and the corresponding Business Sales and Inventories report for August from the Census Bureau, and the August Job Openings and Labor Turnover Survey (JOLTS) from the BLS….this week also saw the release of the first regional Fed manufacturing survey for October: the Empire State Manufacturing Survey for October from the New York Fed, which covers New York, northern New Jersey, and an adjacent county in Connecticut, reported their headline general business conditions index fell from +34.3 in September to +19.8 in October, meaning that a smaller majority of First District manufactures reported growth in various facets of their business in the current month than last…

CPI Rose 0.4% in September on Higher Prices for Food, Shelter, Energy, New Vehicles, Furniture and Appliances

The consumer price index rose 0.4% in September, as higher prices for food, energy, new vehicles, furniture and appliances were only partly offset by lower prices for clothing, used cars and trucks, car and truck rentals, airline fares, and health insurance….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.4% higher in September, after rising by 0.3% in August, 0.5% in July, 0.9% in June, by 0.6% in May, by 0.8% in April. by 0.6% in March, 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, and by 0.2% last September…the unadjusted CPI-U index, which was originally set with prices of the 1982 to 1984 period equal to 100, rose from 273.567 in August to 274.310 in September, which left it statistically 5.3903% higher than the 260.280 index reading of September of last year, which is reported as a 5.4% year over year increase, up from the 5.3% year over year increase reported a month ago, and the greatest one year price increase since July 2008…with higher food and energy prices leading the rise the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up by just 0.2% for the month, as the unadjusted core price index rose from 279.507 to 279.884, which left the core index 4.0252% ahead of its year ago reading of 269.054, which is reported as a 4.0% year over year increase, the same year over year core price increase that was reported for August…

The volatile seasonally adjusted energy price index rose 1.3% in September, after rising by 2.0% in August, 1.6% in July, by 1.5% in June, being unchanged in May, falling by 0.1% in April, rising by 5.0% in March, by 3.9% in February, by 3.5% in January, by 2.6% in December, 0.7% in November, 0.6% in October, and by 1.4% last September, and is now 24.8% higher than in September a year ago….the price index for energy commodities was 1.3% higher in September, while the price index for energy services was 1.2% higher, after rising 1.1% in August….the energy commodity index was up 1.3% on a 1.2% increase in the price of gasoline, and a 3.9% increase in the price of fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 3.8% higher…within energy services, the price index for utility gas service rose 2.7% after rising 1.6% in August and is now 20.6% higher than it was a year ago, while the electricity price index rose 0.8% in September after rising 1.0% in August…..energy commodities are now averaging 41.7% higher than their year ago levels, with gasoline prices averaging 42.1% higher than they were a year ago, while the energy services price index is now up 8.5% from last September, as electricity prices are also 5.2% higher than a year ago…

The seasonally adjusted food price index rose 0.9% in September, after rising by 0.4% in August, 0.7% in July, by 0.8% in June, by 0.4% in May, by 0.4% in April, by 0.1% in March, by 0.2% in February, by 0.1% in January and by 0.3% in December, after being unchanged in November, rising 0.2% in October, and rising by 0.1% last September, as the price index for food purchased for use at home was 1.2% higher in September, after rising 0.4% in August, while the index for food bought to eat away from home was 0.5% higher, as average prices at fast food outlets rose 0.6% and prices at full service restaurants also rose 0.6%, while food prices at employee sites and schools averaged 6.4% lower…

In the food at home categories, the price index for cereals and bakery products was 1.1% higher, as average bread prices rose 1.8%, the price index for rice, pasta, and cornmeal rose 1.6%, the price index for crackers, and bread and cracker products rose 3.1%, and the price index for fresh biscuits, rolls, muffins rose 3.7%….at the same time, the price index for the meats, poultry, fish, and eggs food group was 2.2% higher, as the price index for beef and veal rose 4.8%, the price index for pork rose 1.7%, and the price index of fresh fish and seafood rose 2.4%….in addition, the seasonally adjusted price index for dairy products was 0.7% higher, as milk prices rose 0.4% and the price index for cheese and related products was 0.8% higher…meanwhile, the fruits and vegetables price index was 0.6% higher, as the price index for fresh vegetables rose 1.0% and the price index for processed fruits and vegetables other than those canned or frozen but including those dried rose 2.0%…moreover, the beverages price index was 1.2% higher, as the price index for carbonated drinks rose 1.7% and the price index for coffee rose 1.9%….lastly, the price index for the ‘other foods at home’ category rose 1.1%, as the price index for fats and oils other than butter, margarine and salad dressing but including peanut butter rose 3.7%, the price index for soups rose 1.8%, the price index for baby food rose 2.2%, the price index for prepared salads rose 4.2%, and the price index for snacks was 1.3% higher…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last September, the price index for uncooked beef steaks is up 22.1%, the price index for uncooked beef roasts is up 20.8%, the price index for other beef and veal is up 20.6%, the price index for bacon and related products is up 19.3%, the price index for “other pork including roasts, steaks, and ribs” is up 19.2%, and the price index for fresh fish and seafood is up 10.7%, while the price of food at employee sites and schools has fallen 46.3% over the past year on a 56.1% drop in food prices at elementary and secondary schools…

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in September after rising by 0.1% in August, 0.3% in July, by 0.9% in June, by 0.7% in May, 0.9% in April, 0.3% in March, 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, and by 0.2% in September of last year, the composite price index of all goods less food and energy goods was 0.2% higher in September, while the more heavily weighted composite for all services less energy services also rose 0.2%….

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust August retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 1.3 higher, as the price index for window and floor coverings rose 3,9%, the price index for living room, kitchen, and dining room furniture rose 3.5%, the price index for bedroom furniture rose 1.5%. the price index for appliances rose 1.2%, the price index for household paper products rose 1.3%, and the price index for dishes and flatware rose 2.9%….on the other hand, the apparel price index was 1.1% lower on a 2.4% decrease in the price index for men’s suits, sport coats, and outerwear, a 3.7% decrease in the price index for women’s suits and separates, a 1.7% decrease in the price index for men’s pants and shorts and a 3.0% decrease in the price index for girls’ apparel%….meanwhile, the price index for transportation commodities other than fuel was 0.3% higher, as prices for new cars were 1.2% higher, prices for new trucks rose 1.3%, tire prices were 0.9% higher, and the price index for parts and equipment other than tires rose 1.0%, while the price index for used cars and trucks fell 0.7% … at the same time, the price index for medical care commodities was also 0.3% higher. as prescription drug prices rose 0.8% and the price index for medical equipment and supplies rose 1.0%…however, the recreational commodities index 0.2% lower on a 0.6% decrease in TV prices, a 1.7% decrease in the price index for audio equipment, a 0.4% decrease in the price index for sporting goods, and a 1.3% decrease in the price index for toys…on the other hand, the education and communication commodities index was 0.6% higher on a 1.1% increase in the price index for telephone hardware, calculators, and other consumer information items and a 1.2% increase in the price index for computers, peripherals, and smart home assistants….lastly, a separate price index for alcoholic beverages was 0.2% higher, while the price index for ‘other goods’ was 0.1% higher on a 0.7% increase in the price index for cigarettes and a 0.1% increase in the price index for cosmetics, perfume, bath, nail preparations and implements…

Within core services, the price index for shelter was 0.4% higher as rents rose 0.5% and homeowner’s equivalent rent was 0.4% higher, while prices for lodging away from home at hotels and motels fell 0.6%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.5%, and other household operation costs were on average 0.2% higher, on a 1.9% increase in the price index for gardening and lawncare services….on the other hand, the price index for medical care services was 0.1% lower, as the price index for physician’s services fell 0.3% and the price index for health insurance fell 1.0%….at the same time, the transportation services price index was 0.5% lower, as the price index for car and truck rentals fell 2.9%, the price index for vehicle repair fell 1.3%, airline fares fell 6.4%, ship fares fell 2.4%, and the price index for intracity transportation services fell 1.9%…meanwhile, the recreation services price index rose 0.4% as the price index for cable and satellite television service rose 0.5% and the price index for admissions to entertainment venues rose 1.0%…. at the same time, the index for education and communication services was also 0.4% higher as the price index for internet services and electronic information providers rose 0.6%, the price index for day care and preschool rose 0.7%, and the price index for wireless telephone services rose 0.4%…lastly, the index for other personal services was 0.1% higher as the price index for legal services was 1.8% higher and the price index for apparel services other than laundry and dry cleaning services was 0.8% higher…

Among core line items, the price index for car and truck rental, which is still 42.9% higher than a year ago, the price index for used car and trucks, which is still up 24.4% from a year ago, the price index for ship fares, which is up 10.8% since last September, the price index for intracity transportation, which is up 10.9% over the same span, the price index for lodging away from home including at hotels and motels, which has still risen 19.8% from a year ago, the price index for domestic services, which has risen 11.5% year over year, the price index for living room, kitchen, and dining room furniture, which is now up 13.7% over the last 12 months, the price index for televisions, which has risen 12.7% since last September, the price index for boys’ and girls’ footwear, which has risen by 11.9% over the past year, and the price index for laundry equipment, which is up 19.1% from last September, have all seen prices rise by more than 10% over the past year, while the price index for telephone hardware, calculators, and other consumer information items, which is now down by 14.5% since last September, the price index for video discs and other media services, which is 10.1% lower than last year, and the price index for sewing machines, fabric and supplies, which has fallen 10.3% from a year ago, are the only core line items to have decreased in price by a double digit magnitude over that one year span…

Retail Sales Increased by 0.7% in September after July and August Sales were Revised Higher

Seasonally adjusted retail sales rose 0.7% in September after retail sales for July and August were revised higher….the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $625.4 billion during the month, which was 0.7 percent (± 0.5 percent) above August’s revised sales of $620.9 billion, and 13.9 percent (± 0.7 percent) above the adjusted sales in September of last year….August’s seasonally adjusted sales were revised from $618.7 billion to $620.9 billion, while July sales were also revised higher, from $614.3 billion to $615.25 billion, with this release….unadjusted sales estimates,extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 3.8%, from $631,060 million in August to $606,786 million in September, while they were up 14.3% from the $530,987 million of sales in September a year ago…

Since it’s the end of the quarter for retail sales, we’ll include the entire table from this report showing the change in retail sales by business type, including the quarter over quarter data…again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month’s September “advance” report figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called “preliminary”) as of this report, with the new July to August percentage change under “Jul 2021 (r)” (revised) and the August 2020 to August 2021 percentage change as revised in the 2nd column of the pair.. (for your reference, the table of last month’s advance estimate of August sales, before this month’s revisions, is here)…. then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago….that first column of that pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales which, after adjustment for price changes, could be useful in estimating the impact of this report on 3rd quarter GDP..

September 2021 retail sales table

To compute September’s real personal consumption of goods data for national accounts from this September retail sales report, the BEA will use the corresponding price changes from the September consumer price index, which we reviewed earlier…to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals…from the third line on the above table, we can see that September retail sales excluding the 1.8% price related increase in sales at gas stations were up by 0.6%….then, subtracting the figures representing the 0.7% increase in grocery & beverage sales and the 0.3% increase in food services sales from that total, we find that core retail sales were up by 0.7% for the month….since the CPI report showed that the composite price index for all goods less food and energy goods was up 0.2% in September, we can thus figure that real retail sales excluding food and energy were up by roughly 0.5% month over month…however, the adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up by 0.5%, the price index for transportation commodities other than fuel was 0.3% higher, which would mean that real unit sales at auto & parts dealers would only be around 0.2% higher…on the other hand, while sales at clothing stores were 1.1% higher in September, the apparel price index was 1.1% lower at the same time, which would suggest that real sales of clothing actually rose more than 2.2%…similarly, while nominal sales at sporting goods, hobby, music and book stores rose 3.7%, the price index for recreational commodities fell 0.2%, so real sales of recreational goods were up roughly 3.9%…

In addition to figuring those core retail sales, to make a complete estimate of real September PCE, we would need to adjust food and energy retail sales for their price changes separately, just as the BEA will do….the September CPI report showed that the food price index was 0.9% higher in September, with the price index for food purchased for use at home 1.2% higher, while prices for food bought at restaurants were 0.6% higher… hence, even as nominal sales at food and beverage stores were up 0.7%, real sales of food and beverages would be roughly 0.5% lower in light of those higher prices.…similarly, the 0.3% increase in nominal sales at bars and restaurants, once adjusted for 0.6% higher prices, suggests that real sales at bars and restaurants actually fell by 0.3%…similarly, while sales at gas stations were up 1.8%, there was a 1.2% increase in the retail price of gasoline, which would suggest real sales of gasoline were only up on the order of 0.6%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales….by reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for September will show that real personal consumption of goods rose 0.4% in September, after rising by a revised 0.7% in August, but after falling by a revised 2.4% in July, and rising by 0.4% in June, but after falling by 2.6% in May, and after falling by 0.4% in April, but after rising by 10.0% in March, falling by 3.3% in February and rising by 7.2% in January…..at the same time, the 0.3% increase in real sales at bars and restaurants will have a modest negative impact on September’s real personal consumption of services..

With those estimates for the relative change in real PCE goods between the months of the 2nd and 3rd quarter, we should be able to also estimate the change in PCE goods between those two quarters….setting September’s real PCE goods as an index equal to 100, we can then say that August’s PCE goods equals 99.6 (100-0.4%), after that, we find July’s PCE goods equals 98.9, and from that, we get a index value of 101.3 for June, 100.9 for May, and 103.5 for April…we then compute the quarter over quarter change in those index values at a quarterly rate to determine the probable change that would be applied to 3rd quarter GDP… (((100 + 99.6 + 98.9) /3 ) / ((101.3 + 100.9 + 103.5)/3)) ^4 = 0.9090, which means that real PCE goods are falling at a 9.1% annual rate over the the third quarter…since PCE goods is roughly 23% of GDP, that suggests that PCE goods over those two months will subtract roughly 1.99 percentage points from 3rd quarter GDP…

Record 8.6% Annual Increase in Producer Price Index in September, also Record Increase for Final Demand Goods, and a 46 year Record for Prices of Intermediate Goods

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in September, as prices for finished wholesale goods rose 1.3% while margins of final services providers were 0.2% higher…that increase followed a 0.7% increase in August, when prices for finished wholesale goods rose 1.0% and margins of final services providers rose 0.7%, a July report that indicated the PPI was 1.0% higher, as prices for finished wholesale goods rose 0.6% while margins of final services providers rose 1.1%, a now revised June report that has the PPI 0.6% higher, with prices for finished wholesale goods 1.0% higher while margins of final services providers rose 0.2%, and a rerevised May report that the PPI had risen 0.9%, as prices for finished wholesale goods rose 1.5% while margins of final services providers rose 0.6%….on an unadjusted basis, producer prices are now a record 8.6% higher than a year ago, up from the 8.3% year over year increase reported for August’s producer prices, while the core producer price index, which excludes food, energy and trade services, rose by 0.1% for the month, and is now 5.9% higher than in September a year ago, down from the 6.3% year over year increase that was shown in August…

As noted, the price index for final demand for goods, previously called ‘finished goods’, was 1.3% higher in September, after being 1.0% higher in August, 0.6% higher in July. 1.0% higher in June, 1.5% higher in May, 0.7% higher in April, 1.5% higher in March, 1.6% higher in February, 1.6% higher in January, 0.9% higher in December, 0.4% higher in November, 0.5% higher in October, and 0.4% higher in September of last year, and hence is now up by a record 13.3% from a year ago….the finished goods price index rose 1.2% in September as the price index for wholesale foods rose 2.0%, after rising by 2.9% in August, falling 2.1% in July, rising by 0.8% in June, rising 2.8% in May, and rising by 1.8% in April, and as the price index for wholesale energy goods was 2.8% higher, after it had risen by 0.8% in August, by 2.6% in July, by 2.1% in June, and by 1.4% in May…meanwhile, the index for final demand for core wholesale goods (excluding food and energy) was 0.6% higher in September, after it had risen by 0.6% in August and by 1.0% in July….wholesale energy prices averaged 2.8% higher on a 3.9% increase in wholesale prices for gasoline, an 11.8% increase in wholesale prices for liquefied petroleum gas and a 3.5% increase in wholesale prices for home heating oil, while the wholesale food price index rose 2.0% on a 8.6% increase in the wholesale price index for beef and veal, a 21.2% increase in the wholesale price index for eggs for fresh use, and a 19.4% increase in wholesale price index for fresh and dry vegetables…among core wholesale goods, the wholesale price index for industrial chemicals rose 4.4%, the wholesale price index for travel trailers and campers rose 2.7%, the wholesale price index for transformers and power regulators rose 3.3%, the wholesale price index for commercial furniture rose 2.3%, and the wholesale price index for household appliances rose 2.2%, while the wholesale price index for consumer, institutional, and commercial products not elsewhere classified rose 3.3%….

At the same time, the index for final demand for services rose 0.2% in September, after rising 0.7% in August, 1.1% in July, a revised 0.2% in June, a revised 0.6% in May, and 1.2% in April, and is still up by 6.4% from a year ago, fractionally lower but statistically matching the record increase of August…the index for final demand for trade services rose 0.9%, but the index for final demand for transportation and warehousing services fell 4.0%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.2% higher… among trade services, seasonally adjusted margins for fuels and lubricants retailers rose 11.6%, margins for RVs, trailers, and campers retailers rose 10.4%, margins for major household appliances retailers rose 5.9%, and margins for automobile retailers rose 3.4%, while margins for hardware, building materials, and supplies retailers fell 5.5%…among transportation and warehousing services, average margins for airline passenger services fell 16.9% even as margins for transportation of freight rose 2.3% and margins for courier, messenger, and U.S. postal services rose 2.6%…among the components of the core final demand for services index, the price index for price index for hospital inpatient care rose 0.9%, the price index for tax preparation and planning rose 1.2%, the price index for residential property sales and leases, brokerage fees and commissions rose 1.3%, and the price index for arrangement of flights (partial) rose 3.6%, while index for passenger car rental services fell 5.1%…

This report also showed the price index for intermediate processed goods rose 1.3% in September, after rising 1.0% in August, 1.7% in July, a revised 1.4% in June, a revised 3.0% in May, and rising 1.9% in April, 3.5% in March, 2.9% in February, and 1.8% in January, 1.4% in December, 0.9% in November, 0.9% in October, and 0.6% in September of last year….the price index for intermediate energy goods rose 2.0% in September, as producer prices for LP gas rose 11.8%, refinery prices for gasoline rose 3.9%, refinery prices for fuel oil rose 2.9%, refinery prices for jet fuel rose 2.7%, and producer prices for commercial natural gas rose 3.8%, while refinery prices for residual fuels fell 14.3%… meanwhile, the price index for intermediate processed foods and feeds rose 1.9%, as the producer price index for meats rose 4.5%, the producer price index for processed poultry rose 3.2%, and the producer price index for fats and oils rose 1.8%…at the same time, the core price index for intermediate processed goods less food and energy goods rose 1.1%, as the producer price index for basic organic chemicals rose 5.0%, the producer price index for steel mill products also rose 5.0%, the producer price index for aluminum mill shape rose 3.8%, the producer price index for fabricated structural metal products rose 3.1%, the producer price index for switchgear, switchboard, and industrial controls equipment rose 3.2%, the producer price index for phosphates rose 4.9%, and the producer price index for paperboard rose 2.8%, while the producer price for plywood fell 33.6% and the producer price for building paper and board fell 22.3%…average prices for intermediate processed goods are now 23.9% higher than in August a year ago, the largest year over year price increase since the year ended January 1975, but just the tenth increase after 19 consecutive year over year decreases, which had followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose rose 2.4% in September, after rising 1.0% in August, 1.4% in July, a revised 2.7% in June, a revised 7.2% in May, and by 2.0% in April, after falling by 4.2% in March, but after rising by 11.9% in February, and by 5.3% in January, 2.1% in December, by 6.3% in November, 1.3% in October, and by 5.2% last September….that was as the September price index for crude energy goods rose 8.5% as crude oil prices rose 4.8%, unprocessed natural gas prices rose 14.4%, and coal prices rose 0.2%, while the price index for unprocessed foodstuffs and feedstuffs rose 3.8% on an 8.0% increase in producer prices for slaughter chickens, a 7.2% increase in producer prices for slaughter hogs, and a 6.5% increase in producer prices for alfalfa hay, while producer prices for raw milk fell 4.5% and producer prices for corn fell 12.8%…at the same time, the index for core raw materials other than food and energy materials was down by 3.5%, as the price index for carbon steel scrap fell 4.1% and the price index for logs, bolts, timber, pulpwood, and woodchips fell 0.2%….this raw materials index is still 45.9% higher than a year ago, which is actually down from the 57.9% year over year increase recorded in May, but just the eleventh year over year increase after the annual change on this index had been negative from the beginning of 2019 through October of last year…

Lastly, the price index for services for intermediate demand rose 0.5% in September, after rising 0.3% in August, 1.0% in July, a revised 0.6% in June, a revised 0.6% in May, and rising by 1.3% in April, by 0.6% in March, 0.3% in February, 1.1% in January, and 0.7% in December 2020, after being unchanged in November, rising 0.7% in October, and rising 1.1% last September….the price index for intermediate trade services was 0.6% higher, as margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.6%, margins for intermediate paper and plastics products wholesalers rose 3.2%, margins for intermediate food wholesalers rose 2.9%, and margins for intermediate building materials, paint, and hardware wholesalers rose 3.6%, while margins for intermediate metals, minerals, and ores wholesalers fell 4.7%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.8% higher, as the intermediate price index for arrangement of freight and cargo rose 10.9%, the intermediate price index for the US postal service rose 5.7%, the intermediate price index for water transportation of freight rose 2.9%, and the intermediate price index for air transportation of freight rose 2.3%, while the intermediate price index for transportation of passengers fell 16.6%…in addition, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.2%, as the intermediate price index for business loans (partial) rose 4.9%, the intermediate price index for radio advertising time sales rose 3.8%, and the intermediate price index for portfolio management rose 1.2%, while the intermediate price index for passenger car rental fell 5.1%…over the 12 months ended in September, the year over year price index for services for intermediate demand is still 8.0% higher than it was a year ago, the twelfth consecutive positive annual change since it briefly turned negative year over year from April to August of last year, but down from the record 9.2% year over year increase recorded in July….

Business Sales Fell 0.1% in August; Business Inventories Rose 0.6%

After the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,652.4 billion in August, down 0.1 percent (±0.2%)* from July’s revised sales, but up 15.3 percent (±0.6 percent) from August sales of a year earlier….note that total July sales were concurrently revised up from the originally reported $1,652.2 billion to $1,653.3 billion, still a 0.5% increase from June….manufacturer’s sales were 0.1% higher at $508,251 million in August, and retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, were were 1.0% higher at $548,654 million, while wholesale sales were 1.1% lower at $595,543 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,919.2 billion billion at the end of August, up 0.6 percent (±0.1 percent) from July, and 5.5 percent (±0.3%) higher than in August a year earlier…the value of end of July inventories were revised to $2,070.5 billion from the $2,069.5 billion reported last month, which is now shown as a 0.6% increase from June…seasonally adjusted inventories of manufacturers were estimated to be valued at $749,299 million, up 0.6% from July, while inventories of retailers were valued at $603,488 million, 0.1% more than in July, and inventories of wholesalers were estimated to be valued at $731,124 million at the end of August, 1.2% higher than in July…

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index…while we reviewed the September index above, the producer price index for August indicated that aggregate prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.0% higher, and prices for unprocessed goods were also 1.0% higher….retail inventories are all finished goods, as are about 70% of wholesale inventories, while factory inventories, which we looked at last week, are roughly evenly split between the three stages of production…hence, although the nominal value of August inventories was 0.6% higher, real inventories would have been down by about 0.4% in August, following a July decrease in real inventories of around 0.1% or 0.2%….however, since the recent GDP report showed that real private inventories saw a substantial decrease in the second quarter, a modest decrease in real inventories over the 3rd quarter would still result in a positive impact on 3rd quarter GDP, by reversing the 2nd quarter drop, even after subtracting from that the amount of the much smaller 3rd quarter decrease…

Job Openings and Hiring Lower in August, Job Quitting at a Record High, Layoffs at a Record Low

The Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 659,000, from 11,098,000 in July to 10,439,000 openings in August, after July job openings were revised 164,000 higher, from 10,934,000 to a record high of 11,098,000 in July….August jobs openings were still 61.8% higher than the 6,451,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed fell from a record high of 7.0% in July to 6.6% in August, which was still up from 4.4% a year ago…the largest percentage decrease appears to have been the 124,000 job opening decrease to 288,000 job openings in state and local education, while job openings in transportation, warehousing, and utilities increased by 37,000 to 537,000 (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in August, seasonally adjusted new hires totaled 6,322,000, down by 439,000 from the revised 6,761,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 4.6 in July to 4.3% in August, and was also down from the 4.6% hiring rate in August a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 211,000, from 5,792,000 in July to 6,003,000 in August, while the separations rate as a percentage of the employed rose from 3.9% to 4.1%, which was also up from the separations rate of 3.5% in August a year ago (see table 3)…subtracting the 6,003,000 total separations from the total hires of 6,322,000 would imply an increase of 319,000 jobs in August, somewhat less than the revised payroll job increase of 366,000 for August reported by the September establishment survey last week, but still within the expected +/-110,000 margin of error in these incomplete survey extrapolations……

Breaking down the seasonally adjusted job separations, the BLS finds that a record 4,270,000 of us voluntarily quit our jobs in August, up by 242,000 from the revised 4,028,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.7% to a record 2.9% of total employment, and was also up from the quits rate of 2.1% a year earlier (see details in table 4)….in addition to those who quit, a record low of 1,343,000 were either laid off, fired or otherwise discharged in August, down by 80,000 from the revised 1,423,000 who were discharged in July, while the discharges rate fell to a record low of 0.9% of all those who were employed during the month, down from the 1.0% discharges rate in July and from what was a record low 1.1% discharges rate in August of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 390,000 in August, up from 311,000 in July, and the highest since January 2016, for an ‘other separations rate’ of 0.3%, up from 0.2% in July and from August of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are picked from the aforementioned GGO posts, contact me…)  

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tables and graphs for October 16th

rig count summary:

October 15 2021 rig count summary

retail sales:

September 2021 retail sales table

oil prices:

October 16 2021 oil prices

OPEC oil output:

September 2021 OPEC crude output via secondary sources

world oil supply:

September 2021 OPEC report global oil supply

global oil demand:

September 2021 OPEC report global oil demand

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oil price is highest since 2014; natural gas price fell from 12 year high after largest inventory increase in 16 months; gasoline exports at a 26 month low…

Oil prices finished higher for the 7th straight week after OPEC decided to only add the minimum to global supplies in the coming months….after rising 2.6% to $75.88 a barrel last week as rising global demand amid tight supplies more than offset higher US inventories, the contract price for US light sweet crude for November delivery jumped early on Monday after reports emerged that the Joint Ministerial Monitoring Committee of the OPEC+ alliance had recommended that oil producers stick to their current plan and ease their cuts by just 400,000 barrels per day, and then rocketed to a 7 year high after OPEC and other producers doubled down on their earlier plans to increase oil output at a gradual rate, before settling $1.74 higher at $77.62 a barrel, still the highest closing price since 2014the oil price rally on the OPEC decision continued on Tuesday, with the November contract price rising another $1.31 to another 7 year high at $78.93 a barrel, with crude prices also supported by a Goldman forecast that power generation could add an extra 650,000 barrels a day to oil demand this winter as record global natural gas prices incentivize power generators to switch from gas to oil….however, oil prices dipped in overnight trading after the American Petroleum Institute reported the 2nd straight week of unexpected inventory builds, and then slid from its prior seven year high early Wednesday on that API report, and on Saudi Arabia’s decision to cut nearly all of its November crude prices for Asia, European and U.S.-bound cargoes, and then went on to settle $1.50 or 2% lower at $77.43 a barrel, after the EIA confirmed the API’s report of higher inventories and Russian President Vladimir Putin indicated that his country would ramp up natural gas exports to help stabilize European energy markets…oil prices extended thier losses from the previous session on Thursday, falling below $75 a barrel, after Energy Secretary Jennifer Granholm said the US was considering selling oil from its strategic reserves, and as Russia said it was ready to stabilise the natural gas market, but rallied in the afternoon to settle 87 cents higher at $78.30 a barrel after the U.S. Department of Energy walked back their plans for an SPR release and an export ban and after Biden’s national security adviser urged energy suppliers to lift flows to meet demand, saying that the United States is concerned about their failure to do so.oil prices continued rising overnight with the return of China to the markets, and opened 56 cents higher in New York on Friday, and then jumped to over $80 a barrel for the first time since October 2014 on a retreat in the U.S. dollar index, triggered by a weaker-than-expected September employment report, before settling $1.05 higher on the day at $79.35 a barrel, as the global energy crunch boosted U.S. prices to their highest in almost seven years as big power users struggled to meet demand….oil prices thus finished the week with a 4.6% increase, at their highest since October 31st, 2014

With several news sites citing a “7 year high” for oil prices on Monday, Tuesday, and again on Friday, we’ll put up a longer term oil price graph to see what that looks like….

October 8 2012 oil prices

The above is a screenshot of the current interactive oil price chart from barchart.com, which i have set to show front month oil prices monthly over the past 10 years, which means you’re seeing the same oil prices that were quoted by the media….this same chart can be reset to show prices of front month or individual monthly oil contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show oil prices by the minute, hour, day, week or month for each…each bar in the graph above represents the range of oil prices for a single month, with months when prices rose indicated in green, with the opening price at the bottom of the bar and the closing price at the top, and months when prices fell indicated in red, with the opening price at the top of the bar and the closing price at the bottom, while the small barely visible sticks above or below each monthly bar represent the extent of the price change above or below the opening and closing price during the month in question….likewise, the bars across the bottom show trading volume for the front month oil contract, for the months in question, again with up months indicated by green bars and down months indicated in red….

To find the month when oil prices were last as high as this week’s, i’ve maneuvered my cursor to the month when prices were last at the $80 a barrel level we saw on Friday of this week…that turned out to be November 2014, which you can see by the readout of that month which has been generated by my cursor in small red print at the upper left of the graph, and which shows that the ‘crude light’ oil contract for December 2014 (CLZ14) opened that month priced at $80.59 a barrel, and closed that month priced at $66.16 a barrel….while that would seem to indicate that oil saw prices above this week’s high of $80.11 a barrel early in November of 2014, i’d note that the Wall Street Journal affiliate website Marketwatch puts the date at October 31st, 2014…it could be that they are citing a different oil contract than the CLZ14 contract this graph shows for November…whatever the case, while one could say oil prices were at a 7 year high, we can see that the last time oil prices were as high at they were this week was just short of seven years ago…

Meanwhile, natural gas prices finished lower for the first time in the past eight weeks on the largest increase in US natural gas inventories in over a year….after rising 8.1% to $5.619 per mmBTU last week as natural gas shortages in Europe and Asia drove​ their​ prices to record levels, the contract price of natural gas for November delivery opened higher on Monday and rose 14.7 cents to $5.766 per mmBTU​,​ on forecasts that power generators would burn more of the fuel during the week than was previously expected, as lingering heat was still expected to keep A/C demand high in some parts of the country…US prices then surged 54.6 cents or 9.5% to $6.312  per mmBTU on Tuesday, as prices in Europe rocketed over 21% for November gas and ​by ​23% for December gas to fresh record highs, on worries European countries would not have enough natural gas stored for winter, as China and other Asian LNG buyers bid up prices for available cargoes…while US prices opened higher again on Wednesday, they quickly dropped 63.7 cents or over​ by more than​ 10% to $5.675 per mmBTU, after Vladimir Putin said Russia was ready to pump more gas to help stabilize European energy markets and US traders shifted focus back to domestic markets, where expectations were that supplies had grown more than normal for a fourth week in a row​….​ ​however, even after the EIA reported more natural gas had been added to storage than anyone had expected, natural gas prices ended Thursday virtually unchanged, settling up just two-tenths of a cent at $5.677 per mmBTU…US natural gas prices then slid 11.2 cents to $5.565 per mmBTU on Friday, on a drop in global gas prices and on forecasts for mild weather to keep heating demand at a minimum through late October, thus ending 1.0% l​ower for the week…

The EIA’s natural gas storage report for the week ending October 1st indicated that the amount of working natural gas held in underground storage in the US rose by 118 billion cubic feet to 3,288 billion cubic feet by the end of the week, which ​still ​left our gas supplies 532 billion cubic feet, or 13.9% below the 3,820 billion cubic feet that were in storage on October 1st of last year, and 176 billion cubic feet, or 5.1% below the five-year average of 3,464 billion cubic feet of natural gas that have been in storage as of the1st of October in recent years…the 118 billion cubic foot increase in US natural gas in working storage this week was the largest weekly addition to storage since June 19th of last year, was more than the forecast for a 111 billion cubic foot addition ​from a survey of analysts ​queried ​by S&P Global Platts, and well more than the average addition of 81 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, and also well more than the 75 billion cubic feet that were added to natural gas storage during the corresponding week of 2020…  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending October 1st indicated that after an increase in our oil imports, a big drop in our oil exports, and an increase in our oilfield production, we had surplus oil to add oil to our stored commercial crude supplies for the second time in nine weeks and for the thirteenth time in the past forty-six weeks….our imports of crude oil rose by an average of 483,000 barrels per day to an average of 6,552,000 barrels per day, after rising by an average of 87,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 906,000 barrels per day to an average of 2,114,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,921,000 barrels of per day during the week ending October 1st, 1,389,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 200,000 barrels per day higher at 11,300,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to​ have​ total​ed​ an average of 16,221,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 15,744,000 barrels of crude per day during the week ending October 1st, 330,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 204,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 273,000 barrels per day more than what was added to storage plus our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (-273,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…moreover, since last week’s unaccounted for oil was at (+1,310,000) barrels per day, there was an 1,583,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes indicated by this report nonsense….however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be reasonably accurate by most everyone in the industry….(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) indicate that the 4 week average of our oil imports rose to an average of 6,453,000 barrels per day last week, which was 22.7% more than the 5,258,000 barrel per day average that we were importing over the same four-week period last year…the 204,000 barrel per day net increase in our crude inventories came as 335,000 barrels per day were added to our commercially available stocks of crude oil, while 131,000 barrels per day were pulled out from our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 200,000 barrels per day higher at 11.300,000 barrels per day because the EIA”s rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,900,000 barrels per day, while a 10,000 barrel per day increase in Alaska’s oil production to 448,000 barrels per day had no impact on the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 13.7% below that of our pre-pandemic production peak, but 34.1% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 89.6% of their capacity while using those 15,744,000 barrels of crude per day during the week ending October 1st, up from 88.1% of capacity the prior week, and near normal utilization for early autumn refinery operations…the 15,744,000 barrels per day of oil that were refined this week were 13.7% more barrels than the 13,853,000 barrels of crude that were being processed daily during the pandemic impacted week ending October 2nd of last year, and ​also ​0.6% more than the 15,656,000 barrels of crude that were being processed daily during the week ending September 27th, 2019, when US refineries were operating at what was then a below normal 85.7% of capacity in the wake of tropical storm Imelda…

even with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was lower, decreasing by 523,000 barrels per day to 9,366,000 barrels per day during the week ending October 1st, after our gasoline output had increased by 246,000 barrels per day over the prior week.…this week’s gasoline production was 1.6% less than the 9,522,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.0% lower than the gasoline production of 10,066,000 barrels per day during the week ending October 4th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 130,000 barrels per day to 4,778,000 barrels per day, after our distillates output had increased by 194,000 barrels per day over the prior week…after this week’s increase, our distillates output was 5.4% more than the 532,000 barrels of distillates that were being produced daily during the week ending October 2nd, 2020, while still 1.2% below the 4,835,000 barrels of distillates that were being produced daily during the week ending October 4th, 2019..

despite the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the twelfth time in twenty-six weeks, and for the 20th time in forty-five weeks, rising by 193,000 barrels to 221,809,000 barrels during the week ending October 1st, after our gasoline inventories had increased by 193,000 barrels over the prior week…our gasoline supplies increased by more this week even though the amount of gasoline supplied to US users rose by 28,000 barrels per day to 9,427,000 barrels per day because our imports of gasoline rose by 99,000 barrels per day to 1,088,000 barrels per day while our exports of gasoline fell by 321,000 barrels per day to a sixteen ​month low of 404,000 barrels per day…even after this week’s inventory increase, our gasoline supplies were 0.7% lower than last October 2nd’s gasoline inventories of 226,747,000 barrels, and about 1% below the five year average of our gasoline supplies for this time of the year…

meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the sixth time in eight weeks and for the 17th time in 26 weeks, falling by 396,000 barrels to 129,331,000 barrels during the week ending October 1st, after our distillates supplies had increased by 384,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 392,000 barrels per day to 4,365,000 barrels per day, while our imports of distillates fell by 2,000 barrels per day to 298,000 barrels per day, and even though our exports of distillates fell by 152,000 barrels per day to 768,000 barrels per day…but after seventeen inventory decreases over the past twenty-six weeks, our distillate supplies at the end of the week were 24.7% below the 171,796,000 barrels of distillates that we had in storage on October 2nd, 2020, and about 11% below the five year average of distillates stocks for this time of the year…

meanwhile, with the increase in our oil imports and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the sixth time in the past twenty weeks and for the 17th time in the past year, increasing by 2,345,000 barrels over the week, from 418,542,000 barrels on September 24th to 420,887,000 barrels on October 1st, after our commercial crude supplies had increased by 4,578,000 barrels the prior week…after this week’s increase, our commercial crude oil inventories remained about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still 26.3% above the average of our crude oil stocks at the beginning of October over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this October 1st were 14.6% less than the 492,927,000 barrels of oil we had in commercial storage on October 2nd of 2020, and are now 1.1% less than the 425,569,000 barrels of oil that we had in storage on October 4th of 2019, but still 2.6% more than the 409,951,000 barrels of oil we had in commercial storage on October 5th of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil still near multi year lows, we’ll continue to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR….we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by​ an inconsequential​ 114,000 barrels this week, from 1,851,676,000 barrels on September 24th to 1,851,562,000 barrels on October 1st, after they had risen 10,049,000 barrels from a six year low the prior week..

This Week’s Rig Count

The number of drilling rigs active in the US increased for 47th time out of the past 55 weeks during the week ending October 8th, but they still ​remained ​32.6% below the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by five to 533 rigs this past week, which was also 264 more rigs the pandemic hit 269 rigs that were in use as of the October 9th report of 2020, but was still 1,396 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 5 to 433 oil rigs this week, after oil rigs had risen by 7 oil rigs the prior week, and there are 240 more oil rigs active now than were running a year ago, while they still amount to just 26.5% the high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 99 natural gas rigs, which was still up by 26 natural gas rigs from the 73 natural gas rigs that were drilling during the same week a year ago, but still only 6.2% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as “miscellaneous’ continues to drill in Kern county California, while a year ago there were three such “miscellaneous’ rigs reported to be active…

The Gulf of Mexico rig count was down by 1 rig to ten rigs this week, which is ​also short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with nine of this week’s Gulf rigs drilling for oi in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas….the Gulf rig count is also down by 4 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….in addition, one of the two rigs that had been drilling for natural gas off the shore of the Kenai peninsula in Alaska was shut down this week, and hence this week’s total national offshore rig count of 11 rigs is down by two from last week and down by three rigs from the 14 offshore rigs running a year ago, when there was no drilling off Alaska or off our other coasts…

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet, drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississipp​i​, and the other is drilling for oil in the Galveston Bay area, and hence the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was up by 9 to 483 horizontal rigs this week, which was more than double the 233 horizontal rigs that were in use in the US on October 9th of last year, but was just 35.2% of the record 1,374 horizontal rigs that were deployed on November 21st of 2014..…on the other hand, the vertical rig count was down by 4 to 28 vertical rigs this week, but those were still up by 13 from the 15 vertical rigs that were operating during the same week a year ago….at the same time, the directional rig count was unchanged at 22 directional rigs this week, and those are now up by 1 from the 21 directional rigs that were in use on October 9th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 October 8th, the second column shows the change in the number of working rigs between last week’s count (October 1st) and this week’s (October 8th) count, the third column shows last week’s October 1st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend 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 the 9th of October, 2020…

October 8 2021 rig count summary

as you can see, that modest 5 rig increase masked a ​somewhat ​larger number of changes across several states and basins….checking theRigs by State file at Baker Hughes for changes in the Texas Permian basin, we find that we find that four rigs were added in Texas Oil District 8, which is the core Permian Delaware, while one rig was removed from Texas Oil District 8A, which includes the northern counties of the Permian Midland, thus netting out to a three rig increase in the Texas Permian, ​and ​thus accounting for ​the ​changes in the Permian basin​ ​this week….elsewhere in Texas, we also have a rig added in Texas Oil District 4, which would account for this week’s Eagle Ford shale increase, and also bring the Texas rig count change up to +4, as we see on the state table above…the rig added in California was deployed in a basin that Baker Hughes doesn’t track, as was the rig added in Oklahoma, and since Alaska’s count shows no change despite the offshore rig shutdown, we have to assume a land based rig was concurrently added elsewhere in the state, also in a basin that Baker Hughes keep track of….meanwhile, the oil rig removed from the Gulf of Mexico accounts for the rig decrease in Louisiana…the remaining changes were ​all ​to natural gas rigs in the Appalachain basin and netted out to no change in gas rigs​ this week​; two natural gas rigs were added in the Marcellus in West Virginia, while a single natural gas rig was removed from the Marcellus in Pennsylvania, and another natural gas rig was shut down in Ohio’s Utica shale…

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September’s jobs report; August’s trade deficit, factory inventories and wholesale sales

Major agency reports released this past week included the the Employment Situation Summary for September from the Bureau of Labor Statistics, the August report on our International Trade from the Commerce Dept, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for August, and the August report on Wholesale Trade, Sales and Inventories, both from the Census Bureau…in addition, the Fed released the Consumer Credit Report for August, which indicated that overall consumer credit, a measure of non-real estate debt, grew at a seasonally adjusted $14.4 billion in August, or at a 4.0% annual rate, as non-revolving credit expanded at a 4.1% rate to $3,345.3 billion while revolving credit outstanding grew at a 3.6% rate to $1,001.6 billion…

This week’s major privately issued reports included the ADP Employment Report for September, the September Services Report On Business from the Institute for Supply Management (ISM), who reported their Services PMI rose to 61.9% in September, up from 61.7% in August, indicating a slightly larger majority of service industry purchasing managers reported expansion in various facets of their business in September, and the Mortgage Monitor for August (pdf) from Black Knight Financial Services, who reported that 4.00% of mortgages were delinquent in August, down from the 4.14% that were delinquent in July, and down from the 6.88% delinquency rate of August of 2020, and that 0.27% of mortgages remained in the foreclosure process in August, up from the record low of 0.26% in July, but down from the 0.35% of mortgages that were in foreclosure a year ago…however, with the lifting of the government imposed foreclosure moratorium in July, the Mortgage Monitor also shows that foreclosure starts rose from 4,200 in July to 7,100 in August…

Employers Add 194,000 Jobs in September; Unemployment Rate Fell to 4.8% as Labor Force Participation Rate Declined

The Employment Situation Summary for September showed the smallest increase in payroll jobs so far this year, but that the unemployment rate fell by 0.4% to 4.8%, even as the labor force participation rate fell by 0.1% to to 61.6%….estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 194,000 jobs in September, after the previously estimated payroll job increase for July was revised up from 1,053,000 to 1,091,000 and the payroll jobs increase for August was revised up from 235,000 to 366,000, revisions which mean that the combined number of jobs created over those two months was 169,000 more than was previously reported, and that this report shows 363,000 more jobs than last months…despite the past year’s steady job gains, however, seasonally adjusted non-farm payrolls are still 4,970,000 below their pre-pandemic level……the unadjusted data, meanwhile, shows that there were actually 654,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, and that the seasonal adjustment brought the headline jobs number down to a level where that normal September increase was negated…

Seasonally adjusted job increases in September were seen throughout the private goods producing and service sectors, with only jobs in government seeing a net seasonally adjusted employment decrease of 123,000 jobs, as local school systems added 144,200 fewer jobs and state universities adding 16,600 fewer jobs than is normal for September, shortfalls from the norm which are logged as decreases….a similar dynamic played out for employment in private educational services stats; while 248,600 more were working in private education in September than in August, it’s reported as an 18,900 job decrease….meanwhile, jobs in the leisure and hospitality sector accounted for a seasonally adjusted increase of 74,000 jobs in September, with an increase of 43,000 jobs in performing arts and spectator sports, 29,000 jobs in bars and restaurants and 16,900 more employed in amusements, gambling, and recreation….the broad professional and business services category added 60,000 jobs, as 15,100 were hired by architectural and engineering services, 15,200 more were hired by management and technical consulting services, and 8,800 found jobs with computer systems design and related services…..meanwhile, the retail sector saw an increase of 56,100 jobs, with 27,300 finding jobs in clothing stores, 16,100 more in general merchandise stores, and 16,000 more working for building material and garden supply stores….in addition, the transportation and warehousing sector added 47,300 jobs, including 12,500 couriers and messengers and 15,600 working in warehousing and storage facilities…at the same time, there were 32,000 more jobs in the information industry, with 13,700 hired by the motion picture and sound recording industries and 11,000 more in publishing of books, magazines and newspapers…employment in social assistance rose by 29,800, led by the addition of 17,800 jobs with child care services and 10,200 jobs in individual and family services….meanwhile, employment in manufacturing increased by 26,000, with 8,200 of those working in the manufacture of fabricated metal products and 6,300 more in the manufacture of machinery…in addition, construction employment rose by 22,000, with 11,400 of those jobs with nonresidential specialty trade contractors….other September job additions included 17,000 jobs in wholesale trade, 4,000 jobs in resource extraction, and 2,000 jobs in the financial sector, while health care employment fell by 17,500 despite the addition of 28,200 jobs in ambulatory healthcare services, as hospitals lost 8,100 jobs and nursing homes and residential care facilities employed 37,600 fewer than a month earlier…

The establishment survey also showed that average hourly pay for all employees rose by 19 cents an hour to $30.85 an hour, after it had increased by a revised 11 cents an hour in August; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 14 cents to $26.15 an hour….employers also reported that the average workweek for all private payroll employees rose by 0.2 hour to 34.8 hours in September, while hours for production and non-supervisory personnel rose by 0.1 hour to 34.2 hours, after their workweek had been unchanged for the 3rd month in a row in August…at the same time, the manufacturing workweek was unchanged at 40.4 hours after falling 0.2 hours in August, while average factory overtime increased by 0.1 hour to 3.3 hours…

Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 526,000 to 153,680,000, while the similarly estimated number of those who would qualify as being unemployed fell by 710,000 to 7,674,000; and hence the civilian labor force decreased by a rounded net of 183,000…since the working age population had grown by 155,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 338,000 to 100,412,000, which combined with the lower labor force, was enough to lower the labor force participation rate from 61.7% to 61.6%…however, the relatively large increase in number employed was still enough to boost the employment to population ratio, which we could think of as an employment rate, as it rose from 58.5% to 58.7%…at the same time, the relatively large drop in the number unemployed was also enough to lower the unemployment rate by 0.4%, from 5.2% to 4.8%, which was the lowest unemployment rate since March 2020….meanwhile, the number of the employed who reported they were forced to accept just part time work fell by 1,000 to 4,468,000 in September, while the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from 8.8% of the labor force in August to 8.5% in September, now the lowest since February 2020….

Like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there…note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

Trade Deficit Rose 4.2% to a Record High in August on Higher Imports of Pharmaceuticals and Services

Our trade deficit rose by 4.2% in August as the value of both our exports and our imports increased, but the value of our imports increased by four times as much….the Commerce Dept report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $2.9 billion to a record high of $73.3 billion in August, from a July deficit of $70.3 billion, which was revised from the $70.1 billion deficit for July that had been reported last month…after rounding, the value of our August exports rose by $1.0 billion to $213.7 billion on a $1.1 billion increase to $149.7 billion in our exports of goods, offset by a $0.1 billion decrease to $64.0 billion in our exports of services, while the value of our imports rose by $4.0 billion to $287.0 billion on a $2.7 billion increase to $239.1 billion in our imports of goods and a $1.3 billion increase to $47.9 billion in our imports of services…prices for our exports were on average 0.4% higher in August, which means the relative real change in exports for the month was less than the nominal change by that percentage, while import prices were 0.3% lower, meaning that the relative real change in imports was greater than the nominal dollar value reported here by that percentage…

The increase in our August exports of goods mostly resulted from greater exports of industrial supplies and materials, which were partially offset by lower exports of automotive products, capital goods and farm products….referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $3,535 million to $57,234 million on a $1,645 million increase in our exports of non-monetary gold, a $670 million increase in our exports of natural gas, a $648 million increase in our exports of petroleum products other than fuel oil, a $636 million increase in our exports of crude oil, and a $254 million increase in our exports of other precious metals, and that our exports of consumer goods rose by $295 million to $19,104 million on an $347 million increase in our exports of pharmaceuticals…partially offsetting the increases in those two end use categories, our exports of automotive vehicles, parts, and engines fell by $980 million to $11,201 million on a $544 million decrease in our exports of trucks, buses, and special purpose vehicles and a $297 million decrease in our exports of passenger cars, our exports of capital goods fell by $829 million to $43,868 million on a $690 million decrease of in our exports of civilian aircraft and a $629 million decrease of in our exports industrial machines other than those itemized separately, our exports of foods, feeds and beverages fell by $640 million to $12,170 million on a $616 million decrease in our exports of corn, and our exports of other goods not categorized by end use fell by $207 million to $5,533 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of consumer goods and industrial supplies and materials were responsible for the $2.7 billion increase in our imports of goods, even as our imports of automotive products and “other” goods decreased….our imports of consumer goods rose by $2,979 million to $63,236 million on a $2,238 million increase in our imports of pharmaceuticals, a $625 million increase in our imports of toys, games, and sporting goods, a $428 million increase in our imports of cotton apparel and household goods, a $368 million increase in our imports of apparel and textiles other than those of wool or cotton, and a $332 million increase in our imports of gem diamonds, while our imports of industrial supplies and materials rose by $1,806 million to $57,091 million on a $752 million increase in our imports of organic chemicals, a $450 million increase in our imports of copper, and a $330 million increase in our imports of petroleum products other than fuel oil…partially offsetting the increases in those categories, our imports of automotive vehicles, parts and engines fell by $1,549 million to $28,012 million on a $1260 million decrease in our imports of new & used passenger cars and a $445 million decrease in our imports of trucks, buses, and special purpose vehicles, our imports of capital goods fell by $257 million to $63,095 million on a $835 million decrease in our imports of computers, our imports of foods, feeds, and beverages fell by $239 million to $15,695 million on decreases in our imports of beer and wine, alcoholic beverages other than wine and beer, and food oils and oilseeds, and our imports of other goods not categorized by end use fell by $322 million to $10,145 million….

The Full Release and Tables pdf for this month’s report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected countries:

The August figures show surpluses, in billions of dollars, with South and Central America ($5.7), Hong Kong ($2.2), Brazil ($2.1), Singapore ($1.0), and United Kingdom ($0.8). Deficits were recorded, in billions of dollars, with China ($28.1), European Union ($19.3), Mexico ($6.6), Germany ($5.8), Japan ($5.6), Canada ($5.1), Taiwan ($3.6), South Korea ($3.1), Italy ($3.1), India ($3.0), France ($1.4), and Saudi Arabia ($0.6).

  • The deficit with China increased $3.1 billion to $28.1 billion in August. Exports decreased $1.8 billion to $11.2 billion and imports increased $1.3 billion to $39.3 billion.
  • The deficit with Canada increased $1.4 billion to $5.1 billion in August. Exports decreased $1.6 billion to $25.2 billion and imports decreased $0.2 billion to $30.3 billion.
  • The deficit with Mexico decreased $1.9 billion to $6.6 billion in August. Exports increased $0.9 billion to $24.1 billion and imports decreased $1.0 billion to $30.7 billion.

To gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except that the figures are not annualized here….from that table, we can compute that 2nd quarter real exports of goods averaged 145,669.3 million monthly in 2012 dollars, while the similarly inflation adjusted July and August goods export figures were at 145,668 million and 146,324 million respectively, in that same 2012 dollar quantity index representation…computing the annual rate of change between the second and third quarter inflation adjusted averages, we find that the 3rd quarter’s real exports of goods are running at a 0.90% annual rate above those of the 2nd quarter, or at a pace that would add about 0.07 percentage points to 3rd quarter GDP if it were continued through September….in a similar manner, we find that our 2nd quarter real imports of goods averaged 247,414 million monthly in chained 2012 dollars, while inflation adjusted July and August imports were at 245,481 million and 248,087 million in 2012 dollars respectively…that would mean that so far in the 3rd quarter, our real imports have fallen at a 1.01% annual rate from those of the 2nd quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 1.01% rate would conversely add about 0.12 percentage points to 3rd quarter GDP…..hence, if our July and August trade deficit in goods remains at these same levels throughout September, our improving balance of trade in goods over that of the 2nd quarter would add about 0.18 percentage points to the growth of 3rd quarter GDP….

However, you might note that we have not computed the impact of the usually less volatile change in services here, because the BEA does not provide inflation adjusted data on those, and we don’t have a straightforward way to adjust the various services for all their price changes, but that our exports in services fell $0.1 billion in August, whereas our imports in services grew $1.3 billion, following an even worse imbalance in July services, which would the suggest a substantial hit to GDP on the services side of the trade ledger…

Factory Shipments Rose 0.1% in August, Factory Inventories Rose 0.6%

The August Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $6.2 billion or 1.2 percent to $515.7 billion in August, following an increase of 0.7% to $509.5 billion in July, which was revised from the 0.4% increase to $508.1 billion in new orders reported last month….however, sincethe Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate as revised updates to the August advance report on durable goods that we reported on last week…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that here:

  • Summary: New orders for manufactured goods in August, up fifteen of the last sixteen months, increased $6.2 billion or 1.2 percent to $515.7 billion, the U.S. Census Bureau reported today. This followed a 0.7 percent July increase. Shipments, also up fifteen of the last sixteen months, increased $0.3 billion or 0.1 percent to $508.3 billion. This followed a 1.5 percent July increase. Unfilled orders, up seven consecutive months, increased $11.9 billion or 1.0 percent to $1,239.4 billion. This followed a 0.5 percent July increase. The unfilled orders-to-shipments ratio was 6.86, up from 6.81 in July. Inventories, up fourteen of the last fifteen months, increased $4.1 billion or 0.6 percent to $749.3 billion. This followed a 0.6 percent July increase. The inventories-to-shipments ratio was 1.47, unchanged from July.
  • New orders for manufactured durable goods in August, up fifteen of the last sixteen months, increased $4.7 billion or 1.8 percent to $263.6 billion, unchanged from the previously published increase. This followed a 0.5 percent July increase. Transportation equipment, up three of the last four months, led the increase, $4.1 billion or 5.4 percent to $80.7 billion. New orders for manufactured nondurable goods increased $1.5 billion or 0.6 percent to $252.1 billion.
  • Shipments of manufactured durable goods in August, down following three consecutive monthly increases, decreased $1.2 billion or 0.5 percent to $256.1 billion, unchanged from the previously published decrease. This followed a 2.0 percent July increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease, $2.1 billion or 2.8 percent to $73.4 billion. Shipments of manufactured nondurable goods, up fifteen of the last sixteen months, increased $1.5 billion or 0.6 percent to $252.1 billion. This followed a 0.9 percent July increase. Petroleum and coal products, up fourteen of the last fifteen months, led the increase, $0.5 billion or 1.1 percent to $51.0 billion.
  • Unfilled orders for manufactured durable goods in August, up seven consecutive months, increased $11.9 billion or 1.0 percent to $1,239.4 billion, unchanged from the previously published increase. This followed a 0.5 percent July increase. Transportation equipment, up six of the last seven months, led the increase, $7.3 billion or 0.9 percent to $820.9 billion.
  • Inventories of manufactured durable goods in August, up seven consecutive months, increased $3.5 billion or 0.8 percent to $457.9 billion, unchanged from the previously published increase. This followed a 0.8 percent July increase. Transportation equipment, also up seven consecutive months, led the increase, $1.3 billion or 0.8 percent to $153.5 billion. Inventories of manufactured nondurable goods, up twelve of the last thirteen months, increased $0.7 billion or 0.2 percent to $291.4 billion. This followed a 0.4 percent July increase. Plastics and rubber products, up eleven of the last twelve months, led the increase, $0.4 billion or 1.3 percent to $28.9 billion. By stage of fabrication, August materials and supplies increased 1.3 percent in durable goods and 0.7 percent in nondurable goods. Work in process increased 0.2 percent in durable goods and decreased 1.1 percent in nondurable goods. Finished goods increased 0.7 percent in durable goods and 0.4 percent in nondurable goods.

To gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was 0.5% higher at $264,441 million; the value of work in process inventories was 0.1% lower at $219,102 million, and the value of materials and supplies inventories was 1.1% higher at $265,756 million…the producer price index for August indicated that prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.0% higher, while prices for unprocessed goods were also 1.0% higher….assuming average valuations will be similar for like inventories, we could thus estimate that August’s real finished goods inventories decreased by 0.5%, that real inventories of intermediate processed goods were 1.1% lower, and that real raw material inventory inventories were about 0.1% greater…August’s real inventory decreases follow July’s factory inventory change, when real inventories averaged about 0.6% lower…however, since real NIPA factory inventories were substantially lower in the 2nd quarter, accounting for more that 90% of the quarter’s big inventory drop, the fact that this report appears to indicate just a modest real decrease in 3rd quarter factory inventories, they should therefore have a modest positive impact on the growth rate of 3rd quarter GDP, by an amount equal to the difference between the 2nd and 3rd quarter’s real inventory decreases….

August Wholesale Sales Down 1.1%, Wholesale Inventories Up 1.2%

The August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $595.5 billion, down 1.1 percent (±0.5 percent) from the July’s revised sales, but up 20.6 percent (±1.8 percent) from the wholesale sales of August 2020… the July preliminary estimate was revised up to $602.2 billion from the $601.3 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of a 2.0 percent (±0.4 percent) increase to one of +2.1 percent (±0.4 percent)…..as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $731.1 billion at month end, up 1.2 percent (+/-0.2%) from the revised July level, and 12.3 percent (±1.2 percent) higher than in August a year ago…July’s inventory value was revised from the $722.4 billion reported a month ago to $722.6 billion, which left the July inventory increase unchanged at up 0.6 percent (+/-0.2%)..

August wholesale inventories would be adjusted for inflation with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.0% higher, and prices for unprocessed goods were also 1.0% higher….those producer price changes suggest that the increase in August inventories was mostly price related, and that real wholesale inventories were only up around 0.2%….however, since the key source data and assumptions (xls) for the third estimate of 2nd quarter GDP indicates a real increase of just $0.4 billion in wholesale inventories on an inflation adjusted NIPA basis, even that small of an increase in 3rd quarter real inventories could result in a small boost to 3rd quarter GDP…

 

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are picked from the aforementioned GGO posts, contact me…)

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table and graph for October 9th

rig count summary:

October 8 2021 rig count summary

oil prices:

October 8 2012 oil prices

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US natural gas hits highest price since 2008, closes at 7 1/2 year weekly high; European and Asian prices 5 times higher

Oil prices rose for a sixth consecutive week as rising global demand amid tight supplies more than offset higher US inventories….after rising 3.0% to $73.98 a barrel last week as U.S. crude inventories fell to a 35 month low and as global oil supplies tightened, the contract price for US light sweet crude for November delivery opened higher on Monday on continuing signs that global oil inventories were falling sharply, and rose nearly 2% to close $1.47 higher at $75.45 a barrel, as parts of the globe, especially China and India, were seeing demand pick up with the easing of pandemic conditions…oil prices moved higher early Tuesday, with Brent crude, the International oil benchmark, topping $80 per barrel for the first time since October 2018, as the global natural gas shortage stoked demand for oil as a substitute, before reversing those early gains and dropping to a 16 cent loss at $75.29 a barrel, weighed down by a rallying U.S. Dollar and a selloff in U.S. equity markets, triggered by default warnings from Treasury Secretary Janet Yellen…oil prices then extended their Tuesday losses in overnight trading after the American Petroleum Institute reported across-the-board builds in U.S. crude and petroleum product supplies and opened 91 cents lower on Wednesday, as a stronger U.S. dollar and concerns over a possible government default added further headwinds, before settling with a 46 cent, or a 0.6% loss at $74.83 a barrel, even as OPEC confirmed plans to maintain a deliberate approach to adding supply to the market. after the EIA confirmed the first increase in US supplies in eight weeks…but oil prices steadied on Thursday after a report that China was prepared to buy more oil and other energy supplies to meet growing demand offset the price pressure from the unexpected rise in U.S. crude inventories, and settled 20 cents higher after a volatile session at $75.03 a barrel, thus contributing to a sixth straight quarterly climb for U.S. benchmark prices…oil traded lower early Friday, after European manufacturing surveys indicated a sharp deceleration of growth in September, and as global equity markets extended their decline due to rattled supply chains and rising consumer prices, but rallied to close 85 cents higher at $75.88 a barrel amid reports OPEC+, due to meet on Monday, had discussed how to increase output faster in the coming months, and on word that the White House had spoken with Saudi Arabia about oil prices, and thus finished the week 2.6% higher, while posting a sixth straight weekly gain, the longest streak of weekly advances since early July….

Meanwhile, natural gas prices finished higher for the seventh straight week, as shortages in Europe and Asia drove prices to record levels…after inching up 0.7% to $5.140 per mmBTU last week as domestic and global supply problems outweighed the impact of bearish weather patterns, the contract price of natural gas for October delivery opened 1% higher on Monday and jumped 14% to $5.851 per mmBTU, before settling with an 11% gain on the day at $5.706 per mmBTU, as gas prices at or near record highs of around $26 per mmBTU in Europe and $28 in Asia kept demand for U.S. LNG exports strong…the rally continued into Tuesday, with October gas trading as high as $6.280 per mmBTU before settling with a 13.5 cent gain at a 7 1/2 year closing high of $5.841, as only the limited capacity of US LNG exports prevented US gas prices from following global prices to the moon, while the contract price of natural gas for November delivery, which was to take over as the prompt month on Wednesday, gained 14.9 cents to $5.880 per mmBTU…with markets now tracking the November contract, natural gas prices gave back half the week’s gains and tumbled 7% to $5.477 per mmBTU on Wednesday, the biggest one-day drop since January, on expectations that mild weather forecasts for the coming weeks would allow utilities to boost U.S. stockpiles to near-normal levels ahead of the winter heating season….but prices bounced back 39.0 cents or 7% to a new 7 year high of $5.867 per mmBTU on Thursday, despite a larger than normal injection of gas into storage, as fears that Europe would not have enough gas in storage for the winter heating season boosted global prices to record levels…but ​US ​gas prices came tumbling down again on Friday, and settled off 24.8 cents at $5.619 per mmBTU, as U.S. traders gave more weight to bearish domestic fundamentals than escalating fears of a global supply shortage this winter, but still finished the week 8.1% higher, the largest one week net and percentage gain since the week ending Aug. 27, and ​capping ​the largest six week gain since the week ending Feb. 21, 2014

The seven year high for natural gas prices that we’ve cited has been widely reported by the media, but this week’s brief foray into prices above $6 appears to break this decade’s record high to test those of the last, as the following graph will show us…

natural gas prices October 2 2021

The above graph is a screenshot of the interactive natural gas price chart from barchart.com, which i have set to show front month natural gas prices monthly over the past 20 years, which means you’re seeing the range of natural gas prices over that time as they were quoted daily by the media…this same chart can be reset to show prices of front month or individual monthly natural gas contracts over time periods ranging from 1 day to 30 years, as the menu bar on the top indicates, and also to show natural gas prices by the minute, hour, day, week or month for each…each bar in the graph above represents the range of natural gas prices for a single month, with months when prices rose indicated in green, and months when prices fell indicated in red, with the small barely visible sticks above or below each monthly bar representing the extent of the price change above or below the opening and closing price for the month in question….likewise, the bars across the bottom show trading volume for the months in question, again with up months indicated by green bars and down months indicated in red…it’s clear that natural prices have risen well above the highs of the winter 2013 to 2014 period, so i’ve endeavored to position my cursor on the month when prices last hit the $6.280 per mmBTU level we saw ​on Tuesday of ​this week…that turned out to be December 2008, which you can see by the readout of that month which has been generated in small red print at the upper left of the graph, and which shows that the natural gas contract for January 2009 (NGF09) opened that month priced at $6.550 per mmBTU, and closed that month priced at $5.622 per mmBTU….although ​gas ​prices briefly touched $6.240 per mmBTU in January 2009, they hadn’t been above $6 since until this week..

NB: note that since the above is a monthly price graph, Friday’s 24.6 cent ​price ​drop​,​ on October 1st​,​ gets a monthly bar of its own, which is why the last bar shown points down, despite a weekly close that was at a 7 1/2 year high…

The EIA’s natural gas storage report for the week ending September 24th indicated that the amount of working natural gas held in underground storage in the US rose by 88 billion cubic feet to 3,170 billion cubic feet by the end of the week, which left our gas supplies 575 billion cubic feet, or 15.4% below the 3,745 billion cubic feet that were in storage on September 24th of last year, and 213 billion cubic feet, or 6.3% below the five-year average of 3,383 billion cubic feet of natural gas that have been in storage as of the 24th of September in recent years…the 88 billion cubic foot increase in US natural gas in working storage this week was close to the forecast for a 87 billion cubic foot addition expected by a survey of analysts by S&P Global Platts, but ​well ​​more than the average addition of 72 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, and also more than the 74 billion cubic feet that were added to natural gas storage during the corresponding week of 2020… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 24th indicated that after another sizable increase in our oilfield production and a big jump in oil that could not be unaccounted for, we managed to add oil to our stored commercial crude supplies for the first time in eight weeks and for the twelvth time in the past forty-five weeks….our imports of crude oil rose by an average of 87,000 barrels per day to an average of 6,552,000 barrels per day, after rising by an average of 704,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 211,000 barrels per day to an average of 3,020,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,532,000 barrels of per day during the week ending September 24th, 124,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 500,000 barrels per day higher at 11,100,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 14,632,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 15,415,000 barrels of crude per day during the week ending September 24th, 67,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 528,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 1,310,000 barrels per day less than what was added to storage plus our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+1,310,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…moreover, since last week’s unaccounted for oil was at (+422,000) barrels per day, that means there was an 888,000 barrel per day balance sheet difference in the crude oil fudge figure from a week ago, thus rendering the week over week supply and demand changes indicated by this report useless….however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be reasonably accurate by most everyone in the industry….(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) indicate that the 4 week average of our oil imports rose to an average of 6,147,000 barrels per day last week, which was 18.7% more than the 5,180,000 barrel per day average that we were importing over the same four-week period last year…the 528,000 barrel per day net increase in our crude inventories came as 654,000 barrels per day were added to our commercially available stocks of crude oil, which was partly offset by a 126,000 barrels per day withdrawal of oil that had been stored in our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 500,000 barrels per day higher at 11.100,000 barrels per day because the EIA”s rounded estimate of the output from wells in the lower 48 states was 500,000 barrels per day higher at 10,700,000 barrels per day, while a 9,000 barrel per day increase in Alaska’s oil production to 438,000 barrels per day had no impact on the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 15.3% below that of our pre-pandemic production peak, but 31.7% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 88.1% of their capacity while using those 15,415,000 barrels of crude per day during the week ending September 24th, up from 87.5% of capacity the prior week, and near normal utilization for early autumn refinery operations…while the 15,415,000 barrels per day of oil that were refined this week were 12.8% more barrels than the 13,670,000 barrels of crude that were being processed daily during the pandemic impacted week ending September 25th of last year, they were 3.8% below the 16,017,000 barrels of crude that were being processed daily during the week ending September 27th, 2019, when US refineries were operating at what was then a below normal 86.4% of capacity​ in the wake of tropical storm Imelda​…

with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was also higher, increasing by 246,000 barrels per day to 9,889,000 barrels per day during the week ending September 24th, after our gasoline output had increased by 372,000 barrels per day over the prior week.…while this week’s gasoline production was 11.2% higher than the 8,892,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 1.9% lower than the gasoline production of 10,081,000 barrels per day during the week ending September 27th, 2019….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 194,000 barrels per day to 4,648,000 barrels per day, after our distillates output had increased by 298,000 barrels per day over the prior week…after this week’s increase, our distillates output was 6.7% more than the 4,358,000 barrels of distillates that were being produced daily during the week ending September 25th, 2020, while still 3.4% below the 4,813,000 barrels of distillates that were being produced daily during the week ending September 27th, 2019..

with a second big increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the eleventh time in twenty-five weeks, and for the 19th time in forty-four weeks, rising by 193,000 barrels to 221,809,000 barrels during the week ending September 24th, after our gasoline inventories had increased by 3,474,000 barrels over the prior week…our gasoline supplies increased by less this week because the amount of gasoline supplied to US users rose by 503,000 barrels per day to 9,399,000 barrels per day and because our imports of gasoline fell by 93,000 barrels per day to 989,000 barrels per day while our exports of gasoline rose by 104,000 barrels per day to 621,000 barrels per day…even after this week’s inventory increase, our gasoline supplies were 2.8% lower than last September 25th’s gasoline inventories of 228,182,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased for the sixteenth time in twenty-four weeks and for the 20th time in 40 weeks, rising by 2,554,000 barrels to 131,897,000 barrels during the week ending September 24th, after our distillates supplies had decreased by 2,554,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 451,000 barrels per day to 3,973,000 barrels per day, while our imports of distillates rose by 116,000 barrels per day to 300,000 barrels per day, and even though our exports of distillates rose by 341,000 barrels per day to 920,000 barrels per day…but after sixteen inventory decreases over the past twenty-five weeks, our distillate supplies at the end of the week were still 24.9% below the 172,758,000 barrels of distillates that we had in storage on September 25th, 2020, and about 12% below the five year average of distillates stocks for this time of the year…

meanwhile, with the recovery in our oil production from hurricane Ida finally catching up to the recovery in our oil refining, our commercial supplies of crude oil in storage rose for the fifth time in the past nineteen weeks and for the 17th time in the past year, increasing by 4,578,000 barrels over the week, from 413,964,000 barrels on September 17th to 418,542,000 barrels on September 24th, after our commercial crude supplies had decreased by 3,481,000 barrels the prior week…after this week’s increase, our commercial crude oil inventories were about 7% below the most recent five-year average of crude oil supplies for this time of year, but were still about 27% above the average of our crude oil stocks after the third week of September over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil supplies as of this September 24th were 15.0% less than the 492,426,000 barrels  of oil we had in commercial storage on September 25th of 2020, and are now 1.0% less than the 422,642,000 barrels of oil that we had in storage on September 27th of 2019, but still 3.6% more than the 403,964,000 barrels of oil we had in commercial storage on September 21st of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil near multi year lows, we’ll continue to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR….we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, rose by 10,049,000 barrels this week, from ​a six and a half year low of ​1,841,627,000 barrels on September 17th, to 1,851,676,000 barrels on September 24th…  

This Week’s Rig Count

The number of drilling rigs active in the US increased for 46th time out of the past 54 weeks during the week ending October 1st, but they were still 33.5% below the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by seven to 528 rigs this past week, which was also 262 more rigs the pandemic hit 266 rigs that were in use as of the October 2nd report of 2020, but was still 1,401 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 7 to 421 oil rigs this week, after they had risen by 10 oil rigs the prior week, and there are now 239 more oil rigs active now than were running a year ago, while they still amount to just 26.2% the high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 99 natural gas rigs, which was still up by 25 natural gas rigs from the 74 natural gas rigs that were drilling during the same week a year ago, but still only 6.2% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as “miscellaneous’ continues to drill in Kern county California, while a year ago there were three such “miscellaneous’ rigs reported to be active…

The Gulf of Mexico rig count was up by three rigs to eleven rigs this week, which is still short of the 14 rigs deployed in the Gulf the week before Hurricane Ida approached, with ten of this week’s Gulf rigs deployed in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas…but the Gulf rig count is also still down by 3 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….however, there are still 2 rigs drilling for natural gas off the shore of the Kenai peninsula in Alaska this week, and hence this week’s total national offshore rig count of 13 rigs is down by just one rig from the 14 offshore rigs running a year ago, when there was no drilling off Alaska or off our other coasts…

In addition to those rigs offshore, we continue to have two water based rigs drilling inland; one is a directional rig targeting oil at a depth of over 15,000 feet​,​ drilling from an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississipp, and the other is drilling for oil in the Galveston Bay area, so the inland waters rig count of two is up from one from a year ago..

The count of active horizontal drilling rigs was up by 3 to 474 horizontal rigs this week, which was more than double the 229 horizontal rigs that were in use in the US on October 2nd of last year, but was just over a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the vertical rig count was up by 2 to a 19 month high of 32 vertical rigs this week, and those were also up by 16 from the 16 vertical rigs that were operating during the same week a year ago…..in addition, the directional rig count was up by 2 to 22 directional rigs this week, and those are now up by 1 from the 21 directional rigs that were in use on October 2nd of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 October 1st, the second column shows the change in the number of working rigs between last week’s count (September 24th) and this week’s (October 1st) count, the third column shows last week’s September 24th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend 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 the 2nd of October, 2020…

October 1 2021 rig count summary

this week’s rig changes appear to be fairly straightforward; the three rigs that were added in Louisiana’s offshore waters account for this week’s increase in th​at state; other rigs in the state remained in place….checking the Rigs by State file at Baker Hughes for changes in the Texas Permian basin, we find that one rig was pulled out of Texas Oil District 8, which is the core Permian Delaware, while two rigs were added in Texas Oil District 7C, which includes the southern counties of the Permian Midland, thus netting out to a one rig increase in the Texas Permian, and covering all of this week’s changes in the state​ of Texas​….since the Permian basin count was up by 3 rigs nationally, that means that the two rigs that were added in New Mexico had to have been deployed in the far west reaches of the Permian Delaware to account for the national increase in that basin…the only other rig addition​ ​nationally this week was in Oklahoma, and that appears to have been ​an oil rig ​deployed in a basin that Baker Hughes doesn’t track…

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3rd estimate of 2nd quarter GDP; August’s income and outlays, construction spending, and durable goods

The key economic releases of the past week were the 3rd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, and the August report on Personal Income and Spending, also from the BEA, which includes 2 months of data on personal consumption expenditures and hence will account for more than 46% of 3rd quarter GDP…. other major agency reports released this week included the August report on Construction Spending (pdf) and the August advance report on durable goods, both from the Census Bureau…this week also saw the release of the last two regional Fed manufacturing surveys for September: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell from from 9 in August to −3 in September, indicative of a slight contraction of that region’s manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent western Louisiana and southeastern New Mexico, reported its general business activity index fell from +27.3 in July and +9.0 in August to +4.6 in September, suggesting a somewhat more modest expansion of the Texas region manufacturing economy, after a summer of fairly robust growth…

This week’s major privately issued reports included the September report on light vehicle sales from Wards Automotive, (the source of the BEA’s data) which estimated that vehicles sold at a 12.18 million annual rate in September, down from the 13.05 million annual rate in August, and down from the 16.34 million annual sales rate in September of last year, the Case-Shiller Home Price Index for July, which is an index generated by comparing relative prices for May, June and July repeat home sales to their earlier selling prices, and which reported that home prices nationally for those 3 months averaged 19.7% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 18.6% year over year increase indicated by the prior report, and the widely followed manufacturing purchasing manager’s survey from the Institute for Supply Management (ISM): the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 61.1% in September, up from 59.9% in August, indicating a larger majority of manufacturing purchasing managers reported expansion in various facets of their business in September than a month earlier…

2nd Quarter GDP Revised to Show Our Economy Grew at a 6.7% Rate

The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 6.7% rate during the quarter, revised from the 6.6% growth rate reported in the second estimate last month, as growth in personal consumption, private inventories, and exports was greater than previously estimated, more than offsetting a modest downward revision to fixed investment and an upward revision to imports, which subtract from GDP….In current dollars, our second quarter GDP grew at a 13.38% annual rate, increasing from what would work out to be a $22,038.2 billion a year rate in the 1st quarter to a $22,741.0 billion annual rate in the 2nd quarter, with the headline 6.7% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 6.1% was computed from the price changes of the GDP components and applied to their current dollar change…

As we review this month’s revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change that’s compounded by 4 times of that which actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes now chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which are then used as quantity indexes, rather than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 2nd quarter GDP, which you may have to access by using the BEA’s main GDP page…specifically, we’ll be referencing table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2017; table 2, which shows the contribution of each of the components to the GDP change for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the major GDP components…the pdf for the 2nd quarter’s second estimate, which this estimate revises, is here

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 11.9% growth rate reported last month to a growth rate of 12.0% in this estimate…that growth rate figure was arrived at by deflating the 19.3% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 6.5% annual rate in the 2nd quarter, which was the same PCE inflation rate reported a month ago…..real (inflation adjusted) consumption of durable goods grew at a 11.6% annual rate, which was revised from the 11.3% growth rate shown in the second estimate, and added 1.01 percentage points to the 2nd quarter’s GDP, as real consumption of motor vehicles, recreational goods and vehicles and durables other than furniture and appliances all contributed significantly to the durable goods increase….real personal consumption of nondurable goods rose at a 13.9% annual rate, revised from the 13.7% growth rate shown in the 2nd estimate, and added 1.98 percentage points to 2nd quarter economic growth, as real growth in clothing & footwear consumption at a 37.9% annual rate accounted for more than a third of the non-durables growth….meanwhile, real consumption of services rose at a 11.5% annual rate, revised from 11.3% last month, and added 4.93 percentage points to the final GDP tally, with a 68.0% growth rate of real consumption of food services and accommodations accounting for nearly half of the quarter’s the growth in services…

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 3.9% annual rate in the 2nd quarter, revised from the 4.0% investment contraction reported last month, as real private fixed investment grew at a 3.3% rate, rather than at the 3.4% rate reported in the second estimate, while the previously reported contraction in inventory growth was less than previously estimated….real investment in non-residential structures was revised from contraction at a 5.4% rate to contraction at a 3.0% rate, while real investment in equipment was revised to show growth at a 12.1% rate, an upward revision from the 11.6% growth rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 14.6% rate to growth at a 12.5% rate, while the contraction rate of residential investment was revised from -11.5% to -11.7% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.08 percentage points from the 2nd quarter’s growth rate, the increase in investment in equipment added 0.66 percentage points to the quarter’s growth, the increase in investment in intellectual property added 0.62 percentage points, while the decrease in investment in residential structures subtracted 0.60 percentage points from the 2nd quarter’s GDP growth…

At the same time, investment in real private inventories contracted at an inflation adjusted $168.5 billion rate in the 2nd quarter, revised from the $169.4 billion rate of real inventory shrinkage reported a month ago…this came after inventories had shrunk at an inflation adjusted $88.3 billion rate in the 1st quarter, and hence the $80.2 billion reduction in real inventory growth subtracted 1.26 percentage points from the 2nd quarter’s growth rate, revised from the 1.30 percentage point subtraction due to inventory contraction that was shown in the second estimate….however, since shrinkage of inventories indicates that less of the goods produced during the quarter were left ‘sitting on the shelf’ or in a warehouse, the quarter over quarter decrease in their growth by $80.2 billion meant that real final sales of GDP were relatively greater by that much, or enough to boost 2nd quarter growth in real final sales of GDP to a 8.1% rate, revised from the 7.9% real final sales growth rate shown in the second estimate, but a still decrease from the real final sales growth at a 9.1% rate in 1st quarter, when that quarter’s larger decrease in inventory growth meant that a greater part of the increase in domestic output had been sold…

Both the previously reported increase in real exports and the previously reported increase in real imports were revised higher with this estimate, but the upward revision to exports was greater, and as a result our foreign trade was a smaller subtraction from GDP than was reported in the second estimate….our real exports grew at a 7.6% rate, revised from the 6.6% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.80 percentage points to the 2nd quarter’s growth rate, up from the 0.70 percentage point addition shown in the second estimate….meanwhile, the previously reported 6.7% increase in our real imports was revised to a 7.1% increase, and since imports subtract from GDP because they represent that part off our consumption or investment that was not produced here, their increase subtracted 0.99 percentage points from 2nd quarter GDP, revised from the previous report’s subtraction of 0.94 percentage points…..thus, our deteriorating trade balance subtracted a rounded 0.18 percentage points from 2nd quarter GDP, revised from the rounded 0.24 percentage point subtraction that had been indicated in the second estimate…

Finally, there were negative revisions to real government consumption and investment in this 3rd estimate, as the entire government sector shrunk at a 2.0% rate, revised from the 1.9% contraction rate previously reported…real federal government consumption and investment was seen to have contracted at a 5.3% rate from the 1st quarter in this estimate, which was revised from the 5.2% contraction rate reported in the 2nd estimate…real federal outlays for defense were revised to show contraction at a 1.1% rate, rather than the 0.9% contraction rate previously reported, and subtracted 0.04 percentage points from 2nd quarter GDP, while all other federal consumption and investment shrunk at a 10.7% rate, more than the 10.6% contraction rate previously reported, and subtracted 0.34 percentage points from 2nd quarter GDP….meanwhile, real state and local consumption and investment grew at a 0.2% rate in the quarter, which was revised from the 0.3% growth rate reported in the 2nd estimate, and added 0.02% percentage points to 2nd quarter GDP, even as state and local investment shrunk at a 12.4% rate and subtracted 0.26 percentage points from GDP….note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating there was an increase in the output of those goods or services…

August Personal Income up 0.2%; 2 Months PCE Would Subtract 0.07 Percentage Points from Q3 GDP

The August report Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 3rd quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated….this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they’re seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much national income, spending, and savings would change over a year if August’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from July to August….

Thus, when the opening line of the news release for this report tell us “Personal income increased $35.5 billion (0.2 percent) in August“, they mean that the annualized figure for seasonally adjusted personal income in August, $20,716.7 billion, was $35.5 billion, or almost 0.2% more than the annualized personal income figure of $20,681.2 billion for July; the actual, unadjusted change in personal income from July to August, which would be on the order of one-twelfth of that size, is not given…similarly, annualized disposable personal income, which is income after taxes, rose by 0.1%, from an annual rate of $ 18,105.0 billion in July to an annual rate of $18,123.9 billion in August….the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are thus also annualized…in August, the reasons for the $35.5 billion annual rate of increase in personal income were a annualized $47.1 billion increase in wages and salaries, and a $21.7 billion increase in government social benefits to individuals, which were partly offset by an annualized $28.5 billion decrease in business and farm proprietors’ income..

For personal consumption expenditures (PCE), BEA reports that they increased at a $130.5 billion annual rate, or by more than 0.8 percent, as the annual rate of PCE rose from $15,791.7 billion in July to $15,922.2 in August; that was after the July PCE figure was revised from the originally reported $15,832.3 billion billion annually, while prior months were revised as well, which were already included in the concurrent 3rd estimate of 2nd quarter GDP…..total personal outlays for August, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $152.9 billion to $16,413.0 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $1,710.9 billion annual rate in August, down from the revised $1,824.6 billion annualized personal savings in July… hence, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 9.4% in August, down from 10.1% in July..

As you know, before personal consumption expenditures can be used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report….that index rose from 115.849 in July to 116.314 in August, a month over month inflation rate that’s statistically 0.4014%, which BEA reports as a 0.4% increase, following the rounded +0.4% change in the PCE price index they reported for July…applying that August inflation adjustment to the nominal 0.8% change in August spending left real PCE up a rounded 0.4% in August, after a real PCE decrease of 0.5% in July …note that when those price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….the BEA’s result for that is shown in table 7 of the PDF, where we see that August’s chained dollar personal consumption total works out to 13,691.0 billion annually, 0.42323% more than July’s 13,633.3 billion, a difference that the BEA rounds down and reports as +0.4%…

However, to estimate the impact of the change in real PCE on the change in GDP, month over month changes such as that don’t help us much, since GDP is reported quarterly…thus we have to compare July and August’s real PCE to the the real PCE of the 3 months of the second quarter….while this report reports real PCE for each of those months separately, the BEA also provides the annualized chained dollar PCE for those three months quarterly in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 13,665.6 billion in chained 2012 dollars…(note that’s also what’s shown in table 3 of the pdf for the revised 2nd quarter GDP report)….then, by averaging the annualized chained 2012 dollar figures for July and August, 13,633.3 billion and 13,691.0 billion respectively, we get an equivalent annualized PCE for the two months of the 3rd quarter that we have data for so far….when we compare that average of 13662.15 billion to the 2nd quarter real PCE of 13,665.6 billion, we find that 3rd quarter real PCE has shrunk at a 0.10% annual rate for the two months of the 3rd quarter that we have…{note the math we’ve used to get that annual contraction rate:(((13,633.3 + 13,691.0) / 2) / 13,665.6) ^ 4 = 0.99899, which we subsequently subtract from 1 }…that’s a pace that would subtract 0.07 percentage points from the growth rate of the 3rd quarter, should there be no improvement in September’s real PCE from that July & August average…

Construction Spending Unchanged in August after both June and July Spending were Revised 1% Higher

The August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,584.1 billion, which was statistically unchanged (±1.0 percent)* from the revised annualized estimate of $1,584.0 billion in construction spending in July, but was 8.9 percent (±1.5 percent) above the estimated annualized level of construction spending of August of last year….for the first eight months of this year, construction spending amounted to $1,034.5 billion, which was 7.0 percent (±1.0 percent) above the $966.7 billion spent over the same period in 2020…

July’s construction spending was originally reported at a $1,568.8 billion annual rate, and it has thus been revised up to a $1,584.1 billion annual rate, while June construction spending was revised from the $1,563.4 billion annual rate reported last month to a $1,579,265 billion rate, which would mean that 2nd quarter GDP was underestimated by about 0.12 percentage points…however, the 2nd quarter’s GDP will not be revised to reflect that underestimation until the annual revision of next summer…

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

  • Private Construction – Spending on private construction was at a seasonally adjusted annual rate of $1,242.2 billion, 0.1 percent (±0.5 percent)* below the revised July estimate of $1,243.7 billion. Residential construction was at a seasonally adjusted annual rate of $786.6 billion in August, 0.4 percent (±1.3 percent)* above the revised July estimate of $783.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $455.6 billion in August, 1.0 percent (±0.5 percent) below the revised July estimate of $460.2 billion.
  • Public Construction – In August, the estimated seasonally adjusted annual rate of public construction spending was $341.9 billion, 0.5 percent (±1.6 percent)* above the revised July estimate of $340.3 billion. Educational construction was at a seasonally adjusted annual rate of $79.8 billion, 1.1 percent (±2.0 percent)* above the revised July estimate of $78.9 billion. Highway construction was at a seasonally adjusted annual rate of $98.3 billion, 1.6 percent (±4.4 percent)* above the revised July estimate of $96.8 billion.

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and government investment outlays, for both state and local and Federal governments…. however, gauging the impact of revised July and August construction spending as reported here on 3rd quarter GDP is difficult because all figures given in this report are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…accurately adjusting construction for price changes is not easy either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities’ construction spending….so in lieu of trying to find and adjust for all of those obscure price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed in order to make a ballpark estimate.

That producer price index showed that aggregate construction costs rose 0.2% in August after rising 1.5% in July, 0.7% in June and by 0.5% from April to May…on that basis, we can estimate that construction costs for August were roughly 1.7% more than June, roughly 2.4% more than those of May and roughly 2.9% more than those of April, while obviously 0.2% more than those of July…we then use those percentages to inflate lower priced spending figures for each of the 2nd quarter months, which is arithmetically the same as adjusting higher priced July and August construction spending downward, for comparison purposes… annualized construction spending in millions of dollars for the second quarter months is shown at $1,579,265 for June, $1,564,153 for May, and $1,553,547 for April in this report, while it was at $1,584,038 million for July and $1,584,085 million for August…thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,584,085 + 1,584,038 * 1.002) / 2 ) / (( 1,579,265 * 1.017 + 1,564,153 * 1.024 + 1,553,547 *1.029) / 3) = 0.98971, meaning real construction over July and August was 1.029% lower than that of the 2nd quarter….hence, that means that after adjusting for inflation, real construction for the 3rd quarter fell at a 4.0538% annual rate from that of the 2nd quarterthat’s a contraction at a $16.489 billion annual rate, which means that if September should show no improvement, the pullback in real construction would subtract a net of about 0.44 percentage points from 3rd quarter GDP across those components that it influences…

August Durable Goods: New Orders Up 1.8%, Shipments Down 0.5%, Inventories Up 0.8%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for August (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $4.6 billion or 1.8 percent to $263.5 billion in August, after rising by a revised 0.5% in July….July’s new orders were revised from the $246.9 billion reported last month to $258.9 billion, and hence the month over month percentage change for new orders was revised from a decrease of 0.1% to an increase of 0.5%…even with that upward revision and the August increase, year to date new orders are now running 24.7% above those of 2020, a decrease from the 25.3% year-to date change we saw in this report last month….

As is usually the case, the volatile monthly change in new orders for transportation equipment drove this month’s headline change, as those transportation equipment orders rose $4.2 billion or 5.5 percent to $80.8 billion, on a 77.9% increase to $16,327 million in new orders for commercial aircraft….excluding new orders for transportation equipment, other new orders were up just 0.2% in August, led by a 2.0% or $0.5 billion increase to $36,488 million in new orders for fabricated metal products, while new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment intentions, rose 0.5% to $77,082 million…

Meanwhile, the seasonally adjusted value of August’s shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell for the first time in four months, decreasing by $1.2 billion or 0.5 percent to $256.1 billion, after the value of July’s shipments was revised from $257.8 billion to $257.3 million, thus revising the previously reported increase in July shipments from 2.2% to one of 2.0% from June….a decrease in shipments of transportation equipment was responsible for the August decrease, as such shipments fell $2.0 billion or 2.7 percent to $73.5 billion, as shipments of motor vehicles fell 2.7% to $51,540 million and shipments of commercial aircraft fell 3.2% to $7,789 million, while shipments excluding transportation equipment rose 0.5% to $182,581 million…meanwhile, shipments of nondefense capital goods excluding aircraft rose 0.7% to $74,877, after rising 0.9% in July, and are thus on track to make a positive contribution to 3rd quarter GDP…

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the seventh consecutive month, increasing by $3.4 billion or 0.8 percent to $457.9 billion, after July’s inventories were revised from $453.6 billion to $454.4 billion, which is now an 0.8% increase from June…an increase in inventories of transportation equipment led the August inventory increase, as they rose $1.3 billion or 0.8 percent to $153.4 billion, on a 2.4% increase to $49,223 million in inventories of motor vehicles and parts….

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the seventh consecutive month, increasing by $11.8 billion or 1.0 percent to $1,239.3 billion, after July’s unfilled orders rose 0.5% to $1,227.5 billion from June, revised from the 0.3% increase to $1,225.4 billion reported last month….a $7.3 billion or 0.9 percent increase to $820.8 billion in unfilled orders for transportation equipment led the August increase, while unfilled orders other than those for transportation equipment rose 1.1% to $418.5 billion…. compared to a year earlier, the unfilled order book for durable goods is now 4.0% above the level of last August, even as unfilled orders for transportation equipment are 0.9% below their year ago level, largely on a 9.5% decrease in the backlog of orders for defense aircraft…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are picked from the aforementioned GGO posts, contact me…)  

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table and graph for October 2nd

rig count summary:

October 1 2021 rig count summary

natural gas prices:

natural gas prices October 2 2021

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US crude supplies at a 35 mo low; total supplies of oil plus products at a 6 1/2 year low; DUC well backlog at 6.7 months

US crude supplies at a 35 month low; total supplies of oil plus products made from it at a 6 1/2 year low; exports of distillates at a 28 week low; vertical drilling at an 18 month high; DUC well backlog at 6.7 months..

oil prices rose for a fifth straight week as global oil supplies tightened and U.S. crude inventories fell to a 35 month low..after rising 3.2% to $71.97 a barrel last week on ongoing hurricane impacts and on tightening supplies of crude and fuel, the contract price for US light sweet crude for October delivery opened lower Monday as a broad commodity sell-off in Asia flowed into US oil markets, and tumbled more than $2 by midafternoon as worries over the potential collapse of China property giant Evergrande dragged down global financial markets and fueled strength in the U.S. dollar before recovering to close $1.68 lower at $70.29 a barrel as traders grew more risk averse, ​thus boost​ing​ the dollar​ and making oil more expensive for holders of other currencies…however, oil prices reversed th​at drop on Tuesday, rising above Monday’s opening at one point, after the US lifted travel restrictions on fully vaccinated foreign travelers from 33 countries, hence boosting the prospect for increased jet fuel demand, before settling with a modest gain of 27 cents at $70.56 a barrel, as concerns about the global demand outlook counterbalanced the struggle by big OPEC producers to supply enough ​oil ​meet that demand​,​ as trading in the October oil contract expired….with oil price quotes now referencing the contract price for US light sweet crude for November delivery, which had finished Tuesday up 35 cents at $70.49 a barrel, oil opened 36 cents higher on Wednesday, after the American Petroleum Institute reported lower inventories across the board​,​ and then surged more than 2% to settle $1.74 higher at $72.23 a barrel after the EIA reported U.S. crude stocks fell to their lowest levels in almost three years and that refin​ery demand​ had​ largely​ recovered from recent storms…the oil rally continued into Thursday on the large crude draw, as the Fed signaled it could soon start slowing the pace of its bond-buying program in a first step to withdraw pandemic-era stimulus, and settled $1.07 higher at a two month high of $73.30 a barrel, as equities rallied and the US dollar weakened, boosting the appeal of commodities priced in the currency…oil prices were up nearly 1% more on Friday on a report that global output disruptions had forced companies to pull large amounts of crude out of inventories, and settled 68 cents higher at $73.98 a barrel, as the global surge in natural gas prices was expected to force some consumers to switch to oil for heating ahead of winteroil prices thus finished with a gain of 2.8% on the week, while the November US oil contract, which had closed last week priced at $71.82, finished 3.0% higher…

natural gas prices also rose​ again​ this week, in their case for the sixth straight week, as domestic and global supply problems outweighed the impact of bearish weather patterns… after rising 3.4% to $5.105 per mmBTU last week despite a larger than expected inventory build and cooler forecasts, the contract price of natural gas for October delivery fell 12.0 cents to a fresh one-week low of $4.985 per mmBTU on Monday on forecasts for milder weather over the next two weeks, even as gas prices in Europe and Asia soared to record highs over $25, as two US LNG export facilities remained down, one for maintenance and the other in the wake of Hurricane Nicholas…natural gas prices then fell 18.0 cents to a two week low of $4.805 per mmBTU on Tuesday as cooling weather patterns and interruptions to LNG exports portended larger additions to inventories ahead of winter draws…however, natural gas prices ended Wednesday unchanged after trading higher most of the day, despite gas prices at or near record highs of around $25 per mmBTU in Europe and near $28 per mmBTU in Asia…natural gas prices rebounded vigorously on Thursday, propelled by domestic and global supply challenges as the peak winter demand season loomed​,​ and settled 17.1 cents higher at $4.976 per mmBTU​,​ after earlier rising to $5.037 per mmBTU on an injection of gas into storage that was ​​on a par with most forecasts….natural gas prices then climbed over 3% to a one-week high on Friday as some parts of the country started to crank up heaters with the coming of cooler weather even as air conditioning power demand elsewhere declined…​and on the strength of that two day rally, natural gas contract prices managed to end with a 0.7% gain on the week, even as cash prices at most major US markets ended lower..

the EIA’s natural gas storage report for the week ending September 17th indicated that the amount of working natural gas held in underground storage in the US rose by 76 billion cubic feet to 3,082 billion cubic feet by the end of the week, which left our gas supplies 589 billion cubic feet, or 16.0% below the 3,671 billion cubic feet that were in storage on September 17th of last year, and 229 billion cubic feet, or 6.9% below the five-year average of 3,311 billion cubic feet of natural gas that have been in storage as of the 17th of September in recent years…the 76 billion cubic foot increase in US natural gas in working storage this week was close to the forecast for a 75 billion cubic foot addition from a Reuters survey of analysts, ​and only a ​tad more than the average addition of 74 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years, and also ​slightly ​more than the 70 billion cubic feet that were added to natural gas storage during the corresponding week of 2020…    

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 17th indicated that despite sizeable increases in our oilfield production and our oil imports, we still needed to withdraw oil from our stored commercial crude supplies for the 7th consecutive week, and for the 33rd time in the past forty-four weeks….our imports of crude oil rose by an average of 704,000 barrels per day to an average of 6,465,000 barrels per day, after falling by an average of 44,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 185,000 barrels per day to an average of 2,809,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,656,000 barrels of per day during the week ending September 17th, 519,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 500,000 barrels per day higher at 10,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to total an average of 14,265,000 barrels per day during the cited reporting week…

meanwhile, US oil refineries reported they were processing an average of 15,347,000 barrels of crude per day during the week ending September 17th, 960,000 more barrels per day than the amount of oil they processed during the prior week, while over the same period the EIA’s surveys indicated that an average of 669,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 422,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+422,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed…however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be reasonably accurate by most everyone in the industry….(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) indicate that the 4 week average of our oil imports rose to an average of 6,094,000 barrels per day last week, which was 18.9% more than the 5,125,000 barrel per day average that we were importing over the same four-week period last year…the 669,000 barrel per day net decrease in our crude inventories included 497,000 barrels per day that were pulled out of our commercially available stocks of crude oil, and 172,000 barrels per day of oil that had been stored in our Strategic Petroleum Reserve, part of an emergency loan of oil to Exxon in the wake of hurricane Ida….this week’s crude oil production was reported to be 500,000 barrels per day higher at 10,600,000 barrels per day because the EIA”s rounded estimate of the output from wells in the lower 48 states was 500,000 barrels per day higher at 10,200,000 barrels per day, while a 8,000 barrel per day increase in Alaska’s oil production to 429,000 barrels per day had no impact on the reported rounded national production total….US crude oil production had hit a pre-pandemic record high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 19.1% below that of our pre-pandemic production peak, but still 25.8% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…

meanwhile, US oil refineries were operating at 87.5% of their capacity while using those 15,347,000 barrels of crude per day during the week ending September 10th, up from 82.1% of capacity the prior week, but still a bit below normal utilization for early autumn refinery operations…while the 15,347,000 barrels per day of oil that were refined this week were 14.8% more barrels than the 13,370,000 barrels of crude that were being processed daily during the pandemic impacted week ending September 18th of last year, they were 7.1% below the 16,513,000 barrels of crude that were being processed daily during the week ending September 20th, 2019, when US refineries were operating at what was then a near normal 89.8% of capacity…

with this week’s increase in the amount of oil being refined, the gasoline output from our refineries was also higher, increasing by 372,000 barrels per day to 9,643,000 barrels per day during the week ending September 17th, after our gasoline output had decreased by 851,000 barrels per day over the prior week.…while this week’s gasoline production was 3.5% higher than the 9,315,000 barrels of gasoline that were being produced daily over the same week of last year, it was 5.8% lower than the gasoline production of 10,240,000 barrels per day during the week ending September 20th, 2019….at the same time, our refineries’  production of distillate fuels (diesel fuel and heat oil) increased by 298,000 barrels per day to 4,454,000 barrels per day, after our distillates output had decreased by 29,000 barrels per day over the prior week…but even after this week’s increase, our distillates output was a bit less than the 4,470,000 barrels of distillates that were being produced daily during the week ending September 18th, 2020, and 10.9% below the 5,000,000 barrels of distillates that were being produced daily during the week ending September 20th, 2019..

with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the tenth time in twenty-four weeks, and for the 19th time in forty-four weeks, rising by 3,474,000 barrels to 221,616,000 barrels during the week ending September 17th, after our gasoline inventories had decreased by 1,857,000 barrels over the prior week…our gasoline supplies increased this week even though the amount of gasoline supplied to US users rose by 4,000 barrels per day to 8,896,000 barrels per day because our imports of gasoline rose by 444,000 barrels per day to 1,082,000 barrels per day while our exports of gasoline fell by 13,000 barrels per day to 621,000 barrels per day…even after this week’s inventory increase, our gasoline supplies were 2.6% lower than last September 18th’s gasoline inventories of 227,499,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year…

meanwhile, even with the increase in our distillates production, our supplies of distillate fuels decreased for the sixteenth time in twenty-four weeks and for the 20th time in 40 weeks, falling by 2,554,000 barrels to 131,897,000 barrels during the week ending September 17th, after our distillates supplies had decreased by 1,689,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 629,000 barrels per day to 4,424,000 barrels per day, while our imports of distillates rose by 20,000 barrels per day to 184,000 barrels per day and even though our exports of distillates fell by 188,000 barrels per day to a 28 week  low of 579,000 barrels per day…after sixteen inventory decreases over the past twenty-four weeks, our distillate supplies at the end of the week were 26.5% below the 175,942,000 barrels of distillates that we had in storage on September 18th, 2020, and about 14% below the five year average of distillates stocks for this time of the year…

meanwhile, with our oil refining recovering from Ida faster than our oil production has, our commercial supplies of crude oil in storage fell for the sixteenth time in eightteen weeks and for the 36th time in the past year, decreasing by 3,481,000 barrels over the week, from 417,445,000 barrels on September 10th to a 35 month low of 413,964,000 barrels on September 17th, after our commercial crude supplies had decreased by 6,422,000 barrels the prior week…after this week’s decrease, our commercial crude oil inventories were about 8% below the most recent five-year average of crude oil supplies for this time of year, but were still about 26% above the average of our crude oil stocks after the third week of September over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the Covid lockdowns of last spring and remained elevated for most of the year after that, our commercial crude oil  supplies as of this September 18th were 16.3% less than the 494,406,000 barrels of oil we had in commercial storage on September 19th of 2020, and are now 1.3% less than the 419,538,000 barrels of oil that we had in storage on September 20th of 2019, but still 4.5% more than the 395,989,000 barrels of oil we had in commercial storage on September 21st of 2018…

finally, with our inventory of crude oil and and our supplies of all products made from oil, we’re also going to check the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR….we find that total inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, fell by 3,788,000 barrels this week, from 1,845,415,000 barrels on September 10th to 1,841,627,000 barrels on September 17th, which is the lowest since March 6th, 2015, and hence is a 6 1/2 year low… 

This Week’s Rig Count

The number of drilling rigs active in the US increased for 45th time out of the past 53 weeks during the week ending September 24th, but they were still 34.3% below the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US increased by nine to 521 rigs this past week, which was also 260 more rigs the pandemic hit 261 rigs that were in use as of the September 25th report of 2020, but was still 1,408 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global oil market in an attempt to put US shale out of business….

The number of rigs drilling for oil was up by 10 to 421 oil rigs this week, after they had also risen by 10 oil rigs the prior week, and there are now 230 more oil rigs active now than were running a year ago, while they still amount to just 26.1% the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations fell by one to 99 natural gas rigs, which was still up by 24 natural gas rigs from the 71 natural gas rigs that were drilling during the same week a year ago, but still only 6.2% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008….in addition to oil and gas rigs, a horizontal rig that Baker Hughes classifies as “miscellaneous’ continues to drill in Kern county California, while a year ago there were three such “miscellaneous’ rigs reported to be active…

The Gulf of Mexico rig count was up by four rigs to eight rigs this week, which is still only a partial recovery after Gulf rigs fell from 14 rigs the week before Hurricane Ida approached, with seven of this week’s rigs deployed in Louisiana waters and another drilling for oil in Alaminos Canyon, offshore from Texas…but the Gulf rig count is still down by 6 rigs from a year ago, when 12 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters….however, there are still 2 rigs drilling for natural gas off the shore of the Kenai peninsula in Alaska this week, and hence the total national offshore rig count of 10 rigs is down by just 4 rigs from the 14 offshore rigs running a year ago, when there was no drilling off Alaska or off our other coasts…

In addition to those rigs offshore, a directional rig targeting oil at a depth of over 15,000 feet returned to an inland body of water in Plaquemines Parish, Louisiana, near the mouth of the Mississippi this week, one of three such inland waters rigs that were shut down in Louisiana in the wake of Ida…last week a ​new ​rig ​had ​started drilling for oil in ​the ​Galveston Bay​ area​, so the inland waters rig count is now two, up from one from a year ago..

The count of active horizontal drilling rigs was up by 5 ro 471 horizontal rigs this week, which was more than double the 224 horizontal rigs that were in use in the US on September 25th of last year, but was just over a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the vertical rig count was up by 1 to an 18 month high of 30 vertical rigs this week, and those were also up by 14 from the 16 vertical rigs that were operating during the same week a year ago…..in addition, the directional rig count was up by 3 to 20 directional rigs this week, but those were still down by 1 from the 21 directional rigs that were in use on September 25th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 September 24th, the second column shows the change in the number of working rigs between last week’s count (September 17th) and this week’s (September 24th) count, the third column shows last week’s September 17th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend 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 the 25th of September, 2020…

September 24 2021 rig count summary

Louisiana’s rig count was up by four with the addition of the inland waters rig in Plaquemines Parish and the three rigs in the state’s offshore waters… Oklahoma’s four rig increase includes an oil rig added in the Cana Woodford and an oil rig added in the Arkoma Woodford, where a natural gas rig is already deployed, as well as three more rigs in Oklahoma basins that Baker Hughes doesn’t name, while at the same time an oil rig was pulled out of the Granite Wash in the area of Oklahoma adjacent to the Texas panhandle…in Texas, the Rigs by State file at Baker Hughes shows that three rigs were added in Texas Oil District 8, which is the core Permian Delaware, while a rig was pulled out of Texas Oil District 8A, which includes the northern counties of the Permian Midland, and another rig was pulled out from Texas Oil District 7C, which includes the southern counties of the Permian Midland, thus ​netting out to the one rig increase in the Permian basin…also in Texas, we find that two rigs were added in Texas Oil District 1, at least one of which was targeting the Eagle Ford shale, while a rig was pulled out of Texas Oil District 4, which could have also been an Eagle Ford rig if both of the District 1 rig additions were targeting that basin…elsewhere, the rig pulled out of Utah had been drilling in the Uintah basin, even though it’s not named by Baker Hughes, because all current drilling activity in Utah has been in that basin, while the lone natural gas rig change came as the natural gas rig that started drilling into the Marcellus shale in Cattaraugus County, New York, last week was shut down this week…

DUC well report for August

Last week saw the release of the EIA’s Drilling Productivity Report for September, which includes the EIA’s August data for drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions….that data showed a decrease in uncompleted wells nationally for the 15th month in a row, as both completions of drilled wells and drilling of new wells increased, but remained below the pre-pandemic levels…for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 248 wells, falling from 5,961 DUC wells in July to 5,713 DUC wells in August, which was also 35.3% fewer DUCs than the 8,829 wells that had been drilled but remained uncompleted as of the end of August of a year ago…this month’s DUC decrease occurred as 609 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, up from the 577 wells that were drilled in July, while 857 wells were completed and brought into production by fracking, up from the 838 completions seen in July, and up from the pandemic hit 414 completions seen in August of last year, but still down by 31.9% from the 1,258 completions of August 2019….at the August completion rate, the 5,713 drilled but uncompleted wells left at the end of the month represents a 6.7 month backlog of wells that have been drilled but are not yet fracked, down from the 7.1 month DUC well backlog of a month ago, a ratio that is now approaching that of the year prior to the pandemic, despi​te​ a completion rate that is still a third below the pre-pandemic norm…

both oil producing regions and natural gas producing regions saw DUC well decreases in August, while none of the major basins reported ​a ​DUC well increase….the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 130, from 2,249 DUC wells at the end of July to 2,119 DUCs at the end of August, as 270 new wells were drilled into the Permian during August, while 400 wells in the region were being fracked…in addition, DUCs in the Eagle Ford​ shale​ of south Texas decreased by 43, from 912 DUC wells at the end of July to 869 DUCs at the end of August, as 60 wells were drilled in the Eagle Ford during August, while 103 already drilled Eagle Ford wells were completed…. at the same time, there was also a decrease of 27 DUC wells in the Bakken of North Dakota, where DUC wells fell from 590 at the end of July to 563 DUCs at the end of August, as 39 wells were drilled into the Bakken during August, while 66 of the drilled wells in the Bakken were being fracked….meanwhile, the number of uncompleted wells remaining in Oklahoma’s Anadarko ​basin ​decreased by 19, falling from 838 at the end of July to 819 DUC wells at the end of August, as 33 wells were drilled into the Anadarko basin during July, while 52 Anadarko wells were completed….in addition, DUC wells in the Niobrara chalk of the Rockies’ front range fell by 9, decreasing from 380 at the end of July to 371 DUC wells at the end of August, as 89 wells were drilled into the Niobrara chalk during August, while 98 Niobrara wells were being fracked….

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 16 wells, from 590 DUCs at the end of July to 574 DUCs at the end of August, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 87 of the already drilled wells in the region were fracked….meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region was down by four to 398 DUCs, as 47 wells were drilled into the Haynesville during August, while 51 of the already drilled Haynesville wells were fracked during the same period….thus, for the month of August, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 228 wells to 4741 wells, while the uncompleted well count in the natural gas  basins (the Marcellus, the Utica, and the Haynesville) decreased by 20 wells to 972 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…

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