natural gas supplies above average 1st time in 2 years; refineries slowest since Harvey; largest drop in DUC wells ever

oil prices ended modesty lower this week, largely on disappointment in the details of a proposed US-China trade deal and on a big jump in US oil supplies…after rising nearly 4% to $54.70 a barrel on the promise of further OPEC output cuts and on hopes for a US-China trade pact last week, the price of US light sweet crude for November delivery opened 20 cents higher on Monday amid renewed geopolitical tensions in the Middle East, but immediately began falling as details about the first phase of a U.S.-China trade deal did little to reassure there’​d be a quick end to the trade war and ultimately settled $1.11, or 2% lower at $53.59 a barrel…oil prices fell again on Tuesday, as traders worried that the unrelenting U.S.-China trade war would weaken the global economy and that swelling U.S. crude inventories would further pressure prices, with US crude ending 78 cents, or 1.5%, lower at $52.81 a barrel…however, oil prices recovered part of that loss on Wednesday on hopes that OPEC would extend its supply cuts at their coming biannual meeting, and ended 55 cents, or 1%, higher at $53.36 a barrel…oil prices then tumbled early on Thursday as industry data showed a much larger-than-expected build-up in U.S. inventories, but the drop was limited after the United Kingdom and the European Union announced they had reached a deal on Britain’s separation from the Union, and then, boosted by a weaker dollar, oil prices reversed and rallied late in the session to end up 57 cents at $53.93 a barrel…oil prices edged lower again on Friday, as concerns about the weakest Chinese GDP report in 30 years outweighed a bullish report from its refining sector, but the day’s losses were limited by hopes for progress toward a U.S.-China trade agreement​,​ ​with ​oil end​ing down just 15 cents at $53.78 a barrel…still, oil prices still closed 1.7% lower on the week, as higher US crude inventories and the depressed outlook for energy demand outweighed the optimism about potential future trade deals

natural gas prices, on the other hand, rose for the first time in 5 weeks, as both the 6 to 10 day and the 8 to 14 day forecasts indicated colder than lower temperatures for the broad midsection of the country, and as the storage report came in slightly under the market consensus…after falling 5.9% to $2.214 per mmBTU on record production and weak demand last week, the contract price of natural gas for November delivery rose 6.6 cents or 3% on Monday as a shift to colder in the weather data snapped a 5 day losing streak for natural gas contract prices…momentum from that move carried into Tuesday as prices rose another 5.9 cents, but prices then fell back 3.6 cents on Wednesday as the midday weather models showed less potential for strong, lasting cold..​.​.prices edged higher on Thursday on short-covering and position-squaring ahead of the weekly storage report and ended 1.5 cents higher when the report showed a smaller increase in stores than was expected​, even though it was the largest on record for the date​….natural gas prices then rose two-tenths of a cent on Friday to finish the week at $2.320 per mmBTU, 4.8% higher than the previous Friday…

the natural gas storage report for the week ending October 11th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 104 billion cubic feet to 3,519 billion cubic feet by the end of the week, which meant our gas supplies were 494 billion cubic feet, or 16.3% more than the 3,025 billion cubic feet that were in storage on October 11th of last year, and 14 billion cubic feet, or 0.4% above the five-year average of 3,505 billion cubic feet of natural gas that have been in storage as of the 11th of October in recent years, the first time out natural gas supplies surpassed the previous five-year average since Sept. 22, 2017…..this week’s 104 billion cubic feet injection into US natural gas storage was a bit lower than the consensus forecast for a 108 billion cubic feet injection from analysts surveyed by S&P Global Platts, but it was well above the average 81 billion cubic feet of natural gas that have been added to gas storage during the second week of October over the past 5 years, the 29th such average or above average storage build in the last 31 weeks…the 2,341 billion cubic feet of natural gas that have been added to storage over the 29 weeks of this year’s injection season is the second most for the same period in the modern record, eclipsed only by the record 2​387 billion cubic feet of natural gas that were injected into storage over the same 29 weeks of the 2014 natural gas injection season, a cool summer when there were no injections below 76 billion cubic feet…. 

with our natural gas supplies now above the five year average for the first time in nearly 25 months, we’ll include the graph of natural gas in storage that accompanied this week’s storage report…

October 19 2019 natural gas storage for October 11

the above graph comes from this week’s Natural Gas Storage Report, and it shows the quantity of natural gas in billion cubic feet that was in storage in the lower 48 states over the period from September 2017 up to the week ending October 11th 2019 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background​ graph​ represents the previous upper and lower range of natural gas in storage for any given time of year for the 5 years prior to the two years that are shown by today’s graph…thus the grey area also shows us the normal variation of natural gas storage levels as they fluctuate from season to season, with natural gas in storage underground normally building to a maximum by the first weekend in November, falling through the winter, and usually bottoming out at the end of March or the first week of April, depending of course on the spring heating requirements in any given year…as you can see, the level of natural gas supplies as indicated by the blue graph has been consistently below the 5 year average that’s indicated by the ​dark ​grey graph over the two year span of this graph, with supplies through much of last year well below the 5 year range, often tracking a 15 year low for each date in question…

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 11th showed that because of a decrease in our oil exports and a deepening slowdown in our oil refining, we were left with surplus oil to add to storage for the fifth week in a row…our imports of crude oil rose by an average of 70,000 barrels per day to an average of 6,295,000 barrels per day, after falling by an average of 67,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 153,000 barrels per day to an average of 3,248,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,047,000 barrels of per day during the week ending October 11th, 233,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, the production of crude oil from US wells was reported to be unchanged at a record 12,600,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,647,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,436,000 barrels of crude per day during the week ending October 11th, 221,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 1,145,000 barrels of oil per day were being added to the supplies of oil stored in the US….hence, 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 933,000 barrels per day less than what was reportedly 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 inserted a (+933,000) 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”….with that much oil unaccounted for again this week,​ it​ means that one or all of the oil metrics that the EIA has reported and that we have just transcribed are seriously off the mark (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) indicated that the 4 week average of our oil imports fell to an average of 6,297,000 barrels per day last week, now 18.2% less than the 7,695,000 barrel per day average that we were importing over the same four-week period last year….the 1,145,000 barrel per day net increase in our total crude inventories included 1,326,000 barrels per day that were added to our commercially available stocks of crude oil, which was offset by a withdrawal of 181,000 barrels per day from our Strategic Petroleum Reserve….this week’s crude oil production was reported to be unchanged at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at a record 12,100,000 barrels per day, while a 12,000 barrels per day increase to 485,000 barrels per day in Alaska’s oil production had no impact on the final rounded national production total…last year’s US crude oil production for the week ending October 12th was rounded to 10,900,000 barrels per day, so this reporting week’s rounded oil production figure was 15.6% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 83.1% of their capacity in using 15,436,000 barrels of crude per day during the week ending October 11th, down from 85.7% of capacity the prior week, and the lowest refinery utilization rate since September 2017, ​after Hurricane Harvey had caused the shutdown of 12% of US refining capacity along the western Gulf Coast….hence, the 15,436,000 barrels per day of oil that were refined this week was 5.4% less than the 16,316,000 barrels of crude per day that were being processed during the week ending October 12th, 2018, when US refineries were operating at a seasonal low 88.8% of capacity….

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 68,000 barrels per day to 9,998,000 barrels per day during the week ending October 11th, after our refineries’ gasoline output had decreased by 15,000 barrels per day the prior week….with that decrease in gasoline output, this week’s gasoline production was 4.1% lower than the 10,430,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 147,000 barrels per day to 4,688,000 barrels per day, the lowest since March 2018, after our distillates output had increased by 22,000 barrels per day over the prior week….however, since our distillates production was down by a total of 528,000 barrels per day over the prior 3 weeks, our distillates​’​ production this week was 2.6% below the 4,815,000 barrels of distillates per day that were being produced during the week ending October 12th, 2018…. 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 17 weeks and for the 25th time in thirty-two weeks, falling by 2,562,000 barrels to 226,201,000 barrels during the week to October 11th, after our gasoline supplies had decreased by 1,213,000 barrels over the prior week….the decrease in our gasoline supplies was larger this week even though the amount of gasoline supplied to US markets decreased by 106,000 barrels per day to 9,354,000 barrels per day, while our imports of gasoline rose by 9,000 barrels per day to 651,000 barrels per day while our exports of gasoline fell by 15,000 barrels per day to 781,000 barrels per day….after this week’s decrease, our gasoline supplies were 3.4% lower than last October 12th’s inventory level of 234,156,000 barrels, and but remained roughly 2% above 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 fell for the 19th time in the past 31 weeks, decreasing by 3,823,000 barrels to 123,501,000 barrels during the week ending October 11th, after our distillates supplies had decreased by 3,943,000 barrels over the prior week…our distillates supplies fell this week even though our exports of distillates fell by 389,000 barrels per day to 1,065,000 barrels per day while our imports of distillates rose by 105,000 barrels per day to 197,000 barrels per day, because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 330,000 barrels per day to 4,366,000 barrels per day….after this week’s inventory decrease, our distillate supplies were 6.9% less than the 132,638,000 barrels of distillates that we had stored on October 12th, 2018, and fell to around 11% below the five year average of distillates stocks for this time of the year…

finally, with the refinery slowdown and the decrease in our oil exports, our commercial supplies of crude oil in storage rose for the seventh time in eighteen weeks and for the twenty-second time in 38 weeks, increasing by 2,927,000 barrels, from 425,569,000 barrels on October 4th to 434,850,000 barrels on October 11th to …that increase lifted our crude oil inventories to 2% above the five-year average of crude oil supplies for this time of year, and to more than 31.1% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the second weekend of October, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had generally been rising over the past year up until July, after generally falling until then through most of the prior year and a half, our oil supplies as of October 4th were still 4.4% above the 416,441,000 barrels of oil we had stored on October 12th of 2018, but at the same time were 4.7% below the 456,485,000 barrels of oil that we had in storage on October 13th of 2017, and 7.2% below the 468,711,000 barrels of oil we had in commercial storage on October 14th of 2016…     

This Week’s Rig Count

the US rig count fell for the 8th time in 9 weeks and for the 31st time in 35 weeks over the week ending October 18th, and is now down by nearly 21.5% since the beginning of this year….Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to a 30 month low of 851 rigs this past week, which was also down by 216 rigs from the 1067 rigs that were in use as of the October 19th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…

the count of rigs drilling for oil increased by 1 rig to 713 rigs this week, which was still 160 fewer oil rigs than were running a year ago, and quite a bit below 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 6 rigs to 137 natural gas rigs, a 32 month low for gas rig drilling activity, down by 57 rigs from the 194 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, a change from a year ago, when there were no such “miscellaneous” rigs deployed..

Gulf of Mexico offshore drilling activity decreased by 2 rigs to 21 Gulf rigs running this week, as 2 rigs that had been drilling offshore from Louisiana were shut down…that still left 21 rigs drilling in Louisiana​’s​ offshore waters, 2 more rigs than the Gulf of Mexico rig count of 19 a year ago, when 18 rigs were drilling in Louisiana waters and one was drilling offshore from Texas…in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago…hence, the national total of 22 offshore rigs is up by 2 rigs from the 20 rigs that were deployed offshore a year ago…however, another rig began drilling through an inland body of water in southern Louisiana this week, where there are now two​ drilling on inland waters​, but still down from the 3 such “inland waters” rigs deployed a year ago…

the count of active horizontal drilling rigs was down by 5 rigs to 745  horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 29 month low for horizontal drilling…that was also 181 fewer horizontal rigs than the 926 horizontal rigs that were in use in the US on October 19th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….on the other hand, the directional rig count was unchanged at 55 directional rigs this week, but those were still down by 17 from the 72 directional rigs that were operating during the same week of last year…in addition, the vertical rig count was also unchanged at 51 vertical rigs this week, and those were down by 18 from the 69 vertical rigs that were in use on October 5th of 2018…

the details on this week’s changes in drilling activity by state and by major shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major 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 18th, the second column shows the change in the number of working rigs between last week’s count (October 11th) and this week’s (October 18th) count, the third column shows last week’s October 11th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent 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 19th of October, 2018…   

October 18 2019 rig count summary

we have a problem with the Permian rig count this week, since the Rigs by State – Current and Historical excel file from Baker Hughes shows that one rig was added in Texas Oil District 8, or the core Permian Delaware, that two rigs were added in Texas Oil District 8A, or the northern Permian Midland, and another rig was added in Texas Oil District 7C, or the southern Permian Midland…as it’s likely that the rig pulled out of New Mexico had been operating in the western Permian Delaware, and since the Permian count is only up by one, we have to assume that two of those rigs that were added in Texas Permian districts were not targeting the Permian…to determine where, one could search the North America Rotary Rig Count Pivot Table (xls), which has individual well records going back to February 2011, but unless one knew ​offhand ​which counties were in each of those Texas districts it would likely be a fool’s errand…

in addition, there’s also a disconnect on the totals in the Marcellus ​shale ​and the states involved, since the Marcellus shows a three rig decrease while West Virginia shows a one rig decrease and Pennsylvania shows 4 fewer rigs…since the West Virginia and Pennsylvania current rig counts add up to the current Marcellus count, that means the shallow vertical rigs targeting gas we noted starting up in Fayette County, Pennsylvania during the week ending Sept 13th and in southern West Virginia earlier this year were both shut down this week…to get from there to the 6 rig decrease in natural gas that this week’s report shows, then, we include all 5 of those Appalachian rigs – 3 in the Marcellus and the two shallower rigs targeting formations not tracked separately by Baker Hughes, and two natural gas rig pulled out of the Eagle Ford in southeastern Texas, which are then offset by a rig added in the Barnett shale formation in the north central part of the state…however, neither of those Texas formations shows a change in the table above because their natural gas change was offset by a change in oil rigs; for the Eagle Ford, two oil rigs were added, leaving that basin’s count at 52 oil rigs and 8 targeting natural gas, while an oil rig was pulled out of the Barnett shale, leaving the Barnett with two oil rigs and two targeting natural gas…

DUC well report for September

Monday of this past week saw the release of the EIA’s Drilling Productivity Report for October, which includes the EIA’s September data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the seventh month in a row, this report showed a decrease in uncompleted wells nationally in September, as both drilling of new wells and completions of drilled wells decreased….moreover, the inventory of uncompleted wells fell in every major US basin, including the Permian basin of western Texas and New Mexico, which had seen increases of newly drilled but uncompleted wells (DUCs) every month from August 2016 through August 2019…for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 206 wells, the largest decrease on record, falling from a revised 7,946 DUC wells in July to 7,740 DUC wells in September, which still represents 6.2% more than the 7,284 wells that had been drilled but remained uncompleted as of the end of September of a year ago…that DUC decrease occurred as 1,184 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during September, down by 61 from the 1,245 wells that were drilled in August and the lowest in 19 months, while 1,390 wells were completed and brought into production by fracking, a decrease of 5 well completions from the 1,395 completions seen in August….at the September completion rate, the 7,740 drilled but uncompleted wells left at the end of the month still represent a 5.6 month backlog of wells that have been drilled but are not yet fracked, down from a backlog of 5.7 months a month ago…  

both oil producing regions and natural gas producing regions saw DUC well decreases in September, since no major basin saw an increase…the number of DUC wells remaining in the Oklahoma Anadarko decreased by 59, from 885 at the end of August to 826 DUC wells at the end of September, as 82 wells were drilled into the Anadarko basin during September while 141 Anadarko wells were being fracked….in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells fall by 49, from 3,717 DUC wells at the end of August to 3,668 DUCs at the end of September, as 503 new wells were drilled into the Permian, while 552 wells in the region were being fracked….at the same time, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range decreased by 32 to 473, as 168 Niobrara wells were drilled in September while 200 Niobrara wells were completed….meanwhile, DUC wells in the Eagle Ford of south Texas decreased by 24, from 1,468 DUC wells at the end of August to 1,444 DUCs at the end of September, as 175 wells were drilled in the Eagle Ford during August, while 199 already drilled Eagle Ford wells were completed….in addition, DUC wells in the Bakken of North Dakota fell by 21, from 696 DUC wells at the end of August to 675 DUCs at the end of September, as 104 wells were drilled into the Bakken in August, while 125 of the drilled wells in that basin 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 520 DUCs at the end of July to 504 DUCs at the end of September, as 107 wells were drilled into the Marcellus and Utica shales during the month, while 123 of the already drilled wells in the region were fracked…in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by 5 wells to 180, as 45 wells were drilled into the Haynesville during September, while 50 Haynesville wells were fracked during the same period….thus, for the month of September, DUCs in the five oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 185 wells to 7,056 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 21 wells to 684 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…

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September’s retail sales, industrial production, & new housing construction; August’s business inventories

Major reports released this past week included Retail Sales for September and the corresponding Business Sales and Inventories report for August from the Census Bureau, Industrial production and Capacity Utilization for September from the Fed, the September report on New Residential Construction from the Census Bureau, and the Regional and State Employment and Unemployment report for September from the Bureau of Labor Statistics, which breaks down the two surveys of the monthly employment report by state and region….this week also saw the release of the first two regional Fed manufacturing surveys for October: the Empire State Manufacturing Survey for October from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +2.0 in September to +4.0 in October, suggesting that First District manufacturing has been growing at a snail’s pace, while the Philadelphia Fed Manufacturing Survey for October, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +12.0 in September to +5.6 in October, also suggesting pretty slow growth in that region’s manufacturing… 

Retail Sales Decreased by 0.3% in September after August Sales were Revised Higher

Seasonally adjusted retail sales fell 0.3% in September after retail sales for August were revised 0.2% higher after retail sales for July were revised 0.1% lower…the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $525.6 billion during the month, which was 0.3 percent (±0.5%) lower than August’s revised sales of $526.9 billion, but 4.1 percent (±0.7 percent) above the adjusted sales in September of last year…August’s seasonally adjusted sales were revised from $526.1 billion to $526.9 billion, while July sales were revised lower, from $524.2 billion to $523.9 billion, with this release….unadjusted sales estimates, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 8.8%, from $547,674 million in August to $499,369 million in September, while they were up 3.8% from the $481,094 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 retail sales by business type, including the quarter over quarter data…again, to explain what it 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 2019 (r)” (revised) and the August 2018 to August 2019 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, can be useful in estimating the impact of this report on 3rd quarter GDP:

September 2019 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 last week…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 0.7% drop in sales at gas stations were down by 0.2%….then, subtracting the figures representing the 0.1% decrease in grocery & beverage sales and the 0.2% increase in food services sales from that total, we find that core retail sales were down by a bit more than 0.3% for the month….since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.3% in September, that means the core sales decline was essentially price related, and we can thus figure that real retail sales excluding food and energy were on average little changed over the 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 down by 0.9%, the price index for transportation commodities other than fuel was down 0.7%, as prices for used cars and trucks fell 1.6% while new car prices fell 0.3%; that would suggest that real unit sales at auto & parts dealers would only be on the order of 0.2% lower…similarly, while sales at clothing stores were 1.3% higher in September, the apparel price index was 0.4% lower, which means that real sales of clothing actually rose around 1.7%….on the other hand, since sales at furniture stores were up 0.6% while the price index for household furnishings and supplies increased by 0.3%, that would suggest that real sales at furniture stores only rose 0.3%…meanwhile, while nominal sales at sporting goods, hobby, music and book stores fell 0.1%, the price index for recreational commodities rose 0.2%, so real sales of recreational goods were down roughly 0.3%…

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we’ll 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 0.1% higher in September, with the price index for food purchased for use at home unchanged, while prices for food bought for eating away from home were 0.3% higher… hence, with nominal sales at food and beverage stores 0.1 lower, real sales of food at groceries would also be roughly 0.1% lower.…on the other hand, the 0.2% decrease in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants fell by 0.5%…meanwhile, while sales at gas stations were down 0.7%, there was a 2.4% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 1.6%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for September will show that real personal consumption of goods rose 0.1% in September, after rising by a revised 0.6% in August and by a revised 0.6% in July…that would follow 2nd quarter figures which showed real personal consumption of goods rose 0.4% in June, after rising by 0.6% in May and by 0.6% in April, which would thus result in a quarter over quarter increase at a 5.8% annual rate, which would be enough to add 1.18 percentage points to 3rd quarter GDP….at the same time, the 0.5% decrease in real sales at bars and restaurants will have a small negative impact on September’s real personal consumption of services..

Industrial Production Fell 0.4% in September

The Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production decreased by 0.4% in September after rising by 0.8% in August, revised from the 0.6% increase reported a month ago; at the same time, the percentage change from June to July was revised from down 0.1% to down 0.2%…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell from an unrevised 109.9 in August to 109.5 in September; at the same time, the index for July was revised from the previously reported 109.2 to 109.1, the index for June was revised from the previously reported 109.4 to 109.3, while the May index was revised from 109.2 to 109.3, while leaving the percentage increases for May and June unchanged from the previous report….for the 3rd quarter as compared to the 2nd quarter, industrial production rose at a 1.2% annual rate, while total industrial production was still 0.1% lower than in September a year earlier, due to production decreases in the first and second quarter of this year….

The manufacturing index, which was impacted by the GM strike, decreased by 0.5% in September, from 105.2 in August to 104.8 in September, after increasing by 0.6% in August, decreasing by 0.4% in July and increasing by 0.6% in June, and is now 0.9% lower than a year ago…meanwhile, the mining index, which includes oil and gas well drilling, fell from 133.5 in August to 131.8 in September, after the August index was revised down from 133.6, and is now just 2.6% higher than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 1.4% to 106.8 in September, after the August index was revised 105.2 to 105.1, and is now 1.2% higher than in September of a year ago…

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 77.9% in August to 77.5% in September, after rising from 77.4% in July….capacity utilization of NAICS durable goods production facilities fell from 76.1% in August to 75.4% in September, while capacity utilization for non-durables producers fell from 76.3% to 76.0%…capacity utilization for the mining sector fell to 88.9% in September from 90.5% in August, which was the same as was originally reported, while utilities were operating at 77.7% of capacity during September, up from their 76.8% of capacity during August, which was revised up from 76.7%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….

Business Sales Rose 0.2% in August; Business Inventories were Unchanged

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 $1,463.9 billion in August, up 0.2 percent (±0.1%) from July’s revised sales, and up 1.1 percent (±0.4 percent) from August sales of a year earlier….note that total July sales were concurrently revised down from the originally reported $1,462.9 billion to $1,461.641 billion, now a 0.2% increase from June….manufacturer’s sales were 0.1% lower at $502,957 million in August, while retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, were were 0.6% higher at $461,874 million, and wholesale sales were statistically unchanged at $499,053 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,042.1 billion at the end of August, statistically unchanged (±0.1%) from July, but 4.2 percent (±0.4%) higher than in August a year earlier…the value of end of July inventories were revised to $2,041.782 billion from the $2,042.6 billion reported last month and is now a 0.3% increase from June…seasonally adjusted inventories of manufacturers were estimated to be valued at $695,881 million, statistically unchanged from July, while inventories of retailers were valued at $665,549 million, 0.1% less than in July, and inventories of wholesalers were estimated to be valued at $680,702 million at the end of August, 0.2% 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 last week, the producer price index for August indicated that aggregate prices for finished goods were down 0.5% in August, that prices for intermediate processed goods were down 0.4%, and that prices for unprocessed goods were 1.4% lower….retail inventories are all finished goods, as are the majority of wholesale inventories, while factory inventories, which we looked at two weeks ago, are roughly evenly split between the three stages of production…hence, although the nominal value of August inventories was unchanged, real inventories increased by something on the order of 0.5%…however, that increase followed an increase in July inventories that was entirely price related, meaning real July inventories were marginally lower…since the recent GDP report showed that real private inventories grew at an inflation adjusted $69.0 billion annual rate in the 2nd quarter, any real inventory increase in the 3rd quarter would have to top that increase in order to avoid subtracting from 3rd quarter GDP…

Housing Starts and Building Permits were Both Lower in September

The September report on New Residential Construction (pdf) from the Census Bureau reported that their widely watched estimate of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,256,000, which was 9.4 percent (±9.4 percent)* below the revised August estimated annual rate of 1,386,000 housing unit starts, but was 1.6 percent (±11.6 percent)* above last September’s pace of 1,236,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, September’s housing starts could have been unchanged month over month, or down by as much as 18.8% from those of August, with a 10% chance that the actual change could have even been outside of that wide range….in this report, the annual rate for August housing starts was revised from the 1,364,000 reported last month to a post recession record 1,386,000, while July starts, which were first reported at a 1,191,000 annual rate, were revised down from last month’s initial revised figure of 1,215,000 annually to a 1,204,000 annual rate with this report….

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 112,900 housing units were started in September, down from the 122,200 units started in August…of those housing units started in September, an estimated 80,700 were single family homes and 31,100 were units in structures with more than 5 units, down from the revised 81,800 single family starts in August, and down from the 39,100 units started in structures with more than 5 units in August…

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data, which is also impacted by the weather…in September, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,387,000 housing units, which was 2.7 percent (±1.3 percent) below the revised August rate of 1,425,000 permits, but was 7.7 percent (±2.4 percent) above the rate of building permit issuance in September a year earlier…the annual rate for housing permits issued in August was revised from an annual rate of 1,419,000 to 1,425,000 annually….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 114,300 housing units were issued in September, down from the revised estimate of 127,800 new permits issued in August…the September permits included 70,600 permits for single family homes, down from 79,100 single family permits in August, and 40,600 permits for housing units in apartment buildings with 5 or more units, down from 44,800 such multifamily permits a month earlier…

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.256 Million Annual Rate in September and Comments on September Housing Starts

 

 

(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 picked from the aforementioned GGO posts, contact me…)      

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tables and graphs for October 19th

rig count summary:

October 18 2019 rig count summary

natural gas in storage:

October 19 2019 natural gas storage for October 11

retail sales:

September 2019 retail sales table

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global oil shortage at 3.38 million barrels per day in Sept as OPEC output fell 1.32 mbpd, non OPEC output fell 0.45 mbpd

oil prices ended higher this past week, as prospects for a US-China trade deal rallied financial ​and ​commodity markets worldwide….after falling more than 5% to $52.81 a barrel on weak economic data and the Saudi’s production recovery last week, prices for US light sweet crude for November delivery initially rose more than $1 on Monday, as deadly anti-government demonstrations gripped Iraq, but gave up those gains to close 6 cents lower at $52.75 a barrel, pressured by prevailing worries over energy demand, despite reports of a drop in OPEC output….with U.S.-China trade talks looming over oil markets, oil prices fell again on Tuesday as US blacklisting of more Chinese companies dampened hopes for a quick trade deal, but closed down just 12 cents at 52.63 a barrel, as unrest in Iraq and Ecuador lent support to prices… oil prices slipped for a third consecutive session on Wednesday as the prospect of the United States and China striking a trade deal in talks this week dimmed, and ended 4 cents lower at 52.59 a barrel, as minutes from the Fed’s September meeting raised economic worries and the weekly EIA data revealed a fourth straight rise in domestic crude suppliesoil prices initially fell more than $1 on Thursday on concerns of trade-war related lower fuel demand, but then rallied on comments by OPEC Secretary-General Barkindo that they would take action to balance oil markets at their December meeting and closed 96 cents higher at $53.55 a barrel…oil prices edged slowly higher early on Friday, on hopes for deeper OPEC output cuts and hopes for a US-China trade pact, then jumped more than 2% after Iranian media said a state-owned oil tanker was attacked near Saudi Arabia, and went on to close $1.15 higher at $54.70 a barrel, on reports that the U.S. and China had reached partial agreement that could lead to a truce in the trade waroil prices were thus able to log a weekly gain of nearly 4%, in their first weekly increase since the September 14th drone strikes on Saudi oil facilities..

natural gas prices, on the other hand, fell every day this past week and ended lower for a 4th consecutive week, as record production and weak demand continued to weigh on prices…after falling 2.2% to $2.352 per mmBTU on record production and weak demand last week, the contract price of natural gas for November delivery fell 4.9 cents or more than 2% on Monday after natural gas production had increased to a new all-time high over the weekend and the weather pattern shifted to indicate below normal demand…​gas ​prices ​then ​fell 1.5 cents on Tuesday and another 5.4 cents on Wednesday, as forecasts lessened the odds of a durable early season cold snap, ​thus ​pushing prices lower…prices slipped another 1.6 cents on Thursday on an EIA natural gas storage report that was higher than expected but still within the range of the various market estimates and then inched down another four-tenths of a cent on Friday to end the week at $2.214 per mmBTU, down 5.9% from the prior Friday and down 18.6% from its September 16th close…

the natural gas storage report for the week ending October 4th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 98 billion cubic feet to 3,415 billion cubic feet by the end of the week, which meant our gas supplies were 472 billion cubic feet, or 16.0% more than the 2,943 billion cubic feet that were in storage on October 4th of last year, while still 9 billion cubic feet, or 0.3% below the five-year average of 3,423 billion cubic feet of natural gas that have been in storage as of the 4th of October in recent years….this week’s 98 billion cubic feet injection into US natural gas storage was more than the consensus forecast for a 94 billion cubic feet injection from analysts surveyed by S&P Global Platts, and it was also above the average 89 billion cubic feet of natural gas that have been added to gas storage during the first week of October over the past 5 years, the 28th such average or above average storage build in the last 30 weeks…the 2,237 billion cubic feet of natural gas that have been added to storage over the 28 weeks of this year’s injection season is the second most for the same period in the modern record, eclipsed only by the record 2294 billion cubic feet of natural gas that were injected into storage over the same 28 weeks of the 2014 natural gas injection season, a coolish summer when there were no injections below 76 billion cubic feet…. 

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 4th showed that because of a deepening slowdown in our oil refining, we were left with surplus oil to add to storage for the fourth week in a row…our imports of crude oil fell by an average of 67,000 barrels per day to an average of 6,224,000 barrels per day, after falling by an average of 87,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 534,000 barrels per day to an average of 3,401,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,823,000 barrels of per day during the week ending October 4th, 601,000 fewer barrels per day than the net of our imports minus exports during the prior week…over the same period, the production of crude oil from US wells was reported to be 200,000 barrels per day higher at a record 12,600,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,423,000 barrels per day during this reporting week..  

meanwhile, US oil refineries were reportedly processing 15,656,000 barrels of crude per day during the week ending October 4th, 496,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 389,000 barrels of oil per day were being added to the supplies of oil stored in the US….hence, 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 623,000 barrels per day less than what was reportedly 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 inserted a (+623,000) 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”….with that much  oil unaccounted for again this week, it calls into question all the other oil metrics that the EIA has reported and that we have just transcribed (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) indicated that the 4 week average of our oil imports fell to an average of 6,486,000 barrels per day last week, now 16.8% less than the 7,797,000 barrel per day average that we were importing over the same four-week period last year….the 389,000 barrel per day net increase in our total crude inventories included 418,000 barrels per day that were added to our commercially available stocks of crude oil, which was offset by a withdrawal of 29,000 barrels per day from our Strategic Petroleum Reserve….this week’s crude oil production was reported to be 100,000 barrels per day higher at a record 12,600,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record 12,100,000 barrels per day, while a 8,000 barrels per day decrease to 473,000 barrels per day in Alaska’s oil production ha no impact on the final rounded national production total…last year’s US crude oil production for the week ending October 4th was rounded to 11,200,000 barrels per day, so this reporting week’s rounded oil production figure was 12.5% above that of a year ago, and 49.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 86.4% of their capacity in using 15,656,000 barrels of crude per day during the week ending October 4th, down from 86.4% of capacity the prior week, & well below the normal refinery utilization rate for mid-September, possibly due to the residual effects of tropical storm Imelda’s track through southeastern Texas…whatever the reason, the 15,656,000 barrels per day of oil that were refined this week was 3.6% less than the 16,239,000 barrels of crude per day that were being processed during the week ending October 5th, 2018, when US refineries were operating at 88.8% of capacity….

with the decrease in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 15,000 barrels per day to 10,066,000 barrels per day during the week ending October 4th, after our refineries’ gasoline output had decreased by 159,000 barrels per day the prior week…but even with that decrease in gasoline output, this week’s gasoline production was 3.7% higher than the 9,711,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 22,000 barrels per day to 4,835,000 barrels per day, after our distillates output had decreased by 528,000 barrels per day over the prior 3 weeks….​hence, after those​ prior​ larger decreases, our distillates production was 3.8% below the 5,028,000 barrels of distillates per day that were being produced during the week ending October 5th, 2018…. 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 11th time in 17 weeks and for the 25th time in thirty-two weeks, falling by 1,213,000 barrels to 228,763,000 barrels during the week to October 4th, after our gasoline supplies had decreased by 228,000 barrels over the prior week….the decrease in our gasoline supplies was larger this week because the amount of gasoline supplied to US markets increased by 223,000 barrels per day to 9,460,000 barrels per day, and because our imports of gasoline fell by 201,000 barrels per day to 642,000 barrels per day while our exports of gasoline fell by 124,000 barrels per day to 796,000 barrels per day….after this week’s decrease, our gasoline supplies were 3.1% lower than last October 5th’s inventory level of 236,172,000 barrels, and slipped back to roughly 2% above the five year average of our gasoline supplies for this time of the year…

even with the small increase in our distillates production, our supplies of distillate fuels fell for the 18th time in the past 30 weeks, decreasing by 3,943,000 barrels to 127,324,000 barrels during the week ending October 4th, after our distillates supplies had decreased by 2,418,000 barrels over the prior week…the decrease in our distillates supplies was more extreme this week because our exports of distillates rose by 205,000 barrels per day to 1,454,000 barrels per day  while our imports of distillates rose by 42,000 barrels per day to 92,000 barrels per day, and because the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 76,000 barrels per day to 4,036,000 barrels per day….after this week’s inventory decrease, our distillate supplies were 4.6% less than the 133,465,000 barrels of distillates that we had stored on October 5th, 2018, and fell to around 9% below the five year average of distillates stocks for this time of the year…

finally, with the increase in oil production and the refinery slowdown, our commercial supplies of crude oil in storage rose for the sixth time in seventeen weeks and for the twenty-first time in 38 weeks, increasing by 2,927,000 barrels, from 422,642,000 barrels on September 27th to 425,569,000 barrels on October 4th…that increase still left our crude oil inventories near the five-year average of crude oil supplies for this time of year, but more than 25% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the first weekend of October, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had generally been rising over the past year up until the most recent seventeen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of October 4th were still 3.8% above the 409,951,000 barrels of oil we had stored on October 5th of 2018, but at the same time were 7.9% below the 462,216,000 barrels of oil that we had in storage on October 6th of 2017, and 10.2% below the 473,958,000 barrels of oil we had in commercial storage on October 7th of 2016…     

OPEC’s Monthly Oil Market Report

Thursday of this past week saw the release of OPEC’s October Oil Market Report​, which cover​s September OPEC & global oil data, and ​hence serves to give us the first snapshot of the impact that the September 14th drone attack on Saudi oil infrastructure had on their crude oil production, OPEC’s oil output, and global oil supplies….as you’ll see, this report shows there was again a large shortfall in the amount of oil produced globally in September, almost twice the large shortfall seen in August…

the first table from this monthly report that we’ll look at is from the page numbered 58 of that report (pdf page 68), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures…

September 2019 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC’s oil output fell by 1,318,000 barrels per day to 28,491,000 barrels per day in September, from their revised August production total of 29,809,000 barrels per day…however that August figure was originally reported as 29,741,000 barrels per day, which means that August​’s production​ was revised 68,000 barrels per day higher and hence September’s production was, in effect, a 1,250,000 barrel per day decrease from the previously reported production figures (for your reference, here is the table of the official August OPEC output figures as reported a month ago, before this month’s revisions)…

we can also see that the 1,280,000 barrel per day decrease in production from the Saudis, largely due to the attack on their facilities, was the reason for ​OPEC’s ​September output drop, as decreases of 82,000 barrels per day in output from Venezuela and 60,000 barrels per day in the output from Iraq were largely offset by the 104,000 barrel per day increase in output from Libya and the 24,000 barrel per day increase by Angola, while the oil output from most other OPEC members was​ comparatively​ little changed….we should note that the Saudis reported to OPEC that their production was only lower by 660,000 barrels per day, or only by half as much as the official figures….this can be seen in the the table below, also from the supply section of the report:

September 2019 OPEC crude output as reported

this table is also from the page numbered 58 of OPEC’s October Oil Market Report (pdf page 68), and it shows the oil production totals that several of the OPEC members reported directly to the OPEC Secretariat…usually, these self reported totals are pretty close to the official output totals shown in the first table we posted, but as you see here, in September there was quite a divergence between the official production totals and what several of the OPEC members reported they produced…most notable, of course, is the much smaller output decrease that the Saudis reported…one would think that sophisticated producers such as the Saudis would have a better idea what they produced than outside agencies, but the Saudis have been putting a lot of ​​effort into minimizing the perceived effects of the attack on their output, with repeated reassurances in the media that ​their ​production quickly recovered, since they are still planning to go ahead with the IPO of Saudi Aramco, and are trying to reverse any bad publicity that would effect the eventual pricing of their stock offering…

production from most other OPEC members, other than Iraq and Nigeria, also remains below the output allocation as originally determined for each OPEC member after their December 7th, 2018 meeting, when OPEC agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers, and which were extended at their July 1st meeting a little over three months ago…this can be seen in the table of OPEC production allocations we’ve included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, and it shows average daily production quota in millions of barrels of oil per day for each of the OPEC members as was agreed to at their December 2018 meeting and has now been extended through March 2020 as of their recent meeting….note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by a civil war, are exempt from any production quotas, and that only Libya among those exempt countries is producing more than they did in the 4th quarter of 2018, which you can see in the third column of the first, official OPEC production table above…​we should note that there are media reports that ​OPEC has ​agreed to ​raise the quota for Nigeria to 1.774 million ​barrels per day, but there was no official policy statement to that effect…

the next graphic from the report that we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from October 2017 to September 2019, and it comes from page 59 (pdf page 69) of the September OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale… 

September 2019 OPEC report global oil supply

including the 1.32 million barrels per day decrease in OPEC’s production from what they produced a month ago, their preliminary estimate now indicates that total global oil production fell by 1.77 million barrels per day to 97.32 million barrels per day in September, and that reported decrease came after August’s total global output figure was revised down by 150,000 barrels per day from the 99.24 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 450,000 barrels per day in September after that revision, with lower oil production from Canada, Norway, Kazakhstan, and Russia the major reasons for the non-OPEC output decrease in September…the 97.32 million barrels per day produced globally in September was also 2.00 million barrels per day, or 2.0% lower than the revised 99.32 million barrels of oil per day that were being produced globally in September a year ago (see the October 2018 OPEC report (online pdf) for the originally reported September 2018 details)…with this month’s decrease in OPEC’s output, their September oil production of 28,491,000 barrels per day fell to 29.3% of what was produced globally during the month, down from the revised 30.1% share they contributed in August….OPEC’s September 2018 production was reported at 32,761,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year’s total and new member Congo from this year’s, produced 3,989,000 fewer barrels per day of oil than they produced a year ago, when they accounted for 33.1% of global output, with a 1,948,000 barrel per day drop in output from Saudi Arabia, a 1,288,000 barrel per day decrease in the output from Iran, and a 553,000 barrel per day decrease in the output from Venezuela from that time more than offsetting the small year over year production increases of 111,000 barrels per day by Nigeria, 111,000 barrels per day by Libya, 78,000 barrels per day by the United Arab Emirates and 74,000 barrels per day by Iraq…

with the 1,770,000 barrels per day decrease in global oil output that was seen during September, there was a substantial shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…     

September 2019 OPEC report global oil demand

the table above came from page 32 of the October OPEC Monthly Oil Market Report (pdf page 42), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2019 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 revised estimate of global oil demand during the third quarter of 2019…

OPEC has estimated that during the 3rd quarter of this year, all oil consuming regions of the globe have been using 100.70 million barrels of oil per day, which was revised from their estimate of 100.63 million barrels of oil per day for the 3rd quarter a month ago….meanwhile, 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 97.32 million barrels per day during September, which means that there was a shortage of around 3,380,000 barrels per day in global oil production when compared to the demand estimated for the month… 

in addition, the downward revision of 150,000 barrels per day to August’s global output that’s implied in this report, combined with the 70,000 barrel per day upward revision to 3rd quarter demand, means that the 1,450,000 barrel per day shortfall that we had originally figured for August based on last month’s figures would now have to be revised to a deficit of 1,670,000 barrels per day…similarly, the 70,000 barrel per day upward revision to 3rd quarter demand means that the 2,220,000 barrel per day shortfall that we had originally figured for July would have to be revised to a deficit of 2,290,000 barrels per day….thus, the oil supply deficit for the 3rd quarter as a whole has averaged nearly 2,440,000 barrels per day

however, demand figures for both the first quarter and 2nd quarter were also revised lower with this report, as you can see encircled by the green ellipse on the table above…the 150,000 barrels per day downward revision to 2nd quarter demand would mean that we’d have to revise our global oil deficit for June from 620,000 barrels per day to 470,000, that we’d have to revise our May deficit from 990,000 barrels per day to 840,000 barrels per day, and we’d have to revise our global oil deficit for April from 860,000 barrels per day to 710,000 barrels per day…hence, for the 2nd quarter as a whole, even after those downward revision to demand, the world’s oil producers were producing 617,000 barrels per day less than what was needed…

encircled in green is also a downward revision of 100,000 barrels per day to first quarter demand, a period when supply exceeded demand….that means that the global oil surplus of 190,000 barrels per day we had previously figured for March would have to be revised to a global oil surplus of 290,000 barrels per day…similarly, the 640,000 barrel per day global oil output surplus we had for February would now be a 740,000 barrel per day global oil output surplus, and the 550,000 barrel per day global oil output surplus we had for January would be revised to a 650,000 barrel per day oil output surplus.. so as you can see, we have gone from a global oil surplus averaging over 550,000 barrels per day in the first quarter to an oil shortage of 2,440,000 barrels per day by the third quarter, a swing of 3 million barrels per day….however, most of the media, including industry websites, is still reporting as if we still have a global glut of oil…

This Week’s Rig Count

the US rig count rose for the first time in 8 weeks and for the 4th time in 34 weeks over the week ending October 11th, but is still down by nearly 21% since the beginning of this year….Baker Hughes reported that the total count of rotary rigs running in the US rose by 1 rig to 856 rigs this past week, which was still down by 193 rigs from the 1063 rigs that were in use as of the October 12th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began an attempt to flood the global oil market…

the count of rigs drilling for oil increased by 2 rigs to 710 rigs this week, which was still 157 fewer oil rigs than were running a year ago, and quite a bit below 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 1 rig to 143 natural gas rigs, a 32 month low for gas rig drilling activity and down by 50 rigs from the 193 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, which is equal to the “miscellaneous” rig count of a year ago..

Gulf of Mexico offshore drilling activity was increased by 1 rig to 23 Gulf rigs running this week, with all of those drilling offshore from Louisiana… that’s one more rig than the Gulf of Mexico rig count of a year ago, when 21 rigs were drilling in Louisiana waters and one was drilling offshore from Texas…in addition to the Gulf, one rig continues to drill offshore from the Kenai Peninsula in Alaska, which matches the offshore Alaska count of a year ago…hence, the national total of 24 offshore rigs is up by 1 rig from the 23 rigs that were deployed offshore a year ago…

the count of active horizontal drilling rigs was up by 1 rig to 750 horizontal rigs this week, which was still 177 fewer horizontal rigs than the 927 horizontal rigs that were in use in the US on October 12th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…likewise, the directional rig count was up by 1 to 55 directional rigs this week, but those were still down by 15 from the 70 directional rigs that were operating during the same week of last year…on the other hand, the vertical rig count decreased by 1 to 51 vertical rigs this week, and those were also down by 15 from the 66 vertical rigs that were in use on October 5th of 2018…

the details on this week’s changes in drilling activity by state and by major shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major 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 11th, the second column shows the change in the number of working rigs between last week’s count (October 4th) and this week’s (October 11th) count, the third column shows last week’s October 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent 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 12th of October, 2018…   

October 11 2019 rig count summary

as you can see, rig activity managed its first increase in eight weeks on the back of that six rig increase in the Permian basin, which is currently being targeted for oil…in the Texas Permian in the western part of the state, 4 rigs were added in Texas Oil District 8, or the core Permian Delaware, 2 rigs were added in Texas Oil District 8A, or the northern Permian Midland, and another rig was added in Texas Oil District 7C, which corresponds to southern Permian Midland…hence, with the Texas Permian seeing a 7 rig increase, it’s clear that the rig pulled out of New Mexico this week had been operating in the western reaches of the Permian Midland…those oil rig increases were offset by the 3 oil rigs pulled out of the Cana Woodford in Oklahoma, and an oil rig in another basin not tracked separately by Baker Hughes…among rigs drilling for natural gas, this week saw two rigs added in the Haynesville (one in northwest Louisiana and the other in Texas Oil District 6) and three rigs added in West Virginia’s Marcellus, while four natural gas rigs were shut down in Pennsylvania’s Marcellus, another was shut down in Ohio’s Utica, and one more was pulled from offshore of the Kenai Peninsula in Alaska, where they had been targeting natural gas at a depth of more than 15,000 feet…

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September’s consumer price and producer price indexes; August’s wholesale 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, which together give us most of the metrics needed to adjust other September data for inflation in order to determine the real level of economic activity for the month….in addition to those reports, the BLS released the Job Openings and Labor Turnover Survey (JOLTS) for August, the Census Bureau released the August report on Wholesale Trade, Sales and Inventories, and the Fed released the Consumer Credit Report for August…that Fed report indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $17.9 billion in August, or at a 5.2% annual rate, as non-revolving credit expanded at a 7.8% rate to $3,061.9 billion while revolving credit outstanding contracted at a 2.2% rate to $1,078.6 billion, the largest drop since March…

Consumer Prices Unchanged in September as Lower Energy Prices Offset Higher Rents

The consumer price index was was unchanged in September, as higher prices for shelter and other services were offset by lower prices for energy, clothing, & used cars and trucks …the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in August after rising 0.1% in August, 0.3% in July, 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% in October, and 0.1% last September…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.558 in August to 256.759 in September, which left it statistically 1.7113% higher than the 252.439 index reading of September of last year, which is reported as a 1.7% year over year increase….with prices for most forms of energy being somewhat lower, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, as the unadjusted core price index rose from 264.169 to 264.522, which left the core index 2.3577% ahead of its year ago reading of 258.429, which is reported as a 2.4% year over year increase, same as the year over year increase reported for August…

The volatile seasonally adjusted energy price index fell 1.4% in September, after falling 1.9% in August.rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% last September, and hence is now 4.8% lower than in September a year ago…the price index for energy commodities was 2.3% lower in September, while the index for energy services was 0.1% lower, after falling 0.2% in August….the energy commodity index was down 2.3% due to a 2.4% decrease in the price of gasoline, the largest component, and a 0.8% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.9% lower…within energy services, the price index for utility gas service fell 0.7% after rising 0.1% in August and is now 2.7% lower than it was a year ago, while the electricity price index was unchanged after falling 0.3% in August….energy commodities are now averaging 8.2% lower than their year ago levels, with gasoline prices also averaging 8.2% lower than they were a year ago, while the energy services price index is 0.1% lower than last September, as electricity prices are still 0.7% higher than a year ago…

The seasonally adjusted food price index rose 0.1% September, after being unchanged in June, July & August, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, being unchanged in October, and rising 0.1% last September, as the price index for food purchased for use at home was unchanged in September, while the index for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3% while food prices at elementary and secondary schools were on average 1.2% higher…

In the food at home categories, the price index for cereals and bakery products was 0.5% higher as average bread prices rose 1.6% and the price index for frozen and refrigerated bakery products, pies, tarts and turnovers rose 0.9%…at the same time, the price index for the meats, poultry, fish, and eggs group was 0.3% higher, as the beef and veal price index rose 0.6%, average pork prices rose 0.5%, and egg prices were 6.5% higher…in addition, the seasonally adjusted index for dairy products was 0.2% higher, as average prices for milk rose 0.1% and ice cream prices rose 1.1%…on the other hand, the fruits and vegetables index was 1.0% lower on a 1.2% decrease in the price index for fresh fruits and a 1.5% decrease in the price index for fresh vegetables, led by a 3.1% drop in the price of lettuce…meanwhile , the beverages index was 0.1% higher,, as prices for beverage materials including tea rose 0.8% and carbonated drink prices were 0.5% higher, while coffee prices fell 0.9%….lastly, the index for the ‘other foods at home’ category was 0.3% higher, as the price index for sugar and sweets rose 1.6% and the “other condiments” index, which excludes salt and other seasonings and spices, olives, pickles, & relishes, rose 4.4%….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, none of the food line items have seen a price change of more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.1% September after rising by 0.3% in August, 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of  the five months prior to that, the composite price index of all goods less food and energy goods was 0.3% lower, while the more heavily weighted composite for all services less energy services was 0.3% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was up 0.3%, as the price index for living room, kitchen, and dining room furniture rose 1.4%, the index for appliances rose 1.3%, and the price index for outdoor equipment and supplies rose 0.8%….on the other hand, the apparel price index was 0.4% lower on a 4.2% drop in the price index women’s outerwear, a 2.2% decrease in the index for girls’ apparel, and a 1.9% decrease in the price index for boys & girls footwear… in addition, the price index for transportation commodities other than fuel was 0.1% lower as prices for new cars fell 0.3% and prices for used cars and trucks fell 1.6%, while the price index for motor oil, coolant, and fluids rose 1.3%… meanwhile, prices for medical care commodities averaged 0.6% lower as nonprescription drugs prices fell 0.8%….at the same time, the recreational commodities index was 0.2% higher despite a 0.7% decrease in TV prices because the price index for sporting goods rose 1.7% and the price index for photographic equipment rose 1.6%….however, the education and communication commodities index was 1.2% lower on a 2.3% decrease in prices for college textbooks and a 1.8% decrease in the price index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.3% lower, while the price index for ‘other goods’ was unchanged as a 0.6% increase in the index for tobacco products was offset by a 1.1% decrease in the price index for miscellaneous personal goods…

Within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents, a 0.3% increase in homeowner’s equivalent rent and a 2.1% increase in prices for lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.2% lower….at the same time, the price index for medical care services was 0.4% higher, as nursing homes and adult day services rose 0.6% and health insurance rose 1.4%…in addition, the transportation services price index was 0.3% higher as the price index for parking fees and tolls rose 0.8%, airline fares rose 0.8%, and intercity bus fares rose 1.2%….on the other hand, the recreation services price index was unchanged as cable and satellite television service rose 0.5% and video rentals rose 0.8% while admission to sporting events fell 1.6%….meanwhile, the index for education and communication services was 0.1% higher as the index for technical and business school tuition and fees rose 0.9% and land-line telephone services rose 1.2%….lastly, the index for other personal services was up 0.1% as the price index for laundry and dry cleaning services was 0.5% higher…

Among core line items, prices for televisions, which now average 19.4% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.9% since last September, and the price index for women’s dresses, which is down 12.8% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 18.8% over the past year, the price index for infants’ furniture, which has increased 12.7% year over year, and intercity bus-fare, which has increased by 20.6% since last September, are the only line items to have increased by a double digit magnitude over that span….

Producer Price Index Fell 0.3% in September On Lower Priced Energy, Trade & Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.3% in September, as prices for finished wholesale goods fell by 0.4% and margins of final services providers decreased by 0.2%…that followed an August report that showed the PPI rose 0.1%, even prices for finished wholesale goods fell by 0.5%, because the more heavily weighted margins of final services providers increased by 0.3%, a July report that indicated the PPI rose 0.2%, as prices for finished wholesale goods increased 0.4%, while margins of final services providers decreased by 0.1%, a revised June report that now shows the PPI fell 0.2%, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers increased by 0.2%, and a revised May report that now shows the PPI was 0.2% higher, as prices for finished wholesale goods averaged 0.2% lower while average margins of final services providers were increased 0.3%….on an unadjusted basis, producer prices are now only 1.4% higher than a year ago, down from the 1.8% year over year change indicated by last month’s report…meanwhile, the core producer price index, which excludes food, energy and trade services, was unchanged for the month, and is now 1.7% higher than in September a year ago, down from the 1.9% YoY increase shown in August…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.4% lower in September, after being 0.5% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September of 2018….the finished goods index fell in September because the wholesale price index for energy was 2.5% lower, after falling by 2.5% in August, rising by 2.3% in July, but after falling by a revised 3.9% in June and by a revised 0.4% in May, while the price index for wholesale foods rose 0.3% in September after falling 0.6% in August, rising 0.2% in July and 0.6% in June, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.1% lower after being unchanged in August….wholesale energy prices were lower despite a 21.7% jump in wholesale prices for liquefied petroleum gas due to a 7.2% decrease in wholesale prices for gasoline and 1.8% lower wholesale prices for residential electric power, while the wholesale food price index rose on a 1.9% increase in the wholesale price index for meats and a 18.4% increase in the wholesale price index for fresh eggs….among wholesale core goods, wholesale prices for industrial chemicals fell 3.1% and wholesale prices for iron and steel scrap fell 11.7%, while wholesale prices for both travel trailers and campers and for women’s, girls’, and infants’ apparel rose 1.5%..

At the same time, the index for final demand for services fell 0.2% in September, after rising 0.3% in August, falling 0.1% in July, rising a revised 0.2% in June, and rising a revised 0.3% in May, as the index for final demand for trade services and the index for final demand for transportation and warehousing services both fell 1.0% in September while the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher….among trade services, seasonally adjusted margins for fuels and lubricants retailers fell 10.8%, margins for automobile retailers fell 2.7%, margins for apparel, footwear, and accessories retailers fell 4.5%, and margins for for machinery and vehicle wholesalers fell 2.7%, while margins for lawn, garden, and farm equipment and supplies retailers rose 5.6%… among transportation and warehousing services, margins for truck transportation of freight fell 0.6% and margins for airline passenger services fell 2.6%…among the components of the core final demand for services index, margins for bundled wired telecommunications access services rose 3.9%, margins for mining services rose 1.3%, and margins for hospital outpatient care rose 1.1%..

This report also showed the price index for intermediate processed goods fell 0.4% in September, after falling 0.7% in August, rising 0.2% in July, and falling a revised 1.0% in June and a revised 0.4% in May….the price index for intermediate energy goods fell 0.7%, as refinery prices for gasoline fell 7.2%, refinery prices for residual fuels fell 7.3%, and prices for commercial electric power fell 1.1%…however, prices for intermediate processed foods and feeds rose 0.7%, as the producer price index for prepared animal feeds rose 0.9% and producer prices for meats rose 1.9%… meanwhile, the core price index for intermediate processed goods less food and energy fell 0.3% as producer prices for prices for basic organic chemicals fell 3.8% and producer prices for building paper and board decreased 2.1%… prices for intermediate processed goods are now 3.4% lower than in September a year ago, the fifth consecutive year over year decrease following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods fell 1.4% in September, after falling 1.0% in August, rising 1.6% in July, falling revised 4.0% in June, and falling a revised 3.1% in May…that was as the September price index for crude energy goods fell 0.8% as crude oil prices fell 1.1% and unprocessed natural gas prices fell 1.2%, while the price index for unprocessed foodstuffs and feedstuffs fell 1.9% on a 10.3% decrease in producer prices for slaughter hogs, a 5.1% decrease in producer prices for slaughter chickens, and a 3.7% decrease in producer prices for slaughter cattle….at the same time, the index for core raw materials other than food and energy materials fell 1.6%, as prices for copper base scrap fell 1.6% and prices for unprocessed iron and steel scrap fell 11.7%…this raw materials index is now 10.1% lower than a year ago, as the year over year change on this index has been negative all year…

Lastly, the price index for services for intermediate demand rose 0.1% in September, after rising 0.5% in August, falling 0.2% in July, being unchanged in June (revised), and rising a revised 0.1% in May, rising 0.4% in April, and 0.5% in March…the price index for intermediate trade services was 1.2% higher, as as margins for intermediate paper and plastic product wholesalers rose 5.2%, margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.7% and margins for intermediate building materials, paint, and hardware wholesalers rose 1.6%…at the same time the index for transportation and warehousing services for intermediate demand was unchanged, as the price index for intermediate arrangement of freight and cargo transportation rose 3.4% while the price index for transportation of passengers (partial) fell 2.5%…meanwhile, the core price index for intermediate services less trade, transportation, and warehousing fell 0.2%, as the price index for television advertising time sales fell 4.1%, nonresidential real estate rents fell 1.8% and the index for business loans (partial) fell 2.8%, while the intermediate price index for bundled wired telecommunication access services rose 3.9%….over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.4% higher than it was a year ago…

August Wholesale Sales Flat, Wholesale Inventories Up 0.2%

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 $499.1 billion, virtually unchanged (+/-0.4%) from the revised July level, but down 0.7 percent (±0.9 percent)* from wholesale sales of August 2018… the July preliminary estimate was revised down to $499,050 million from the $499.6 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of up 0.3 percent (±0.4 percent)* to up 0.2 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 $680.7 billion at month end, up 0.2 percent (+/-0.2%)* from the revised July level, and 6.2 percent (±0.9 percent) higher than in August a year ago…July’s inventory value was revised from $679,084 million to $679,131 million, while this report says “the June to July inventory change was revised from the preliminary estimate of up 0.4 percent (±0.2 percent) to up 0.2 percent (±0.2 percent)*”….however, the archived July report shows that the preliminary June to July inventory change was originally published as “up 0.2 percent (±0.2 percent)*” from June, so the change is statistically unchanged from what was published last month…

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 down 0.5% in August, that prices for intermediate processed goods were down 0.7%, while prices for unprocessed goods were 1.0% lower….hence, the real August wholesale inventories were at least 0.5% higher than in July, which themselves were little changed from the end of the second quarter…since real wholesale inventories grew at an inflation adjusted $32.4 billion annual rate (in 2012 dollars) in the 2nd quarter, or by about 0.7%, the real inventory increase by the end of the 3rd quarter will have to top that increase in order to avoid subtracting from 3rd quarter GDP…

Job Openings, Hiring and Job Quitting Lower in August, Layoffs Unchanged

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 123,000, from 7,174,000 in July to 7,051,000 openings in August, after July job openings were revised 43,000 lower, from 7,217,000 to 7,174,000…August jobs openings were also 4.0% lower than the 7,342 ,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.5% in July to 4.4% in August, which was also down from 4.7% a year ago…the largest percentage decrease appears to have been the 47,000 job opening decrease to 130,000 openings in the information sector, while openings in the transportation, warehousing, and utilities sector increased by 21,000 to 315,000 (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 5,779,000, down by 199,000 from the revised 5,978,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.9% to 3.8%, which was also down from 3.9% hiring rate in August a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 172,000, from 5,810,000 in July to 5,636,000 in August, while the separations rate as a percentage of the employed fell from 3.8% to 3.7%, which was the same as in August a year ago (see table 3)…subtracting the 5,638,000 total separations from the total hires of 5,779,000 would imply an increase of 141,000 jobs in August, somewhat less than  the revised payroll job increase of 168,000 for August reported by the September establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings

Breaking down the seasonally adjusted job separations, the BLS finds that 3,526,000 of us voluntarily quit our jobs in August, down by 142,000 from the revised 3,668,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.4% to 2.3% of total employment, the same quits rate as a year earlier (see details in table 4)….in addition to those who quit, another 1,787,000 were either laid off, fired or otherwise discharged in August, down by 1,000 from the revised 1,788,000 who were discharged in July, as the discharges rate remained at 1.2% of all those who were employed during the month, same as the discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 325,000 in August, down from 353,000 in July, for an ‘other separations rate’ of 0.2%, the same as in July and as in 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 picked from the aforementioned GGO posts, contact me…)      

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tables and graphs for October 12

rig count summary:

October 11 2019 rig count summary

OPEC production, self reported:

September 2019 OPEC crude output as reported

OPEC production, official:

September 2019 OPEC crude output via secondary sources

global oil supply:

September 2019 OPEC report global oil supply

global oil demand:

September 2019 OPEC report global oil demand

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largest September addition to natural gas in storage on record; drilling for natural gas falls to 32 month low

oil prices saw their largest weekly drop since mid-July on weak economic data, but managed to break an eight day losing streak on Friday when the September employment report was not as bad as some feared…after falling 3.6% to $55.91 a barrel after the Saudis restored their oil production to the pre-attack level last week, prices of US light sweet crude for November delivery tanked on Monday on reports that the Trump administration was considering more extreme measures in its economic war with China and ended down $1.84, or 3.3%, at $54.07 a barrel, as fears of a supply shortfall after the Sept. 14 attack on Saudi Arabia fadedoil prices rebounded early Tuesday on a Reuters report that oil output from the world’s largest oil producers fell during the third quarter, but then turned lower after a report showing US manufacturing had slowed by the most in over ten years, with US crude settling down 45 cents at $53.62 a barrel…oil prices rebounded again early Wednesday after oil industry data showed a surprise drop in U.S. crude inventories, but quickly reversed after the EIA report showed that US crude inventories had actually risen by more than was expected, and ended down 98 cents at $52.64 a barrel after the ADP reported that September private payrolls came in below expectations…oil prices moved lower for an eighth-straight session on Thursday after a report that U.S. services sector growth had slowed to its most anemic pace in three years, but recovered from the session low of $50.99 to finish at $52.45 a barrel, down just 19 cents on the day…oil prices finally moved higher Friday after the Labor Department reported payroll jobs increased moderately in September and that the unemployment rate dropped to a 50-year low of 3.5%, and ended 36 cents higher at $52.81 a barrel, but still ended more than 5% lower for the week, its second consecutive weekly decline...

natural gas prices also ended the week lower even as they broke a 12 day losing streak on Thursday after the longer term weather forecasts suggested cooler weather and hence the onset of the heating season for the middle section of the country…after falling each day last week (and in fact every day since September 16th) and ending down nearly 6% at $2.404 per mmBTU, the quoted contract price of natural gas for November delivery resumed its downward slide on Monday, falling 7.4 cents to $2.33 per mmBTU, after weekend data had indicated a new all-time high for gas production, and forecasts suggested reduced cooling demand without the need for much heating…natural gas prices fell 4.7 cents on Tuesday and then 3.6 cents more on Wednesday, the 12th straight decline in a slump that had seen prices for November gas fall 17.5% over the prior 2 and a half weeks….however, on Thursday, despite a storage report that was on the high side of estimates, prices quickly recovered after the EIA report as mid-October weather outlooks trended cooler and ended the day 8.2 cents higher at $2.329 per mmBTU…the November gas contract price then added another 2.3 cents on Friday to end the week at $2.352 per mmBTU, still 5.2 cents or 2.2% lower than where it ended the prior week..

the natural gas storage report for the week ending September 27th from the EIA indicated that the quantity of natural gas held in storage in the US increased by 112 billion cubic feet to 3,317 billion cubic feet by the end of the week, which meant our gas supplies were 465 billion cubic feet, or 16.3% more than the 2,852 billion cubic feet that were in storage on September 27th of last year, while still 18 billion cubic feet, or a half percent below the five-year average of 3,335 billion cubic feet of natural gas that have been in storage as of the 27th of September in recent years….this week’s 112 billion cubic feet injection into US natural gas storage was a bit more than the forecast for an 109 billion cubic feet injection by analysts surveyed by S&P Global Platts, while it was well above the average 82 billion cubic feet of natural gas that have been added to gas storage during the fourth week of September over the past 5 years, the 27th such average or above average storage build in the last 29 weeks…the 2,139 billion cubic feet of natural gas that have been added to storage over the 27 weeks of this year’s injection season is the second most for the same period in the modern record, eclipsed only by the record 2204 billion cubic feet of natural gas that were injected into storage over the same 26 weeks of the 2014 natural gas injection season, a coolish summer when there were no injections below 76 billion cubic feet….  

as it turns out, that 112 billion cubic feet increase in natural gas storage was the largest on record for the month of September, and the second highest Fall injection in the modern records for this storage report, a level which we can get a sense of with the following graphic of the weekly natural gas inventory change.. 

October 5 2019 change in natural gas inventories up to Sept 27

the above graphic is a screenshot of an interactive graphic included on the EIA’s weekly natural gas storage dashboard, and as the heading indicates, it shows the weekly change, in billions of cubic feet, of natural gas in storage in the lower 48 states…the blue dots represent the weekly changes of natural gas in storage for each week this year up to the current report, and the dark diamonds represent the 5 year average change of natural gas in storage for each of the weeks of the year, while the shaded grey background to those markers represent the range of changes for each week of the year over that 5 year span…thus, for this week, which i have highlighted on this interactive graph by moving my cursor below this week’s dots, you can see the 112 billion cubic feet addition for this year, the 82 billion cubic feet average for the same week over the prior 5 years, and the prior range of between 47 billion cubic feet and 110 billion cubic feet of natural gas that was added to storage over the prior 5 years, with that latter large injection being the one for the same period in 2014…

notice that the blue dots representing this year’s weekly injections are often above the prior 5 year range, as represented by the grey shading, and that the blue dot for the current week’s injection is clearly higher than any prior injection recorded in the 2nd half of the year above…as it turns out, the recent historical records show this week’s 112 billion cubic foot injection was the highest ever for September, and the second highest for the season, eclipsed only by the 113 billion cubic feet injection for the week ending October 7th, 2011….the historical record also shows that this year’s injection of 2,139 billion cubic feet is in sharp contrast to the injections of 2018, when just 1,512 billion cubic feet of natural gas were added to storage between the last week of March and the last week of September, leading to the lowest November gas stores in 16 years, and subsequently to concerns about possible mid-winter shortages…

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 27th showed that because of a big pullback in our oil refining, we were left with surplus oil to add to storage for the third week in a row…our imports of crude oil fell by an average of 87,000 barrels per day to an average of 6,291,000 barrels per day, after falling by an average of 672,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 116,000 barrels per day to an average of 2,867,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,424,000 barrels of per day during the week ending September 27th, 29,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, the production of crude oil from US wells was reported to be 100,000 barrels per day lower at a 12,400,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,824,000 barrels per day during this reporting week..

meanwhile, US oil refineries were reportedly processing 16,017,000 barrels of crude per day during the week ending September 27th, 496,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net average of 443,000 barrels of oil per day were being added to the supplies of oil stored in the US….hence, 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 636,000 barrels per day less than what was reportedly 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 inserted a (+636,000) 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”….with that much  oil unaccounted for once again this week, it calls into question all the other oil metrics that the EIA has reported and that we have just transcribed (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) indicated that the 4 week average of our oil imports rose to an average of 6,611,000 barrels per day last week, now 15.7% less than the 7,984,000 barrel per day average that we were importing over the same four-week period last year….the 443,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, while the amount of oil stored in our Strategic Petroleum Reserve remained unchanged……this week’s crude oil production was reported to be 100,000 barrels per day lower at a record 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day lower at 11,900,000 barrels per day, while a 8,000 barrels per day increase to 480,000 barrels per day in Alaska’s oil production ha no impact on the final rounded national production total…last year’s US crude oil production for the week ending September 21st was rounded to 11,100,000 barrels per day, so this reporting week’s rounded oil production figure was 11.7% above that of a year ago, and 47.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 86.4% of their capacity in using 16,017,000 barrels of crude per day during the week ending September 27th, down from 89.8% of capacity the prior week, & well below the normal refinery utilization rate for mid-September, partially due to tropical storm Imelda’s track through southeastern Texas…as a result, the 16,017,000 barrels per day of oil that were refined this week was 3.5% less than the 16,591,000 barrels of crude per day that were being processed during the week ending September 28th, 2018, when US refineries were operating at 90.4% of capacity….

with the decrease in the amount of oil being refined, gasoline output from our refineries was also lower, decreasing by 159,000 barrels per day to 10,081,000 barrels per day during the week ending September 27th, after our refineries’ gasoline output had increased by 789,000 barrels per day the prior week…but even with that decrease in gasoline output, this week’s gasoline production was 1.3% higher than the 9,950,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 187,000 barrels per day to 4,813,000 barrels per day, after our distillates output had decreased by 341,000 barrels per day over the prior 2 weeks….with those decreases, our distillates production was 4.3% below the 5,029,000 barrels of distillates per day that were being produced during the week ending September 28th, 2018…. 

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 10th time in 16 weeks and for the 24th time in thirty-one weeks, falling by 228,000 barrels to 229,976,000 barrels during the week to September 27th, after our gasoline supplies had increased by 519,000 barrels over the prior week….the decrease in our gasoline supplies came even as the amount of gasoline supplied to US markets decreased by 209,000 barrels per day to 9,137,000 barrels per day, as our exports of gasoline rose by 115,000 barrels per day to 920,000 barrels per day, while our imports of gasoline rose by 43,000 barrels per day to 843,000 barrels per day….after this week’s decrease, our gasoline supplies were 2.2% lower than last September 28th’s inventory level of 235,221,000 barrels, while slipping back to roughly 3% above 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 fell for the 17th time in the past 29 weeks, decreasing by 2,418,000 barrels to 131,267,000 barrels during the week ending September 27th, after our distillates supplies had decreased by 2,978,000 barrels over the prior week…the decrease in our distillates supplies was less extreme this week because our exports of distillates fell by 374,000 barrels per day to 1,249,000 barrels per day, while our imports of distillates fell by 44,000 barrels per day to 50,000 barrels per day, while the amount of distillates supplied to US markets, an indicator of our domestic demand, increased by 63,000 barrels per day to 3,960,000 barrels per day….after this week’s inventory decrease, our distillate supplies were 3.6% less than the 136,131,000 barrels of distillates that we had stored on September 28th, 2018, and fell to around 8% below the five year average of distillates stocks for this time of the year…

finally, with the slowdown in our refining of oil, our commercial supplies of crude oil in storage rose for the fifth time in sixteen weeks and for the twentieth time in 37 weeks, increasing by 3,104,000 barrels, from 419,538,000 barrels on September 20th to 422,642,000 barrels on September 27th…that increase still left our crude oil inventories near the five-year average of crude oil supplies for this time of year, but more than 25% higher than the prior 5 year (2009 – 2013) average of crude oil stocks after the fourth week of September, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had generally been rising over the past year up until the most recent sixteen weeks, after generally falling until then through most of the prior year and a half, our oil supplies as of September 27th were still 4.6% above the 403,964,000 barrels of oil we had stored on September 28th of 2018, but at the same time were 9.1% below the 464,963,000 barrels of oil that we had in storage on September 29th of 2017, and 9.9% below the 469,108,000 barrels of oil we had in commercial storage on September 30th of 2016…    

This Week’s Rig Count

the US rig count fell for the 7th week in a row and for the 29th time in 33 weeks over the week ending October 4th, and is now down by more than 21% since the beginning of this year….Baker Hughes reported that the total count of rotary rigs running in the US fell by 5 rigs to nearly a 30 month low of 855 rigs this past week, which was also down by 197 rigs from the 1057 rigs that were in use as of the October 5th report of 2018, and well less than half of the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…

the count of rigs drilling for oil decreased by 3 rigs to 710 rigs this week, which was a 29 month low for oil rigs and 151 fewer oil rigs than were running a year ago, and quite a bit below 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 2 rigs to 144 natural gas rigs, a 32 month low for gas rig drilling activity and down by 45 rigs from the 189 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition, a vertical rig classified as miscellaneous continued to drill on the big island of Hawaii this week, down by one from the “miscellaneous” rig count of a year ago, when 2 miscellaneous rigs were deployed..

Gulf of Mexico offshore drilling activity was unchanged with 22 Gulf rigs still running this week, with all of those drilling offshore from Louisiana…​ ​however, with a jump in the​ Gulf in​ same week of last year, th​is week’s count now matches the Gulf of Mexico rig count of a year ago, when 21 rigs were drilling in Louisiana waters and one was drilling offshore from Texas…in addition to the Gulf, two rigs continue to drill offshore from the Kenai Peninsula in Alaska, one targeting oil at 5,000 to 10,000 feet and the other targeting natural gas at a depth of more than 15,000 feet, which matches the offshore Alaska count of a year ago…hence, the national total of 24 offshore rigs the same number of rigs that were deployed offshore a year ago…

the count of active horizontal drilling rigs was down by 3 rigs to 749 horizontal rigs this week, which was the least horizontal rigs deployed since May 12th, 2017 and hence is a 28 month low for horizontal drilling…that was also 170 fewer horizontal rigs than the 919 horizontal rigs that were in use in the US on October 5th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…likewise, the directional rig count was also down by 3 to 54 directional rigs this week, and those were down by 12 from the 66 directional rigs that were operating during the same week of last year…on the other hand, the vertical rig count increased by 1 to 52 vertical rigs this week, but those were down by 15 from the 67 vertical rigs that were in use on October 5th of 2018…

the details on this week’s changes in drilling activity by state and by major shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major 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 4th, the second column shows the change in the number of working rigs between last week’s count (September 27th) and this week’s (October 4th) count, the third column shows last week’s September 27th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent 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 5th of October, 2018…   :

October 4 2019 rig count summary

as you can see, the 4 rig increase in New Mexico partially offset this week’s rig decrease in other states…to determine where in New Mexico those rigs might have been added, we have to first check the Permian rig count in Texas, which we find in the Rigs by State – Current and Historical excel file from Baker Hughes, and which shows that 3 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while drilling in both Texas Oil District 8A and Texas Oil District 7C, the northern and southern Permian Midland, was unchanged…hence, for the Permian rig count to show a one rig increase, all 4 of the rigs added in New Mexico had to have been start-ups in the western Permian Delaware…meanwhile, in the Eagle Ford of South Texas, 6 oil seeking rigs were shut down, while 4 natural gas rigs were added, leaving the Eagle Ford deployment at 50 oil rigs and 10 targeting natural gas…on the other hand, the 2 rigs that were shut down in Oklahoma’s Cana Woodford included one oil rig and one targeting gas, while another Oklahoma rig was shut down outside of the major basins tracked by Baker Hughes…meanwhile, North Dakota only shows a 1 rig increase despite the 2 rigs added in the Williston basin because a second Williston basin rig was started up in Montana, the first time Montana has had two rigs deployed since January…note that to offset the 4 natural gas rigs that were added in the Eagle Ford, 2 natural gas rigs were pulled out of West Virginia’s Marcellus, one natural gas rig was pulled out of Oklahoma’s Cana Woodford, one natural gas rig was pulled out of northern Louisiana’s Haynesville while an oil rig was added ​in ​Shelby county Texas ​on the ​western ​side of the Haynesville at the same time, and 2 natural gas rigs were removed from basins not tracked separately by Baker Hughes…lastly, we should also note that other than the changes in the major producing states shown above, Mississippi also saw a rig shut down this week and now has two rigs remaining active; the rig count in that state has fluctuated back and forth between 1 and 6 rigs over just the past couple months, so who knows what’s going on down there….

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