total supplies of everything oil jump 6.6 million barrels to another record as rig count drops

oil prices bounced around this week and ended somewhat lower, as news of increasing international oil production and the building domestic product glut dampened speculative buying on the unlikely prospect of an OPEC-Russian production freeze…the 7 day price rally that helped push prices up over 22% from their lows in the first three weeks of August ended on Monday, as forced short squeeze buying came to an end amid news of increased Chinese, Iraqi and Nigerian exports, sending the expiring September WTI oil contract down 3% to close at $47.05 a barrel, while the new October oil contract fell $1.70, or 3.5% to close at $47.41 a barrel…oil production freeze talk returned to the fore on Tuesday, on reports that Iran was ‘sending positive signals’ that it may support an OPEC attempt to support prices as October oil, now the widely quoted front month contract, closed up 69 cents at $48.10 a barrel, despite a report from the American Petroleum Institute that crude oil stockpiles had increased by nearly 4.5 million barrels, the biggest buildup in 4 months…oil prices were then slammed on Wednesday and closed down $1.33 at $46.77 a barrel after the EIA reported increased inventories across the entire oil and oil products complex, even though their 2.5 million barrel build of crude was 2 million less than the API had telegraphed less than 24 hours earlier…oil prices then returned to the plus column on Thursday, rising 56 cents to $47.33 a barrel, on positive economic reports and further cooperative statements from Iran’s oil minister…oil rose again on Friday after an Iranian TV report that Yemeni forces had fired ballistic missiles at Saudi oil facilities and held on to most of those gains to close the week 1.8% lower at $47.64 a barrel, after Baker Hughes reported the U.S. oil rig count was unchanged for the week….

The Latest Oil Stats from the EIA

as mentioned, the oil data for the week ending August 19th from the US Energy Information Administration showed increases in inventories of oil and of all major refined products, exacerbated by oil imports that were near a 4 year high, even as refineries returned to operating at a seasonable level…however, this week’s crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +523,000 barrels per day, which meant that 523,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week’s metrics were off by that amount, so we have to again take this week’s data with a large grain of salt…that’s now the 9th week in a row that we’ve seen a large positive adjustment, and as a result this year’s cumulative daily average of that weekly statistical adjustment is now up to a positive 93,000 barrels per day, a reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn’t showing up in the final consumption or inventory figures… 

at any rate, the EIA reported that our imports of crude oil rose by an average of 449,000 barrels per day to an average of 8,738,000 barrels per day during the week ending August 19th, which was the second most oil we’ve imported in any week since October 19th of 2012….this week’s imports were more than 1.44 million barrels per day, or 21.7%, more than the 7,199,000 barrels of oil per day we imported during the week ending August 21st a year ago, and the 4 week average of our oil imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.5 million barrels per day, 13.3% higher than the same four-week period last year… 

at the same time, our field production of crude oil fell by 49,000 barrels per day to an average of 8,548,000 barrels per day during the week ending August 19th, as a 6,000 barrel per day increase in Alaskan oil production was offset by a 55,000 barrel per day drop in production from the lower 48 states…that left the week’s oil production down by 8.5% from the 9,337,000 barrels we produced during the week ending August 21st of 2015, and 11.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…our oil production for the week ending August 21st is now 671,000 barrels per day lower than we what were producing at the beginning of this year…  

meanwhile, crude oil used by US refineries dropped by an average of 186,000 barrels per day to an average of 16,679,000 barrels of crude per day during the week ending August 19th, as the US refinery utilization rate fell to 92.5% for that week, down from 93.5% of capacity the prior week, and down from the refinery utilization rate of 94.5% logged during the week ending August 21st last year…the drop in refining was entirely due to a 244,000 barrel per day drop in oil used on the Gulf Coast, where refineries were slowed by flooding in Louisiana and a refinery fire in Texas….product bound east cost crude oil refining actually rose by 60,000 barrels per day, though their capacity utilization only rose 85.5%, in contrast to a 94.4% capacity utilization rate of a year ago, when a glut of products was not a problem…nationally, the amount of crude oil refined this week was 21,000 barrels more than the 16,658,000 barrels of crude per day US refineries used during the week ending August 21st last year, and 1.6% more than the equivalent week in 2014… 

the 186,000 barrel per day drop in crude oil being refined in turn led to a 155,000 barrels per day drop in our refineries’ production of gasoline, which fell to 10,035,000 barrels per day during the week ending August 19th…still, that was 2.6% higher than our gasoline output of 9,782,000 barrels per day during the week ending August 21st last year, and 9.6% higher than the gasoline production of the equivalent week of 2014….at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 90,000 barrels per day to 4,849,000 barrels per day during the week ending August 19th….that left our distillates output 1.4% less than the 4,906,000 barrels per day that was being produced during the same week last year, and 1.3% less than the distillates production of the equivalent week of 2014… 

even with production of both gasoline and distillates down however, supplies of both left over at the end of the week were higher than last week, as were supplies of all other major refined products…our gasoline inventories rose by 36,000 barrels to 232,695,000 barrels as of August 19th, as our gasoline imports rose by 191,000 barrels per day to 801,000 barrels per day…that left this week’s gasoline inventories 8.5% higher than the 214,434,000 barrels of gasoline that we had stored on August 21st last year, and also 9.6% higher than the 212,314,000 barrels of gasoline we had stored on August 22nd of 2014…similarly, our distillate fuel inventories rose by 122,000 barrels to 153,257,000 barrels by August 19th, which left our distillate inventories 2.3% above the distillate inventories of 149,836,000 barrels of August 21st last year, and 24.8% above the distillate inventories of 122,794,000 barrels of August 22nd, 2014…  

inventories of all other major products rose as well….our stockpiles of propane/propylene rose by 2,391,000 barrels to 96,135,000 barrels last week, which meant they were 0.4% above the then record high of 95,724,000 set during the week of August 21st last year, and 28.7% higher than the propane/propylene inventories of the same week in 2014…inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) other than propane/propylene rose by 2,628,000 barrels to 148,086,000 barrels as of August 19th, 17.2% higher than the 126,335,000 barrels we had stored as of August 21st last year, and 15.6% higher than the equivalent week in 2014…inventories of kerosene type jet fuel rose by 102,000 barrels to 41,751,000 barrels as of August 19th, not up much from our jet fuel stockpiles of 41,694,000 barrels on August 21st last year, but 20.3% higher than our 34,719,000 barrels of jet fuel supplies we had stored on August 22nd of 2014…and stockpiles of residual fuel oils rose by 1,443,000 barrels to 40,493,000 barrels as of August 19th, 1.9% higher than the 39,719,000 barrels we had stored a year earlier, and 11.7% higher than the 36,248,000 barrels of residual fuel oils we had stored on August 22nd 2014…

lastly, with the big jump in imports and the refinery slowdown, our inventories of crude oil that has yet to be refined into any of the above products also rose, increasing by 2,501,000 barrels to 523,594,000 barrels as of August 19th, the 4th oil inventory increase in 5 weeks…thus we ended up with 16.2% more crude oil in storage than the 450,761,000 barrels we had stored as of the same weekend a year earlier, and 45.3% more crude oil than the 360,475,000 barrels we had stored on August 22nd of 2014…

tying it all together, the chart below, from Zero Hedge, shows the aggregate of all oil and oil products we had in storage for every week since the beginning of 1990; it’s a compact version of the interactive graph that accompanies the EIA’s Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page…as of August 19th, our total stockpiles of oil and oil products set a new record at 1,400,176,000 barrels, the 23rd new record high set in 2016, and 6,613,000 barrels more than the record set for this metric last week…we’ve now set new records for total supplies 8 weeks in a row, adding a total of 28.3 million barrels of oil and oil products to what we already have stored over that 8 week stretch….you might also note from that chart that our 1.4 billion barrels of total supply is now more than 30% higher than the 2010 to 2014 average, and 40% higher than the 1 billion barrel average of the decade before that…

August 24 2016 total EIA inventory for week ending August 19

This Week’s Rig Counts

US drilling activity fell for only the 2nd time in the past 13 weeks during the week ending August 26th, following the prior string of 39 weeks where the rig count had not risen at all…Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 489 rigs as of Friday, which was also down from the 877 rigs that were deployed as of the August 28th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil was unchanged this week at 406, but was still down from the 675 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 2 rigs to 81 rigs this week, which ties the previous all time low for natural gas rigs set 3 weeks earlier on August 5th — prior to this year, there is no record of less than 150 natural gas rigs deployed in the US in any week…gas rigs were also down from the 202 natural gas rigs that were drilling on August 28th year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there were also two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs deployed….  

one of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico was shut down this week, leaving 17 still active in the Gulf of Mexico and offshore nationally at week end, down from 29 rigs drilling in the Gulf and a total of 30 rigs offshore nationally a year ago…however, there was also another rig set up to drill through an inland lake in southern Louisiana, which brought the inland waters rig count up to 4 rigs, which was the same as a year earlier…

the number of working horizontal drilling rigs fell by 3 rigs this week after rising by 7 rigs last week, which left the count of active horizontal rigs at 379 rigs, which was still down from the 672 horizontal rigs that were in use on August 28th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…in addition, the vertical rig count dropped by 2 rigs to 62 rigs this week, which was down from the 125 vertical rigs that were drilling in the US during the same week last year…meanwhile, the directional drilling rig count rose by 3 rigs to 48 rigs, which was still down from the 80 directional rigs that were deployed during the same week last year…     

the details on this week’s changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of August 26th, the second column shows the change in the number of working rigs between August 19th and August 26th, the third column shows the August 19th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was August 28th of 2015:    

August 26 2016 rig count summary

once again, the Permian basin of western Texas shows the only significant increase in the rig count this week, as has typically been the case during the 13 weeks that oil drilling has generally been on the increase…on the other hand, there were two rigs removed from the Denver-Julesburg-Niobrara chalk of the Rockies front range, the first pullback of that magnitude in that basin since February; the rig count there had previously climbed from 12 to 18 over the prior three months…also note the removal of a single rig from the Utica of Ohio, where 13 rigs remain active, down from 20 rigs a year ago…also, not shown on the state table above was the decrease from 3 rigs to 2 rigs in Alabama, which brings them back to the same level of drilling activity as they saw a year ago, and the increase from 3 rigs to 4 rigs in Mississippi, which is also an increase from the 3 rigs working in Mississippi as of August 28th a year ago…

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2nd estimate 2nd quarter GDP; July’s durable goods, new and existing home sales

the key economic release of the past week was the 2nd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, which was released on Friday…other widely watched releases we saw earlier in the week included the July advance report on durable goods and the July report on new home sales, both from the Census bureau, and the Existing Home Sales Report for July from the National Association of Realtors (NAR)…this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which rose to a 12 month high of +0.27 in July, up from +0.05 in June…however, that still left the 3 month average of the index at –0.10, which supposedly indicates national economic activity has been below the historical trend over those recent months…in addition, this week saw the release of two more regional Fed manufacturing surveys for August: 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 collapsed to -10 in July from +11 in July, suggesting a return to contraction for that region’s manufacturing; and the Kansas City Fed manufacturing survey for July, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to -4 in August, up from -6 in July, suggesting that the regional contraction, mostly in energy related industries, continues for the 18th month…

2nd Quarter GDP Revised to Indicate Growth at a 1.1% Rate

the Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.1% rate in the quarter, revised down from the 1.2% growth rate reported in the advance estimate last month, as residential investment was revised lower, private inventory investment decreased more than was previously estimated, our trade deficit was revised higher, and government shrunk more than was first reported…in current dollars, our first quarter GDP grew at a 3.4% annual rate, increasing from what would work out to be a $18,281.6 billion a year rate in the 1st quarter to a $18,436.5 billion annual rate in the 2nd quarter of this year, with the headline 1.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.3%, aka the GDP deflator, was applied to the current dollar change…

recall that the press release for the GDP 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 which actually occurred over the 3 month period, and that the prefix “real” is used to indicate that the change has been adjusted for inflation using prices chained from 2009, from which all percentage changes in this report are calculated, as they thus represent the change in quantity of goods and services output…given the misunderstanding evoked by the text of the press release, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 2nd quarter GDP, which is linked to on the sidebar of the BEA press release…specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2012; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; table 4, which shows the change in the price indexes for each of the components; and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts…the pdf for the 1st quarter advance estimate, which this estimate revises, is here

growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 4.2% growth rate reported last month to a 4.4% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 6.46% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation at a 2.0% annual rate in the 2nd quarter, which was revised from the 1.9% PCE inflation rate reported a month ago…real consumption of durable goods grew at a 9.9% annual rate, which was revised from the 8.4% growth rate in the advance report, and added 0.71 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 15.2% rate accounted for more than half the durables increase…real consumption of nondurable goods by individuals rose at a 5.7% annual rate, revised from the 6.0% increase rate reported in the 1st estimate, and added 0.81 percentage points to 2nd quarter economic growth, as higher consumption of food, clothing and other non-durables more than offset a small decrease in consumption of energy goods ….at the same time, consumption of services rose at a 3.1% annual rate, revised from the 3.0% growth rate reported last month, and added 1.42 percentage points to the final GDP tally, as real health care consumption rose at a 5.6% rate…

meanwhile, seasonally adjusted real gross private domestic investment contracted at a 9.7% annual rate in the 2nd quarter, with the aggregate statistically unrevised from the 9.7% shrinkage estimate reported last month, as real private fixed investment shrunk at a 2.5% rate, rather than at the 3.2% rate reported in the advance estimate, while the inventory contraction was somewhat larger than previously estimated…investment in non-residential structures was revised from shrinking at a rate of 7.9% to shrinking at a 8.4% rate, and real investment in equipment was revised to show contraction at a 3.7% rate, also worse than the 3.5% contraction rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 3.5% rate to growth at a 8.7% rate…on the other hand, real residential investment was shown to be shrinking at a 7.7% annual rate, rather than the 6.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.23 percentage points from the 2nd quarter’s growth rate, the decrease in investment in equipment subtracted 0.22 percentage points from growth, lower residential investment subtracted 0.30 percentage points from GDP, while growth in investment in intellectual property added 0.34 percentage points to 2nd quarter GDP…

in addition, investment in real private inventories fell by an inflation adjusted $12.4 billion in the 2nd quarter, revised from the originally reported $8.1 billion of inventory shrinkage…this came after inventories had grown at an inflation adjusted $40.7 billion rate in the 1st quarter, and hence the $53.1 billion decrease in real inventory growth subtracted 1.26 percentage points from the quarter’s growth rate, in contrast to the 1.16 percentage point subtraction due to slower inventory growth that was shown in the advance estimate….since slower growth in inventories indicates that less of the goods produced during the quarter were left “sitting on the shelf”, their decrease by $53.1 billion meant that real final sales of GDP were relatively greater by that much, and hence real final sales of GDP increased at a 2.4% rate in the 2nd quarter, in contrast to the real final sales increase at a 1.2% rate in the 1st quarter, when the change in inventories was smaller…

the previously reported increase in real exports was revised smaller with this estimate, while the reported decrease in real imports was revised to show a increase, and as a result the change in our net trade was a smaller addition to GDP rather than was previously reported…our real exports grew at a 1.2% rate rather than the 1.4% 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, their growth added 0.14 percentage points to the 2nd quarter’s growth rate, a bit less than the 0.16 percentage point addition shown in the previous report……meanwhile, the previously reported 0.4% decrease in our real imports was revised to a 0.3% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 0.04 percentage points from 2nd quarter GDP….thus, our still weakening trade balance only added a net 0.10 percentage points to 2nd quarter GDP, rather than the 0.23% percentage point addition that had been indicated by the advance estimate…

finally, there were also negative revisions to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 1.5% rate, revised from the shrinking at a 0.9% rate previously reported…real federal government consumption and investment was seen to have shrunk at a 0.3% rate from the 1st quarter in this estimate, which was revised from the 0.2% contraction rate in the 1st estimate…real federal outlays for defense were revised to show shrinkage at a 3.1% rate, rather than the 3.0% contraction rate previously reported, and subtracted 0.12% percentage points from 2nd quarter GDP, while all other federal consumption and investment grew at a 3.8% rate, rather than the 3.9% rate previously reported, and added 0.10% percentage points to 2nd quarter GDP,,,meanwhile, real state and local consumption and investment shrunk at a 2.2% rate in the quarter, which was revised from the 1.3% contraction rate reported in the 1st estimate, and subtracted 0.25% percentage points from 2nd quarter GDP….note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…

July Durable Goods: New Orders Up 4.4%, Shipments Up 0.2%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $9.7 billion or 4.4 percent to $228.9 billion in July, following a revised drop of 4.2% in June new orders, which had been originally reported as a 4.0% decrease…year to date new orders are still 0.9% below those of 2015, vs the statistically unchanged year over year change we saw in this report last month…as is usually the case, the volatile monthly change in new orders for transportation equipment drove the July headline change, as those transportation equipment orders rose $7.5 billion or 10.5 percent to $78,861 million, on a 89.9% increase to $12,498 million in new orders for commercial aircraft….excluding new orders for transportation equipment, other new orders were still up 1.5% in July, as new orders for computers and electronic products were up 3.6% to $24,780 million, contributing to a 1.6% increase in new orders for nondefense capital goods excluding aircraft, which is a proxy for equipment investment…

the seasonally adjusted value of July’s shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, rose by $0.4 billion or 0.2 percent to $232.9 billion, after June shipments were revised from a increase of 0.4% to an increase of 0.5% because May shipments were revised 0.1% lower….a 1.5% increase in shipments of computers and electronic products drove the July change, as those shipments rose $0.4 billion to $27.1 billion… meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the first time in seven months, increasing by $1.2 billion or 0.3 percent to $383.0 billion, after the drop in June inventories was revised from a 0.2% decrease to a 0.1% decrease…an increase in inventories of transportation equipment were a major factor in the inventory increase, as they rose $0.5 billion or 0.4 percent to $123.7 billion, on a 7.2% increase to $11,519 million in inventories of defense aircraft…excluding the increase in inventories of transportation equipment, all other durable goods inventories increased 0.3% to $259,300 million…

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, fell for the 2nd consecutive month, slipping by $0.8 billion or 0.1 percent to $1,126.6 billion, following a June decrease of 0.9%, which was statistically unrevised…a $1.9 billion or 0.2 percent to $772.2 billion decrease in unfilled orders for transportation equipment was responsible for all of the decrease, as unfilled orders excluding transportation equipment rose 0.3% to $354,349 million….compared to a year earlier, the unfilled order book for durable goods is now 2.2% below the level of last July, with unfilled orders for transportation equipment 3.2% below their year ago level, largely on a 7.4% decrease in the backlog of orders for motor vehicles… 

July New Home Sales Highest in at Least 8 Years

the Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 654,000 new homes a year, which was 12.4 percent (±12.7%)* above the revised June rate of 582,000 new single family home sales a year and 31.3 percent (±19.9%) above the estimated annual rate that new homes were selling at in July of last year….the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….thus, that uncertainty must be considered when noting media reports alleging that new homes sales were at the highest level since October 2007…however, even allowing for a maximum downward revision reflecting the ±12.7% margin of error in this report, July new homes sales would still be at their highest level since March 2008…with this report; sales new single family homes in June were revised from the annual rate of 592,000 reported last month to a 582,000 a year rate, and home sales in May, initially reported at an annual rate of 551,000 and revised to a 572,000 a year rate last month, were unrevised with this report, while April’s annualized home sale rate, initially reported at 619,000 and revised from 586,000 to 572,000 last month, were further revised down to 570,000 with this release..

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of Census field reps, which showed that approximately 57,000 new single family homes sold in July, up from the 53,000 new homes that sold in both May and June….the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $294,600, down from the median sale price of $310,500 in June and down from the median of $296,000 in July a year ago, while the average July new home sales price was $355,800, up from $353,500 average sales price in June, and up from the average sales price of $341,900 in July a year ago….a seasonally adjusted estimate of 233,000 new single family houses remained for sale at the end of July, which represents a 4.2 month supply at the July sales rate, down from the reported 4.9 month supply in June….

Existing Home Sales Fall 3.2% in July, Down 1.6% YoY, as Prices Slip

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 3.2% from June to July, projecting that 5.39 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 1.6% below the annual sales rate projected in July of a year ago; June sales at a 5.57 million annual rate were essentially unrevised from last month’s report…the NAR also reported that the median sales price for all existing-home types was $244,100 in July, down from $247,600 in June 5.3% higher than in July a year earlier, which they report as “the 53rd consecutive monthly year over year increase in home prices”…..the NAR press release, which is titled “Existing-Home Sales Lose Steam in July “, 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…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this unadjusted data indicates that roughly 514,000 homes sold in July, down by 11.7% from the 582,000 homes that sold in June, and down by 6.7% from the 551,000 homes that sold in July of last year, so we can see there was a sizable seasonal adjustment just to bring the annualized published figures up to the level reported…that same pdf indicates that the median home selling price for all housing types fell 1.4%, from a revised $247,600 in June to $244,100 in July, while the average home sales price was $285,900, down 1.3% from the $289,800 average in June, but up 3.6% from the $275,900 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $226,200 in the Midwest to a high of $373,100 in the West…

 

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

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August 27th graphics

rig count summary:

August 26 2016 rig count summary

total oil + oil products inventory:

August 24 2016 total EIA inventory for week ending August 19

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oil production up by the most since last May, total supplies of oil & oil products at another record high..

oil prices rose with little interruption this week, largely on the ongoing talk about a possible Russian – OPEC agreement to freeze their oil output, although a falling US dollar (which makes internationally traded goods more expensive here) and a large drawdown of crude oil and gasoline inventories didn’t help…the best way to see what happened price-wise is to start with a graph, because that picture of spiking prices goes a long way towards showing us all we really need to know…

August 20th 2016 oil prices

the graph above, which should be familiar to you by now, shows the daily prices per barrel over the past 3 months for the September contract of the US benchmark oil, West Texas Intermediate (WTI) as traded at the Cushing Oklahoma depot…Friday’s $48.52 a barrel closing price for that oil contract is now up 22.8% from the $39.51 a barrel interim low price seen at the close on Tuesday, August 2nd, while it’s still 2.3% below the $49.88 a barrel price seen for the August contract on July 1st…note that the light red and green bars across the bottom of the graph show the trading volume for that contract each day, wherein green bars indicate days when the price rose, and red bars indicate days when the price fell…but while we’ve seen the oil price rise 7 days in a row, a fairly impressive rally, note that the height of the bars indicate below average levels of trading for every day this week except Thursday…that’s a fair indication that it’s not big players like major refiners buying oil who are driving this price rise, but rather a collection of smaller oil traders we might think of as bored Pokemon-Go players, who are buying oil contracts in the absence of sellers because that’s what they do…also note that September trading for Brent oil, the international benchmark, has already expired, and the international contract for October delivery is now trading $50.88 a barrel, as it’s been holding a few dollars above the US price for several months now…

The Latest Oil Stats from the EIA

this week’s oil data for the week ending August 12th from the US Energy Information Administration indicated a surprising jump in our production of crude oil, a return to near recent normal levels of oil imports after 3 weeks near 4 year highs, an large increase in oil refining to seasonal levels, and thus a decrease in crude oil inventories, as well as another drop in gasoline inventories… however, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was + 394,000 barrels per day, which means that 394,000 more barrels per day showed up in our final consumption and inventory figures than were accounted for by our production or import figures, meaning one or several of this week’s metrics were incorrect by that amount, errors which are typically due to miscues in reporting or gathering that data…that’s now the 8th week in a row that we’ve seen a large positive adjustment, and as a result this year’s cumulative daily average of that weekly statistical adjustment is now up to a positive 80,000 barrels per day, which means a lot of oil or refined products have been turning up in the data, the sources for which haven’t been accounted for…of course, this indicates that this weekly crude oil data is unreliable and will need to be revised later, but it’s the weekly data that the markets react to, hence influencing the price of oil and hence ultimately decisions to drill or frack..

at any rate, according to the EIA. domestic production of crude oil from US wells rose by 152,000 barrels per day to an average of 8,597,000 barrels per day during the week ending August 12th, which was our largest one-week jump in oil output since the week ending May 22nd of 2015…moreover, only 52,000 barrels per day of that increase came from Alaska, as the lower 48 saw a 100,000 barrel per day increase to 8,120,000 per day…that increase strongly suggests that a number of those DUC oil wells (drilled but uncompleted) that we looked at 2 weeks ago were likely completed, fracking that may have been set in motion by oil prices near $50 a the end of June….hence our oil production this week was only 8.0% below the 9,348,000 barrels we produced during the week ending August 14th of 2015, and 10.5% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…

the EIA also reported that our imports of crude oil fell by an average of 211,000 barrels per day to an average of 8,193,000 barrels per day during the week ending August 12th, the least oil we’ve imported since the week ending July 15th….nonetheless, this week’s imports were still more than 1.9% more than the 8,138,000 barrels of oil per day we imported during the week ending August 14th a year ago, while the 4 week average of our imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) stayed at the 8.4 million barrel per day level, 11.5% above the same four-week period last year…    

meanwhile, the amount of crude oil used by US refineries rose by 268,000 barrels per day to an average of 16,865,000 barrels of crude per day during the week ending August 12th…that was as the US refinery utilization rate rose to 93.5% during the week, up from 92.2% of capacity during the week ending August 5th but still below the refinery utilization rate of 95.1% logged during the week ending  August 14th 2015…crude oil refining on the product glut bound east coast was down by 1000 barrels per day as their utilization rate oddly rose to 84.2%, but their throughput was still 12.8% below a year ago, when east coast refineries were being operated at 93.5% of capacity…nationally, crude oil refined this week was a half percent more than the 16,775,000 barrels of oil per day US refineries processed during the week ending August 14th last year, and was 2.7% more than the equivalent week in 2014…  

with the increase in refining, our refineries’ production of gasoline rose by 182,000 barrels per day to an average of 10,280,000 barrels per day during the week ending August 12th, just 9,000 barrels per day short of the gasoline output record we set during the week ending June 17th…still, that was only 0.3% higher than our gasoline output of 10,248,000 barrels per day during the week ending August 14th last year, which was the high for 2015 gasoline production…at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also jumped, rising by 200,000 barrels per day to 4,939,000 barrels per day during the week ending August 12th….that brought our distillates output to within 2.6% of the 5,072,000 barrels per day that was being produced during the same week last year…

even with the near record output of gasoline, however, our gasoline inventories fell again, dropping by 2,724,000 barrels to 232,659,000 barrels as of August 12th, which was again well above the normal summertime drawdown…contributing to this week’s gasoline shortfall was a 320,000 barrel per day drop in our gasoline imports to 610,000 barrels per day, while the amount of gasoline supplied to US markets slipped by an inconsequential 7,000 barrels per day to 9,762,000 barrels per day…nonetheless, this week’s gasoline inventories were still 9.3% higher than the 212,774,000 barrels of gasoline that we had stored on August 14th last year, and also 9.1% higher than the 213,274,000 barrels of gasoline we had stored on August 15th of 2014, so our gasoline supplies still remain categorized by the EIA as “well above the upper limit of the average range” for this time of year..         

even as our gasoline inventories dropped, our distillate fuel inventories rose by 1,939,000 barrels to 153,155,000 barrels by August 12th, as our demand for distillates fell 8.9% to 3,488,000 barrels per day during the week…that increase in supplies brought our distillate inventories to a level 3.2% above the distillate inventories of 148,400,000 barrels of the 14th of August last year, and 26.0% above the distillate inventories of 121,542,000 barrels of August 15th, 2014, which the EIA characterized as “near the upper limit of the average range for this time of year”… 

  with our crude oil imports lower and our refinery consumption of crude higher, we needed to draw oil out of storage to meet that need, and hence our stocks of crude oil in storage fell by 2,508,000 barrels to 521,093,000  barrels….nonetheless, we still ended the week with 14.2% more oil in storage than the 456,213,000 barrels we had stored as of the same weekend a year earlier, and 43.7% more oil than we had stored on August 15th of 2014….since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it’s pretty obvious that our current crude oil supplies of 521.1 million barrels also remain “well above the upper limit of the average range” for this time of year…”     

now, as we mentioned in opening, that 2.5 million barrel drop in crude supplies and the 2.7 million barrel drop in gasoline supplies were widely seen as contributing to this week’s oil price rally…oil prices jumped about 50 cents a barrel right after the Wednesday EIA release, then spiked another $1 a barrel on Thursday morning after the inventory data was digested…oil traders apparently see those drops in supply as evidence that the oil glut which drove prices down is being alleviated…however, the day traders in oil apparently can’t see past the oil and gasoline numbers, because they ignored the 1.9 million barrel increase in distillates supply, the 1.8 million barrel increase in propane/propylene inventories, the 552,000 barrel increase in residual fuels supply, and a 2.2 million barrel increase in “other oils”, which includes unfinished oils, road oil, and natural gas plant liquids…add them all together, it meant that total commercial petroleum inventories were still up 1.3 million barrels for the week, which is a record high, as you can clearly see on the graph below… 

August 18 2016 Total Commercial Oil and Petroleum Inventories for August 12

the above graph, from the EIA, is a static version of the interactive graph that accompanies the EIA’s Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page…this graph takes crude oil, natural gas liquids, and all the products produced from them and adds them together, for a weekly total of all commercial supplies, amounts for which are all listed separately and in total on the EIA’s Total Stocks of Crude Oil and Petroleum Products page…for the week ending August 12th, this total rose to 1,393,563,000 barrels, a new record high that was 1,320,000 barrels more than the previous week…in fact, so far in just this year alone we have set and eclipsed 22 new record highs of this total supply metric, almost a continuous weekly increase except for during May, when the total dropped by less than a million barrels each week…but we’ve now set new records for total supplies 7 weeks in a row, adding a total of 21.7 million barrels of oil and oil products to what we already have stored over that 7 week stretch….

This Week’s Rig Count

drilling activity rose again during the week ending August 19th, for the 11th time in the last 12 weeks, following a prior string of 39 weeks wherein the rig count had not risen at all…Baker Hughes reported that the total count of active rotary rigs running in the US rose by 10 rigs to 491 rigs as of Friday, which was still down from the 885 rigs that were deployed as of the August 21st report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil this week rose by 10 rigs to 406, which was still down from the 674 oil directed rigs that were in use the same week last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations was unchanged at 83 rigs, which was down from the 211 natural gas rigs that were drilling on August 21st year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there were also two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs drilling ….  

included in this week’s totals was the startup of new drilling from a platform offshore from Louisiana in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 18 rigs, which was still down from 31 Gulf of Mexico rigs a year ago…since the Gulf rigs are the only offshore rigs going right now, 18 is also the count for the US total offshore, which is down from 32 offshore drillers at this time last year…

meanwhile, the number of working horizontal drilling rigs increased for the 10th time in the past dozen weeks, rising by 7 rigs to 382, which still was down from the 677 horizontal rigs that were in use on August 21st of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count increased by 2 rigs to 64 rigs, which was still down from the 130 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was up by 1 rig to 41 rigs, which was down from the 78 directional rigs that were in use during the same week last year… 

details on this week’s changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of August 19th, the second column shows the change in the number of working rigs between August 12th and August 19th, the third column shows the August 12th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week’s case was August 21st of 2015:   

August 19 2016 rig count summary

once again, the increase of 7 rigs in the Permian basin of west Texas underpinned this week’s rig count increase, but this week showed some other notable activity; an increase of 3 rigs in central Oklahoma’s Cana Woodford basin, and an increase of 3 rigs in the Marcellus, apparently by adding 2 rigs in Pennsylvania and 1 rig in West Virginia…since those Marcellus rigs were almost certainly natural gas directed, we have to guess that 3 conventional natural gas rigs were removed elsewhere, to account for the unchanged gas rig count…the drop of two rigs to 27 in the Williston basin, home of the Bakken shale, is also a surprise; that count from Baker Hughes has not been consistent with the daily rig count released by the North Dakota Department of Mineral Resources, which shows 32 rigs as of this weekend…

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July consumer prices, industrial production, and new home construction

this week’s key reports were the July Consumer Price Index from the Bureau of Labor Statistics, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau…other reports released this week included Regional and State Employment and Unemployment for July from the BLS, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index fell from +0.55 in July to -4.21 in August, suggesting First District manufacturing was again contracting, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from -2.9 in July to +2.0 in August, suggesting a subdued level of growth has returned to that region’s manufacturing for only the 3rd time in the past year…

July Consumer Price Index Nets Zero Change on Lower Gasoline, Groceries

the consumer price index was unchanged in July, as price increases for most core services were offset by lower prices for groceries and energy commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted price index for July was unchanged after rising 0.2% in June, 0.2% in May, 0.4% in April and 0.1% in March….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell, from 241.038 in June to 240.647 in July, which left it statistically 0.835% higher than the 238.638 index reading of last July….regionally, prices for urban consumers have risen 1.4% in the West, 0.8% in the Northeast, 0.7% in the South, and 0.4% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people…with mostly lower commodity prices mostly offsetting higher prices for services, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index also falling from 247.821 to 247.768, which put it 2.20% ahead of its year ago reading of 242.436…

the volatile seasonally adjusted energy price index fell by 1.6% in July after rising by 1.3% in June, 1.2% in May and 3.4% in April, but after falling by more than 11.5% over this past winter, and thus the energy price index still remained 10.9% lower than it was in July a year ago….prices for energy commodities were 4.4% lower while the index for energy services rose by 1.0%, after falling by by 0.5% in June….the decrease in the energy commodity index included a 4.6% drop in the price of gasoline, the largest component, and a 1.6% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.4% increase…within energy services, the index for utility gas service rose by 3.1% after falling by 0.4% in June, but utility gas was still priced 0.4% lower than it was a year ago, while the electricity price index rose by 0.5%, after falling by 0.5% in June…energy commodities are now priced 19.4% below their year ago levels, with gasoline prices averaging 19.9% lower than they were a year ago…meanwhile, the energy services price index is still 0.9% lower than last July, as even electricity prices have fallen 1.0% over that period..

the seasonally adjusted food price index was unchanged in July, after it fell by 0.2% in June, as 0.2% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at both fast food outlets and at full service restaurants rose 0.2%…in the food at home categories, the price index for cereals and bakery products was 0.2% lower on 0.7% lower prices for rice and cuts in prices for cookies and pastries….the price index for the meats, poultry, fish, and eggs group fell by 0.6% as prices for beef fell 1.4% and both pork and egg prices averaged 0.6% lower….in addition, the index for dairy products was 0.4% lower on a 1.4% drop in prices for fresh whole milk… meanwhile, the fruits and vegetables index rose 0.3% after falling by 0.1% in June, 0.7% in May and 0.5% in April, as a 0.4% increase in prices for fresh fruits and a 0.9% increase for canned vegetables more than offset a 2.1% drop in lettuce prices and 1.8% lower priced potatoes…the beverages index was also 0.3% higher on a 0.6% increase in prices for noncarbonated juices and drinks and a 1.9% pop in prices for non-coffee beverage materials including tea… lastly, prices in the other foods at home category were on average 0.2% lower as 1.1% higher prices for margarine and 1.4% higher salad dressing were offset by a 2.1% drop in prices for peanut butter and 1.3% lower prices soups…..among food line items, only eggs, which are now priced 29.0% lower than a year ago, and ground beef, which has fallen by 10.2%, have seen a price change greater than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.1% in July after rising by 0.2% in April, in May and in June, the composite of all goods less food and energy goods fell by 0.1%, while the composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust July retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as a 1.8% decrease in prices for major appliances was offset by 1.4% higher floor and window coverings, and the apparel price index was also unchanged as 0.6% higher prices for men’s apparel was offset by a 5.5% drop in girls apparel…prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down another 1.0% after falling 1.1% in June and 1.3% in May…at the same time, prices for medical care commodities were 0.4% higher after a 1.1% increase in June on a 0.9% increase in prescription drug prices…meanwhile, the recreational commodities index fell 0.4% as TV prices fell another 2.0%, and the education and communication commodities index was 0.3% lower as a 1.7% price drop for telephone hardware more than offset a 0.4% increase in prices for educational books and supplies…lastly a separate index for alcoholic beverages fell 0.1% on a 0.3% decrease in prices for wine bought for use at home, while the index for ‘other goods’ was down 0.3% on a 1.5% drop in prices for stationery, stationery supplies and gift wrap..

within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.3% increase in owner’s equivalent rent while costs for lodging away from home at hotels and motels dropped 2.7%, and costs for water, sewers and trash collection were 0.3% lower….the index for medical care services rose 0.5% as physicians’ services rose 0.7%, while the transportation services index fell 0.2% on a 2.6% decrease in car and truck rentals…at the same time, the recreation services index rose 0.1% as video & audio rental services fell 2.9% while admissions to sporting events rose 2.4%… meanwhile, the index for education and communication services fell 0.2% as college tuition fell 0.3% as did wireless telephone service…lastly, other personal services were up 0.4% on a 1.6% increase in legal fees…among core prices, a 12.3% year over year increase in moving and storage expenses was the only line items with an annual increase greater than 10%, while only telephone hardware, which has fallen by 11.3%, and televisions, which are now 20.1% cheaper than a year ago, saw prices drop by more than 10% over the past year…

Industrial Production Up 0.7% in July, Largest Increase in 20 Months

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.7% in July after rising by a revised 0.4% in June…however, industrial production is still down 0.5% from a year ago, as it has seen three consecutive quarterly decreases…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.8 in July from 104.1 in June, which was essentially unchanged from a month ago…at the same time, the May reading for the index was revised up from 103.5 to 103.7, and April reading for the index was revised up 103.8 to 103.9…

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.5, from 103.1 in June to 103.6 in July, after June’s manufacturing index was revised down from 103.2…. meanwhile, the mining index, which includes oil and gas well drilling, rose from 103.4 in June to 104.2 in July, after the June index was revised up from 102.7 and prior months were revised higher as well….nonetheless, the mining index still remains 10.2% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.1% in July after rising a revised 2.1% in June, as warmer weather than is typical for July over most of the country boosted use of air conditioning and pushed the utility index to 3.5% above its year earlier reading…

this report also includes capacity utilization figures, which are 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 from 75.4 in June to 75.9% in July….capacity utilization by NAICS durable goods production facilities rose from 76.1 in June to 76.5 in July, while capacity utilization for non-durables producers rose from 74.6% to 74.9%….capacity utilization for the mining sector rose to 74.9% in July, up from 74.1% in June, which was originally reported as 73.6%, while utilities were operating at 81.0% of capacity during July, up from their 79.4% of capacity during June…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….   

New Housing Construction Little Changed in July

the July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,211,000, which was 2.1 percent (±8.8%) above the revised June estimated annual rate of 1,186,000 housing units started, and was 5.6 percent (±14.7%) above last July’s pace of 1,147,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July’s housing starts could have been down by 6.7% or up by as much as 10.9% from those of June, with even larger revisions possible…in this report, the annual rate for June housing starts was revised from the 1,189,000 reported last month to 1,186,000, while May starts, which were first reported at a 1,164,000 annual rate, were revised down from last month’s initial revised figure of 1,136,000 annually to 1,128,000 annually with this report….those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 114,000 housing units were started in July, up from the 110,600 units started in June…of those housing units started in July, an estimated 72,700 were single family homes and 40,500 were units in structures with more than 5 units, down from the revised 75,400 single family starts in June, but up from the 33,500 units started in structures with more than 5 units in June…

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 July, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,152,000 housing units, which was just 0.1 percent (±1.2%) below the revised June rate of 1,153,000 permits, but was 0.9 percent (±1.5%) above the rate of building permit issuance in July a year earlier…the annual rate for housing permits issued in June was unrevised….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 95,800 housing units were issued in July, down from the revised estimate of 114,400 new permits issued in June…the July permits included 61,100 permits for single family homes, down from 74,700 in June, and 32,200 permits for housing units in apartment buildings with 5 or more units, down from 36,900 such multifamily permits a month earlier… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.211 Million Annual Rate in July and Comments on July Housing Starts

 

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

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August 20th graphics

oil prices:

August 20th 2016 oil prices

total stocks:

August 18 2016 Total Commercial Oil and Petroleum Inventories for August 12

rig count summary:

August 19 2016 rig count summary

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oil prices up on OPEC freeze rumors; rig count up most in a year, has biggest % jump in 23 years…

oil prices rose more than 6.4% this week and are now up nearly 14% from the low they hit the prior Tuesday, largely on renewed rumors that OPEC might negotiate a freeze of oil production at current levels…recall we’ve been through these rumors before, when Russia and OPEC ministers talked the same game before their April meeting in Doha, and subsequently pushed oil prices up 50% from their February lows, only to have the Saudis refuse to participate and ultimately increase their production …this time a September meeting of oil producers is planned in Algeria, and Russia will be there (although they’ve dismissed the freeze rumors so far), and the same agents responsible for the March freeze talk are spreading it again, and the market is reacting, despite record Saudi production, Iraqi contracts to increase theirs, and indications that Oman will not even attend…still, it’s obviously in the interest of OPEC’s spokesmen, the Russians, and those in the US with oil interests to push oil prices up by keeping the rumor alive, so we may be in for an extended period of volatile oil markets as they respond to the latest “news” of this freeze talk…

so, despite the ongoing glut in oil and oil products, US oil contract prices for September jumped right out of the gate on those rumors Monday, rising by $1.22, or 2.9%, to close at $43.02 a barrel…they opened higher on Tuesday, but slid in the afternoon to close at $42.77 a barrel after the American Petroleum Institute reported a 2.09 million barrel increase in crude supplies, the biggest jump in in 3 months…prices continued to fall on Wednesday despite the EIA”s report of a crude supply increase of half that much, and settled at $41.71 a barrel, as traders focused on an even larger build of inventories at Cushing, the oil depot on which US prices are based…oil prices then jumped over $2 a barrel, or 5%, on Thursday morning, after comments from the Saudi oil minister about possible action to stabilize prices, and closed at $43.49 a barrel, in their largest one-day jump since April…the upward price momentum carried into Friday as prices barely skipped a beat on news of the largest jump in American oil rigs in a year, and they thus added another $1 to close the week at $44.49 a barrel…

The Latest Oil Stats from the EIA

the oil data for the week ending August 5th from the US Energy Information Administration indicated a modest drop in our oil imports from the prior week’s near 4 year high, a corresponding drop in the amount of crude being refined by domestic refineries, a modest increase in the amount of crude we stored, and larger than normal seasonal drops in our gasoline and distillate inventories, which were offset by increases in stores of other petroleum products…however, this week’s crude oil fudge factor the EIA included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +575,000 barrels per day, which meant that 575,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures…that’s now the 7th week in a row that we’ve seen a large positive adjustment, and as a result this year’s cumulative daily average of that weekly statistical adjustment is now up to a positive 70,000 barrels per day, which means a lot of oil & products are turning up, where the sources haven’t been accounted for…i really dont have any idea why that adjustment has so dramatically reversed from earlier this year, when much of what we had appeared to have produced or imported each week did not show up in the final weekly consumption or inventory figures; one would think that aberrant data gathering would at least show a fairly consistent error in one direction or another … 

domestic production of crude oil from US wells was down by just 15,000 barrels per day to an average of 8,445,000 barrels per day during the week ending August 5th, as Alaskan production fell 2,000 barrels per day and output from the lower 48 fell by 13,000 barrels per day…that left us down by 774,000 barrels per day from what we what were producing at the beginning of this year, and our oil production this week was 10.1% below the 9,395,000 barrels we produced during the week ending August 7th of 2015, and 12.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…

at the same time, our imports of crude oil, the other major source of our domestic crude supply, fell to an average of 8,404,000 barrels per day during the week ending August 5th, dropping by 334,000 barrels per day from the 45 month high average of 8,738,000 barrels per day we imported during the week ending July 29th…. however, that was still 11.0% more than the 7,496,000 barrels per day we were importing during the same week of last year, and our 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf) has now increased to the 8.4 million barrel per day level, 11.5% above the same four-week period last year…   

meanwhile, crude oil used by US refineries dropped by an average of 255,000 barrels per day to an average of 16,597,000 barrels of crude per day during the week ending August 5th, as the US refinery utilization rate fell to 92.2% for that week, down from 93.3% of capacity the prior week, and down from the refinery utilization rate of 96.1% logged during the week ending August 7th last year…although east cost crude oil refining fell by 64,000 barrels per day and their capacity utilization fell to 80.6%, the largest pullback of 171,000 barrels per day was seen by Midwest refiners, whose utilization rate fell from 97.7% to 93.4%…nationally, crude oil refined this week was 2.5% less than the 17,029,000 barrels of crude per day US refineries used during the week ending August 7th last year, but still 1.2% more than the equivalent week in 2014…

even with the drop in oil being refined, however, US refineries production of gasoline still increased by 106,000 barrels per day to 10,098,000 barrels per day during week ending August 5th, which was also up by 105,000 barrels per day, or 1.1% more than the 9,993,000 barrels of gasoline per day being produced during the week ending August 7th last year, as east coast refineries still managed to produce an average of 3,321,000 barrels of gasoline per day, 50,000 barrels per day more than the prior week and 3.4% more than a year earlier….however, refinery output of distillate fuels (diesel fuel and heat oil) fell by 201,000 barrels per day to 4,739,000 barrels per day during the week ending August 5th, which left our distillates output 7.9% below the distillates production of 5,148,000 barrels per day during the week ending August 7th of last year……      

even with the decent increase in gasoline production, our gasoline inventories fell again, dropping by 2,807,000 barrels to 235,383,000 barrels as of August 5th, which was about twice the normal weekly summertime decrease…that was despite a 293,000 barrel per day jump in our gasoline imports, from 637,000 barrels per day the prior week to 930,000 barrels per day during the week ending August 5th, as the amount of gasoline supplied to US markets barely inched up by 17,000 barrels per day to 9,769,000 barrels per day….in addition, gasoline exports look to be stable, although accurate data for that lags, so i have no idea where all that gasoline production and those gas imports went…nonetheless, this week’s gasoline inventories were still 9.2% higher than the 215,482,000 barrels of gasoline that we had stored on August 7th  last year, and also 10.7% higher than the 212,689,000 barrels of gasoline we had stored on August 8th of 2014, so our gasoline supplies still remain categorized by the EIA as “well above the upper limit of the average range” for this time of year..     

meanwhile, our distillate fuel inventories fell by 1,959,000 barrels to 151,196,000 barrels as of August 5th, which left them just 2.3% above the distillate inventories of 147,806,000 on the 7th of August last year, but still 23.4% above the distillate inventories of 122,502,000 barrels of August 8th, 2014…in this case, there was nearly a 10% increase in demand for distillates, from 3,605,000 barrels per day during the week ending July 29th, to 3,937,000 barrels per day during the reporting week, that accounted for the drawdown of supplies, and thus the EIA has changed the characterization of our distillates supply to “near the upper limit of the average range for this time of year”…

finally, with both crude oil imports and refinery consumption of that crude down by similar magnitudes, we again ended the week with a surplus of oil, and hence our stocks of crude oil in storage rose by 1,055,000 barrels to 523,601,000 barrels, the 3rd increase of more than a million barrels in a row…as a result, we ended the week with 14.8% more oil in storage than the 455,275,000 barrels we had stored as of the same weekend a year earlier, and 42.9% more oil than we had stored on August 8th of 2014….since our oil supplies first topped 500 million barrels early this year, and first topped 400 million barrels in January of 2015, it goes without saying that our current crude oil supplies of 523.6 million barrels also remain “well above the upper limit of the average range” for this time of year…”     

This Week’s Rig Count

the Friday US rig count was up by the most in one week since July 24th 2015 as US drilling activity increased for the 10th time out of the last 11 weeks….Baker Hughes reported that the total count of active rotary rigs running in the US rose by 17 rigs to 481 rigs as of August 12th, which was still down from the 884 rigs that were deployed as of the August 14th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil this week rose by 15 rigs to 396, which was still down from the 672 oil directed rigs that were in use a year ago, and down from the recent high of 1609 oil rigs that were deployed on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 2 rigs to 83 rigs this week, which was down from the 211 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there were also two rigs working this week that were classified as miscellaneous, unchanged from last week but up by 1 miscellaneous rig from the same week a year ago….this week’s 3.66% increase in rigs was the largest percentage increase in drilling since 30 drilling rigs were added to the prior week’s 641 rigs on May 28th, 1993..

the number of working horizontal drilling rigs increased for the 9th time in the past 11 weeks, rising by 13 rigs to 375, which still was down from the 676 horizontal rigs that were in use on August 14th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count increased by 4 rigs to 62 rigs, which was still down from the 127 vertical rigs that were drilling in the US during the same week last year, while the directional rig count was unchanged at 44 rigs, which was down from the 81 directional rigs that were deployed during the same week last year…

details on this week’s changes in drilling activity by state and shale basin are included in our screenshot of that part of the rig count summary from Baker Hughes which shows those changes below…the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of August 12th, the second column shows the change in the number of working rigs between August 5th and August 12th, the third column shows the August 5th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was August 14th of 2015:   

August 12 2016 rig count summary

once again, we see that the lions share of this week’s increased activity occurred in the Permian basin of western Texas, where 12 rigs were added, which contributed to the 13 rig increase in Texas….and again, outside of that area, the changes were pretty subdued, with no state or shale basin seeing a change in activity greater than 1 rig…we should note that the Utica shale had a rig added, and hence the count for both the Utica and for Ohio increased to 14 rigs…in other states not listed above, Alabama again saw another rig added, and now they have 3 active, which is an increase of 2 rigs from the 1 rig they had active a year ago, while Illinois saw one of the 3 rigs they had running shut down this week, leaving them two, also up from just 1 rig a year ago…

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