US oil imports highest since Sept 2012, refining at all time high, US rigs down, global rigs up, Canadian rigs up 110

the OPEC inspired oil rally finally ran out of steam this week, as oil prices retreated for the first time in 5 weeks, and by the most in 11 weeks…after closing at $53.99 a barrel last Friday, oil prices fell all day long on Monday, after news of record-high exports from Iraq’s southern crude terminals spread doubt about the effectiveness of the OPEC production cuts, leading to a reversal of speculative bets by hedge funds and other money managers, which ultimately pushed crude for February delivery $2.03 lower, as it ended the day at $51.96 a barrel….crude prices continued to slump on Tuesday as oil production from Nigeria jumped and Kuwait’s oil minister suggested other non-compliance with OPEC’s cuts, and went on to close at $50.82 a barrel, after the announcement that the US will sell 8 million barrels of oil from the Strategic Petroleum Reserve later this month, with delivery in February….oil prices then steadied on Wednesday morning and then turned around to rise more than $1.50 Wednesday afternoon, despite the EIA report of massive builds in supplies of oil, gasoline and distillates and the largest jump in US oil production in 20 months, after the Saudi oil minister said they cut oil production to below 10 million barrels per day and planned to cut deeper cut in February, which would put them more than 100,000 barrels per day below their promised target and 625,000 barrels per day below their recent output high…after closing Wednesday at $52.25 a barrel, oil prices continued rising on that Saudi news Thursday and closed higher at $53.01 a barrel, before the doubts about OPEC compliance crept back in on Friday, and oil prices then dropped back to close the week at $52.37 a barrel, 3.0% lower than last week’s close, amid concerns about the biggest drop in Chinese exports since 2009 and what impact that slowdown would have on their demand for crude…

natural gas prices, on the other hand, made a round trip this week, diving to their lowest level since mid-November on Monday, and then regaining most of the prior week’s losses over the rest of the week…after rising to a high of $3.93 per mmBTU on the Wednesday after Christmas, natural gas prices had slid more than 45 cents last week to $3.285 per mmBTU, after forecasts for an arctic cold spell faded…facing further forecasts of warmer than anticipated weather conditions for January, natural gas prices fell another 18.2 cents on Monday of this week, ending at $3.103 per mmBTU…that drop was almost completely reversed on Tuesday, as natural gas prices rose 17.5 cents to close at $3.278 per mmBTU, on the possibility of cooler temperatures late January to early February…natural gas prices then reversed again to edge lower on Wednesday, closing at $3.224 per mmBTU, as exceptionally warm weather continued to weigh on the market….natural gas prices then jumped 16.2 cents on Thursday, closing the day at $3.386 per mmBTU, after the EIA’s Weekly Natural Gas Storage Report indicated a larger than expected drop of 151 billion cubic feet (Bcf) of gas in storage during the week ending January 6th, which left our natural gas supplies at 3,160 billion cubic feet, 10.3% lower than a year ago but still close to the 5 year average for the fist week in Januarynatural gas then opened 2 cents lower on Friday as traders incorporated milder weather into their forecasts, but then went on to close more than 3 cents higher at $3.419 per mmBTU, as a couple of weather models added some risk that heating demand could return to seasonal averages by the end of the month

The Latest Oil Stats from the EIA

this week’s oil data for the week ending January 6th from the US Energy Information Administration indicated a jump to a 4 year high in our imports of crude oil and a increase to a new record high in our oil refining, which was still not enough to use all those extra oil imports, leaving our supplies of crude oil quite a bit higher than the prior week…our imports of crude oil rose by an average of 1,869,000 barrels per day to an average of 9,052,000 barrels per day during the week, the most oil we’ve imported since September, 2012, while at the same time our exports of crude oil rose by an average of 41,000 barrels per day to an average of 727,000 barrels per day, which meant that our effective imports netted out to 8,325,000 barrels per day for the week…at the same time, our crude oil production rose by 176,000 barrels per day to an average of 8,946,000 barrels per day, which means the daily supply of crude oil from imports and wells totaled 17,271,000 barrels per day during the week, 2 million barrels more than the prior week…

refineries reportedly used 17,107,000 barrels of crude per day during the week, an increase of 418,000 barrels per day from the last week of 2016, while at the same time, 585,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA figures seem to indicate that we consumed or stored 421,000 more barrels of oil per day than were accounted for by our increased oil imports and production…therefore, the EIA inserted that phantom 421,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out…the EIA footnote to that line 13 says that number represents “unaccounted for crude oil”, which is further described on page 61 in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”…as you know, we’ve been calling that number that’s inserted to make oil balance the EIA’s weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports rose to an average of 8.2 million barrels per day, now 6.3% higher than the same four-week period last year…our crude oil production for the week ending January 6th was 3.0% lower than the 9,227,000 barrels of crude that we produced during the week ending January 8th of last year, and 6.9% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015…interestingly, this week’s big oil production increase all came by way of the lower 48, as Alaskan production was down by 14,000 barrels per day…that suggests that oil prices over $50 a barrel the past 7 weeks has been bringing on additional completions of DUC (drilled, but uncompleted) wells..

US refineries operated at 93.6% of capacity in using those 17,107,000 barrels of crude per day, up from 92.0% of capacity the prior week, to hit a utilization level only reached once in 2016, during the first week of September during 2016…during the same week last year, refineries had consumed 684,000 fewer barrels of crude per day than they did this week, while running at 91.2% of capacity…gasoline production from US refineries rose by 199,000 barrels per day to 9,666,000 barrels per day during the week ending January 6th, which was 9.6% more than the 8,820,000 barrels per day of gasoline produced during the week ending January 8th a year ago, and 5.9% more than the 9,125,000 barrels per day of gasoline produced during the week ending January 9th, 2015, as there is normally a slowdown in gasoline output at this time of year…meanwhile, refineries’ output of distillate fuels (diesel fuel and heat oil) actually fell by 5,000 barrels per day to 5,324,000 barrels per day, following the prior week’s record high for distillates production…thus our distillates production was still up by 11.8% from the 4,760,000 barrels per day that was being produced during the week ending January 8th last year, and 4.2% higher than the 5,108,000 barrels per day of distillates produced during the same week of 2014…     

with the increase in our gasoline production, the EIA reported that our gasoline supplies rose by 5,023,000 barrels to 240,473,000 barrels as of December 30th, for a two week jump of 13.33 million barrels in our gasoline inventories…that was as our domestic consumption of gasoline rose by just 5,000 barrels per day from last week’s one year low to 8,470,000 barrels per day, and as our gasoline imports fell 39,000 barrels per day to 683,000 barrels per day while our gasoline exports fell by 15,000 barrels per day to 981,000 barrels per day…even with the back to back large increases, however, our gasoline inventories as of January 6th were little changed from 240,434,000 barrels of gasoline that we had stored on January 8th of last year or the 240,334,000 barrels of gasoline we had stored on January 9th of 2015..

in addition to the near record two week jump in gasoline supplies, our supplies of distillate fuels also rose, increasing by 8,356,000 barrels to 170,041,000 barrels by January 6th, following the prior week’s increase of 10,051,000 barrels, which looks to be the largest two week jump in distillates supplies on recordthe amount of distillates supplied to US markets, a proxy for our consumption, was up from last weeks record low by 175,000 barrels per day to 2,792,000 barrels per day, but still remained well below normal, while our exports of distillates fell 165,000 barrels per day to 1,035,000 barrels per day, which was somewhat below the average of last year….after the two weeks of oversized increases, our distillate inventories are now 2.7% higher than the distillate inventories of 165,554,000 barrels of January 8th last year, and 21.6% above the distillate inventories of 139,851,000 barrels of January 9th, 2015…

finally, even though we refined a record amount of crude oil, our oil imports were even higher, and as a result our inventories of surplus crude oil rose by 4,097,000 barrels to 483,109,000 barrels by January 6th, a level which was was still  5.7% below the April 29th record of 512,095,000 barrels…nonetheless, we still ended the week with 7.1% more crude oil in storage than the 451,190,000 barrels we had stored January 8th of 2016, and 36.4% more crude than the 354,195,000 barrels of oil we had in storage on January 9th of 2015… furthermore, even though our supplies of residual fuel oil fell by 627,000 barrels to 41,846,000 barrels and our supplies of propane/propylene fell by 4,464,000 barrels to 79,659,000 barrels during this same week, our total supplies of crude and refined products rose by 13,436,000 barrels to 2,030,421,000 barrels during the week ending January 6th, the largest weekly increase since the week ending April 3rd of 2015…

This Week’s Rig Count

US drilling activity slowed down for the first time in 11 weeks during the week ending January 13th, in what seems to be a chance anomaly rather than a basic change in drilling intentions…Baker Hughes reported that the total count of active rotary rigs running in the US fell by 6 rigs to 659 rigs in the week ending this Friday, which was still up by 9 rigs from the 650 rigs that were deployed as of the January 15th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…at the same time, drilling activity in Canada rose by 110 rigs, from 205 rigs a week ago to 315 rigs this week, an increase of more than 50%, which left them well ahead of last year’s 227 rig deployment…

rigs drilling for oil in the US decreased by 7 rigs to 522 rigs during the week, only the 2nd retreat in oil drilling in the past 28 weeks…but oil drilling is still up from the 515 oil directed rigs that were working in the US on January 15th last year, while down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…Canadian oil drilling increased by 89 rigs to 170 rigs, which was way up from the 110 oil rigs deployed in Canada on January 15th of 2016…at the same time, the count of US drilling rigs targeting natural gas formations increased by 1 rig to 136 rigs, which has now pushed US natural gas drilling above the 135 natural gas rigs that were in use a year ago, while it was still way down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008… Canadian rigs targeting natural gas increased by 21 rigs to 144 rigs, also up from the 117 natural gas rigs running in Canada a year earlier…one US rig and one Canadian rig that were classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

another drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 24, still down from 26 rigs working in the Gulf a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 25 rigs, also down from last year’s offshore US total of 26…however, the last platform that had been drilling through an inland lake in southern Louisiana was shut down this week, so there are now no active rigs in the inland waters category remaining, down from 1 rig on inland waters a year ago..

the number of horizontal drilling rigs working in the US increased by 3 rigs to 537 rigs this week, which is now up from the 511 horizontal rigs that were in use in the US on January 15h last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, two directional rigs were added to those active, increasing the directional rig count to 59, which was still down from the 62 directional rigs that were deployed during the same week last year…however, the vertical rig count fell by 11 rigs to 63 rigs as of January 13th, which left the vertical rig count down from last year’s deployment of 77 vertical rigs…

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 January 13th, the second column shows the change in the number of working rigs between last week’s count (January 6th) and this week’s (January 13th) count, the third column shows last week’s January 6th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday 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 case was for January 15th of 2016…       

January 13 2017 rig count summary

as you can see from the tables above, the US drilling pullback was fairly widespread, with 6 different states (plus Alabama) and 8 different basins seeing rigs shut down…but as we saw from the Canadian count increase, there does not seem to be a fundamental or economic reason for US drillers to be shutting down rigs this week, so until we hear.otherwise, we’ve got to consider this week’s report anomalous, an odd circumstance wherein several drillers in several states just happened to be shutting down rigs at the same time…at least Ohio was included in that, as we’re now back down to 19 rigs, which was still up from 13 rigs a year ago…and as we mentioned, Alabama, which is not included above, also shed a rig this week, and now they have none, an improvement from a year ago, when they had one rig deployed..

International Rig Counts for December

Baker Hughes also released the international rig counts for December earlier this week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end….Baker Hughes reported that an average of 1,772 rigs were drilling for oil and natural gas around the globe in December, which was up from the 1,678 rigs that were drilling around the globe in November, but down from the 1,969 rigs that were working globally in December of last year…increased North American drilling again accounted for most of the global increase, as the average US rig count rose from 580 rigs in November to 634 rigs in December, which was still down from the average of 714 rigs that were working in the US in December a year ago, while the average Canadian rig count rose from 173 rigs in November to 209 rigs in December, which was also up from the 160 Canadian rigs that were deployed in December a year earlier….outside of Northern America, the International rig count rose by 4 rigs to 929 rigs in November, which was still down from 1,095 rigs a year ago, as increases in drilling in Latin America and Eastern Asia more than offset a decrease in Middle East activity.. 

drilling activity in the Middle East fell for the 8th time over the past 12 months, as the countries included in this region pulled out a net of 4 rigs, reducing their active rig average to 376 rigs for the month, which was also down from the 422 rigs deployed in the Middle East a year earlier….OPEC member Kuwait cut back from 47 rigs to 44, which was still up from the 43 rigs the Kuwaitis were running a year ago…the Saudis reduced their active rig fleet from 127 rigs to 125, which was also down from the 129 rigs the Saudis were running in December last year, but still up from the 112 rigs they were running in November of 2014, before their attempt to flood the global market…Dubai, an emirate in the United Arab Emirates, also cut their rig count by 2 rigs to 2, also down from 4 rigs in December a year ago…Oman, who is not an OPEC member but who has committed to a production cut of 45,000 barrels a day, also reduced their drilling by 2 rigs, from 61 rigs in November to 59 rigs in December, which left them well below the 73 rigs they were running in December a year ago…on the other hand, Egypt, who is not an OPEC number and who has not agreed to output cuts, added 2 rigs in December and thus had 24 rigs active, which was still down from the 44 rigs they were running a year earlier…in addition, OPEC members Qatar and Abu Dhabi both added a rig; that brought Qatar up to 10 rigs, also up from 7 a year earlier, and brought Abu Dhabi up to 48 rigs, which was still one less than their year ago total…and Israel, who’s never had more than 1 rig running over the past two years, started up one rig in December, their first drilling activity since February…  

meanwhile, a three rig increase in the Latin American region masked a number of variances in the member states…the region saw its active rig count increase from 181 rigs in November to 184 in December, as their offshore count rose from 28 rigs to 32, while overall drilling was still down from 270 rigs in December of 2015, largely because the region had idled 92 rigs over the first 6 months of 2016…Brazilian and Colombian drillers, neither of whom are party to the production cuts, both added 3 rigs during the month; for Brazil, that brought their active rig count back up to 13 rigs, which was still down from the 38 rigs deployed in Brazil a year earlier, while for Columbia, their count rose to 19 rigs, up from the 12 rigs they had running a year earlier…OPEC member Ecuador and non-OPEC member Chile both added 2 rigs; for Ecuador, that lifted their active rig count to 7 rigs, up from 2 rigs a year earlier, while the Chilean count rose to 4 rigs, up from the 1 rig they were running a year earlier…OPEC member Venezuela started up one more rig and thus had 52 rigs running, still down from 70 rigs a year earlier, as did non-aligned drillers in Bolivia and Peru, where the rig counts rose to 5 rigs and 1 rig respectively, unchanged from a year ago for Bolivia but down from 2 rigs a year ago for Peru….Mexico, who has agreed to cut their oil output by 100,000 barrels a day, also added a rig; they now have 19 rigs active, which is well down from the 42 rigs they were running last December…almost offsetting all of those increases, however, was Argentina, where they cut their drilling activity from 70 rigs down to 59 rigs…that was down from 91 rigs a year ago, and from over 100 active rigs in Argentina in every prior month of 2015

in addition, drilling activity in the Asia-Pacific region increased by 4 rigs to 192 rigs in December, even as their offshore deployment fell from 92 rigs to 87, which was down from the 198 rigs working the region a year earlier, which only included 76 working offshore at that time….Australia added 5 rigs, bringing their total to 9 rigs active nationwide, which was still down from the 16 they were running a year earlier…Thailand and Indonesia both added 2 rigs, bringing their counts up to 12 rigs and 16 rigs respectively, which was down from 4 rigs last year for Thailand  and down from 25 rigs last year for Indonesia…the Philippines also started a rig, after having no activity in November, but they were still down from the 4 rigs they had deployed a year ago…on the other hand, China shut down 3 offshore rigs, leaving 25 offshore, same as they had running last December…at the same time, Brunei shut down both of the rigs they had active, while a year ago they had just one, and India reduced their rig count from 177 to 116 rigs, which was still up from the 100 rigs working in India a year earlier….

drilling activity also increased in Europe, rising by 2 rigs to 99 rigs, which was down from the 114 rigs working in Europe a year ago at this time, as their offshore drilling increased from 33 rigs to 35, same as they had offshore a year ago…the offshore increases were of one rig each offshore from Norway and the U.K., which brought the offshore counts in those countries up to 16 rigs and 11 rigs respectively, down from 17 last December for Norway but up from 9 offshore rigs a year ago for the U.K….other European countries adding land based rigs were Hungary and Albania, both of which increased to 2 rigs, same as each had a year earlier…meanwhile, both Bulgaria and the Netherlands shut down a rig; for Bulgaria, that left them with no drilling, down from 2 rigs a year earlier, and for the Netherlands, that left them with 2 rigs active, down from 4 rigs a year ago…

lastly, the African continent saw a net decrease of 1 rig in to 78 rigs in December, which left them down from the 91 rigs working in Africa last year at this time…the Congo Republic shut down all 3 rigs they had active in November, which was also their rig count a year ago…OPEC members Nigeria and Algeria shut down 1 rig each, leaving 4 rigs still drilling in Nigeria, down from 8 rigs a year ago, and leaving 52 rigs still working in Algeria, still up from 49 rigs a year ago….meanwhile, four African nations added 1 rig each: OPEC member Angola, Cameroon, Liberia and Kenya…that brought Angola back up to 4 rigs, still down from last year’s 11; brought Cameroon back to 1 rig, same as a year ago, and brought Kenya back up to 11 rigs, same as a year earlier, while the new rig working in Liberia was their first drilling in 2 and a half years….finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China’s offshore area, with an average of 25 rigs active in December, were included in the Asian totals here…

Posted in Uncategorized | Leave a comment

December retail sales and producer price index; November wholesale sales, business inventories, and JOLTS

reports released this past week included Retail Sales for DecemberWholesale Trade, Sales and Inventories for November, and Business Sales and Inventories for November, all from the Census Bureau, and the December Import-Export Price Index and the December Producer Price Index from the Bureau of Labor Statistics…in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for November and the Fed released the Consumer Credit Report for November…the later showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $24.6 billion, or at a 7.9% annual rate, as non-revolving credit expanded at a 5.9% rate to $2,757.6 billion and revolving credit outstanding rose at a 13.5% rate to $992.4 billion…the Mortgage Monitor for November (pdf) Black Knight Financial Services, a private report that we usually review, was also released this week..

Retail Sales Up 0.6% in December after Prior Months Revised Higher

seasonally adjusted retail sales increased in December after retail sales for October and November were revised higher…the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $469.1 billion during the month, which was up 0.6 percent (±0.5%) from November’s revised sales of $466.2 billion and 4.1 percent (±0.9%) above the adjusted sales in December of last year…November’s seasonally adjusted sales were revised up from $465.5 billion to $466.2 billion, while October’s sales were also revised higher, from $456.1 billion to $456.3 billion; as a result, the October to November change was revised up from up 0.1 percent (±0.5%) to up 0.2 percent (±0.2%), and the year over year increase for the 4th quarter came in at 4.1%…..estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales rose 15.5%, from $468,555 million in November to $541,175 million in December, while they were up 4.4% from the $518,253 million of sales in December a year ago, so we can see how the large seasonal adjustment to holiday sales brought the headline sales into line vis-a-vis the Holiday increase that would normally be expected in December…

since it’s the end of the quarter and the end of the year for retail sales, we’ll include the entire table from this report showing retail sales by business type, including the quarter over quarter data…again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month’s December “advance” report in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called “preliminary”) as of this report, with the new October to November percentage change under “Oct 2016 r” (revised) and the November 2015 to November 2016 percentage change as revised in the 2nd column of the pair (for your reference, the table of last month’s advance estimate of November sales, before this month’s revisions, is here)…. then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (October, November and December) from the preceding three months of the 3rd quarter (July, August and September) and then from the same three months (October, November and December) of a year earlier….that first column of the last pair thus gives us a snapshot comparison of 3rd quarter sales to fourth quarter sales, which will useful in estimating the impact of this report on 3rd quarter GDP after we get the December price data next week….

December 2016 retail sales table

from the above table, we can see that a 2.4% increase to $98,699 million in seasonally adjusted sales at motor vehicle and parts dealers was mostly responsible for the December sales strength, because without those automotive sales, retail sales were only up 0.2%…automotive sales for November were also revised higher, from the originally reported 0.5% decrease to a decrease of just 0.2%, and hence accounted for about half of the upward revision to that month’s sales…also note the 2.0% increase to 35,858 million in sales at gas stations, which was likely the result of higher prices for gasoline…take gas station and automotive sales out, and December retail sales were statistically unchanged from November….still, without knowing the change in price for each of these components, it’s difficult to ascertain the net economic impact of this month’s retail sales, so we’ll defer that judgment until we get the price data from the CPI next week…

Producer Prices Up 0.3% in December on Higher Food and Energy

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in December as prices for finished wholesale goods increased 0.7%, while margins of final services providers increased by 0.1%…this followed a November report that indicated the overall PPI had increased 0.4%, with prices for finished goods up 0.2% while final demand for services rose 0.5%, and an October report that indicated the PPI was unchanged, with prices for finished goods up 0.4% while final demand for services fell 0.3%….producer prices are now up 1.6% from a year ago, a figure which is now rapidly increasing, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015…

as noted, the price index for final demand for goods, aka ‘finished goods’, rose by 0.7% in December, after rising by 0.2% in November, 0.4% in October, 0.5% in September, but after falling by 0.4% in August, as the index for wholesale energy prices rose 2.6% from November to December while the price index for wholesale foods was 0.7% higher and the index for final demand for core wholesale goods (ex food and energy) rose 0.3%…major wholesale energy price increases in December included a 20.1% increase in wholesale prices for liquefied petroleum gas, a 9.6% increase for wholesale heat oil, and a 7.8% increase in wholesale gasoline prices, while among wholesale food prices, a 63.2% increase in the prices of eggs was partially offset by a 13.2% decrease for fresh fruits and melons…among wholesale core goods, prices for passenger cars increased 1.1%, prices for light trucks rose 1.3%, while wholesale prices for appliances were down 1.1%…

meanwhile, the index for final demand for services rose by 0.1% in December after rising 0.5% in November and falling by 0.3% in October, as the index for final demand for trade services rose 0.2%, the index for final demand for transportation and warehousing services fell 0.4% and the index for final demand for services less trade, transportation, and warehousing services was 0.2% higher….among trade services, seasonally adjusted margins for TV, video, and photographic equipment retailers increased 6.3% after rising 6.0% in November, margins for paper and plastics products wholesalers increased 4.6%, and margins for major household appliances retailers increased 2.4%, while margins for fuels and lubricants retailers fell 13.4%.. among transportation and warehousing services, margins for airline passenger services fell 2.4% and margins for air transport of freight fell 0.4% while all other transportation and warehousing services were higher.. in the core final demand for services index, margins for securities brokerage, dealing, and investment advisers rose 4.4%, margins for passenger car rentals were 5.7% higher, while margins for vehicle rental and lodging arrangement were 1.8% lower…

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after rising 0.3% in both October and November and by a revised 0.4% in September…prices for intermediate processed goods are now 1.8% higher than in December a year ago, only the second year over year increase after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016…. in November, the price index for intermediate energy goods rose 2.1% and prices for intermediate processed foods and feeds rose 0.8%, while the core price index for processed goods for intermediate demand less food and energy was just 0.1% higher, despite a 13.1% increase in intermediate wholesale prices for asphalt…

at the same time, the price index for intermediate unprocessed goods rose 8.3% in December, the largest increase since a 9.0% jump in February 2007, after being unchanged in November, and falling a 0.6% in October, 0.7% in September, and 2.0% in August….the index for crude energy goods rose 14.6% as prices for crude oil rose 18.9%, the price index for unprocessed foodstuffs and feedstuffs was rose 5.8%, as the index for slaughter steers and heifers rose 29.2 percent and raw milk prices rose 19.2%…moreover, the index for core raw materials other than food and energy materials rose 3.6%, on an 15.0% increase in wholesale prices for iron and steel scrap… this raw materials index is now up 13.2% from year ago, in contrast to its maximum year over year decrease of 26.4% that was seen 13 months ago, in November of 2015…

lastly, the price index for services for intermediate demand was 0.4% higher in December, after being 0.2% higher in November, 0.6% lower in October, 0.4% higher in September, and being unchanged in August… the index for trade services for intermediate demand was 1.1% higher as margins for intermediate paper and plastics products wholesalers rose 4.6% and margins for intermediate metals, minerals, and ores wholesalers rose 2.3%…the index for transportation and warehousing services for intermediate demand was up 0.1%, as pricing for intermediate air mail and package delivery services rose 1.4%, while the intermediate index for transportation of passengers (partial) fell 2.4%, and the core price index for services less trade, transportation, and warehousing for intermediate demand rose 0.4%, as a 9.0% increase in the index for prices for advertising space sales in newspapers accounted for much of the increase in intermediate services…over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.4% higher than it was a year ago…  

November Wholesale Sales Up 0.4%, Wholesale Inventories Up 1.0%

the November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $452.6 billion, up by 0.4 percent (+/0.5%) from the revised October level of $446.1 billion, and 3.4 percent (±0.9 percent) above the value of wholesale sales of a year earlier…the October preliminary sales estimate was revised downward $1.3 billion, which now means October sales were 1.1% (±0.5%) more than those of September, rather than 1.4% as reported last month….wholesale sales of durable goods were up 0.4 percent (+/-0.7%) from last month and were up 2.5 percent (+/-1.4%) from a year earlier, with wholesale sales of furniture 5.2% higher than in October while wholesale sales of  electrical and electronic goods fell 2.4%…wholesale sales of nondurable goods were also up by 0.4 percent (+/-0.9%) from October, and were up 4.2 percent (+/-1.4%) from last November, with wholesale sales of drugs and druggist sundries up 2.1%, while wholesale sales of petroleum and petroleum products were down 3.5% for the month…as an intermediate activity, wholesale sales are not included in GDP except as a trade service, since they do not represent an increase in the output of the goods sold….

on the other hand, the monthly change in private wholesale inventories is a major factor in GDP, as additional goods “on the shelf” represent goods that were produced, and the Census estimated they were valued at $595.3 billion at the end of November, 1.0 percent (±0.2 percent) higher than the revised October level and 1.4 percent (+/-1.2%)* above the valuation of last November’s inventories…October’s preliminary inventory estimate was revised up from the previously reported $587.7 billion to $589.4 billion, and hence October wholesale inventories were down just 0.1% from September…wholesale durable goods inventories were up 1.0 percent (+/-0.4%)* from October but were 0.3 percent (+/-1.4%) lower than a year earlier, as the value of automotive inventories was 3.0% higher, while the value of inventories of computers and related equipment was up 2.0%…inventories of nondurable goods were also valued 1.0 percent (+/-0.7%) higher than in October and were valued 4.1 percent (+/-2.1%) higher than last November, as the value of inventories of petroleum and petroleum products was up 2.7% and the value of inventories of farm products was 5.0% higher than in October…with the November producer price index for finished goods up by 0.2% on 0.6% higher food prices, real wholesale inventories appear to be up on the order of 0.8% in November, more than reversing their revised September to October decrease of 0.5%…that follows a third quarter when real wholesale inventories were essentially flat, so this two month increase should add about 0.22 percentage points to 4th quarter GDP…

October Business Sales Up 0.1% Business Inventories Up 0.7%

after the release of the December retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for November (pdf), which incorporates the revised November retail data from that December report and the earlier published November wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,326.7 billion in November, up 0.1 percent (±0.2%) from October’s revised sales, and up 2.3 percent (±0.4%) from November sales of a year earlier…note that total October sales were concurrently revised up from the originally reported $1,326.8 billion to $1,325.1 billion, so gross sales in this report were actually little changed from what was reported last month ….manufacturer’s sales fell 0.1% to $463,787 million in November; retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, were statistically unchanged at $410,284 million, and wholesale sales rose 0.4% to $452,622 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,827.5 billion at the end of November, up 0.7 percent (±0.1%)* from October, and 1.5 percent (±0.5%)* higher than in November a year earlier…at the same time, the value of end of October inventories was revised from the $1,813.0 billion reported last month to $1814.456 billion..seasonally adjusted inventories of manufacturers were estimated to be valued at $623,070 million, up 0.2% from October, while inventories of retailers were valued at $609,122 million, 1.0% more than in October, and inventories of wholesalers were estimated to be valued at $595,305 million at the end of November, also 1.0% higher than in October…

for GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for November, which was up 0.2% for finished goods…last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged that those inventories would would fractionally subtract from 4th quarter GDP….on the other hand, earlier we found that real wholesale inventories would likely add about 0.22 percentage points to 4th quarter GDP growth…this week’s real retail inventories for November, after a 0.2% price adjustment of the 1.0% nominal value increase, thus would have increased by about 0.8% from October, after a real October decrease of 0.8% from September in real retail inventories…that followed a third quarter that saw producer price index decreases of 0.2% in both July and August help boost real retail inventories by 0.5%…thus it appears that slower growth in real retail inventories over October and November are on track to subtract about 0.37 percentage points from 4th quarter GDP growth, despite their large nominal increase..

Job Openings, Hiring, Layoffs and Quitting, All Increase In November

the Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 71,000, from 5,451,000 in October to 5,522,000 in November, after October job openings were revised 83,000 lower, from 5,534,000 to 5,451,000…October’s jobs openings were 6.2% higher than the 5,198,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed at 3.7% was up from the revised 3.6% from October and from 3.5% November a year ago…the November increase in openings can be accounted for by the 99,000 job opening decrease to 1,069,000 openings in the health care and social assistance sector , while the accommodation and food services sector saw openings increase by 54,000 to 643,000 (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in November, seasonally adjusted new hires totaled 5,219,000, up by 59,000 from the revised 5,160,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed remained unchanged at 3.6% in November, but was down from 3.7% in November a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 62,000, from 4,966,000 in October to 5,028,000 in November, as the separations rate as a percentage of the employed rose from 3.4% to 3.5%, which was the same rate as in November a year ago (see table 3)…subtracting the 5,028,000 total separations from the total hires of 5,219,000 would imply an increase of 191,000 jobs in November, a bit less than the revised payroll job increase of 204,000 for November reported in the December establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings

breaking down the seasonally adjusted job separations, the BLS finds that 3,064,000 of us voluntarily quit our jobs in November, up from the revised 3,023,000 who quit their jobs in October, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, while it was up from 2.0% a year earlier (see details in table 4)….in addition to those who quit, another 1,637,000 were either laid off, fired or otherwise discharged in November, up by 68,000 from the revised 1,569,000 who were discharged in October, as the discharges rate remained unchanged at 1.1% of all those who were employed during the month, which was down from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 326,000 in November, down from 373,000 in October, for an ‘other separations rate’ of 0.2%, which was down from 0.3% in October and in November of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release…  

 

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

Posted in Uncategorized | Leave a comment

screen shots for January 14th

rig count summary:

January 13 2017 rig count summary

December retail sales:

December 2016 retail sales table

Posted in Uncategorized | Leave a comment

record distillates production, year high jump in gasoline & distillates supplies, drilling rigs now up from a year ago, et al

oil prices rose for the 4th week in a row this week, but only after clawing back from an opening day nosedive…after closing December 2016 at $53.72 a barrel, US oil prices shot up to well above $55 a barrel in early trading on Tuesday morning, hitting an 18 month high on the first day of the agreed to oil production cuts by OPEC and non-OPEC oil producers, as Arab media reported that Kuwait and Oman had cut their crude output…however, with other news from other OPEC members not forthcoming, oil traders grew nervous, and oil prices turned sharply lower by that afternoon, as the February contract price tumbled nearly $3 in a few hours before closing at $52.33 a barrel, a two week low…the OPEC rally resumed on Wednesday, and oil prices were further propelled higher to close at $53.20 a barrel after the American Petroleum Institute reported a 7.4 million barrel draw on U.S. crude oil inventories, the largest drop in US oil supplies since September…oil prices then slid on Thursday morning, as official US oil data showed a surprisingly large increase in U.S. gasoline and distillate inventories, but news that Saudi Arabia had cut production as they had agreed to sent prices back up in the afternoon, and they went on to close at $53.76 a barrel….oil prices then opened lower on Friday, after the release of weak economic reports on US employment and trade, but rose again on further signs of OPEC compliance, to end the week at 53.99 a barrel, up slightly from where it started…oil prices have thus increased 19.4% since the November 30th OPEC meeting, and will probably stay at these elevated levels as long as the OPEC/NOPEC production cuts are on the table…

natural gas prices, on the other hand, have no cartel controlling the supply, and when the weather forecast turns against them, as it did this week, natural gas prices plunge…you might recall that on Wednesday of last week, natural gas prices for January hit a two year high of $3.93 per mm-BTU (million British thermal units) before that contract expired, and then the February contract eventually fell to close the week at $3.743 per mmBTU…well, over the three day weekend, the long range weather forecast changed to indicate a shorter severe cold snap followed by much warmer winter temperatures, and as a result, natural gas prices opened the new year lower and dove 12% on Tuesday to end the day at $3.327 per mmBTU…that weather related price drop extended into Wednesday, as natural gas prices fell another 6 cents to close at a six-week low of $3.267 per mmBTU…gas prices then steadied on Thursday, closing the day at $3.273 per mmBTU,after the EIA’s Weekly Natural Gas Storage Report indicated a decline of 49 billion cubic feet (Bcf) of gas in storage for the week ending December 30th, which left our gas supplies at 3,311 billion cubic feet, 9.9% less than a year ago…gas prices then closed higher for the second day in a row on Friday, rising 1.2 cents, or 0.4%, at $3.285 per mmBTU, after recovering after trading as low as $3.214/mmBtu earlier in the session…NOAA’s climate prediction center continues to show expectations for a warmer than normal winter for much of the densely populated eastern areas of the country, so unless that should change, we’d expect natural gas prices will remain under pressure…

The Latest Oil Stats from the EIA

this week’s reports on oil from the US Energy Information Administration were released on Thursday and are for the week ending December 30th…in the last week of 2016, our imports of crude oil were almost a million barrels per day lower than the prior week, while our refineries were consuming more oil than in any week since Labor Day, and hence they needed to draw a large amount of crude oil from storage to meet their needs…our imports of crude oil fell by an average of 984,000 barrels per day to an average of 7,183,000 barrels per day during the week, our lowest oil imports since the interruption cause by Hurricane Matthew…at the same time, our exports of crude oil rose by an average of 59,000 barrels per day to an average of 686,000 barrels per day, the 2nd most ever, which meant that our effective imports netted out to 6,497,000 barrels per day for the week…meanwhile, our crude oil production rose by 4,000 barrels per day to an average of 8,770,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled just 15,267,000 barrels per day for the week…

refineries reportedly used 16,689,000 barrels of crude per day during the week, an increase of 123,000 barrels per day from the week before Christmas, while at the same time, 1,007,000 barrels of oil per day were being pulled out of oil storage facilities in the US…thus, this week’s EIA figures seem to indicate that we still consumed 415,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that phantom 415,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out…the EIA footnote to that line 13 calls it “unaccounted for crude oil”, which is further described on page 61 in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”…as you know, we’ve been calling that balance number the EIA’s weekly oil fudge factor…

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports fell to an average of 7.8 million barrels per day, now just 0.5% higher than the same four-week period last year….our crude oil production for the week ending December 30th was still 4.9% lower than the 9,219,000 barrels of crude we produced during the week ending January 1st of last year, and 8.7% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015…

US refineries operated at 92.0% of capacity in using those 16,557,000 barrels of crude per day, up from 91.0% of capacity the prior week, but still down from 92.5% of capacity during the same week a year ago, even though they refined 37,000 more barrels of crude per day this week than they did during the same week last year…however, gasoline production from those refineries fell by 1,071,000 barrels per day to 9,467,000 barrels per day during the week ending December 30th, from last week’s record high of 10,537,000 barrels per day…nonetheless, this week’s gasoline production was still 8.0% more than the 8,766,000 barrels per day of gasoline produced during the week ending January 1st a year ago, and 8.8% more than the 8,701,000 barrels per day of gasoline produced during the week ending January 2nd, 2015, so there’s apparently a normal slowdown in gasoline refining at this time of year…and at the same time that gasoline output was falling, refineries’ output of distillate fuels (diesel fuel and heat oil) was rising by 372,000 barrels per day to 5,329,000 barrels per day, which was a new record high for distillates production…thus our distillates production was up by 7.1% from the 4,976,000 barrels per day that was being produced during the week ending January 1st last year, and 2.9% higher than the 5,180,000 barrels per day of distillates produced during the same week of 2014…     

however, even with that big drop in our gasoline production, the EIA reported that our gasoline supplies rose by 8,307,000 barrels to 227,143,000 barrels as of December 30th, the biggest one week jump in gasoline inventories since last January, as our domestic consumption of gasoline fell by 813,000 barrels per day to 8,465,000 barrels per day, which was likewise our lowest gasoline consumption since last January…also contributing to this week’s jump in our gasoline supplies was a 288,000 barrel per day increase to 722,000 barrels per day in our gasoline imports, while at the same time our gasoline exports fell by 153,000 barrels per day from last week’s record high of 1,149,000 barrels per day…that increase kept our gasoline inventories as of December 30th 1.5% higher than the 231,996,000 barrels of gasoline that we had stored on January 1st of last year, while they were still 0.7% below the 237,163,000 barrels of gasoline we had stored on January 2nd of 2015..

moreover, at the same time as our gasoline supplies were jumping by 8.3 million barrels, our supplies of distillate fuels were also rising, increasing by 10,051,000 barrels to 152,378,000 barrels by December 30th…in addition to record refinery production, a major factor in that increase of distillates supplies was a 1,175,000 barrel per day drop to 2,792,000 barrels per day in the amount of distillates supplied to US markets, a proxy for consumption…now, that seems to be some kind of anomaly, because that’s the lowest product supplied number for distillates since the week ending April 19, 1999, and we have seen a similar drop in that metric at this time of year each of the last 5 years…nonetheless, that, combined with record production of distillates and a 216,000 barrels per day drop from last week’s record high of 1,416,000 barrels per day our exports of distillates, meant that we saw the largest one week jump in distillates supplies in two years…since both gasoline supplies and distillate supplies saw such large jumps this week, we’ll include a graph here that will help us see what’s going on…

January 7 2017 invenories as of December 30th

the two bar graphs above, taken from the Zero Hedge coverage of this week’s EIA report, show the weekly change in gasoline and distillate inventories for each week of the last 3 years, with the bar graph for gasoline inventories on top and the bar graph for distillate inventories below that….within each graph, each red or green bar represents a weekly change in inventories over the past 3 years, with green bars indicating an addition to that inventory during the reference week, and red representing a withdrawal from that inventory for that week, with the size of the bars indicating the volume in barrels of the addition or withdrawal…in addition, a heavy green arrow has been added to each chart to indicate the number of weeks that have elapsed since an inventory addiction large as the current one has occurred ….thus on the gasoline graph we can see that large volumes of gasoline are typically added to storage during the winter months of November through February, while smaller withdraws from storage are made most weeks during the summer driving season…so this week’s increase in gasoline supplies was not that unusual at all, as increases to gasoline inventories of that magnitude were obviously typical in each of the last three winters…we have a similar seasonality, but less regular, for distillate storage and withdrawal as shown in the lower graph…since refineries tend to step up distillate production during the winter months to meet heat oil demand, wintertime withdrawals aren’t as severe as they otherwise might be, and when that increased winter distillates output coincides with a week of weak demand such as we saw this week, all that extra distillate production ends up heading for storage….thus we have the largest addition to distillate inventories since the 2nd week of January 2015, which leaves us with 1.4% more distillate inventories than we had on January 1st last year, and 18.1% above the distillate inventories of 136,926,000 barrels on January 2nd, 2015……

finally, the big drop in our oil imports, combined with the increase in refining, meant that we had to pull crude oil out of storage to meet the refiner’s needs, and hence our inventories of crude oil fell by 7,051,000 barrels to 479,012,000 barrels by December 30th, which was the lowest level for our crude supplies since February 19th of last year, and  6.4% below the April 29th record of 512,095,000 barrels…nonetheless, we still ended the week with 6.2% more crude oil in storage than the 450,956,000 barrels we had stored at the beginning of 2016, and 37.2% more crude than the 348,806,000 barrels of oil we had in storage on January 2nd of 2015…    

This Week’s Rig Count

US drilling activity increased for the 10th week in a row and for the 15th time in the past 16 weeks during the week ending January 6th, although the pace of increase remains modest compared to that of the weeks immediately following the OPEC deal…Baker Hughes reported that the total count of active rotary rigs running in the US rose by 7 rigs to 665 rigs by this Friday, which was up by 1 from the 664 rigs that were deployed as of the January 8th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014… 

rigs drilling for oil increased by 4 rigs to 529 rigs during the week, which was the most oil drilling rigs that have been in use since December 4th of 2015, as oil drilling activity has only retreated once in the past 27 weeks…oil drilling is now up from the 516 oil directed rigs that were working in the US on January 8th last year, but down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 135 rigs, which still left active gas rigs down from the 148 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008… one rig that was classified as miscellaneous also remained active, compared to a year ago, when no such miscellaneous rigs were deployed..

a single drilling platform began working offshore from Louisiana in the Gulf of Mexico this week, which brought the Gulf of Mexico rig count up to 23, still down from 27 offshore rigs a year ago..another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 24 rigs, also down from last year’s offshore total of 27…the number of working horizontal drilling rigs increased by 2 rigs to 534 rigs this week, which is now up from the 519 horizontal rigs that were in use in the US on January 8th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, four vertical rigs were added to those active, increasing the vertical rig count to 74, which was down from the 81 vertical rigs that were deployed during the same week last year..in addition, the directional rig count rose by 1 rig to 57 rigs as of January 6th, which still left the directional rig count down from last year’s deployment of 64 directional rigs…

once again, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 January 6th, the second column shows the change in the number of working rigs between last week’s count (December 30th) and this week’s (January 6th) count, the third column shows last week’s December 30th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday 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 case was for January 8th of 2016…       

January 6th 2017 rig count summary

we do have an unusual change this week, in that 5 rigs were pulled out of the Granite Wash of the Texas-Oklahoma panhandle region, yet it’s hard to tell where they came from at a glance, since the Oklahoma rig count is unchanged and the Texas rig count is up three…looking at the details on drilling in the individual Texas oil districts, we see that drilling in district 10, which is the panhandle region, was down from 11 rigs to 6 rigs, so that question is solved  …in addition, it also appears that at least one of the 3 rig increase in New Mexico was in the Wolfcamp, in the western part of the Permian, since Texas details only shows a 2 rig increase in that basin…note that yet another gas-directed rig was also added in Ohio’s Utica shale…that brings the Utica shale rig count up to 21, up from 14 a year ago…we could therefore say that with a 50% year over year increase, drilling in the Utica shale is increasing faster than in any other basin in the US, since the 58 rig increase in the Permian only represents a 28% jump…also note that of the states not shown among the major producers above, Indiana saw two rigs pulled out this week, leaving one still active in the state, whereas a year ago they had none, while Illinois drillers added a rig, their first activity in a while, which is still down from the 2 rigs that were deployed in Illinois last January 8th..

Posted in Uncategorized | Leave a comment

December jobs report; November trade deficit, construction spending, and factory inventories…

in addition to the Employment Situation Summary for December from the Bureau of Labor Statistics, this week also saw the release of three November reports from the Census Bureau that will input into 4th quarter GDP: the November report on our International Trade, the November report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November….among the privately issued reports released this week were the ADP Employment Report for December and the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 18.29 million annual rate in November, up 3.2% from the 17.73 million annual pace of vehicle sales in October and up 5.5% from the 17.34 million vehicle rate in December of 2015…as a result of those strong December sales, total vehicle sales in 2016 were at a record 17.465 million vehicles, up from the previous record of 17.396 million that was set in 2015…

in addition to those reports, the week saw the release of both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the December Manufacturing Report On Business reported that the manufacturing PMI (Purchasing Managers Index) rose to 54.7% in December, up from 53.2% in November, which suggests a stronger expansion in manufacturing firms nationally, and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 57.2%, unchanged from November, indicating that the same plurality of service industry purchasing managers reported expansion in various facets of their business in December as did in November…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…

Employers Add 156,000 Jobs in December, Unemployment Rate Rises to 4.7%

the Employment Situation Summary for December indicated another month of weak job creation, which was confirmed by even weaker figures from the household survey, leading to a 0.1% uptick in the unemployment rate…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 156,000 jobs in December, after the previously estimated payroll job increase for November was revised up from 178,000 to 204,000, while the payroll jobs increase for October was revised down from 142,000 to 135,000…that means that this report represents a total of 175,000 more seasonally adjusted payroll jobs than were reported last month, better than the 3 month average of 165,000 jobs per month, but below the 6 month average of 189,000 jobs per month…the unadjusted data, however, shows that there were actually 270,000 less payroll jobs extent in December than in November, as normal seasonal layoffs in areas such as construction and recreational services were smoothed over by the seasonal adjustments..

seasonally adjusted job increases in December, however, did show that construction was one of the two sectors that actually saw relative job losses as well, as construction employment fell by 3,000 as an 11,700 job increase in residential specialty trade contractors was offset by employment decreases in heavy and civil engineering construction and all kinds of building construction…2,000 jobs were also lost in resource extraction, with 1,300 of those coming out of the oil and gas fields…on the other hand, employment in health care and social assistance rose by 63,300 in December, with the addition of 29,700 jobs in ambulatory care services, of which 8,200 were in doctor’s offices, and 21,100 jobs in individual and family social assistance services…another 34,500 seasonally adjusted jobs were added in accommodation and food services, with the addition of 29,600 jobs in bars and restaurants…17,000 jobs were added by manufactures, with factories producing fabricated metal products accounting for 5,800 of those…the broad professional and business services sector, which usually leads in monthly job gains, only added 15,000 jobs, as janitorial jobs increased by 10,600, while there were 13,200 fewer accounting and bookkeeping jobs and temporary help agencies employed 15,500 less than in November…other sectors with employment increases in December included transportation and warehousing, where 14,700 jobs were added, finance and insurance, which added 12,800 employees, and local governments, which added 11,000…meanwhile, employment in wholesale trade, retail, and information was little changed for the month…

even with a number of the job increases in generally poorer paying jobs, the establishment survey also showed that average hourly pay for all employees still rose by 10 cents an hour to $26.00 an hour in December, after it had decreased by a revised 2 cents an hour in November; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $21.80 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.6 hours…at the same time, the manufacturing workweek increased by 0.1 hour to 40.7 hours, while average factory overtime was unchanged at 3.3 hours…

meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 63,000 to 152,111,000, while the estimated number of those unemployed rose by 120,000 to 7,520,000; which led to a 184,000 (rounded up) increase in the total labor force…since the working age population had grown by 202,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 18,000 to a record high of 95,102,000…however, with the increase in those in the labor force almost equal to the increase in the civilian noninstitutional population, the labor force participation rate ticked up from 62.7% in November to 62.8% in December….meanwhile, the increase in number employed as a percentage of the increase in the population was nearly stable and left the employment to population ratio, which we could think of as an employment rate, unchanged at 59.7%…at the same time, the increase in the number unemployed was also large enough to increase the unemployment rate from 4.6% to 4.7%…meanwhile, the number of those who reported they were forced to accept just part time work fell by 61,000, from 5,659,000 in November to 5,598,000 in December, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, down to 9.2% of the labor force in December, its lowest since April 2008….

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.. 

Further Deterioration of Trade Deficit in November Will Hit 4th Quarter GDP

our trade deficit rose by 6.8% in November as the value of our imports increased while the value of our exports was somewhat lower….the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by $2.88 billion to $45.24 billion in November from a revised October deficit of $42.36 billion…the value of our November exports fell by $0.4 billion to $185.8 billion on a $0.7 billion decrease to $122.4 billion in our exports of goods which was partially offset by a $0.3 billion increase to $63.5 billion in our exports of services, while our imports rose $2.4 billion to $231.1 billion on a $2.7 billion increase to $189.0  billion in our imports of goods which was slightly offset by a $0.3 billion decrease to $42.1 billion in our imports of services…export prices were on average 0.1% lower in November, so our real November exports would be greater than the nominal value by that percentage, while import prices were 0.3% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage….

the drop in our November exports of goods resulted from lower exports of capital goods and automotive vehicles, which were partially offset by increases in our exports of industrial supplies and consumer goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1733 million to $41,936 million on a $1,256 million drop in our exports of civilian aircraft, a $285 million decrease in our exports of industrial engines, and a $207 million drop in our exports of engines for civilian aircraft, and our exports of automotive vehicles, parts, and engines fell by $300 million to $12,113 million on a $285 million decrease in our exports of trucks, buses, and special purpose vehicles…in addition, our exports of foods, feeds and beverages fell by $195 million to $11,049 million on a $313 million decrease in our exports soybeans, and our exports of other goods not categorized by end use fell by $691 million to $5,172 million…offsetting the decreases in those export categories, our exports of industrial supplies and materials rose by $1463 million to $35,176 million on a $362 million increase in our exports of fuel oil, a $339 million increase in our exports of nonmonetary gold, and a $206 million increase in our exports of other petroleum products, and our exports of consumer goods rose by $481 million to $16,401 million on a $297 million increase in our exports of pharmaceuticals…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of industrial supplies and materials accounted for the lions share of the November increase in our imports…our imports of those industrial supplies and materials rose by $2,246 million to $39,870 million as our imports of crude oil rose by $914 million, our imports of nonmonetary gold rose by $258 million and our imports of bauxite and aluminum rose by $208 million….in addition, our imports of foods, feeds, and beverages rose by $228 million to $11,163 million, our imports of automotive vehicles, parts and engines rose by $140 million to $29,272 million on a $248 million increase in our imports of parts and accessories which was offset by a $283 million decrease in our imports of trucks, buses, and special purpose vehicles, and our imports of other goods not categorized by end use rose by $130 million to $7,955 million….slightly offsetting those import increases, our imports of capital goods fell by $131 million to $49,404 million on a $241 million decrease in our imports of computers and a $221 million decrease in our imports of computer accessories, which were partially offset by a $131 million increase in our imports of civilian aircraft, and our imports of consumer goods fell by $85 million to $49,486 million on a $599 million decrease in our imports of artwork, antiques and other collectables, a $390 million decrease in our imports of gem diamonds, and a $209 million decrease in our imports of toys, games, and sporting goods which were mostly offset by a $292 million increase in our imports of pharmaceuticals and a $736 million increase in our imports of cellphones..

to gauge the impact of October and November goods trade on 4th 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 in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here….from that table, we can estimate that 3rd quarter real exports of goods averaged 122,746.7 million monthly in 2009 dollars, while inflation adjusted October and November exports were at 120,470 million and 119,353 million respectively, in that same 2009 dollar quantity index representation…. annualizing the change between the average of the two quarters, we find that the 4th quarter’s real exports of goods are falling at a 8.9% annual rate from those of the 3rd quarter, or at a pace that would subtract about 0.67 percentage points from 4th quarter GDP if continued through December…..in a similar manner, we find that our 3rd quarter real imports averaged 179,347.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 180,786 million and 182,935 million respectively…that would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 5.7% from those of the 3rd quarter…since 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 5.7% rate would in turn subtract another 0.72 percentage points from 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our worsening balance of trade in goods would subtract about 1.39 percentage points from the growth of 4th quarter GDP….

Finally, note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don’t have easy source of all their price changes.  With changes in services trade usually small compared to volatile goods trade, that’s not usually a concern, but note that our services surplus did show a significant improvement that could partially ameliorate the losses to growth seen in trade in goods.  To quickly estimate the magnitude of that offset, we’ll note that the 3rd quarter average of our nominal services surplus was $20,421 million, while our services surplus rose by $525 million to $21,387 million in November.  Thus our unadjusted services surplus is rising at rising at an unusual 14.5% annual rate so far in the 4th quarter.  If that were to be maintained throughout December, it would add about 0.17 percentage points of the trade goods losses back to 4th quarter GDP.

Construction Spending Rose 0.9% in November After Prior Months Were Revised Lower

the Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,182.1 billion annually if extrapolated over an entire year, which was 0.9 percent (±1.5%)* above the revised October annualized estimate of $1,166.5 billion and also 4.1 percent (±2.0%)* above the estimated annualized level of construction spending in November of last year…the annualized October construction spending estimate was revised 0.1% lower, from $1,172.6 billion to $1,171.4 billion, while the annual rate of construction spending for September was revised 0.2% lower, from $1,166.5 billion to $1,164.4 billion…the downward revision to September construction spending would imply that the 3rd estimate of 4th quarter GDP was overstated, but by less than 0.02 percentage points, not likely enough to change the published figure…

private construction spending was at a seasonally adjusted annual rate of $892.8 billion in November, 1.0 percent (±1.5%)* above the revised October estimate of $884.3 billion, which was revised down from the $885.9 billion reported for October last month…residential spending was at a $462.9 billion annual rate in November, 1.0 percent (±1.3%)* higher than the downwardly revised annual rate of $458.2 billion in October, while private non-residential construction spending rose 0.9 percent (±1.5%)* to $429.9 billion from the upwardly revised October level, led by a 7.0% increase in spending for construction of lodging facilities….at the same time, public construction spending was estimated to be at an annual rate of $289.3 billion, 0.8 percent (±2.5%)* above the revised October estimate of $287.1 billion, with public spending for education up 2.1% to an annual rate of $72.2 billion and spending for highways and streets up 1.1% to an annual rate of $94.6 billion ..

construction spending inputs 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 November spending reported in this release on 4th quarter GDP is difficult because all the 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… in lieu of the multiple price indexes for construction specified in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make that price adjustment and thereby get a rough estimate of the real change… that index showed that aggregate construction costs were up 0.1% in November after being up 0.7% in October, and up 0.1% in both August and September…on that basis, we can estimate that construction costs for October were up 0.7% from September, up 0.8% from August, and up 0.9% from July, while construction costs for November were up 0.8% from September, up 0.9% from August, and up 1.0% from July…we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison…annualized construction spending in millions of dollars for the third quarter months is given as 1,164,432 for September, 1,166,513 for August, and 1,160,407 for July, while it was at 1,171,436 in October and 1,182,097 in November…thus to compare the inflation adjusted construction spending of the 4th quarter months to those of the third quarter, our formula would be ((1,182,097 + 1.001* 1,171,436)/2 ) / ((1.008 * 1,164,432 + 1.009 *1,166,513 + 1.01 * 1,160,407)/3) = 1.002636, meaning real construction over October and November was only up 0.2636% vis a vis the 3rd quarter, despite being up quite a bit more in dollars…in GDP terms, that means real construction for the 4th quarter increased at an annual rate 1.059% over that of the 3rd quarter, or at a pace that would add about 0.08 percentage points to 4th quarter GDP, should December construction remain on the same trend…

Factory Shipments Down 0.1%, Inventories Inch Higher

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for November (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $11.3 billion or 2.4 percent to $458.3 billion, the first decrease in five months, following an increase of 2.8% in October, which was revised from the 2.7% increase reported last month….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 useful as a revised update to the November advance report on durable goods we reported on two weeks ago…this report showed that new orders for manufactured durable goods fell by $10.8 billion or 4.5 percent to $228.8 billion in November, revised from the previously published 4.6% decrease to $228.2 billion….

this report also indicated that the seasonally adjusted value of November factory shipments fell for the first time in 4 months, decreasing by $0.3 billion or 0.1 percent to $463.8 billion, following a 0.2% increase in October, revised from the previously published 0.4% increase…shipments of durable goods were down by $0.2 billion or 0.1 percent to $234.2 billion, essentially unrevised from the decrease that was published two weeks ago…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods were down by $0.5 billion, or 0.2%, to $229.6 billion, as a $0.7 billion, 1.7% decrease in the value of shipments of petroleum and coal accounted for the increase…

meanwhile, the aggregate value of November factory inventories rose for the fourth time in five months, increasing by $1.4 billion or 0.2 percent to $623.1 billion, after an October increase of 0.1%… November inventories of durable goods increased in value by $0.7 billion to $383.7 billion, revised from the previously published 0.1% increase, following a revised 0.1% decrease in October durable inventories…..the value of non-durable goods’ inventories increased by $0.7 billion or 0.3 percent to $239.0, following a revised 0.3% increase in October non-durable inventories…

to gauge the effect of November factory inventories on 4th 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 was up 0.3% to $222.46 billion in November; the value of work in process inventories was up 0.3% to $191.74 billion, and the value of materials and supplies inventories was virtually unchanged at $208.9 billion…the November producer price index reported prices for finished goods increased 0.2%, prices for intermediate processed goods inventories were 0.3% higher, while prices for unprocessed goods were unchanged, thus indicating that real finished goods inventories were 0.1% higher, while real inventories of intermediate processed goods and raw material inventory inventories were both essentially unchanged…the aggregate November change in real factory inventories is thus up less than 0.1%, following a full 0.1% decrease in October, and thus 4th quarter factory inventories are still fractionally lower, after increasing in the 3rd quarter, and thus would fractionally subtract from 4th quarter GDP…

 

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

Posted in Uncategorized | Leave a comment

graphics for January 7th

rig count summary:

January 6th 2017 rig count summary

refined products inventories:

January 7 2017 invenories as of December 30th

Posted in Uncategorized | Leave a comment

an 18 mo high for oil, a 2 year high for nat gas; record gasoline production, but gasoline and distillates supplies down on record exports

prices for both oil and natural gas reached interim highs on Wednesday of this week before sliding lower, in trading volume that was about one-third of normal….after closing last week at $53.02 a barrel, prices for US oil rose steadily after the markets opened on Tuesday, closing 1.7% higher at $53.90 a barrel, as traders focused on the OPEC and non-OPEC production cuts that are set to begin next week…the OPEC inspired rally continued into Wednesday, with prices hitting $54.33 a barrel before getting knocked back when the American Petroleum Institute’s weekly report showed a 4.2 million barrel increase in commercial crude oil inventories, instead of the expected 1.5 million-barrel drawdown, but oil still closed at an 18-month high of $54.06 a barrel…prices continued to slide on Thursday, even though the EIA reported a much smaller 614,000 barrel increase in oil supplies, and ended the day down 29 cents at $53.77 a barrel…prices slipped again on Friday, amid profit taking before the long weekend, closing at $53.72 a barrel, and thus ended the year up 45%, in the largest annual increase since 2009

prices for natural gas, meanwhile, rose from last week’s close of $3.662 per mmBTU (million British thermal units) to $3.761 per mmBTU on Tuesday, as cold weather consumption continued to eat into inventories, with heating degree days running 11 percent above average and seasonal natural gas consumption up 21 percent from last year’s levelsgas prices rose sharply again Wednesday, as forecasts called for even colder weather, with the expiring contract for January gas delivery increasing 16.9 cents, or 4.49%, to settle at a two year high of $3.93 per mm-BTU, while the more actively traded February contract rose 13.2 cents, or 3.51%, to close at $3.898 a mm-BTU….now trading for February delivery, natural gas prices wobbled on Thursday, even though the EIA’s Weekly Natural Gas Storage Report showed that natural-gas stockpiles shrank by 237 billion cubic feet to 3360 billion cubic feet last week, which left our natural gas supplies 10.9% below the level of a year earlier, and 2.3% below the 5 year average for this time of year…prices then went on to close down 9.6 cents, or 2.5% lower, at $3.802 per mmBTU, as moderating weather forecasts had traders pulling back from prior price highsnatural gas prices then extended their decline on Friday, closing down roughly 1.4% at $3.743 per mmBTU, but were still up 59% for the year, in their largest annual increase since 2005..

The Latest Oil Stats from the EIA

this week’s reports on oil for the week ending December 23rd from the US Energy Information Administration indicated a modest drop in our imports of crude from last week’s elevated levels, while refining also fell back to below seasonal levels, which still left us with a small surplus of crude at the end of the week…our imports of crude oil fell by an average of 304,000 barrels per day to an average of 8,167,000 barrels per day during the week, after rising by 1,111,000 barrels per day the prior week…at the same time, our exports of crude oil rose by an average of 70,000 barrels per day to an average of 627,000 barrels per day, which meant that our effective imports netted out to 7,540,000 barrels per day for the week…meanwhile, our crude oil production fell by 20,000 barrels per day to an average of 8,766,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled 16,306,000 barrels per day for the week…

refineries reportedly used 16,557,000 barrels of crude per day during the week, a decrease of 101,000 barrels per day from the week ending the 16th, while at the same time, 88,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA figures seem to indicate that we ended up with 339,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that 339,000 barrels per day number into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance out…the EIA footnote to that line 13 calls it “unaccounted for crude oil”, which is further described on page 61 in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”…as you know, we’ve been calling that number the EIA’s weekly fudge factor…

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports rose to an average of 8.075 million barrels per day, now 2.4% higher than the same four-week period last year….our crude oil production for the week of December 23rd was 4.7% lower than the 9,202,000 barrels of crude we produced during the week ending December 25th of last year, and 8.8% below our record oil production of 9,610,000 barrels per day that we saw during the week ending June 5th 2015…

US refineries operated at 91.0% of capacity in using those 16,557,000 barrels of crude per day, down from 91.5% of capacity the prior week and down from 92.6% of capacity during the same week a year ago, as they also refined 125,000 less barrels of crude per day than they did during the same week last year…nonetheless, gasoline production from those refineries rose by 387,000 barrels per day to a record high of 10,537,000 barrels per day during the week ending December 23rd, which was 6.2% more than the 9,921,000 barrels per day of gasoline produced during the week ending December 25th a year ago, and 3.4% more than the 10,195,000 barrels per day of gasoline produced during the week ending December 26th, 2014, which was also an all time record for gasoline output at that time…at the same time, refineries’ output of distillate fuels (diesel fuel and heat oil) fell by 165,000 barrels per day to 4,957,000 barrels per day during the week ending December 23rd, which was still up a bit from the 4,927,000 barrels per day that was being produced during the week ending December 25th last year, but 6.6% lower than the 5,307,000 barrels per day of distillates produced during the same week of 2014…     

however, even with the record high in our gasoline production, the EIA reported that our gasoline supplies fell by 1,593,000 barrels to 227,143,000 barrels as of December 23rd, even as our domestic consumption of gasoline was little changed at 9,278,000 barrels per day…while our gasoline imports fell by 13,000 barrels per day to 434,000 barrels per day, our gasoline exports rose by 354,000 barrels per day to a record high of 1,149,000 barrels per day, which was only the 3rd time in history that our gasoline exports topped 1 million barrels per day…nonetheless, our gasoline inventories as of December 23rd were still 2.6% higher than the 221,420,000 barrels of gasoline that we had stored on December 25th of last year, but 0.8% lower than the 229,048,000 barrels of gasoline we had stored on December 26th of 2014…since our gasoline exports have suddenly jumped to heretofore unheard of levels, we’ll include a graph of what that looks like below…

December 30 2016 gasoline exports for December 23

the above graph was taken from an article on this week’s EIA report at Zero Hedge, and it shows weekly gasoline exports since late August and a staggered monthly estimate of our gasoline exports before that time, as the EIA itself only reported monthly estimates before then…you can see that for most of this year, our gasoline exports were in the 400,000 barrel per day range, never exceeding 500,000 barrels per day….however, as of September, our gasoline exports began to rise in a volatile manner, ultimately topping and remaining above 800,000 barrels per day since November…now we’ve topped 1,100,000 barrels per day of gasoline exports in two out of the last three weeks, and as a result our domestic supplies of gasoline continue to be drawn down, even as our refineries are producing gasoline at record levels…

moreover, at the same time as our gasoline supplies were being drawn down for export, so too were our supplies of distillate fuels, which fell by 1,881,000 barrels to 155,935,000 barrels by December 23rd, as our exports of distillates rose by 284,000 barrels per day to a record high of 1,416,000 barrels per day…now, unlike gasoline, exports of distillates over 1 million per day is not uncommon, as we’ve typically exported large quantities of distillates to Europe, where they use diesel powered automobiles, while importing gasoline from them, which European refineries had produced in excess of their needs…but still, we are now exporting distillates at record levels, and as a result what was once our large surplus of distillates has fallen 1.0% below the distillate inventories of 153,110,000 barrels of December 25th last year, while they still remain 20.6% above the distillate inventories of 125,721,000 barrels of December 26th, 2014…

finally, even though our oil imports fell from the prior week’s elevated level, with the pullback in refining they were still enough to boost our inventories of crude oil by 614,000 barrels to 486,063,000 barrels by December 23rd,which was still 5.1% below the April 29th record of 512,095,000 barrels…but we still ended the week with 6.8% more crude oil in storage than the 455,106,000 barrels we had stored as of the same weekend a year earlier, and 37.7% more crude than the 352,979,000 barrels of oil we had in storage on December 26th of 2014…   

This Week’s Rig Count

US drilling activity increased for the 9th week in a row and for the 14th time in the past 15 weeks during the week ending December 30th, although the pace of increase slowed from the double digit rig gains we saw in the prior three weeks….Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 658 rigs by this Friday, which was still down from the 698 rigs that were deployed as of the December 31st report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014… 

rigs drilling for oil increased by 2 rigs to 525 rigs during the week, which was the most oil drilling rigs that have been in use since December 31st last year, as oil drilling activity has only retreated once in the past 26 weeks…but oil drilling was still down from the 536 oil directed rigs that were working in the US on that date last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 132 rigs, which still left active gas rigs down from the 162 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008… one rig that was classified as miscellaneous also remained active, in a change from a year ago, when no such miscellaneous rigs were deployed…

two offshore platforms that had been drilling in the Gulf of Mexico last week were shut down this week, leaving the Gulf of Mexico rig count at 25 rigs, down from 22 Gulf rigs a year ago…another drilling operation was still ongoing in the offshore waters of Alaska, which means our total offshore count for the week was 23 rigs, also down from last year’s offshore total of 25…the number of working horizontal drilling rigs increased by 6 rigs to 532 rigs this week, which was still down from the 549 horizontal rigs that were in use in the US on December 31st last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, a single vertical rig was added to those active, increasing the vertical rig count to 70, which was down from the 89 vertical rigs that were deployed during the same week last year…meanwhile, the directional rig count fell by 2 rigs to 56 rigs as of  December 30th, which left the directional rig count down 4 rigs from last December 31st’s deployment of 60 directional rigs…

once again, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows 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 December 30th, the second column shows the change in the number of working rigs between last week’s count (December 23rd) and this week’s (December 30th) count, the third column shows last week’s December 23rd active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday 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 case was for December 31st  of 2015…      

December 30 2016 rig count summary

obviously there were few changes this week, with oilfield activity probably slowed down by the holiday week…of the major producing states, only Kansas saw its lone rig shut down, while all the increases in drilling occurred in the states where most of the drilling was already taking place…note that Louisiana only netted zero because the two rigs that were pulled out of the Gulf of Mexico offset 2 land based rigs that were added in the southern part of the state…the basins seeing drilling increases were mostly the usual suspects, the Permian and Eagle Ford of Texas, the Granite Wash of the Texas-Oklahoma panhandle region, the Williston basin or Bakken shale in North Dakota, and the Cana Woodford of Oklahoma, home of the newer STACK and SCOOP plays…and other than what’s shown in the table above, only Alabama saw its rig count drop from 2 rigs last week to 1 rig this week, unchanged quantitatively from a year ago, even though a year ago the only rig active in Alabama was offshore from the state, in its Gulf waters…

Posted in Uncategorized | Leave a comment