3rd estimate 4th quarter GDP; February’s income and outlays, durable goods, & new home sales

The key economic reports released the past week were the 3rd estimate of 4th quarter GDP and the February report on Personal Income and Spending from the Bureau of Economic Analysis; other widely watched releases included  the advance report on durable goods for February and the February report on new home sales, both from the Census bureau…we also had the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, rose to which rose to +0.16 in February from –0.33 in January, which was revised from the -0.25 reported for January last month…however, the 3 month average of the CFNAI decreased to –0.21 in February from a revised –0.11 in January, which indicates that national economic activity has been below the historical trend over recent months…

This week also saw the release of two more regional Fed manufacturing surveys for March: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +2 in March from -2 in February, still a near zero reading, suggesting a stagnation in that region’s manufacturing, and the Kansas City Fed manufacturing survey for March, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -17 in March, the lowest reading since April 2009, down from 5 in February and from -1 in January, suggesting the onset of a sharper contraction in that region’s manufacturing…

4th Quarter GDP Grew at a 2.1% Rate, Unchanged from Second Estimate

The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the quarter, statistically unchanged from the 2.1% growth rate reported in the second estimate last month, as personal consumption expenditures were a bit greater than was previously estimated, while subtractions from investment were a bit more and additions to GDP from trade and defense spending were a bit less than was previously estimated….in current dollars, our fourth quarter GDP grew at a 3.5% annual rate, increasing from what would work out to be a $21,542.5 billion a year output rate in the 3rd quarter to a $21,729.1 billion annual rate in the 4th quarter, with the headline 2.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.3%, known in aggregate as the GDP deflator, was computed and applied to the current dollar change of each of the GDP components…

Remember that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 4th quarter GDP, which can be accessed directly on the BEA’s GDP landing page, which also offers links to just the tables on Excel and other technical notes…specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 1st quarter of 2016; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components…the pdf for the 4th quarter second estimate, which this estimate revises, is here

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from a growth rate of 1.7% to an overall 1.8% growth rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 3.2% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.4% annual rate in the 4th quarter, which was revised from the 1.3% PCE inflation rate reported a month ago…real consumption of durable goods grew at a 2.8% annual rate, which was revised from the 2.6% growth rate shown in the 2nd estimate, and added 0.20 percentage points to GDP, as real consumption of motor vehicles and parts grew at a 5.4% rate and accounted for over 60% of the durable goods increase….however, real consumption of nondurable goods by individuals shrunk at a 0.6% annual rate, revised from the 0.3% contraction rate reported in the 2nd estimate, and subtracted 0.08 percentage points from the 4th quarter’s economic growth rate, as a 1.2% contraction in real consumption of food and beverages and a 2.1% contraction in real consumption of gasoline and other energy goods accounted for most of the shrinkage in non-durables….at the same time, consumption of services grew at a 2.4% annual rate, revised from the 2.2% growth rate reported last month, and added 1.12 percentage points to the final GDP tally, as real consumption of health care services grew at a 4.9% rate and accounted for more than half of the quarter’s growth in services…

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 6.0% annual rate in the 4th quarter, unrevised from the contraction estimate reported last month, as real private fixed investment shrunk at a 0.6% rate, revised from the 0.5% contraction rate reported in the 2nd estimate, while inventory growth was bit greater than previously estimated…investment in non-residential structures was revised to show contraction at a 7.2% rate, not as deep as the 8.1% contraction rate previously reported, and real investment in equipment contracted at 4.3% rate, revised from the 4.4% contraction rate shown a month ago…meanwhile the quarter’s investment in intellectual property products was revised from growth at a 4.0% rate to growth at a 2.8% rate, while at the same time real residential investment was shown to be growing at a 6.5% annual rate, revised from 6.2% in the previous report….after those revisions, the decrease in investment in non-residential structures subtracted 0.21 percentage points from the 3rd quarter’s growth rate and the decrease in investment in equipment subtracted 0.25 percentage points from the quarter’s growth rate, while growth in investment in intellectual property added 0.13 percentage points to the growth rate of 4th quarter GDP and growth in residential investment added 0.24 percentage points to the growth rate of GDP…..for an easy to read table as to what’s included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3….

At the same time, growth of real private inventories was revised from the previously reported $13.1 billion in inflation adjusted growth to show that inventory grew at an inflation adjusted $13.0 billion rate….that came after inventories had grown at an inflation adjusted $69.4 billion rate in the 3rd quarter, and hence the (rounded) $56.4 billion negative change in real inventory growth from the 3rd to the 4th quarter subtracted 0.98 percentage points from the 4th quarter’s growth rate, same as the subtraction from GDP due to the slower inventory growth reported in the second  estimate….however, since a smaller growth of inventories indicates that less of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their decrease at a $56.4 billion rate conversely meant that real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 3.1% rate in the 4th quarter, same as was shown in the second estimate, in contrast to the real final sales growth rate of 2.1% in the 3rd quarter, when the lack of inventory growth meant that the quarter’s growth in real final sales was the same as that of the quarter’s GDP…..

The previously reported increase in real exports was revised a bit higher with this estimate, while the previously reported decrease in real imports was revised lower, and on net the change in our net trade was a slightly smaller addition to GDP rather than was previously reported…our real exports grew at a 2.1% rate rather than the 2.0% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 0.24 percentage points to the 4th quarter’s growth rate, statistically unrevised from the addition shown in the previous report….meanwhile, the previously reported 8.6% contraction in our real imports was revised to a 8.4% contraction, and since imports are subtracted from GDP because they represent either consumption or investment added to an other GDP component that was not produced here, their decrease conversely added 1.27 percentage points to 4th quarter GDP, rather than the 1.29 percentage point addition shown last month….thus, our improving trade balance added a net of 1.51 percentage points to 4th quarter GDP, rather than the rounded 1.53 percentage point addition that had been indicated by the second estimate..

Finally, there was also a downward revision to real government consumption and investment in this 3rd estimate, as the real growth rate for the entire government sector was revised from growth at a 2.6% rate to growth at a 2.5% rate…real federal government consumption and investment was seen to have grown at a 3.4% rate in this estimate, down from the 3.8% growth rate shown in the second estimate, as real federal outlays for defense grew at a 4.4% rate and added 0.17 percentage points to 4th quarter GDP, revised from the 5.3% growth rate shown previously, while all other federal consumption and investment was revised from a 1.7% growth rate to growth at a 1.9% rate, which added 0.05 percentage points to 4th quarter GDP….meanwhile, real state and local consumption and investment was revised from growth at a 1.9% rate in the second estimate to growth at a 2.0% rate in this estimate, as state and local investment spending grew at a 5.4% rate and added 0.11 percentage points to 4th quarter GDP, while state and local consumption spending grew at a 1.2% rate and also added 0.11 percentage points to GDP…note that government outlays for social insurance are not included in this government GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…

Personal Income up 0.6% in February, Personal Spending up 0.2%, PCE Price Index up 0.1%

The February report on Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 1st quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated….this report also provides us with the nation’s personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they’re seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if February’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from January to February…

Hence, when the opening line of the press release for this report tell us “Personal income increased $106.8 billion (0.6 percent) in February“, that means that the annualized figure for US personal income in February, $19,095.1 billion, was $106.8 billion, or somewhat less than 0.6% greater than the annualized personal income figure of $18,988.3 billion for January; the actual change in personal income from January to February is not given…similarly, annualized disposable personal income, which is income after taxes, rose by a bit more than 0.5%, from an annual rate of an annual rate of $16,765.1 billion in January to an annual rate of $16,853.8 billion in February…the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in February, the largest contributors to the $106.8 billion annual rate of increase in personal income were a $49.5 billion annualized increase in wages and salaries and a $47.4 billion annualized increase in business & farm proprietors’ income…

For the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at a $27.7 billion annual rate, or by a tad less than 0.2 percent, as the annual rate of PCE rose from $14,881.2 billion in January to $14,908.8 in February, after the January PCE figure was revised up from the originally reported $14,870.7 billion annually…the current dollar increase in February spending resulted from a $41.0 billion annualized increase to $10,344.1 billion in annualized in spending for services, which was partially offset by a $13.3 billion decrease to $4,564.8 billion in spending for goods, a decrease which was evident in last week’s February retail sales report….total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $28.4 billion to $15,469.3 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $1,384.5 billion annual rate in February, up from the revised $1,324.3 billion in annualized personal savings in January… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to an 11 month high of 8.2% in February from January’s savings rate of 7.9%… 

Before personal consumption expenditures can be used in the 1st quarter GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption…the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is included in Table 9 in the pdf for this report….that PCE price index rose from 110.685 in January to 110.784 in February, a month over month inflation rate that’s statistically 0.08944%, which BEA reports as an increase of 0.1 percent, following a PCE price index increase of 0.1% that was reported for January…then, applying that 0.0894% inflation adjustment to the increase in February PCE shows that real PCE rose by 0.09594% in February, which the BEA also reports as a 0.1% increase……notice that when those PCE price indexes are applied to a given month’s annualized PCE in current dollars, it gives us that month’s annualized real PCE in those same chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to that of another….that result is shown in table 7 of the PDF, where we see that February’s chained dollar consumption total works out to 13,458.2 billion annually, 0.974% more than January’s 13,445.1 billion, statistically the same as the real PCE increase we just computed..

Finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter….while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3 months of the 4th quarter was represented by 13,413.8 billion in chained 2012 dollars…(note that’s the same figure shown in table 3 of the pdf for the 4th quarter GDP report)….then, by averaging the annualized chained 2012 dollar PCE figures for January and February, 13,445.1 billion and 13,458.2 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have the data for so far….when we compare that average of 13,451.6 to the 4th quarter chained dollar PCE of 13,413.8, we find that 1st quarter real PCE has grown at a 1.334% annual rate for the two months of the 1st quarter included in this report (note the math to get that annual rate: (((13,445.1 + 13,458.2 ) / 2 ) / 13,413.8 ) ^ 4 = 1.006096…that growth rate means that if March real PCE does not improve from the average of January and February, which now seems likely, growth in PCE would add just 0.93 percentage points to the growth rate of the 1st quarter…

February Durable Goods: New Orders Up 1.2%, Shipments Up 0.0%, Inventories Flat

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $2.9 billion or 1.2 percent to $249.4 billion in February, after January’s new orders were revised from the $246.2 billion reported last month to $246.54 billion, now a 0.1% increase from December’s new orders…however, year to date new orders are only up by 0.4% from those of 2019…the volatile monthly new orders for transportation equipment were responsible for February’s increase, as new transportation equipment orders rose $3.8 billion or 4.6 percent to $87.0 billion, despite a 14.9% decrease to $3,812 million in new orders for defense aircraft….excluding orders for transportation equipment, new orders fell 0.6%, while excluding just new orders for defense equipment, new orders rose 0.1%….meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, were fairly weak, falling by $553 million or 0.8% to $68,775 million…

Over the same period, the seasonally adjusted value of February’s shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, rose for the first time in eight months, increasing by $2.1 billion or 0.8 percent to $252.3 billion, after the value of January shipments was revised from $250.1 billion to $250.2 billion, now down 0.1% from December….higher shipments of transportation equipment were also responsible for the February shipments increase, as they increased by $2.4 billion or 2.9 percent to $85.0 billion…meanwhile, shipments of nondefense capital goods less aircraft fell 0.7% to $68,922 million, after January’s capital goods shipments were revised 0.3% lower…

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.1 billion to $434.9 billion, an increase which is considered statistically unchanged, after January inventories were revised from $435.4 billion to $434.768 billion, now down 0.1% from December….inventories of transportation equipment rose $0.6 billion or 0.4 percent to $151.7 billion, while inventories of computers and electronic products fell $0.3 billion or 0.7% to $43.38 billion…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but very volatile new orders, rose for the fourth time in five months, increasing by $1.4 billion or 0.1 percent to $1,158.6 billion, following a statistically insignificant January increase to $1,157.28 billion, which was revised from the previously reported $1,157.0 billion….a $1.9 billion or 0.2 percent increase to $791.3 billion in unfilled orders for transportation equipment was responsible for the increase, while unfilled orders excluding transportation equipment orders were down 0.2% to $367,363 million…the unfilled order book for durable goods is now 0.6% below the level of last February, with unfilled orders for transportation equipment 2.0% below their year ago level, mostly due to a 4.7% decrease in the backlog of orders for commercial aircraft and parts…

February New Home Sales Reported Lower

The Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 765,000 homes annually during the month, which was 4.4 percent (±14.8 percent)* below the revised January annual sales rate of 800,000 new home sales, but 14.3 percent (±17.5 percent)* above the estimated annual rate that new homes were selling at in February of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from the February sales rate of a year ago, with the figures in parenthesis representing the 90% confidence range for the reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in January were revised from the annual rate of 764,000 reported last month to an annual rate of 800,000, and new home sales in December, initially reported at an annual rate of 694,000 and revised up to a 708,000 rate last month, were revised up to a 724,000 a year rate with this report, while November’s annualized new home sales rate, initially reported at an annual rate of 719,000 and revised from a 697,000 rate to a 692,000 a year rate last month, were revised back up to a 700,000 annual rate with this release…

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 68,000 new single family homes sold in February, up from the estimated 62,000 new homes that sold in January and up from the 49,000 that sold in December, and up from 57,000 in February a year ago…the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $345,900, up from the median sale price of $325,300 in January and up from the median sales price of $320,800 in February a year ago, while the average February new home sales price was $403,800, up from the $384,000 average sales price in January, and up from the average sales price of $383,600 in February a year ago….a seasonally adjusted estimate of 319,000 new single family houses remained for sale at the end of February, which represents a 5.0 month supply at the February sales rate, up from the revised 4.8 months months of new home supply in January…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales at 765,000 Annual Rate in February and A few Comments on February New 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 picked from the aforementioned GGO posts, contact me…)      

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tables and graphs for March 28

rig count summary:

March 27 2020 rig count summary

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oil prices hit 18 year low in largest drop in 29 years; natural gas prices end at a 24 year low; DUC backlog at 7.1 months

oil prices hit an 18 year on the way to their largest weekly drop in 29 years; natural gas prices ended at a 24 year low; natural gas rigs were at a 41 month low; DUC wells are down 9.7% year over year, their backlog is at 7.1 months

oil prices ended down nearly 30% this week, despite rising nearly 24% on Thursday in the largest single day price jump in history, as the economic impact of the coronavirus pandemic and the Saudi-Russian oil price war continued to destabilize pricing…after falling 23% to $31.73 a barrel for the same reasons last week, the contract price of US light sweet crude for April delivery opened more than 6% higher at $33.75 a barrel Monday morning in an initial response to the Fed’s emergency interest rate cut to 0% on Sunday, but those gains quickly evaporated as traders interpreted the Fed move as panicked and desperate while the Saudis continued to flood global markets with $25 oil, driving US prices down more than 10% to a session low of $28.03 per barrel before recovering to close at $28.70 a barrel, a loss of $3.03 on the day…oil prices continued falling Tuesday as Goldman Sachs slashed its oil forecast to $22 and others forecast oil prices in the teens, with US crude closing $1.75 lower at a 4 year low of $26.95 a barrel, as recession fears and the Saudi price war continued to weigh on markets…oil prices steadied early on Wednesday after the API had reported a drop in U.S. inventories of crude, gasoline and distillates, but then plunged as governments worldwide accelerated lockdowns to counter the coronavirus pandemic, prompting fears of a global economic collapse, with U.S. crude futures falling $6.58, or 24.4%, to settle at $20.37 a barrel, the 3rd largest price drop on record and the lowest oil price in more than 18 years….however, the entirety of that price drop was reversed in the first 4 and a half hours of trading on Thursday, as oil prices briefly spiked 36% to $27.71 a barrel after remarks by Trump that he might intervene in the Saudi-Russian price war on the way to an increase of $4.85, or 23.8%, the biggest one day price jump on record, with US crude settling at $25.22 a barrel, as traders absorbed news of a plethora of central bank and government interventions to combat the economic fallout from the coronavirus pandemic and as Russia indicated it would like to see higher prices…Thursday’s rally continued into early Friday, with US crude reaching $27.89 a barrel in the early hours, but by 11:00 AM, it had sunk back to $25.02 a barrel on the way to a $19.46 a barrel nadir, before recovering to rise 15% from there to close at $22.43 a barrel, down $2.79 or 11.1% to $22.43 a barrel on the day, even as the world’s richest nations poured unprecedented aid into their economies to stop a coronavirus-driven global recession…prices thus finished the week more than 29.3% lower than the prior week, the largest one week percentage drop since 1991, as some traders saw oil demand shrinking as much as 10 to 20 million barrels a day (10-20%) as drivers stay home and flights are grounded across the world

with that, here’s a graph of 20 years of front month oil prices:

March 20 2020 oil prices

the above graph is a screenshot of the interactive price chart for the front month oil contract at Barchart.com, “the leading provider of real-time or delayed intraday stock and commodities charts and quotes”, and it shows the range of prices for the nearest oil futures contract as a vertical bar for each month over the past 20 years….this graph was generated by taking the price quotes for what is called the “front month” oil futures contract, or the contract that is being quoted as “the price of oil” daily, with the each monthly contract price being replaced by the next month’s price when trading in that contract expires on the 4th business day prior to the 25th calendar day of the month preceding the contract month… you might also note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month’s closing price…as you can see, oil prices are now down to a level not seen since March 2002, and well below the lows of late 2015 to early 2016, when oil prices had crashed after OPEC after flooded the global oil market & caused a collapse in prices which put hundreds of US oil companies into bankruptcy

natural gas prices also fell out of bed this week, sliding to a 24 year low on Wednesday, which was then matched at Friday’s close…after rising 9.4% to $1.869 per mmBTU last week on hopes that the collapse in oil prices would prompt drillers to cut back on both oil and gas production, the contract price of natural gas for April delivery fell 5.4 cents, or 3% on Monday, on a rising awareness that the coronavirus pandemic would reduce natural gas demand, and despite forecasts for cooler weather and greater heating demand in the US over the next two weeks than was previously expectedthe economic slowdown continued to pressure prices as they fell 8.6 cents on Tuesday, with forecasts for milder weather and less heating demand next week also pushing prices lower…April natural gas then plunged 12.5 cents or 7% to $1.604 per mmBTU on Wednesday, their lowest price since 1995, tracking lower alongside the day’s 24% collapse in oil prices, as travel bans sparked by the coronavirus slashed the global outlook for energy demandwith the Thursday natural gas storage report close to expectations, natural gas followed other markets higher and rose 5 cents, only to fall back by the same amount on Friday to end the week back at $1.604 per mmBTU, the lowest weekly close since August 1995, and leaving the front-month contract down over 14% this week, its biggest weekly decline since November.

and here’s what a graph of 20 years of natural gas prices looks like:

March 20 2020 natural gas prices

like the oil graph, this graph is a screenshot of the interactive price chart for the front month natural gas contract at Barchart.com, showing the range of prices for the nearest natural gas futures contract as a vertical bar for each month over the past 20 years….like the oil graph, this graph was generated by taking the price quotes for the “front month” natural gas futures contract, or the contract that is being quoted as “the price of oil” daily, with the each monthly contract price being replaced by the next month’s price when trading in that contract expires, which for natural gas contracts occurs on the on the 3rd last business day of the month prior to the contract month….as you can see, current natural gas prices are now the lowest on this 20 year graph, a few cents below the lows hit in late February and early March 2016, and at a level not seen since August 1995…you can access the graph showing the complete natural gas price history using the link to the interactive graph above, which we chose not to include here because it displayed poorly.. 

the natural gas storage report from the EIA on the week ending March 13th indicated that the quantity of natural gas held in underground storage in the US fell by 9 billion cubic feet to 2,034  billion cubic feet by the end of the week, which left our gas supplies 878 billion cubic feet, or 76.0% higher than the 1,156 billion cubic feet that were in storage on March 13th of last year, and 281 billion cubic feet, or 16.0% above the five-year average of 1,816 billion cubic feet of natural gas that has been in storage as of the 13th of March in recent years….the 9 billion cubic feet that were withdrawn from US natural gas storage this week was near the consensus estimate for a 8 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, but was much less than the average 63 billion cubic feet of natural gas that have been pulled from natural gas storage during the second week of March over the past 5 years, and also way less than the 91 billion cubic feet withdrawal reported during the corresponding week of 2019.. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 13th indicated that a ​big ​increase in our oil exports reduced the week’s ​domestic ​oil surplus, but we were still left with a ​modest amount of oil to add to our stored commercial supplies, the nineteenth addition ​of oil ​to storage in the past twenty-seven weeks….our imports of crude oil rose by an average of 127,000 barrels per day to an average of 6,539,000 barrels per day, after rising by an average of 174,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 968,000 barrels per day to 4,378,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,161,000 barrels of per day during the week ending March 13th, 841,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells rose by 100,000 barrels per day to 13,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,261,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 15,820,000 barrels of crude per day during the week ending March 13th, 119,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that an average of 279,000 barrels of oil per day were being added to to the supplies of oil stored in the US….so looking at that data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 838,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+838,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we’ll continue to report them, just as they’re watched & believed as accurate by most everyone else…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,351,000 barrels per day last week, now 4.5% less than the 6,649,000 barrel per day average that we were importing over the same four-week period last year….the 279,000 barrel per day addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity 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 higher at a record 13,100,000 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 ​12,600,000 barrels per day, while a 5,000 barrel per day increase Alaska’s oil production to 478,000 barrels per day had no impact on the rounded national total….last year’s US crude oil production for the week ending March 15th was rounded to 12,100,000 barrels per day, so this reporting week’s rounded oil production figure was 8.3% above that of a year ago, and 55.4% 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 15,820,000 barrels of crude per day during the week ending March 13th, the same capacity utilization of the prior week, ​and still near the recent average refinery capacity utilization for the second week of March, historically the time of year that refineries change​ ​over to summer blends and undergo​ annual​ maintenance…nonetheless, the 15,820,000 barrels per day of oil that were refined this week were 2.3% less than the 16,198,000 barrels of crude that were being processed daily during the week ending March 15th, 2019, when US refineries were operating at 88.9% of capacity….

with the modest increase in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 18,000 barrels per day to 9,974,000 barrels per day during the week ending March 13th, after our refineries’ gasoline output had increased by 199,000 barrels per day over the prior week… after this week’s increase in gasoline output, our gasoline production was half a percent higher than the 9,925,000 barrels of gasoline that were being produced daily over the same week of last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 19,000 barrels per day to 4,686,000 barrels per day, after our distillates output had increased by 57,000 barrels per day over the prior week…but even after this week’s increase in distillates output, our distillates’ production for the week was 4.8% less than the 4,923,000 barrels of distillates per day that were being produced during the week ending March 15th, 2019….

despite the increase in our gasoline production, our supply of gasoline in storage at the end of the week ​decrease​d​ for the seventh week in a row, after twelve consecutive increases, falling by 6,180,000 barrels to 240,819,000 barrels during the week ending March 13th, after our gasoline supplies had decreased by 5,049,000 barrels over the prior week….our gasoline supplies decreased by even more this week because the amount of gasoline supplied to US markets increased by 247,000 barrels per day to 9,696,000 barrels per day, while our exports of gasoline fell by 142,000 barrels per day to 603,000 barrels per day, while our imports of gasoline fell by 22,000 barrels per day to 688,000 barrels per day….but even after this week’s big inventory decrease, our gasoline supplies were only 0.3% lower than last March 15th’s gasoline inventories of 241,503 ,000 barrels, and close to the five year average of our gasoline supplies for the same time of the year…

similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 24 weeks and for 33rd time in the past 49 weeks, falling by 2,940,000 barrels to 125,120,000 barrels during the week ending March 13th, after our distillates supplies had decreased by a near record 6,404,000 barrels over the prior week….our distillates supplies fell by less this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 385,000 barrels per day to 4,013,000 barrels per day, and because our exports of distillates fell by 174,000 barrels per day to 1,356,000 barrels per day, while our imports of distillates fell by 45,000 barrels per day to 263,000 barrels per day….after this week’s inventory decrease, our distillate supplies at the end of the week were 5.4% lower than the 132,242,000 barrels of distillates that we had stored on March 15th, 2019, and fell to about 11% below the five year average of distillates stocks for this time of the year…

finally, even after the jump in our oil exports, our commercial supplies of crude oil in storage rose for the twenty-first time in thirty-eight weeks and for the thirty-third time in the past 52 weeks, increasing by 1,954,000 barrels, from 451,783,000 barrels on March 6th to 453,737,000 barrels on March 13th ….but even after 8 straight increases, our crude oil inventories slipped to ​almost 3% below the five-year average of crude oil supplies for this time of year, even as they remained 27.2% higher than the prior 5 year (2010 – 2014) average of crude oil stocks after the second week of March, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels​ and continued rising​….since our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of March 13th were 3.2% above the 439,483,000 barrels of oil we had in commercial storage on March 15th of 2019, and 5.9% above the 428,306,000 barrels of oil that we had in storage on March 16th of 2018, while at the same time remaining 14.9% below the 533,110,000 barrels of oil we had in commercial storage on March 17th of 2017…    

This Week’s Rig Count

the US rig count decreased for the 22nd time in the past 27 weeks during the week ending March 20th, and is now down by 28.7% from the last rig count of 2018…..Baker Hughes reported that the total count of rotary rigs running in the US decreased by twenty rigs to 772 rigs this past week, which was also down by 244 rigs from the 1066 rigs that were in use as of the March 22nd report of 2019, and 1,157 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business

the number of rigs drilling for oil decreased by 19 rigs to 664 oil rigs this week, which was also 160 fewer oil rigs than were running a year ago, and ​considerably less than 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 decreased by 1 to 106 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was a 41 month low for natural gas drilling​, down by 86 gas rigs from the 192 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 to those rigs drilling for oil & gas, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there were no such “miscellaneous” rigs deployed..

offshore drilling activity in the Gulf of Mexico remained at 19 rigs this week, with 18 Gulf rigs deployed in Louisiana waters and one rig still drilling offshore from Texas…that’s now one less than the number of rigs that were deployed in the Gulf a year ago, when 17 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters…with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is thus equal to the national offshore rig total, as it has been all winter…

the count of active horizontal drilling rigs decreased by 17 rigs to 696 horizontal rigs this week, which was the fewest horizontal rigs active since December 13th 2019, and also 204 fewer horizontal rigs than the 900 horizontal rigs that were in use in the US on March 22nd of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….in addition, the vertical rig count was down by four rigs to 27 vertical rigs this week, and those were down by 26 from the 53 vertical rigs that were operating during the same week of last year….on the other hand, the directional rig count was up by one rig to 49 directional rigs this week, but those were also down by 14 from the 63 directional rigs that were in use on March 22nd of 2019…

the details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 20th, the second column shows the change in the number of working rigs between last week’s count (March 13th) and this week’s (March 20th) count, the third column shows last week’s March 13th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 22nd of March, 2019…    

March 20 2020 rig count summary

as you can see, the rigs withdrawn from the Permian basin accounted for the majority of this week’s rig decline, as well as the lions share of the horizontal rig pullback…in the Texas Permian, six rigs were pulled out of Texas Oil District 8, or the core Permian Delaware​,​ and two more rigs were pulled out of Texas Oil District 7C, or the southern Permian Midland…since the Permian basin rig count was reduced by a total of 13, we can therefore figure that the 5 rigs that were pulled out in New Mexico had been drilling in the western Permian Delaware…elsewhere in Texas, an Eagle Ford rig was pulled out of Texas Oil District 1, while Texas Oil Districts 5 and 9 both lost rigs that weren’t associated with a major shale basin….the Williston shale rig came out of North Dakota, and while Oklahoma saw a rig pulled out of the Cana Woodford, it also had one added in the Granite Wash basin, which means that Oklahoma also saw three rigs pulled out of basins not tracked separately by Baker Hughes…one of those could have been a natural gas rig, since the sole natural gas rig reduction this week also came out of one of those “other” basins that Baker Hughes doesn’t itemize…

DUC well report for December

Tuesday of this past week saw the release of the EIA’s Drilling Productivity Report for March, which includes the EIA’s February data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the twelfth month in a row, this report showed a decrease in uncompleted wells nationally in February, as drilling of new wells decreased and completions of drilled wells increased…..for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 60 wells, falling from a revised 7,697 DUC wells in January to 7,637 DUC wells in February, which now is 9.7% fewer DUCs than the 8,454 wells that had been drilled but remained uncompleted as of the end of February of a year ago…this month’s DUC decrease occurred as 1,014 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during February, down by 2 from the 1,016 wells that were drilled in January and the lowest number of wells drilled since June 2017, while 1,074 wells were completed and brought into production by fracking, an increase of 12 well completions from the 1,062 completions seen in January, but still down from the 1160 completions seen in February of last year….at the February completion rate, the 7,637 drilled but uncompleted wells left at the end of the month now represents a 7.1 month backlog of wells that have been drilled but are not yet fracked, down from the 7.3 month backlog of a month ago…

both oil producing and natural gas producing regions saw DUC well decreases in February, even as two of the seven major basins saw modest DUC increases…the number of DUC wells remaining in the Oklahoma Anadarko decreased by 49, falling from 752 at the end of January to 703 DUC wells at the end of February, as 61 wells were drilled into the Anadarko basin during January while 110 Anadarko wells were being fracked….at the same time, DUC wells in the Eagle Ford of south Texas decreased by 13, from 1,373 DUC wells at the end of January to 1,360 DUCs at the end of February, as 159 wells were drilled in the Eagle Ford during February, while 172 already drilled Eagle Ford wells were completed….in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range decreased by 12 to 446, as 133 Niobrara wells were drilled in February while 145 Niobrara wells were completed….on the other hand, DUC wells in the Bakken of North Dakota increased by 13, from 839 DUC wells at the end of January to 852 DUCs at the end of February, as 97 wells were drilled into the Bakken in January, while 84 of the drilled wells in that basin were being fracked…in addition, the Permian basin of west Texas and New Mexico saw its total count of uncompleted wells rise by 11, from 3,490 DUC wells at the end of January to 3,482 DUCs at the end of February, as 454 new wells were drilled into the Permian, while 443 wells in the region 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 9 wells, from 574 DUCs at the end of January to 565 DUCs at the end of February, as 74 wells were drilled into the Marcellus and Utica shales during the month, while 83 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 1 well to 230, as 36 wells were drilled into the Haynesville during February, while 37 Haynesville wells were fracked during the same period….thus, for the month of February, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 50 wells to 6,842 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 10 wells to 795 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…

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February’s retail sales, industrial production, housing construction, & existing home sales; January’s business inventories & JOLTS

major monthly reports released over the past week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February report on Industrial Production and Capacity Utilization from the Fed, the February report on New Residential Construction, also from the Census Bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)…in addition, the Bureau of Labor Statistics released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January during this same week… this week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +12.9 in February to an eleven year low of -21.5 in March, the largest drop on record, suggesting the sudden onset of a recession in First District manufacturing… meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to a nine year low of -12.7 in March from +36.7 in February, also the largest drop for that index on record and also indicating a sudden contraction of that region’s manufacturing activity this month…

Retail Sales Down 0.5% in February after Revisions to December and January

seasonally adjusted retail sales decreased 0.5% in February after retail sales for January were revised higher…the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $528.1 billion during the month, which was 0.5 percent (±0.4%) lower than January’s revised sales of $530.9 billion, but still 4.3 percent (±0.7 percent) above the adjusted sales in February of last year…January’s seasonally adjusted sales were revised up from $529.8 billion to $530.9 billion, while December’s sales were revised from $528.4 billion down to $527,646 million; as a result, the December to January change was revised up from up 0.3 percent (±0.4 percent)* to up 0.6 percent (±0.3 percent)…the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $2.1 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.04 percentage points…estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 0.8%, from $483,330 million in January to $479,583 million in February, while they were up 7.8% from the $444,794 million of sales in February of a year ago..  

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the February Census Marts pdf….the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the January revised figure to this month’s February “advance” report in the first sub-column, and then the year over year percentage sales change since last February is in the 2nd column…the second double column pair below gives us the revision of the January advance estimates (now called “preliminary”) as of this report, with the new December to January percentage change under “Dec 2019 (r)” (revised) and the January 2019 to January 2020 percentage change as revised in the last column shown…for your reference, our copy of the table of last month’s advance estimate of January sales, before this month’s revisions, is here, should you be interested in more detail in how it was revised.….

February 2020 retail sales table

To compute February’s real personal consumption of goods data for national accounts from this February retail sales report, the BEA will use the corresponding price changes from the February consumer price index, which we reviewed last week…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that February retail sales excluding the 2.8% price-related decrease in sales at gas station were down by 0.3%…..then, subtracting the figures representing the fractional decrease in grocery & beverage store sales and the 0.5% decrease in food services sales from that total, we find that core retail sales were down by less than 0.3% for the month (-0.268%)…since the CPI report showed that the composite price index for all goods less food and energy goods was 0.2% higher in February, we can thus approximate that real retail sales excluding food and energy will on average be down by nearly 0.5%…..however, the actual adjustment in national accounts data 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 and parts dealers were down 0.9%, the price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at vehicle and parts dealers fell by roughly 1.1%…similarly, while nominal sales at clothing stores were 1.2% lower in February, the apparel price index was 0.4% higher, which means that real sales of clothing probably fell around 1.6%…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.1%, the price index for recreational commodities fell 0.1%, so we can figure real sales of recreational goods were up by roughly 0.2%….

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately…the February CPI report showed that the food price index was 0.4% higher, with the index for food purchased for use at home 0.5% higher, while prices for food bought to eat away from home were 0.2% higher… thus, while nominal sales at food and beverage stores were unchanged, real sales of food and beverages would be roughly 0.5% lower in light of the 0.5% higher prices…meanwhile, the 0.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 0.7% during the month….on the other hand, while sales at gas stations were down 2.8%, there was a 3.3% decrease in the retail price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales….averaging real sales that we have thus estimated together, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 0.4% in February, after rising by a revised 0.2% in January, but after being unchanged in December, also revised…at the same time, the 0.7% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by almost 0.1%…

Industrial Production Up 0.6% in February on 7.1% Jump in Utility Output

The Fed’s February G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.6% in February after falling by a revised 0.5% in January, which left industrial output unchanged from a year ago…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 109.6 in February, after the January index was revised down from 109.2 to 109.0, the December index was revised up from 109.5 to 109.6, and the November index was left unchanged at 110.0..

The manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.9 in February, after the January index was revised down from 104.9 to 104.8…with the prior months unrevised, the manufacturing index now sits 0.4% below its year ago level….meanwhile, the mining index, which includes oil and gas well drilling, fell 1.5%, from 135.0 in January to 133.0 in February, after the January index was revised down from 136.2, which still left the mining index 2.1% higher than it was a year earlier…finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 7.1% in our cooler February, from 98.4 to 105.4, after our warm January’s utility index was revised from 98.0 to 98.4, now down 4.9% from December…with this February’s temperatures below the warmer levels seen across much of the US last February, the utility index is 0.4% higher than it was a year ago, after the January utility index had been reported 6.2% lower than it was in January a year earlier…

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 rose to 77.0% in February from 76.6% in January, which was revised down from the  76.8% reported last month …capacity utilization of NAICS durable goods production facilities rose from a revised 74.5% in January to 74.7% in February, while capacity utilization for non-durables producers slipped from an upwardly revised 76.5% to 76.4%…capacity utilization for the mining sector fell to 88.4% in February from 89.9 % in January, which was originally reported as 90.7%, while utilities were operating at 75.8% of capacity during February, up from their 71.0% of capacity during January, which was previously reported at 70.6%…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..

Housing Starts, Permits Reported Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,599,000, which was 1.5 percent (±12.4 percent)* below the revised estimated January annual rate of 1,624,000, but was 39.2 percent (±17.7 percent) above last February’s rate of 1,149,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been up by 10.9% or down by as much as 13.9% from those of January, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for January housing starts was revised from the 1,567,000 reported last month to 1,624,000, while December starts, which were first reported at a 1,608,000 annual rate, were revised from last month’s initial revised figure of 1,626,000 annually back down to a 1,601,000 annual rate with this report….

The 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 113,000 housing units were started in February, down from the 113,200 units that were started in January but up from the 108,300 units that were started in December….of those housing units started in February, an estimated 75,300 were single family homes and 36,300 were units in structures with more than 5 units, up from the revised 68,000 single family starts in January but down from the 44,600 units started in structures with more than 5 units in December…

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 February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,464,000, which was 5.5 percent (±1.5 percent) below the revised January rate of 1,550,000 permits, but was 13.8 percent (±2.1 percent) above the rate of building permit issuance in February a year earlier…the annual rate for housing permits issued in January was a 13 year high for building permits and was revised up from the originally reported 1,551,000….

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 roughly 100,800 housing units were issued in February, down from the revised estimate of 112,800 new permits issued in January….of those issued in February, 70,600 were permits for single family homes and 27,000 were permits for units in structures of more than 5 units, up from the 70,400 single family permits in January, but down from the 39,500 permits for units in structures of more than 5 units…for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.599 Million Annual Rate in February and Comments on February Housing Starts… 

Job Openings Jumped in January; Hiring and Layoffs Fell, Quits were Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 411,000, from 6,552,000 in December to 6,963,000 in January, after December job openings were revised 129,000 higher, from 6,423,000 to 6,552,000, as part of an annual revision of 2019’s job openings and labor turnover data…January’s jobs openings were still 7.4% lower than the revised 7,520,000 job openings reported for January a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.4% from the 4.1% logged in December, but was down from the 4.8% rate of January a year ago…(details on job openings by industry and region can be viewed in Table 1)…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 January, seasonally adjusted new hires totaled 5,824,000, down by 103,000 from the revised 5,927,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed fell from 3.9% in December to 3.8% in January, and was also down from the 3.9% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)….meanwhile, total separations fell by 148,000, from 5,762,000 in December to 5,614,000 in January, as the separations rate as a percentage of the employed fell from 3.8% to 3.7%, which was also down from 3.8% in January a year ago (see table 3)…subtracting the 5,614,000 total separations from the total hires of 5,824,000 would imply an increase of 210,000 jobs in January, somewhat less than the revised payroll job increase of 273,000 for January reported in the February establishment survey of two weeks ago 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 3,532,000 of us voluntarily quit our jobs in January, up from the revised 3,528,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, while it was down from the 2.4% quits rate of a year earlier (see details in table 4)….in addition to those who quit, another 1,684,000 were either laid off, fired or otherwise discharged in January, down by 209,000 from the revised 1,893,000 who were discharged in December, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 399,000 in January, up from 341,000 in December, for an ‘other separations rate’ of 0.3%, up from 0.2% in December and from 0.2% in January 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…   

January Business Sales Up 0.6%, Business Inventories Down 0.1%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,471.2 billion in January, up 0.6 percent (±0.2 percent) from December’s revised sales, and 2.1 percent (±0.3 percent) higher than January sales of a year earlier…note that total December sales were concurrently revised up from the originally reported $1,461.0 billion to $1,462.940 billion, now a 0.1% increase from November, rather than the 0.1% decrease previously reported….manufacturer’s sales fell 0.5% to $501,825 million in January, while retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 0.6% to $464,818 million, and wholesale sales rose 1.6% to $504,570 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,035.3 billion at the end of January, down 0.1 percent (±0.1 percent)* from the end of December, but still 1.1 percent (±0.4 percent) higher than in January a year earlier…at the same time, the value of end of December inventories was revised from the $2040.0 billion reported last month to $2,038.1 billion, now unchanged from November, which would imply a downward revision of about 0.03 or 0.04 percentage points to 4th quarter GDP….seasonally adjusted inventories of manufacturers were estimated to be valued at $703,403 million, down 0.1% from December, and inventories of retailers were valued at $660,227 million, statistically unchanged from in December, while inventories of wholesalers were estimated to be valued at $671,621 million at the end of January, 0.4% lower than in December…

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 0.1% higher…two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged those inventories would have a modest negative impact on 1st quarter GDP…also two weeks ago, we found that January’s wholesale inventories decrease alone would not yet be enough to hit 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.1% lower, real retail inventories for the month, after the 0.1% finished goods price adjustment, thus would have thus decreased by 0.2% from December, after a fourth quarter that saw real retail inventories decrease at a 2.6% annual rate…therefore, what is shaping up to be a much smaller real retail inventory decrease in the 1st quarter to date would have a noticeable positive impact on 1st quarter GDP…

February’s Existing Home Sales Rose 6.5%

The National Association of Realtors (NAR) reported that existing home sales increased by 6.5% from January to February on a seasonally adjusted basis, projecting that 5.77 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was the highest since 2007 and 7.2% above the annual sales rate projected in February of last year….however, the January home sales pace was revised from the 5.46 million annual rate reported a month ago to a 5.42 million rate with this report…the NAR also reported that the median sales price for all existing-home types was $270,100 in February, 8.0% higher than in February a year earlier, which they report “marks 96 straight months of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Jump 6.5% in February“, 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 usually look at the raw data overview (pdf) to see what actually happened with home sales during the month…this unadjusted data indicates that roughly 335,000 homes sold in February, up 5.7% from the revised 317,000 homes that sold in January, and 7.7% more than the 311,000 homes that sold in February of last year….that same pdf indicates that the median home selling price for all housing types rose by 1.5%, from a revised $266,200 in January to $270,100 in February, while the average home sales price rose by less than one percent to $302,900 from the $305,800 average sales price in January, which was also up 6.0% from the $288,500 average home sales price of February a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.77 million in February and Comments on February 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 picked from the aforementioned GGO posts, contact me…)      

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graphs and tables for March 21

rig count summary:

March 20 2020 rig count summary

oil prices:

March 20 2020 oil prices

natural gas prices:

March 20 2020 natural gas prices

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tables and graphs for March 21

retail sales:

February 2020 retail sales table

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oil prices down by half in 2 months; oil surplus near 2.2 mpd in February; biggest ​distillates ​draw in 16 years

oil prices now down by half from January’s high on coronavirus and price war impacts; globl oil surplus near 2.2 mpd in February even with OPEC cuts still in effect; biggest ​distillates ​draw since January 2004, natural gas rigs at a new 40 month low

US oil prices fell 23% this past week after the Saudis initiated an oil price war against the Russians for their failure to agree on oil production cuts that the Saudis were pushing at the OPEC meeting the week before, a failure which itself had precipitated a 10% drop to a 42 month low on Friday of last week…before the markets even opened for this week, oil prices had plunged 30% in early trading on Sunday night, after the Saudis marked down prices on all the grades of oil they sell and indicated they’d be increasing production…. hence, when the markets opened Monday morning, the contract price of US light sweet crude for April delivery opened $8.41 or 20.4% lower than last week’s close of $41.28 at $32.87 a barrel and continued falling in early trading, tanking by more that 30% to $27.34 amid forecasts for $20 oil, before recovering to settle at $31.13 a barrel, hence posting a loss of $10.15 or 24.6% on the day, its biggest one day drop since 1991oil prices then rebounded on Tuesday following reports that talks between OPEC and its allies remained possible, with oil prices closing up $3.23 or more than 10% at $34.36 a barrel, surging with the equity markets as the possibility of economic stimulus encouraged buying while U.S. producers slashed spending in a move that traders hoped would reduce output….after opening higher and rallying to as high as $36 early Wednesday, crude prices turned lower after Saudi Aramco said it had been directed by the energy ministry to raise its production capacity by a million barrels per day (10%) and after the EIA reported the biggest jump in US crude supplies since October, with US crude settling $1.38, or 4% lower at $32.98 per barrel….oil prices fell again on Thursday amid a broad decline in global markets after the US banned travel from Europe following the World Health Organization’s decision to declare the coronavirus outbreak a pandemic, with US crude prices falling as much as 8% to a low of $30.02 before recovering to close at $31.50, a loss of $1.48 on the day…oil prices opened lower on Friday and were down more than a dollar while waiting for Trump’s expected State of Emergency declaration, but jumped more than 5% after Trump announced his intention to buy “large quantities of oil” for the Strategic Petroleum Reserve and settled with a gain of 23 cents at $31.73 a barrel …nonetheless, oil prices posted their biggest weekly percentage drop since the financial crisis of 2008 this week, rocked by both the coronavirus pandemic and efforts Saudi Arabia and its allies to flood the market with record levels of supply

March 14 2020 oil prices

the above graph is a screenshot of the interactive price chart for the April oil contract at Barchart.com, a “leading provider of real-time or delayed intraday stock and commodities charts and quotes”, and it shows the range of prices for the April oil futures contract as a vertical bar for each day over the past 6 months…note that each bar has two small horizontal appendages: the one on the left is the opening price for the month the bar indicates, while the appendage on the right is the month’s closing price…across the bottom the red and green bars indicate the trading volume for each day, with down days indicated in red and days when the price rose indicated in green…what we want to note here is the precipitous fall in oil prices since the interim high for the April contract was hit on January 8th, when oil briefly traded at $64.99 a barrel before falling back…this week’s closing price thus represents less than half of that high, with Monday nadir of $27.34 a barrel representing a 58% decline in just two month’s time..

while oil prices were falling, natural gas prices were moving higher on expectations that the collapse in oil prices would prompt drillers to cut back on both oil and gas production… after rising 1.4% to $1.708 per mmBTU even as the weather remained bearish last week, the contract price of natural gas for April delivery jumped 7 cents, or over 4% on Monday on forecasts for colder weather and higher heating demand next week than was previously expected…natural gas futures then soared 15.8 cents or almost 9% on Tuesday, on hopes of an economic stimulus package and expectations the that oil price collapse would prompt U.S. drillers to cut back on oil and associated gas production in major shale oil basins…after flirting with $2 gas, prices fell back on Wednesday and ended 5.8 cents lower despite forecasts for a little more gas demand over the next two weeks than was previously expected…prices fell another 3.7 cents, or 2%, after the EIA reported a smaller than expected withdrawal of gas from storage on Thursday, even as the decline was limited by forecasts for cooler U.S. weather and higher heating demand over the next two weeks and expectations the oil price drop this week would cut crude and associated gas production in shale basins….the April natural gas contract then added 2.8 cents on Friday’s state of emergency declaration to finish the week at $1.869 per mmBTU, thus showing a 9.4% gain for the week..

the natural gas storage report from the EIA on the week ending March 6th indicated that the quantity of natural gas held in underground storage in the US fell by 48 billion cubic feet to 2,043 billion cubic feet by the end of the week, which left our gas supplies 796 billion cubic feet, or 63.8% higher than the 1,247 billion cubic feet that were in storage on March 6th of last year, and 227 billion cubic feet, or 12.5% above the five-year average of 1,816 billion cubic feet of natural gas that has been in storage as of the 6th of March in recent years….the 48 billion cubic feet that were withdrawn from US natural gas storage this week was less than the consensus estimate for a 55 billion cubic feet withdrawal from a survey of analysts by S&P Global Platts, and was also much less than the average 99 billion cubic feet of natural gas that have been pulled from natural gas storage during the first week of March over the past 5 years, while it was way less than the 164 billion cubic feet withdrawal reported during the corresponding week of 2019..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending March 6th indicated that a modest increase in our oil imports and a big drop in our oil exports left us with a large surplus of oil to add to our stored commercial supplies, the eighteenth addition to storage in the past twenty-six weeks….our imports of crude oil rose by an average of 174,000 barrels per day to an average of 6,412,000 barrels per day, after rising by an average of 21,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 744,000 barrels per day to 3,410,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,002,000 barrels of per day during the week ending March 6th, 918,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells fell by 100,000 barrels per day to 13,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,002,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 15,702,000 barrels of crude per day during the week ending March 6th, 5,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that an average of 1,095,000 barrels of oil per day were being added to to the supplies of oil stored in the US….so looking at that data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 794,000 barrels per day less than what what was added to storage plus what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+794,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media treats these figures as gospel and since they drive oil pricing and hence decisions to drill for oil, we’ll continue to report them, just as they’re watched & believed as accurate by most everyone else…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,354,000 barrels per day last week, now 6.5% less than the 6,797,000 barrel per day average that we were importing over the same four-week period last year….the 1,095,000 barrel per day net addition to our total crude inventories was all added to our commercially available stocks of crude oil, while the quantity 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 13,000,000 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 12,500,000 barrels per day, while a 1,000 barrel per day decrease Alaska’s oil production to 473,000 barrels per day had no impact on the rounded national total….last year’s US crude oil production for the week ending March 8th was rounded to 12,000,000 barrels per day, so this reporting week’s rounded oil production figure was 8.3% above that of a year ago, and 54.2% 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 15,702,000 barrels of crude per day during the week ending March 6th, down from 86.9% of capacity the prior week, but still near the recent average refinery capacity utilization for the first week of March, historically the time of year that refineries changeover to summer blends and undergo maintenance…however, the 15,702,000 barrels per day of oil that were refined this week were 2.0% less than the 16,020,000 barrels of crude that were being processed daily during the week ending March 8th, 2019, when US refineries were operating at 87.6% of capacity….

even with the amount of oil being refined little changed, gasoline output from our refineries was somewhat higher, increasing by 199,000 barrels per day to 9,956,000 barrels per day during the week ending March 6th, after our refineries’ gasoline output had decreased by 40,000 barrels per day over the prior week… after this week’s increase in gasoline output, our gasoline production was 2.3% higher than the 9,735,000 barrels of gasoline that were being produced daily over the same week of last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 57,000 barrels per day to 4,705,000 barrels per day, after our distillates output had decreased by 198,000 barrels per day over the prior week…but even after this week’s increase in distillates output, our distillates’ production for the week was 3.1% less than the 4,856,000 barrels of distillates per day that were being produced during the week ending March 8th, 2019….

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week fell for the six week in a row, after twelve consecutive increases, and was hence down for the 20th time in 38 weeks, falling by 5,049,000 barrels to 246,999,000 barrels during the week ending March 6th, after our gasoline supplies had decreased by 4,339,000 barrels over the prior week….our gasoline supplies decreased by even more this week because the amount of gasoline supplied to US markets increased by 263,000 barrels per day to 9,449,000 barrels per day, while our exports of gasoline fell by 67,000 barrels per day to 745,000 barrels per day, while our imports of gasoline rose by 199,000 barrels per day to 710,000 barrels per day….but even after this week’s big inventory decrease, our gasoline supplies were still fractionally higher than last March 8th’s gasoline inventories of 246,090,000 barrels, and about 1% above the five year average of our gasoline supplies for the same time of the year…

similarly, with the decrease in our distillates production, our supplies of distillate fuels decreased for the 18th time in 24 weeks and for 33rd time in the past 49 weeks, falling by 6,404,000 barrels to 128,060,000 barrels during the week ending March 6th, the biggest draw since January 2004, after our distillates supplies had decreased by 4,008,000 barrels over the prior week….our distillates supplies fell by a near record amount this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 479,000 barrels per day to 4,398,000 barrels per day, and because our exports of distillates rose by 103,000 barrels per day to 1,530,000 barrels per day, while our imports of distillates rose by 183,000 barrels per day to 308,000 barrels per day….after this week’s big inventory decrease, our distillate supplies at the end of the week were 6.1% lower than the 136,369,000 barrels of distillates that we had stored on March 8th, 2019, and fell to about 10% below the five year average of distillates stocks for this time of the year…

finally, with the big drop in our oil exports, our commercial supplies of crude oil in storage rose for the twentieth time in thirty-seven weeks and for the thirty-second time in the past 52 weeks, increasing by 7,664,000 barrels, from 444,119,000 barrels on February 28th to 451,783,000 barrels on March 6th, the largest increase since November 1st ….but even after 7 straight increases, our crude oil inventories were stlll roughly 2% below the five-year average of crude oil supplies for this time of year, even while they remained about 35% higher than the prior 5 year (2010 – 2014) average of crude oil stocks after the first week of March, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels….even though our crude oil inventories had generally been rising over the past year, except for during this past summer, after generally falling until then through most of the prior year and a half, our oil supplies as of March 6th were just fractionally above the 449,072,000 barrels of oil we had in commercial storage on March 8th of 2019, and still 4.8% above the 430,928,000 barrels of oil that we had in storage on March 9th of 2018, while at the same time remaining 14.5% below the 528,156,000 barrels of oil we had in commercial storage on March 10th of 2017, a week which followed a period when we had been adding 10 million barrels per week to storage…   

OPEC’s Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC’s March Oil Market Report, which covers OPEC & global oil data for February, and hence it gives us a picture of the global oil supply & demand situation as production cuts totaling 2.1 million barrels a day from OPEC and its partners were still in effect, before the recent breakdown of OPECs agreemen…but as we’ll see, this report shows there was already a surplus more than 2 million barrels per day of oil produced globally in February, almost entirely due to coronavirus related downward revisions to demand…we should note as a caveat that estimating demand while an epidemic is spreading is pretty much a crapshoot, and hence the numbers we’ll be reporting this month should be considered having a much larger margin of error than we’d normally expect from this report..

the first table from this monthly report that we’ll look at is from the page numbered 55 of that report (pdf page 63), 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…

February 2020 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC’s oil output fell by 546,000 barrels per day to 27,772,000 barrels per day in February, from their revised January production total of 28,318,000 barrels per day…however that January output figure was originally reported as 28,859,000 barrels per day, which means that OPEC’s January production was revised 541,000 barrels per day lower with this report, and hence February’s production was, in effect, a 1,087,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month’s revisions)…

from that OPEC table, we can also see that the 647,000 barrel per day decrease in production in wartorn Libya was the only reason for the February drop in OPEC’s output, and were it not for that, there would have been a modest production increase, as several OPEC members increased output…nonetheless, it appears that oil output from most OPEC members, other than that of Iraq, still remains far enough below the output allocations that were 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 so as to allow for such modest increases….those output allocations for 2019, before ​the first quarter’s additional cuts, can be seen in the first table of OPEC production quotas for last year which we’ve included on the left below: 

OPEC supply cut targets as of October 2019

OPEC additional supply cuts as of December 2019

in addition to the allocations shown on the table on the left, at their meeting with other oil producers on December 6th of this past year, OPEC announced additional production cuts of 500,000 barrels per day through to March 2020 on top of those 2019 allocations, a breakdown of which we have in a table from OPEC on the right above…that table was posted on OPEC’s website after their December 6th meeting, and it shows the additional production cuts each of the OPEC members and their allies among other producers ​were expected to make over the 3 month period beginning January…as you see, the heaviest output cuts have been on the core OPEC members of Saudi Arabia. the United Arab Emirates, Kuwait and Iraq, while embargoed Iran and Venezuela remain exempt…obviously, that table would be more ​useful if their current production, or even their expected end production, were included, but i’ve been unable to find a table with those complete metrics, so we’ll just have to make do switching back and forth between the two tables we have to see how each member is impacted….in addition to those cuts that came out of the December​ ​OPEC meeting, the Saudis ​had ​voluntarily pledged to cut an additional 400,000 barrels a day more than was mandated by the December 6th agreement, bringing the total current output cut for the group to 2.1 million barrels a day, or more than 2% of global output…however, with the breakdown of the OPEC talks the Friday before last, and the Saudi’s subsequent declaration that they would increase production, those production cuts have now gone by the boards…nonetheless, the stated intentions to increase production ​going forward ​do not affect the February data that we’re looking at today…

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 March 2018 to February 2020, and it comes from page 54 (pdf page 66) of the March 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… 

February 2020 OPEC report global oil supply

largely due to the 546,000 barrel per day drop in OPEC’s production from what they produced a month ago, OPEC’s preliminary estimate indicates that total global oil production was down by a rounded 0.29 million barrels per day to average 99.75 million barrels per day in January, a reported decrease which came after January’s total global output figure was revised lower by 80,000 barrels per day from the 100.12 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 250,000 barrels per day in February after that revision, with higher oil production from the US, Norway, Guyana, Bahrain, Oman and the UK the major reasons for the non-OPEC output increase in February… despite the decrease in February’s output, the 99.75 million barrels of oil per day produced globally in February were 0.86 million barrels per day, or 0.9% greater than the 98.89 million barrels of oil per day that were being produced globally in February a year ago, the 2nd month of OPECs first round of production cuts (see the March 2019 OPEC report (online pdf) for the originally reported February 2019 details)…with this month’s downward revision to and decrease in OPEC’s output, their February oil production of 27,772,000 barrels per day fell to 27.8% of what was produced globally during the month, down from the 28.3% share OPEC contributed in January, and the 29.3% global share they had in December, before Ecuador quit the cartelOPEC’s February 2019 production, which included 522,000 barrels per day from Ecuador, was reported at 30,549,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 2,255,000 fewer barrels per day of oil in February than what they produced a year ago, when they accounted for 30.8% of global output, with 760,000 barrel per day drop in the output from Libya, a 663,000 barrel per day drop in the output from Iran, a 404,000 barrel per day decrease in output from Saudi Arabia, and a 242,000 barrel per day decrease in the output from Venezuela from that time accounting for most of the year over year output decrease… 

even with the big drop in OPEC’s output that we’ve seen in this report, there was a still substantial surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…     

February 2020 OPEC report global oil demand

the above table came from page 30 of the March OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2020 over the rest of the table…on the “Total world” line in the second column, we’ve circled in blue the figure that’s relevant for February, which is their estimate of global oil demand during the first quarter of 2019…

OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe will be using 97.58 million barrels of oil per day, which is a 1.95 million barrel per day downward revision from the 99.51 million barrels of oil per day they were estimating for the 1st quarter a month ago (circled in green), largely reflecting coronavirus related demand destruction….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 producing 99.75 million barrels per day during February, which means that there was a surplus of around 2,170,000 barrels per day in global oil production ​in ​February​ ​when compared to the demand estimated for the month… 

the revisions to January output and to 1st quarter demand (included in the green ellipse above) means that the previous surplus figure we had computed for January should be revised as well….however, the downward revision to 1st quarter demand was due to the impacts of the coronavirus, which were negligible during January, meaning that 1.95 million barrel per day revision for the quarter reflects demand impacts that fell over February and are expected over March…however, since we’re computing monthly surplus or shortfalls off of quarterly demand data, the only way we can get close to an accurate estimate for the 3 months of the quarter would be to compute the figures as if the demand revision were evenly spread over those months…

hence, since we ​had ​estimated a surplus of 610,000 barrels per day in global oil production during January a month ago, based on the figures published at that time, we’ll adjust that as part of an eventual first quarter total and revise that accordingly… as we saw earlier, January’s global output figure was was revised 80,000 barrels per day lower than the figures published a month ago, while global demand for the 1st quarter was 1.95 million barrel per day lower, so with these revised figures, we’ll now find that global oil production in January was running roughly 2,480,000 barrels per day in excess of demand

meanwhile, for 2019, OPEC is revising its demand estimates 80,000 barrels per day lower, which we have circled in orange…while most of that downward revision falls in the 4th quarter, it’s now a bit too far removed for us to be recomputing monthly figures for that period, so we’ll just apply that 80,000 barrel per day demand revision to the year as a whole….based on revisions in the February OPEC Monthly Oil Market Report, we had figured and oil shortage of 284,090,000 barrels for the entirely of 2019…since demand for the year has now been revised 80,000 barrels per day lower, our new estimate would be that 2019’s glogal oil production saw a shortage of 254,890,000 barrels, compared to OPEC’s estimated demand….that’s still a substantial a net oil shortfall that is the equivalent of more than two and a half days of global oil production at the December production rate… 

This Week’s Rig Count

despite the recent drop​s​ in​ both​ oil & gas prices, the US rig count remained nearly stagnant for the 7th week in a row over the week ending March 13th, as decisions to redeploy equipment typically lag prices by several weeks…but while the rig count is down by just a quarter-percent since the beginning of this year, it still remains down by 27% from the end of 2018….Baker Hughes reported that the total count of rotary rigs running in the US decreased by one rigs to 792 rigs this past week, which was still down by 234 rigs from the 1026 rigs that were in use as of the March 15th report of 2019, and 1,137 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in an attempt to put US shale out of business

the number of rigs drilling for oil increased by 1 rig to 683 oil rigs this week, which was still 150 fewer oil rigs than were running a year ago, and much lower than 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 decreased by 2 to 107 natural gas rigs, which was the least number of natural gas rigs active since October 21st of 2016, and hence was another 40 month low for natural gas drilling…natural gas rigs were also down by 86 gas 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 to the rigs drilling for oil & gas, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there were no such “miscellaneous” rigs deployed..

offshore drilling activity in the Gulf of Mexico dropped by 4 rigs to 19 rigs this week, with 18 Gulf rigs remaining in Louisiana waters and one rig still drilling offshore from Texas…that’s now three less than the number of rigs that were deployed in the Gulf a year ago, when 19 rigs were drilling offshore from Louisiana and three rigs were operating in Texas waters…with no rigs deployed off other US shores elsewhere at this time, the current Gulf of Mexico rig count is thus equal to the national offshore rig total, as it has been all winter…

the count of active horizontal drilling rigs increased by 5 rigs to 713 horizontal rigs this week, which was the most horizontal rigs active since November 1st 2019, but still 194 fewer horizontal rigs than the 907 horizontal rigs that were in use in the US on March 15th 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 down by three rigs to 48 directional rigs this week, and those were also down by 17 from the 65 directional rigs that were operating during the same week of last year….​in addition, the vertical rig count was also down by three rigs to 31 vertical rigs this week, and those were down by 23 from the 54 vertical rigs that were in use on March 15th of 2019…

the details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 13th, the second column shows the change in the number of working rigs between last week’s count (March 6th) and this week’s (March 13th) count, the third column shows last week’s March 6th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 15th of March, 2019…    

March 13 2020 rig count summary

the ​5 rig drop in the Louisiana rig count reflects the shutting down of the 4 aforementioned offshore rigs that had been deployed in Louisiana waters, and a Haynesville shale rig in the northwest corner of the state; however, the Haynesville rig count remain​ed unchanged because a rig began drilling in that basin on the Texas side of the state line at the same time…the 4 rig increase in Texas includes that rig, Permian basin rigs that were added Texas Oil Districts 7C and 8A, the districts that encompass the Permian Midland basin, as well as rig additions in Texas Oil Districts 1 and 3, which were offset by the stacking of a rig in Texas Oil District 2…with Texas thus adding two Permian rigs this week, we can therefore figure that the rig that was added in New Mexico had to drilling in the western Permian Delaware..​.the Cana Woodford addition was an oil rig drilling in Oklahoma, offset by a conventional rig that was shut down elsewhere in the state..​.among rigs drilling for natural gas, two were added in West Virginia’s Marcellus while 2 were shut down in Ohio’s Utica and two more natural gas rigs were shut down in “other basins” that Baker Hughes does not track separately..

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