DUC well numbers falling, natural gas prices at a 19 month high, 1 million bpd swing in oil fudge factor casts doubt on weekly data

as of this week, there’s been a new addition to the raft of reports that the EIA publishes monthly that will be worth our watching…commencing with the September Drilling Productivity Report (which was released on the 12th), the EIA will be including a supplement that will provide a monthly estimate of the number of drilled but uncompleted wells (DUCs) in the 7 regions that the Drilling Productivity Report covers, and they’ll be including a summary of that supplement under tab 3 on the anchor Drilling Productivity Report webpage….the addition of such data was a logical move, since a part of the Drilling Productivity Report has always cited oil and gas productivity per drilling rig data, which became pretty meaningless as drillers would drill wells but not frack them, thus showing no additional production after drilling…for this initial report, they estimate that there were 5,031 drilled but uncompleted (ie, unfracked) wells remaining in the 7 basins they cover (the Bakken, Niobrara, Permian, and Eagle Ford, Marcellus, Utica, and the Haynesville), down from 5,065 DUC wells in July…the Permian basin was the only region to see an increase in uncompleted wells, from 1310 DUC wells in July to 1348 in August, which fits what we already knew from the Baker Hughes rig count, wherein 70% of the rigs added over the past 19 weeks were in that basin…the Utica saw a nominal drop, from 132 DUC wells in July to 129 DUCS in August, while the Marcellus saw their uncompleted well inventory fall from 658 wells in July to 642 DUC wells in August…small graphs with the report indicate that oil basin DUCs (ie the Bakken, Niobrara, Permian, and Eagle Ford) rose from 2500 in late 2013 to over 4500 earlier this year, but declined by about 400 over the last five months…natural gas basin (Marcellus, Utica, and the Haynesville) DUCs, on the other hand, fell at a slow, irregular pace from near 1200 to near 1000 over the period, but have fallen more rapidly over the past several months to 914 as of the August report….that should not be a surprise, as the number of gas drilling rigs has dropped from over 1500 throughout 2008 to 374 rigs by the end of 2013, falling to set record lows for gas drilling most every week in early 2016, and hitting bottom at just 81 natural gas rigs nationally on both August 5th and August 26th…apparently, gas drillers have idled their rigs while they’ve been fracking their DUC inventory to maintain enough cash flow to pay interest on their debts…

speaking of natural gas, prices for October delivery of nat gas hit 19 month highs on two successive days of trading on the New York Mercantile Exchange this week, even though supplies remain 8.2% above normal for this time of year…you’ve probably noticed that it’s been warmer than normal for this time of year, not just in Ohio but across the nation…since natural gas overtook coal as the top fuel for thermal electric generation earlier this year, warmer than normal fall weather means that many  Americans, especially south of here, are using more air conditioning than normal for this time of year, and thus consuming more electric power and hence more natural gas than they normally would, at a time of year when most surplus natural gas would normally be heading into storage…after closing last week at $2.948 per mmBTU (million British thermal units), natural gas prices rose to $2.934 per mm-BTU on Monday, then jumped to $3.047 per mm-BTU on Tuesday and to $3.057 per mm-BTU on Wednesday, putting them up 5.8% over 5 days, before falling back to $2.990 per mm-BTU on Thursday and to $2.955 per mm-BTU on Friday, after the EIA’s Weekly Natural Gas Storage Report for week ending September 16th showed that 52 billion cubic feet of natural gas were added to storage in the US over that week, down from last year’s 105 billion cubic feet addition, and down from the 83 billion cubic feet average addition for this time of year, which apparently disappointed traders who were expecting a smaller addition….what apparently drove the rally were forecasts that September was on pace to be the hottest on record in the US, and the NOAA three month forecast for October through December, that indicated a likelihood of warmer than normal temperatures for 80% of the country, with much above normal temperatures in the Northeast and Southwest, while only the 6 states in the Southeast would see close to normal temperatures…since it’s been a few months since we last looked at a natural gas price chart, we’ll include one here today…

September 24 2016 natural gas prices

the above graph shows the October contract price over the last 6 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered to the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark for setting natural gas prices across the US…obviously, recent prices still remain below the $4 per mmBTU breakeven price that was often quoted before prices crashed, and since the count of rigs drilling for gas continued to has hit new lows almost weekly over the entirety of this period up until the end of August, we feel it’s safe to say that natural gas prices likely still remain below breakeven in all but the richest spots of the Utica and Marcellus today…still, as we noted, the older uncompleted wells are now being fracked faster than new wells are being drilled, so eventually some drilling will have to resume if the same level of natural gas supply is to be maintained…

US oil prices, meanwhile, which had fallen by 6.2% last week to $43.03 a barrel, rose every day this week until Friday, when they gave up almost $2 of their gains on a confluence of issues…up a bit to close at $43.30 on Monday, oil prices rose to $44.05 on Tuesday after the American Petroleum Institute reported a surprise inventory draw of 7.497 million barrels, when traders had been expecting a 3.25 million barrel addition to supplies…oil prices then fell again on Wednesday when the EIA weekly report confirmed a massive supply drawdown, and subsequently closed the day at $45.34 a barrel…the price rally continued on that sinking oil supply news on Thursday as price rose almost another dollar to close at $46.32 a barrel…however, on Friday prices were hit after a Saudi oil spokesman said that the oil producers meeting Algiers next week would not result in any formal decisions to freeze supply, and that any agreement would be deferred until the OPEC meeting in Vienna in November…the price drop got worse in the afternoon, after the Fed confirmed it intended to restrict bank involvement in markets for physical commodities such as oil, and with oil drilling on the increase again, oil prices went on to suffer their worst one-day loss since mid-July, but still managed to close the week a $44.48 a barrel, a 2% gain on the week overall…

The Latest Oil Stats from the EIA

the oil data for the week ending September 16th from the US Energy Information Administration showed an increase in our imports of oil to pre-Hermine levels, surprisingly large drops in our stockpiles of both crude and gasoline, and a seasonal pullback in the amount of oil used by domestic refineries….however, this week’s crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung by more than a million barrels a day to -532,000 barrels per day, from last week’s +513,000 barrels per day, which means that 532,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final oil consumption or inventory figures….needless to say, a million barrel per day swing in the balance sheet adjustment renders most of our week over week comparisons useless, but for the same week last year the adjustment was also an inordinately large negative -625,000 barrels per day, which means that at least our year over year comparisons will be subject to similar magnitudes of error…

with that in mind, then, we’ll note that the EIA reported that production of crude oil from US wells rose by 19,000 barrels per day to an average of 8,512,000 barrels per day during the week ending September 16th, as output of Alaskan oil rose by 6,000 barrels per day and production from the lower 48 states was 13,000 barrels per day higher, the third small increase in continental US production in a row….that still left the week’s domestic oil production 6.8% lower than the 9,136,000 barrels we produced during the week ending September 18th of last year, and 11.4% below the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last  year…though our oil production for the week ending September 16th was 707,000 barrels per day lower than what we were producing at the beginning of this year, its now up by 84,000 barrels per day since the beginning of July, so it appears our oil output is stabilizing at these levels as more DUC wells are brought into production…  

for the same week, the EIA also reported that our imports of crude oil rose by an average of 247,000 barrels per day to an average of 8,309,000 barrels per day, 15.4% more than the 7,176,000 barrels of oil per day we imported during the week ending September 18th a year ago…the 4 week average of our oil imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf), which includes both a 3 year high and the subsequent Hermine import bust, slipped to an average of 8.1 million barrels per day, still 9.1% higher than the same four-week period last year… but our exports of crude oil were up by an average of 170,000 barrels per day to an average of 588,000 barrels per day during the same week, partially mitigating the effect of this week’s import increase on supplies…

meanwhile, the amount of crude oil used by US refineries fell by an average of 143,000 barrels per day to an average of 16,587,000 barrels of crude per day during the week ending September 9th, as the US refinery utilization rate fell to 92.0% for that week, down from 92.9% of capacity the prior week, but up from the refinery utilization rate of 90.9% logged during the week ending September 18th last year…however, despite a 343.000 barrel per day drop in refining over two weeks, the amount of crude refined this week nationally was still 2.4% more than the 16,203,000 barrels of crude per day US refineries used during the week ending September 18th last year, and 2.3% more than the equivalent week in 2014, as refining for “the summer driving season” normally comes to a close with the passing of the labor day weekend …   

however, despite the apparent refinery slowdown, our refineries’ production of gasoline rose by 183,000 barrels per day to 10,083,000 barrels per day during the week ending September 16th, which was historically the highest US gasoline output in any week during the three months following Labor Day….that was thus 5.6% higher than our gasoline output of 9,545,000 barrels per day during the week ending September 18th last year, and 10.4% higher than the gasoline production of the equivalent week of 2014….at the same time, refinery output of distillate fuels (diesel fuel and heat oil) rose by 45,000 barrels per day to 4,978,000 barrels per day during the week ending September 16th, which still left our distillates production 2.1% less than the 5,083,000 barrels per day that was being produced during the same week last year, but 2.1% more than the 4,875,000 barrels per day of distillates production of the equivalent week of 2014…  

however, even with the increase in gasoline production, our gasoline inventories fell by 3,204,000 barrels to 225,156,000 barrels as of September 16th, as our domestic demand for gasoline unexpectedly rose by 244,000 barrels per day to 9,650,000 barrels per day and as our gasoline imports fell by 81,000 barrels per day to 569,000 barrels per day…still, this week’s gasoline inventories remained 2.9% higher than the 218,756,000 barrels of gasoline that we had stored on September 18th last year, and 7.1% higher than the 210,324,000 barrels of gasoline we had stored on September 19th of 2014, and still remain categorized by the EIA as “well above the upper limit of the average range” for this time of year….at the same time, our distillate fuel inventories rose by 2,238,000 barrels to 164,992,000 barrels by September 16th, following the prior week’s 4,619,000 barrel increase…that put our distillate inventories 8.6% above the distillate inventories of 151,875,000 barrels of September 18th last year, and 28.3% above the distillate fuel inventories of 128,595,000 barrels of September 19th, 2014…  

oddly, even with our crude oil imports higher and our refinery consumption of crude lower, we apparently needed to draw more oil out of storage to meet our need needs than last week, as our stocks of crude oil in storage fell by 6,200,000 barrels to 504,598,000 barrels….since our crude supplies have thus dropped by nearly 21.3 million barrels over the past three weeks, it would be a good time to pull out a longer term chart to see what that drop of supplies looks like from a historical prospective..

September 24 2016 crude oil supplies as of 9-16

the above graph comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of independent investment and economics research, run by Dr Ed Yardeni…it shows the end of the week stocks of crude oil in millions of barrels for each week beginning with January 2012, up to and including this week’s report for September 16th, with graphs for each year color coded as indicated…here we can see how our oil inventories stayed in a narrow range between 2012 and 2014, represented by the mustard, green and blue bands, typically falling to 350 million barrels by the end of each summer and rising to around 390 million barrels by early spring….however, at the beginning of 2015, represented by the grape colored graph, our inventories of oil started rising each week till they reached 490 million barrels at the end of April 2015, and then stayed elevated in a range 80 to 100 million barrels above the previous norms…that continued into 2016, represented by the scarlet colored graph, and although the rate of increase tailed off early this year, our oil supplies had generally averaged about 15% above 2015’s elevated levels, and more than 40% above historical levels, since early April of this year…the big hit to 2016 inventories came two weeks ago, when the Gulf and Atlantic Coast storm disrupted imports, and now we’ve seen another 6.2 million barrel drop, complicated by the massive half million barrel per day difference between apparent supply and end use…nonetheless, we still ended this week with 12.2% more oil in storage than the 453,969,000 barrels we had stored as of the same weekend a year earlier, and 40.9% more oil than we had stored on September 19th of 2014….however, the markets generally react to the year over year change as reported weekly by the EIA, but as we can see from the above graph, last year’s supply of oil (and of most oil products) was already more than 20% above the historical norm…

This week’s rig count

US drilling activity increased during the week ending September 23rd, after falling the prior week, and has now been up 14 out of the last 17 weeks…Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 511 rigs as of Friday, which was still down from the 838 rigs that were deployed as of the September 25th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil rose by 2 rigs to 418 rigs this week, which was still down from the 641 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations rose by 3 rigs to 92 rigs this week, which was also down from the 197 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…there also remained a single rig that was classified as miscellaneous, technically an increase from a year ago when there were no miscellaneous rigs at work…  

the number of working horizontal drilling rigs rebounded to an 8 rig increase this week after falling by 2 rigs last week, which brought the count of active horizontal rigs back up to 402 rigs, which was nonetheless still down from the 629 horizontal rigs that were in use on September 25th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional drilling rig count increased by 1 rig to 49 rigs, which was also down from the 86 directional rigs that were deployed during the same week last year…meanwhile, the vertical rig count fell by 4 rigs to 60 rigs this week, which was down from the 123 vertical rigs that were drilling in the US during the same week last year…there was also the removal of a rig that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count back to 3 rigs, which was down from 5 rigs on inland waters a year earlier…

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 23rd, the second column shows the change in the number of working rigs between last week (September 16th) and this week (September 23rd), the third column shows last week’s September 16th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was September 25th of 2015:       

Sepember 23 2016 rig count summary

again, we have another week where the table reveals there was not much changing going on anywhere in the country, although it’s not apparent from the above where the 8 horizontal drillers were added…the complete state table shows no additions outside of those listed here, so we’ll have to guess that one or several states with both conventional and shale exploitation taking place, such as Texas or Oklahoma, saw vertical rigs removed in one area while horizontal rigs were added in another…also note that the Permian basin, where most of the new drilling has been taking place over the last 4 months, saw a reduction in its rig count for only the 2nd time in the past 19 weeks…

Posted in Uncategorized | Leave a comment

August new home construction and existing home sales

there were just two reports of note this week: the August report on New Residential Construction from the Census Bureau and the Existing Home Sales Report for August from the National Association of Realtors (NAR)…other reports released this week included Regional and State Employment and Unemployment for August from the BLS, and the Chicago Fed National Activity Index (CFNAI) for August, a weighted composite index of 85 different economic metrics, which fell to −0.55 in August, down from +0.24 in July, revised from the +0.24 reported last month….however, the 3 month average of the index still rose from –0.09 in July to –0.07 in August, which nonetheless indicates that national economic activity has been below the historical trend over those 3 recent months…in addition, this week also saw the Kansas City Fed manufacturing survey for September, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +6 in September, up from -4 in August and –6 in July, suggesting that the 18 month regional contraction, mostly in energy related industries, may be coming to an end…

New Housing Construction Little Changed in August; Building Permits Down YoY

the August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started during the month was at a seasonally adjusted annual rate of 1,142,000, which was 5.8 percent (±9.7%)* below the revised July estimated annual rate of 1,212,000 housing unit starts, but was 0.9 percent (±12.5%)* above last August’s pace of 1,132,000 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, August’s housing starts could have been up by 3.9% or down by as much as 15.5% from those of July, with even larger revisions possible after a number of months…in this report, the annual rate for July housing starts was revised from the 1,211,000 reported last month to 1,212,000, while June starts, which were first reported at a 1,189,000 annual rate, were revised up from last month’s initial revised figure of 1,186,000 annually to 1,195,000 annually 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 Census field agents, which estimated that 100,700 housing units were started in August, down from the 114,200 units started in July…of those housing units started in August, an estimated 66,700 were single family homes and 32,700 were units in structures with more than 5 units, down from the revised 72,700 single family starts in July, and down from the 40,400 units started in structures with more than 5 units in July…

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…in August, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,139,000 housing units, which was 0.4 percent (±1.6%)* below the revised July rate of 1,144,000 permits, and was 2.3 percent (±1.5%) below the rate of building permit issuance in August a year earlier…the annual rate for housing permits issued in July was revised from 1,152,000 down to 1,144,000  annually….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 107,000 housing units were issued in August, up from the revised estimate of 95,100 new permits issued in July…the August permits included 71,300 permits for single family homes, up from 61,000 in July, and 32,500 permits for housing units in apartment buildings with 5 or more units, down from 31,600 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 1.142 Million Annual Rate in August and Comments on July Housing Starts

August Existing Home Sales Little Changed from July or from August a Year Ago

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales slipped by 0.9% from July to August, projecting that 5.33 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was still 0.8% above the annual sales rate projected in August of a year ago; July sales at a 5.58 million annual rate were revised from the 5.59 annual rate indicated by last month’s report…the NAR also reported that the median sales price for all existing-home types was $240,200 in August, down from $243,300 in July but 5.1% higher than in August a year earlier, which they report as “the 54th consecutive monthly year over year increase in home prices”…..the NAR press release, which is titled “Existing-Home Sales Soften Further in August“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this unadjusted data indicates that roughly 541,000 homes sold in August, up by 5.5% from the 513,000 homes that sold in July, and up by 6.7% from the 504,000 homes that sold in August of last year, so we can see that it was just a seasonal adjustment that caused the annualized published figures up to show a decrease…that same pdf indicates that the median home selling price for all housing types fell 1.3%, from a revised $243,300 in July to $240,200 in August, while the average home sales price was $282,100, down 1.0% from the $284,900 average in July, but up 4.0% from the $271,300 average home sales price of August a year ago, with the regional average home sales prices ranging from a low of $222,700 in the Midwest to a high of $373,100 in the West…

for both seasonally adjusted and unadjusted graphs and additional commentary on this report, check out the following two posts from Bill McBride at Calculated Risk: Existing Home Sales decreased in August to 5.33 million SAAR and A Few Comments on August Existing Home Sales

 

(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 from the aforementioned GGO posts, contact me…)               

Posted in Uncategorized | Leave a comment

September 24 graphics

natural gas prices:

September 24 2016 natural gas prices

rig count summary:

Sepember 23 2016 rig count summary

oil supplies:

September 24 2016 crude oil supplies as of 9-16

Posted in Uncategorized | Leave a comment

this week’s Ohio Supreme Court rulings, another record for refined products supplies, et al

before we start on the regular fracking patch news, we should take note of two rulings which were handed down by the Ohio Supreme Court this week that relate to fracking in Ohio….in the first, the Court ruled in favor of Secretary of State Jon Husted and against the citizen petitions to establish a charter form of county government that had been advanced by groups in Athens, Meigs and Portage counties, news of which we’ve been carrying as it developed over the past several months, wherein local election boards had ruled against the petitions, ultimately throwing the decisions to the Secretary of State…this was basically a replay of the rulings of last summer that we covered in two posts, wherein county charter government proposals in Athens, Fulton and Medina were ruled off the November 2015 ballot…

the second Supreme Court ruling involved, as best i can determine, 16 cases that had been brought in regards to the state’s Dormant Mineral Act, wherein the court ruled on three of those cases, while the remaining cases were disposed of based on the authority of those initial three decisions…to cut to the chase, the question being decided was who owns the mineral rights to a property, the surface land owner, or the mineral rights holder, after decades of extraction inactivity at the site…i gather that the Ohio Dormant Mineral Act, Ohio Revised Code § 5301.56, sets forth that ownership of mineral rights would transfer to the owner of the surface property after said mineral rights would deem to be abandoned…however, the court ruled that this transfer is not automatic, ie, that the surface owner must bring a quiet title action to obtain a judicial decree that a mineral interest has been abandoned, and otherwise, as in the cases being ruled on this week, the mineral rights holder would retain those long dormant rights…thus, in the lead case, Corban v. Chesapeake, the court found that an Ohio man who had inherited 164.5 acres in Harrison County could not prevent Chesapeake from drilling on his land, even though the property had been purchased by his family 57 year ago from a coal company, since that company had retained rights to the oil and gas deposits…thus, it would appear that all of those properties in our part of the state that have at one time had gas or drilling on them would be subject to fracking in the future, without any additional compensation the surface landowners…that would seem to include all the farms that had wells drilled on them in the gas boom of the mid-1980s, when everyone with a piece of land in this part of the county thought they were the reincarnation of J.R. Ewing, and that would be the case even if said farms have since been sold and been subsequently developed as residential properties…now, there are several links to this ruling here, including two from law journals, so i’d welcome anyone with a law background to further clarify what this ruling means for those who might own or who have purchased such a property in this part of the state, because eventually we’re going to want to know that…

in other news, oil prices fell more than 6% this week, despite two days that saw prices rise, as global oil glut concerns overwhelmed the impact of other news & rumors…after closing last week at $45.88 a barrel, oil prices rose nearly one percent on Monday, supported by a weaker dollar and a broad-based market rally, and closed up 41 cents at 46.29 a barrel…but oil prices fell steadily all day Tuesday, after OPEC raised its 2017 forecast of non-OPEC oil supplies and the Paris based International Energy Agency (IEA) published its September Oil Market Report, which forecast demand for oil would only grow 1.3 million barrels per day this year, or 100,000 barrels per day less than their prior estimate…after falling 3% on that news to close at $44.90 a barrel on Tuesday, oil prices then fell another 3% on Wednesday to close at $43.58 a barrel on news that oil shipments from both Libya and Nigeria would soon be resuming, exacerbating the oil glut…oil prices then rose roughly 0.8% to $43.91 on Thursday when gasoline prices rose 5.1% after a major rupture of the Colonial Pipeline, which transports 1.2 million barrels of gasoline a day from Texas to New Jersey, spilled the fuel near Birmingham Alabama, closing the pipeline and thus threatening gasoline supplies to 6 states…oil prices then resumed their slide on Friday after a report from Goldman Sachs forecast that crude would continue to trade within the $45-50 band over the next 12 months, and that any price increase above $50 was highly unlikely, comparing the current period to the 12 year stretch in the 1990s, when oil traded around $20 a barrel….oil prices thus closed the week at $43.03 a barrel, 6.2% lower than last Friday’s close..

The Latest Oil Stats from the EIA

this week’s oil stats for the week ending September 9th from the US Energy Information Administration indicated that our oil imports returned to recent levels after last week’s storm related interruptions, that refinery throughput eased from the near record levels of last week, and that a relatively small drawdown of crude oil inventories was more than offset by a six and a half million barrel increase in supplies of refined products…however, this week’s crude oil fudge factor that was needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung back to +513,000 barrels per day, after last week’s -169,000 barrels per day, which meant that 513,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week’s metrics were off by that amount… we’ve now seen a large positive adjustment in 11 out of the last 12 weeks, and as a result this year’s cumulative daily average of that weekly statistical adjustment has risen to a positive 101,000 barrels per day, a significant reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn’t showing up in the final consumption or inventory figures…   

this week’s EIA data also showed that production of crude oil from US wells rose by 35,000 barrels per day to an average of 8,493,000 barrels per day during the week ending September 9th, as output of Alaskan oil rose by 30,000 barrels per day and production from the lower 48 states was 5,000 barrels per day higher, the second small increase in continental US production in a row….that still left the week’s domestic oil production 6.8% lower than the 9,117,000 barrels we produced during the week ending September 11th of last year, and 11.6% off the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…our oil production for the week ending September 9th was also still 726,000 barrels per day lower than what we were producing at the beginning of this year…  

during the same week, the EIA reported that our imports of crude oil rose by an average of 993,000 barrels per day to an average of 8,062,000 barrels per day, 12.1% more than the 7,189,000 barrels of oil per day we imported during the week ending September 11th a year ago…the 4 week average of our oil imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) remained at an average of 10.2 million barrels per day, 10.1% higher than the same four-week period last year… at the same time our exports of crude oil fell by an average of 83,000 barrels per day to an average of 418,000 barrels per day during the week ending  September 9th, well down from the oil export record of 698,000 barrels per day we saw during the week ending August 26th…combined, that meant our net imports were 1,076,000 higher than last week…

meanwhile, the amount of crude oil used by US refineries fell by an average of 200,000 barrels per day to an average of 16,730,000 barrels of crude per day during the week ending September 9th, as the US refinery utilization rate fell to 92.9% for that week, down from 93.7% of capacity the prior week, and down from the refinery utilization rate of 93.1% logged during the week ending September 11th last year…refining on the glutted east coast fell by 54,000 barrels per day as the refinery utilization rate there fell back to 85.5% from last week’s 89.6%, while the Gulf coast refineries also took in 116,000 less barrels of crude per day than they did last week…nonetheless, the amount of crude refined this week nationally was still 1.3% more than the 16,513,000 barrels of crude per day US refineries used during the week ending September 11th last year, and 2.6% more than the equivalent week in 2014, as refining for “the summer driving season” now comes to a close with the passing of the labor day weekend …   

the 200,000 barrel per day drop in crude oil being refined, combined with the beginning of the seasonal switch in refinery processes, led to a 273,000 barrel per day drop in our refineries’ production of gasoline, which fell to 9,900,000 barrels per day during the week ending September 9th, the lowest gasoline output since the second week of June…still, that was 7.1% higher than our gasoline output of 9,247,000 barrels per day during the week ending September 11th last year, and 7.9% higher than the gasoline production of the equivalent week of 2014….at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 98,000 barrels per day to 4,933,000 barrels per day during the week ending September 9th….that left our distillates output 2.8% less than the 5,076,000 barrels per day that was being produced during the same week last year, but still a bit more than the 4,910,000 barrels per day of distillates production of the equivalent week of 2014…  

however, even with the slowdown in gasoline production, our gasoline inventories rose by 567,000 barrels to 228,360,000 barrels as of September 9th, as our gasoline imports rose by 43,000 barrels per day to 650,000 barrels per day and as our domestic demand for gasoline fell by 189,000 barrels per day to 9,406,000 barrels per day, confirming that driving really did tail off after Labor Day…that left this week’s gasoline inventories 5.0% higher than the 217,387,000 barrels of gasoline that we had stored on September 11th last year, and 8.4% higher than the 210,738,000 barrels of gasoline we had stored on September 12th of 2014…at the same time, our distillate fuel inventories rose by 4,619,000 barrels to 162,754,000 barrels by September 9th, which was the largest one week build of distillate inventories since January 8th of this year…that put our distillate inventories 5.7% above the distillate inventories of 153,963,000 barrels of September 11th last year, and 27.4% above the distillate inventories of 127,772,000 barrels of September 12th, 2014…  

end of the week inventories of most other major refined products were higher as well….our stockpiles of propane/propylene rose by 1,963,000 barrels to 98,51,000 barrels last week, which meant they were 3.5% above last year’s September 11th record high of 97,693,000 barrels, and 30.5% higher than the propane/propylene inventories of the same weekend in 2014…inventories of kerosene type jet fuel rose by 908,000 barrels to 42,749,000 barrels as of September 9th, 4.1% above our jet fuel stockpiles of 41,077,000 barrels on September 11th last year, and 10.8% higher than our 38,596,000 barrels of jet fuel supplies we had stored on September 12th of 2014…in addition, our stockpiles of residual fuel oils rose by 997,000 barrels to 40,583,000 barrels as of September 9th, up 4.1% from the 38,988,000 barrels we had stored a year earlier, and 11.3% higher than the 36,463,000 barrels of residual fuel oils we had stored on September 12th of 2014….and while inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) fell by 439,000 barrels to 150,681,000 barrels as of September 9th, they remained 14.0% higher than the 132,196,000 barrels we had stored as of September 11th last year, and 15.0% higher than the equivalent week in 2014…adding all the refined products together, we find that they rose by 6,571,000 barrels over the week ending September 9th, to another new record high, just as we’ve seen them do almost every week this year…

lastly, the expected rebound in our oil supplies after Hurricane Hermine curtailed last week’s East Coast and Gulf imports did not materialize, and therefore refineries and exporters found in necessary to withdraw 559,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 9th fell to 510,798,000 barrels…but that was still 12.0% higher than the 455,894,000 barrels of oil we had stored as of September 11th, 2015, and 41.0% higher than the 362,271,000 barrels of oil we had stored on September 12th of 2014, so the two weeks of inventory drawdowns barely put a dent in our oversupply of crude…. 

This Week’s Rig Count

US drilling activity fell for the 3rd time in the past 16 weeks during the week ending September 16th, following the prior string of 39 weeks back to August 21, 2015 wherein the rig count had not risen at all…Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 506 rigs as of Friday, which was also down from the 842 rigs that were deployed as of the September 18th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil rose by 3 rigs to 416 rigs this week, and they’re now up by 100 rigs since the May 27th nadir; however, that was still down from the 644 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations fell by 3 rigs to 89 rigs this week, which was also down from the 198 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…the week also saw the removal of 1 rig that was classified as miscellaneous, still leaving a single miscellaneous rig in play, still up from a year ago when there were no miscellaneous rigs deployed….  

two additional drilling platforms were deployed in the Gulf of Mexico this week, both of which were offshore from Louisiana…that bought the Gulf of Mexico and the total US offshore count up to 20 rigs, down from 29 rigs drilling in the Gulf and a total of 31 rigs working offshore nationally a year ago…at the same time, there was also a rig removed that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count back to 4 rigs, which was down from 5 rigs on inland waters a year earlier…

the number of working horizontal drilling rigs fell by 2 rigs this week after rising by only 1 rig last week, which left the count of active horizontal rigs at 394 rigs, which was down from the 664 horizontal rigs that were in use on September 18th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count was unchanged at 64 rigs this week, which was down from the 119 vertical rigs that were drilling in the US during the same week last year, while the directional drilling rig count was also unchanged at 48 rigs, which was also down from the 83 directional rigs that were deployed during the same week last year…     

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 16th, the second column shows the change in the number of working rigs between last week (September 9th) and this week (September 16th), the third column shows last week’s September 9th active rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was September 18th of 2015:      

September 16 2016 rig count summary

there’s really not much to see here this week, is there?  Oklahoma saw three rigs added, with one obviously in the Ardmore Woodford and another in the Cana Woodford, but those came after they had pulled out 4 rigs last week, which we suspected may have been in reaction to the record setting 5.8 earthquake they’d seen in that region the Saturday before…Louisiana was down two rigs despite the 2 additions in the Gulf, and we can account for part of that by the inland lake rig shutdown and the rig pulled out of the Haynesville, which also accounts for one of the gas directed rigs pulled out…we should also note that a single rig was also pulled out of Alabama, where 1 rig remains, and out of Idaho, where there are now none, which aren’t shown on the state table above…otherwise, there were 2 more rigs added in the Permian, which by itself accounts for 70 of the oil rigs that have been added since the end of April…thus, without the Permian, there wouldn’t be much of a drilling recovery to speak of at all…

Posted in Uncategorized | Leave a comment

August retail sales, consumer and producer prices, and industrial production; July’s business inventories

reports released this past week included Retail Sales for August and Business Sales and Inventories for July from the Census bureau, August Industrial Production and Capacity Utilization from the Fed, and the August Consumer Price Index, the August Import-Export Price Index, and the August Producer Price Index, all from the Bureau of Labor Statistics… the Fed also released the 2nd Quarter Flow of Funds report, a 198 page pdf report that tracks the flow of money throughout the economy as it moves between households, businesses, and government, and which is usually reported on for household net worth, which tends to fluctuate with the stock market and the value of homes, as measured by the CoreLogic Home Price Index…this week’s report showed that household net worth rose from $88.0 trillion in the 1st quarter of this year to a record $89.1 trillion in the 2nd quarter, as the value of real estate owned by households rose by $474 billion and the value of corporate stock owned by households increased by $452 billion….. 

this week also saw the release of the first two regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from -4.21 in August to -1.99 in September, suggesting that First District manufacturing was still contracting, but at a slower pace, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +2.0 in August to +12.8 in September, suggesting more robust growth than the region’s manufacturing has seen in any month over the past year…

Retail Sales Fall by 0.3% in August

seasonally adjusted retail sales were down in August while retail sales for July now indicates an increase, despite being unchanged, due to the downward revision of June sales…the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $456.3 billion during  the month, which was down 0.3 percent (±0.5%)* from July’s revised sales of $457.9 billion but 1.9 percent (±0.7%) above the adjusted sales in August of last year…July’s seasonally adjusted sales were statistically unrevised at $457.7 billion, while June sales were revised lower, from $457.9 billion to $457.4 billion, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 1.8%, from $461,851 million in July to $470,250 million in August, while they were up 3.0% from the $456,340 million of sales in August a year ago…the revision to June sales means that 2nd quarter sales were roughly $0.5 billion lower than previously reported, which would be enough to dock 0.4 percentage points from 2nd quarter GDP when the 3rd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the June to July change under “Jun 2016 (r)evised” and the revised July 2015 to July 2016 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance July sale estimates, before this month’s revision, is here….

August 2016 retail sales table

from the above table, we can see that the 0.3% decrease in August sales was largely driven by the 0.9% decrease to $92,862 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have only shown a 0.1% decrease for the month…in addition, there was an 0.8% decrease to $33,115 million in sales at gas stations, which we figure to be mostly due to lower prices…if we take out gas station sales in addition to motor vehicles and parts, we find August retail sales would be still be down nearly half of 0.1%, which would be considered statistically unchanged from the previous month…also notice the other large month over month decreases: miscellaneous store retailers saw sales drop by 2.4% to $10,293 million, while sales at building material & garden equipment & supplies dealers fell 1.4% to $28,695 million…considering that, as we’ll see next, prices except for food were generally higher, this report suggests a reduction in the contribution of personal consumption expenditures for goods to 3rd quarter GDP…

August Consumer Price Index Up 0.2% on Higher Medical Care, Rents

the consumer price index increased by 0.2% in August, as price increases for most core services were only partially offset by lower prices for groceries and energy commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.2% in August after it had been unchanged in July and rose 0.2% in June, 0.2% in May, 0.4% in April and 0.1% in March….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 240.647 in July to 240.853 in August, which left it statistically 1.064% higher than the 238.316 index reading of last August, which is reported as a 1.1% increase….regionally, prices for urban consumers have risen 1.6% in the West, 1.1% in the Northeast, 1.0% in the South, and 0.6% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people…with flat to lower prices for food and energy commodities offsetting higher prices for services, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 247.768 to 248.284, which put it 2.32% ahead of its year ago reading of 242.651…

the volatile seasonally adjusted energy price index was unchanged in August after falling by 1.6% in July, but rising by 1.3% in June, 1.2% in May and 3.4% in April….however, since the energy price index fell by more than 11.5% over this past winter, it still remained 9.2% below its level in August of a year ago….prices for energy commodities were 0.9% lower while the index for energy services rose by 0.8%, after rising by 0.9% in July….the decrease in the energy commodity index included a 0.9% reduction in the price of gasoline, the largest component, and a 2.5% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, fell by an average of 2.7%…within energy services, the index for utility gas service rose by 2.1% after increasing by 3.1% in July, and hence utility gas is now priced 1.1% higher than it was a year ago, while the electricity price index rose by 0.5%, after also increasing by 0.5% in July…energy commodities are now priced 17.3% below their year ago levels, with gasoline prices averaging 17.8% lower than they were a year ago…meanwhile, the energy services price index is still 0.4% lower than last August, as electricity prices have fallen 0.7% over that period..

the seasonally adjusted food price index was unchanged in August, just as it was in July, as 0.2% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3%..the food price index is also unchanged from a year ago, as a 1.9% decrease in the price of food at home offset a 2.8% increase in prices for food away from home, which included a 12.0% jump in prices of lunches at elementary and secondary schools…

in the food at home categories, the price index for cereals and bakery products was unchanged in August as 1.5% lower prices for breakfast cereals and a 0.9% decrease in white bread prices offset a 1.7% increase in prices of crackers and a 1.2% increase in prices for bread other than white bread…the price index for the meats, poultry, fish, and eggs group fell by 0.4% as egg prices averaged 6.6% lower and a 0.5 increase in the beef index was offset by a 0.5% decrease in pork prices…meanwhile, the index for dairy products was unchanged as a 1.2% increase in prices for fresh whole milk was offset by a 0.6% decrease in prices for cheese while other dairy products were also lower… in addition, the fruits and vegetables index was also unchanged, as a 1.5% increase in tomato prices was offset by a 3.0% drop in prices for oranges and a 0.7% decrease in the index for processed fruits and vegetables…the beverages index was 0.1% lower as a 1.0% decrease in the price of roast coffee more than offset 0.6% higher prices for noncarbonated juices and drinks…lastly, prices in the other foods at home category were on average 0.2% lower, as a 4.0% drop in prices of olives, pickles, relishes and 1.5% lower salad dressing offset 1.2% higher prices for peanut butter and 1.0% higher prices for sugar…..among food at home line items, only eggs, which are now priced 37.9% lower than a year ago, and apples, which are 10.3% higher, have seen a price change greater than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.3% in August after rising by 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods rose by 0.1%, while the 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 August retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% lower on a 1.8% decrease in prices for living room, kitchen, and dining room furniture, while the apparel price index was 0.2% higher as 3.9% higher prices for girl’s apparel and a 4.5% increase in prices for men’s outwear was only partially offset by a 6.6% drop in prices for women’s outwear…prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down another 0.6% after falling 1.0% in July, 1.1% in June and 1.3% in May…at the same time, prices for medical care commodities were 1.1% higher on a 1.3% increase in prescription drug prices…meanwhile, the recreational commodities index rose 0.1% as another 2.1% drop in TV prices was more than offset by a 1.5% increase in photographic equipment, a 5.3% increase in recreational book prices, and 1.0% higher prices for toys, games, hobbies and playground equipment…meanwhile, the education and communication commodities index was unchanged as a 1.3% price drop for computer software and accessories offset a 1.6% increase in prices for college textbooks….lastly a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 0.4% on a 0.9% increase in prices for infants equipment and an 0.8% increase in cigarette prices..

within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents, a 0.3% increase in owner’s equivalent rent, and a 2.3% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.2% and other household operation costs were 0.1% lower….at the same time, the index for medical care services rose 0.9% as hospital services rose 1.7% and health insurance was up 1.1%….meanwhile, the transportation services index was up 0.1% despite a 3.4% decrease in car and truck rentals as intercity transportation services rose 1.5% and motor vehicle insurance rose 0.5%…on the other hand, the recreation services index fell 0.1% as video & audio rental services fell 0.8% and admissions to sporting events fell 0.4%…meanwhile, the index for education and communication services rose 0.1% as land-line telephone services rose 0.6% while college tuitions fell 0.4%…lastly, the index for other personal services was up 0.1% with no increase greater than the 0.2% increase in haircut prices…among core prices, only televisions, which are now 20.6% cheaper than a year ago, saw prices change by more than 10% over the past year…

Industrial Production and Capacity Utilization Both Down 0.4% in August

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.4% in August after rising by a revised 0.6% in July…as a result, industrial production is now down 1.1% from a year ago, as it had previously seen three consecutive quarter over quarter decreases…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 104.4 in August from 104.9 in July, which was unchanged from what was reported for July a month ago…at the same time, the June reading for the index was revised up from 104.1 to 104.3..

the manufacturing index, which accounts for more than 77% of the total IP index, fell by 0.4, from 103.4 in July to 103.0 in August, after July’s manufacturing index was revised down from 103.6…. meanwhile, the mining index, which includes oil and gas well drilling, rose from 104.5 in July to 105.6 in August, after the July index was revised up from 104.2….nonetheless, the mining index still remains 9.3% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.4% in August after rising 2.1% in July and a revised 2.9% in June…we would look for that August utility index to ultimately be revised higher, since population adjusted temperatures in August were slightly more above normal than the population adjusted temperatures of July

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 75.9% in July to 75.5% in August…capacity utilization of NAICS durable goods production facilities rose fell from 76.3 in July to 75.8 in August, after July’s figure was revised down from 76.5%, while capacity utilization for non-durables producers fell from a downwardly revised 74.8% to 74.6%…capacity utilization for the mining sector rose to 76.2% in August, up from 75.2% in July, which was originally reported as 74.9%, while utilities were operating at 80.4% of capacity during August, down from their 81.7% of capacity during July, which was revised up from 81.0%…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….

Producer Prices Flat in August on Lower Food and Energy Prices, Higher Core Services

the seasonally adjusted Producer Price Index (PPI) for final demand netted no change in August as prices for finished wholesale goods fell by 0.4%, while margins of final services providers rose by 0.1%…this followed a July report that showed the overall PPI had decreased 0.4%, with prices for finished goods down 0.4% while final demand for services fell 0.3%….producer prices are now unchanged from a year ago, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015…

as we noted, the index for final demand for goods, aka ‘finished goods’, fell by 0.4% in August, after falling 0.4% in July but rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices fell 0.8% from July to August and the price index for wholesale foods was 1.6% lower, while the index for final demand for core wholesale goods (ex food and energy) rose 0.1%…major wholesale price changes included a 32.2% drop in wholesale prices for eggs and an 11.5% drop in prices for fresh and dried vegetables, while lower wholesale prices for heat oil (down 7.6%), diesel fuel (-6.1%) and LP gas (-5.8%) dragged the energy index lower…

meanwhile, the index for final demand for services rose by 0.1% in August after falling by 0.3% in July and rising 0.4% in June, as the index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.5% higher….noteworthy among trade services was a 6.0% increase in seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers, a 4.2% increase in margins for a apparel wholesaling, a 2.9% drop in margins for machinery and equipment wholesaling and a 5.2% drop in margins for chemicals and related products wholesaling…among transportation and warehousing services, margins for air transport of freight fell 1.8% and margins for airline passenger services fell 1.7%…in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services, margins for passenger car rental services, and margins for residential property sales and leases, brokerage fees and commissions were all 2.8% higher..

this report also showed the price index for processed goods for intermediate demand decreased by 0.1%, after rising 0.2% in July, 0.9% in June, 0.8% in May but also after falling monthly from last July through March, as prices for intermediate processed goods still remain 3.7% lower than in August a year ago…. the price index for intermediate energy goods fell by 1.1%, prices for intermediate processed foods and feeds fell 1.9%, while the price index for processed goods for intermediate demand less food and energy was 0.3% higher…meanwhile, the price index for intermediate unprocessed goods was down by 2.8%, after falling by 0.4% in July but rising by 2.8% in June, 1.3% in May, 3.0% in April and 1.6% in March, in the only increases in that index since June of last year…driving the August decrease was a 6.8% drop in the index for crude energy goods, as prices for crude oil fell 9.1%; at the same time, the index for unprocessed foodstuffs and feedstuffs fell 1.8%, while the index for core raw materials other than food and energy materials was 0.8% higher…. this raw materials index is now 8.4% lower than it was a year ago, but more than two thirds of the year over year decrease of 26.4% seen in November 2015 has since been retraced…

lastly, the price index for services for intermediate demand was unchanged in August, after rising 0.3% higher in July and 0.8% in June, as the index for trade services for intermediate demand fell 1.3%, while the index for transportation and warehousing services for intermediate demand was 0.1% higher, and the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.4%…driving the increase in prices for services for intermediate demand was a 2.8% increase in the index for intermediate services related to portfolio management; in addition, the indexes for loan services (partial); broadcast and network television advertising time sales; courier, messenger, and  U.S. postal services; and machinery and equipment parts and supplies wholesaling also rose…over the 12 months ended in August, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.4% higher than it was a year ago…    

July Business Sales Down 0.2%, Business Inventories Unchanged

after the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August report and the earlier published 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 $1,303.6 billion in July, down 0.2 percent (±0.1%) from June revised sales, and down 0.8 percent (±0.4%) from July sales of a year earlier…note that total June sales were also revised down from the originally reported  $1,307.8 billion to $1,306.2 million….manufacturer’s sales were down 0.2% to $458,864 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.1% to $402,872 million, while wholesale sales fell 0.4% to $441,865 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.2 billion at the end of July, virtually unchanged (±0.1%)* from June, but 0.5 percent (±0.6%)* higher than in July a year earlier…the value of end of June inventories was revised up slightly from the $1,813.7 billion reported last month to $$1,813.8 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $620,329 million, 0.1% higher than in June, inventories of retailers were valued at $601,564 million, 0.3% less than in June, while inventories of wholesalers were estimated to be valued at $591,261 million at the end of July, statistically unchanged from June…

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index, which was down 0.4% in the aggregate in July…two weeks ago, we looked at real factory inventories with that adjustment, and judged they would provide a substantial boost to 3rd quarter GDP; similarly, last week we found that real wholesale inventories would also provide a boost to GDP…this week’s real retail inventories for July, after a 0.4% price adjustment of the 0.3% nominal value decline, would have increased by about 0.1% over June, in a second quarter that saw producer price index increases of 0.5%, 0.7%, and 0.8% in April, May and June reduce real inventories…thus it appears that retail inventories are also on track to add incrementally to the growth of 3rd quarter GDP..

 

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

Posted in Uncategorized | Leave a comment

September 17h graphics

retail sales:

August 2016 retail sales table

rig count summary:

September 16 2016 rig count summary

Posted in Uncategorized | Leave a comment

refining at a 13 month high, oil imports at 11 month low as Hermine leads to largest drop in oil supplies in 17 years; global rigs for August

oil prices were remarkably volatile this past week, as we saw two price spikes of nearly 5%, each followed by price retreats of almost the same magnitude…early on Monday morning, a holiday in the US markets, news of a meeting between Russian ol minister Alexander Novak and his Saudi counterpart Khalid al-Falih.was announced, and prices for US oil, which had drifted from last week’s close of $44.44 a barrel to near $44.10 a barrel in European and US off-market trading, suddenly spiked up by more than $2 in the first few hours of trading, briefly hitting $46.53 a barrel on production freeze speculations, only to crash right back down to near where they started the day after the joint statement from the meeting was released, which only said that the parties agreed to work together on stabilizing the oil market, with no specifics…then, with the official US markets open on Tuesday, US crude slipped back to below $44 a barrel in the morning, on news of Saudi budget cuts, before gradually recovering in the afternoon to end the day down 7 cents, or 0.2% lower than the prior Friday, to close at $44.38 a barrel on the New York Mercantile Exchange…prices continued to meander on Wednesday morning, then spiked over to $46 a barrel in the afternoon, after the American Petroleum Institute reported a 12 million barrel drawdown from our stockpiles of crude, against market expectations of a million barrel increase in supplies…after closing Wednesday at $45.50 a barrel, oil prices hovered in that range early Thursday until the EIA report, delayed a day because of the holiday, showed a 14.5 million draw down in our supplies of crude, the largest weekly crude-supply drop since 1999, which sent oil prices soaring 4.7%, to close Thursday at a two-week high of $47.62 a barrel…then on Friday, as traders realized the big drop in supplies was likely just a temporary aberration caused by the hurricane of that week, and as hopes for a production freeze faded, oil prices gave up most of Thursday’s gains and closed down $1.74 at 45,88 a barrel, or 3.7% lower on the day, but up 3.2% for the week..

The Latest Oil Stats from the EIA

as we noted, the oil data for the week ending September 2nd from the US Energy Information Administration indicated that our supplies of oil and gasoline nosedived, as our oil imports fell to an 11 month low on tropical storm related shipping disruptions on the east coast and in the Gulf of Mexico and an unrelated shutdown of the Houston ship channel…furthermore, this week’s crude oil fudge factor needed to make the weekly U.S. Petroleum Balance Sheet (line 13) balance swung to -169,000 barrels per day, down from + 233,000 barrels per day last week, which meant that 169,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final consumption or inventory figures….that breaks the string of 10 weeks wherein we’d seen a large positive adjustment each week, and lowers this year’s cumulative daily average of that weekly statistical adjustment to a positive 90,000 barrels per day, which means that on average this year, 90,000 more barrels of oil per day were showing up in our final consumption and inventory figures than were accounted for by our production or import figures…. 

after we reported last week that our imports had hit a 47 month high during the week ending August 26th, the EIA reported this week that our imports of crude oil fell from there by 1,848,000 barrels per day to an average of 7,069,000 barrels per day during the week ending September 2nd, the least oil we’ve imported in any week since the 7,068,000 barrels per day we imported during the week ending October 19th last year….although this week’s crude imports were 5.2% lower than the 7,459,000 barrels of oil per day we imported during the week ending September 4th last year, the 4 week average of our imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) was still at an average of 8.2 million barrels per day, 7.4% higher than the same four-week period last year… 

at the same time, EIA data showed that production of crude oil from US wells fell by 30,000 barrels per day, from an average of 8,488,000 barrels per day during the week ending August 26th to an average of 8,458,000 barrels per day during the week ending September 2nd, as output of Alaskan oil fell by 45,000 barrels per day while production from the lower 48 states was 15,000 barrels per day higher…why there wasn’t also a curtailment in domestic production due to the storms is a mystery to me, since we know from last week’s Baker Hughes data that a large percentage of Gulf of Mexico platforms were shut down during this same week… at any rate, this week’s nominal output drop left the week’s domestic oil production down by 7.4% from the 9,135,000 barrels we produced during the week ending September 4th of last year, and 12.0% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…our oil production for the week ending September 2nd was thus 761,000 barrels per day lower than what we were producing at the beginning of this year…  

meanwhile, the amount of crude oil used by US refineries jumped by an average of 315,000 barrels per day to an average of 16,930,000 barrels of crude per day during the week ending September 2nd, which was the most oil we’ve refined in 13 months and our 3rd highest refinery throughput in history…that was as the US refinery utilization rate rose to 93.7% for the week, up from 92.6% of capacity during the week ending August 26th, and up from the 90.9% refinery utilization rate during the week ending September 4th last year..refining on the glutted east coast rose by 40,000 barrels per day as the refinery utilization rate there rose from 86.7% to 89.6%, while the Midwest refineries picked up the slack with a 98.4% utilization rate and Gulf coast refineries took in 165,000 more barrels of crude per day than they did last week…as a result, the amount of crude refined this week nationally was 5.1% more than the 16,110,000 barrels of crude per day US refineries used during the week ending September 4th last year, and 3.7% more than the equivalent week in 2014, being that we’re at a time of year that crude refining normally tails off, as “the summer driving season” apparently comes to a close with the labor day weekend …   

with more oil being refined, our refinery production of gasoline rose by 152,000 barrels per day to an average of 10,173,000 barrels per day during the week ending September 2nd, which was the 5th highest gasoline output in any week on record, and 6.1% higher than our gasoline production during the equivalent week of 2015…at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 58,000 barrels per day to 5,031,000 barrels per day during week ending the 2nd, which was 237,000 barrels per day, or 4.9% higher than our distillates production during the same week of 2015…    

however, even with the near record output of gasoline, our gasoline inventories fell for second week in a row, dropping by 4,211,000 barrels to 227,793,000 barrels as of September 2nd, the largest one week drop in gasoline supplies since mid-March….that was as our imports of gasoline fell by 225,000 barrels per day to a 21 week low of 607,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 84,000 barrels per day to 9,595,000 barrels per day, apparently in one last consumption surge before the holiday… nonetheless, this week’s gasoline supplies were still 6.2% higher than the 214,547,000 barrels of gasoline that we had stored on September 4th last year, and 7.3% higher than our gasoline supplies of September 5th, 2014, and thus our gasoline stores are still categorized as “well above the upper limit of the average range” for this time of year.. 

meanwhile, our distillate fuel inventories rose by 3,382,000 barrels to 158,135,000 barrels as of September 2nd, which pushed our distillate inventories to a level 4.8% above the then 4 year high of 150,903,000 barrels of September 4th last year, and 24.0% above the distillate inventories of 127,493,000 barrels of September 5th, 2014… that increase thus changed the EIA characterization of our distillate inventories to “above the upper limit of the average range for this time of year”

lastly, after that big 1.848 million barrel per day drop in oil imports, refineries found it necessary to withdraw 14,513,000 barrels of oil from our stockpiles of crude oil in storage to meet their needs, and hence our oil inventories as of September 2nd fell to 511,357,000 barrels, the largest one week drop in oil supplies since the week ending January 1st 1999...from where we sit, it’s impossible to tell if that drop in supplies is just a one week aberration or not, and whether that supply will be restored in the weeks ahead, once all the ships that were forced to anchor offshore come in and unload…even so, this week’s 511,357,000 barrels of crude supplies is still 11.7% higher higher than the 457,998,000 barrels of oil we had stored as of September 4th, 2015, and 42.6% higher than the 358,598,000 barrels of oil we had stored on September 5th of 2014…. 

This Week’s Rig Counts

whereas this week’s EIA oil data for September 2nd was impacted by the movement of hurricane Hermine through the eastern Gulf of Mexico and up the East Coast, this week’s rig count report for the week ending September 9th was influenced by the reversal of last week’s storm impacts…Baker Hughes reported that the total count of active rotary rigs running in the US was up by 11 rigs to 508 rigs as of Friday, which was still down from the 848 rigs that were working as of the September 11th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014… the count of rigs drilling for oil rose by 7 rigs to 414, which was down from the 652 oil directed rigs running a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 4 to 92, which was still down from the 196 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…  

while last week we saw 7 platforms that had been drilling offshore in the Gulf of Mexico shut down, this week saw the startup of 8 such platforms, all of which are logged in as being offshore of Louisiana…thus, without the temporary hurricane effect, we have the net addition of one Gulf of Mexico rig over two weeks, bringing the Gulf count and the total offshore nationally up to 18 rigs, which is down from 29 rigs drilling in the Gulf and a total of 31 rigs offshore nationally a year ago…

meanwhile, the count active horizontal drilling rigs was up by 1 rig to 396 rigs this week, which was still down from the 652 horizontal rigs that were in use on September 11th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, 6 more directional rigs were also added, bringing the directional rig count up to 48 rigs, which still was down from the 81 directional rigs that were in use at the end of the same week a year earlier…in addition, the vertical rig count was up by 4 rigs to 64 rigs, which was still down from the 119 vertical rigs that were up and running in the US during the same week last year…   

the details on this week’s changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 9th, the second column shows the change in the number of working rigs between last week (September 2nd) and September 9th, the third column shows last week’s September 2nd rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in September a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was September 11th of 2015:     

September 9 2016 rig count summary

from the state table we see that the biggest change is the restarting of 8 rigs in Louisiana, 7 of which had just been shut down a week earlier…elsewhere, Texas added 4 rigs, none of which were horizontal by the looks of the basin count, while Oklahoma saw 4 rigs shut down, possibly as a result of the earthquake and subsequent shutdown of the injection wells, leaving frackers with no place to dispose of their wastewater, which in Oklahoma amounts to ten times the quantity of oil they produce…also note the addition of another rig in the Utica in Ohio, and two more nearby, in the Marcellus in West Virginia…otherwise, changes in activity in the shale basins was pretty subdued, as would be supported the addition on just one horizontal rig, a stat which sometimes masks much more activity when we peel back the details…so all in all, an uneventful week, once we get past the return of drilling to the eastern Gulf of Mexico…

International Rig Counts for August

this week also saw the monthly release of the international rig counts for August, which unlike the weekly count, is an average of the number of rigs running in each country during the month, rather than the total of those rig drilling at month end….Baker Hughes reported that an average of 1547 rigs were drilling for oil and natural gas around the globe in August, which was up from the 1,481 rigs that were drilling around the globe in July but down from the 2,226 rigs that were working globally in August of last year…increased North American drilling again accounted for the global increase, as the average US rig count rose from 449 rigs in July to 481 rigs in August, which was still down from the average of 849 rigs working in the US in August a year ago, while the average Canadian rig count rose from 94 rigs in July to 129 rigs in August, again still down from the 206 Canadian rigs that were deployed in August a year earlier….outside of Northern America, the International rig count fell by a single rig to 937 rigs in August, which was also down from 1,118 rigs a year ago, as a pullback in drilling in the Middle East region offset small increases elsewhere..

drilling activity in the Middle East fell for the 6th time in the past 8 months, as countries included in this region idled a net of 11 rigs, leaving an average of 379 rigs still drilling, which was down from the 393 rigs deployed in the Middle East a year earlier….the largest regional drilling cutback was in Pakistan, where their active rig count dropped from 29 rigs in July to 21 rigs in August, with the idling of 6 rigs targeting oil and 2 rigs targeting natural gas; however, that drop only left the Pakistanis two rigs shy of the 23 rigs they were running a year ago, as the 30 rigs they had active in June was their most in the recent record…meanwhile, Qatar saw the idling of 2 of the 7 rigs they had active in July; the 5 rigs they had running in August was down from 9  rigs a year earlier…at the same time, both the Saudis and the Iraqis saw their rig count drop by a single rig; the Saudis went from a total of 125 rigs in July to 124 in August with the idling of 3 rigs targeting natural gas and the start up of 2 rigs targeting oil, while the Iraqis, who only have oil rigs deployed, dropped from 39 rigs to 38….while that left Iraq down from the 48 rigs they were running last August, the Saudi count was up from 120 rigs a year earlier, and up from the 106 rigs they had working in August of 2014…meanwhile, Abu Dhabi was the lone Middle East country to add a rig; they now have 48, which is up from the 38 rigs they had deployed a year ago…

while the Middle East was cutting back, the Asia-Pacific region added 8 rigs and thus had 194 rigs deployed in August, up from the 186 drilling rigs working in July, but down from the 220 rigs working the region a year earlier, as the Asia-Pacific offshore rig count also rose by four rigs to 92…Australia doubled their active rig count from 3 rigs to 6 in August, but they were still down from the 15 rigs they had working a year earlier…India, Indonesia, and Thailand each added two rigs in August; for India, that brought them back to 115 rigs, the same as they had working a year earlier, for Indonesia, it brought them back to 19 rigs, which was still down from the 25 they were using last August, while for Thailand, their count rose to 13 rigs, which was still short of the 15 rigs they had in use a year earlier…in addition, Malaysian drillers also added a rig, giving them 4 rigs active, which was down from 9 rigs in August of 2015…on the other hand, Brunei cut back from 2 rigs to 1, the same as a year earlier, while the Japanese idled their lone active rig, leaving none, same as year ago…at the same time, the rig count offshore from China dropped from 28 rigs to 26, which was still up from 25 rigs in August of 2015…

meanwhile, the Latin American countries netted an increase of 1 rig, after adding 8 rigs in July, in the region’s only increases this year; prior to July, the region had idled 92 rigs over the first 6 months of 2016…in August, Latin America drillers averaged 187 rigs, which included 37 offshore, down from the average of 319 rigs, which included 53 offshore rigs, that were active in Latin America in August of 2015….that single rig increase masked a lot of changes in the individual countries, however, as Brazil, Mexico and Venezuela each added 3 rigs in August…for Brazil, that increase brought them up to 18 rigs, which was still down from the 39 rigs they had in use a year earlier; for Mexico, their increase brought them back up to 26 rigs, which was down from 41 rigs a year earlier and down from the 81 rigs they were running in August of 2014, and for Venezuela, it brought them back to 53 rigs in August, still down from 72 rigs a year earlier…in addition, Colombian drillers added 2 rigs and now have 8 rigs working, but that’s still way down from the 30 rigs they were using last year at this time…offsetting those increases, Argentina’s drillers idled 7 rigs in August, after they had started up 9 rigs in July, which left them with 65 active rigs, down from the 108 rigs that were drilling in Argentina a year earlier…3 other Latin American counties idled one rig: Bolivia cut their count to 4 rigs, which was still up from last years 2 rigs, while Chile cut back to 3 rigs, same as as a year ago, and Trinidad cut back to 3 rigs, down from last year’s 6 rigs..

elsewhere, countries in Africa reduced their net activity by 1 rig in August, leaving 81 rigs still in drilling, down from the 96 rigs working the African continent last year at this time…Angola shut down 1 rig, leaving 4 rigs, which was down from the 8 rigs that they had active a year earlier…Morocco and Tunisia both shut down the only rigs they had active, a cut from 1 rig in Morocco and 2 in Tunisia a year earlier…meanwhile, both Algeria and Nigeria added rigs; that brought the Algerian count up to 56, also up from 52 rigs a year earlier, and brought the Nigerian count back to 6 rigs, down from 9 rigs a year earlier…

and lastly, the net rig count in Europe increased by 2 to 96 rigs in August, which was down from the 109 rigs working in Europe a year ago at this time…Poland saw their rig count double from 4 rigs to 8, which was up from 7 rigs a year earlier…Romania added 2 rigs, so the 5 rigs they were running in August was the same as they had active a year earlier…Turkey also added 2 rigs, and at 31 rigs rigs in August they were up from the 28 rigs they had active a year earlier…both Germany and the Netherlands increased their drilling activity from 2 rigs in July to 3 rigs in August; for the Germans, it was up from 1 a year earlier, while for the Dutch, that was down from last year’s 7 rigs…on the other hand, Norway cut its drilling activity from 20 rigs to 17, still up from 16 rigs a year earlier, and the Czechs idled both of the rigs they had been running over the past 12 months… elsewhere, UK offshore was cut back from 10 rigs to 9, down from 12 platforms offshore a year ago, and Hungary shut down 1 rig, leaving 1 rig, down from 2 rigs a year earlier…..finally, note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China’s offshore area, with an average of 26 rigs active in August, down from 28 from July, were included in the Asian totals here…   

Posted in Uncategorized | Leave a comment