gasoline output at 56 week high; refineries at 55 week high, oil supply close to demand, DUC well backlog at 10.8 months

oil prices finished higher this week on strong US economic data after OPEC and the IEA had already revised their oil demand forecasts higher…after falling 3.5% to $59.32 a barrel last week on rising ​oil ​supplies and fears of falling demand, the contract price of US light sweet crude for May delivery slipped in thin trading early on Monday as rising Covid-19 case numbers globally kept a lid on prices, but recovered to close 38 cents higher at $59.70 per barrel on optimism over the pace of coronavirus vaccinations in the United States​,​ and after the Yemeni Houthis said they fired missiles at Saudi oil sites…oil prices moved almost a dollar higher early Tuesday on the release of strong Chinese import data, but settled just 48 cents higher after the FDA halted use of Johnson & Johnson’s COVID-19 vaccine over blood clot concerns…oil prices then jumped on Wednesday after the EIA reported a much larger draw from crude inventories than had been expected, and then finished $2.97 or nearly 5% higher at $63.15 a barrel on a report from the International Energy Agency that predicted global oil demand and supply would rebalance in the second half​,​ and that producers might then need to pump an additional 2 million barrels per day to meet demand...oil prices moved lower early Thursday following th​at sharp rise on Wednesday, but rallied again on a big jump in US retail sales as Americans spent their pandemic relief checks​,​ and as COVID-19 vaccinations allowed broader economic re-engagement, and closed 31 cents higher at a four week high of $63.46 per barrel…oil prices moved higher again early Friday after China reported their first-quarter GDP had jumped 18.3% year on year, but then drifted lower to close down 33 cents at $63.13 a barrel on concerns about rising Covid-19 infections in other major economies, but still managed to log a 6.1% gain on the week, with both US and global oil contracts posting their best weekly gains since the week ended March 5th...

natural gas prices also finished higher this week on stronger LNG exports and on an unexpected temperature drop…after falling 4.3% to $2.526 per mmBTU last week as it appeared the heating season had ended on warming April weather, the contract price of natural gas for May delivery opened fractionally higher on Monday and went on to gain 3.5 cents as a bout of chilly spring weather was forecast to sweep across large swaths of the Lower 48, likely providing a boost for gas demand and cash prices…natural gas prices rose another 5.8 cents to $2.619 per mmBTU on Tuesday as robust liquefied natural gas (LNG) levels fueled demand optimism and a dose of chilly weather also bolstered cash prices…natural gas continued higher on colder weather Wednesday, but faded as traders took profits late in the session prior to Thursday’s EIA inventory report​,​ and ended a tenth of a cent lower at $2.618 per mmBTU…natural gas prices rebounded Thursday as the government’s weekly inventory report proved bullish, and both weather forecasts and demand for U.S. exports remained favorable​,​ and closed 4.0 cents higher at $2.658 per mmBTU…the momentum continued into Friday as gas prices moved up another 2.2 cents on near-record LNG and pipeline exports, and on forecasts that power generators would burn more gas next week, to finish th​is week at a five-week high of $2.680 per mmBTU, also a 6.1% gain on the prior Friday’s close…

the natural gas storage report from the EIA for the week ending April 9th indicated that the amount of natural gas held in underground storage in the US rose by 61 billion cubic feet to 1,845 billion cubic feet by the end of the week, which left our gas supplies 242 billion cubic feet, or 11.6% below the 2,087 billion cubic feet that were in storage on April 9th of last year, but now 11 billion cubic feet, or 0.6% above the five-year average of 1,834 billion cubic feet of natural gas that have been in storage as of the 9th of April in recent years….the 61 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 65 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also less than the 68 billion cubic feet added to natural gas storage during the corresponding week of​ 2020, but it far surpassed the average addition of 26 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years..

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 9th indicated that despite an increase in our oil production and a decrease in our oil exports, we needed to withdraw oil from our stored commercial crude supplies for the third time in eight weeks and for the 25th time in the past thirty-eight weeks….our imports of crude oil fell by an average of 4​11,000 barrels per day to an average of 5,852,000 barrels per day, after rising by an average of 119,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 855,000 barrels per day to an average of 2,579,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,273,000 barrels of per day during the week ending April 9th, 444,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,273,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 15,051,000 barrels of crude per day during the week ending April 9th, 7,000 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 a net of 999,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was a rounded 222,000 barrels per day more than what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (-222,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed…..furthermore, since last week’s fudge factor was at +811,000 barrels per day, there was a 1,033,000 barrel per day balance sheet difference in the unaccounted for crude oil figure from a week ago, which renders the week over week supply and demand changes we have just transcribed meaningless….however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,971,000 barrels per day last week, which was 0.7% more than the 5,929,000 barrel per day average that we were importing over the same four-week period last year… the 999,000 barrel per day net withdrawal from our crude inventories included an 841,000 barrel per day withdrawal from our commercially available stocks of crude oil, and a 153,000 barrel per day withdrawal from our Strategic Petroleum Reserve, space in which has been leased for commerical purposes….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 10,500,000 barrels per day, while Alaska’s oil production at 457,000 barrels per day added 500,000 barrels per day the rounded national total (EIA’s math)….our prepandemic record high US crude oil production during the week ending March 13th 2020 was at a rounded 13,100,000 barrels per day, so this reporting week’s rounded oil production figure was 16.0% below that of our production peak, yet still 30.5% above 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 85.0% of their capacity while using those 15,051,000 barrels of crude per day during the week ending April 9th, up from 84.0% of capacity during the prior week, and the highest refinery utilization in 55 weeks, reflecting the utilization level during the last week before the Covid related slowdown…while the 15,051,000 barrels per day of oil that were refined this week were 18.8% higher than the 12,665,000 barrels of crude that were being processed daily during the week ending April 10th of last year, they were still 6.4% below the 16,078,000 barrels of crude that were being processed daily during the week ending April 12th, 2019, when US refineries were operating at a​n unusually low 87.7% of capacity…

with the ongoing increase in the amount of oil being refined, the gasoline output from our refineries increased by 336,000 barrels per day to a fifty-six week high of 9,615,000 barrels per day during the week ending April 9th, after our gasoline output had decreased by 60,000 barrels per day over the prior week…while this week’s gasoline production was 62.6% higher than the 5,915,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 3.6% lower than the March 13th 2020 pre-pandemic high of 9,974,000 barrels per day, and 3.0% below the gasoline production of 9,917,000 barrels per day during the week ending April 12th, 2019….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 4,000 barrels per day to 4,643,000 barrels per day, after our distillates output had decreased by 99,000 barrels per day over the prior week… but since the onset of the pandemic didn’t appear to impact distillates’ production, this week’s distillates output was still 5.8% lower than the 4,927,000 barrels of distillates that were being produced daily during the week ending April 10th, 2020…

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the sixteenth time in twenty-two weeks, and for 20th time in 39 weeks, but only rose by 309,000 barrels to 234,897,000 barrels during the week ending April 9th, after our gasoline inventories had increased by 4,044,000 barrels over the prior week...our gasoline supplies increased by less this week because our imports of gasoline fell by 458,000 barrels per day to 839,000 barrels per day while our exports of gasoline fell by 129,000 barrels per day to 663,000 barrels per day, and because the amount of gasoline supplied to US users increased by 163,000 barrels per day to 8,944,000 barrels per day…but even after two inventory increases, our gasoline supplies were 10.4% lower than last April 10th’s gasoline inventories of 262,217,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the insignificant increase in our distillates production, our supplies of distillate fuels decreased for the 7th time in 11 weeks and for the 21st time in thirty-three weeks, falling by 2,083,000 barrels to 143,464,000 barrels during the week ending April 9th, after our distillates supplies had increased by 1,452,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 464,000 barrels per day to 4,128,000 barrels per day, and because our imports of distillates fell by 64,000 barrels per day to a 25 week low of 261,000 barrels per day, while our exports of distillates fell by 18,000 barrels per day to 1,074,000 barrels per day….even after this week’s inventory decrease, our distillate supplies at the end of the week were still 11.2% above the 129,004,000 barrels of distillates that we had in storage on April 10th, 2020, and about 4% above the five year average of distillates stocks for this time of the year…

finally, despite the drop in our oil exports, our commercial supplies of crude oil in storage fell for the 13th time in the past twenty-two weeks and for the 26th time in the past year, decreasing by 5,890,000 barrels, from 498,313,000 barrels on April 2nd to 492,423,000 barrels on April 9th…after this week’s decrease, our commercial crude oil inventories​ slipped to just 1% above the most recent five-year average of crude oil supplies for this time of year, and to about 43% above the average of our crude oil stocks as of the first weekend of April over the 5 years at the beginning of this decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the spring lockdowns of last year, our commercial crude oil supplies as of April 9th are now 2.2% less than the 503,618,000 barrels of oil we had in commercial storage on April 10th of 2020, but still 8.2% more than the 455,154,000 barrels of oil that we had in storage on April 12th of 2019, and also 15.2% more than the 427,567,000 barrels of oil we had in commercial storage on April 13th of 2018…   

OPEC’s Monthly Oil Market Report

Tuesday of this past week saw the release of OPEC’s April Oil Market Report, which covers OPEC & global oil data for March, and hence it gives us a picture of the global oil supply & demand situation for the 3rd month after OPEC, the Russians, and other oil producers agreed to increase their oil production by 500,000 barrels per day starting January, from their prior commitment to cut production by 7.7 million barrels a day from an October 2018 peak, which had been earlier reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July of 2020, and after the Saudis unilaterally decided to cut their own production by a million barrels per day during February and March of this year…before we start, we want to again caution that the oil demand estimates made herein, while the course of the Covid-19 pandemic still remains uncertain, should be considered as having a much larger margin of error than we’d expect from this report during stable and hence more predictable periods.. 

the first table from this monthly report that we’ll check is from the page numbered 48 of this month’s report (pdf page 58), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings below indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thereby avert any potential disputes that could arise if each member reported their own figures…

March 2021 OPEC crude output via secondary sources

as we can see from the above table of their oil production data, OPEC’s oil output increased by a rounded 201,000 barrels per day to 25,042,000 barrels per day during March, up from their revised February production total of 24,842,000 barrels per day…however, that February output figure was originally reported as 24,848,000 barrels per day, which therefore means that OPEC’s February production was revised 6,000 barrels per day lower with this report, and hence OPEC’s March production was, in effect, a rounded 195,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official February OPEC output figures as reported a month ago, before this month’s revision)…

from the above table, we can see that a 137,000 barrels per day increase in Iran’s production, an increase of 40,000 barrels per day in Angola’s output, and a production increase of 26,000 barrels per day from Libya were the major factors in OPEC’s March output increase; however, both Iran and Libya were exempt from quotas during March, and Angola’s output increase is largely a reversal of their February production decrease, so OPEC’s adherence to the negotiated production cuts appears to be intact…recall that last year’s original oil producer’s agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June, but that agreement had been extended to include July at a meeting between OPEC and other producers on June 6th….then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August and subsequent months, which was thus the agreement that covered OPEC’s output for the rest of 2020…the OPEC+ agreement for January’s production, which was later extended to include February and March output, was to further ease their supply cuts by 500,000 barrels per day to 7.2 million barrels per day from that original baseline…however,  war torn Libya and US sanctioned OPEC members Iran and Venezuela have been exempt from the production cuts imposed by these agreements, and as we can see above, they all posted production increases this month…

for those OPEC members that do fall under the output quotas imposed by that series of revised agreements, we finally have a revised table of the output levels they are “voluntarily” required to adhere to:

March 2021 OPEC   production quotas

the above table was provided as a downloadable attachment to the press release following the press release following the 13th OPEC and non-OPEC Ministerial Meeting on January 5th of this year; it includes the reference production and expected production levels for the 10 members of OPEC that are expected to make cuts and for the other major oil producers who are party to what the press calls the “OPEC + agreement”….the first column in the above table shows the reference oil production baseline, in thousands of barrel per day from which each of the oil producers was to cut from, a figure which is based on each of the producer’s October 2018 oil output, ie., a date before last year’s and the prior year’s output cuts took effect, and coincidently the highest monthly production of the era for most of the producers who are party to these cuts…the remaining columns show the adjustment, or cut, from that reference production level and then the oil output allowed for each producer under the agreement for the months of January, February and March…OPEC arrived at these figures by adjusting the 23% cut from the October 2018 baseline originally agreed to for May and June 2020 for subsequent agreements to “ease” that 23% cut by agreed to fractions, and it applied to all participants except for Mexico, who already had their oil production hedged to profit from lower prices…the OPEC member output quota is identical for each of the three months covered above; however, the ongoing agreements from theOPEC and non-OPEC Ministerial Meetings have allowed Russia and Kazakhstan to incrementally increase their oil output over February and March to meet seasonal increases in domestic demand…for March, Iraq, with an oil output of 3,914,000 per day, was the only OPEC member producing significantly more than their quota, which was more than covered by the Saudis unilaterally keeping their production a million barrels per day below their quota…

the next graphic from this month’s report that we’ll highlight shows us both OPEC and world oil production monthly on the same graph, over the period from April 2019 to March 2021, and it comes from page 49 (pdf page 59) of OPEC’s April Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC’s monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale…. 

March 2021 OPEC report global oil supply

after this month’s reported 201,000 barrel per day increase in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global liquids production increased by a rounded 1,220,000 barrels per day to average 93.23 million barrels per day in March, a reported increase which apparently came after February’s total global output figure was revised down by 270,000 barrels per day from the 92.28 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 1,020,000 barrels per day in March after that revision, with an increase of 930,000 barrels per day from the US alone accounting for most of the non-OPEC production increase in March, as US production rebounded from the February freeze… 

after that increase in March’s global output, the 93.23 million barrels of oil per day that were produced globally in March were still 7.22 million barrels per day, or 7.6% less than the revised 100.45 million barrels of oil per day that were being produced globally in March a year ago, which was the second month of additional production cuts of 500,000 barrels per day in an attempt to support prices (see the April 2020 OPEC report (online pdf) for the originally reported March  2020 details)…with this month’s increase in OPEC’s output, their March oil production of 25,042,000 barrels per day was at 26.9% of what was produced globally during the month, a decrease of 0.1% from their revised 27.0% share of the global total in February….OPEC’s March 2020 production was reported at 28,612,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,570,000, or 12.5% fewer barrels per day of oil in March 2021 than what they produced a year earlier, when they accounted for 28.7% of global output…  

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

March 2021 OPEC report global oil demand copy

the above table came from page 27 of the April Oil Market Report (pdf page 37), and it shows regional and total oil demand estimates in millions of barrels per day for 2020 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2021 over the rest of the table…on the “Total world” line in the second column, we’ve circled in blue the figure that’s relevant for March, which is their estimate of global oil demand during the first quarter of 2021… OPEC is estimating that during the 1st quarter of this year, all oil consuming regions of the globe have used an average of 93.43 million barrels of oil per day, which is a rounded 400,000 barrels per day upward revision from the 93.04 million barrels of oil per day of demand they were estimating for the first quarter a month ago (note that we have encircled this month’s revisions in green), which still reflects quite a bit of coronavirus related demand destruction compared to 2019, when global demand averaged 99.98 million barrels per day….but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were only producing 93.23 million barrels million barrels per day during March, which would imply that there was a shortage of around 200,000 barrels per day in global oil production in March when compared to the demand estimated for the month..

In addition to figuring the March global oil supply shortfall that’s evident in this report, the downward revision of 270,000 barrels per day to February’s global oil output that’s implied in this report, combined with the 400,000 barrels per day upward revision to first quarter demand noted above, means that the 760,000 barrels per day global oil output shortage we had previously figured for February would now be revised to a shortage of 1,430,000 barrels per day...similarly, the oil surplus of 190,000 barrels per day we had previously figured for January would be revised to a shortage of 210,000 barrels per day in light of the 400,000 barrel per day upward revision to first quarter demand…

Note that in green we’ve also circled an upward revision of 120,000 barrels per day to 2020’s demand, which also means that the supply shortfalls or surpluses that we previously reported for last year’s months would need to be revised….a separate table on page 27 of the April Oil Market Report (pdf page 37) indicates the revisions to 2020 demand included an an upward revision of 80,000 barrels per day to 4th quarter demand, and an upward revision of 400,000 barrels per day to 1st quarter 2020 demand…

based on OPEC revisions of a month ago, we revised the oil shortages we had previously computed for the 4th quarter months to 1,180,000 barrels per day for December, 1,780,000 barrels per day for November, and 3,080,000 barrels per day for October…the upward revision of 80,000 barrels per day to 4th quarter demand will now mean those shortages would be revised to 1,260,000 barrels per day for December, 1,860,000 barrels per day for November, and 3,160,000 barrels per day for October…there was also an oil supply shortfall in the third quarter months, but it was somewhat smaller…however, since global demand was still depressed in the second quarter of 2020 due to the initial Covid surge, surpluses of oil averaging around 9.5 million barrels per day were being produced over those three months…meanwhile, the last time we revised estimates for 1st quarter 2020 oil surpluses, we had a record surplus of 17,550,000 barrels per day in March, a 1,670,000 barrel per day global oil output surplus in February, and a 700,000 barrel per day oil output surplus in January…;.with OPEC’s new upward revision of 400,000 barrels per day to 1st quarter 2020 demand, those surpluses would be reduced to 17,150,000 barrels per day in March, a 1,270,000 barrel per day surplus in February, and a 300,000 barrel per day oil surplus in January of last year….so despite the upward revision to 2020’s demand and OPEC’s deep production cuts beginning in May of last year, the quanities of oil produced globally in 2020 still averaged well over 3 million barrels per day more than anyone wanted…by maintaining their production cuts despite current month shortages, OPEC obviously knows that, they just aren’t talking about it publicly…

This Week’s Rig Count

The US rig count rose for the 28th time over the past 31 weeks during the week ending April 16th, but it still remains down by 44.6% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US was up by 7 to 439 rigs this past week, which was still down by 90 rigs from the pandemic hit 529 rigs that were in use as of the April 17th report of 2020, and was 1,490 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 their first attempt to put US shale out of business….

The number of rigs drilling for oil was up by 7 to 338 oil rigs this week, after being unchanged the prior week, leaving us with 94 fewer oil rigs than were running a year ago, and at 21.0% of 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 was up by one to 94 natural gas rigs, which was up by 5 natural gas rigs from the 89 natural gas rigs that were drilling a year ago, but still just 5.9% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…meanwhile, the rig classified as ‘miscellaneous’ that had been drilling in the middle of the Permian basin in MIdland county Texas was shut down this week, leaving just one ‘miscellaneous’ rig, in Lake County, California, while a year ago there were two such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count was up by 1 to 12 rigs this week, with 10 of those rigs drilling for oil in Louisiana’s offshore waters and now 2 rigs drilling for oil in Alaminos Canyon offshore from Texas…that was 5 fewer Gulf of Mexico rigs than the 17 rigs drilling in the Gulf a year ago, when 16 Gulf rigs were drilling for oil offshore from Louisiana and one rig was drilling for oil in Texas waters…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig counts…in addition to those offshore, this week a platform was set up to drill through an inland lake in St Mary parish Louisiana, while a year ago there were no rigs deployed on inland waters…

The count of active horizontal drilling rigs was up by 4 to 398 horizontal rigs this week, which was still down by 85 rigs from the 483 horizontal rigs that were in use in the US on April 17th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was up by two rigs to 20  directional rigs this week, but those were still down by 8 from the 28 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was up by one to 21 vertical rigs this week, and those were up by 3 from the 18 vertical rigs that were in use on April 17th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of April 16th, the second column shows the change in the number of working rigs between last week’s count (April 9th) and this week’s (April 16th) count, the third column shows last week’s April 9th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 17th of April, 2020..    

April 16 2021 rig count summary

it appears that most of this week’s changes were pretty straightforward…checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that one rig was added in Texas Oil District 8, which includes the core Permian Delaware, and  one rig was added in Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, and yet another rig was added in in Texas Oil District 8A, which includes the northern counties of the Permian Midland basin, which thus means the rig count in the Texas Permian was up by 3 this week, accounting for the national change…..elsewhere in Texas, there were two rigs added in Texas Oil District 1, while two rigs were pulled out from Texas Oil District 2, which all could have been in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state, still leaving no net change in that basin…the Texas rig count was up by 5, however, because an offshore platform was added in the state’s waters, and there was also a rig added in Texas Oil District 10, which accounts for one of the rigs added in the Granite Wash, which thus means the other Granite Wash addition was in Oklahoma, accounting for that state’s increase…elsewhere, the rig addition in Louisiana was the previously mentioned inland waters rig in St Mary parish, and another oil rig was added in North Dakota’s Williston basin….meanwhile, the natural gas rig count was up by one despite the loss of one in Pennsylvania’s Marcellus because the inland waters rig in Louisiana was a gas rig and one of the Permian rigs added this week was also targetting natural gas…

DUC well report for March

Monday of this past week saw the release of the EIA’s Drilling Productivity Report for April, which includes the EIA’s March data for drilled but uncompleted ​(DUC) ​oil and gas wells in the 7 most productive shale regions….that data showed a decrease in uncompleted wells nationally for the 10th month in a row, as both completions of drilled wells and drilling of new wells both increased, but remained far below the pre-pandemic levels…for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 177 wells, falling from 7,089 DUC wells in February to 6,912 DUC wells in March, which was also 17.5% fewer DUCs than the 8,379 wells that had been drilled but remained uncompleted as of the end of March of a year ago…this month’s DUC decrease occurred as 464 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during March, up from the 396 wells that were drilled in February, while 641 wells were completed and brought into production by fracking, up from the 490 completions seen in February, but still down by 42.5% from the 1,115 completions seen in March of last year….at the March completion rate, the 6,912 drilled but uncompleted wells left at the end of the month represents a 10.8 month backlog of wells that have been drilled but are not yet fracked, down from the 14.7 month DUC well backlog of a month ago, with the understanding that this normally indicative backlog ratio is being skewed by a completion rate that is roughly half of the pre-pandemic norm…

both oil producing regions and natural gas producing regions saw DUC well decreases in March, as no basins ​were ​report​ed with DUC increases….the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 56, from 3,219 DUC wells at the end of February to 3,163 DUCs at the end of March, as 214 new wells were drilled into the Permian during March, while 270 wells in the region were completed…at the same time, DUC wells in the Niobrara chalk of the Rockies’ front range fell by 39, decreasing from 520 at the end of February to 481 DUC wells at the end of March, as 43 wells were drilled into the Niobrara chalk during March, while 82 Niobrara wells were being fracked….in addition, DUCs in the Eagle Ford of south Texas decreased by 28, from 1,037 DUC wells at the end of February to 1,009 DUCs at the end of March, as 44 wells were drilled in the Eagle Ford during March, while 72 already drilled Eagle Ford wells were completed…at the same time, there was also a decrease of 22 DUC wells in the Bakken of North Dakota, where DUC wells fell from 669 at the end of February to 677 DUCs at the end of March, as 25 wells were drilled into the Bakken during March, while 47 of the drilled wells in that basin were being fracked…meanwhile, the number of uncompleted wells remaining in Oklahoma’s Anadarko decreased by 20, falling from 760 at the end of February to 740 DUC wells at the end of March, as 19 wells were drilled into the Anadarko basin during March, while 39 Anadarko wells were being fracked….

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 11 wells, from 559 DUCs at the end of February to 548 DUCs at the end of March, as 71 wells were drilled into the Marcellus and Utica shales during the month, while 82 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 to 324, as 48 wells were drilled into the Haynesville during March, while 49 of the already drilled Haynesville wells were fracked during the same period….thus, for the month of March, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 165 wells to 6,040 wells, while the uncompleted well count in the natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 12 wells to 872 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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March consumer prices, retail sales, industrial production, & new home construction; February’s business inventories

Major monthly reports released this past week included the March Consumer Price Index from the Bureau of Labor Statistics, the March report on Industrial Production and Capacity Utilization from the Fed, and the Retail Sales report for March, the Business Sales and Inventories report for February, and the March report on New Residential Construction, all from the Census Bureau…the week also saw the release of the March Import-Export Price Index and the Regional and State Employment and Unemployment Summary for March, both from the Bureau of Labor Statistics; the latter report breaks down the two employment surveys from the monthly national jobs report by state and region….while the text of that report provides a useful summary of this data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands…

This week also saw first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index rose to +26.3, up from +17.4 in March, suggesting a broader expansion of 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 rose to +50.2 in April from +44.5 in March, the index’s highest reading in nearly 50 years, indicating that the great majority of the region’s manufacturing firms reported increases in their activity this month…

CPI Rose 0.6% in March on Higher Prices for Energy and Transportation Services

The consumer price index rose 0.6% in March, the largest monthly increase since August 2012, as higher prices for fuel, utilities, transportation services, financial services, and used vehicles were only slightly offset by lower prices for clothing and for communication commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.6% higher in March, after rising by 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, but after falling by 0.1% last May, by 0.7% last April and by 0.3% in March of last year….the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 263.014 in February to 264.877 in March, which left it statistically 2.6198% higher than the 258.678 reading of March of last year, which is reported as a 2.6% year over year increase, up from the 1.7% year over year increase reported a month ago….with higher prices for energy a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were only up by 0.3% for the month, as the unadjusted core price index rose from 270.696 to 271.713, which left the core index 1.6464% ahead of its year ago reading of 267.268, which is reported as a 1.6% year over year increase, up from the 1.3% year over year core price increase that was reported for February, but still little changed from the 1.6% the year over year core price increase that was reported for December of 2020…

The volatile seasonally adjusted energy price index rose 5.0% in March, after rising by 3.9% in February, 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% in May, by 9.5% in April, and by 5.8% last March, and hence is now 13.2% higher than in March a year ago…the price index for energy commodities was 8.9% higher in March, while the index for energy services was 0.6% higher, after rising 0.9% in February….the energy commodity index was up 8.9% on a 9.1% increase in the price of gasoline and a 3.2% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.5% lower…within energy services, the price index for utility gas service rose 2.5% after rising 1.6% in February and is now 9.8% higher than it was a year ago, while the electricity price index was unchanged in March after rising 0.7% in February….energy commodities are now averaging 22.0% higher than their year ago levels, with gasoline price averaging 22.5% higher than they were a year ago, while the energy services price index is now up 4.1% from last March, as electricity prices are also 2.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% in March, after rising by 0.2% in February, 0.1% in January and 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% last July, rising 0.5% last June, rising 0.7% last May and 1.4% last April, and by 0.3% last March, as the price index for food purchased for use at home was 0.1% higher in March, after rising 0.3% in February, while the index for food bought to eat away from home was also 0.1% higher, as average prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%, while food prices at employee sites and schools averaged 13.3% lower…notably, the price index for food at elementary and secondary schools was down 16.3% and is now down 43.5% from a year ago…

In the food at home categories, the price index for cereals and bakery products was 0.1% lower even as average bread prices rose 0.2%, as the price index for fresh biscuits, rolls, muffins fell 1.2%, the price index for crackers and bread and cracker products fell 1.2% and the price index for fresh sweetrolls, coffeecakes, doughnuts fell 1.0%….on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.1% higher, as the price index for poultry rose 0.9%, the price index for pork rose 1.0%, the price index for fresh fish and seafood rose 1.3%, and egg prices rose 2.0%…meanwhile, the seasonally adjusted price index for dairy products was 0.5% lower, as milk prices fell 0.5% and the price index for dairy products other than cheese and ice cream was 0.9% lower….however, the fruits and vegetables price index was 1.0% higher as the price index for fresh fruits rose 0.9%, the price index for fresh vegetables rose 1.4%, and the price index for dried beans, peas, and lentils rose 2.8%….meanwhile, the beverages price index was 0.2% lower as the price index for nonfrozen noncarbonated juices and drinks fell 1.8% and the price index for coffee fell 0.7%….lastly, the price index for the ‘other foods at home’ category was unchanged, as the price index for sugar and sweets rose 0.4% and the price index for snacks rose 0.6%, while the price index for fats and oils fell 0.4% and the price index for prepared salads fell 1.7%…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last March, the only food line items showing a price change greater than 10% over the past year are beef roasts, which are 11.2% higher, and the index for pork roasts, steaks, and ribs, which has risen 10.5%…

Among the seasonally adjusted core components of the CPI, which rose 0.3% in March after rising 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, by 0.3% in August, by 0.5% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and being unchanged in March of last year, the composite price index of all goods less food and energy goods was 0.1% higher in March, while the more heavily weighted composite for all services less energy services was 0.4% higher….

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the price index for household furnishings and supplies was was 0.4% higher,  as the price index for major appliances rose 1.9%, the price index for living room, kitchen, and dining room furniture rose 2.4%, and the price index for tools, hardware and supplies rose 1.6%….however, the apparel price index was 0.3% lower on a 1.7% decrease in the price index for men’s suits, sport coats, and outerwear, a 4.1% decrease in the price index for women’s suits and separates, a 5.6% decrease in the price index for girls’ apparel, and a 3.1% decrease in the price index for boys’ and girls’ footwear….meanwhile, the price index for transportation commodities other than fuel was 0.2% higher, as prices for new cars and trucks were unchanged, prices for used cars and trucks rose 0.5%, and the price index for vehicle parts and equipment other than tires was 2.4% higher… at the same time, the price index for medical care commodities 0.1% higher, as prescription drug prices were unchanged while nonprescription drug prices rose 0.2%…on the other hand, the recreational commodities index was 0.2% lower on a 0.6% decrease in TV prices, a 1.3% decrease in the price index for sporting goods, a 1.8% decrease in the price index for photographic equipment and supplies, and a 1.6% decrease in the price index for recreational books…in addition, the education and communication commodities index was 1.8% lower on a 2.3% decrease in the price index for educational books and supplies, a 2.0% decrease in the price index for computers, peripherals, and smart home assistants, and a 0.9% decrease in the price index for telephone hardware, calculators, and other consumer information items….lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was up 0.2% on a 0.4% increase in the price index for miscellaneous personal goods and a 0.6% increase in cigarette prices…

Within core services, the price index for shelter was 0.3% higher as rents rose 0.2% and homeowner’s equivalent rent was 0.2% higher, and as prices for lodging away from home at hotels and motels rose 4.4%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.2% and other household operation costs were on average 0.1% higher….meanwhile, the price index for medical care services was 0.1% higher, as the price index for outpatient hospital services rose 0.7% and the price index for inpatient hospital services rose 0.5%….at the same time, the transportation services price index was 1.8% higher as car and truck rentals rose 11.7%, the price index for intracity mass transit rose 2.7%, and the price index for vehicle insurance rose 3.3%…in addition, the recreation services price index rose 0.8% as the index for admission to movies, theaters, and concerts rose 1.1% and the price index for admissions to sporting events rose 4.7%…. on the other hand, the index for education and communication services was unchaged as the price index for delivery services rose 1.0% while the price index for day care and preschool services fell 0.8% and the price index for wireless telephone services fell 0.3%…lastly, the index for other personal services was up 0.9% as the price index for checking accounts and other bank services rose 13.0% while the price index for haircuts was 0.4% higher…

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is now down by 18.0% since last March, the price index for men’s suits, sport coats, and outerwear, which is also down 18.0% from a year ago, the price index for women’s dresses, which has fallen by 11.4% in the past year, the price index for admission to sporting events, which is still down by 11.9% from a year ago, and airline fares, which are still down by 15.1% since last March, have all seen prices drop by more than 10% over the past year, while the price index for car and truck rental, which has now risen 31.2% from a year ago, and the price index for laundry equipment, which is up 24.2% from last March, are the only core line items to have increased by a double digit magnitude over that span….

Retail Sales Rose 9.8% in March as Consumers Spent Stimulus Checks

Seasonally adjusted retail sales increased by 9.8% in March, the second largest jump on record, after retail sales for January and February were both revised higher…the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled a record high $619.1 billion during the month, which was up by 9.8 percent (±0.5%) from February’s revised sales of $529.3 billion and 27.7 percent (±0.7 percent) above the adjusted sales in March of last year… February’s seasonally adjusted sales were revised from $561.7 billion to $563.7 billion, while January’s sales were revised from $579.1 billion to $579.552 billion; as a result, the percent change from January to February was revised from down 3.0 percent (±0.5 percent) to down 2.7 percent (±0.2 percent)….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually up 27.3%, from $493,085 million in February to $627,885 million in March, while they were up 30.4% from the $481,513 million of sales in March 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 March Census Marts pdf….the first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2021 r” (revised) and the February 2020 to February 2021 percentage change as revised in the 2nd column of that pair…(for your reference, our copy of this same table from the advance February estimate, before this month’s revisions, is here)…. lastly, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago….as you can see from that fifth column, overall retail sales for the 1st quarter of 2021 were roughly 7.7% higher than the 4th quarter of 2019, which implies that nominal personal consumption of goods for the 1st quarter will be up by roughly the same amount, before any inflation adjustments…

March 2021 retail sales table

To compute March’s real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we just reviewed…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 March retail sales excluding the 10.9% price-related increase in sales at gas stations were up by 9.7%….then, removing the 0.7% increase in grocery & beverage sales and the 13.4% increase in food services sales out from that total, we find that core retail sales were up by almost 10.9% for the month…since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% higher in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 10.8%…however, the actual adjustment in national accounts 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 sporting goods and other recreational commodity stores were up 23.5%, the March price index for transportation commodities other than fuel was 0.2% lower, which would mean that real unit sales at sporting goods and other recreational commodity stores were probably on the order of 26.4% higher, once the price increase is taken into account… similarly, while nominal sales at clothing stores were 18.3% higher in March, the apparel price index was 0.3% lower, which means that real sales of clothing likely rose around 18.6%…on the other hand, while sales at furniture and home furnishing stores were 5.9% higher, the price index for household furnishings and supplies was was 0.4% higher, which means real sales of furniture and home furnishings only rose by around 5.5%..

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.1% higher, as the price index for food purchased for use at home rose 0.1% while the index for food bought away from home was also 0.1% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%…hence while nominal sales at food and beverage stores were 0.7% higher, real sales of food and beverages would be around 0.6% higher in light of the 0.1% higher prices…on the other hand, the 13.4% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose around 13.0% during the month…and while sales at gas stations were up 10.9%, there was a 9.1% increase in price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 1.6% or 1.7%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual increase in real sales at gas stations was likely greater…reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by around 8.9% in March, after falling by a revised 2.9% in February and rising by a revised 7.8% in January…at the same time, the 13.0% increase in real sales at bars and restaurants would boost March real personal consumption of services by more than 1%…

Now that we have estimates of the percentage change in PCE goods for all three months of the first quarter, we can also estimate the contribution that PCE goods will make to 1st quarter GDP…. the February income and outlays report gives the change in real PCE goods for the 4th quarter months as unchanged in October, down 1.2% in November, and down 2.2% in December…based on the revisions to retail sales in the March retail report, we now have PCE goods for January at +7.8%, PCE goods for February at -2.9%, and PCE goods for March at +8.9%…to simplify our calculations, we’ll now convert perfcentage changes in PCE goods into an index, and set October with an index value of 100.00…thus Nov = 98.80, Dec = 96.63, Jan = 104.17, Feb = 101.15, and March = 110.15…hence, to figure out the growth rate of 1st quarter PCE goods, we have this calculation ( ((104.17 + 101.15 + 110.15) / 3)/ ((100 + 98.8 + 96.63)/ 3)) ^ 4  = 1.30021  …that means that PCE goods rose at about a 30.0% annual rate in the 1st quarter…since PCE goods has usually been around 23% of GDP, that means the contribution of PCE goods alone to first quarter GDP will be around 6.90 percentage points…

Industrial Production Rose 1.4% in March After February Output Revised 0.6% Lower

The Fed’s G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 1.4% in March after falling by a revised 2.6% in February, which left production 1.0% higher than a year ago… the industrial production index, with the benchmark set for average 2012 production to be equal to 100.0, ended at 105.6 in March, up from an February index reading that was revised down from 104.7 to 104.1, after the January index was revised down from 107.1 to 106.9, which caused the February decrease to be revised from 2.2% down to 2.6%…meanwhile December index was revised up from 105.8 to 105.9, the November index was unrevised at 104.8, and the October was revised from 103.8 to 103.9…as a result of those revisions and the March increase, US industrial production was up at a 2.5% annual rate for the first quarter as a whole…

The manufacturing index, which accounts for around 77% of the total IP index, rose to 102.8 in March from a revised 100.0 in February, which had previously been reported at 100.7… that came after the January manufacturing index was revised from 103.8 to 103.9, the December manufacturing index was left unrevised at 102.6, and the November manufacturing index was revised from 101.8 to 101.9….after revisions, the manufacturing index now sits 3.1% above its year ago level, while first quarter manufacturing has grown at a 2.7% annual rate from that of the 4th quarter of 2019….meanwhile, the mining index, which includes oil and gas well drilling, rose 5.7%, from 112.8 in February to 119.2 in March, after the February mining index was revised up from last month’s reported 112.6, which still left the mining index 8.8% below where it was a year earlier…finally, the utility index, which typically fluctuates due to deviations from normal temperatures, fell by 11.4% in March, from 111.5 to 98.8, after the February utility index was revised from 112.5 to 111.5, now up 9.2% from January…including this month’s revisions, the utility index is still only 0.2% below that of a year ago, as last March was also much warmer than normal…

This report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 74.4% in March from 73.4% in February, which was revised down from the 73.8% utilization reported a month ago…capacity utilization of NAICS durable goods production facilities rose from a revised 71.3% in February to 73.5% in March, while capacity utilization for non-durables producers was up from 73.5% to 75.4%…capacity utilization for the mining sector rose to 82.2% in March from 77.7% in February, which had been reported as 77.5% last month, while utilities were operating at 68.8% of capacity during March, down from 77.8% in February, while the February utility index was revised down from the previously reported 78.5%…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..  

February Business Sales Down 1.9%, Business Inventories Up 0.5%

After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….note that wholesale sales and inventories were revised on March 24th, which thus revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report…

According to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,549.6 billion in February, down 1.9 percent (±0.3 percent) from January’s revised sales, but still up 5.7 percent (±0.4 percent) from February sales of a year earlier…January’s sales were revised from the originally reported $1,568.5 billion to $1,579,238 million, now a 4.5% increase from December….the seasonally adjusted value of manufacturer’s sales fell 2.0% to $502,400 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 2.8% to $508,904 million, while wholesale sales fell 0.8% to $538,303 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,010.8 billion at the end of February, up 0.5 percent (±0.1%) from the end of January, but 0.7 percent (±0.4 percent) lower than in February a year earlier…at the same time, the value of end of January inventories was revised from the $1,982.4 billion reported last month to $2,000.7 billion, now 0.4% higher than December….seasonally adjusted inventories of manufacturers were estimated to be valued at $702,441 million, up 0.8% from January, and inventories of retailers were valued at $625,903 million, statistically unchanged January, while inventories of wholesalers were estimated to be valued at $682,470 million at the end of February, 0.6% higher than in January…

For GDP purposes, all those inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up by 1.4% for finished goods…last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those declining real inventories would have a significant negative impact on 1st quarter GDP…also last week, we found that February’s wholesale inventories decrease would have a negative impact on 1st quarter GDP….with a 1.4% increase in prices, real retail inventories will fall by around 0.6% in February, after falling around 1.8% in January, following a large increase in real retail inventories in the fourth quarter…hence the real retail inventory decrease in the 1st quarter will not only reverse that 4th quarter increase, but also subtract from the growth of GDP by the size of the 1st quarter real inventory decrease…

March Housing Starts at a 14 Year High; Building Permits Also Higher

The March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,739,000 in March, which was the highest rate since June 2006, 19.4 percent (±13.7 percent) above the revised estimated annual rate of 1,457,000 starts in February, and was also 37.0 percent (±15.2 percent)* above last March’s pandemic hit annual rate of 1,269,000 starts….the figures in parenthesis represent the most likely range of the change indicated; in other words, March housing starts could have been up by as much as 33.1% from those of last March, or up just by 5.7%, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for February housing starts was revised from the 1,421,000 reported last month to 1,457,000, while January starts, which were first reported at a 1,580,000 annual rate, were revised from last month’s initial revised figure of 1,584,000 annually to a 1,642,000 annual rate with this report….

These annual rates of housing 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 144,400 housing units were started in March, up from the 103,100 units that were started in February and the 115,200 units that were started in January…of those housing units started in March, an estimated 103,700 were single family homes and 38,800 were units in structures with more than 5 units, up from the revised 74,800 single family starts in February and down from the 27,000 units started in structures with more than 5 units in February…

The monthly data on new building permits, with a smaller margin of error, are usually a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,766,000, which was 2.7 percent (±1.7 percent) above the revised February rate of 1,720,000 permits, and was 30.2 percent (±1.8 percent) above rate of building permit issuance in March a year earlier…the annual rate for housing permits issued in February was revised up from the originally reported 1,682,000, as apparently last month’s data collection was hampered by the deep freeze….

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 158,300 housing units were issued in March, up from the revised estimate of 120,100 new permits issued in February…of those permits issued in March, 110,800 were permits for single family homes and 42,100 were permits for units in structures of more than 5 units, up from the 81,100 single family permits in February, and up from the 35,600 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 increased to 1.739 Million Annual Rate in March and Comments on March 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 of which are picked from the aforementioned GGO posts, contact me…)  

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graphs and tables for April 17th

rig count summary:

April 16 2021 rig count summary

retail sales:

March 2021 retail sales table

OPEC + quotas:

March 2021 OPEC   production quotas

OPEC output:

March 2021 OPEC crude output via secondary sources

global oil supply:

March 2021 OPEC report global oil supply

global oil demand:

March 2021 OPEC report global oil demand copy

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gasoline imports at a 98 week high despite highest refinery utilization in 54 weeks

oil prices fell for the fourth week in five this week, on rising oil supplies and on the prospect of pandemic related falling demand…after rising 0.8% to $61.45 a barrel last week on expectations that the Biden infrastructure plan would increase demand for oil, the contract price of US light sweet crude for May delivery opened 5 cents higher on Monday but tumbled nearly 5% from there on the likelihood of a increase in oil supplies, from both OPEC’s planned production hikes and as a result of the possible easing of US sanctions on Iran, as oil prices closed down $2.80 at $58.65 a barrel…oil prices rose early on Tuesday as a drop in the U.S. dollar made crude a more attractive buy, and hung on to close 68 cents, or 1.2%, higher at $59.33 a barrel on strong economic reports from the US and China and on a stronger global growth forecast from the IMF…oil prices fell in after hours trading Tuesday after the API surprised traders with big product inventory increases and then opened lower on Wednesday, but reversed to climb marginally as traders looked past the EIA’s rising gasoline and distillate supplies and turned their attention to the second successive weekly crude stockpile withdrawal, and settled 44 cents higher at $59.77 a barrel on an improving global economic outlook, even as gains were capped by rising gasoline inventories and fears that new coronavirus outbreaks would weaken a global recovery in fuel demand…the brief rally faded on Thursday, however, with oil prices pressured as rising cases of COVID-19 threatened to slow global economies, but recovered to end down just 17 cents at $59.60 a barrel as a falling dollar and rising stock markets offset earlier declines caused by the big increase in gasoline stockpiles and subdued demand compared to pre-pandemic levels…oil prices edged up in early Asian trading on Friday, supported by a weaker dollar, as traders weighed rising supplies and the impact on fuel demand from the COVID-19 pandemic, but turned lower in rangebound US trading on Friday, on rising supplies from major producers and on concerns over a mixed picture on the pandemic’s impact on fuel demand, and finished the session 28 cents lower at $59.32 a barrel, thus ending the week down 3.5%, the biggest weekly loss since mid-March….

natural gas prices also finished lower this week as the heating season appeared to be ending on warming April weather….after rising 0.8% to $2.639 per mmBTU last week on record LNG exports and on a bullish weekly storage report, the contract price of natural gas for May delivery opened 4.6 cents lower on Monday and tumbled 4.9% to a 12.8 cent loss at $2.511 per mmBTU, as weather forecasts shifted much warmer for the next couple of weeks, reducing both heating and power demand through mid-April…natural gas prices rebounded early Tuesday on a cooler revision to the latest weather forecast but failed to hold the gains, closing down another 5.5 cents at 2.456 per mmBTU…natural gas rebounded again on Wednesday, as weather models aligned to forecast a colder trend for mid-April, and this time held onto a 6.4 cent gain at $2.520 per mmBTU…however, gas prices waffled around that price on Thursday as the weekly storage data failed to offer any surprises and weather models maintained a warm pattern for the near term and the May contract price ultimately settled two-tenths of a cent higher at $2.522 per mmBTU…a similar rangebound natural gas trade unfolded on Friday and prices barely moved before adding on another four-tenths of a cent, and thus finished the week at $2.526 per mmBTU, still 4.3% lower than the prior week’s close…

the natural gas storage report from the EIA for the week ending April 2nd indicated that the amount of natural gas held in underground storage in the US rose by 20 billion cubic feet to 1,784 billion cubic feet by the end of the week, which left our gas supplies 235 billion cubic feet, or 11.6% below the 2,019 billion cubic feet that were in storage on April 2nd of last year, and 36 billion cubic feet, or 1.3% below the five-year average of 1,808 billion cubic feet of natural gas that have been in storage as of the 2nd of April in recent years….the 20 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 27 billion cubic foot addition from an S&P Global Platts survey of analysts, and was also less than the 30 billion cubic feet added to natural gas storage during the corresponding week of a year earlier, but was well more than the average addition of 8 billion cubic feet of natural gas that have typically been injected into natural gas storage during the same week over the past 5 years… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending April 2nd indicated that because of a decrease in our oil production and modest increases in our oil exports and our oil refining, we needed to withdraw oil from our stored commercial crude supplies for the second time in seven weeks and for the 24th time in the past thirty-seven weeks….our imports of crude oil rose by an average of 119,000 barrels per day to an average of 6,264,000 barrels per day, after rising by an average of 523,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 260,000 barrels per day to an average of 3,434,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,830,000 barrels of per day during the week ending April 2nd, 141,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 200,000 barrels per day lower at 10,900,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 13,730,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 15,044,000 barrels of crude per day during the week ending April 2nd, 103,000 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 a net of 503,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 811,000 barrels per day less than what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+811,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed….however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,838,000 barrels per day last week, which was 5.0% less than the 6,144,000 barrel per day average that we were importing over the same four-week period last year… the 503,000 barrel per day net withdrawal from our crude inventories was due to a 503,000 barrel per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be 200,000 barrels per day lower at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 300,000 barrels per day lower at 10,400,000 barrels per day, while a 13,000 barrel per day increase to 458,000 barrels per day in Alaska’s oil production added 100,000 barrels per day the rounded national total (EIA’s math)….our record high US crude oil production during the week ending March 13th 2020 was at a rounded 13,100,000 barrels per day, so this reporting week’s rounded oil production figure was 16.8% below that of our production peak, yet still 29.3% above 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 84.0% of their capacity while using those 15,044,000 barrels of crude per day during the week ending April 2nd, up from 83.9% of capacity during the prior week, and the highest refinery utilization in 54 weeks, reflecting the utilization level during the last week before the Covid slowdown…while the 15,044,000 barrels per day of oil that were refined this week were 10.3% higher than the 13,634,000 barrels of crude that were being processed daily during the week ending April 3rd of last year, they were still 6.6% below the 16,100,000 barrels of crude that were being processed daily during the week ending April 5th, 2019, when US refineries were operating at a still low 87.5% of capacity…

even with the increase in the amount of oil being refined, the gasoline output from our refineries decreased by 60,000 barrels per day to 9,279,000 barrels per day during the week ending April 2nd, after our gasoline output had increased by 762,000 barrels per day over the prior week…while this week’s gasoline production was 59.5% higher than the 5,818,000 barrels of gasoline that were being produced daily over the same week of last year, it was still 6.9% lower than the March 13th 2020 pre-pandemic high of 9,972,000 barrels per day….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 99,000 barrels per day to 4,639,000 barrels per day, after our distillates output had increased by 137,000 barrels per day over the prior week… but since the onset of the pandemic didn’t appear to impact distillates’ production, this week’s distillates output was still 6.9% lower than the 4,982,000 barrels of distillates that were being produced daily during the week ending April 3rd, 2020…

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the fifteenth time in twenty-one weeks, and for 19th time in 38 weeks, rising by 4,044,000 barrels to 234,588,000 barrels during the week ending April 2nd, after our gasoline inventories had decreased by 1,735,000 barrels over the prior week...our gasoline supplies increased this week because our imports of gasoline rose by 678,000 barrels per day to a 98 week high of 1,297,000 barrels per day while our exports of gasoline rose by 251,000 barrels per day to 792,000 barrels per day, and because the amount of gasoline supplied to US users decreased by 101,000 barrels per day to 8,891,000 barrels per day…but even after this week’s inventory increase, our gasoline supplies were 8.8% lower than last April 3rd’s gasoline inventories of 257,303,000 barrels, and about 2% below the five year average of our gasoline supplies for this time of the year… 

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels increased for the 4th time in 10 weeks and for the 12th time in thirty-two weeks, rising by 1,452,000 barrels to 145,547,000 barrels during the week ending April 2nd, after our distillates supplies had increased by 2,542,000 barrels during the prior week….our distillates supplies rose by less this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 449,000 barrels per day to 3,664,000 barrels per day, because our exports of distillates rose by 398,000 barrels per day to 1,092,000 barrels per day, and because our imports of distillates fell by 116,000 barrels per day to 325,000 barrels per day…after this week’s inventory increase, our distillate supplies at the end of the week were 18.6% above the 122,724,000 barrels of distillates that we had in storage on April 3rd, 2020, and rose to about 5% above the five year average of distillates stocks for this time of the year…

finally, with the increase in our oil exports and the recovery in our refinery throughput, our commercial supplies of crude oil in storage fell for the 13th time in the past twenty-one weeks and for the 25th time in the past year, decreasing by 3,522,000 barrels, from 501,835,000 barrels on March 26th to 498,313,000 barrels on April 2nd…after this week’s decrease, our commercial crude oil inventories fell to 3% above the most recent five-year average of crude oil supplies for this time of year, and to 44.6% above the average of our crude oil stocks as of the first weekend of April over the 5 years at the beginning of this decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the spring lockdowns of last year, after generally rising over the past two and a half years, except for summers and during the 10 weeks prior to the Texas freeze, after generally falling from a record high over the year and a half prior to September of 2018, our commercial crude oil supplies as of April 2nd were 2.9% more than the 484,370,000 barrels of oil we had in commercial storage on April 3rd of 2020, and 9.1% more than the 456,550,000 barrels of oil that we had in storage on April 5th of 2019, and also 16.3% more than the 428,638,000 barrels of oil we had in commercial storage on April 6th of 2018…      

This Week’s Rig Count

Note: this week’s rig count includes 8 days, since last week’s report was released on Thursday in advance of the Good Friday…nonetheless, the rig count rose for the 27th time over the past 30 weeks during the week ending April 9th, but it still remains down by 45.5% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US was up by 2 to 432 rigs this past week, which was still down by 170 rigs from the 602 rigs that were in use as of the April 10th report of 2020, and was 1,497 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 their first attempt to put US shale out of business….

The number of rigs drilling for oil was unchanged at 331 oil rigs this week, after rising by 13 oil rigs the prior week, leaving us with 167 fewer oil rigs than were running a year ago, and 20.6% of 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 was up by two to 93 natural gas rigs, which was only down by 3 natural gas rigs from the 96 natural gas rigs that were drilling a year ago, but still just 5.8% of 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 or gas, two rigs classified as ‘miscellaneous’ continued to drill this week, one in the middle of the Permian basin in MIdland county Texas, and the other in Lake County, California, while a year ago there were also two such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count was down by 3 to 11 rigs this week, with 10 of those rigs drilling for oil in Louisiana’s offshore waters and 1 continuing to drill for oil in Alaminos Canyon offshore from Texas…that was 7 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when all 18 Gulf rigs were drilling for oil offshore from Louisiana…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig counts….

The count of active horizontal drilling rigs was up by 3 to 394 horizontal rigs this week, which was still down by 151 rigs from the 545 horizontal rigs that were in use in the US on April 10th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….meanwhile, the directional rig count was down by one rig to 18 directional rigs this week, and those were also down by 17 from the 35 directional rigs that were operating during the same week a year ago….at the same time, the vertical rig count was unchanged at 20 vertical rigs this week, and those were down by 2 from the 22 vertical rigs that were in use on April 10th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of April 9th, the second column shows the change in the number of working rigs between last week’s count (April 1st) and this week’s (April 9th) count, the third column shows last week’s April 1st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 10th of April, 2020..    

April 9 2021 rig count summary

as you can see, there were ​just a few changes this week, after widespread new activity last week…checking for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we do find that that one rig was added in Texas Oil District 8, which includes the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which thus leaves us with no change in the rig count in the Texas Permian this week…..elsewhere in Texas, there was one rig added in Texas Oil District 1, while a rig was pulled out from Texas Oil District 4, which both could have been in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state, still leaving no net change in that basin either…at the same time, there was also a rig added in Texas Oil District 6, which must have been targeting that region’s Haynesville shale, since the Haynesville shale count was unchanged in northern Louisiana….the Texas count is still unchanged, however, because an offshore platform in the state’s waters was shut down at the same time, while the Louisiana is only down one despite the loss of two offshore rigs because there was a land rig startup in an unnamed basin in the southern part of the state…elsewhere, two more oil rigs were added in a Utah basin not tracked by Baker Hughes, more than likely the Uinta, and another oil rig was added in Oklahoma, also in a basin not tracked by Baker Hughes, while an oil rig was shut down in Wyoming, which could have been operating in any one of three basins in that state Baker Hughes doesn’t track..for this week’s two additions of natural gas rigs, we have the rig that was added in the Haynesville shale, and another rig that was added in Ohio’s Utica shale at the same time…

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March producer prices; February’s trade deficit, job openings survey, factory inventories, & wholesale trade

Major monthly reports released over the past week included the Commerce Department’s report on our International Trade for February, the Producer Price Index for March and the Job Openings and Labor Turnover Survey (JOLTS) for February, both from the Bureau of Labor Statistics, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for February, and the February report on Wholesale Trade, Sales and Inventories, both from the Census Bureau….in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $27.6 billion, or at a 7.9% annual rate, the most since late 2017, as non-revolving credit expanded at a 7.3% annual rate to $3,231.4 billion and revolving credit outstanding grew at a 10.1% rate to $974.4 billion…

Privately issued reports released this week included the March 2021 Services Report On Business® from the Institute for Supply Management, which saw the ISM Services index rise to an all-time high of 63.7% in March, up from 55.3% in February, indicating a much larger plurality of service industry purchasing managers reported expansion in various facets of their business in March, and the Mortgage Monitor for February (pdf) from Black Knight Financial Services, which indicated that 6.00% of all mortgages were delinquent in February, up from 5.85% in January, and up from 3.28% in February of 2020, and that a record low of 0.32% of all mortgages were in the foreclosure process, unchanged from the 0.32% that were in foreclosure in January but down from the 0.45% of mortgages that were in foreclosure a year earlier…

US Trade Deficit Rises 4.8% in February to Record High

Our trade deficit rose 4.8% February, as both our exports and imports decreased, but the value of our exports fell by almost three times as much as the value of our imports did….the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $3.3 billion to $71.1 billion in February, from a January deficit that was revised down to $67.8 billion from the $68.2 billion deficit reported a month ago…in rounded figures, the value of our February exports fell by $5.0 billion to $187.3 billion on $4.8 billion decrease to $131.1 billion in our exports of goods and a $0.2 billion decrease to $56.1 billion in our exports of services, while our imports fell $1.7 billion to $258.3 billion as a $2.0 billion decrease to $219.1 billion in our imports of goods was partially offset by a $0.3 billion increase to $39.2 billion in our imports of services….export prices averaged 1.6% higher in February, which means our real exports month over month fell more than the nominal decrease by that percentage, while import prices rose 1.3%, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage…

The decrease in our February exports of goods resulted from lower exports of capital goods, consumer goods, soybeans, and of automotive vehicles, parts and engines…referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of capital goods fell by $2,451 million to $39,094 million on a $738 million decrease in our exports of industrial machines other than those itemized separately, a $459 million decrease in our exports of civilian aircraft, and a $409 million decrease in our exports of semiconductors, and that our exports of consumer goods fell by $937 million to $15,049 million on a $470 million decrease in our exports of gem diamonds; in addition, our exports of foods, feeds and beverages fell by $727 million to $13,166 million on a $889 million decrease in our exports of soybeans, and our exports of automotive vehicles, parts, and engines fell by $703 million to $11,899 million on a $319 million decrease in our exports of parts and accessories of vehicles other than tires, engines and chassis and a $280 million decrease in our exports of new and used passenger cars, while our exports in other goods not categorized by end use fell by $372 million to $4,968 million….partially offsetting the decreases in those end use categories, our exports of industrial supplies and materials rose by $352 million to $46,448 million as a $2,399 million increase in our exports of natural gas and a $503 million increase in our exports of non-monetary gold were partly offset by a $824 million decrease in our exports of crude oil, a $326 million decrease in our exports of plastic materials, and a $357 million decrease in our exports of natural gas liquids…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that lower imports of automotive vehicles, parts, and engines and of consumer goods were responsible for the $2.0 billion decrease in our February imports, while their impact was partly offset by greater imports of industrial supplies and materials…our imports of automotive vehicles, parts and engines fell by $3,393 million to $28,184 million on a $1,768 million decrease in our imports of passenger cars, a $633 million decrease in our imports of trucks, buses, and special purpose vehicles, and a $589 million decrease in our imports of parts and accessories of vehicles other than tires, engines and chassis, and our imports of consumer goods fell by $2,674 million to $60,665 million as a $3,876 million decrease in our imports of pharmaceuticals and a $438 million decrease in our imports of household appliances were partially offset by a $737 million increase in our imports of artwork, antiques, and other collectibles…in addition, our imports of foods, feeds, and beverages fell by $669 million to $13,116 million on decreases in most food & feed categories and a $285 million decrease in imports of foods other than those itemized separately…partially offsetting the decreases in those end use categories, our imports of industrial supplies and materials rose by $3,531 million to $46,586 million on a $1,056 million increase in our imports of finished metal shapes, a $963 million increase in our imports of crude oil, an $874 million increase in our imports of natural gas, a $535 million increase in our imports of precious metals other than those itemized, and a $395 million increase in our imports of petroleum products other than those itemized, and our imports of capital goods rose by $159 million to $57,707 million as a $951 million increase in our imports of civilian aircraft was partly offset by a $420 million increase in our imports of computers, and lastly our imports of other goods not categorized by end use rose by $924 million to $9,483 million…

The press release for this month’s report summarizes Exhibit 19 in the full release pdf for February, which gives us surplus and deficit details on our goods trade with selected countries:

The February figures show surpluses, in billions of dollars, with South and Central America ($3.7), Brazil ($1.4), Hong Kong ($1.2), Singapore ($0.6), United Kingdom ($0.2), and Saudi Arabia ($0.1). Deficits were recorded, in billions of dollars, with China ($30.3), European Union ($19.0), Mexico ($6.8), Germany ($5.3), Japan ($4.5), Canada ($4.0), Italy ($3.2), France ($2.7), Taiwan ($2.4), South Korea ($2.3), and India ($1.7).

  • The deficit with China increased $3.1 billion to $30.3 billion in February. Exports decreased $4.5 billion to $10.4 billion and imports decreased $1.5 billion to $40.6 billion.
  • The deficit with Canada increased $2.2 billion to $4.0 billion in February. Exports decreased $0.5 billion to $23.7 billion and imports increased $1.7 billion to $27.7 billion.
  • The deficit with Mexico decreased $5.1 billion to $6.8 billion in February. Exports increased $2.1 billion to $22.8 billion and imports decreased $3.0 billion to $29.6 billion.

To gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here….from that table, we can figure that the 4th quarter’s real exports of goods averaged 145,373.7 million monthly in chained 2012 dollars, while inflation adjusted 1st quarter goods exports were at 147,294 million and 139,441 million for January and February respectively in that same 2012 dollar quantity index representation…averaging January’s and February’s goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter’s real exports of goods are running at a 5.4068% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.33 percentage points from 1st quarter GDP….. in a similar manner, we find that our 4th quarter real imports of goods averaged 239,602.7 million monthly in chained 2012 dollars, while inflation adjusted January and February imports were at 243,409 million and 238,534 million respectively, after that same 2012 chained dollars inflation adjustment…that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 2.305% annual rate from those of the 4th quarter…since increases in imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 2.3% rate would subtract about 0.26 percentage points from 1st quarter GDP….hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract around 0.59 percentage points from 1st quarter GDP…

Note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that the $0.2 billion decrease in exports of services and the $0.3 billion increase in imports of services both suggest that February’s trade in services would also be a subtraction from 1st quarter GDP, after the change January’s exports and imports in services were statistically equal…

Producer Prices rose 1.0% in March on Higher Wholesale Energy Prices, Wider Margins for Trade and Transport Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 1.0% in March, as prices for finished wholesale goods rose 1.7% while margins of final services providers rose 0.7%…that increase followed a February report that the PPI was 0.5% higher, with prices for finished wholesale goods on average 1.4% higher, while margins of final services providers increased by 0.1%, a January report that had the PPI 1.3% higher, with average prices for finished wholesale goods rising 1.4%, while margins of final services providers increased by 1.3%, a now revised December report that indicated the PPI was up 0.3%, with prices for finished wholesale goods up 1.0% while margins of final services providers were 0.2% lower, and a re-revised November report that shows the PPI was unchanged, with prices for finished wholesale goods rising 0.4% while margins of final services providers decreased 0.2%….on an unadjusted basis, producer prices are now 4.2% higher than a year ago, up from the 2.8% year over year increase indicated by last month’s report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.6% for the month, and is now 3.1% higher than in March a year ago, up from the 2.2% year over year increase as was shown in February…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 1.7% higher in March, after being 1.4% higher in February, 1.4% higher in January, 1.0% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, and 1.4% higher in May, but 2.8% lower in April and 1.7% lower in March of last year….the finished goods price index rose 1.7% in February because the price index for wholesale energy goods was 5.9% higher, after it had risen by 6.0% in February, 5.1% in January, 4.7% in December, 1.7% in November, and by 0.5% in October, while the price index for wholesale foods rose 0.5%, after rising by 1.3% in February, rising 0.2% in January, after being unchanged in December and rising by a revised 0.2% in November, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.9% higher, after it had risen by 0.3% in February and 0.8% in January….wholesale energy prices averaged 5.9% higher due to a 8.8% increase in wholesale prices for gasoline and a 16.5% increase in wholesale prices for No.2 diesel fuel, while, the wholesale food price index rose 0.5% on a 10.3% increase in the wholesale price index for eggs for fresh use, a 6.0% increase in the wholesale price index for pork, and a 7.7% increase in wholesale price index for fin-fish and shellfish….among core wholesale goods, the wholesale price index for industrial chemicals rose 9.1%, the wholesale price index for mobile homes rose 2.5%, and the wholesale price index for iron and steel scrap rose 10.8% ..

At the same time, the index for final demand for services rose 0.7% in March, after rising 0.1% in February and 1.3% in January, after falling by 0.2% in December and in November, as the index for final demand for trade services rose 1.0%, the index for final demand for transportation and warehousing services rose 1.5%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.4% higher…among trade services, seasonally adjusted margins for machinery and vehicle wholesalers rose 6.7%, margins for apparel, jewelry, footwear, and accessories retailers rose 5.8%, margins for TV, video, and photographic equipment and supplies retailers rose 6.8%, and margins for food retailers rose 1.1%, while margins for automobile retailers fell 4.7%.. among transportation and warehousing services, average margins for truck transportation of freight rose 1.7%, average margins for air transportation of freight rose 1.2%, and average margins for rail transportation of freight and mail rose 1.1%…among the components of the core final demand for services index, the index for portfolio management rose 1.6%, the index for passenger car rental rose 9.6%, and margins for residential property sales and leases, brokerage fees and commissions rose 1.7%, while margins for arrangement of cruises and tours fell 3.0%…

This report also showed the price index for intermediate processed goods rose 4.0% in March, after rising 2.7% in February, 1.7% in January, a revised 1.2% in December, a revised 0.9% in November, 0.9% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.2% in June, but after being unchanged in May and falling the prior 5 months….the price index for intermediate energy goods rose 8.8%, as refinery prices for gasoline rose 8.8%, refinery prices for No. 2 diesel fuel rose 16.5%, refinery prices for jet fuel rose 12.6%, producer prices for industrial electric power rose 9.5%, and producer prices for industrial natural gas rose 8.5%… meanwhile, the price index for intermediate processed foods and feeds rose 0.9%, as the producer price index for fats and oil rose 3.1%, the producer price index for processed poultry rose 3.9%, and the producer price index for prepared animal feeds rose 1.0%…at the same time, the core price index for intermediate processed goods less food and energy rose 3.2% as the producer price index for plastic resins and materials rose 9.1%, the producer price index for phosphates rose 20.4%, the producer price index for steel mill products rose 17.6%, the producer price index for plywood rose 10.5%, and the producer price index for hardwood lumber rose 9.0%…prices for intermediate processed goods are now 12.5% higher than in March a year ago, the fourth increase after 19 consecutive year over year decreases, which followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 9.3% in March, after rising 4.3% in February, 3.8% in January, a revised 2.3% in December, a revised 6.3% in November, and after rising by 1.3% in October, 5.2% in September, 4.0% in August, 0.6% in July, 5.4% in June and 8.4% in May, but after falling 13.7% in April, and by 8.1% last March ….that was as the March price index for crude energy goods rose 22.3% as crude oil prices rose 11.0%, unprocessed natural gas prices rose 46.6%, and coal prices were unchanged, while the price index for unprocessed foodstuffs and feedstuffs rose 1.4% on a 17.0% increase in the price of slaughter hogs, and a 5.3% increase in producer prices for alfalfa hay….at the same time, the index for core raw materials other than food and energy materials rose 3.2%, as the price index for copper base scrap rose 11.1% and the price index for iron and steel scrap rose 10.8%… this raw materials index is now 41.6% higher than a year ago, just the fifth annual increase in more than 2 years, as the year over year change on this index had been negative from the beginning of 2019 through October of last year…

Lastly, the price index for services for intermediate demand rose 0.4% in March, after rising 0.7% in February, 1.3% in January, and a revised 0.2% in December, after being unchanged  in November, rising 0.7% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% last June….the price index for intermediate trade services was 0.4% higher, as margins for intermediate building materials, paint, and hardware wholesalers rose 3.6%, margins for intermediate paper and plastics products wholesalers rose 3.9%, and margins for intermediate hardware, building material, and supplies retailers rose 2.1%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.9% higher, as the intermediate price index for water transportation of freight rose 3.3%, the intermediate price index for truck transportation of freight rose 1.7%, and the intermediate price index for arrangement of freight and cargo rose 2.9%….at the same time, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.3%, as the intermediate price index for business loan services (partial) rose 6.2%, the intermediate price index for passenger car rental rose 9.6%, the intermediate price index for investment banking rose 4.4%, and the intermediate price index for advertising space sales in periodicals and newspapers rose 1.8%, while the intermediate price index for truck, utility trailer, and RV rental and leasing fell 2.6%..over the 12 months ended in March, the year over year price index for services for intermediate demand is 4.0% higher than it was a year ago, the seventh consecutive positive annual change since it briefly turned negative year over year from April to August for the first time in the history of this index…

Job Openings, Hiring, Layoffs & Job Quitting were all Higher in February

The Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 268,000, from 7,099,000 in January to 7,367,000 in February, after January’s job openings were revised up from the originally reported 6,917,000…February’s jobs openings were also 5.1% higher than the 7,012,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.7% in January to 4.9% in February, which was also up from the 4.4% rate of February a year ago…the healthcare and social assistance sector, with a 233,000 job opening increase to 1,453,000 openings, saw the largest increase, while job openings in state and local education decreased by 117,000 to 177,000  (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 February, seasonally adjusted new hires totaled 5,738,000, up by 273,000 from the revised 5,465,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed rose from 3.8% in January to 4.0% in February, which was also up from the 3.9% hiring rate in February a year earlier (details of hiring by sector since October and for a year ago are in table 2)….meanwhile, total separations rose by 133,000, from 5,323,000 in January to 5,456,000 in February, as the separations rate as a percentage of the employed rose from 3.7% in January to 3.8% in February, and was also up from 3.7% in February a year ago (see details in table 3)…subtracting the 5,456,000 total separations from the total hires of 5,738,000 would imply an increase of 288,000 jobs in February, somewhat less than the revised payroll job increase of 468,000 for February reported in the March establishment survey last week, with at least some of that difference likely due to the difference in the date of the surveys, which is at month end for this report but is during the week of the 12th for the employment situation….

Breaking down the seasonally adjusted job separations, the BLS founds that 3,357,000 of us voluntarily quit our jobs in February, up by 51,000 from the revised 3,306,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, which was still up from the quits rate of 2.2% year earlier (see details in table 4)….in addition to those who quit, another 1,775,000 were either laid off, fired or otherwise discharged in February, also up by 51,000 from the revised 1,724,000 who were discharged in January, as the discharges rate remained at 1.2% of all those who were employed during the month, while it was down from the 1.3% discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 323,000 in February, up from 294,000 in January, for an ‘other separations rate’ of 0.2%, same as in January and the same as in February 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…  

February Factory Shipments Down 2.0%, Factory Inventories 0.8% Higher

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for February from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $4.1 billion or 0.8 percent to $505.7 billion in February, the first decrease in 10 months, following a revised 2.7% increase to $509.7 billion in January, which was originally reported as a 2.6 percent increase to $509.4 billion a month ago….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate as revised updates to the February advance report on durable goods which was released two weeks ago…on those durable goods revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in February, down following nine consecutive monthly increases, decreased $4.1 billion or 0.8 percent to $505.7 billion, the U.S. Census Bureau reported today. This followed a 2.7 percent January increase. Shipments, also down following nine consecutive monthly increases, decreased $10.3 billion or 2.0 percent to $502.4 billion. This followed a 1.8 percent January increase. Unfilled orders, up two consecutive months, increased $8.5 billion or 0.8 percent to $1,082.3 billion. This followed a 0.2 percent January increase. The unfilled orders-to-shipments ratio was 6.29, up from 6.11 in January. Inventories, up six of the last seven months, increased $5.5 billion or 0.8 percent to $702.4 billion. This followed a 0.2 percent January increase. The inventories-to-shipments ratio was 1.40, up from 1.36 in January. 
  • New orders for manufactured durable goods in February, down following nine consecutive monthly increases, decreased $3.2 billion or 1.2 percent to $254.1 billion, down from the previously published 1.1 percent decrease. This followed a 3.6 percent January increase. Transportation equipment, down following five consecutive monthly increases, led the decrease, $1.5 billion or 1.8 percent to $83.4 billion. New orders for manufactured nondurable goods decreased $0.9 billion or 0.4 percent to $251.6 billion.
  • Shipments of manufactured durable goods in February, down following five consecutive monthly increases, decreased $9.4 billion or 3.6 percent to $250.8 billion, down from the previously published 3.5 percent decrease. This followed a 1.8 percent January increase. Transportation equipment, also down following five consecutive monthly increases, led the decrease, $7.1 billion or 8.3 percent to $78.5 billion. Shipments of manufactured nondurable goods, down following nine consecutive monthly increases, decreased $0.9 billion or 0.4 percent to $251.6 billion. This followed a 1.8 percent January increase. Chemical products, also down following nine consecutive monthly increases, led the decrease, $0.8 billion or 1.1 percent to $71.1 billion.
  • Unfilled orders for manufactured durable goods in February, up two consecutive months, increased $8.5 billion or 0.8 percent to $1,082.3 billion, unchanged from the previously published increase. This followed a 0.2 percent January increase. Transportation equipment, up following eleven consecutive monthly decreases, led the increase, $5.0 billion or 0.7 percent to $711.1 billion.
  • Inventories of manufactured durable goods in February, up following two consecutive monthly decreases, increased $2.8 billion or 0.7 percent to $427.3 billion, unchanged from the previously published increase. This followed a 0.3 percent January decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $0.9 billion or 0.6 percent to $146.6 billion. Inventories of manufactured nondurable goods, up six of the last seven months, increased $2.7 billion or 1.0 percent to $275.1 billion. This followed a 0.9 percent January increase. Petroleum and coal products, up four consecutive months, led the increase, $1.9 billion or 5.3 percent to $37.4 billion..

To gauge the effect of February’s dollar valued factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index….by stage of fabrication, the value of finished goods inventories increased 0.5% to $251,683 million; the value of work in process inventories also increased by 0.5% to $206,550 million, and the value of materials and supplies inventories increased by 1.3% to $244,208 million…at the same time, the producer price index for February indicated that prices for finished goods increased 1.4%, that prices for intermediate processed goods were 2.7% higher, and that prices for unprocessed goods were on average 4.3% higher, even as core raw materials were priced 1.3% lower than January’s….assuming similar valuations for like inventories, that would suggest that February’s real finished goods inventories were around 0.9% lower than January’s, that real inventories of intermediate processed goods were about 2.2% smaller, and that real raw material inventory inventories were on average lower, even as core raw material inventories were higher…since there was a small increase in 4th quarter real factory inventories, the large February decrease, following an equally large decrease in January’s real factory inventories, will thus have a significant negative impact on 1st quarter GDP…

February Wholesale Sales Down 0.8%, Wholesale Inventories Up 0.6% Due to Higher Prices

The February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $538.3 billion, down 0.8 percent (±0.7 percent) from the revised January level, but 6.4 percent (±0.9 percent) higher than wholesale sales of February 2020… the December 2020 to January 2021 percent change in sales was revised from the preliminary estimate of up 4.9 percent (±0.7 percent) to $531.7 billion to an increase of 4.4 percent (±0.9 percent) to $542,867 million in conjunction with an annual revision of previously published data based on the results of the 2019 Annual Wholesale Trade Survey and the results of the 2017 Economic Census, which makes any such comparisons to previous published amounts nonsense….as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at $682.5 billion at month end, an increase of 0.6 percent (+/-0.4%) from the revised January level and also 2.0 percent (±1.1 percent) higher than February a year ago, with the January preliminary inventory estimate revised upward from the advance estimate of up 1.3 percent (±0.4 percent) to $661.7 billion to an increase of 1.4 percent (±0.2 percent) to $678.2 billion….

For national accounts, the wholesale inventories reported here will be adjusted the February producer price index, ie the index a month prior to the one we just reported on…with notable exceptions such as inventories of farm products, chemicals and petroleum, we’ve previously estimated that wholesale inventories appear to be roughly 70% finished goods….with the February producer price index for finished goods up by 1.4% while the producer price indexes for intermediate goods & raw goods were 2.7% higher and 4.3% higher respectively, we can thus figure that February’s real wholesale inventories would have decreased by at least 0.8%, and probably by much more…since the real wholesale inventories inched up a bit over the 4th quarter, any real decrease in the 1st quarter will not only reverse that bit, but also subtract from the growth of GDP by the size of the real inventory decrease…

 

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

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tables for April 10th

rig count summary:

April 9 2021 rig count summary

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US refinery utilization at a 53 week high, gasoline production at a 25 week high

oil prices rose for the first time in four weeks, despite an OPEC decision to increase output, as the new US infrastructure plan is expected to increase demand for oil…after falling 0.7% to $61.42 a barrel last week as new Covid infections and lockdowns increased worldwide, the contract price of US light sweet crude for May delivery opened lower on Monday on news that the container ship that had blocked oil traffic for nearly a week in the Suez Canal had been refloated, but reversed to finish 59 cents or 1% higher at $61.56 a barrel after Reuters reported that Russia would support stable oil output ahead of a meeting with the OPEC later in the week…but oil prices fell on Tuesday as the Suez Canal was cleared and traders focused on the upcoming OPEC+ meeting and the impact of Covid-19 on oil demand in Europe, and finished $1.01 or 1.6% lower at $60.55 a barrel, as near-term risks to the demand recovery story emerged with setbacks to economic reopening plans worldwide…oil prices opened lower on Wednesday after the American Petroleum Institute reported surprisingly large crude inventory build, but reversed to show a 1% gain by midday after the EIA reported a modest inventory withdrawal, before reversing again to tank 2% before the close after France announced it would start a month-long lockdown in the face of another Covid surge, as oil prices ended $1.39 lower on the day at $59.16 a barrel….however, oil prices jumped at the open and moved sharply higher on Thursday, despite the news that OPEC+ had reached a deal to gradually ease production cuts from May, as traders took heart in their incremental increases over three months and reacted to the announcement Biden’s vast infrastructure plan that includes investments in roads, railways, and clean energy that would all take copius quantites of oil and asphalt to build, as oil closed $2.29 higher at $61.45 a barrel, and with the markets closed on Good Friday, thus finished the week’s trading with a modest 0.8% gain

natural gas prices also rose fractionally this week as LNG exports remained at record levels and the weekly storage report showed a smaller inventory build than had been expeccted…after rising 0.9% to $2.557 per mmBTU last week on strong LNG exports and a bullish storage report, the contract price of natural gas for April delivery opened fractionally higher on its last day of trading on Monday and continued rising to finish trading 2.9 cents higher at $2.586 per mmBTU, on record LNG exports and on forecasts for slightly higher heating demand over the coming week…with the contract price of natural gas for May delivery moving to the top of the board on Tuesday, natural gas quotes fell 3.0 cents to $2.623 per mmBTU, even as exports climbed higher, as a weakening weather outlook and the anticipation of an inventory increase kept natural gas prices in check…natural gas futures fell again on Wednesday, slipping 1.5 cents to $2.608 per mmBTU, as traders mulled domestic demand weakness and the potential for a bearish government inventory report on the next day… however, when Thursday’s natural gas storage report came in a bit below market expectations, natural gas prices bounced 2% and went on to settle 3.1 cents higher at $2.639 per mmBTU, as the initial price momentum faded as traders struggled to make sense of the accompanying revision….thus the daily natural gas quotes saw a 3.2% gain on the week as the front month shifted from April to May, while the May contract itself ended the week 0.8% higher, having closed last week at $2.619 per mmBTU…

the natural gas storage report from the EIA for the week ending March 26th indicated that the amount of natural gas held in underground storage in the US rose by 14 billion cubic feet to 1,764 billion cubic feet by the end of the week, after gas in storage for the week ending March 19th was revised 4 billion cubic feet higher to 1750 billion cubic feet…that left our gas supplies 225 billion cubic feet, or 11.3% below the 1,989 billion cubic feet that were in storage on March 26th of last year, and 36 billion cubic feet, or 2​.​0% below the five-year average of 1,800 billion cubic feet of natural gas that have been in storage as of the 26th of March in recent years….the 14 billion cubic feet that were added to US natural gas storage this week was less than the average forecast of a 19 billion cubic foot addition from an S&P Global Platts survey of analysts, while it contrasted with the 20 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, as well as the average withdrawal of 24 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years… 

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 26th indicated that after a big increase in our oil exports and another big increase in our oil refining, we finally need to withdraw oil from our stored commercial crude supplies for the first time in six weeks and for the 23rd time in the past thirty-six weeks….our imports of crude oil rose by an average of 523,000 barrels per day to an average of 6,145,000 barrels per day, after rising by an average of 299,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 693,000 barrels per day to an average of 3,174,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,971,000 barrels of per day during the week ending March 26th, 170,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,071,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,941,000 barrels of crude per day during the week ending March 26th, 552,000 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 a net of 125,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 745,000 barrels per day less than what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a (+745,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed….however, since most everyone treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,686,000 barrels per day last week, which was 9.4% less than the 6,279,000 barrel per day average that we were importing over the same four-week period last year… the 125,000 barrel per day net withdrawal from our crude inventories was due to a 125,000 barrel per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be 100,000 barrels per day higher at 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 200,000 barrels per day higher at 10,700,000 barrels per day, while a 10,000 barrel per day decrease to 445,000 barrels per day in Alaska’s oil production subtracted 100,000 barrels per day the rounded national total (EIA’s math)….last year’s US crude oil production for the week ending March 27th was rounded to 13,000,000 barrels per day, so this reporting week’s rounded oil production figure was 14.6% below that of a year ago, yet still 31.7% above the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 83.9% of their capacity while using those 14,941,000 barrels of crude per day during the week ending March 26th, up from 81.6% of capacity during the prior week, and the highest refinery utilization in 53 weeks, which appears to reflect utilization​ during ​the last week before the Covid slowdown…however, the 14,941,000 barrels per day of oil that were refined this week were just fractionally higher than the 14,898,000 barrels of crude that were being processed daily during the week ending March 27th of last year, when US refineries were operating at a seasonal low 82.3% of capacity…

with the increase in the amount of oil being refined, the gasoline output from our refineries was higher for the 8th time in 20 weeks, increasing by 762,000 barrels per day to a twenty-five week high of 9,339,000 barrels per day during the week ending March 26th, after our gasoline output had decreased by 300,000 barrels per day over the prior week…as a result, this week’s gasoline production was 25.3% higher than the 7,456,000 barrels of gasoline that were being produced daily over the same week of last year, but still 6.3% lower than the March 13 2020 pre-pandemic high of 9.972,000 barrels per day ….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 137,000 barrels per day to 4,738,000 barrels per day, after our distillates output had increased by 1,703,000 barrels per day from a twenty-six year low of 2,898,000 barrels per day over the prior three weeks…but even after that four week rebound in our distillates’ production, this week’s distillates output was still 4.6% lower than the 4,966,000 barrels of distillates that were being produced daily during the week ending March 27th, 2020…

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the sixth time in twenty weeks, and for 19th time in 37 weeks, falling by 1,735,000 barrels to 230,544,000 barrels during the week ending March 26th, after our gasoline inventories had increased by 204,000 barrels over the prior week...our gasoline supplies decreased this week because the amount of gasoline supplied to US users increased by 275,000 barrels per day to 8,891,000 barrels per day, and because our exports of gasoline rose by 108,000 barrels per day to 541,000 barrels per day, and because our imports of gasoline fell by 320,000 barrels per day to 619,000 barrels per day…after this week’s inventory decrease, our gasoline supplies were 6.6% lower than last March 27th’s gasoline inventories of 246,806,000 barrels, and about 4% below the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the recovery in our distillates production, our supplies of distillate fuels increased for the 3rd time in 10 weeks and for the 11th time in thirty-one weeks, rising by 2,542,000 barrels to 144,095,000 barrels during the week ending March 26th, after our distillates supplies had increased by 3,806,000 barrels during the prior week….our distillates supplies managed to rise this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 521,000 barrels per day to 4,113,000 barrels per day, because our exports of distillates fell by 426,000 barrels per day to 703,000 barrels per day, while our imports of distillates fell by 223,000 barrels per day to 664,000 barrels per day…after this week’s inventory increase, our distillate supplies at the end of the week were 17.9% above the 122,248,000 barrels of distillates that we had in storage on March 27th, 2020, and rose to about 4% above the five year average of distillates stocks for this time of the year…

finally, with the increase in our oil exports and the recovery in our refinery throughput, our commercial supplies of crude oil in storage fell for the 12th time in the past twenty weeks and for the 24th time in the past year, decreasing by 876,000 barrels, from 502,711,000 barrels on March 19th to 501,835,000 barrels on March 26th…after this week’s modest decrease, our commercial crude oil inventories remained 6% above the most recent five-year average of crude oil supplies for this time of year, and w​as still nearly 49% above the average of our crude oil stocks as of the fourth week of March ​over the 5 years ​at the beginning of th​is decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the spring lockdowns of last year, after generally rising over the​ past two ​and a half ​years​,​ except for ​summers and ​during the 10 weeks prior to the Texas freeze, after generally falling from a record high over the year and a half prior to September of 2018, our commercial crude oil supplies as of March 26th were 7.0% more than the 469,193,000 barrels of oil we had in commercial storage on March 27th of 2020, 11.6% more than the 449,521,000 barrels of oil that we had in storage on March 29th of 2019, and also 18.0% more than the 425,332,000 barrels of oil we had in commercial storage on March 16th of 2018…       

This Week’s Rig Count

Note: this week’s rig count was released on Thursday in advance of the Good Friday market holiday, so it only covers 6 days…nonetheless, the rig count rose for the 26th time over the past 29 weeks​,​ and by the most since January 15th​,​ during the week ending April 1st, but it still remains down by 47.3% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US was up by 13 to 430 rigs this past week, which was still down by 234 rigs from the 664 rigs that were in use as of the April 3rd report of 2020, and was 1,499 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 their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 13 rigs to 331 oil rigs this week, after rising by 9 oil rigs the prior week, ​still ​leaving us with 225 fewer oil rigs than were running a year ago, and 20.6% of 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 was down by one to 91 natural gas rigs, which was also down by 9 natural gas rigs from the 100 natural gas rigs that were drilling a year ago, and just 5.7% of 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 or gas, there are now two rig​s​ classified as ‘miscellaneous’ drilling this week, one in the ​middle of the ​Permian basin in MIdland county Texas, and the other in Lake County, California, while a year ago there were also two such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count was up by 2 to 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and 2 continuing to drill for oil in Alaminos Canyon offshore from Texas…that was 4 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, and one rig was drilling for natural gas in the West Delta field, also offshore from Louisiana…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig counts….

The count of active horizontal drilling rigs was up by 11 to 391 horizontal rigs this week, which was still down by 202 rigs from the 593 horizontal rigs that were in use in the US on April 3rd of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was up by 4 rigs to 19 directional rigs this week, but those were still down by 22 from the 41 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was down by 2 to 20 vertical rigs this week, and those were down by 10 from the 30 vertical rigs that were in use on April 3rd of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of April 1st, the second column shows the change in the number of working rigs between last week’s count (March 26th) and this week’s (April 1st) count, the third column shows last week’s March 26th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 3rd of April, 2020..    

April 1 2021 rig count summary

this is the first week in a while where the new activty has been so widespread, rather than ​largelu limited to the Permian…checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that that one rig was added in Texas Oil District 8A, which encompasses the northernmost counties of the Permian Midland basin, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which thus means there was no change in the rig count in the Texas Permian this week…since the national Permian rig count was up by 3, that means that all three rigs that were added in New Mexico must have been added in the farthest west reaches of the Permian Delaware, to account for the national Permian increase….elsewhere in Texas, there was one rig added in Texas Oil District 1, another rig added in Texas Oil District 2, and yet another a rig added in Texas Oil District 3, any two of which could have been the rigs added in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state…at the same time, there was also a rig added in Texas Oil District 6, which doesn’t appear to have been targeting that region’s Haynesville shale, since the Haynesvile was down by ​the​ single​ rig pulled out in northern Lousiana…Louisiana’s rig count is still up by one, however, because of the two oil rigs added in th​at state’s offshore waters…elsewhere, two oil rigs were added in Oklahoma, including one in the Granite Wash, two more oil rigs were added in a Utah basin not named by Baker Hughes, more than likely the Uinta, and an oil rig was added in Colorado, which apparently wasn’t targeting the state’s DJ Niobrara chalk…for ​changes in ​natural gas rigs, we have the rig that was removed from Louisiana’s Haynesville shale, and another rig that was pulled out of West Virginia’s Marcellus, while a rig was added in Pennsylvania’s Marcellus at the same time…

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March employment report; February’s construction spending

Major monthly reports released over the past week included the Employment Situation Summary for March from the Bureau of Labor Statistics and the February report on Construction Spending from the Census Bureau…this week also saw the last of the regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +28.9 from last month’s +17.2, indicating that a substantial majority of Texas businesses reported an increase in activity during the month…

Privately issued reports released this week included the ADP Employment Report for March and the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 17.75 annual rate in March, up from the snowstorm suppressed 15.67 annual sales rate in February, and up from the pandemic lockdown suppressed 11.37 million annual sales rate reported a year earlier…the week also had the release of the Case-Shiller Home Price Index for January from S&P Case-Shiller, which reported that home prices during November, December and January averaged 11.2% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier….in addition, this week also saw the widely followed March Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that the manufacturing PMI (Purchasing Managers Index) rose to 64.7% in March, up from 60.8% in February, which suggests a widespread expansion among manufacturing firms nationally…

Employers Add 916,000 Jobs in March, Unemployment Rate Falls 0.2% to 6.0%

The Employment Situation Summary for March reported a much larger than expected payroll job increase, while the employment rate rose 0.2% and the unemployment rate fell 0.2%…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 916,000 jobs in March, after the previously estimated payroll job increase for January was revised up by 67,000, from 166,000 to 233,000, and the payroll jobs increase for February was revised up by 89,000, from 379,000 to 468,000…so including those revisions, this report thus represents a total of 1,072,000 more seasonally adjusted payroll jobs than were reported last month…nonetheless, seasonally adjusted non-farm payrolls are still 8,403,000 below the record 152,523,000 jobs reported for February a year ago, before the pandemic related layoffs kicked in…the unadjusted data shows that there were actually 1,323,000 more payroll jobs extant in March than in February, as the usual seasonal job increases in sectors such as construction, administrative and waste services, and in leisure and hospitality were washed out by the seasonal adjustments…

Seasonally adjusted job increases in March were spread through both the goods producing and the service sectors and government, with no major sector showing a statistically significant job loss…even after a 156,000 job downward seasonally adjustment, employment in the leisure and hospitality sector increased by 280,000 jobs, including the addition of 175,800 more jobs in bars and restaurants, 41,200 more jobs in amusements, gambling, and recreation, and 40,000 more jobs in accommodation…similarly, even after a 101,000 job downward seasonally adjustment, employment in construction increased by 110,000 jobs, including 38,200 jobs with nonresidential specialty trade contractors and 27,300 more in heavy and civil engineering construction…with several school districts resuming in-person classes, employment in local education increased by 76,000 jobs; at the same time, state government education payrolls increased by 49,600, and private educational services added 64,400 more….the broad professional and business services sector added 66,000 jobs, with an increase of 12,800 jobs with employment services and 10,000 jobs servicing to buildings and dwellings…employment in manufacturing rose by 53,000, led by the addition of 13,700 jobs in the manufacture of fabricated metal products and 7,400 more in the manufacture of miscellaneous nondurable goods…there were also 47,500 jobs added in transportation and warehousing, including 16,700 couriers and messengers and 12,800 jobs in transit and ground passenger transportation…another 42,000 jobs were added in a catch-all ‘other services’ category, including 18,600 jobs in personal and laundry services and 18,300 in repair and maintenance  ….employment in health care and social assistance rose by 36,400, with the addition of 20,100 jobs in individual and family services and 4,200 jobs in home health care services…wholesale trade employment increased by 23,700, led by the addition of 14,300 jobs in the trade of durable goods….in addition, seasonally adjusted retail jobs increased by 22,500, with 16,300 of those in clothing and clothing accessories stores and 13,000 more with motor vehicle and parts dealers, which were partially offset by a loss of 9,100 jobs in building material and garden supply stores…the resource extraction sector added 20,000 jobs, 19,300 of which were in support activities for mining…there were also 16,000 more jobs in the financial sector, due to the addition of 11,200 jobs with insurance carriers and related activities and 10,000 more in real estate, as credit intermediation and related activities shed 6,600 employees….meanwhile employment in other major sectors, including the information sector and utilities, saw employment change by less than 2,000 over the month….

The establishment survey also showed that average hourly pay for all employees fell by 4 cents an hour to $29.96 an hour in March, after it had increased by a revised 4 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 2 cents to $25.21 an hour…employers also reported that the average workweek for all private payroll employees increased by 0.3 hour to 34.9 hours in March, after a 0.4 hour decrease in February, while hours for production and non-supervisory personnel rose by 0.3 hour to 34.3 hours, also reflecting a rebound from February…in addition, the manufacturing workweek rose by 0.2 hour to 40.5 hours, while average factory overtime increased by 0.1 hours to 3.3 hours…

Meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 609,000 to 150,848,000, while the similarly estimated number of those counted as unemployed fell by 262,000 to 9,710,000; which together meant there was a 347,000 increase in the total labor force…since the working age population had grown by 85,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 263,000 to 100,445,000…meanwhile, the increase of those in the labor force was large enough, when compared to the civilian noninstitutional population, to increase the labor force participation rate from 61.4% in February to 61.5% in March……at the same time, the increase in number employed as a percentage of the increase in the population was enough to raise the employment to population ratio, which we could think of as an employment rate, by 0.2%, from 57.6% in February to 57.8% in March…likewise, the decrease in the number unemployed was enough to lower the unemployment rate by 0.2%, from 6.2% in February to 6.0% in March….meanwhile, the number who reported they were involuntarily working part time fell by 262,000 to 5,826,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 11.1% in February to 10.7% in March, the lowest since March of last year..

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

Construction Spending Fell 0.8% in February after January & December Figures Were Revised Higher

The Census Bureau’s report on February construction spending (pdf) reported that Construction spending during February 2021 was estimated at a seasonally adjusted annual rate of $1,516.9 billion, 0.8 percent (±0.7 percent) below the revised January estimate of $1,529.0 billion. The February figure is 5.3 percent (±1.0 percent) above the February 2020 estimate of $1,441.1 billion. During the first two months of this year, construction spending amounted to $213.2 billion, 4.9 percent (±1.0 percent) above the $203.2 billion for the same period in 2020. “…the January annualized spending estimate was revised 0.5% higher, from the $1,521.5 billion reported a month ago to $1,529.0 billion, while December’s construction spending was revised from $1,496.5 billion to $1,510.4 billion annually, which together meant that the January construction spending increase was revised from +1.7% to +1.2%…the $13.9 billion upward revision to December’s annualized spending would mean we’ll see a upward revision of about 12 basis points to 4th quarter GDP when the annual revisions are released later this summer…

A further breakdown of the different subsets of construction spending are provided by a Census summary, which precedes the detailed spreadsheets:below:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,165.7 billion, 0.5 percent (±0.7 percent)* below the revised January estimate of $1,171.6 billion. Residential construction was at a seasonally adjusted annual rate of $717.9 billion in February, 0.2 percent (±1.3 percent)* below the revised January estimate of $719.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $447.8 billion in February, 1.0 percent (±0.7 percent) below the revised January estimate of $452.3 billion.
  • Public Construction: In February, the estimated seasonally adjusted annual rate of public construction spending was $351.2 billion, 1.7 percent (±1.2 percent) below the revised January estimate of $357.4 billion. Educational construction was at a seasonally adjusted annual rate of $86.9 billion, 3.2 percent (±1.3 percent) below the revised January estimate of $89.8 billion. Highway construction was at a seasonally adjusted annual rate of $102.3 billion, 0.6 percent (±3.1 percent)* below the revised January estimate of $103.0 billion.

As you can tell from that summary, construction spending data would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of February’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price to determine the actual change in construction put in place…there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust the figures for all of those types of construction separately, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate…

That price index showed that aggregate construction costs were up 0.3% in February, after they had increased by 0.2% in January, and had been up by 0.1% in both December and in November…on that basis, we can estimate that February construction costs were about 0.5% more than those of December, roughly 0.6% more than those of November, and roughly 0.7% more than those of October, and of course 0.3% more than those of January…we then use those relative price change percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison….this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,510,387 in December, $1,479,555 in November, and $1,458,989 in October, while annualized construction spending was at $1,516,927 in February and $1,528,954 in January….thus to compare January’s nominal construction spending of $1,384,486 and February’s figure of $1,366,697 to inflation adjusted figures of the fourth quarter, our formula becomes: ((1,516,927 + 1,528,954 * 1.003) / 2 ) / (( 1,510,387 * 1.005 + 1,479,555 * 1.006 + 1,458,989 * 1.007)/ 3) = 1.022372, which tells us that real construction spending over January and February was up by 2.237% from that of the 4th quarter period, or up at a 9.25% annual rate…then, to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and that of January’s & February’s adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add about 0.88 percentage points to 1st quarter GDP, an estimate which assumes there would be little change in real construction in March over the January & February average…

 

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

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tables for April 3rd

rig count summary:

April 1 2021 rig count summary

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Suez Canal shutdown cuts Persian Gulf exports; US gasoline exports at a 41 week low…

oil prices fell for the third week in a row, after rising 80% over the prior 18 weeks, as new Covid infections and lockdowns increased worldwide…after falling 6.4% to $61.42 a barrel last week on rising tension between Biden and Putin, and on a new wave of Covid infections across Europe, the contract price of US light sweet crude for April delivery opened higher on Monday as hopes for a pick-up in demand later this year helped arrest last week’s broad sell-off​,​ and hung on to finish with a 13 cent gain as traders continued to weigh the prospects for energy demand after problems with the AstraZeneca vaccine and renewed lockdowns in Europe, as trading in the April US oil contract expired ​with it priced ​at $61.55 a barrel…with oil quotes now referencing the price of US light sweet crude for May delivery, which had risen 12 cents to $61.56 a barrel on Monday, oil prices​ ​tumbled from the opening bell on Tuesday as European coronavirus curbs pointed to another hit to demand, and ended ​the day ​down $3.80​​ or more than 6%​ ​at $57.76 a barrel, as hope for an economic recovery was dampened by setbacks in vaccine rollouts in parts of Europe and Southern Asia, with prices​ then​ falling even lower in post-settlement trade after the American Petroleum Institute reported U.S. crude oil inventories unexpectedly rose over the most recent week…prices thus opened lower on Wednesday, but edged higher as investors looked for bargains following the previous day’s plunge, and then jumped nearly 6% to close $3.42 higher at $61.18 a barrel after a ​big ​ship ran aground in the Suez Canal, provoking concern that the incident would tie up crude shipments and drive prices higher…but oil prices opened lower again on Thursday as coronavirus lockdown concerns outweighed the Suez Canal disruptions and slid to a 4% loss, with May crude settling $2.62 lower at $58.56 a barrel, as the U.S. reported the most new Covid cases since Feb. 12 and the U.S. dollar strengthened, reducing the appeal of commodities priced in the currency…however, oil prices bounced back on Friday, on fears that the ship stuck in the Suez Canal might block shipping for weeks, squeezing supply, with oil closing $2.41 higher at $60.97 a barrel after Yemen’s Houthis said they had attacked several of Saudi Aramco’s facilities with drones and ballistic missilesoil prices thus finished their most volatile week in 11 months with a loss of just 0.7%, while the May oil contract also saw a statically identical decline…

meanwhile, natural gas prices finished slightly higher for the first time in 6 weeks after the closure of the Suez Canal, cutting off LNG exports from the Persian Gulf and Australia….after falling 2.5% to $2.535 per mmBTU last week as weather forecasts suggested little demand for heating thru the remainder of the season, the contract price of natural gas for April delivery opened 1% lower on Monday but quickly reversed ​course ​on continued robust liquefied natural gas output and settled up 4.7 cents on the day​ ​at $2.582 per mmBTU​.​…but continuing forecasts for weak weather related demand overshadowed LNG growth on Tuesday and prices ​reversed to fall 7.4 cents to $2.508 per mmBTU, which was followed by a penny price rebound on Wednesday amid concern about delayed LNG export deliveries after the grounded container ship blocked the Suez Canal…natural gas prices then rallied on Thursday after a bullish government inventory report and on consistently solid demand for U.S. LNG exports​,​ and climbed 5.2 cents to settled at $2.570 per mmBTU…however, despite strong exports and signs of stronger Gulf Coast industrial demand, natural gas futures drifted lower on Friday, finishing down 1.3 cents at $2.557 per mmBTU on the day, but still​ managed to​ log a 0.9% increase on the week…

the natural gas storage report from the EIA for the week ending March 19th indicated that the amount of natural gas held in underground storage in the US fell by 36 billion cubic feet to 1,746  billion cubic feet by the end of the week, which left our gas supplies 263 billion cubic feet, or 13.1% below the 2,009 billion cubic feet that were in storage on March 19th of last year, and 78 billion cubic feet, or 4.3% below the five-year average of 1,824 billion cubic feet of natural gas that have been in storage as of the 19th of March in recent years….the 36 billion cubic feet that were drawn out of US natural gas storage this week was more than the average forecast of a 21 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, and was also more than 26 billion cubic foot withdrawal from natural gas storage seen during the corresponding week of a year earlier, but it was less than the average withdrawal of 51 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years…    

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 19th indicated that even after another big increase in our oil refining, we still had a modest surplus of oil left to add to our stored commercial crude supplies, which increased for the 5th week in a row and for the 13th time in the past thirty-five weeks….our imports of crude oil rose by an average of 299,000 barrels per day to an average of 5,622,000 barrels per day, after falling by an average of 332,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 39,000 barrels per day to 2,481,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,141,000 barrels of per day during the week ending March 19th, 338,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was 100,000 barrels per day higher at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production appears to total an average of 14,141,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,389,000 barrels of crude per day during the week ending March 19th, 957,000 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 273,000 barrels of oil per day were being added to the supplies of oil stored in the US….comparing those totals, 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 522,000 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 plugged a (+522,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there ​must have been a error or errors of that magnitude in this week’s oil supply & demand figures that we have just transcribed….however, since most everyone treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,723,000 barrels per day last week, which was 9.5% less than the 6,326,000 barrel per day average that we were importing over the same four-week period last year…..the 273,000 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 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at 10,500,000 barrels per day, while a 5,000 barrel per day decrease to 454,000 barrels per day in Alaska’s oil production had no impact on the rounded national total….last year’s US crude oil production for the week ending March 20th was rounded to 13,000,000 barrels per day, so this reporting week’s rounded oil production figure was 15.4% below that of a year ago, yet still 30.5% above 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 81.6% of their capacity while using those 14,389,000 barrels of crude per day during the week ending March 19th, up from 76.1% of capacity during the prior week, but still a historically low figure, even for this time of year, when refineries are typically undergoing seasonal maintenance…hence, the 14,389,000 barrels per day of oil that were refined this week were still 9.2% fewer barrels than the 15,838,000 barrels of crude that were being processed daily during the week ending March 20th of last year, when US refineries were operating at a seasonal slow 87.9% of capacity…

even with the increase in the amount of oil being refined, the gasoline output from our refineries was lower for the 12th time in 19 weeks, decreasing by 300,000 barrels per day to 8,577,000 barrels per day during the week ending March 19th, after our gasoline output had decreased by 128,000 barrels per day over the prior week…as a result, this week’s gasoline production​ ​was 4.3% lower than the 8,958,000 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 373,000 barrels per day to 4,601,000 barrels per day, after our distillates output had increased by 1,330,000 barrels per day from a twenty-six year low of 2,898,000 barrels per day over the prior two weeks…but even after that three week rebound in our distillates’ production, this week’s distillates​ ​output was still 4.9% lower than the 4,838,000 barrels of distillates that were being produced daily during the week ending March 20th, 2020…

even with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week increased for the fourteenth time in nineteen weeks, and for 18th time in 36 weeks, rising by a modest 204,000 barrels to 232,279,000 barrels during the week ending March 19th, after our gasoline inventories had increased by 472,000 barrels over the prior week...our gasoline supplies managed to increase this week even though the amount of gasoline supplied to US users increased by 174,000 barrels per day to 8,616,000 barrels per day because our exports of gasoline fell by 247,000 barrels per day to a nine month low of 433,000 barrels per day, and because our imports of gasoline rose by 29,000 barrels per day to 939,000 barrels per day…but even after this week’s inventory increase, our gasoline supplies were 2.9% lower than last March 20th’s gasoline inventories of 239,282,000 barrels, and about 3% below the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the recovery in our distillates production, our supplies of distillate fuels increased for the 2nd time in 9 weeks and for the 10th time in thirty weeks, rising by 3,806,000 barrels to 141,553,000 barrels during the week ending March 19th, after our distillates supplies had increased by 255,000 barrels during the prior week….our distillates supplies rose this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 436,000 barrels per day to 3,592,000 barrels per day, while our exports of distillates rose by 441,000 barrels per day to 1,129,000 barrels per day​, and​ while our imports of distillates rose by 140,000 barrels per day to 664,000 barrels per day…after this week’s inventory increase, our distillate supplies at the end of the week were 13.8% above the 124,442,000 barrels of distillates that we had in storage on March 20th, 2020, and rose to about 1% above the five year average of distillates stocks for this time of the year…

finally, even with the recovery in our refinery throughput, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) ended the week higher for the eighth time in the past nineteen weeks and for the 29th time in the past year, increasing by 1,​912,000 barrels, from 500,799,000 barrels on March 12th to 502,711,000 barrels on March 19th…after this week’s modest increase, our commercial crude oil inventories remained 6% above the most recent five-year average of crude oil supplies for this time of year, and were still nearly 49% above the 5 year average of our crude oil stocks as of the third week of March at the beginning of the decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the spring lockdowns of last year, after generally rising over the prior two years except for during the 10 weeks prior to the Texas freeze​,​ and except for during the past two summers, after generally falling​ from a record high​ over the year and a half prior to September of 2018, our commercial crude oil supplies as of March 19th were 10.4% more than the 455,360,000 barrels of oil we had in commercial storage on March 20th of 2020, 13.7% more than the 442,283,000 barrels of oil that we had in storage on March 22​nd of 2019, and also 17.4% more than the 428,306,000 barrels of oil we had in commercial storage on March 16th of 2018…      

This Week’s Rig Count

The US rig count rose for the 25th time over the past 28 weeks during the week ending March 26th, but it still remains down by 47.3% from the pre-pandemic rig count….Baker Hughes reported that the total count of rotary rigs running in the US was up by 6 to 417 rigs this past week, which was still down by 311 rigs from the 728 rigs that were in use as of the March 27th report of 2020, and was 1,512 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 their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 9 rigs to 318 oil rigs this week, after rising by 9 oil rigs the prior week, leaving us with 300 fewer oil rigs than were running a year ago, and less than a fifth of 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 was unchanged at 92 natural gas rigs for the 5th week in row, which was still down by 10 natural gas rigs from the 102 natural gas rigs that were drilling a year ago, and just 5.7% of 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 or gas, one rig classified as ‘miscellaneous’ continued to drill in Lake County, California this week, while a year ago there were two such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count was down by one to twelve rigs this week, with 10 of those rigs drilling for oil in Louisiana’s offshore waters and 2 continuing to drill for oil in Alaminos Canyon offshore from Texas…that was 6 fewer Gulf of Mexico rigs than the 18 rigs drilling in the Gulf a year ago, when 17 Gulf rigs were drilling for oil offshore from Louisiana, and one rig was drilling for natural gas in the West Delta field​, also​ offshore from Louisiana…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig totals are equal to the Gulf rig counts….

The count of active horizontal drilling rigs was up by 8 to 380 horizontal rigs this week, which was still down by 273 rigs from the 653 horizontal rigs that were in use in the US on March 27th of last year, and less than a third of the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, the directional rig count was up by ​1 rig to 15 directional rigs this week, but those were also down by 32 from the 47 directional rigs that were operating during the same week a year ago….on the other hand, the vertical rig count was down by 3 to 22 vertical rigs this week, and those were down by 6 from the 28 vertical rigs that were in use on March 27th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 26th, the second column shows the change in the number of working rigs between last week’s count (March 19th) and this week’s (March 26th) count, the third column shows last week’s March 19th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 27th of March, 2020..    

March 26 2021 rig count summary

once again, it appears that most of this week’s new activity was in the Permian basin… so checking first for the details on the Permian basin in Texas from the Rigs by State file at Baker Hughes, we find that there were 6 rigs new rigs set up in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which includes the southernmost counties of the Permian Midland basin, which together means there was a net increase of 5 rigs in the Texas Permian, thus accounting for this week’s Permian basin change…..elsewhere in Texas, there were 2 rigs pulled out of Texas Oil District 1, while there was a rig added in Texas Oil District 4, which all could have been in the Eagle Ford shale, which stretches in a narrow band through the southeast part of the state…at the same time, there was also a rig pulled out of Texas Oil District 10 in the Texas panhandle, which doesn’t appear to have been targeting that region’s Granite Wash basin….other rig additions were in Colorado, but not in the state’s Niobrara chalk, in Oklahoma’s Cana Woodford, in North Dakota’s Williston basin, and in a Utah basin not named by Baker Hughes​, more than likely the Uinta​…other than those, the only other change evident this week ​was ​the oil rig that was removed from Louisiana’s offshore waters ​that we alluded to previously… 

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