global oil supply near December’s demand; US distillates exports at a 40 mo low​; gasoline production at a 34 week low​

oil prices managed an increase for the tenth time out of the past eleven weeks despite a sharp selloff on Friday, as strength in equities, a weaker dollar, and strong Chinese demand bouyed prices…after rising 7.7% to a ten month high of $52.24 a barrel last week after the Saudis unilaterally cut their oil output, the contract price of US light sweet crude for February delivery opened higher on Monday but quickly turned lower as lockdowns spread and China saw its biggest daily increase in virus infections in more than five months, but came back to close a penny higher at $52.25 a barrel as pressure from a rising dollar and worries over a COVID-related hit to demand was overshadowed by optimism over prospects for near-term exports…oil prices started lower early Tuesday as traders remained concerned about climbing coronavirus cases globally, but turned higher to settle with a gain of 96 cents at $53.21 a barrel, as wall street rallied and the dollar weakened, raising the appeal of commodities priced in the currency….oil prices then rose overnightafter the API reported a surprisingly large crude inventory drawdown and hence opened higher Wednesday, but couldn’t hold those gains even after the EIA also reported a larger than expected crude draw, ending down 30 cents at $52.91 a barrel after the U.S. dollar gained ground and inventories of gasoline and distillates rose more than expected…oil prices moved higher again on Thursday, boosted by a weaker dollar and bullish signs from Chinese import data and ended 66 cents, or 1.3%, higher at an 11 month high of $53.57 a barrel, buoyed by the ongoing Covid-19 vaccine rollout and expectations that the Biden administration’s proposed stimulus package would improve demand for crudeboosted by strong import data from China, oil prices opened higher on Friday, but quickly faded as the dollar rose and China ramped up lockdown measures to control its latest outbreak and tumbled more than 2% to end the session at $52.36 a barrel, down $1.21 on the day, but still up 12 cents on the week, as vaccine breakthroughs and Saudi Arabia’s earlier pledge to deepen output cuts continued to support prices

natural gas price also saw a small increase this week as traders ​continue to bet that a polar air mass​ will arrive later this month….after rising 6.3% to $2.700 per mmBTU last week on forecasts for colder weather and greater heating demand later in January, the contract price of natural gas for February delivery opened 10 cents lower on Monday, following forecasts for mild weather and diminished heating demand, but rebounded in afternoon trading to finish 4.7 cents higher at $2.747 per mmBTU amid anticipation of a late-month Polar Vortex and a surge in frigid temperatures…natural gas prices surged 15 cents or more than 5%​​ early on Tuesday amid expectations for that intensifying cold air outbreak, but reversed in the afternoon when models showed “not quite as cold air into Western Canada, thereby pushing less impressive subfreezing air into the U.S. as well” in late January, with gas prices settling for a six-tenths of a cent gain at $2.753 per mmBTU…conflicting forecasts led to an erratic day of trading on Wednesday that saw natural gas prices swing between gains and losses several times before settling 2.6 cents lower at $2.727 per mmBTU, and then gas prices fell to their lowest in a week on Thursday on forecasts for milder weather and less heating demand over the next two weeks than was previously expected, even as the draw of ​natural ​gas from storage was larger than expected…on Friday, however, forecasts shifted back to greater expectations for a severe polar outbreak and stronger heating demand by late January, boosting gas prices by 7.1 cents to $2.737 per mmBTU, thus finishing 3.7 cents, or 1.4% higher on the week..

the natural gas storage report from the EIA for the week ending January 8th indicated that the quantity of natural gas held in underground storage in the US decreased by 134 billion cubic feet to 3,196 billion cubic feet by the end of the week, which left our gas supplies 126 billion cubic feet, or 4.1% higher than the 3,070 billion cubic feet that were in storage on January 8th of last year, and 218 billion cubic feet, or 7.3% above the five-year average of 2,978 billion cubic feet of natural gas that have been in storage as of the 8th of January in recent years….the 134 billion cubic feet that were drawn out of US natural gas storage this week was more than the average forecast of a 123 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, ​and ​still more than the 126 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of a year earlier, but it was quite a bit less than the average withdrawal of 161 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years​…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 8th indicated that despite an increase in oil imports and a decrease in oil exports, we still had to withdraw oil from our stored commercial ​crude ​supplies for the 7th time in the past eight weeks and for the 18th time in the past twenty-five weeks…our imports of crude oil rose by an average of 870,000 barrels per day to an average of 6,239,000 barrels per day, after rising by an average of 43,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 621,000 barrels per day to 3,011,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,228,000 barrels of per day during the week ending January 8th, 1,491,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,228,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,650,000 barrels of crude per day during the week ending January 8th, 274,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 464,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 43,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-43,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed….however, since last week’s line 13 balance sheet adjustment was +495,000 barrels per day, indicating a week over week difference of 537,000 barrels per day in the fudge factor, the difference between those errors means any week over week comparisons of oil supply and demand figures reported here are pretty useless…still, since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as published, just as they’re watched & believed to be accurate by most everyone in the industry…..(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,625,000 barrels per day last week, which was still 14.9% less than the 6,611,000 barrel per day average that we were importing over the same four-week period last year…..the 464,000 barrel per day net withdrawal from our crude inventories was due to a 464,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 3,000 barrel per day decrease to 511,000 barrels per day in Alaska’s oil production had no impact on the rounded national total…last year’s US crude oil production for the week ending January 10th was rounded to 13,000,000 barrels per day, so this reporting week’s rounded oil production figure was 15.4% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 82.0% of their capacity while using those 14.650,000 barrels of crude per day during the week ending January 8th, up from 80.7% of capacity during the prior week, and matching the highest refinery utilization rate since March….however, since US refinery utilization averaged the lowest on record through 2020, the 14,650,000 barrels per day of oil that were refined this week were still 13.7% fewer barrels than the 16,973,000 barrels of crude that were being processed daily during the week ending January 10th of last year, when US refineries were operating at 92.2% of capacity…

despite the increase in the amount of oil being refined, gasoline output from our refineries was lower for the 6th time in 8 weeks, decreasing by 498,000 barrels per day to a 34 week low of 7,512,000 barrels per day during the week ending January 8th, after our gasoline output had decreased by 1,181,000 barrels per day over the prior week…and since our gasoline production was just beginning to recover from a multi-year low in the wake of this Spring’s covid lockdowns, that further ​drop meant that this week’s gasoline output was 19.1% less than the 9,281,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) ​​decreased by 124,000 barrels per day to 4,661,000 barrels per day, after our distillates output had increased by 146,000 barrels per day over the prior week….and since it was also just coming off a three year low, our distillates’ production was 10.5% less than the 5,205,000 barrels of distillates per day that were being produced during the week ending January 10th, 2020…

even with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week increased for the seventh time in nine weeks, for 11th time in 27 weeks, rising by 4,​395,000 barrels to 245,476,000 barrels during the week ending January 8th, after our gasoline inventories had ​increased by 4,519,000 barrels over the prior week…our gasoline supplies increased ​again ​this week even as the amount of gasoline supplied to US users increased by 91,000 barrels per day to 7,532,000 barrels per day, because our exports of gasoline fell by 285,000 barrels per day to 598,000 barrels per day, while our imports of gasoline fell by 62,000 barrels per day to 383,000 barrels per day….but even after this week’s inventory increase, our gasoline supplies were 5.0% lower than last January 10th’s gasoline inventories of 258,287,000 barrels, while about 1% above the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased for the 6th time in 7 weeks and for the 22nd time in the past year, rising by 4,786,000 barrels to 152,029,000 barrels during the week ending January 8th, after our distillates supplies had increased by 6,390,000 barrels during the prior week….our distillates supplies rose again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 668​,​000 barrels per day to 3,609,000 barrels per day, because our exports of distillates fell by 518,000 barrels per day to a 40 month low of 714,000 barrels per day while our imports of distillates rose by 44,000 barrels per day to 346,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 10.9% above the 147,221,000 barrels of distillates that we had in storage on January 10th, 2020, and about 9% above the five year average of distillates stocks for this time of the year…

finally, even with the increase in our oil imports and the decrease in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) fell for the 20th time in the past thirty-one weeks but for just the 23rd time in the past year, decreasing by 8,010,000 barrels, from 485,459,000 barrels on January 1st to 482,211,000 barrels on January 8th…but even after that decrease, our commercial crude oil inventories were still about 9% above the five-year average of crude oil supplies for this time of year, and about 47% above the prior 5 year (2011 – 2015) average of our crude oil stocks as of the second weekend of January, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of January 8th were still 12.5% more than the 428,511,000 barrels of oil we had in commercial storage on January 10th of 2020, and also 10.3% more than the 437,055,000 barrels of oil that we had in storage on January 11th of 2019, and 16.9% above the 412,654,000 barrels of oil we had in commercial storage on January 12th of 2018…  

OPEC’s Monthly Oil Market Report

Thursday of this past week saw the release of OPEC’s January Oil Market Report, which covers OPEC & global oil data for December, and hence it gives us a picture of the global oil supply & demand situation over the fifth month of the extended agreement between OPEC, the Russians, and other oil producers, wherein they have agreed to cut production by 7.7 million barrels a day from the 2018 peak, reduced from the 9.7 million barrels a day cuts they had imposed on themselves during May, June and July….before we look at what this month’s report shows us, we should again caution that estimating oil demand while the course of the Covid-19 pandemic remains uncertain is pretty speculative, and hence the demand estimates we’ll be reporting this month should again be considered as having a much larger margin of error than we’d expect from this report during stable and hence more predictable periods.. 

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

December 2020 OPEC crude output via secondary sources

as we can see from the above table of their oil production data, OPEC’s oil output increased by 278,000 barrels per day to 25,362,000 barrels per day during December, from their revised November production total of 25,083,000 barrels per day…however, that November output figure was originally reported as 25,109,000 barrels per day, which thus means that OPEC’s October production was revised 26,000 barrels per day lower with this report, and hence December’s production was, in effect, a rounded 252,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official November OPEC output figures as reported a month ago, before this month’s revisions)…

from the above table, we can see that a 136,000 barrels per day increase in Libyan production, an increase of 76,000 barrels per day in Iraq’s output, and a production increase of 63,000 barrels per day from the Emirates were the major factors in OPEC’s December output increase…while Libyan production is still recovering from their years of civil strife, Iraq and UAE were the two major producers who objected to the extension of the current production cuts in meetings in early December…that contentious meeting resulted in an OPEC agreement to increase production by 500,000 barrel per day in January, so it appears that Iraq, the Emirates, and a few others may be jumping the gun on that increase…

recall that this year’s original oil producer’s agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months early in the pandemic, during May and June, but that agreement was extended to include July at a meeting between OPEC and other producers on June 6th….then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day to 7.7 million barrels per day for August and subsequent months, which is thus the agreement that covers OPEC’s output in this month’s report…however, war torn Libya and US sanctioned OPEC members Iran and Venezuela were exempt from the production cuts imposed by that agreement, and as you can see above, together with Iraq and the Emirates, those exempt members account for this month’s production increase… 

since there has never seemed to be a published table or listing available of how much each OPEC member was expected to produce under the eased production cuts of August through December, we’ve been including the table that shows the October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to during May, June, and July…from the following table, we can easily compute the production quotas that each of the OPEC members was expected to hold to in December:

April 13th 2020 OPEC   emergency cuts

the above table shows the oil production baseline in thousands of barrel per day from which each of the oil producers was to cut from in the first column, a figure which is based on each of the producer’s October 2018 oil output, ie., a date before the past year’s and this year’s output cuts took effect, and coincidently the highest ​monthly ​production of the era for most of the producers ​who are ​party to these cuts; the second column shows how much each participant had originally committed to cut during May and June in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant had agreed to after that cut…the producer’s agreement for August through the end of this year amends the above such that each member would be allowed to ​reduce their production cut shown above (ie, the “voluntary adjustment” shown above) by 20%…for example, Algeria’s “cut” was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period…under the new agreement for August and the following months, Algeria would reduce their “cut” by 20%, or to 193,000 barrels per day, thus allowing them to produce 864,000 barrels per day during December…offhand, by comparing this table’s allocation ​plus​ ​20% to the initial OPEC production table above, it appears that only Iraq, who’s December production should have been limited to 3,804,000 barrels per day, is the only OPEC member to have exceeded their production quota for December…

the next graphic from this month’s report that we’ll highlight shows us both OPEC and world oil production monthly on the same graph, over the period from January 2019 to December 2020, and it comes from page 50 (pdf page 60) of the November OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC’s monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale…. 

December 2020 OPEC report global oil supply (2)

after the reported 278,000 barrel per day increase in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global liquids production increased by a rounded 58 million barrels per day to average 92.93 million barrels per day in December, a reported increase which apparently came after November’s total global output figure was revised down by 180,000 barrels per day from the 92.53 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 300,000 barrels per day in December after that revision, with oil production increases of 290,000 barrels per day from the OECD countries accounting for almost all of the non-OPEC production increase in December… after that increase in December’s global output, the 92.93 million barrels of oil per day that were produced globally in December were 8.23 million barrels per day, or 8.1% less than the revised 101.16 million barrels of oil per day that were being produced globally in December a year ago, which was the 12th month of OPECs first round of production cuts (see the January 2020 OPEC report (online pdf) for the originally reported December 2019 details)…with this month’s increase in OPEC’s output, their December oil production of 25,362,000 barrels per day was at 27.3% of what was produced globally during the month, ​an increase from their revised 27.2% share of the global total in November…. OPEC’s December 2019 production, which included 538,000 barrels per day from former OPEC member Ecuador, was reported at 29,444,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 3,544,000, or 12.2% fewer barrels per day of oil in December 2020 than what they produced a year earlier, when they accounted for 29.4% of global output… 

However, even after the increase in OPEC’s and global oil output that we’ve seen in this report, there was still a ​mode​s​t s​hortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…   

December 2020 OPEC report global oil demand

the above table came from page 25 of the December OPEC Monthly Oil Market Report (pdf page 35), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2020 over the rest of the table…on the “Total world” line in the fifth column, we’ve circled in blue the figure that’s relevant for December, which is their estimate of global oil demand during the fourth quarter of 2020…

OPEC ​has estimated that during the 4th quarter of this year, all oil consuming regions of the globe ​had been using an average of 93.56 million barrels of oil per day, which is a 900,000 barrels per day upward revision from the 93.47 million barrels of oil per day they were estimating for the 4th quarter a month ago (note that we have encircled this month’s revisions in green), still reflecting quite a bit of coronavirus related demand destruction compared to 2019, when 4th quarter global demand averaged 100.95 million barrels per day….but as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were producing 92.93 million barrels million barrels per day during December, which would imply that there was a shortage of around 370,000 barrels per day in global oil production in December when compared to the demand estimated for the month..

In addition to figuring December’s global oil supply shortfall that’s evident in this report, the downward revision of 180,000 barrels per day to November’s global oil output that’s implied in this report, plus the 90,000 barrels per day upward revision to fourth quarter demand noted above, means that the 940,000 barrels per day global oil output shortage we had previously figured for November would now be revised to a shortage of 1,210,000 barrels per day..,similarly, the 2,420,000 barrels per day global oil output shortage we had previously figured for October would now be revised to a shortage of 2,510,000 barrels per day once we account for the the 90,000 barrels per day upward revision to fourth quarter demand…

However, note that in green we’ve also circled an downward revision of 200,000 barrels per day to third quarter demand, a quarter when there was also shortage of oil production as compared to demand….that downward revision to demand means that the 600,000 barrels per day global oil output shortage we had previously figured for September would now be revised to a shortage of 400,000 barrels per day, that the 1,730,000 barrels per day global oil output shortage we had previously figured for August would now be revised to a shortage of 1,530,000 barrels per day, and that the 3,050,000 barrels per day global oil output shortage we had previously figured for July would now be revised to an estimated shortage of 2,850,000 barrels per day…

Note that we’ve also circled a downward revision of 20,000 barrels per day to second quarter demand, a quarter when there was a large excess of oil production due to coronavirus related lockdowns…based on that downward revision to demand, our previous estimate that there was a surplus of 4,900,000 barrels per day in June would now be revised up to a 4,920,000 barrels per day surplus, that the oil surplus of 7,680,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 7,700,000 barrels per day, and that the 16,430,000 barrels per day surplus that we had previously figured for April would have to be revised to a surplus of 16,450,000 barrels per day…  

Finally, note there was also an upward revision of 200,000 barrels per day to first quarter demand, which we have also encircled in green on the table above…that means that the record global oil surplus of 17,750,000 barrels per day we had previously figured for March would have to be revised to a still record global oil surplus of 17,550,000 barrels per day, that the 1,870,000 barrel per day global oil production surplus we had figured for February would now be a 1,670,000 barrel per day global oil output surplus, and that the 900,000 barrel per day global oil output surplus we last had for January would now be revised to a 700,000 barrel per day oil output surplus.. so despite the shortage of oil that has developed in the second half of this year, it’s obvious the world’s oil producers had produced a lot of oil earlier this year that no one wanted…  

This Week’s Rig Count

The US rig count rose for the 17th time in the past eighteen weeks during the week ending January 15th, but for just the 19th time in the past 44 weeks, and hence it is still down by 53.0% over that forty-four week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 13 to 373 rigs this past week, which was still down by 423 rigs from the 796 rigs that were in use as of the January 10th report of 2020, and was also still 31 fewer rigs than the all time low rig count prior to 2020, and 1,556 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 12 rigs to 287 oil rigs this week, after rising by 8 oil rigs the prior week, leaving us with 386 fewer oil rigs than were running a year ago, and still less than a fifth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 1 to 85 natural gas rigs, which was still down by 35 natural gas rigs from the 120 natural gas rigs that were drilling a year ago, and just 5.3% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil or gas, one rig classified as ‘miscellaneous’ continue​d​ to drill in Lake County, California this week, while a year ago there were three such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count was down by 1 to 16 rigs this week, with 15 of those rigs drilling for oil in Louisiana’s offshore waters, up from 14 last week, and one drilling for oil offshore from Texas, down from 3 a week ago…the total was 4 fewer Gulf rigs than the 20 rigs drilling in the Gulf a year ago, when 18 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig figures are equal to the Gulf rig counts….however, in addition to those rigs offshore, there are now 3 rigs drilling through inland bodies of water this week, one in Lafourche Parish, south of New Orleans, another in St Mary parish, farther west along the southern Louisiana coast, and ​an​other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 12 to 332 horizontal rigs this week, which was still 377 fewer horizontal rigs than the 709 horizontal rigs that were in use in the US on January 17th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count was up by one to 19 vertical rigs this week, but those were also still down by 24 from the 43 vertical rigs that were operating during the same week a year ago….meanwhile, the directional rig count was unchanged at 22 directional rigs this week, and those were still down by 22 from the 44 directional rigs that were in use on January 17th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of January 15th, the second column shows the change in the number of working rigs between last week’s count (January 8th) and this week’s (January 15th) count, the third column shows last week’s January 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 17th of January, 2020..    

January 15 2021 rig count summary

even as there were more changes in drilling activity this week than recently, most of the new rigs were concentrated in the Permian…checking for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that there were 8 new rigs added in Texas Oil District 8, which corresponds to the core Permian Delaware, and another rig was added in Texas Oil District 8A, which encompasses the northern counties in the Permian Midland, thus indicating that the Permian basin in Texas saw an increase of 9 rigs this week…since the national Permian rig count was up by 10, that means that the rig that was added in New Mexico must have been added in the far west reaches of the Permian Delaware, to account for the national Permian basin rig increase…elsewhere in Texas, there were 2 rigs added in Texas Oil District 1, which would account for the two rig increase in the Eagle Ford shale, and another rig added in Texas Oil District 10, which is usually indicative of a Granite Wash rig increase, but not this week, since the Granite Wash​ basin​ still shows no activity…rigs removed from Texas include one that ​had been drilling for oil offshore, and another pulled from Texas Oil District 6, which had been drilling in the Haynesville shale….the Haynesville shale still sho​w​s an increase, however, because two rigs were added in that basin in northern Louisiana; the other Louisiana rig increases were on inland waters and offshore…elsewhere, 2 oil rigs were added in Colorado, in the Niobrara chalk of the Rockies’ front range, while oil rigs were pulled out of the Williston basin in Norht Dakota and from an unnamed basin in Oklahoma at the same time….this week’s natural gas rig increase was in the aforementioned Haynesville shale, while the Marcellus shale showed no ​net ​change because while two rigs were pulled out of the Marcellus in Pennsylvania, two rigs were added in the Marcellus in West Virginia at the same time..

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December’s consumer & producer prices, retail sales, & industrial production; November’s business inventories & JOLTS

Major reports that were released this past week included the December Consumer Price Index, the December Producer Price Index, the December Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for November, all from the Bureau of Labor Statistics; the Advance Retail Sales Report for December and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November, both from the Census Bureau, and the December report on Industrial Production and Capacity Utilization from the Fed….the week also saw the release of the first regional Fed manufacturing survey for January: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +6.3 in November and from +4.7 in December to +3.5 in January, suggesting somewhat sluggish growth of First District manufacturing….

CPI Rose 0.4% in December on Higher Prices for Fuel, Food, Clothing, and Car Insurance

The consumer price index rose 0.4% in December, as higher prices for fuel, food, clothing, and vehicle insurance were only slightly offset by lower prices for airline fares, major appliances and used vehicles…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.4% higher in December, after rising 0.2% in November, being unchanged in October, rising by by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.6% in June, after falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, and rising by 0.2% last December….the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 260.229 in November to 260.474 in December, which left it statistically 1.3620% higher than the 256.974 reading of October of last year, which is reported as a 1.4% year over year increase, up from the 1.2% year over year increase reported a month ago….with higher prices for gasoline a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were just 0.1% higher for the month, as the unadjusted core price index actually fell from 269.473 to 269.226, which left the core index 1.6196% ahead of its year ago reading of 264.935, which is reported as a 1.6% year over year increase, the same as the year over year core price increase that was reported for November…

The volatile seasonally adjusted energy price index rose 4.0% in December, after rising 0.4% in November, 0.1% in October, 0.8% in September, 0.9% in August, 2.5% in July, 5.1% in June, but after falling by 1.8% in May, by 10.1% in April, 5.8% in March, 2.0% in February and by 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% last October, but is still 9.4% lower than in November a year ago…the price index for energy commodities was 8.2% higher in December, while the index for energy services was 0.1% higher, after rising 1.1% in November….the energy commodity index was up 8.2% on a 8.3% increase in the price of gasoline and a 10.0% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.2% higher…within energy services, the price index for utility gas service fell 0.8% after rising 3.1% in November and is now 4.1% higher than it was a year ago, while the electricity price index rose 0.4% after rising 0.5% in November….energy commodities are still averaging 15.2% lower than their year ago levels, with gasoline prices also averaging 15.2% lower than they were a year ago, while the energy services price index is now up 2.6% from last December, as electricity prices are now 2.2% higher than a year ago…

The seasonally adjusted food price index rose 0.4% in December, after falling 0.1% in November, rising 0.2% in October, being unchanged in September, rising 0.1% in August, falling 0.4% in July, rising 0.6% in June, 0.7% in May, 1.5% in April, 0.3% in March, 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but after being unchanged last June, July & August, as the price index for food purchased for use at home was 0.4% higher in December, after falling 0.3% in November, while the index for food bought to eat away from home was also 0.4% higher, as average prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 0.1% higher…

In the food at home categories, the price index for cereals and bakery products was 0.4% higher as average bread prices rose 0.2%, the price index for breakfast cereal rose 1.0%, and the price index for cakes, cupcakes, and cookies rose 1.2%….on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.2% lower as the price index for beef and veal fell 0.3%, the price index for poultry fell 0.9%, and egg prices fell 3.5%…at the same time, the seasonally adjusted index for dairy products was 0.8% higher, as whole milk prices rose 3.4% and the index for cheese and related products was 0.4% higher….meanwhile, the fruits and vegetables index was 0.4% lower as the price index for canned fruit fell 1.5% and the price index for canned vegetables fell 2.1%, while the price index for fresh vegetables fell 0.5% on a 2.6% decrease in tomato prices…on the other hand, the beverages price index was 1.1% higher as the price index for carbonated drinks rose 1.8% and the price index for coffee also rose 1.8%….lastly, the price index for the ‘other foods at home’ category was 0.7% higher, as the price index for butter and margarine rose 2.1%, peanut butter prices rose 3.2%, and the price index for soups rose 1.7%…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last November, just peanut butter prices, which have risen 11.2%, is the only food line item showing a change greater than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which was 0.1% higher in December after being 0.2% higher in November, being unchanged in October, after rising by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and by 0.1% in March, but after rising by 0.2% in February, 0.2% in January, 0.1% December, and by 0.2% last November, the composite price index of all goods less food and energy goods was 0.2% higher in December, while the more heavily weighted composite for all services less energy services was 0.1% higher….

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust November’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% lower, as the price index for major appliances fell 3.0% and the price index for window and floor coverings fell 2.3%….at the same time, the apparel price index was 1.4% higher on a 4.6% increase in the price index for men’s suits, sport coats, and outerwear, a 4.8% increase in the price index for men’s shirts and sweaters, a 3.2% increase in the price index for women’s dresses, a 3.0% increase in the index for women’s outerwear, a 2.3% increase in the price index for girls’ apparel, and a 2.3% increase in the price index for boys’ apparel….on the other hand, the price index for transportation commodities other than fuel was 0.2% lower even as prices for new cars rose 0.3%, as prices for used cars and trucks fell 1.2% and the price index for vehicle parts and equipment other than tires fell 0.1%….meanwhile, the price index for medical care commodities 0.4% lower, as both prescription and nonprescription drug prices fell 0.4% and the price index for medical equipment and supplies fell 0.2%…however, the recreational commodities index was 0.2% higher on a 0.7% increase in TV prices, a 2.5% increase in the price index for other video equipment, a 0.5% increase in the price index for pets, pet supplies, & accessories, a 2.4% increase in the price index for photographic equipment, and a 3.6% increase in the price index for sports equipment…at the same time, the education and communication commodities index was 0.8% higher on a 1.8% increase in the price index for computers, peripherals, and smart home assistants and a 1.7% increase in the price index for computer software and accessories….lastly, a separate price index for alcoholic beverages was 0.2% lower, while the price index for ‘other goods’ was up 0.3% on a 3.2% increase in the price index for infants equipment and a 1.1% increase in cigarette prices…

Within core services, the price index for shelter was 0.1% higher as rents and homeowner’s equivalent rent were both 0.1% higher, while prices for lodging away from home at hotels and motels unchanged, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.4% and other household operation costs were on average 2.0% higher on a 3.2% increase in domestic services….meanwhile, the price index for medical care services was 0.1% lower, as the price index for eyeglasses and eye care fell 0.1% and the average price of health insurance fell 1.1%… the transportation services price index was also 0.1% lower even though vehicle insurance costs rose 1.4% as airline fares fell 2.3%, car and truck rentals fell 5.6%, and the price index for automobile service clubs fell 1.1%…at the same time, the recreation services price index fell 0.5% as the index for photo processing fell 5.6% and the index for admissions to movies, concerts and sporting events fell 3.5%….meanwhile, the index for education and communication services was 0.1% higher as the price index delivery services rose 1.5% and the price index for day care and preschool rose 0.3%…lastly, the index for other personal services was up 0.9% as the price index for checking accounts and other bank services rose 8.5% and the price index for laundry and dry cleaning services was 0.4% higher…

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is down by 16.3% since last December, the price index for men’s suits, sport coats, and outerwear, which is still down 13.4% from a year ago, the price index for women’s dresses, which has fallen by 11.2% in the past year, the price index for medical equipment and supplies which is down by 10.0% from a year ago, the price index for lodging away from home including hotels and motels, which has fallen by 11.2% in the past year, and airline fares, which are now down by 18.4% since last December, have all seen prices drop by more than 10% over the past year, while the cost of intercity bus fare, which is up by 12.8% over the past year, the price index for used cars and trucks, which has risen 10.0% from a year ago, the price index for infant’s equipment, which is up by 22.3% year over year, and the price index for major appliances, which is up 16.6% from last December, are the only line items to have increased by a double digit magnitude over that span…. 

Retail Sales Fell 0.7% in December after Prior Months Were Revised Lower

Seasonally adjusted retail sales decreased in December after retail sales for October and November were revised lower…the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $540.9 billion during the month, which was 0.7 percent (±0.5%) lower than November’s revised sales of $544.6 billion, but was 2.9 percent (±0.7 percent) above the adjusted sales in December of last year…November’s seasonally adjusted sales were revised almost 0.4% lower, from $546.5 billion to $544.6 billion, while October’s sales were revised less than 0.1% lower, from $552.5 billion to $552.2 billion; as a result, the October to November change was revised up from a decrease of 1.1 percent (±0.5%) to a decrease of 1.4 percent (±0.2%), and the quarter over quarter increase for the 4th quarter was reduced to 0.3%….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 13.5%, from $546,082 million in November to $620,036 million in December, while they were up 4.8% from the $591,380 million of sales in December a year ago, so we can see how the large December seasonal adjustment knocked the big holiday sales increase we’d normally expect down to a negative print…

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” figure 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 2020 r” (revised) and the November 2019 to November 2020 percentage change as revised in the 2nd column of that pair (for your reference, the table from the 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 is useful in estimating the impact of retail sales on 4th quarter GDP, after those sales are adjusted for price changes….

December 2020 retail sales table

To compute December’s real personal consumption of goods data for national accounts from this December retail sales report, the BEA will use the corresponding price changes from the December consumer price index, which we reviewed above…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that December retail sales excluding the 6.6% price-related increase in sales at gas stations were down by 1.2%….then, subtracting the figures representing the 1.4% decrease in grocery & beverage sales and the 4.5% decrease in food services sales from that total, we find that core retail sales were down by almost 0.7% for the month…since the CPI report showed that the composite price index for all goods less food and energy goods was 0.1% higher in December, we can thus approximate that real retail sales excluding food and energy will show an decrease of roughly 0.8%… however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at clothing stores were 2.4% higher in December, the apparel price index was 1.4% higher, which would mean that real sales of clothing only rose by around 1.0%.…similarly, while nominal sales at sporting goods, hobby, music and book stores fell 0.8%, the price index for recreational commodities rose 0.2%, so we can figure real sales of recreational goods were down roughly 1.0%…on the other hand, while nominal sales at motor vehicles and parts dealers were down 1.9%, the price index for transportation commodities other than fuel decreased by 0.2%, which would suggest that real sales at motor vehicles and parts dealers were down around 1.7%…

In addition to figuring those core retail sales, to make a complete estimate of real December PCE, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the CPI report showed that the food price index was 0.4% higher in December, with both the index for food purchased for use at home and the index for food bought to eat away from home 0.4% higher… hence, with nominal sales at food and beverage stores 1.4% lower, real sales of food and beverages would be down around 1.8% in light of the 0.4% higher prices…likewise, the 4.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 4.9%…meanwhile, while sales at gas stations were up 6.6%, there was an 8.3% increase in the retail price of gasoline, which would suggest real sales of gasoline were down around 1.7%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…..by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we can estimate that the income and outlays report for December will show that real personal consumption of goods fell by more than 0.9% for the month, after falling by a revised 1.4% in November, but after being close to unchanged in October…at the same time, the 4.9% decrease in real sales at bars and restaurants will have a significant negative impact on December’s real personal consumption of services…

Industrial Production Rose 1.6% in December, With a Big Boost from Cold Temperatures

The Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production jumped by a seasonally adjusted 1.6% in December after rising by a revised 0.5% in November and 1.0% in October, which together meant that industrial production rose at a 8.4% annual rate in the 4th quarter, after rising by a revised 42.5% rate in the 3rd quarter, even as industrial production is still down 3.6% year over year, albeit an improvement from the 5.5% year over year decrease reported a month ago…..the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 105.7 in December from 104.1  in November, which was revised from the 104.0 reported last month, while at the same time the index for October was revised but remained at 103.6 but is now a 1.0% increase from September, rather than the 0.9% increase previously reported, while the IP index for September remained at 102.6…

The manufacturing index, which accounts for more than 75% of the total IP index, rose 0.9% to 102.2 in December, after the November index was revised from 101.1 to 101.3 and the October idex was revised from 100.3 to 100.5, while the manufacturing index is still 2.8% lower than it was a year ago….meanwhile, the mining index, which includes oil and gas well drilling, rose from 115.5 in November to 117.4 in December, after the November mining index was revised down from 116.0, still leaving the mining index at a level 12.3% lower than it was a year earlier…finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose by 6.2% in our cold December, from 100.0 to 106.3, after the November utility index was revised up from 99.9, now 4.5% lower than October…since December 2019 was a warmer than normal month, the utility index is now 2.7% higher than it was a year ago…

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 74.5% in December from 73.4% in November, which was revised from the 73.3% reported last month…capacity utilization of NAICS durable goods production facilities rose from a upwardly revised 72.3% in November to 73.0% in December, while capacity utilization for non-durables producers rose from a upwardly revised 74.3% to 75.0%…capacity utilization for the mining sector rose to 80.5% in December from 79.0% in November, which was originally reported as 79.4%, while utilities were operating at 74.5% of capacity during December, up from 70.3% of capacity during November, which was previously reported at 70.2%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….

Producer Prices rose 0.3% in December on Higher Wholesale Fuel Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in December, as prices for finished wholesale goods averaged 1.1% higher while margins of final service providers were on average 0.1% lower….that followed a November report that the PPI rose 0.1%, as prices for finished wholesale goods averaged 0.4% higher while margins of final service providers were unchanged, an October report wherein the PPI rose 0.3%, as prices for finished wholesale goods averaged 0.5% higher while margins of final service providers averaged 0.2% higher, a newly revised September report that showed the PPI had risen 0.4%, as prices for finished wholesale goods rose 0.4% and margins of final service providers averaged 0.5% higher, and a re-revised August report that indicates the PPI was 0.2% higher, as prices for finished wholesale goods averaged 0.3% higher while margins of final service providers averaged 0.1% higher….on an unadjusted basis, producer prices are 0.8% higher than a year ago, same as year over year increase indicated by last month’s report, while the core producer price index, which excludes food, energy and trade services, rose by 0.4% for the month, and is now 1.1% higher than in December a year ago, up from the 0.9% year over year increase shown in November…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 1.1% higher in December, after being 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.3% higher in August, 0.7% higher in July, 0.4% higher in June, 1.5% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, and 0.2% higher in December of last year….the finished goods price index rose 1.1% in December because the price index for wholesale energy goods was 5.5% higher, after it had risen by 1.2% in November, by 0.8% in October, fallen by a revised 0.4% in September, and risen by a revised 0.8% in August, by 4.6% in July, and by 9.6% in June, while the price index for wholesale foods fell 0.1%, after rising by 0.5% in November, 2.4% in October, and by a revised 1.4% in September, after falling 0.3% in August, while the index for final demand for core wholesale goods (excluding food and energy) was 0.5% higher, after rising 0.2% in November, being unchanged in October, 0.4% higher in September and 0.3% higher in July and August….wholesale energy prices averaged 5.5% higher due to a 16.1% increase in wholesale prices for gasoline, a 12.6% increase in wholesale prices for No.2 diesel fuel, and a 47.6% increase in wholesale prices for home heating oil, while the wholesale price for residential natural gas fell 1.5%…meanwhile, the wholesale food price index fell 0.1% on a 3.6% decrease in the wholesale price index for dairy products, an 5.0% decrease in the wholesale price index for fresh and dry vegetables, and a 24.9% decrease in wholesale price of eggs for fresh use….among core wholesale goods, the wholesale price index for industrial chemicals rose 3.4%, the wholesale price index for travel trailers and campers rose 0.8%, and the wholesale price index for iron and steel scrap rose 25.8% while the wholesale price index for computers and computer equipment fell 1.6% ..

At the same time, the index for final demand for services was 0.1% lower in December, after being unchanged in November, rising 0.2% in October, a revised 0.5% in September, a revised 0.1% in August, and 0.5% in July, as the index for final demand for trade services fell 0.8% and the index for final demand for transportation and warehousing services fell 0.1%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.2% higher….among trade services, seasonally adjusted margins for hardware, building materials, and supplies retailers fell 8.2%, margins for RVs, trailers, and campers retailers fell 10.0%, and margins for fuels and lubricants retailers fell 6.6%… among transportation and warehousing services, average margins for airline passenger services fell 3.4% while average margins for air transportation of freight fell 1.4%…among the components of the core final demand for services index, the index for arrangement of cruises and tours rose 11.1%, the index for membership dues and admissions and recreation facility use fees rose 2.4%, margins for consumer loans rose 3.5%, while margins for deposit services (partial) fell 3.7%…

This report also showed the price index for intermediate processed goods rose 1.5% in December, after rising 1.4% in November, 0.3% in October, a revised 0.7% in September, a revised 0.9% in August, 1.4% in July, and 1.3% in June, but after being unchanged in May and falling the prior 5 months….the price index for intermediate energy goods rose 3.3%, as refinery prices for gasoline rose 16.1%, refinery prices for jet fuel rose 27.4%, and producer prices for lubricating oil base stocks rose 13.7%, while producer prices for natural gas to electric utilities fell 17.6%… meanwhile, the price index for intermediate processed foods and feeds rose 0.4%, as the producer price index for processed poultry rose 1.4%, the producer price index for meats rose 3.7% and the producer price index for prepared animal feeds rose 1.9%…at the same time, the core price index for intermediate processed goods less food and energy rose 1.2% as the producer price index for primary nonferrous metals rose 8.1%, the producer price index for copper and brass mill shapes rose 6.8%, and the producer price index for softwood lumber rose 12.5%, while the producer price index for plywood fell 3.5%…prices for intermediate processed goods are now 1.3% higher than in December a year ago, the first increase after 19 consecutive year over year decreases, which followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 2.2% in December, after rising 7.3% in November, 2.6% in October, a revised 4.0% in September, a revised 3.9% in August and .0% in July, and rising 5.1% in June and 8.6% in May, but after falling 12.6% in April and 8.5% in March….that was as the December price index for crude energy goods rose 2.5% as crude oil prices rose 17.5% while unprocessed natural gas prices fell 9.4%, and as the price index for unprocessed foodstuffs and feedstuffs rose 0.2% on an 11.6% jump in the price of raw milk, a 2.2% increase in the price of raw sugar cane, and a 0.8% increase in the price of unprocessed wheat…at the same time, the index for core raw materials other than food and energy materials rose 4.5%, as producer prices for recyclable paper rose 14.6%, the price index for iron and steel scrap rose 25.8%, the price for copper base scrap rose 10.0%, and raw cotton prices rose 8.6%… this raw materials index is now 1.5% higher than a year ago, the second annual increase in 2 years, as the year over year change on this index had been negative from the beginning of 2019 through October…

Lastly, the price index for services for intermediate demand rose 0.4% in December, after falling 0.1% in November, rising 0.8% in October, rising a revised 0.8% in September, a revised 0.9% in August, 0.4% in July, and 0.3% in June….the price index for intermediate trade services was 0.7% higher, as margins for metals, minerals, and ores wholesalers rose 7.0% and margins for intermediate building materials, paint, and hardware wholesalers rose 4.7%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.1% lower, as the intermediate price index for arrangement of freight and cargo fell 4.8% and the intermediate price index for transportation of passengers (partial) fell 3.3%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing rose 0.4%, as the intermediate price index for business loans rose 6.2%, the intermediate price index for permanent job placement services rose 1.8% and the intermediate price index for portfolio management rose 1.7%…over the 12 months ended in December, the year over year price index for services for intermediate demand is 1.6% higher than it was a year ago, the fourth consecutive positive annual change since it turned negative year over year in April for the first time in the history of this index…

November Business Sales Down 0.1%: Business Inventories Up 0.5%

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 $1,480.8 billion in November, down 0.1 percent (±0.2%)* from October’s revised sales, but up 1.5 percent (±0.4%) from November sales of a year earlier…note that total October sales were concurrently revised from the previously reported $1,482.3 billion  to $1,482.1 billion, still up 0.9% from September….manufacturer’s sales rose 0.7% to $492,931 million in November; retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, fell 1.1% to $491,081 million, and wholesale sales rose 0.2% to $496,738 million..

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,959.9 billion at the end of November, up 0.5 percent (±0.1 percent) from October, but 3.2 percent (±0.5 percent) lower than in November a year earlier…at the same time, the value of end of October inventories was revised from the $1,948.7 billion reported a month ago to $1,950.354 billion, now an 0.8% increase from September…. seasonally adjusted inventories of manufacturers were estimated to be valued at $692,933 million, up 0.7% from October, and inventories of retailers were valued at $617,142 million, also 0.7% higher than in October, while inventories of wholesalers were estimated to be valued at $649,823 million at the end of November, statistically unchanged from 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 0.4% for finished goods, including an increase of 0.2% ex food & energy…last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged the negative change in those inventories would have a modest negative impact on 4th quarter GDP growth…also last week, we found that real wholesale inventories were at least 0.4% lower for the month, following a 0.5% real increase in October, and that they add to the growth of 4th quarter GDP largely because of the sharp drop in the 3rd quarter they were poised to reverse….since nominal retail inventories for November have now been shown to 0.7% higher, real retail inventories for the month, considering a 0.4% finished goods price adjustment, would have thus increased by 0.3% from October, after a real 0.4% increase in that month…since the third quarter saw a small real decrease in real retail inventories, these real inventory increases we now have indicated for the 4th quarter would necessarily add back that decrease, plus the amount of the real 4th quarter increase, to the growth of 4th quarter GDP…

Job Openings Lower in November; Hiring & Layoffs Rose, Quitting was Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 105,000, from 6,632,000 in October to 6,527,000 in November, after October’s job openings were revised 20,000 lower, from 6,652,000 to 6,632,000…November’s jobs openings were also 3.9% lower than the 6,793,000 job openings reported in November a year ago, as the job openings ratio expressed as a percentage of the employed fell to 4.4% in November from 4.5% October, while it was up from 4.3% in November a year ago….the largest percentage decrease in November openings appears to be a 45,000 job opening decrease to 77,000 openings in the information sector, while the professional and business services sector saw job openings increase by 54,000 to 1,274,000 (see table 1 for more job openings 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 5,979,000, up by 67,000 from the revised 5,912,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed remained at 4.2% in November, while it was still up from 3.9% in November a year ago (details on hiring by region and by sector since July are in table 2)….meanwhile, total separations rose by 271,000, from 5,142,000 in October to 5,413,000 in November, as the separations rate as a percentage of the employed rose from 3.6% to 3.8%, and it was also up from 3.7% in November a year ago (see table 3)…subtracting the 5,413,000 total separations from the total hires of 5,979,000 would imply an increase of 566,000 jobs in November, somewhat more than the revised payroll job increase of 336,000 for November reported in the December establishment survey last week, with at least some of that difference likely due to the difference in the date of the surveys, which is at month end for this report but is during the week of the 12th for the employment situation…

Breaking down the seasonally adjusted job separations, the BLS finds that 3,156,000 of us voluntarily quit our jobs in November, up by 6,000 from the revised 3,150,000 who quit their jobs in October, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.2% of total employment, while it was down from 2.3% a year earlier (see job quitting details in table 4)….in addition to those who quit, another 1,971,000 were either laid off, fired or otherwise discharged in November, up by 295,000 from the revised 1,676,000 who were discharged in October, as the discharges rate rose from 1.2% to 1.4% of total employment, which was also up from the discharges rate of 1.2% in November a year ago….meanwhile, other separations, which includes retirements and deaths, were at 287,000 in November, down from 317,000 in October, for an ‘other separations rate’ of 0.2%, which was the same rate as in October and as 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 easily 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 of which are picked from the aforementioned GGO posts, contact me…)  

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tables and graphs for January 16

rig count summary

January 15 2021 rig count summary

retail sales:

December 2020 retail sales table

OPEC output:

December 2020 OPEC crude output via secondary sources

global oil supply:

December 2020 OPEC report global oil supply (2)

global oil demand:

December 2020 OPEC report global oil demand

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gasoline demand at a 32 week low, gasoline supplies up ​most in 3​5 weeks; distillate​s​ supplies​ up most in 31 weeks​

oil exports at a forty-one week high & refinery utilization ​at a 19 week high led to largest drop in crude supplies since August; gasoline production fell ​by ​the most since March to a 7 month low, but gasoline demand at a 32 week low meant gasoline supplies jumped by ​the ​most in 3​5 weeks; distillate​s​ demand at a 15 week low​ led to largest increase in distillate​s​ supplies​ in 31 weeks​..

oil prices rose for the ninth time out of the past ten weeks this week, after the Saudis unilaterally cut their oil output…after inching up 0.6% to $48.52 a barrel last week on a weaker dollar and on Trump’s signing of the Covid stimulus bill, the contract price of US light sweet crude for February delivery opened lower on Monday as OPEC delayed their decision on extending their output cuts into February, and fell throughout the trading session to settle 90 cents lower at $47.62 per barrel as U.S. stocks fell 2% on concerns over the outcome of runoff Senate elections in Georgia….oil prices were lower again early Tuesday before OPEC+ resumed their meeting on February​’s oil​ output levels, but then jumped nearly 5% after news that Saudi Arabia would make​ large​ voluntary cuts to their oil output to finish $2.31 higher at $49.93 per barrel, as Mideast tensions rose after Iran seized a South Korean-flagged oil tanker in the Strait of Hormuz…oil prices were ​most​ly mixed early Wednesday after the American Petroleum Institute had reported a modest crude draw but large fuel inventory increases but then resumed their climb after the EIA reported the largest withdrawal from crude inventory since August before closing 70 cents higher at $50.63 per barrel…oil prices remained steady on Thursday even after Trump mobs stormed the U.S. Capitol, as oil traders focused on the likelihood of tighter supplies after Saudi Arabia had unilaterally agreed to cut output, and settled 20 cents higher at $50.83 per barrel as demand fears, slow vaccine rollouts, and the US political uncertainty took some wind out of the oil rally’s sails...but the oil rally resumed Friday as traders focused on the Democratic victories in the Georgia elections that would boost the likelihood of a larger government stimulus, a​nd US crude prices settled $1.41, or 2.8%, higher at $52.24 a barrel, thus finishing the week with a 7.7% increase and at the highest price level since February of last year..

natural gas prices also moved higher this week on forecasts for colder weather and greater heating demand later in the month…after rising 1% to $2.539 per mmBTU last week in volatile trading on equally volatile swings in the weather outlook, the contract price of natural gas for February delivery opened 4% higher on Monday, on strong LNG exports, flat production, and an improved outlook for weather-driven demand, but drifted lower to settle with a 4.2 cent increase at $2.581 per mmBTU…February gas prices extended th​at increase on Tuesday, however, rising 12.1 cents to $2.702 per mmBTU, as weather models pointed to fresh bouts of cold air over the Midwest and East in the second half of January, and then added 1.4 cents ​to that gain ​on Wednesday on continued strength in LNG exports…natural gas prices inched up another 1.3 cents on Thursday after the EIA reported a withdrawal from gas inventories that was well above normal but below expectations, but pulled back 2.9 cents to finished the week with a 6.3% gain at $2.700 per mmBTU on a shift in weather forecasts that pointed to a potential delay in the onset of widespread freezing temperatures from early in the third full week of January to later in the month

the natural gas storage report from the EIA for the week ending January 1st indicated that the quantity of natural gas held in underground storage in the US decreased by 130 billion cubic feet to 3,330 billion cubic feet by the end of the week, which left our gas supplies 138 billion cubic feet, or 4.2% higher than the 3,192 billion cubic feet that were in storage on January 1st of last year, and 201 billion cubic feet, or 6.4% above the five-year average of 3,129 billion cubic feet of natural gas that have been in storage as of the 1st of January in recent years….the 130 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast of a 139 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, but it was higher than the average withdrawal of 115 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and much more than the 48 billion cubic feet withdrawal from natural gas storage seen during the corresponding warmer week ​ending January 3rd, 2020…. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending January 1st indicated that with our supply of and demand for oil little changed from the prior week, we had to withdraw oil from our stored commercial supplies for the 6th time in the past seven weeks and for the 18th time in the past twenty-four weeks…our imports of crude oil rose by an average of 43,000 barrels per day to an average of 5,369,000 barrels per day, after falling by an average of 238,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 7,000 barrels per day to a forty-one week high of 3,632,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,737,000 barrels of per day during the week ending January 1st, 36,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 12,737,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,376,000 barrels of crude per day during the week ending January 1st, 89,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,144,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 495,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+495,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed….however, since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as they’re published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,421,000 barrels per day last week, which was 18.1% less than the 6,617,000 barrel per day average that we were importing over the same four-week period last year…..the 1,144,000 barrel per day net withdrawal from our crude inventories was due to a 1,144,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 1,000 barrel per day decrease to 514,000 barrels per day in Alaska’s oil production had no impact on the rounded national total…last year’s US crude oil production for the week ending January 3rd was rounded to 12,900,000 barrels per day, so this reporting week’s rounded oil production figure was 14.7% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 80.7% of their capacity while using those 14,376,000 barrels of crude per day during the week ending January 1st, up from 79.4% of capacity during the prior week, and the highest refinery utilization rate since ​August….however, since refinery utilization ​averaged the lowest on record through 2020, the 14,376,000 barrels per day of oil that were refined this week were still 14.9% fewer barrels than the 16,897,000 barrels of crude that were being processed daily during the week ending January 3rd of last year, when US refineries were operating at 93.0% of capacity…

despite the increase in the amount of oil being refined, gasoline output from our refineries was lower for the 5th time in seven weeks, decreasing by 1,181,000 barrels per day to a seven month low of 8,010,000 barrels per day during the week ending January 1st, after our gasoline output had increased by 362,000 barrels per day over the prior week…and since our gasoline production was just beginning to recover from a multi-year low in the wake of this Spring’s covid lockdowns, that drop meant that this week’s gasoline output was 9.9% less than the 8,887,000 barrels of gasoline that were being produced daily over the same week of last year….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 146,000 barrels per day to 4,785,000 barrels per day, after our distillates output had increased by 49,000 barrels per day over the prior week….but since it’s also just coming off a three year low, our distillates’ production was also 9.9% less than the 5,311,000 barrels of distillates per day that were being produced during the week ending January 3rd, 2019…

even with the big drop in our gasoline production, our supply of gasoline in storage at the end of the week increased for the sixth time in eight weeks, for 11th time in 27 weeks, and by the most since the last week of April, rising by 4,519,000 barrels to 241,081,000 barrels during the week ending January 1st, after our gasoline inventories had decreased by 1,192,000 barrels over the prior week…our gasoline supplies increased this week because the amount of gasoline supplied to US users decreased by 687,000 barrels per day to a 32 week low of 7,441,000 barrels per day, and because our exports of gasoline fell by 28,000 barrels per day to 883,000 barrels per day, while our imports of gasoline fell by 156,000 barrels per day to 445,000 barrels per day….but even after this week’s increase, our gasoline supplies were 4.2% lower than last January 3rd’s gasoline inventories of 251,609,000 barrels, and near the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased for the 5th time in 6 weeks, for the 22nd time in the past year, and by the most since May 29th, rising by 6,390,000 barrels to 152,029,000 barrels during the week ending January 1st, after our distillates supplies had increased by 3,095,000 barrels during the prior week….our distillates supplies rose by more this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 653,000 barrels per day to a 15 week low of 2,941,000 barrels per day,​ even as our imports of distillates fell by 317,000 barrels per day to 302,000 barrels per day​ and as​ our exports of distillates rose by 10,000 barrels per day to 1,232,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 13.9% above the 139,050,000 barrels of distillates that we had in storage on January 3rd, 2019, and about 4% above the five year average of distillates stocks for this time of the year…

finally, with the decrease in our oil imports and the increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) fell for the 19th time in the past thirty weeks but for just the 23rd time in the past year, decreasing by 8,010,000 barrels, from 493,469,000 barrels on December 25th to 485,459,000 barrels on January 1st.…but even after that big decrease, our commercial crude oil inventories were still about 9% above the five-year average of crude oil supplies for this time of year, and about 48% above the prior 5 year (2011 – 2015) average of our crude oil stocks as of the first weekend of January, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of January 1st were still 12.6% above the 431,060,000 barrels of oil we had in commercial storage on January 3rd of 2020, and also 10.4% more than the 439,738,000 barrels of oil that we had in storage on January 4th of 2019, and 15.7% above the 419,515,000 barrels of oil we had in commercial storage on January 5th of 2018…     

This Week’s Rig Count

note: last week’s rig count was released on Wednesday, December 30th, ahead of the New Year’s weekend, so this week’s rig count covers 9 days…that said, the US rig count rose for the 16th time in the past seventeen weeks during the period ending January 8th, but for just the 18th time in the past 43 weeks, and hence it is still down by 54.6% over that forty-three week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 9 to 360 rigs this past week, which was still down by 421 rigs from the 781 rigs that were in use as of the January 10th report of 2020, and was also still 44 fewer rigs than the all time low rig count prior to 2020, and 1,569 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 8 rigs to 275 oil rigs this week, after rising by 3 oil rigs the prior week, leaving us with 384 fewer oil rigs than were running a year ago, and still less than a fifth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was up by 1 to 84 natural gas rigs, which was still down by 35 natural gas rigs from the 119 natural gas rigs that were drilling a year ago, and just 5.2% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil or gas, one rig classified as ‘miscellaneous’ continue to drill in Lake County, California this week, while a year ago there were three such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count remained unchanged at 17 rigs this week, with 14 of those rigs drilling for oil in Louisiana’s offshore waters and three drilling for oil offshore from Texas…that was 4 fewer Gulf rigs than the 21 rigs drilling in the Gulf a year ago, when 19 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig figures are equal to the Gulf rig counts….however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 7 to 320 horizontal rigs this week, which was still 378 fewer horizontal rigs than the 698 horizontal rigs that were in use in the US on January 10th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count was up by 1 to 22 directional rigs this week, but those were still down by 23 from the 45 directional rigs that were operating during the same week a year ago….in addition, the vertical rig count was up by one to 18 vertical rigs this week, and those were also still down by 20 from the 38 vertical rigs that were in use on January 10th of 2020….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of January 8th, the second column shows the change in the number of working rigs between last week’s count (December 30th) and this week’s (January 8th) 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 on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the​ 10th of January, 2020..    

January 8 2021 rig count summary

as you can see, there were more changes in drilling activity this week than recently, with two basins showing 4 rig increases…checking for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that there were no changes in any Permian Texas Oil District, which thus means that the 4 rigs that were added in New Mexico must have been added in the far west reaches of the Permian Delaware to account for the national Permian basin rig increase… since the rig count in all other Texas oil districts also remained unchanged, that means that the rig that was pulled out of the panhandle region Granite Wash basin came out of Oklahoma, which had a rig added in the Cana Woodford and in some other ​oil ​basin that Baker Hughes doesn’t aggregate at the same time…for natural gas seeking rigs, we had two rigs pulled out of the Utica shale, one from Ohio and one from Pennsylvania, while four rigs were added in the Marcellus, three in Pennsylvania and one in West Virginia…at the same time, a natural gas rig was pulled out of the Haynesville shale in DeSoto Parish, Louisiana, while an oil rig began drilling in nearby at the same time, in the first Haynesville shale oil drilling since November 2019…

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note: there’s more here

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December’s jobs report; November’s trade deficit, construction spending, factory inventories, and wholesale trade..

The major economic reports released the past week were the Employment Situation Summary for December from the Bureau of Labor Statistics, the November report on our International Trade from agencies within the Commerce Dept, and the November report on Construction Spending (pdf), the Full Report on Manufacturers’ Shipments, Inventories and Orders for November and the November report on Wholesale Trade, Sales and Inventories (pdf), all from the Census Bureau….in addition, this week the Fed released the Consumer Credit Report for November, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $15.3 billion, or at a 4.4% annual rate, as non-revolving credit expanded at a 6.1% rate to $3,198.0 billion in November, while revolving credit outstanding shrank at a 1.0% rate to $978.8 billion…

Privately issued reports released this week included the ADP Employment Report for December, the light vehicle sales report for December from Wards Automotive, which estimated that vehicles sold at a 16.27 million annual rate in December, up from the 15.55 million annual pace of vehicle sales reported for November, but down from the 16.70 million vehicle sales rate reported for December of 2019,  and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the December Manufacturing Report On Business® indicated that the manufacturing PMI (Purchasing Managers Index) rose to 60.7% in December, up from 57.5% in November, indicating a more robust growth rate of US manufacturing during the month, and the December Services Report On Business, which saw the Services index rise to 57.2% in December, up from 55.9% in November, meaning a modestly larger plurality of service industry purchasing managers reported expansion in various facets of their business in December than 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 Cut 140,000 Jobs in December, Unemployment Rate Steady

The Employment Situation Summary for December indicated that employers reduced payrolls for the first time since April, but that the unemployment rate remained at 6.7% and the U-6 unemployment rate fell by 0.3% to 11.7%…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers cut 140,000 jobs in December, after the previously estimated payroll job increase for November was revised up by 91,000, from 245,000 to 336,000, and the payroll jobs increase for October was revised up by 44,000, from 610,000 to 654,000…while that means that this report represents a net of just 5,000 fewer seasonally adjusted payroll jobs than were reported last month, it still leaves December’s non-farm payrolls down by 9,812,000 jobs from the 152,436,000 seasonally adjusted jobs that were reported in February…the unadjusted data, meanwhile, shows that there were actually 328,000 fewer payroll jobs extent in December than in November, as the usual seasonal layoffs in areas such as construction and other outdoor services were normalized by the seasonal adjustments to show the job increases indicated..

December’s seasonally adjusted job losses were concentrated in just a few sectors; the largest job decrease was in the leisure and hospitality sector, which lost 498,000 jobs, with the loss of 372,900 jobs in bars and restaurants, 91,900 more in amusements, gambling, and recreation and 23,600 fewer jobs in accommodation…in addition, private educational services cut 62,500 employees, while the government sector shed 45,000 jobs, with 31,500 of those from local governments excluding education and 19,900 jobs cut from state government education…meanwhile, seasonally adjusted job increases included 161,000 more jobs in the professional and business services sector, where 67,600 jobs were added by temporary employment services and 20,300 were added by computer systems design and related services…after a holiday related downward seasonal adjustment, retail sales still added 120,500 more workers, led by a 56,700 increase in those working in general merchandise stores, a 14,300 increase in jobs with non-store retailers, and a 13,400 job increase in those working for automobile dealers…after a upward seasonal adjustment of 154,000 jobs, the construction sector showed a 51,000 job increase, with 18,300 of those employed by nonresidential specialty trade contractors and another 15,000 added in heavy and civil engineering construction…the transportation and warehousing sector added 46,600 employees in December, of which 37,400 were ‘couriers and messengers’ (ie, package delivery), while employment in health care increased by 38,800 jobs during the month, as 31,500 more employees were added by hospitals…meanwhile, manufacturing employment increased by 38,000, as manufacturers of plastics and rubber products added 6,900 jobs, motor vehicles and parts factories added 6,700, and nonmetallic mineral products manufacturers added 6,100, while the wholesale trade sector saw the addition of 25,100 employees, with 11,400 of those in durable goods sales and 10,800 in sales of non-durable goods…at the same time, employment in the other major sectors, including utilities, financial activities, information, and resouce extraction, was little changed over the month..

With the aforementioned employment decreases of mostly lower paying jobs, the establishment survey thus showed that average hourly pay for all employees rose by 23 cents an hour to $29.81 an hour in December, after it had increased by a 9 cents an hour in November; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 20 cents to $25.09 an hour……employers also reported that the average workweek for all private payroll employees was down by a tenth of an hour to 34.7 hours in December, while hours for production and non-supervisory personnel was unchanged at 34.2  hours…at the same time, the manufacturing workweek held steady at 40.2 hours, while average factory overtime rose 0.1 hour to 3.3 hours…

Meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 21,000 to 149,830,000, while the estimated number of those unemployed rose by 8,000 to 10,736,000; which together meant there was a rounded 30,000 increase in the total labor force….since the working age population had grown by 145,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 115,000 to 100,663,000…with the increase of those in the labor force just a bit below the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 61.5% in December….meanwhile, the increase in number employed as a percentage of the increase in the population was not significant enough to change the employment to population ratio, which we could think of as an employment rate, as it was also unchanged at 57.4%…at the same time, the relatively small increase in the number considered unemployed was not enough to change the unemployment rate, which remained at 6.7% in December.. however, the number of those who reported they were forced to accept just part time work fell by 471,000, from 6,641,000 in November to 6,170,000 in December, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, by 0.3% to 11.7% of the labor force in December, the lowest since March

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..

Trade Deficit Rose 8.0% in November on Higher Imports of Cell Phones, et al

Our trade deficit rose 8.0% in November as the value of our exports increased but the value of our imports increased by quite a bit more….the Commerce Dept report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $5.0 billion to $68.1 billion in November, from an October deficit of $63.1 billion, which was revised but remained statistically unchanged from the deficit reported for October a month ago….the value of our November exports rose by $2.2 billion to $184.2 billion on a $1.3 billion increase to $127.7 billion in our exports of goods and a $0.9 billion increase to $56.4 billion in our exports of services, while the value of our imports rose by $7.2 billion to $252.3 billion on a $6.3 billion increase to $214.1 billion in our imports of goods and an increase of $0.9 billion to $38.2 billion in our imports of services…export prices were on average 0.6% higher in November, which means the relative real increase in exports for the month was smaller than the nominal increase by that percentage, while import prices were 0.1% higher, meaning the increase in real imports was smaller than the nominal dollar increase reported here by that percentage…

The $1.3 billion increase in the value of our November exports of goods largely resulted from greater exports of industrial supplies and materials and of foods, feeds, and beverages…referencing the Full Release and Tables for November (pdf), in Exhibit 7, we find that the value of our exports of industrial supplies and materials rose by $830 million to $41,798 million on a $473 million increase in our exports of natural gas, and that our exports of foods, feeds and beverages rose by $538 million to $12,904 million on increased exports of soybeans, wheat, barley, sorghum, oats, meats and poultry…in addition, our exports of exports of consumer goods rose by $176 million to $16,375 million, and our exports of other goods not categorized by end use rose by $136 million to $5,007 million…partially offsetting the increases in those export categories, our exports of capital goods fell by $241 million to $38,904 million on a $291 million decrease in our exports of civilian aircraft engines, and our exports of automotive vehicles, parts, and engines fell by $125 million to $12,550 million on a $133 million decrease in our exports of trucks, buses, and special purpose vehicles…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods, and shows that higher imports of consumer goods, industrial supplies and materials, and capital goods accounted for November’s $6.3 billion increase in our imports…our imports of consumer goods rose by $4,003 million to $61,183 million on a $2,752 million increase in our imports of cellphones, a $300 million increase in our imports of household appliances and a $296 million increase in our imports of artwork, antiques and other collectibles, and our imports of industrial supplies and materials rose by $1511 million to $39,727 million, led by a $353 million increase in our imports of precious metals other than gold and a $222 million increase in our imports of crude oil, and our imports of capital goods rose by $1,203 million to $58,092 million on a $414 million increase in our imports of civilian aircraft, a $320 million increase in our imports of semiconductors, and a $264 million increase in our imports of photo servicing industry machinery…in addition, our imports of foods, feeds, and beverages rose by $53 million to $13,403 million, and our imports of other goods not categorized by end use rose by $706 million to $9,452 million….partly offsetting the increases in those import categories, our imports of automotive vehicles, parts and engines fell by $1,035 million to $31,168 million on a $1,054 million decrease in our imports of new and used passenger cars….

The Full Release and Tables pdf for this month’s report also summarizes Exhibit 19,  which gives us surplus and deficit details on our goods trade with selected  countries:

The November figures show surpluses, in billions of dollars, with South and Central America ($3.0), Hong Kong ($1.8), OPEC ($1.2), Brazil ($1.2), United Kingdom ($1.1), Saudi Arabia ($0.2), and Singapore ($0.2). Deficits were recorded, in billions of dollars, with China ($30.0), European Union ($16.7), Mexico ($11.3), Japan ($6.6), Germany ($4.9), Italy ($3.5), Taiwan ($3.0), South Korea ($2.9), India ($2.4), Canada ($1.7), and France ($1.7).

  • The deficit with China increased $3.5 billion to $30.0 billion in November. Exports decreased $0.5 billion to $12.6 billion and imports increased $3.0 billion to $42.6 billion.
  • The deficit with the European Union increased $1.0 billion to $16.7 billion in November. Exports increased $0.9 billion to $20.4 billion and imports increased $2.0 billion to $37.1 billion.
  • The surplus with South and Central America increased $0.8 billion to $3.0 billion in November. Exports increased $0.2 billion to $11.0 billion and imports decreased $0.6 billion to $8.0 billion.

To estimate the impact of October’s and November’s trade in goods on the eventual 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here….from that table, we can figure that we can figure that 3rd quarter real exports of goods averaged 136,611 million monthly in 2012 dollars, while similarly inflation adjusted October and November exports were at 143,883 million and 144,581 million respectively in that same 2012 dollar quantity index representation…annualizing the change between the average monthly real exports of the two quarters, we find that the 4th quarter’s real exports of goods are running at a 24.25% annual rate above those of the 3rd quarter, or at a pace that would add about 1.32 percentage points to 4th quarter GDP if it were to continue at the same pace through December….in a similar manner, we find that the 3rd quarter’s real imports of goods averaged 227,055.3 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 233,736 million and 241,121 million in 2012 dollars respectively…those chained dollar representations of real goods imports would indicate that so far in the 4th quarter, real imports have been growing at annual rate of 19.565% from those of the 3rd quarter…since imports are subtracted from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their increase at a 19.656% rate would subtract about 1.36 percentage points from 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our deteriorating balance of trade in goods would subtract a negligible 0.04 percentage points from the growth of 4th quarter GDP….(note, however, that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the BEA does not provide inflation adjusted data on those, but that the increases in November’s imports and exports of services were statically similar, also suggesting a negligible impact on GDP)…

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

The Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,459.4 billion annually if extrapolated over an entire year, which was 0.9 percent (±0.8%) above the revised October annualized estimate of $1,446.9 billion and also 3.8 percent (±1.3 percent) above the estimated annualized level of construction spending in November of last year…at the same time, the annualized October construction spending estimate was revised nearly 0.6% higher, from $1,438.5 billion to $1,446.9 billion, while the annual rate of construction spending for September was revised almost 0.3% higher, from $1,420.4 billion to $1,423.963 billion…the $3.6 billion upward revision to September construction spending would imply that the 3rd estimate of 3rd quarter GDP growth was understated by roughly 0.03 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer…

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,111.8 billion, 1.2 percent (±0.5 percent) above the revised October estimate of $1,098.6 billion. Residential construction was at a seasonally adjusted annual rate of $658.1 billion in November, 2.7 percent (±1.3 percent) above the revised October estimate of $641.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $453.8 billion in November, 0.8 percent (±0.5 percent) below the revised October estimate of $457.6 billion.
  • Public Construction: In November, the estimated seasonally adjusted annual rate of public construction spending was $347.6 billion, 0.2 percent (±1.3 percent)* below the revised October estimate of $348.3 billion. Educational construction was at a seasonally adjusted annual rate of $86.7 billion, 0.3 percent (±1.2 percent)* above the revised October estimate of $86.5 billion. Highway construction was at a seasonally adjusted annual rate of $97.5 billion, 1.8 percent (±3.5 percent)* above the revised October estimate of $95.8 billion.

As you can infer from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in 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 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…that’s problematic because there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for the prices changes of all of those types of construction separately, we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make an approximate price adjustment and thereby get a rough estimate of the real change in construction…

That price index showed that aggregate construction costs were up 0.1% in November after being unchanged in October, down 0.2% in September and down 0.3% in August…on that basis, we can estimate that construction costs for November were up 0.1% from September, down 0.1% from August, and down 0.4% from July, while they were obviously up 0.1% from October…we then use those percentage changes to adjust the spending figures for each of those 3rd quarter months against November, which is arithmetically the same as adjusting lower priced October and November construction spending upward, for purposes of comparison…annualized construction spending in millions of dollars for the third quarter months is given as $1,423,963 for September, $1,426,884 for August, and $1,398,952 for July, while it was at annual rates of $1,446,877 in October and $1,459,440 in November….thus to compare the difference between the inflation adjusted construction spending of the two recent 4th quarter months and those of the third quarter, our calculation would be ((1,459,440 + 1,446,877 * 1.001)/2) / ((1,423,963 *1.001 + 1,426,884 * .999 + 1,398,952 * .996) / 3) = 1.027672, meaning average real construction over the months of October and November was up 2.7672% vis a vis the 3rd quarter…in GDP terms, that means real construction for the 4th quarter has increased at an annual rate of 11.537% from that of the 3rd quarter so far, or at a pace that would add about 1.30 percentage points to 4th quarter GDP, should real December construction continue at the same pace as that of October and November…

Factory Shipments Up 0.7% in November, Factory Inventories Up 0.7%, Both on Higher Prices

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for November from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $5.0 billion or 1.0 percent to $487.2 billion in November, following an increase of 1.3% to $482.2 billion in October, which was revised from the 1.0% increase to $480.8 billion that was reported for October a month ago….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate as revised updates to the October advance report on durable goods we reported on two weeks ago…on those durable goods revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in November, up seven consecutive months, increased $5.0 billion or 1.0 percent to $487.2 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent October increase. Shipments, also up seven consecutive months, increased $3.4 billion or 0.7 percent to $492.9 billion. This followed a 1.2 percent October increase. Unfilled orders, down eight of the last nine months, decreased $0.6 billion or 0.1 percent to $1,073.2 billion. This followed a 0.2 percent October decrease. The unfilled orders-to-shipments ratio was 6.40, up from 6.38 in October. Inventories, up three of the last four months, increased $5.1 billion or 0.7 percent to $692.9 billion. This followed a 0.3 percent October increase. The inventories-to-shipments ratio was 1.41, unchanged from October.
  • New orders for manufactured durable goods in November, up seven consecutive months, increased $2.3 billion or 1.0 percent to $244.4 billion, up from the previously published 0.9 percent increase. This followed a 1.8 percent October increase. Transportation equipment, up six of the last seven months, led the increase, $1.6 billion or 2.1 percent to $79.0 billion. New orders for manufactured nondurable goods increased $2.7 billion or 1.1 percent to $242.8 billion.
  • Shipments of manufactured durable goods in November, up six of the last seven months, increased $0.8 billion or 0.3 percent to $250.1 billion, unchanged from the previously published increase. This followed a 1.5 percent October increase. Miscellaneous products, up nine of the last ten months, led the increase, $0.4 billion or 2.5 percent to $15.5 billion. Shipments of manufactured nondurable goods, up seven consecutive months, increased $2.7 billion or 1.1 percent to $242.8 billion. This followed a 0.8 percent October increase. Petroleum and coal products, up six of the last seven months, led the increase, $1.8 billion or 4.4 percent to $41.6 billion.
  • Unfilled orders for manufactured durable goods in November, down eight of the last nine months, decreased $0.6 billion or 0.1 percent to $1,073.2 billion, unchanged from the previously published decrease. This followed a 0.2 percent October decrease. Transportation equipment, down nine consecutive months, drove the decrease, $3.4 billion or 0.5 percent to $713.4 billion.
  • Inventories of manufactured durable goods in November, up three consecutive months, increased $3.8 billion or 0.9 percent to $426.5 billion, unchanged from the previously published increase. This followed a 0.3 percent October increase. Transportation equipment, up twenty-six of the last twenty-seven months, led the increase, $2.5 billion or 1.7 percent to $150.8 billion. Inventories of manufactured nondurable goods, up three of the last four months, increased $1.3 billion or 0.5 percent to $266.5 billion. This followed a 0.2 percent October increase. Petroleum and coal products, up following two consecutive monthly decreases, led the increase, $0.9 billion or 2.9 percent to $31.3 billion.

To gauge the impact 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 November’s finished goods inventories was 0.8% higher at $247,059 million; the value of work in process inventories was 1.0% higher at $219,930 million, and materials and supplies inventories were valued 0.4% higher at $236,198 million…the producer price index for November indicated that prices for finished goods increased 0.4%, that prices for intermediate processed goods were 1.4% higher, and that prices for unprocessed goods were on average 7.3% higher….assuming similar valuations for like types of inventories, those price changes would suggest that November’s real finished goods inventories were up about 0.4%, that real inventories of intermediate processed goods were around 0.4% smaller, and around 6.9% smaller, with a caveat on that last figure because two-thirds of the increase in the index for unprocessed goods was due to a 48.9% jump in prices for unprocessed natural gas; even so, real raw material inventories were down at least 2% without that…those November inventory changes follow an October report that indicated real finished goods inventories were about 0.1% lower, that real inventories of intermediate processed goods were about 2.6% lower, and that real raw material inventory inventories were about 2.3% lower…since real factory inventories in the 3rd quarter were only slightly lower, any larger inventory decreases in the 4th quarter such as we see indicated here will subtract from GDP by the difference bewteen the 3rd quarter and 4th quarter decreases..

November Wholesale Sales Up 0.2%, Wholesale Inventories Unchanged

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 “$496.7 billion, up 0.2 percent (±0.4 percent)* from the revised October level, but were down 0.2 percent (±1.1 percent)* from the revised November 2019 level.“…October’s sales were revised down to $495,974 million from the $496.6 billion reported last month, and as a result “The September 2020 to October 2020 percent change was revised from the preliminary estimate of up 1.8 percent (±0.4 percent) to up 1.7 percent (±0.4 percent).”  as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold…

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this November report estimated that wholesale inventories were valued at a seasonally adjusted “$649.8 billion at the end of November, virtually unchanged (±0.2 percent)* from the revised October level. Total inventories were down 2.1 percent (±1.1 percent) from the revised November 2019 level”. ..the value of inventories at the end of October was revised to $649.8 billion from the $649.0 billion indicated by last month’s report, which is now up 1.3% from September..

To estimate the impact of November wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index…although details are not broken out in this report, we’ve previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as inventories of crude oil and farm products…as we noted earlier, the producer price index for November indicated that prices for finished goods increased 0.4%, that prices for intermediate processed goods were 1.4% higher, and that prices for unprocessed goods were on average 7.3% higher; thus the lack of change in the nominal value of wholesale inventories was despite rising prices, and hence real wholesale inventories were at least 0.4% lower for the month, and that follows an October when real whole inventories were around 0.5% higher….since real wholesale inventories in the 3rd quarter were down sharply, the change real wholesale inventories in the 4th quarter would thus add to the growth of 4th quarter GDP by first reversing the 3rd quarter decline, and then by incrementing or decrementing that with the magnitude of the 4th quarter change…

 

 

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

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table for January 9th

rig count summary:

January 8 2021 rig count summary

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oil ends 2020 down 20%; natural gas ends up 15%; oil exports at 40 week high

oil prices ended higher for the eighth week in the past nine this week, as a new stimulus bill and a weaker dollar supported prices…after falling 2.1% to $48.24 per barrel last week as a new mutant strain of the coronavirus spreading in the UK worried traders that it would hurt demand for energy, the contract price of US light sweet crude for February delivery rose more than 1% early on Monday after Trump signed the Covid stimulus bill, backing down from his earlier threat to block the $2.3 trillion package, but resumed their slide of the prior week by the afternoon on worries about how the new variant of the Covid-19 would impact demand for energy to end the day down 61 cents at $47.62 a barrel…but oil prices opened higher on Tuesday on progress on a final Brexit deal, which would stabilize trade between Europe and the UK, and finished with a gain of 38 cents at $48.00 a barrel on hopes that a larger pandemic aid payment to US consumers would spur fuel demand and stimulate economic growth…oil prices opened higher again on Wednesday after a bigger-than-anticipated draw from U.S. crude inventories was reported late Tuesday by the American Petroleum Institute, but then fluctuated between gains and losses even after the EIA data showed a larger-than-expected drop in U.S. crude inventories, before settling 40 cents higher at $48.40 a barrel, with gains limited by the detection in Colorado of the more contagious variant of the coronavirus that causes Covid-19oil then traded in a narrow range in light trading on New Years Eve before settling 12 cents higher at $48.52 a barrel, thus posting a 0.6% gain on the week…while finishing the month of December 6.6% higher, oil contracts still lost more than a fifth of their value in 2020, as lockdowns to combat the coronavirus depressed economic activity and sent oil markets reeling

natural gas prices also ended slightly higher in volatile trading this week, as prices first tumbled, and then rallied, on swings in the weather outlook…after falling 6.7% to $2.518 per mmBTU last week as the weather turned milder and inventory withdrawals failed to meet expectations, the contract price of natural gas for January delivery opened more than 8% lower on Monday and quickly fell to an 11% loss on weather models that suggested temperatures for much of the country could be well above normal for early January, before recovering a bit to close down 8 1/2% at $2.305 per mmBTU…but almost as quickly as it fell, the January Nymex natural gas futures contract rebounded sharply ahead of its expiration on Tuesday to post a 7% gain at $2.467 per mmBTU, as robust LNG demand took center stage…now quoting the contract price of natural gas for February delivery, which had ended last week at $2.512 per mmBTU and fell 18 cents monday before bouncing back11.8 cents Tuesday, natural gas prices fell 2.2 cents to $2.422 per mmBTU on Wednesday on a continued bearish weather outlook and a slip in LNG demand, before jumping 11.7 cents or nearly 5% higher to $2.539 per mmBTU on Thursday despite a bearish storage report, after weather models flipped colder for the next couple of weeks and gas production dipped back below 90 billion cubic feet per day ..natural gas ​price ​quotes thus finished the week 0.8% higher, with the February contract showing a 1.0% gain, as natural gas prices posted their strongest year since 2016

the natural gas storage report from the EIA for the week ending December 25th indicated that the quantity of natural gas held in underground storage in the US decreased by 114 billion cubic feet to 3,460 billion cubic feet by the end of the week, which still left our gas supplies 251 billion cubic feet, or 7.8% higher than the 3,209 billion cubic feet that were in storage on December 25th of last year, and 206 billion cubic feet, or 6.3% above the five-year average of 3,254 billion cubic feet of natural gas that have been in storage as of the 25th of December in recent years….the 114 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast of a 123 billion cubic foot withdrawal from an S&P Global Platts survey of analysts, but ​it ​was higher than the average withdrawal of 105 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and much more than the 87 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of 2019….  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 25th indicated that because of a decrease in our oil imports and another increase in our oil exports, we had to withdraw oil from our stored commercial supplies for the 16th time in the past twenty-three weeks and for the 22nd time in the past fifty weeks …our imports of crude oil fell by an average of 238,000 barrels per day to an average of 5,326,000 barrels per day, after risng by an average of 140,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 526,000 barrels per day to a forty week high of 3,625,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,701,000 barrels of per day during the week ending December 25th, 764,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 12,701,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,287,000 barrels of crude per day during the week ending December 25th, 273,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 866,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 719,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+719,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting that there must have been an error or errors of that magnitude in the oil supply & demand figures that we have just transcribed….however, since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as published, just as they’re watched & believed to be accurate by most everyone in the industry….(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 5,698,000 barrels per day last week, which was 14.4% less than the 6,657,000 barrel per day average that we were importing over the same four-week period last year…..the 866,000 barrel per day net withdrawal from our crude inventories was due to a 866,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 2,000 barrels per day decrease to 512,000 barrels per day in Alaska’s oil production had no impact on the rounded national total…last year’s US crude oil production for the week ending December 27th was rounded to 12,900,000 barrels per day, so this reporting week’s rounded oil production figure was 14.7% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 79.4% of their capacity while using ​those​ 14,287,000 barrels of crude per day during the week ending December 25th, up from 78.0% of capacity during the prior week, but excluding the covid collapse earlier this year and the 2005, 2008, and 2017 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the past twenty-eight years….hence, the 14,287,000 barrels per day of oil that were refined this week were still 17.3% fewer barrels than the 17,283,000 barrels of crude that were being processed daily during the week ending December 27th of last year, when US refineries were operating at 94.5% of capacity…

with the increase in the amount of oil being refined, gasoline output from our refineries was higher for the 2nd time in six weeks, increasing by 362,000 barrels per day to 9,191,000 barrels per day during the week ending December 18th, after our gasoline output had increased by 307,000 barrels per day over the prior week…but since our gasoline production is still recovering from a multi-year low in the wake of this Spring’s covid lockdowns, this week’s gasoline output was still 9.7% less than the 10,173,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 49,000 barrels per day to 4,639,000 barrels per day, after our distillates output had decreased by 14,000 barrels per day over the prior week….​but ​since it’s also just coming off a three year low, our distillates’ production was 12.7% less than the 5,311,000 barrels of distillates per day that were being produced during the week ending December 27th, 2019…

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the second time in seven weeks and for 16th time in 26 weeks, falling by 1,192,000 barrels to 237,754,000 barrels during the week ending December 25th, after our gasoline inventories had decreased by 1,125,000 barrels over the prior week…our gasoline supplies decreased this again week because the amount of gasoline supplied to US users increased by 106,000 barrels per day to 8,128,000 barrels per day, and because our exports of gasoline rose by 154,000 barrels per day to 911,000 barrels per day, while our imports of gasoline rose by 30,000 barrels per day to 601,000 barrels per day….after this week’s decrease, our gasoline supplies were 2.4% lower than last December 27th’s gasoline inventories of 242,472,000 barrels, but still about 1% above the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the modest increase in our distillates production, our supplies of distillate fuels increased for the 4th time in 15 weeks, and for the 22nd time in the past year, rising by 3,095,000 barrels to 152,029,000 barrels during the week ending December 25th, after our distillates supplies had decreased by 2,325,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 580,000 barrels per day to 3,594,000 barrels per day, and because our imports of distillates rose by 175,000 barrels per day to 444,000 barrels per day, while our exports of distillates rose by 29,000 barrels per day to 1,222,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 13.7% above the 133,720,000 barrels of distillates that we had in storage on December 27th, 2019, and about 6% above the five year average of distillates stocks for this time of the year…

finally, with the decrease in our oil imports and the increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil being stored in the SPR) fell for the 18th time in the past twenty-nine weeks but for just the 22nd time in the past year, decreasing by 6,065,000 barrels, from 499,534,000 barrels on December 18th to 493,469,000 barrels on December 25th.…but even after that big decrease, our commercial crude oil inventories were still about 11% above the five-year average of crude oil supplies for this time of year, and about 50% above the prior 5 year (2010 – 2014) average of our crude oil stocks as of the last weekend of December, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of December 25th were still 14.8% above the 429,896,000 barrels of oil we had in commercial storage on December 27th of 2019, and also 11.8% more than the 441,418,000 barrels of oil that we had in storage on December 28th of 2018, and 16.3% above the 424,463,000 barrels of oil we had in commercial storage on December 29th of 2017…     

This Week’s Rig Count

note: this week’s rig count was released on Wednesday ahead of the New Year’s weekend, just as last week’s rig count was released on Wednesday ahead of Christmas, which thus means that this week’s count still covers 7 days, albeit not the usual 7 days ending on a Friday…that said, the US rig count rose for the 15th time in the past sixteen weeks during the period ending December 30th, but for just the 17th time in the past 42 weeks, and hence it is still down by 55.7% over that forty-two week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 3 to 351 rigs this past week, which was still down by 445 rigs from the 769 rigs that were in use as of the January 3rd report of 2020, and was also still 53 fewer rigs than the all time low rig count prior to this year, and 1,578 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 3 rigs to 267 oil rigs this week, after rising by 1 oil rig the prior week, leaving us with 403 fewer oil rigs than were running a year ago, and still less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations remained unchanged at 83 natural gas rigs, which was still down by 40 natural gas rigs from the 123 natural gas rigs that were drilling a year ago, and just 5.3% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil or gas, one rig classified as ‘miscellaneous’ continue to drill in Lake County, California this week, while a year ago there were three such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count remained unchanged at 17 rigs this week, with 14 of those rigs drilling for oil in Louisiana’s offshore waters and three drilling for oil offshore from Texas…that was 5 fewer Gulf rigs than the 22 rigs drilling in the Gulf a year ago, when 20 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig figures are equal to the Gulf rig counts….however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 4 to 313 horizontal rigs this week, which was still 388 fewer horizontal rigs than the 701 horizontal rigs that were in use in the US on January 3rd of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count was down by 1 to 21 directional rigs this week, and those were also down by 30 from the 51 directional rigs that were operating during the same week a year ago….meanwhile, the vertical rig count was unchanged at 17 vertical rigs this week, and those were still down by 27from the 44 vertical rigs that were in use on January 3rd of 2020….

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

December 30 2020 rig count summary

as you can see, there were only a few changes in drilling activity this week…checking for the details on the Permian in Texas from the Rigs by State file at Baker Hughes, we find that two rigs were added in Texas Oil District 8, which corresponds to the core Permian Delaware, while the rig count in all other Texas oil districts remained unchanged, which thus accounts for the total change in Texas and the 2 rig increase in the Permian…this week’s only other change is equally straightforward, as the rig that was added in Oklahoma was added in the Cana Woodford, thus accounting for the two other changes we see in the tables above…

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October’s Case-Shiller HPI; Advance Economic Indicators for November

With the major month end reports already released last week, the only widely watched report released this week was the Case-Shiller Home Price Index for October from S&P Case-Shiller, which doesn’t even include any prices of homes, but just a index generated by averaging relative sales prices of homes that sold during August, September and October against the sales prices of the same homes when they sold during prior 3 month periods going back to January of 2000…comparing sales prices on that basis, the Case-Shiller report indicated that their national home price index for those 3 months averaged 8.4% higher than it did for the same homes that sold during the same 3 month period a year earlier, up from the 7.0% year over year index increase indicated by the September report, which covered sales prices from July, August and September….meanwhile, this week also saw the last of the regional Fed manufacturing surveys for December: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +9.7 from November’s +12.0, suggesting that the Texas manufacturing economy is growing slightly slower than a month ago…

In addition, the Census Bureau released three “Advance Economic Indicators” this week, which are sketchy estimates that have typically been released a day before the monthly GDP reports since 2016, & which are intended to give the Bureau of Economic Analysis a basis for their estimates of the related GDP components… the Advance U.S. International Trade in Goods report indicated that our trade deficit in goods increased to $84.8 billion in November from a revised $80.4 billion in October, as November’s exports of goods were valued at $127.2 billion, $1.1 billion more than October’s exports, while November’s imports of goods were valued at $212.0 billion, $5.5 billion more than October’s imports… meanwhile, the Advance Monthly Retail Inventories report indicated that retail inventories were valued at $616.9 billion at the end of November, up 0.7 percent (+/- 0.4%) from October, after October’s revised inventories rose 0.9% from September, while the Advance Monthly Wholesale Inventories report indicated end-of-month wholesale inventories were valued at $649.0 billion, down 0.1 percent (+/- 0.2 percent)* from October, after October’s revised inventories rose 1.2% from September…the details on and revisions to these advance estimates will be provided when the full reports are released in the coming weeks..

 

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

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tables and graphics for January 2nd

rig count summary:

December 30 2020 rig count summary

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oil falls first time in 8 weeks on spread of mutant virus; US oil supplies now more than 50% above the 2010-2014 average

oil prices fell for the first time in 8 weeks this week, as a mutant strain of the coronavirus spreading in the UK prompted a severe lockdown there and new travel restrictions world-wide…after rising more than 5% to $49.10 a barrel last week on a lower dollar and optimism about the vaccine rollouts, the contract price of US light sweet crude for January delivery fell in early trading on Monday as a new, fast-spreading mutant strain of coronavirus in the UK raised concerns that tighter restrictions there and elsewhere would stall th​e​ recovery in the need for fuel, and was down nearly $3 or 6% before recovering to close $1.36 lower at $47.74 a barrel despite the rollout of a new vaccine in the US, a congressional deal for a $900 billion coronavirus aid package, and European approval for the use of the COVID-19 vaccine developed by Pfizer, as trading in the January US oil contract expired…now quoting the contract price of US crude for February delivery, which had fallen $1.27 to $47.97 a barrel on Monday, oil prices continued sliding on Tuesday, following new travel bans and lockdowns in Europe and the U.S. to combat the fast-spreading variant of the disease, as February crude settled 95 cents lower at $47.02 a barrel, with losses limited after France’s Europe minister said his country would restart freight to the UK by the next day…US oil prices then drifted lower in overseas trading after the American Petroleum Institute reported a surprise gain of 2.7 million barrels in US crude supplies, and then opened lower in New York on Wednesday and were down nearly 2% before the EIA reported withdrawals from U.S. inventories of crude, gasoline and distillate fuels, sparking a turnaround in oil prices which then settled 2.34%, or $1.10, higher at $48.12 per barrel…oil prices again moved higher on Thursday on news that Britain and the European Union had signed a post-Brexit trade deal and finished the shortened pre-holiday session 11 cents higher at $48.24 per barrel, but still finished the week 2.1% lower as traders fretted that a resurgence in the Covid-19 pandemic in the U.S. and Europe would hurt demand for energy​,​ without a sufficient bailout from government​s​ to promote consumer and business activity...

natural gas prices also ended lower this week, as the weather turned milder and inventory withdrawals failed to meet expectations…after rising 4.2% to $2.700 per mmBTU last week as major winter storms moved through the eastern US population centers, the contract price of natural gas for January delivery opened more than 1% higher on Monday as surging LNG exports and forecasts for colder weather in late December outweighed concerns over the new coronavirus strain, but slid from the initial spurt to close just a half cent higher at $2.705 per mmBTU as new UK travel restrictions were imposed by several European countries and Canada…natural gas prices then jumped on Tuesday on forecasts for colder weather and expectations of a large withdrawal of gas from storage and held on to settle 7.5 cents higher at $2.780 per mmBTU….however, natural gas futures plummeted on Wednesday as weather models continued to seesaw, gas production increased, export cargoes were cancelled, and the awaited inventory report fell sh​ort of market expectations, and finished 17.2 cents, or over 6% lower, at $2.608 per mmBTU…natural gas prices continued to sink in light Christmas eve trading amid mild temperatures and light heating demand across much of the Lower 48 and settled another 9.0 cents lower at $2.518 per mmBTU, thus closing with a 6.7% loss on the week..

the natural gas storage report from the EIA for the week ending December 18th indicated that the quantity of natural gas held in underground storage in the US decreased by 152 billion cubic feet to 3,574 billion cubic feet by the end of the week, which still left our gas supplies 278 billion cubic feet, or 8.4% higher than the 3,296 billion cubic feet that were in storage on December 18th of last year, and 218 billion cubic feet, or 6.8% above the five-year average of 3,356 billion cubic feet of natural gas that have been in storage as of the 18th of December in recent years….the 152 billion cubic feet that were drawn out of US natural gas storage this week was less than the average forecast from an S&P Global Platts survey of analysts who had expected a 154 billion cubic foot withdrawal, but was higher than the average withdrawal of 127 billion cubic feet of natural gas that have typically been pulled out of natural gas storage during the same week over the past 5 years, and ​more than ​the 146 billion cubic feet withdrawal from natural gas storage seen during the corresponding week of 2019…. 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending December 18th indicated that because of another big increase in our oil exports, we had to withdraw oil from our stored commercial supplies for the 15th time in the past twenty-two weeks and for the 21st time in the past forty-nine weeks …our imports of crude oil rose by an average of 140,000 barrels per day to an average of 5,564,000 barrels per day, after falling by an average of 1,055,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 472,000 barrels per day to an average of 3,099,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,465,000 barrels of per day during the week ending December 18th, 322,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly unchanged at 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,465,000 barrels per day during this reporting week… 

meanwhile, US oil refineries reported they were processing 14,014,000 barrels of crude per day during the week ending December 18th, 169,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 80,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 469,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+469,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting that there must have been an error or errors of that size in the oil supply & demand figures that we have just transcribed….furthermore, since last week’s fudge factor was at -61,000 barrels per day, there was a 530,000 barrel per day balance sheet difference from a week ago, which renders the week over week supply and demand changes we have just transcribed unreliable…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,717,000 barrels per day last week, which was still 12.9% less than the 6,566,000 barrel per day average that we were importing over the same four-week period last year…..the 80,000 barrel per day net withdrawal from our crude inventories was due to a 80,000 barrels per day withdrawal from our commercially available stocks of crude oil, while the oil supplies in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported to be unchanged at 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was unchanged at 10,500,000 barrels per day, while a 13,000 barrels per day increase to 514,000 barrels per day in Alaska’s oil production had no impact on the rounded national total…last year’s US crude oil production for the week ending December 20th was rounded to 12,900,000 barrels per day, so this reporting week’s rounded oil production figure was 14.7% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 78.0% of their capacity while using 14,014,000 barrels of crude per day during the week ending December 18th, down from 79.1% of capacity during the prior week, and excluding ​earlier this year and ​the 2005, 2008, and 2017 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the past twenty-eight years….hence, the 14,014,000 barrels per day of oil that were refined this week were still 17.5% fewer barrels than the 16,980,000 barrels of crude that were being processed daily during the week ending December 20th of last year, when US refineries were operating at 93.3% of capacity…

even with the decrease in the amount of oil being refined, gasoline output from our refineries was higher for the 2nd time in six weeks, increasing by 307,000 barrels per day to 8,829,000 barrels per day during the week ending December 18th, after our refineries’ gasoline output had increased by 182,000 barrels per day over the prior week…but since our gasoline production is still recovering from a multi-year low in the wake of this Spring’s covid lockdown, this week’s gasoline output was still 14.0% less than the 10,269,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 14,000 barrels per day to 4,590,000 barrels per day, after our distillates output had decreased by 67,000 barrels per day over the prior week….since it’s also just coming off a three year low, our distillates’ production was 14.9% less than the 5,394,000 barrels of distillates per day that were being produced during the week ending December 20th, 2019…

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the first time in six weeks and for 15th time in 25 weeks, falling by 1,125,000 barrels to 237,754,000 barrels during the week ending December 18th, after our gasoline inventories had increased by 1,020,000 barrels over the prior week…our gasoline supplies decreased this week because this week’s adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components was at +103,000 barrels per day vs last week’s -370,000 barrels per day, and because the amount of gasoline supplied to US markets increased by 47,000 barrels per day to 8,022,000 barrels per day, and because our imports of gasoline fell by 40,000 barrels per day to 571,000 barrels per day while our exports of gasoline fell by 27,000 barrels per day to 757,000 barrels per day….after this week’s decrease, our gasoline supplies were 0.6% lower than last December 20th’s gasoline inventories of 239,260,000 barrels, but still about 4% above the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels decreased for the 11th time in 14 weeks, and for the 30th time in the past year, falling by 2,325,000 barrels to 148,934,000 barrels during the week ending December 18th, after our distillates supplies had increased by 167,000 barrels during the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 172,000 barrels per day to 4,174,000 barrels per day, and because our exports of distillates rose by 123,000 barrels per day to 1,193,000 barrels per day, and because our imports of distillates fell by 48,000 barrels per day to 444,000 barrels per day….but even after this week’s inventory decrease, our distillate supplies at the end of the week were 19.2% above the 124,944,000 barrels of distillates that we had in storage on December 20th, 2019, and about 10% above the five year average of distillates stocks for this time of the year…

finally, with the increase in our oil exports, our commercial supplies of crude oil in storage (not including the commercial oil in the SPR) fell for the 17th time in the past twenty-eight weeks and for the 20th time in the past year, decreasing by 562,000 barrels, from 500,096,000 barrels on December 11th to 499,534,000 barrels on December 18th.…but even after that ​modest ​decrease, our commercial crude oil inventories rose to 11% above the five-year average of crude oil supplies for this time of year, and ​rose to 50.8% above the prior 5 year (2010 – 2014) average of our crude oil stocks as of the third weekend of December, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had generally been rising over the past two years, except for this autumn and during the past two summers, after generally falling over the year and a half prior to September of 2018, our commercial crude oil supplies as of December 18th were 13.2% above the 441,359,000 barrels of oil we had in commercial storage on December 20th of 2019, also 13.2% more than the 441,411,000 barrels of oil that we had in storage on December 21st of 2018, and 14.4% above the 436,491,000 barrels of oil we had in commercial storage on December 15th of 2017…     

This Week’s Rig Count

note: this week’s rig count was released on Wednesday ahead of the Christmas holiday, and hence only covers five days…nonetheless, the US rig count rose for the 14th time in the past fifteen weeks during the period ending December 23rd, but for just the 16th time in the past 41 weeks, and hence it is still down by 56.​1% over that thirty-eight week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 2 to 348 rigs this past week, which was still down by 457 rigs from the 805 rigs that were in use as of the December 27th report of 2019, and was also still 56 fewer rigs than the all time low rig count prior to this year, and 1,581 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 1 rig to 264 oil rigs this week, after rising by 5 oil rigs the prior week, leaving us with 413 fewer oil rigs than were running a year ago, and still less than a sixth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by 2 to 85 natural gas rigs, which was still down by 42 natural gas rigs from the 125 natural gas rigs that were drilling a year ago, and just 5.3% of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil ​or gas, one rig classified as ‘miscellaneous’ continue to drill in Lake County, California this week, while a year ago there were three such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count increased by 1 to 17 rigs this week, with 14 of those rigs drilling for oil in Louisiana’s offshore waters and three drilling for oil offshore from Texas…that was still 6 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when 21 Gulf rigs were drilling for oil offshore from Louisiana, one rig was drilling for natural gas in the Mississippi Canyon offshore from Louisiana, and one rig was drilling for oil offshore from Texas…since there are no rigs operating off of other US shores at this time, nor were there a year ago, this week’s national offshore rig figure​s​ are equal to the Gulf rig counts….however, in addition to those rigs offshore, two rigs continue to drill through inland bodies of water this week, one in St Mary parish in southern Louisiana and the other in Chambers County, Texas, just east of Houston, while a year ago there was just one rig drilling on US inland waters..

The count of active horizontal drilling rigs was up by 1 to 309 horizontal rigs this week, which was still 394 fewer horizontal rigs than the 703 horizontal rigs that were in use in the US on December 27th of last year, and less than a quarter of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count was up by 1 to 22 directional rigs this week, but those were also still down by 31 from the 53 directional rigs that were operating during the same week of last year….meanwhile, the vertical rig count was unchanged at 17 vertical rigs this week, and those were still down by 32 from the 49 vertical rigs that were in use on December 27th of 2019….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of December 23rd, the second column shows the change in the number of working rigs between last week’s count (December 18th) and this week’s (December 23rd) count, the third column shows last week’s December 18th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 27th of December, 2019…    

December 23 2020 rig count summary

note that this week saw the first decrease in the Permian basin rig count since September 11th….so, first checking for the details on the Permian in Texas, we find that one rig was added in Texas Oil District 8, which corresponds to the core Permian Delaware, while one rig was pulled out of Texas Oil District 7C, which roughly corresponds to the southern portion of the Permian Midland, which thus means that the net Permian rig count in Texas was unchanged…since the Permian basin rig count was down by 1 rig nationally, that means that the rig that was shut down in New Mexico must have been pulled out of the farthest west reaches of the Permian Delaware, to account for the national Permian decrease…elsewhere in Texas, we ha​​ve a rig added in Texas Oil District 6, which accounts for one of this week’s Haynesville shale rig additions. while the other two Haynesville rigs were added in adjacent north​west​ern Louisiana….those two Haynesville​ gas​ rigs and the oil rig that was added offshore account for Louisiana’s 3 rig increase…at the same time, in Oklahoma we ha​d a rig added in the Cana-Woodford while there​ was a two rig increase in the state, which means that an Oklahoma rig was added in an “other” basin that Baker Hughes does not track…on the other hand, the rig count is down by one in Colorado because there was a rig pulled out of the Denver-Julesburg Niobrara chalk….meanwhile, for rigs targeting natural gas, we have the three rigs that were added in the Haynesville​ shale​, while a natural gas rig was pulled out of West Virginia​’s​ Marcellus at the same time..

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