the coming LNG export wave; oil refining at a two year low, refinery utilization at a 4 year low, oil exports at all time high

oil again traded in a narrow price range this week, ending about 1.0% higher at $53.99, although such a week over week comparison really shouldn’t be made, because this week’s prices were for April delivery, while last week’s price quotes were for March oil…after closing last week at $53.40 a barrel, March oil traded 22 cents higher on the Presidents’ Day holiday for settlement on Tuesday as traders again played rising U.S. drilling activity against OPEC production cuts….prices then rose to near three-week highs on Tuesday after OPEC Secretary General Mohammad Barkindo told an oil conference that compliance with the output cuts was above 90 percent and that oil supplies would fall, with the expiring March contract closing out at $54.06 and the new front month April contract up 1% to $54.37…prices for April oil then fell about 1.5% on Wednesday on expectations of another surge in U.S. inventories, which were to be reported after the market closed at 4:30 PM, with that April contract closing at $53.59 a barrel…however, oil prices bounced back to close at $54.45 a barrel on Thursday after API estimates of supply indicated a small draw, with distillates seeing the largest draw since October 2014…oil prices then fell back on Friday, after EIA data showed an increase in both crude production and inventories, and yet another record high for the later, and ended the session 46 cents lower at $53.99 a barrel….

on the other hand, natural gas prices took another tumble this week, with the contract for March falling from a quote of $2.834 per mmBTU on Monday to $2.564 per mmBTU on Tuesday, as the post holiday markets opened to record warmth across a broad swath of the country…that price for March natural gas then recovered a bit in light trading, to $2.592 per mmBTU on Wednesday and to $2.617 per mmBTU on Thursday, when trading in the March natural gas contract expired…prices for the April natural gas contract then rose 3.8 cents to close at $2.787 on Friday, as increasing power loads and modestly higher peak power forecasts helped support prices

as we pointed out last week, natural gas drilling activity has typically slowed at these price levels, only picking up when price quotes approach $4 per mmBTU, such that drillers can usual contract to sell their initial high output at prices above those levels…so while indications are that contract prices will stay below those break even levels in the near term, the specter that natural gas exports will eventually put pressure on supplies and raise prices to stimulate more drilling is still a threat we’ll have to deal with…that was brought to the fore by two reports that were released this week, both of which forecast higher future demand for US LNG (liquefied natural gas) exports…

the first report, released Monday, was Royal Dutch Shell’s Outlook, an annual report which had previously been released by British Gas (BG), who Shell bought out early last year…they expect global natural gas demand to average an annual increase of 2% a year between 2015 and 2030, with LNG demand expected to rise at twice that rate, at 4 to 5% per year…in the year just ended, LNG import demand grew by 17 million tons to 265 million tons…the bar graph below from Shell shows where most of the growth in LNG imports came from last year:

February 25 2017 LNG import growth

the above graphic comes from page 9 of the the slide booklet of the 2017 Shell LNG Outlook and it shows the counties that increased their LNG imports last year, and by how much…in addition, those countries who were not LNG importers in 2015 are indicated in red, so all of their 2016 imports thus represent increased demand…note the US is the 3rd from the left, as even we increased LNG imports a bit last year…according to Shell, future demand for LNG will come from 2 groups of countries; those where LNG will be needed to replace declining domestic production, which includes countries such as India, Thailand, Malaysia, Indonesia, Kuwait, the Emirates, and Egypt, and those where LNG will supplement existing pipeline or domestic supplies, such as China, southern Europe and eastern Europe…

the second report that projected rising LNG demand was from the Wednesday release of the EIA’s daily “today in energy” series, and was titled Liquefied natural gas exports expected to drive growth in U.S. natural gas trade…projecting from the Annual Energy Outlook 2017 base reference case, they expect us to become a net exporter of natural gas on an average annual basis by 2018…this will occur as our imports of natural gas from Canada fall and as our LNG exports increase, as they expect four more LNG export facilities that are currently under construction to be completed by 2021…the lead graphic from that report, which we’ll include below, shows how this plays out over the next 20 years…

February 23 22017 natural gas trade projections

the above graphic, which we’ve copied from Wednesday’s release Today in Energy, shows our imports of natural natural gas in trillions of cubic feet as a negative below the zero line, and our exports of natural gas in  trillions of cubic feet as a positive above the zero line, with historical data represented for the years from 1980 to 2016, and projections shown for the years from 2017 to 2040…below the zero line, our natural gas pipeline imports from Canada are shown in pink, and our LNG imports are represented by light blue…above the line, our natural gas pipeline exports to Mexico are represented by the burnt orange shading, our pipeline exports to Canada are represented by the rose shaded section, and our projected LNG exports from existing and under construction port facilities are represented by the navy blue shaded part of the graph…while we’ve had weeks in 2017 where our exports may have exceeded our imports, and will likely have such weeks again in 2017, this projection is on an annual basis, and according the EIA, we were a small natural gas net importer in 2016 and will again be an importer in 2017….clearly, our current LNG exports are still so small they barely show up in 2016 on a graph of this scale…

right now, only one U.S. export facility is currently in operation, Sabine Pass, on the Gulf of Mexico border between Texas and Louisiana, where just 4.5 million tons per annum is operational, and 27 million tons per annum is still under construction… however, the Federal Energy Regulatory Commission has approved natural gas export terminals with a capacity of 17 billion cubic feet (bcf) per day, which would represent the offshoring of about 19% of current U.S. natural gas production…furthermore, if all terminals for which applications are pending or expected are included, the quantity of our LNG exports goes up to 42 billion cubic feet (bcf) per day, or about 47 percent of our current natural gas production…right now, roughly 40% of our natural gas production comes from the old legacy gas fields in the south, primarily in Texas and Louisiana, while the other 60% of our output comes from 7 shale basins, with the Marcellus and the Utica account for roughly half of that…should all these export terminals be pushed through, however, almost all of the new gas will have to come from the pure natural gas shale plays, the Marcellus, the Utica, and the Haynesville, which means there will be a massive expansion of drilling and fracking to meet these natural gas export requirements…

Australia is a bit ahead of us in exporting LNG, and their experience should give us a sense of what our coming LNG exports will do to U.S. natural gas prices…contracts for natural gas exports are written well in advance of delivery, and as a result Australians living in the country’s eastern region ended up paying more than twice as much for natural gas last winter than did Japanese customers taking delivery of liquefied natural gas (LNG) from the same fields…the same could easily happen here…presently, US gas futures prices are generally below $3 per mmBTU, while current LNG prices in Japan are over $7 per mmBTU…even worse, just a couple weeks ago Spain was paying more than $10 per mmBTU for LNG…if an US gas exporter contracts to deliver LNG to Japan or Spain at those prices, they’ll get the gas from US shale production before US customers who dont have a contract do…if that should occur during a cold snap in mid winter, a shortage of natural gas could develop domestically, sending our prices skyrocketing…and in such a case, some of us who cant afford the higher priced natural gas simply wont get it….we know this happens, because just three years ago an LP gas shortage developed in the US for exactly the same reason, and as US LP gas prices spiked while our LP gas exports soared, a North Dakota Standing Rock Sioux woman was found dead, froze to death in her mobile home, with an empty propane tank…we can expect the same to happen here once natural gas prices rise to levels beyond which those on fixed income can afford it…

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 17th from the US Energy Information Administration showed that our imports of crude oil fell to the lowest level since October and our refining of that crude oil fell for the 6th week in a row to the lowest rate in two years, leaving us with a small surplus of crude to add to our stored oil supplies, which thus were at another an all time high…our imports of crude oil fell by an average of 1,205,000 barrels per day to an average of 7,286,000 barrels per day during the week, while at the same time our exports of crude oil rose by 185,000 barrels per day to an average of 1,211,000 barrels per day, which meant that our effective imports netted out to 6,075,000 barrels per day for the week, 1,390,000 barrels per day less than last week…at the same time, our crude oil production rose by 24,000 barrels per day to an average of 9.001,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 15,076,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,271,000 barrels of crude per day during the week, 187,000 barrels per day less than during the prior week, while at the same time, 81,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we used or stored 276,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 276,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that balance sheet number by backing into it, using the same arithmetic we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports fell to an average of 8.36 million barrels per day, still 7.5% higher than the same four-week period last year…at the same time our crude oil exports at 1,211,000 barrels per day was another new record for oil exports, beating the record set last week, and as a result our crude oil exports are now averaging 3 times what we were exporting last February…meanwhile, this week’s 24,000 barrel per day oil production increase included a 17,000 barrel per day increase in oil production in the lower 48 states and a 7,000 barrel per day increase in output from Alaska…topping 9 million barrels per day for the first time since last April, our crude oil production for the week ending February 17th was just 1.1% lower than the 9,102,000 barrels of crude that we produced during the week ending February 19th of last year, while it remained 6.3% below our June 5th 2015 record oil production of 9,610,000 barrels per day…

the 15,271,000 barrels of crude per day that were refined this week was down by 10.7% from the 17,107,000 barrels per day being refined during the first week of this year, and 2.4% less than the 15,685,000 barrels being refined during the same week last year….US refineries were operating at 84.3% of their capacity in the week ending February 17th, their lowest operating rate in nearly 4 years, down from 85.4% of capacity the prior week and down from the 87.3% capacity utilization rate during the week ending February 19th year ago…since we’re at an interim nadir for refinery throughput and capacity utilization this week, we’ll include a graph of what that looks like compared to historical trends below…

February 23 2017 refinery throughput for Feb 17

the above graph comes from an emailed package of graphs from John Kemp, who is a senior energy analyst and columnist with Reuters (see my footnote below)…this graph shows US refinery throughput in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our refinery throughput on any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the daily range, traced by the blue dashes over each day of the year…the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented in red…there is an obvious seasonality to oil refining, with demand highest in the summer and again around the holidays, but we can still see that for most all of 2016 and the first five weeks of 2017, oil refining was either at seasonal record highs or near the top of the average range…however, with domestic inventories of gasoline, distillates and most other refined products also at record levels in recent weeks, storage space for refined products has been stretched to its limits, profit margins for refineries fell to the lowest in a year, and thus refiners have cut back on the amount of oil they processed…

however, even though they refined less oil this week, gasoline production from those refineries still rose by 479,000 barrels per day to 9,429,000 barrels per day during the week ending February 17th, which was still 5.4% less than the 10,009,000 barrels per day of gasoline that were produced during the week ending February 19th a year ago…meanwhile, refineries’ production of distillate fuels (diesel fuel and heat oil) also rose, increasing by 136,000 barrels per day to 4,467,000 barrels per day, which was up fractionally from the 4,438,000 barrels per day of distillates that were being produced during the week ending February 19th last year, during a mild El Nino winter… 

however, even with the increase in our gasoline production, the EIA reported that our gasoline inventories fell by 2,628,000 barrels to 256,435,000 barrels as of February 17th, in the second drop in our gasoline supplies in the past 8 weeks…that happened as our domestic consumption of gasoline rose by 230,000 barrels per day to a still below normal 8,663,000 barrels per day, while our gasoline exports rose by 293,000 barrels per day to 848,000 barrels per day and our gasoline imports fell by 238,000 barrels per day to 367,000 barrels per day…however, even with this week’s inventory draw down, our gasoline supplies are up by nearly 29.3 million barrels since Christmas, remain statistically on a par with the 256,457,000 barrels of gasoline that we had stored on February 19th of last year, and are still 6.8% above the 240,014,000 barrels of gasoline we had stored on February 20th of 2015… 

similarly, even with the increase in our distillates production, our supplies of distillate fuels fell by 4,924,000 barrels to 165,133,000 barrels by February 17th, as the amount of distillates supplied to US markets, a proxy for our consumption, rose by 439,000 barrels per day to 4,292,000 barrels per day, and as our imports of distillates fell by 87,000 barrels per day to 129,000 barrels per day and as our exports of distillates were up 15,000 barrels per day to 1,007,000 barrels per day….even so, our distillate inventories are still 2.7% higher than the distillate inventories of 160,715,000 barrels of February 19th last year, and 33.4% above the distillate inventories of 124,698,000 barrels of February 20th, 2015…  

finally, with the major curtailment in our refining, we again had surplus crude remaining, and hence our inventories of crude oil rose for the 7th week in a row, increasing by 564,000 barrels to 494,762,000 barrels by February 17th, which was yet another record for our crude supplies…thus we ended the week with 8.2% more crude oil in storage than the 479,012,000 barrels we ended 2016 with, 8.9% more crude oil in storage than the then record 476,325,000 barrels we had stored on February 19th of 2016, 29.7% more crude than the 399,943,000 barrels of oil we had in storage on February 20th of 2015 and 56.7% more crude than the 331,024,000 barrels of oil we had in storage on February 21st of 2014…   

This Week’s Rig Count

US drilling activity increased for the 16th time in 17 weeks during the week ending February 24th, but the 5 week string of double digit rig count increases has finally ended….Baker Hughes reported that the total count of active rotary rigs running in the US increased by just 3 rigs to 754 rigs in the week ending on this Friday, which was 251 more rigs than the 502 rigs that were deployed as of the February 26th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the number of rigs drilling for oil rose by 5 rigs to 602 rigs this week, which was up from the 400 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations fell by 2 rigs to 151 rigs this week, which was still up from the 102 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work…   

the drilling platform that had been working offshore from Alaska was shut down this week, coincidentally the same week that we learned that an offshore gas pipeline under the Cook Inlet sprung a leak…that left the total US offshore count for the week at 17 rigs, all in the Gulf of Mexico, down from 27 offshore rigs a year ago, when again they were all in the Gulf of Mexico…at the same time, a rig was set up on an inland lake in southern Louisiana, where there are now 4 of them, up from two inland water rigs a year ago…

.the number of horizontal drilling rigs working in the US increased by 10 rigs to 624 rigs this week, which is now up by 227 rigs from the 397 horizontal rigs that were in use in the US on February 26th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, 3 directional rigs were shut down during the week, cutting the directional rig count back to 69, which was still up from the 47 directional rigs that were deployed during the same week last year…in addition, a net of 4 vertical rigs were stacked this week, reducing the vertical rig count to 61, which was still up from the 58 vertical rigs that were deployed during the same week a year ago…

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of February 24th, the second column shows the change in the number of working rigs between last week’s count (February 17th) and this week’s (February 24th) count, the third column shows last week’s February 17th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 26th of February, 2016…        

February 24 2017 rig count summary

again, this week’s drilling changes were mostly about Texas, where they added 8 rigs, including 3 in the Permian in west Texas and another 3 in the Eagle Ford of south Texas…2 more rigs were also added in the Cana Woodford, site of the hot SCOOP and STACK plays…two rigs were shut down in Alaska, including the one offshore, and a net of two were pulled from Louisiana; otherwise, not much changed…note that outside of the major producing states shown above, Indiana also had their only active rig shut down this week; that left them unchanged from a year ago, though, when the state also had no drilling activity…

* * * * *

as i noted, one of the graphs that i included above was from an emailed package of graphs from John Kemp, a senior energy analyst and columnist with Reuters…i had used two of his graphs taken from his twitter account the prior week and in so doing, noted a twitter message from him which said: SIGN UP to receive a free daily digest of best in energy news + my research notes by emailing john.kemp@tr.com
so i requested to be included on his daily digest mailing list and he responded: With pleasure.  If you know anyone else who might like to receive the daily digest and my research notes, please encourage them to contact me and I will add their emails to the circulation as well.  The mailing list is open to anyone interested in energy. Very best wishes.  John. 
i am now receiving a daily mailing of links & graphics, copies of his columns as published, and what appears a weekly pdf of graphs… so if anyone is interested in receiving the same, please write to John Kemp as noted above…alternatively you can also follow him on twitter, @ https://twitter.com/JKempEnergy where he seems to post much of what he otherwise mails…since i dont use twitter, his emails work best for me…

Posted in Uncategorized | Leave a comment

new home sales and existing home sales for January

the only two widely watched reports that were released this past week were the January report on new home sales from the Census bureau and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…we also saw the release of the Chicago Fed National Activity Index (CFNAI) for January, a weighted composite index of 85 different economic metrics, which fell to -0.05 in January from +0.18 in December, which was revised from the +0.14 reported last month…at the same time, the 3 month average of that index rose to -0.02 in January, up from a revised  -0.03 in December, which still indicates that national economic activity has been slightly below the historical trend over recent months…in addition, this week also saw the release of the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index at +14, up from +9 in January, its highest reading since June 2011, indicating an ongoing expansion in that region’s manufacturing…

New Home Sales Little Changed in January

the Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 555,000 homes annually, which was 3.7 percent (±18.5%)* above the revised December annual sales rate of 535,000 new single family homes and 5.5 percent (±25.4 percent)* above the estimated annual rate that new homes were selling at in January of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December, or even from January sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in December were revised from the annual rate of 536,000 reported last month to an annual rate of 535,000, and new home sales in November, initially reported at an annual rate of 592,000 and revised to a 598,000 rate last month, were revised down to a 575,000 a year rate with this report, while October’s annualized new home sales rate, initially reported at an annual rate of 563,000 and revised up to a 571,000 a year rate last month, were revised back down to a 568,000 rate with this release…

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 41,000 new single family homes sold in January, up from the estimated 38,000 new homes that sold in December but down from the 46,000 that sold in November…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $312,900, down from the median sale price of $316,200 in December but up from the median sales price of $291,100 in January a year ago, while the average January new home sales price was $360,900, down from the $378,900 average sales price in December, and down from the average sales price of $365,600 in January a year ago….a seasonally adjusted estimate of 265,000 new single family houses remained for sale at the end of January, which represents a 5.7 month supply at the January sales rate, down from the 5.8 months of new home supply reported in December…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 555,000 Annual Rate in January and A few Comments on January New Home Sales

January Existing Home Sales 3.3% Higher

the National Association of Realtors (NAR) reported that existing home sales rose by 3.3% from December to January on a seasonally adjusted basis, projecting that 5.69 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was just 0.7% above the annual sales rate projected in January of a year ago…December sales are now shown to have been at a 5.51 million annual rate, revised up from the 5.49 million annual rate indicated by last month’s report…the NAR also reported that the median sales price for all existing-home types was $228,900 in January, down from $233,300 in December, but 7.1% higher than in January a year earlier, which they report as “the 59th consecutive month of year-over-year gains”…..the NAR press release, which is titled “Existing-Home Sales Jump in January“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually transpired during the month…this unadjusted data indicates that roughly 320,000 homes sold in January, down by 26.8% from the 437,000 homes that sold in December, but up by 6.0% from the 302,000 homes that sold in January of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures to show a month over month increase….that same pdf indicates that the median home selling price for all housing types fell 1.9%, from a revised $233,300 in December to $228,900 in January, while the average home sales price was $271,000, down 1.4% from the $274,900 average sales price in December, but up 5.2% from the $257,700 average home sales price of January a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: “Existing-Home Sales Jump in January” and A Few Comments on January Existing Home Sales

 

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

Posted in Uncategorized | Leave a comment

February 25th graphics

refinery throughput:

February 23 2017 refinery throughput for Feb 17

rig count summary:

February 24 2017 rig count summary

2016 natural gas import increases:

February 25 2017 LNG import growth

natural gas imports and exports:

February 23 22017 natural gas trade projections

Posted in Uncategorized | Leave a comment

record highs for US oil exports, gasoline and crude supplies; monthly OPEC and DUC reports, et al

oil contracts once again traded in a narrow price range this week, sliding by 90 cents a barrel to $52.93 a barrel on Monday, and then gradually clawing more than half of that drop back to end the week at $53.40 a barrel, down less than 1% for the week…oil traders seem to believe that the OPEC production cuts will eventually dent the supply glut, which has kept prices from falling below current levels, while US crude inventories continue to pile up, holding back any price increases…rather than discussing how prices moved, we’ll just include a current graph so you can see for yourself…

February 18 2017 crude oil prices

the graph above shows the daily closing prices per barrel of oil over the past 3 months for the March contract for the US benchmark oil, West Texas Intermediate (WTI), as stored or to be delivered to the Cushing Oklahoma storage depot…we can see how oil prices jumped 14% during the last week of November, after the OPEC deal was announced, inched up a bit from there to approach $55 a barrel in December, and then slipped back to the $52 to $54 a barrel range over the past 6 weeks…this is a far cry from the 5% a day price changes we saw over most of 2015 and 2016, and we should figure that kind of volatility will return once prices break out of this narrow range…

next we’ll include a similar graph of natural gas prices, so you can all see what’s happened to them as our winter has turned warmer than expected:

February 17 2007 natural gas prices

the above graph shows the daily closing contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in March at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US…as you can see, natural gas contract quotes have been sliding since Christmas, at a time when a cold snap brought on the largest December drawdown of natural gas supplies in 6 years…at that time, the then current January contract hit a 2 year high of $3.93 per mmBTU, which ultimately led to a nominal increase in drilling for gas early this year…historically, however, natural gas drilling activity has been on a long downtrend from the 1,606 natural rigs that were deployed on August 29th, 2008, only increasing briefly in late 2009 and early 2010 and again in 2014 in the months after natural gas prices briefly rose above $4.00 per mmBTU, but ultimately sliding to just 82 rigs on June 3rd, 2016 after gas price had earlier slipped below $2 per mmBTU…so although this week has seen another small rig increase, that’s probably drilling that was contracted for earlier in the year…absent such contracts, we should expect gas drilling to slow down again until such time as natural gas prices rise appreciably from these levels…

OPEC’s February report

Monday of this past week saw the release of the OPEC Monthly Oil Market Report for February (covering January data), so we’ll look at that first, because it’s the production data in this report, not the IEA estimates that we looked at last week, that will determine, by OPEC’s own standards, whether their members have complied with the agreed to production cuts or not…this first table is from page 59 of the OPEC pdf and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled…for all their official production measurements, OPEC uses “secondary sources”, such as analyst’s reports from satellites and shipping data, as an impartial adjudicator of their output quotas and production cuts, to resolve any potential disputes that might arise if each member reported their own figures…this is also the data we typically see quoted in the media, other than in independent analysis by energy research divisions of organizations such as Platts and Reuters that’ll have their own numbers.. 

February 18 2017 January OPEC production

here we see that the official data shows that OPEC production was down by 890,200 barrels per day in January, from a December oil production total that was revised 56,000 barrels per day lower from what was reported last month…(for your reference, here is the December table before those revisions)…recall that OPEC committed to reducing their production by 1.2 million barrels per day, so these initial figures show they’re not there yet….these figures are also somewhat less than the 1.04 million barrels per day that the IEA said that OPEC had cut last week, but IEA numbers were higher for December, so their total of 32.06 million barrels per day in January production is closer to OPEC’s figure…the IEA showed that the Saudis had cut 560,000 barrels per day to end January at 9.98 million barrels per day, whereas these official numbers indicate the Saudis cut 496,000 barrels per day to end at 9.946 million barrels per day…the IEA also showed smaller cuts for Iraq and the Emirates, two major producers who have only cut half what they promised, than OPEC shows, so these figures would seem to indicate that the cooperation with the cuts is more evenly spread than IEA figures had indicated, even if it was less overall… 

the next table, also from page 59 of the OPEC pdf, shows the oil production that each of the members reported to OPEC (for those that did report)…this data is considered suspect because of the many incentives OPEC members have to fudge their data, and is rarely reported by the media, but i’m including it as a curiosity, because OPEC members are quite obviously reporting that they’ve cut their output more than the official figures show…what stands out below is that the Saudis claimed to have cut 717,600 barrels per day, while the official totals “from secondary sources” above show they’ve actually only cut 496,200 barrels per day….that’s important because Saudi claims are usually reported by the media, and often move the price of oil…

February 18 2017 January reported OPEC production

next, we’ll include a graph of the OPEC data for all members included in this report, so we can see how this month’s production stacks up next to historical figures…

February 16 2017 OPEC Januaary outpul

the above graph, taken from the ‘OPEC oil charts” page at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to January 2017…obviously, we can see that OPEC production is down quite a bit over the past two months from their record production of 33,374,000 million barrels per day in November, in their run-up before the agreement was reached, but note that their current production is still more than what they were producing last April and May of 2016, and every other month before that, including last January, when they produced 31,628,000 barrels per day (a figure i arrived at by subtracting Indonesian production from the 14 member total they reported last year.pdf) …that means that despite all of the hullabaloo they’ve made over cutting production, their January 2017 production of 32,139,000 barrels per day is still 1.6% more oil than they were producing in January 2016…

this next graphic we’ll include, as the heading tells us, shows us both OPEC and world oil production monthly on the same graph, from February 2015 to January 2017, and it also comes from page 59 of the February OPEC Monthly Oil Market Report…the pale blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, and that’s shown on the right scale…global oil production fell to 95.82 million barrels per day in January, and OPEC production thus represented 33.5% of what was produced globally, a decrease from 34.0% in December…but even with the two months of cuts we can obviously see here, global oil supply is still in surplus, as the table after this graph will show..

February 18 2017 January world oil supply

the table below comes from page 34 of the February OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC’s forecast for oil demand by region and globally over 2017 over the rest of the table…while the changes by region from quarter to quarter may be interesting, the reason we’re including this table here today is for the forecast for oil demand in the first quarter of 2017, which is shown on the “Total world” line of the second column…projections are that during the first three months of this year, all oil consuming areas of the globe will use 94.84 million barrels of oil per day, up from the 94.62 millions of barrels of oil per day they used in 2016…but as OPEC showed us in the supply section of this report and the summary supply graph above, even with the production cuts, the world’s oil producers were still producing 95.82 million barrels per day during January…that means that even after all the production cuts have take place, there was still a surplus of around a million barrels per day in global oil production…

February 18 2017 January world oil demand

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 10th from the US Energy Information Administration showed that our imports of crude oil fell back from last week’s record but remained elevated, while our refining of that oil fell for the 5th week in a row to the second lowest rate in a year, and as a result there was another large surplus of crude added to our oil supplies, which were thus boosted to an all time high…our imports of crude oil fell by an average of 881,000 barrels per day to an average of 8,491,000 barrels per day during the week, while at the same time our exports of crude oil rose by 459,000 barrels per day to an average of 1,026,000 barrels per day, which meant that our effective imports netted out to 7,465,000 barrels per day for the week, 1,340,000 barrels per day less than last week…at the same time, our crude oil production slipped by 1,000 barrels per day to an average of 8,977,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,442,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,458,000 barrels of crude per day during the week, 435,000 barrels per day less than during the prior week, while at the same time, 1,361,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we consumed or stored 377,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 377,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that number by backing into it, using the same method we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports inched up to an average of 8.491 million barrels per day, 9.9% higher than the same four-week period last year…we should also note that our crude oil exports of 1,026,000 barrels per day is a new record for oil exports, beating the prior record set in the first year of this year by 299,000 barrels per day…so you’ll be sure to see that, we’ll include a self explanatory.graph of that jump in our exports from the EIA’s crude oil exports page, directly below…..

February 18 2017 crude oil exports for February 10

meanwhile, this week’s 1,000 barrel per day oil production decrease included a 6,000 barrel per day increase in oil production in the lower 48 states, offset by a 7,000 barrel per day decrease in output from Alaska…our crude oil production for the week ending February 10th was 1.7% lower than the 9,135,000 barrels of crude that we produced during the week ending February 12th of last year, while it remained 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day…

US refineries were operating at 85.4% of their capacity in using those 15,458,000 barrels of crude per day, down from 87.7% of capacity the prior week, and down from the year high of 93.6% of capacity just five weeks earlier, when they were processing 17,107,000 barrels of crude per day….their processing of oil is also down by 2.5% from the 15,848,000 barrels of crude that were being refined during the week ending February 12th, 2016, when refineries were operating at 88.3% of capacity….with the refinery slowdown, gasoline production from our refineries fell by 854,000 barrels per day to 8,950,000 barrels per day during the week ending February 10th, which was 7.5% less than the 9,675,000 barrels per day of gasoline that were being produced during the week ending February 12th a year ago…at the same time, refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 271,000 barrels per day to 4,531,000 barrels per day, which was 2.8% less than the 4,663,000 barrels per day of distillates that were being produced during the week ending February 12th last year, also during a mild winter…

however, even with the big drop in our gasoline production, the EIA reported that our gasoline inventories rose by 2,846,000 barrels to a record 259,063,000 barrels as of February 10th, in the sixth increase in our gasoline supplies in 7 weeks…that happened as our domestic consumption of gasoline fell by 508,000 barrels per day to 8,433,000 barrels per day, again well below normal for this time of year…in addition, our gasoline exports, which have often served to reduce our excess supplies, fell by 447,000 barrels per day to 555,000 barrels per day, while our imports of gasoline fell by 207,000 barrels per day to 604,000 barrels per day, making for the first week our gasoline imports exceeded our gasoline exports since the week ending October 14th…since this week’s gasoline supplies are at an all time time high, we’ll include a graph of their recent history here…

February 16 2017 gasoline inventory as of Feb 3

the above graph comes from the twitter feed of John Kemp, who is an energy analyst and columnist with Reuters…it shows US gasoline stores in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our supplies, or the middle of the daily range, traced by the blue dashes over each day of the year…the graph also shows our 2016 gasoline inventories traced weekly in a yellow line, with our year to date 2017 gasoline supplies represented in red…thus we can clearly see that for almost all of 2016, our gasoline supplies were at a seasonal high for every given date, and so far in 2017, our weekly totals have broke those year old 2016 records…

and that’s what happened this week…last year, on February 12th, our gasoline supplies rose to a new record of 258,693,000 barrels, beating the February 13th 2015 record of 243,132,000 barrels by 6.4%…this week’s 259,063,000 barrels thus topped last year’s record by just a small fraction, but it is still a new record nonetheless…recent years have shown that gasoline supplies usually start to fall after the 2nd week of February, (which is clearly visible on the graph), so that may very well happen again this year…still, our gasoline stores are now up by nearly 32 million barrels since Christmas, and on track to continue setting seasonal records higher than those set last year..

meanwhile, the big drop in distillates production served to reduce our supplies of distillate fuels by 689,000 barrels to 170,057,000 barrels by February 10th, as the amount of distillates supplied to US markets, a proxy for our consumption, fell by 57,000 barrels per day to 3,853,000 barrels per day, and as our exports of distillates fell by 105,000 barrels per day to 992,000 barrels per day…even so, our distillate inventories are still 4.7% higher than the distillate inventories of 162,375,000 barrels of February 12th last year, and 33.5% above the distillate inventories of 127,409,000 barrels of February 13th, 2015… 

lastly, the ongoing elevated level of our oil imports, combined with slack refining, led to another large addition to our weekly inventories of crude oil, which rose by 9,527,000 barrels to 518,119,000 barrels by February 10th, thus topping the previous record high oil supply of 512,095,000 barrels set on April 29th 2016…so another record high calls for yet another graph…

February 16 2017 oil inventory as of Feb 3

like the previous graph, this graph also comes from the twitter feed of John Kemp, who seems to post several graphs daily, along with other energy news…also like the prior graph, this one shows US oil supplies in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our oil supplies for any day traced by the blue dashes over each day of the year…this graph also shows our 2016 oil inventories traced weekly in yellow, with our year to date 2017 oil supplies in red…the difference here, as we saw last week, is that our 2016 oil supplies were not just fractionally higher than those of 2015, they averaged more than 10% higher, while 2015 oil supplies ran as much as a third higher than those of 2014…thus the 2017 oil inventories are that much higher again, and we’ve now set a new record for oil supplies on the 41st day of the year, which unlike gasoline supplies, tend to continue to rise seasonally until at least the 120th day of each year (when refining for summer gasoline supplies picks up)….thus, our oil supplies on February 10th were 9.6% higher than the then February record 472,823,000 barrels that we had stored on February 12th of 2016, 32.3% higher than the previous mid-February record of 391,516,000 barrels in storage on February 13th of 2015, and 56.6% higher than the closer to normal 330,956,000 barrels of oil that we had stored on February 12th of 2014…

This Week’s Rig Count

US drilling activity increased for the 15th time in 16 weeks during the week ending February 17th, with the five week increase of 92 drilling rigs still the largest 5 week increase since January 2010…Baker Hughes reported that the total count of active rotary rigs running in the US increased by 10 rigs to 751 rigs in the week ending on this Friday, which was 237 more rigs than the 514 rigs that were deployed as of the February 19th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the number of rigs drilling for oil rose by 6 rigs to 597 rigs this week, which was up from the 413 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 153 rigs this week, which was also up from the 101 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work…   

four drilling platforms offshore from Louisiana in the Gulf of Mexico were shut down this week, while one was added offshore from Texas, which reduced the net Gulf of Mexico rig count down to 17, which was also down from the 25 rigs working in the Gulf a  year ago…the total US offshore count for the week was thus cut back to 18 rigs, as a drilling operation is still going on in the offshore waters off Alaska…..

the number of horizontal drilling rigs working in the US increased by 7 rigs to 614 rigs this week, which is now up by 184 rigs from the 413 horizontal rigs that were in use in the US on February 19th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…in addition, 6 directional rigs were added during the week, bringing the total directional rig count up to 72, up from the 66 directional rigs that were deployed during the same week last year…on the other hand, a net of 3 vertical rigs were stacked this week, reducing the vertical rig count to 65, which was still up from the 50 vertical rigs that were deployed during the same week a year ago…

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of February 17th, the second column shows the change in the number of working rigs between last week’s count (February 10th) and this week’s (February 17th) count, the third column shows last week’s February 10th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 19th of February, 2016…        

February 17 2017 rig count summary

as you can see from the above tables, the rig count story this week was all Texas, but not so much in the Permian basin as it has been lately, as the 16 Texas rig increases were fairly widespread, with 8 different Texas oil and gas districts seeing increases, while 2 districts saw drilling cut back…the unusual activity was the 5 rig increase in the Granite Wash basin of the eastern Texas panhandle and adjacent Oklahoma area, where all 13 rigs there are now drilling for oil, versus a year ago, when 7 out of the 10 rigs deployed there were drilling for natural gas…as for the increase of 4 rigs targeting natural gas, none were in our area, as 3 were added in the Haynesville and one was added in the Eagle Ford, while obviously the Ohio and Pennsylvania rig counts remained unchanged…also note that outside of the major producing states shown above, Mississippi saw a rig added this week; they now have 3 rigs working, up from just one rig during the same week a year ago..

DUC report for January

this week also saw the release of the EIA’s Drilling Productivity Report for January, which once again showed another increase in uncompleted wells nationally, mostly as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin…we had expected that with oil prices above $50, some of the DUC well backlog would be completed, but this report again showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5,289 in December to 5,391 in January….a possible cause for this increase that i hadn’t considered until this week might be a shortage of competent fracking crews…an article at Rigzone this week titled Bringing Back Our People: Industry Combats Workforce Challenges cites their problem as previously laid off workers who will probably never return to the oil industry….since the oil field layoffs started in early 2015, we’ve now gone nearly two years with just skeleton fracking crews operating in much of the country, and many of those who had worked in the oil fields before have since found work elsewhere…fracking has also gotten much more complex over that period, so putting together a fracking crew familiar with the latest techniques has become that much harder…

like in December, all of the January DUC increases were oil wells; the Permian basin, which includes the Wolfcamp and several other shale plays in these stats, saw its total count of uncompleted wells rise from 1,673 in November to 1,757 in January, in keeping with the increase in drilling that we’ve seen in that basin…at the same time, DUCs in the Niobrara chalk of the Rockies front range rose by 13, to 708 in January, and DUCs in the Eagle Ford of south Texas increased by 11 to 1,255…on the other hand, the Marcellus saw a small decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 610 in December to 600 in January…in addition; the Utica also showed a decrease of five uncompleted wells and thus had only 98 DUCs remaining in January…for the month, DUCS in the 4 oil basins tracked by the EIA (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 107 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) fell by 15 wells, as they have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered….  

Posted in Uncategorized | Leave a comment

January retail sales, consumer and producer prices, industrial production, business inventories, housing starts

this week brought us a half dozen of the regular monthly agency reports, including the Retail Sales report for January and Business Sales and Inventories for December from the Census Bureau, the January Producer Price Index and the January Consumer Price Index from the Bureau of Labor Statistics, the January report on Industrial Production and Capacity Utilization from the Fed, and the January report on New Residential Construction, also from the Census Bureau…this week also saw the release of the first two regional Fed manufacturing surveys for February: 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 rose to +18.7,  up from +6.5 in January, suggesting an accelerating growth rate in First District manufacturing….meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose to +43.3 in February from a  reading + 23.6 in January, indicating an overwhelming plurality of the region’s manufacturing firms reported increases in their activity this month…

January Consumer Prices Rise 0.6% on Higher Fuel, Shelter, and Clothing

the consumer price index increased by 0.6% in January, the largest increase since February 2013, as higher prices for gasoline accounted for nearly half the increase…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.6% in January after it had risen 0.3% in December, 0.2% in November, 0.4% in October, 0.3% in September, and 0.2% in August….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 241.432 in December to 242.839 in January, which left it statistically 2.500% higher than the 236.916 index reading of last January….regionally, prices for urban consumers have risen by 2.5% in the West, by 2.6% in the South, 2.5% in the Northeast and by 2.2% in the Midwest over the past year, with higher price increases in the South and Midwest in cities of less than 1,500,000 people , while the largest cities saw the greater price increases in the West…with higher prices for gasoline responsible for half the increase in the index, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 249.134 to 250.083, which left it 2.272% ahead of its year ago reading of 244.528…

the volatile seasonally adjusted energy price index increased by 4.0% in January, after it had risen by 1.5% in December, 1.2% in November, 3.5% in October, and 2.9% in September…as a result, energy prices are now 10.8% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016…prices for energy commodities were 7.6% higher while the index for energy services rose by 0.3%, after slipping 0.1% in December ….the increase in the energy commodity index included a 7.8% increase in the price of gasoline, the largest component, and a 3.5% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 4.0%…within energy services, the index for utility gas service rose by 1.5% in its 7th increase in a row, and hence utility gas is now priced 10.1% higher than it was a year ago, while the electricity price index was unchanged, just as it was in November  and December….energy commodities are now priced 20.0% above their year ago levels, with gasoline prices averaging 20.3% higher than they were a year ago.…meanwhile, the energy services price index is now 2.9% higher than last January, as even electricity prices have increased by 1.0% over that period..

the seasonally adjusted food price index rose 0.1% in January, after it had been unchanged for 6 consecutive months, as prices for food purchased for use at home was unchanged while prices for food bought to eat away from home rose 0.4%, as average prices at fast food outlets rose 0.3% while average prices at full service restaurants rose 0.5%…the food price index is still 0.2% lower than a year ago, as a 1.9% drop in the price of food at home has been mostly offset by a 2.5% increase in prices for food away from home, which included a 2.6% increase in prices of food at employee sites and schools…

in the food at home categories, the price index for cereals and bakery products decreased by 0.1% as 1.1% higher prices for cookies and a 1.3% increase in the index for rice, pasta, cornmeal were more than offset by a 1.2% decrease in prices for breakfast cereal and a 1.5% decrease in prices for crackers…the price index for the meats, poultry, fish, and eggs group rose by 0.7% as beef prices rose 0.3% and egg prices rose 14.3%, while the index for dairy products was 0.8% higher on a 1.6% increase in the price for cheese….the fruits and vegetables index was 1.7% lower on a 1.8% drop in prices for fresh fruits and a 2.4% drop in prices for fresh vegetables…the beverages index was 0.3% lower as carbonated drinks saw an average 1.0% price cut…lastly, prices in the ‘other foods at home’ category were on average 0.2% higher, as butter prices rose 3.9% and olives, pickles and relishes averaged a 5.1% increase…..among food at home line items, eggs, which are still priced 19.4% lower than a year ago, tomatoes, which are 18.4% lower, and lettuce, which is 16.8% lower than last year, have seen price changes greater than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.3% in January after rising by  0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods rose 0.4%, while the more heavily weighted composite for all services less energy services was 0.3% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust January retail sales for inflation in national accounts data, the index for household furnishings and supplies rose by 0.4% as prices for infants’ furniture was up 7.6%, prices for dishes and flatware were 7.2% higher, and laundry equipment prices rose 2.2%…the apparel price index was 1.4% higher on a 3.8% increase in prices for men’s furnishings and a 5.2% increase in prices for women’s dresses….prices for transportation commodities other than fuel were up 0.4%, as prices for new cars rose 0.9%, while prices for medical care commodities were 0.3% higher on 0.7% higher drug prices….meanwhile, the recreational commodities index fell 0.2% on 0.4% lower priced toys and sporting goods, while the education and communication commodities index was 0.1% higher as a 2.9% increase in prices for computer software and accessories was only partially offset by a 1.5% increase in prices for educational books and supplies….lastly, a separate price index for alcoholic beverages was up 0.2% on 1.4% higher prices for whiskey bought for drinking at home, while the price index for ‘other goods’ was down 0.1% on a 1.2% decrease in the index for stationery, stationery supplies, and gift wrap…

within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents, a 0.2% increase in owner’s equivalent rent, and a 0.2% decrease in lodging away from home at hotels and motels, while the household operations services index increased 0.1%….meanwhile, the index for medical care services was up 0.2% as services of medical professionals other than doctors and dentists rose 0..7%…in addition, the transportation services index was 0.3% higher on a 1.8% increase in intercity bus fare, a 2.0% increase in airline fares, and a 0.8% increase for motor vehicle insurance…at the same time, the recreation services price index was up 0.7% as admissions to sporting events rose 5.5%, while the index for education and communication services was unchanged as delivery services increased prices 2.8% while college tuition and internet services were both 0.1% lower…lastly, the index for other personal services was up 0.3% as legal service fees were 2.0% higher…among core prices, only televisions, which are now 21.8% cheaper than a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by that double digit magnitude.. 

Retail Sales Up 0.4% in January after December Revised Higher

seasonally adjusted retail sales increased 0.4% in January after retail sales for December were revised higher…the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $472.1 billion during the month, which was up 0.4 percent (±0.5%) from December’s revised sales of $470.5 billion and 5.9 percent (±0.9%) above the adjusted sales in January of last year…December’s seasonally adjusted sales were revised up from $469.1 billion to $470.46 billion, while November’s sales were revised lower, from $466.2 billion to $466.0 billion; as a result, the November to December change was revised up from up 0.6 percent (±0.5%) to up 1.0 percent (±0.2%)…..estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 22.4%, from $541,774 million in December to $420,638 million in January, while they were up 4.9% from the $400,928 million of sales in January a year ago, so we can see how a large seasonal adjustment to holiday and post holiday sales brought the headline sales into line vis-a-vis the normal decrease that would be expected in January…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the January Census Marts pdf….the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the December revised figure to this month’s January “advance” report in the first sub-column, and then the year over year percentage sales change since last January in the 2nd column…the second double column pair below gives us the revision of the December advance estimates (now called “preliminary”) as of this report, with the new November to December percentage change under “Nov 2016 r” (revised) and the December 2015 to December 2016 percentage change as revised in the last column shown…for your reference, the table of last month’s advance estimate of December sales, before this month’s revisions, is here.….

January 2017 retail sales table

despite the apparent improvement in sales, this January report is much worse than it looks…for starters, the 2.3% increase to $37,156 million in gasoline station sales accounted for half the increase, and that was only due to higher gas prices…take that, and the 1.4% increase to $55,987 million in sales at bars and restaurants out, and January retail sales were flat…moreover, as we saw in the report on consumer prices, the composite of all goods less food and energy goods rose an unusual 0.4% for the month, which means real core sales were actually down by that 0.4%…especially hard hit were the auto dealers; with sales down by 1.2% and prices for new cars and trucks up 0.9%, that means their real sales fell by more than 2% for the month…and even in store types where the apparent sales were much higher, such as clothing where we see a 1.0% increase in nominal sales, prices for apparel concurrently rose by 1.4%, meaning real clothing store sales were actually down 0.4%…we would not be surprised to see real PCE for January, which will be released at the end of the February, turn negative for the first time in months…

Producer Prices Up 0.6% in January on Higher Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.6% in January, the largest increase since May 2015, as prices for finished wholesale goods increased 1.0%, while margins of final services providers increased by 0.3%…this followed a revised December report that indicated the PPI was 0.2% higher, with prices for finished goods up 0.6% while final demand for services rose 0.1%, and a November report that indicated the overall PPI had increased 0.5%, with prices for finished goods up 0.2% while final demand for services rose 0.5%…note that monthly PPI readings for the entirety of 2016 were revised with this report to reflect a recalculation of seasonal adjustment factors…on an unadjusted basis, producer prices remain 1.6% higher than a year earlier, same as in December…

as noted, the price index for final demand for goods, aka ‘finished goods’, rose by 1.0% in January, after rising by 0.6% in December, 0.2% in November, 0.3% in October, and 0.5% in September, as the index for wholesale energy prices rose 4.7% from December to January while the price index for wholesale foods was unchanged and the index for final demand for core wholesale goods (ex food and energy) rose 0.4%…major wholesale energy price increases in December included a 14.5% increase in wholesale prices for heat oil, and a 12.9% increase in wholesale gasoline prices, while among wholesale food prices, a 7.0% increase in the wholesale price of pork was partially offset by a 7.2% decrease for wholesale beef…among wholesale core goods, prices for women’s, girls’, and infants’ apparel increased 2.4% and wholesale prices for appliances rose 1.8%, while wholesale prices for tires were down 1.3%…

meanwhile, the index for final demand for services rose by 0.4% in January after rising by 0.1% in December, by 0.5% in November and falling by 0.4% in October, as the index for final demand for trade services rose 0.9%, the index for final demand for transportation and warehousing services rose 1.1%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% lower….among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers increased 4.8% and accounted for nearly half of the January increase in the index for final demand services, while margins for TV, video, and photographic equipment retailers increased 14.1% after rising 6.3% in December and  6.0% in November… among transportation and warehousing services, margins for airline passenger services rose 3.7%… in the core final demand for services index, margins for securities brokerage, dealing, and investment advisers rose 2.5%, while margins for passenger car rentals were 10.4% lower…

this report also showed the price index for processed goods for intermediate demand was 1.1% higher, the largest increase since February 2013, after rising 0.4% in December, 0.3% in November and by a revised 0.4% in October…prices for intermediate processed goods are now 3.8% higher than in January a year ago, the third year over year increase after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016…. in January, the price index for intermediate energy goods rose 4.8%, prices for intermediate processed foods and feeds rose 0.5%, while the core price index for processed goods for intermediate demand less food and energy was 0.3% higher…

at the same time, the price index for intermediate unprocessed goods rose 3.8 in January, after rising 8.4% in December, but falling by 0.4% in November, 0.5% in October, 0.6% in September, and 2.1% in August….the index for crude energy goods rose 6.7% as prices for raw natural gas rose 23.6%, and the price index for unprocessed foodstuffs and feedstuffs rose 2.2%, as the index for slaughter hogs rose 10.3 percent and raw milk prices rose 15.2%…moreover, the index for core raw materials other than food and energy materials rose 3.2%, on an 14.8% increase in wholesale prices for iron and steel scrap… this raw materials index is now up 17.6% from year ago, in contrast to a prior year over year decrease of 26.4% that we saw just 14 months ago, in November of 2015…

lastly, the price index for services for intermediate demand was 0.3% higher in January, after being 0.4% higher in December and 0.1% higher in November and October.. the index for trade services for intermediate demand was 0.2% lower as margins for intermediate building materials, paint, and hardware wholesalers fell 3.2%…the index for transportation and warehousing services for intermediate demand was also down 0.2%, as pricing for intermediate courier and messenger services fell 4.6%, while the core price index for services less trade, transportation, and warehousing for intermediate demand rose 0.4%, as a 5.5% increase in the index for business loans (partial) accounted for much of the increase in the intermediate services index…over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 1.5% higher than it was a year ago…  

Industrial Production Slips 0.3% in January on Mild Weather

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.3% in January after rising by a revised 0.6% in December, which left it unchanged from a year ago…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was actually unchanged from the previously published 104.6 in January, after the December index was revised up from there to 104.8, the November index was revised from the 103.7 reported last month to 104.2, while at the same time the index for September was revised from 104.2 to 104.1….

the manufacturing index, which accounts for more than 77% of the total IP index, rose to 103.8 in January, after the December index was revised from 103.2 to 103.5, the November index was revised from 103.0 to 103.3, the October index was revised from 103.2 to 103.3, the September index was revised from 102.9 to 103.0, and the August index was revised from 102.8 to 102.9….meanwhile, the mining index, which includes oil and gas well drilling, rose from 105.7 in December to 108.3 in January after the December index was revised down from 107.1, which left the mining index 0.4% than it was a year earlier…finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 5.7% in January, from 104.8 to 98.8, after the December utility index was revised from 104.0 to 104.8…with January 2016 heating requirements somewhat closer to normal, the utility index is now 2.6% lower 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 forutotal industry fell to 75.3% in January from 75.6% in December, which was revised from the 75.5% reported last month …capacity utilization of NAICS durable goods production facilities fell from a upwardly revised 76.4% in December to 76.2% in January, while capacity utilization for non-durables producers rose from an upwardly revised 74.6% to 75.0%…capacity utilization for the mining sector rose to 78.1% in January from 77.1% in December, which was originally reported as 78.1%, while utilities were operating at 75.1% of capacity during January, down from their 79.7% of capacity during December, which was previously reported at 79.1%…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…. 

December Business Sales Up 2.0%, Business Inventories Up 0.4%

after the release of the January retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for December (pdf), which incorporates the revised December retail data from that December report and the earlier published December 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 $1,356.0 billion in December, up 2.0 percent (±0.2%) from November’s revised sales, and up 5.2 percent (±0.4%) from December sales of a year earlier…note that total November sales were concurrently revised up from the originally reported $1,326.7 billion to $1,328.8 billion, so gross sales in this report were actually up 2.2% from what was reported last month ….manufacturer’s sales rose 2.2% to $475,843 million in December; retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, rose 1.2% t0 $415,242 million, and wholesale sales rose 2.6% to $464,905 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,835.7 billion at the end of December, up 0.4 percent (±0.2%) from November, and 2.0 percent (±0.5%) higher than in December a year earlier…at the same time, the value of end of November inventories was revised from the $1,827.5 reported last month to $1828.97 billion….seasonally adjusted inventories of manufacturers were estimated to be valued at $625,585 million, up 0.1% from November, while inventories of retailers were valued at $609,010 million, also 0.1% more than in November, and inventories of wholesalers were estimated to be valued at $601,147 million at the end of December, 1.0% higher than in November…

January Housing Starts Down from December, Permits Up

the January report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in January was at a seasonally adjusted annual rate of 1,285,000, which was 2.6 percent (±11.0 percent)* below the revised estimated December annual rate of 1,279,000, but was 10.5 percent (±15.3%)* above last January’s rate of 1,160,000 housing starts a year…the asterisks indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been down by 4.8% or up by as much as 25.8% from those of last January, with revisions of a greater magnitude in either direction possible…in this report, the annual rate for December housing starts was revised from the 1,226,000 reported last month to 1,285,000, while November starts, which were first reported at a 1,090,000 annual rate, were revised from last month’s initial revised figure of 1,102,000 annually up to a 1,149,000 annual rate with this report….these annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 82,500 housing units were started in January, down from the 87,000 units that were started in December and the 87,700 units that were started in November

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in January, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,285,000, which was 4.6 percent (±2.0 percent) above the revised December rate of 1,228,000 permits, and 8.2 percent (±1.6 percent) above the rate of building permit issuance in January a year earlier…the annual rate for housing permits issued in December was revised up from the originally reported 1,210,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 86,800 housing units were issued in January, down from the revised estimate of 91,400 new permits issued in December…. for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts at 1.246 Million Annual Rate in January and Comments on January Housing Starts

 

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

Posted in Uncategorized | Leave a comment

February 18 tables & graphs

oil prices:

February 18 2017 crude oil prices

natural gas prices:

February 17 2007 natural gas prices

rig count summary:

February 17 2017 rig count summary

US crude exports:

February 18 2017 crude oil exports for February 10 

US gasoline supplies:

February 16 2017 gasoline inventory as of Feb 3

US oil supplies:

February 16 2017 oil inventory as of Feb 3

official OPEC output:

February 18 2017 January OPEC production

reported OPEC output:

February 18 2017 January reported OPEC production

graphed OPEC output

February 16 2017 OPEC Januaary outpul

world oil supply:

February 18 2017 January world oil supply

forecast global demand:

February 18 2017 January world oil demand

retail sales:

January 2017 retail sales table

Posted in Uncategorized | Leave a comment

US oil imports hit a 52 month high, a near record jump in oil supplies; OPEC cuts oil output but keeps on drilling..

in case you haven’t heard, the Army Corps of Engineers reneged on its commitment to conduct a thorough environmental review of the Dakota Access pipeline, approved the final easement needed to complete the pipeline, and granted the permit that will allow its completion…after that green light from the Corps on Tuesday, Energy Transfer Partners said on Wednesday that it plans to resume work immediately, and Phillips 66, holder of a 25 percent stake in the project, said they expected the Dakota Access Pipeline to start pumping Bakken crude in the second quarteraccording to the Associated Press, the Cheyenne River Sioux filed a legal challenge to the easement Thursday in federal court in Washington, D.C. while Standing Rock Sioux Chairman David Archambault flew to Washington to meet with Trump administration officials to share the Tribe’s perspective on why they so strongly opposed the project… U.S. District Judge James “Jeb” Boasberg, who will be overseeing the lawsuit filed by the Standing Rock and Cheyenne River Sioux, is said to be sympathetic to the historic exploitation of Indians in America, but has also denied an earlier attempt by the Standing Rock tribe to halt the pipeline work…

meanwhile, petrogeologist and oil analyst Art Berman echoed the same reservations that i had voiced in reporting that Trump had ordered expedited approval and construction of the Keystone XL…in an article posted at oilprice.com and elsewhere, Berman asserts that it will take at least $85 oil prices to develop enough new oil sand projects needed to fill the Keystone XL, and that even under the optimistic projections from the Canadian Association of Petroleum Producers that annual oil sand production will grow 128,000 barrels per day until 2021, it would take still 10 years to fill the Keystone, even if none of the other new Canadian pipeline projects currently approved and underway were completed…he concludes that TransCanada’s bet is that oil prices will move much higher and more quickly than most forecasts anticipate and that the volumes of bitumen will be there by the time that the pipeline is built, and also a bet that US tight oil plays will continue to produce enough light oil for several decades to dilute the tarry goop to a viscosity light enough to pipe and refine….i’ll take the other side of that bet…

at any rate, at least we’re going to get a brief respite from the onslaught of pipeline approvals we’ve seen over the past two weeks…two weeks ago, during his initial barrage of pipeline diktats, Trump named Cheryl LaFleur as acting chairwoman of the Federal Energy Regulatory Commission, and largely as a result of that, Norman Bay, who served as FERC chairman for the past two years, tendered his resignation effective February 3rd…that left the 5 member commission with just two sitting commissioners, LaFleur and Colette Honorable, and as a result FERC no longer has a quorum, can’t approve anything, and hence cancelled their next monthly meeting on February 16th….so until such time as Trump vets and appoints at least one more commissioner, and that new commissioner is approved by the Senate, no more pipelines can be approved…according to the Associated Press, there’s at least a half dozen major pipeline projects totaling more than $10 billion that now wait approval, including the $2 billion Pennsylvania to Ohio and Michigan Nexus pipeline, that would pass through the counties south of us, and the Atlantic Coast pipeline, which several members of Trump’s transition team and White House staff have business or lobbying connections to..

* * * * * 

oil continued to trade in a narrow range this week as news that OPEC had achieved 90% compliance to their agreed to production cuts offset the news that US oil supplies saw their 2nd largest weekly jump in the EIA’s recordsstrength in U.S. dollar, which makes internationally traded commodities cheaper, weighed on oil prices to start off the week, as US WTI oil for March delivery fell 1.5% to close at $53.01 a barrel, after closing the prior week at $53.83….prices continued to fall on Tuesday, after the EIA forecast that US crude output would hit a fracking era high in 2018 and the American Petroleum Institute reported the 2nd largest increase in oil inventories in history, along with large increases in gasoline and distillate supplies, and again ended another 1.5% lower at $52.17 a barrel….however, prices steadied on Wednesday, despite confirmation of the large oil supply increase from the EIA, and closed up 17 cents at $52.34 a barrel, as a drop in gasoline supplies encouraged traders to think that demand for gas was returning to normal….momentum from that rebound carried into Thursday, when prices rose to close at $53.00, after oil ministers from Iran and Qatar suggested that OPEC production cuts might be extended into the 2nd half of this year…oil prices then rose 1.6% on Friday to close out the week 3 cents higher than last week at $53.86 a barrel, after the International Energy Agency said OPEC had achieved a record initial compliance of 90% with their planned production cuts, that global oil output had fallen by 1.5 million barrels per day, and revised upward their estimate of global oil demand growth for this year  from 1.3 million barrels per day to 1.4 million  barrels per day…

for an initial look at those OPEC compliance levels, we have a table of OPEC oil output for December and January as per the IEA (note that’s the International Energy Agency, headquartered in Paris, as distinguished from the US EIA, the Energy Information Administration of the US Dept of Energy, in case those similar acronyms are confusing to you)

February 11 2017 OPEC production via IEA

the above table comes from the IEA via Zero Hedge and it shows the IEA estimates of the December output of crude, in millions of barrels, from each of the OPEC members in the first column, estimates of their January output of crude in the second column, and then the supply baseline in the third column, also in millions of barrels …it’s that supply baseline, which is approximately equal to the October production level of each member, on which the 4.5% OPEC production cuts are based, so the amount in millions of barrels of crude that each member is expected to cut is therefore shown in the 4th column, as the “agreed cut”….then, based on these estimates of January oil production, the “actual cut”, or the difference between the baseline and each member’s January production, is then shown in the next to last column…finally, in the last column, the IEA computes a compliance percentage, which is simply the amount each member has cut shown as a percentage of what they agreed that they would cut…at the bottom, they then total OPEC figures and give us the totals for all 11 members of OPEC, and conclude from those totals that they’ve achieved 90% compliance..while that’s all pretty much self explanatory, as are the footnotes at the bottom of the table, we’d note that the Saudis by themselves cut 116% of what they’d agreed to, and thus account for more than half of the OPEC cuts so far….that means that without the Saudi cuts, OPEC compliance was at a not very spectacular 71.6%

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 3rd from the US Energy Information Administration showed that our imports of crude oil were at their highest level in over 4 years, while our refining of that oil fell for the 4th week in a row, and as a result this week’s surplus of crude that was added to our stored supplies ended up as the 2nd largest on record…our imports of crude oil rose by an average of 1,082,000 barrels per day to an average of 9,372,000 barrels per day during the week, while at the same time our exports of crude oil rose by 18,000 barrels per day to an average of 567,000 barrels per day, which meant that our effective imports netted out to 8,805,000 barrels per day for the week, 1,064,000 barrels per day more than last week…at the same time, our crude oil production rose by 63,000 barrels per day to an average of 8,978,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 17,783,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,893,000 barrels of crude per day during the week, 54,000 barrels per day less than during the prior week, while at the same time, 1,976,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we consumed or stored 86,000 more barrels of oil per day than were accounted for by our oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 86,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that number by the method we just showed, and hence we’ve been calling it the EIA’s weekly oil fudge factor...

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports rose to an average of 8.463 million barrels per day, now 10.0% higher than the same four-week period last year…from that same source, we also find that this week’s 63,000 barrel per day oil production increase included a 73,000 barrel per day jump in oil production in the lower 48 states, which was partially offset by a 10,000 barrel per day decrease in output from Alaska..our crude oil production for the week ending February 3rd thus was just 2.3% lower than the 9,186,000 barrels of crude that we produced during the week ending February 5th of last year, and 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day…

US refineries were operating at 87.7% of their capacity in using those 15,893,000 barrels of crude per day, down from 88.3% of capacity the prior week and down from the year high of 93.6% of capacity just four weeks earlier, but up from the 86.1% capacity utilization rate during the same week a year ago, as refineries are now into their regular winter slowdown…thus, even though the week’s oil refining was down by more than 1.2 million barrels per day from the first week of this year, it was 2.5% more than the 15,510 000 barrels of crude refined during the week ending February 5th, 2016….and even though they took in less crude, gasoline production from those refineries rose by 703,000 barrels per day to 9,804,000 barrels per day during the week ending February 3rd, which was 2.6% more than the 9,553,000 barrels per day of gasoline that were produced during the week ending February 5th a year ago (part of this week’s increase was a 226,000 barrel per day adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components)….meanwhile, refineries’ production of distillate fuels (diesel fuel and heat oil) also rose, increasing by 125,000 barrels per day to 4,802,000 barrels per day, which was up by 10.2% from the 4,357,000 barrels per day of distillates that were being produced during the week ending February 5th last year, during a mild El Nino winter…

however, even with the increase in our gasoline production, the EIA reported that our gasoline inventories fell by 869,000 barrels to 256,217,000 barrels as of February 3rd, the first drop in our gasoline supplies in 6 weeks…that happened as our domestic consumption of gasoline rose by 631,000 barrels per day to a closer to normal 8,941,000 barrels per day, following 4 weeks wherein gasoline demand approached 16 year lows…that gasoline supply draw-down occurred despite gasoline imports that were up by 323,000 barrels per day to 811,000 barrels per day, while our gasoline exports remained unchanged at 902,000 barrels per day…however, even with this week’s withdrawal, our gasoline supplies are up by more than 29 million barrels since Christmas, and remain fractionally higher than the 255,657,000 barrels of gasoline that we had stored on February 5th of last year, and 5.6% above the 242,647,000 barrels of gasoline we had stored on February 6th of 2015…

meanwhile, with the increase in distillates production, our supplies of distillate fuels rose by 29,000 barrels to reach 170,746,000 barrels by February 3rd, for an increase of over 19 million barrels over the first 6 weeks of winter, at a time of year when distillates are usually being drawn down and consumed as heat oil…the amount of distillates supplied to US markets, a proxy for our consumption, rose by 101,000 barrels per day to 3,910,000 barrels per day, and was thus above the average of the past 5 years, and our exports of distillates rose by 217,000 barrels per day to 1,097,000 barrels per day, or else we would have had even more surplus…..still, our distillate inventories ended the week 6.1% higher than the distillate inventories of 160,976,000 barrels of February 5th last year, and 30.1% above the distillate inventories of 131,223,000 barrels of February 6th, 2015…    

lastly, as we mentioned in opening this segment, the elevated level of our oil imports led to the 2nd largest recorded jump in our weekly inventories of crude oil, which rose by 13,830,000 barrels to 508,592,000 barrels by January 27th, a level which is now only 0.7% below the April 29th record level of 512,095,000 barrels…moreover, we ended the week with 8.1% more crude oil in storage than the then record 470,676,000 barrels we had stored on February 5th of 2016, and 32.5% more crude than the 383,800,000 barrels of oil we had in storage on February 6th of 2015…since it’s been a while since we’ve taken a look at a graph of our oil supplies, we’ll include the EIA graph of them here first, and explain why these common EIA graphs have become inadvertently deceptive…

February 10 2017 crude oil stocks for Feb 3

in the graph above, copied from the EIA’s This Week in Petroleum Oil Section, the blue line shows the recent track of US oil inventories over the period from June 2015 to February 3, 2017, while the grey shaded area represents the range of US oil inventories millions of barrels as reported weekly by the EIA over the prior 5 years for any given time of year…the grey area intends to show us the normal range of US oil inventories as they fluctuate from season to season over the 5 years prior to the two years shown by the blue line…however, note that the increase in the grey wedge on the right now includes the record oil inventories that we were seeing last year at this time (ie, it includes the image of the blue line, or the early 2016 record inventories) which we have recently been exceeding by 5% to 10% each week…thus, the grey section of the graph, supposedly representing historical seasonal levels, has already become bloated by the record inventories that we’ve been seeing for two years running, as we can see in the blue line…thus comparing the current inventory level in blue to the grey shaded area is deceptive, in that the top of that grey area now represents record glut of the prior year…by rights, to compare the current blue line to a normal level of inventories, it should be compared to the bottom of the grey shaded area, as we’ll show in the graph below, which gives us the exact crude oil supplies for every week of the period:..

February 11 2017 Yardeni crude stocks for Feb 3

the above graph comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of independent investment and economics research, run by Dr Ed Yardeni…it shows the end of the week stocks of crude oil in millions of barrels for each week beginning with January 2013, up to and including this week’s report for February 3rd, with graphs for each year color coded as indicated…here we can see how our oil inventories stayed in a narrow range during 2013 and 2014 (and during the years before then, for that matter), represented by the mustard and green bands, typically falling to below 330 million barrels by the end of each summer and then rising to nearly 370 million barrels by early spring….however, at the beginning of 2015, represented by the blue colored graph, our inventories of oil started rising each week till they topped 450 million barrels at the end of April 2015, and then stayed elevated in a range 80 to 100 million barrels above the previous norms over the rest of that year…that continued into 2016, represented by the grape colored graph, and although the rate of increase over 2015 tailed off late in the year, our 2016 oil supplies had generally averaged about 15% above 2015’s elevated levels, and more than 40% above historical levels…now we see in the scarlet colored graph, representing the beginning of 2017, that our oil supplies are rising again from the comparable seasonal records set in 2016…thus, to accurately compare today’s oil inventories to the seasonal norm, we’d have to go back not just one or two years, but three years to early 2014, before the current oil glut developed…doing that, we’d find that today’s oil inventories of 508.6 million barrels are 54.1% higher than the oil inventories of 329,983,000 barrels seen on February 7th, 2014…

This Week’s Rig Count

US drilling activity increased for the 14th time in 15 weeks during the week ending February 10th, with the four week increase in drilling rigs still the largest 4 week increase since January 2010…Baker Hughes reported that the total count of active rotary rigs running in the US increased by 12 rigs to 741 rigs in the week ending on this Friday, which was 200 more rigs than the 541 rigs that were deployed as of the February 12th report a year earlier, but of course still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the number of rigs drilling for oil rose by 8 rigs to 591 rigs this week, which was up from the 439 oil directed rigs that were in use a year ago, but down from the recent high of 1609 oil rigs that were drilling on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 149 rigs this week, which was also up from the 102 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…there also remained a single rig that was classified as miscellaneous, which we could call an increase from a year ago, when there were no miscellaneous rigs at work…   

one drilling platform offshore from Louisiana in the Gulf of Mexico was shut down this week, which cut the Gulf of Mexico rig count back down to 20, which was also down from the 25 rigs working in the Gulf a  year ago…our total offshore count for the week was thus cut back to 21 rigs, as a drilling operation is still going on in the offshore waters off Alaska…however, one drilling platform started operations on an inland lake in southern Louisiana, where there are now 3 such inland waters operations, which is also up from 2 rigs working on inland waters a year ago..

the number of horizontal drilling rigs working in the US increased by 11 rigs to 607 rigs this week, which is now up by 174 rigs from the 433 horizontal rigs that were in use in the US on February 12th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…in addition, a net of one vertical rig was added during the week, bringing the total vertical rig count up to 68, which was also up from the 59 vertical rigs that were deployed during the same week last year…meanwhile, the directional rig count was unchanged at 66 rigs as of February 10th, which was 17 rigs more than last February 12th’s count of 49 directional rigs….

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of February 10th, the second column shows the change in the number of working rigs between last week’s count (February 3rd) and this week’s (February 10th) count, the third column shows last week’s February 3rd active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 12th of February, 2016…       

February 10 2017 rig count summary

once again, we see new drilling in the Permian basin of western Texas and New Mexico accounted for half of this week’s increase, while a 3 rig addition in the Eagle Ford of south Texas brought the total increase in the state to 7 rigs, with 4 of the Permian rigs apparently on the New Mexico side of the border…on the other hand, the Cana Woodford of Oklahoma, home to the SCOOP and the STACK basins, was down by 5 rigs to 51 rigs this week, after rising by 7 rigs last week, 3 rigs the prior week, and 9 rigs the week before that; i have no idea what’s going on down there…nor have i heard news that would explain the 2 rigs that were shut down in Ohio’s Utica, which cut the state total back to 19 rigs…we can explain the 4 natural gas rig increase in the light of that Ohio drop by noting the 3 rig increase in the Marcellus, another gas rig in the Haynesville, and two gas rigs in “other basins”, which Baker Hughes doesn’t name in their summary data…otherwise, what we see above is what we got; there were no changes in states other than those listed above…

International Rig Counts for January

Baker Hughes also released the international rig counts for January on Tuesday of this past week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end….Baker Hughes reported that an average of 1,918 rigs were drilling for oil and natural gas around the globe in January, which was up from the 1,772 rigs that were drilling around the globe in December, and up from the 1,969 rigs that were working globally in January of last year, which was the first time global drilling activity surpassed year earlier totals since December of 2014….increased North American drilling again accounted for most of the global increase, as the average US rig count rose from 634 rigs in December to 683 rigs in January, which was also up from the average of 654 rigs that were working in the US in January a year ago, while the average Canadian rig count rose from 209 rigs in December to 302 rigs in January, which was also up from the 192 Canadian rigs that were deployed in January a year earlier….outside of Northern America, the International rig count rose by 4 rigs to 933 rigs in January, which was still down from 1,095 rigs a year ago, as increases in drilling in the Middle East and Eastern Asia more than offset a decrease in Latin American activity..

drilling activity in the Middle East rose for just the 5th time over the past 13 months, as the countries included in this region added a net of 6 rigs, including 3 offshore, increasing their active rig average to 382 rigs for the month, which was still down from the 407 rigs deployed in the Middle East a year earlier….OPEC member Kuwait accounted for the entire increase, as they started 8 more rigs in January and now have 54 rigs active, which was up from the 40 rigs the Kuwaitis were running a year ago….in addition, Egypt, who is not an OPEC number and who has not agreed to output cuts, added 1 rig in January and thus had 25 rigs active, which was still down from the 42 rigs they were running a year earlier….on the other hand, Oman, who is not an OPEC member but who has committed to a production cut of 45,000 barrels a day, cut back their drilling by 2 rigs, from 59 rigs in December to 57 rigs in January, which left them down from the 70 rigs they were running in January a year ago…in addition, the Saudis pulled out one rig in January, which left them with 124 rigs still active, the same number as they had running a year earlier…however, Saudi Arabia’s rig count has averaged near 125 rigs weekly since early 2015, up from their average of around 105 rigs in 2014, so they’ve not yet even pulled back to the level of drilling they were doing before OPEC opened the spigots…among other major OPEC producers, Iraq’s drilling was unchanged at 41 rigs in January, while Abu Dhabi of the United Arab Emirates was also unchanged at 48 rigs, the same as their count a year ago, although like the Saudis, they are still doing far more drilling than their 30 rig average of early 2014…

drilling activity in the Asia-Pacific region also increased by a net of 6 rigs to 198 rigs in January, even as their offshore deployment fell by 5 from 87 rigs to 82, which was down from the 198 rigs working the region a year earlier, which just included 75 platforms working offshore at that time….Indonesia, who was booted out of OPEC for not agreeing to the group’s production cuts, added 7 rigs and thus had 23 rigs working during January, up from 20 rigs a year earlier….Australia added 5 more rigs, after adding 5 rigs in December, bringing their total to 14 rigs active nationwide, which was thus up from the 13 rigs they were running a year earlier… Brunei, who had shut down both of the rigs they had active in December, started both rigs back up in January, and the 2 rigs they’re now running are the same as they had a year earlier….on the other hand, China shut down 5 more offshore rigs, after they had shut down 3 rigs in December, leaving them with 20 rigs working offshore, down from the 27 offshore rigs they were running last January…at the same time, both Papua New Guinea and Malaysia both idled one rig; that left Papua New Guinea with 2 rigs active, same as they had a year earlier, and left Malaysia with 3 rigs running, down form the 5 rigs they were running a year earlier…

meanwhile, the Latin American region saw their active drilling rig numbers drop by a net of 8 rigs to 176 rigs, down from 243 rigs in January of last year, and down from 321 rigs as recently as September of 2015, as the region idled 92 rigs over the first 6 months of 2016….Argentina, where they had shut down 11 rigs in December, shut down another 7 in January, and now have 52 rigs active, down from 72 rigs a year ago, and also down from over the over 100 active rigs Argentina saw through most of 2015…Mexico, who has agreed to cut their oil output by 100,000 barrels a day, idled 3 rigs for the month, which left them with 16 active rigs, down from the 43 rigs they were running last January….Venezuela and Ecuador, both members of OPEC, each shut down 1 rig; that left Venezuela with 51 rigs, down from 67 last January, and left Ecuador with 6 rigs, up from the single rig they were running last January, which was during an anomalous slowdown in Ecuador’s normal activity…..in addition, Chile shut down 2 rigs and now have 2 remaining, down from the 3 rigs they had active last January, and Suriname shut down the only rig they had active in December, while they had two active a year ago…on the other hand, Brazilian drillers, who were not party to the OPEC production cuts, added 3 rigs during the month; which brought their active rig count back up to 16 rigs, which was still down from the 34 rigs deployed in Brazil a year earlier…..Trinidad and Tobago, meanwhile, added two rigs, and now have 5 rigs working, which is still down from the 7 rigs they had running a year ago…in addition, both Columbia and Peru added a single rig; for Peru, that brought their active rig count up to 2 rigs, up from none a year earlier, while for Columbia, their count rose to 20 rigs, up from the 8 rigs they had running a year earlier…

drilling activity also slipped a bit in Europe, falling by 1 rig to 98 rigs, which was down from the 108 rigs working in Europe a year ago at this time, as their offshore drilling activity fell from 35 rigs to 31 rigs, also down from 35 rigs offshore a year ago…4 platforms offshore from Norway were idled, leaving 12 still active there, down from 18 a year ago, while the UK idled 3 offshore, leaving them 8 active, same as they had offshore last January….on the other hand, 2 new offshore platforms were deployed off the coast of the Netherlands, and one was set up in the Mediterranean off of Italy…those brought the Netherlands count up to 3 offshore, from one on land and one offshore in December, but down from two on land and two offshore in January of 2016, and brought the Italian count up to 5 rigs, from 4 land based rigs in December and 3 on land last January…elsewhere on land in Europe, Turkey added 3 rigs and now have 32 active, up from 29 rigs in December and a year ago, and France started up two rigs, up from none in in France in December and none most of last year…meanwhile, the Germans shut down 1 rig, leaving them 3 still active, down from the 7 rigs they had deployed a year earlier…

lastly, the African continent saw a net increase of 1 rig to 79 rigs in January, which was still down from the 94 rigs working in Africa last year at this time…OPEC member Nigeria, who is exempt from the organization’s production cuts for the time being, added 2 rigs and now have 6 rigs working, which was still down from the 9 rigs they had deployed a year ago…OPEC member Angola also added a rig, and now have 5 rigs active, also down from the 10 rigs they had active a year earlier…in addition, the Congo Republic, which had shut down all 3 rigs they had active in December, added 1 rig back in January, still down from the 3 rigs they had active last January…OPEC member Algeria shut down 1 rig, leaving 51 rigs still working in Algeria, same as they had a year ago….and both Liberia and Ghana shut down the only drilling rig they had active; a year ago, Liberia had no rigs and Ghana had one….finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China’s offshore area, with an average of 20 rigs active in January, were included in the Asian totals here…  

Posted in Uncategorized | Leave a comment