tables and graphs for Sept 26th

rig count summary:

September 25 2020 rig count summary

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global oil shortage at 1.57 million bpd in August; DUCs fell as completions rose, new wells drilled remained at all time low

OPEC report indicates a global oil shortage of 1.57 million barrels per day in August; DUCs fell as completions rose and new wells drilled remained at all time low; November natural gas price is 28.6% higher than October natural gas price..

​US ​oil prices rose for the first time in three weeks after hurricane Sally cut output, US ​oil ​supplies fell,​ ​and the Saudis pressured their OPEC partners to cut production…after falling 6.1% to $37.33 a barrel last week after the Saudis marked down their export prices and domestic crude supplies increased, the contract price of US light sweet crude for October delivery moved higher early Monday as another tropical storm in the Gulf of Mexico forced ​offshore ​production offline yet again, but turned lower and finished down 7 cents at $37.26 a barrel amid concerns about a stalled global economy, after OPEC ​had ​forecast a 9.46 million barrels per day drop in ​global ​demand this year…prices edged slightly lower early Tuesday, but turned higher as Hurricane Sally stalled offshore, and ended with a gain of $1.02 as $38.28 a barrel as more than a quarter of U.S. offshore oil and gas production was shut, and key exporting ports were closed by the approaching storm…oil prices then opened higher Wednesday after the API report indicated falling crude inventories, and then surged more than 4% after the EIA report confirmed a big drawdown in U.S. crude and gasoline inventories as Hurricane Sally left a swath of U.S. offshore production shut down, with US crude prices ending up $1.88 at $40.16 a barrel in their largest daily gain since June…oil prices gave up more than 1% of that gain in early trading on Thursday, but then reversed those losses to end 81 cents or 2% higher at $40.97 a barrel as an OPEC panel pressed laggards Iraq, Nigeria and the United Arab Emirates to cut more barrels to compensate for their overproduction in recent months…​​the oil rally weakened on Friday after a Libyan General said the blockade on the country’s oil exports would be lifted for a month as a prelude to negotiations, but still ended ​the day ​14 cents higher at $41.11 a barrel, the highest close in over two weeks…oil prices thus ended more than 10% higher for the week, after Saudi Arabia pressured its allies to stick to production quotas, Hurricane Sally cut U.S. production, and banks including Goldman Sachs predicted an oil supply deficit for the remainder of this year..

natural gas prices, on the other hand, fell for the third consecutive week, as a bigger than expected injection into storage put gas supplies on track to go into winter at a record level….after falling 12% to a four week low of $2.269 per mmBTU last week on an early cold weather outbreak and rising gas supplies, the contract price of natural gas for October delivery opened the week higher on Monday and held onto a 4.1 cent gain at $2.310 as LNG exports rose and natural gas output fell as producers shut in production ahead of Hurricane Sally’s expected landfall on the Gulf Coast…natural gas prices rose another 5.2 cents on Tuesday as Sally’s slow approach outweighed rising LNG exports and forecasts for milder weather and lower cooling demand over the next two weeks, but then gave up the week’s gains in falling 9.5 cents to a four week low of $2.267 per mmBTU on Wednesday ​after Sally made landfall far east of Louisiana’s gas production and was downgraded to a tropical storm…natural gas prices then plummeted 10% to a six week low of $2.042 per mmBTU on Thursday as the EIA reported a much bigger-than expected increase in gas inventories that kept stockpiles on track to reach record highs by the end of October.…gas prices were then down another 6% at $1.926 per mmBTU on Friday before clawing their way back to close with a gain of six-tenths of a cent at $2.048 per mmBTU, as resuming output in the Gulf of Mexico offset an increase in LNG exports, which left the October contract down more than 9% on the week, and at a record 61 cents per mmBTU below the closing November natural gas quote of $2.633 per mmBTU

the natural gas storage report from the EIA for the week ending September 11th indicated that the quantity of natural gas held in underground storage in the US increased by 89 billion cubic feet to 3,614 billion cubic feet by the end of the week, which left our gas supplies 535 billion cubic feet, or 17.4% greater than the 3,079 billion cubic feet that were in storage on September 11th of last year, and 421 billion cubic feet, or 13.2% above the five-year average of 3,193 billion cubic feet of natural gas that have been in storage as of the 11th of September in recent years….the 89 billion cubic feet that were added to US natural gas storage this week was significantly higher than the forecast of a 77 billion cubic foot increase from an S&P Global Platts” survey of analysts, and it was also more than the 82 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and well above the average of 77 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years..  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 11th showed that because of a drop in our oil imports and an increase in​ our​ refinery throughput, we needed to withdraw oil from our stored supplies for the seventh time out of 8 weeks and for the 12th time in thirty-five weeks…our imports of crude oil fell by an average of 416,000 barrels per day to an average of 5,423,000 barrels per day, after rising by an average of 523,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 349,000 barrels per day to an average of 2,595,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,413,000 barrels of per day during the week ending September 11th, 67,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 900,000 barrels per day higher at 10,900,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 13,313,000 barrels per day during this reporting week…

meanwhile, US oil refineries reported they were processing 13,488,000 barrels of crude per day during the week ending September 11th, 709,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net total of 931,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 755,000 barrels per day more than what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-755,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…moreover, since last week’s fudge factor was +547, indicating a week over week difference of 1,302,000 barrels per day in the line 13 balance sheet adjustment, the size of those errors render our week over week comparisons of oil supply and demand as nonsense…but since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them as published, just as they’re watched & believed to be accurate by most everyone in the industry… (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,513,000 barrels per day last week, which was 20.1% less than the 6,652,000 barrel per day average that we were importing over the same four-week period last year….the 931,000 barrel per day net withdrawal from our total crude inventories was as 627,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 304,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is now being leased for commercial use, and hence the recent SPR additions and withdrawals should ​really ​be included in our commercial supplies….this week’s crude oil production was reported to be 900,000 barrels per day higher at 10,900,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 900,000 barrels per day to 10,400,000 barrels per day, while Alaska’s oil production rose by 3,000 barrrels per day to 459,000 barrels per day but still added 500,000 barrels per day to the rounded national total….last year’s US crude oil production for the week ending September 13th was rounded to 12,400,000 barrels per day, so this reporting week’s rounded oil production figure was 12.1% below that of a year ago, yet still 29.3% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 75.8% of their capacity while using 13,488,000 barrels of crude per day during the week ending September 11th, up from 71.8% of capacity during the prior week, but excluding the 2005 and 2008 hurricane-related refinery interruptions, still one of the lowest refinery utilization rates of the last thirty years…hence, the 13,488,000 barrels per day of oil that were refined this week were 19.3% fewer barrels than the 16,707,000 barrels of crude that were being processed daily during the week ending September 13th of last year, when US refineries were operating at 91.2% of capacity….

even with the jump in the amount of oil being refined, gasoline output from our refineries was still lower, decreasing by 111,000 barrels per day to 8,819,000 barrels per day during the week ending September 11th, after our refineries’ gasoline output had decreased by 604,000 barrels per day over the prior week…and since our gasoline production is still recovering from a multi-year low in the wake of this Spring’s covid lockdown, this week’s gasoline output was 6.7% less than the 9,451,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 5,000 barrels per day to​ ​4,403,000 barrels per day, after our distillates output had decreased by 381,000 barrels per day to a three year low of 4,398,000 barrels per day over the prior week…after this week’s increase in distillates output, our distillates’ production was still 13.8% less than the 5,109,000 barrels of distillates per day that were being produced during the week ending September 13th, 2019….

with the decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 9th time in 11 weeks and for the 24th time in 33 weeks, falling by 381,000 barrels to 231,524,000 barrels during the week ending September 11th, after our gasoline supplies had decreased by 2,954,000 barrels over the prior week…our gasoline supplies decreased by less this week even though the amount of gasoline supplied to US markets increased by 88,000 barrels per day to 8,478,000 barrels per day because our imports of gasoline roseby 26,000 barrels per day to 574,000 barrels per day and because our exports of gasoline fell by 203,000 barrels per day to 506,000 barrels per day….but even after the gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 0.8% higher than last September 13th’s gasoline inventories of 229,685,000 barrels, and roughly 3% above the five year average of our gasoline supplies for this time of the year… 

meanwhile, even with our distillates production near a three year low, our supplies of distillate fuels increased for the eighteenth time in 24 weeks and for the 22nd time in 49 weeks, rising by 1,675,000 barrels to 177,195,000 barrels during the week ending September 11th, after our distillates supplies had decreased by 1,675,000 barrels during the prior week….our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 904,000 barrels per day to nearly a 28 year low of 2,809,000 barrels per day, and even as our exports of distillates rose by 128,000 barrels per day to 1,212,000 barrels per day, while our imports of distillates fell by 48,000 barrels per day to 112,000 barrels per day…and after this week’s inventory increase, our distillate supplies at the end of the week were 31.2% above the 136,663,000 barrels of distillates that we had in storage on September 13th, 2019, and about 22% above the five year average of distillates stocks for this time of the year…

finally, with the increase in our refinery throughput and the decrease in our oil imports, our commercial supplies of crude oil in storage (not including commercial oil in the SPR) fell for the 9th time in the past fifteeen weeks and for the 16th time in the past year, decreasing by 4,389,000 barrels, from 500,434,000 barrels on September 4th to 496,045,000 barrels on September 11th…even after that decrease, our commercial crude oil inventories were still around 14% above the five-year average of crude oil supplies for this time of year, and about 53% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the second weekend of September, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories have generally been rising over the past two years, except for during the past two summers, after generally falling over the year and a half prior to September of 2018, our crude oil supplies as of September 11th were 18.9% above the 417,126,000 barrels of oil we had in commercial storage on September 13th of 2019, 25.9% more than the 394,137,000 barrels of oil that we had in storage on September 14h of 2018, and 5.9% above the 468,241,000 barrels of oil we had in commercial storage on September 8th of 2017…    

OPEC’s Monthly Oil Market Report

Monday of this past week saw the release of OPEC’s September Oil Market Report, which covers OPEC & global oil data for August, and hence it gives us a picture of the global oil supply & demand situation in the first month after the unprecedented agreement between OPEC, the Russians, and other oil producers to cut production by 9.7 million barrels a day was reduced to a 7.7 million barrels a day cut….we​’ll​ again​ ​caution that estimating oil demand while most countries are still trying to recover from a Covid-19 induced recession is pretty speculative, and hence the demand figures we’ll be reporting this month should again be considered as having a much larger margin of error than we’d expect from this report during normal, more predictable periods.. 

the first table from this monthly report that we’ll review is from the page numbered 50 of this month’s report (pdf page 63), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as a means of impartially adjudicating whether their output quotas and production cuts are being met, to thus avert any potential disputes that could arise if each member reported their own figures…

August 2020 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC’s oil output was up by 763,000 barrels per day to 24,045,000 barrels per day during August, from their revised July production total of 23,283,000 barrels per day…however that July output figure was originally reported as 23,172,000 barrels per day, which means that OPEC’s July production was revised 111,000 barrels per day higher with this report, and hence August’s production was, in effect, a rounded 874,000 barrel per day increase from the previously reported OPEC production figure (for your reference, here is the table of the official July OPEC output figures as reported a month ago, before this month’s revisions)…

from the above table, we can also see that production increases of 475,000 barrels per day from the Saudis, 180,000 barrels per day from the Emirates,​ and​ 175,000 barrels per day from Kuwait accounted for the August increase, even as Iraq made a deeper production cut of 100,000 barrels per day….recall that the original oil producer’s agreement was to cut production by 9.7 million barrels per day from an October 2018 baseline for just two months, during May and June, but that agreement was extended to include July at a meeting between OPEC and other producers on June 6th….then, in a subsequent meeting in July, OPEC and the other oil producers agreed to ease their deep supply cuts by 2 million barrels per day in August, which accounts for the output increase by most members that we see today…however, since Iraq had never been in compliance with the original cuts during May, June and July, the producers group pressured them into committing to make “compensation cuts” over August and September to make up for their overproduction in previous months, which is what accounts for their deeper cut we see above….

​there does not seem to be a table ​or listing available ​of how much each OPEC member was expected to produce under the newly eased cuts of August, so we’ll include below the table which shows the October 2018 reference production for each of the OPEC members (as well as other producers party to the mid-April agreement), as well as the production level each of those producers was expected to cut their output to during May, June, and July….

April 13th 2020 OPEC   emergency cuts

the above table shows the oil production baseline in thousands of barrel per day from which each of the oil producers w​a​​s to cut from in the first column, a ​figure which is based on each of the producer’s October 2018 output, ie., a date before the past year’s and ​this year’s output cuts took effect; the second column shows how much each participant ​had committed to cut in thousands of barrel per day, which was 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant had agreed to after that cut…the producer’s agreement for August​ amends the above such that each member would be allowed to increase their May thru July production cut level (ie, the “voluntary adjustment” shown above) by 20%…for example, Algeria’s “cut” was expected to be 241,000 barrels per day from May thru July, which would reduce their oil production to 816,000 barrels per day over that period…under the agreement for August, Algeria would reduce their “cut” by 20% to 193,000 barrels per day, allowing them to produce 864,000 barrels per day during August…offhand, it appears that only the UAE, who should have held their production under 2,690,000 barrels per day, has exceeded their quota for August…note that sanctioned OPEC members Iran and Venezuela and war-torn Libya are exempt from these cuts…

the next graphic from this month’s report that we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from September 2018 to August 2020, and it comes from page 51 (pdf page 64) of the September OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC​’s ​monthly oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale….

August 2020 OPEC report global oil supply

including the 763,000 barrel per day increase in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global oil production increased by a rounded 1.32 million barrels per day to average 89.88 million barrels per day in August, a reported increase which apparently came after July’s total global output figure was revised down by 190,000 barrels per day from the 88.75 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 560,000 barrels per day in August after that revision, with oil production from Canada and Russia accounting for the lion’s share of the non-OPEC increase in August…but even with the increase in August’s global output, the 89.88 million barrels of oil per day that were produced globally in August were 10.01 million barrels per day, or 10.1% less than the revised 99.89 million barrels of oil per day that were being produced globally in August a year ago, the 8th month of OPECs first round of production cuts (see the September 2019 OPEC report (online pdf) for the originally reported August 2019 details)…with this month’s increase in OPEC’s output, their August oil production of 24,045,000 barrels per day rose to 26.8% of what was produced globally during the month, up from their revised 26.3% share in July, and up from the 25.4% share they contributed to global output in June…OPEC’s August 2019 production, which included 537,000 barrels per day from former OPEC member Ecuador, was reported at 29,741,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 5,159,000, or 17.4% fewer barrels per day of oil in August than what they produced a year ago, when they accounted for 30.0% of global output…

Even with the increase in OPEC’s and global oil output that we’ve seen in this report, there was still a shortfall in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…  

August 2020 OPEC report global oil demand

the above table came from page 27 of the September OPEC Monthly Oil Market Report (pdf page 40), and it shows regional and total oil demand estimates in millions of barrels per day for 2019 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2020 over the rest of the table…on the “Total world” line in the fourth column, we’ve circled in blue the figure that’s relevant for August, which is their estimate of global oil demand during the third quarter of 2020…

OPEC is estimating that during the 3rd quarter of this year, all oil consuming regions of the globe have been using an average of 91.45 million barrels of oil per day, which is a 650,000 barrels per day downward revision from the 92.10 million barrels of oil per day they were estimating for the 3rd quarter a month ago (​revisions are ​encircled in green), reflecting quite a bit of coronavirus related demand destruction compared to 2019, when summertime ​global ​demand exceeded 100 million barrels per day….however, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were only producing 89.88 million barrels per day during August, which would imply that there was a shortage of around 1,570,000 barrels per day in global oil production in August when compared to the demand estimated for the month… 

in addition to figuring th​at August ​oil ​shortage implied by this report, the downward revision of 190,000 barrels per day to July’s global oil output that’s implied in this report, combined with the 650,000 barrels per day downward revision to 3rd quarter demand that we’ve circled in green means that the3,350,000 barrels per dayglobal oil output shortage we had previously figured for July would now be revised to a shortage of 2,890,000 barrels per day….

Note that in green we’ve also circled a downward revision of 200,000 barrels per day to second quarter demand, a quarter when there was a​large excess of oil production…based on that downward revision to demand, our previous estimate that there was a surplus of 5,610,000 barrels per day in June would now be revised to a 5,810,000 barrels per day surplus, the oil surplus of 8,390,000 barrels per day that we had previously figured for May would have to be revised to a surplus of 8,590,000 barrels per day & the 17,140,000 barrels per day that we had previously figured for April would have to be revised to a surplus of 17,340,000 barrels per day… 

there was also an upward revision of 10,000 barrels per day to first quarter demand, which we have also encircled in green on the table above…that means that the record global oil surplus of 17,788,000 barrels per day we had previously figured for March would have to be revised downward to a still record global oil surplus of 17,778,000 barrels per day, the 1,900,000 barrel per day global oil production surplus we had figured for February would now be a 1,890,000 barrel per day global oil output surplus, and the 930,000 barrel per day global oil output surplus we last had for January would now be revised to a 920,000 barrel per day oil output surplus.. so despite the shortage of oil that has developed in July and August, it’s obvious the world’s oil producers had produced a lot of oil earlier this year that no one wanted..​.​

This Week’s Rig Count

the US rig count rose for the 3rd time in the past 28 weeks during the week ending September 18th, but it is still down by 68% over that twenty-eight week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 1 to 255 rigs this past week, which was still down by 613 rigs from the 868 rigs that were in use as of the September 20th report of 2019, and was also 149 fewer rigs than the all time low prior to this year, and 1,674 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil decreased by 1 rig to 179 oil rigs this week, after decreasing by 1 oil rig the prior week, leaving us with 540 fewer oil rigs than were running a year ago, and less than a eighth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations increased by two to 73 natural gas rigs, which was still down by 7​5 natural gas rigs from the 148 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil & gas, three rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, one in Sonoma County, California, and one in the Permian basin in Eddy County, New Mexico…a year ago, there only one such “miscellaneous” rig deployed…

The Gulf of Mexico rig count fell by 1 to 14 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and two drilling for oil offshore from Texas…that was 9 fewer Gulf rigs than the 23 rigs drilling in the Gulf a year ago, when all 23 Gulf rigs were drilling offshore from Louisiana…while there are no rigs operating off of other US shores at this time, a year ago there were also two rigs deployed offshore from Alaska, so this week’s national offshore count is down by 11 from the national offshore rig count of 25 a year ago…also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling in inland waters..

The count of active horizontal drilling rigs was up by 1 to 215 horizontal rigs this week, which was still 541 fewer horizontal rigs than the 756 horizontal rigs that were in use in the US on September 20th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count was up by 21 to 23 directional rigs this week, but those were still down by 38 from the 61 directional rigs that were operating during the same week of last year….on the other hand, the vertical rig count fell by 2 to 17 vertical rigs this week, and those were also down by 34 from the 51 vertical rigs that were in use on September 20th of 2019….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 18th, the second column shows the change in the number of working rigs between last week’s count (September 11th) and this week’s (September 18th) count, the third column shows last week’s September 11th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 20th of September, 2019…    

September 18 2020 rig count summary

as has been the case most of the summer, there were only a few changes in drilling activity again this week, with only four rig removals and just five rig additions, suggesting that prices are currently high enough that drillers are no longer trying to shut down money-losing operations, but not high enough to encourage the addition of new rigs to the field….checking the rig counts in the Texas part of Permian basin, we find that 2 rigs were added in Texas Oil District 8, which is the core Permian Delaware, while rig counts in the other Permian basin districts remained unchanged…since the national Permian basin rig count was down by one, that means that the three rigs that were pulled out of New Mexico must have been drilling in the far western Permian Delaware, to balance the national rig count on that basin…meanwhile, the Texas rig count is only up by one because the Gulf oil rig that was removed this week had been drilling in Texas waters…elsewhere, rig additions this week were in North Dakota’s Williston basin, Louisiana’s Haynesville, and West Virginia’s Marcellus, with the latter two additions accounting for this week’s increase in drilling for natural gas…

DUC well report for August

Monday of this past week also saw the release of the EIA’s Drilling Productivity Report for September, which includes the EIA’s August data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions….for the 14th time in the past eightteen months, this report showed a decrease in uncompleted wells nationally in August, as completions of drilled wells increased while drilling of new wells remained unchanged….for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 77 wells, falling from 7,742 DUC wells in July to ​7,665 DUC wells in August, which was also 7.8% fewer DUCs than the 8,310 wells that had been drilled but remained uncompleted as of the end of August of a year ago…this month’s DUC increase occurred as 292 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during August, the same number that were drilled in July, and hence matching lowest number of wells drilled in any month in the history of this report, while 369 wells were completed and brought into production by fracking, an increase of 95 well completions from the 274 completions seen in July, but still down by 73.4% from the 1,389 completions seen in August of last year….at the August completion rate, the 7,655 drilled but uncompleted wells left at the end of the month represents a 20.7 month backlog of wells that have been drilled but are not yet fracked, down from the 29.3 month DUC well backlog of a month ago, ​with the understand​ing that this normally indicative backlog ratio is being skewed by near record low completions…

both oil producing regions and natural gas producing regions saw DUC well increases in August, even as one natural gas basin saw a small​ ​DUC increase… the number of uncompleted wells remaining in the Oklahoma Anadarko decreased by 25, falling from 725 at the end of July to 700 DUC wells at the end of August, as just 10 wells were drilled into the Anadarko basin during August, while 35 Anadarko wells were being fracked…at the same time, DUCs in the Permian basin of west Texas and New Mexico decreased by 22, from 3,554 DUC wells at the end of July to 3,532 DUCs at the end of August, as 133 new wells were drilled into the Permian, while 155 wells in the region were completed….in addition, DUC wells in the Bakken of North Dakota decreased by 14, from 881 DUC wells at the end of July to 867 DUCs at the end of August, as 19 wells were drilled into the Bakken in August, while 33 of the drilled wells in that basin were being fracked…there was also a decrease of 10 DUC wells in the Eagle Ford of south Texas, from 1,187 DUC wells at the end of July to 1,177 DUCs at the end of August, as 15 wells were drilled in the Eagle Ford during August, while 25 already drilled Eagle Ford wells were completed…meanwhile, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range was unchanged at 481, as 20 new Niobrara wells were drilled in August while 20 drilled Niobrara wells were being fracked…

among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 10 wells, from 601 DUCs at the end of June to 591 DUCs at the end of August, as 61 wells were drilled into the Marcellus and Utica shales during the month, while 71 of the already drilled wells in the region were fracked….on the other hand, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 4 to 317, as 34 wells were drilled into the Haynesville during August, while 30 of the already drilled Haynesville wells were fracked during the same period….thus, for the month of August, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 71 wells to 6,757 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 6 wells to 908 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…

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August’s retail sales, industrial production, new home construction and business inventories

Widely watched monthly reports that were released this past week included the Retail Sales Report for August and the Business Sales and Inventories report for July, both from the Census bureau, the August Industrial Production and Capacity Utilization report from the Fed, and the August report on New Residential Construction from the Census Bureau…in addition, the Bureau of Labor Statistics released the Regional and State Employment and Unemployment report for August, a report which breaks down the two employment surveys from the monthly national jobs report by state and region….while the text of this report provides a useful summary of this data, the serious statistics aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands…

This week also saw the release of the first two regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York, northern New Jersey and Puerto Rico, reported their headline general business conditions index rose from +3.7 in August to +17.0 in September, suggesting a faster pace of growth for First District manufacturers, while the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +17.2 in August to +15.0 in September, suggesting a slightly slower growth rate among that region’s manufacturers…  

Retail Sales Rose 0.6% in August after July’s Sales Were Revised 0.3% Lower

Seasonally adjusted retail sales rose 0.6% in August after retail sales for July were revised lower…the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $537.5 billion during the month, which was up 0.6 percent (±0.5%)* from July’s revised sales of $534.6 billion and 2.6 percent (± 0.7 percent) above the adjusted sales in August of last year…July’s seasonally adjusted sales were revised down from the $536.0 billion reported last month to $534.6 billion, while June sales were revised 0.1% higher, from $529.4 billion to $529.962 billion, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 0.9%, from $550,941 million in July to $545,890 million in August, while they were up just 0.1% from the $545,247 million of sales in August a year ago…the revision to June’s sales means that 2nd quarter sales were more than $2.2 billion higher at an annual rate than was previously reported, which would be enough to add 0.03 percentage point to 2nd quarter GDP when the 3rd estimate is published at the end of the month…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the June to July change under “Jun 2020 (r)evised”, and the revised July 2019 to July 2020 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance July sale estimates, before this month’s revision, is here….

August 2020 retail sales table

To compute August’s real personal consumption of goods data for national accounts from this August retail sales report, the BEA will use the corresponding price changes from the August consumer price index, which we reviewed last week….to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals…from the third line on the above table, we can see that August retail sales excluding the 0.4% increase in sales at gas stations were also up by 0.6%….then, subtracting the figures representing the 1.2% decrease in grocery & beverage store sales and the 4.7% increase in food services sales from that total, we find that core retail sales were virtually unchanged month over month…since the August CPI report showed that the the composite price index of all goods less food and energy goods was 1.0% higher in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show a decrease of about 1.0% for the month…however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 0.2%, the August price index for transportation commodities other than fuel was 2.1% higher, which would suggest that real sales at auto & parts dealers were about 1.9% lower once price increases are taken into account… similarly, while nominal sales at clothing stores were 2.9% higher in August, the apparel price index was 0.6% higher, which means that real sales of clothing likely rose by about 2.3%…and in the lone case where August’s prices for a major goods category fell, we see that sales at drug stores were up 0.8% while prices for medical care commodities were 0.1% lower, which suggests that real sales at drug stores rose 0.9%…

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the August CPI report showed that the food price index rose 0.1% in August, as the price index for food purchased for use at home fell 0.1% while the index for food bought away from home was 0.3% higher…thus, while nominal sales at food and beverage stores were 1.2% lower in August, prices were 0.1% lower, which means that real sales of food and beverages would be roughly 1.1% lower…on the other hand the 4.7% nominal increase in sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests real sales at bars and restaurants rose by 4.4% for the month…meanwhile, while sales at gas stations were up 0.4%, there was a 2.0% increase in the retail price of gasoline, which would suggest real sales of gasoline were on the order of 1.6% lower, with a caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for August will show that real personal consumption of goods fell by about 1.1% in August, after rising by a revised 1.3% in July and by a revised 5.8% in June, after rising by 14.4% in May, after falling by 12.5% in April and by 0.7% in March…at the same time, the 4.4% increase in real sales at bars and restaurants will have a positive impact on the order of +0.3% on August’s real personal consumption of services…

Industrial Production Rose 0.4% in August after June & July Revised Higher

The Fed’s August report on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% in August, after rising by a revised 3.5% in July and a revised 6.1% in June…however, even with those increases, industrial production is still down 7.7% from a year ago, and down 7.5% from its pre-pandemic level….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 101.4 in August from 101.0 in July, which was revised up from the 100.2 that was reported for July a month ago…at the same time, the June reading for the index was revised from 97.2 to 97.5, the May index was revised from 92.0 to 91.9, the April index was revised from 91.2 to 91.0, and the March index was revised from 104.6 to 104.5…

The manufacturing index, which accounts for more than 75% of the total IP index, rose by 1.0%, from 97.0 in July to 97.9 in August, after July’s manufacturing index was revised from 96.5 to 97.0, June’s manufacturing index was revised but unchanged at 93.4, May’s manufacturing index was revised from 87.0 to 86.9, April’s manufacturing index was revised from 83.8 to 83.6, and the March manufacturing index was revised from 99.7 to 99.6…even with the August increase, the manufacturing index is still down by 6.9% from a year ago….meanwhile, the mining index, which includes oil and gas well drilling, fell from 112.5 in July to 109.7 in August, after the July index was revised up from 108.5, as the year over year change in the mining index declined to 17.9% from the 17.0% decrease reported a month ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, slipped by 0.4%, from 105.6 in July to 105.2 in August, after the July utility index was revised down from 105.9, and after the June utility index was revised from 102.5 to 101.7…however, even though last August was generally much cooler than this year, the utility index is only 0.5% above its year ago reading of 104.6..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose from 71.1% in July to 71.4% in August…capacity utilization of NAICS durable goods production facilities rose from 68.9% in July to 69.4% in August, after July’s figure was revised up from 68.1%, while capacity utilization for non-durables producers rose from an unrevised 71.5% to 72.4%…capacity utilization for the mining sector fell to 74.5% in August from 76.2% in July, which was originally reported as 73.5%, while utilities were also operating at 74.5% of capacity during August, down from their 75.0% of capacity during July, which was revised down from 75.2%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories…. 

New Housing Construction Reported Lower in August; Building Permits Little Changed

The August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,416,000, which was 5.1 percent (±9.6 percent)* below the revised July estimated annual rate of 1,492,000 housing unit starts, but was 2.8 percent (±10.3 percent)* above last August’s pace of 1,279,000 housing starts a year…the asterisks indicate that the Census Bureau does not have sufficient data to determine whether housing starts actually rose or fell from July or even over the past year, with the figures in parenthesis the most likely range of the changes indicated; in other words, August’s housing starts could have been up by 4.5% or down by as much as 14.7% from those of July, with a 10% chance that the actual change could have even been outside of that wide range…in this report, the annual rate for July housing starts was revised from the 1,496,000 reported last month to 1,492,000, while June’s housing starts, which were first reported at a 1,186,000 annual rate, were revised up from last month’s initial revised figure of 1,222,000 annually to 1,265,000 annually with this report….

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 127,300 housing units were started in August, down 8.5% from the 139,100 units started in July…of those housing units started in August, an estimated 93,200 were single family homes and 32,400 were units in structures with more than 5 units, up from the revised 93,100 single family starts in July, but down from the 45,300 units started in structures with more than 5 units in July…

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 August, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,470,000 housing units, which was 0.9 percent (±1.4 percent)* below the revised July rate of 1,483,000 permits, and was 0.1 percent (±1.5 percent)* below the rate of building permit issuance in August a year earlier…the annual rate for housing permits issued in July was revised from 1,495,000 to a rate of 1,483,000 annually….

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for roughly 125,500 housing units were issued in August, down from the revised estimate of 135,400 new permits issued in July…the August permits included 89,600 permits for single family homes, down from 92,100 in July, and 31,200 permits for housing units in apartment buildings with 5 or more units, down from 39,100 such multifamily permits a month earlier…

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: 8:38 AM Housing Starts decreased to 1.416 Million Annual Rate in August and Comments on August Housing Starts

July Business Sales Up 3.2%, July Business Inventories Up 0.1%

After the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August report and the earlier published July factory data and last week’s July wholesale trade report 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 $1,441.1 billion in July, up 3.2 percent (±0.2%) from June’s revised sales, but down 1.2 percent (±0.4 percent) from July’s sales of a year earlier…note that total June’s sales were concurrently revised up from the originally reported $1,394.0 billion to $1,396.2 billion with this report, which is now an 8.6% increase from May….manufacturer’s sales were up by 4.6% to $479,530 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.5% to $482,372 million, while wholesale sales rose 4.6% to $479,151 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,914.3 billion at the end of July, up 0.1% (±0.1%) from June, but 5.9 percent (±0.3 percent) lower than in July a year earlier…the value of end of June inventories was revised up from the $1,912.1 billion reported last month to $1,912.3 billion, which is still down 1.1% from May…seasonally adjusted inventories of manufacturers were estimated to be valued at $687,216 million, 0.5% lower than in June, inventories of retailers were valued at $594,755 million, 1.2% more than in June, while inventories of wholesalers were estimated to be valued at $632,304 million at the end of July, down 0.3% from June…

With the release of the factory inventory data two weeks ago, we judged that the real change in July factory inventories would have a modest negative impact on the growth rate of 3rd quarter GDP; then, with the release of the wholesale inventory last week, we felt that real wholesale inventories would provide substantial boost to 3rd quarter GDP…since the producer price index for July showed that prices for finished goods were on average 0.8% higher, that means that the real increase in retail inventories was only around 0.4% for the month…however, since real retail inventories saw a substantial decrease in the second quarter, any real increase in July retail inventories would thus have a substantial positive impact on 3rd quarter GDP, first by reversing the 2nd quarter drop, and then by incrementally adding to that by the amount of the July increase…

 

(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 picked from the aforementioned GGO posts, contact me…)

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tables and graphs for September 19th

retail sales:

August 2020 retail sales table

rig count summary:

September 18 2020 rig count summary

OPEC production:

August 2020 OPEC crude output via secondary sources

global oil output:

August 2020 OPEC report global oil supply

global oil demand:

August 2020 OPEC report global oil demand

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US fields the lowest percentage of horizontal rigs and the highest percentage of vertical rigs in 3 years; distillates’ output at a 3 year low

US oil prices fell for a second straight week this week after the Saudis & Emirates marked down their prices on oil exports to Asia and domestic crude supplies increased…after falling more than 7% to $39.77 a barrel in the first drop in five weeks on fears of a slowing recovery last week, the contract price of US light sweet crude for October delivery opened lower in New York trading on Tuesday and quickly tanked, reflecting a drop of more than 1.5% in overseas markets Monday after Saudi Arabia had made the deepest price cuts for crude supplies to Asia in five months over the holiday weekend…Tuesday’s oil price continued lower to settle down $3.01, or 7.6%, at $36.76 a barrel, the lowest price since June, as equities also sold off amid growing demand concerns as Covid-19 continued to spread worldwide…oil prices recovered part of that loss Wednesday, rising $1.29, or 3.5%, to settle at $38.05 a barrel as the flurry of Tuesday’s panic-stricken trading was absorbed and the market rebalanced, leading to a rebound…but the rebound was short-lived as oil prices opened lower Thursday after the API had reported an increase in US oil supplies and then continued falling when that surprise increase was confirmed by the EIA to settle down at 75 cents as $37.30 a barrel, as some traders interpreted those rising oil supplies as a sign of falling demand…October oil then traded in a narrow range on Friday and finished 3 cents higher at $37.33 a barrel, but still posted its second straight weekly decline, down 6.1% from last Friday’s close, as crude stockpiles rose around the world and fuel demand failed to rebound to pre-coronavirus levels

natural gas prices also finished lower for a second straight week on an early cold weather outbreak and rising gas supplies…after falling 2.6% to $2.588 per mmBTU last week on cooler temperatures and reduced demand, the contract price of natural gas for October delivery opened lower on Tuesday and tumbled along with oil prices on Covid19 related demand fears, finishing down 18.8 cents or 7% at $2.40 per mmBTU on an increase in gas output and forecasts for cooler weather and lower demand in late September, despite a post-Laura rebound in LNG exports and record pipeline exports to Mexico…with the same dynamic remaining in play, natural gas prices steadied and closed six-tenths of a cent higher on Wednesday, but then fell 8.3 cents to a four week low of $2.323 per mmBTU on Thursday on forecasts for cooler weather and less air conditioning demand next week than had been expected, following an EIA report on gas supplies showing that storage was filling quickly as cooler temperatures swept over swaths of the Lower 48….with unseasonable cold in place in the the mountains and plains, natural gas prices fell another 5.4 cents to a fresh four week low of $2.269 per mmBTU on Friday, thus ending the week about 12% lower, in their biggest weekly decline since March

the natural gas storage report from the EIA for the week ending September 4th indicated that the quantity of natural gas held in underground storage in the US increased by 70 billion cubic feet to 3,525 billion cubic feet by the end of the week, which left our gas supplies 528 billion cubic feet, or 17.6% greater than the 2,997 billion cubic feet that were in storage on September 4th of last year, and 409 billion cubic feet, or 13.1% above the five-year average of 3,116 billion cubic feet of natural gas that have been in storage as of the 4th of September in recent years….the 70 billion cubic feet that were added to US natural gas storage this week were more than the forecast of a 64 billion cubic foot increase from an S&P Global Platts” survey of analysts, but it was still less than the 80 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, while it was in line with the average of 68 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years..  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending September 4th showed that because our oil production and our oil imports partially recovered from hurricane Laura while our refinery throughput did not, we had surplus oil to add to our stored supplies for the first time in seven weeks and for the 6th time in the past fo​u​rteen weeks…our imports of crude oil rose by an average of 523,000 barrels per day to an average of 5,423,000 barrels per day, after falling by an average of 1,016,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 58,000 barrels per day to an average of 2,944,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 2,479,000 barrels of per day during the week ending September 4th, 581,000 more barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 300,000 barrels per day higher at 10,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 12,479,000 barrels per day during this reporting week…

meanwhile, US oil refineries reported they were processing 12,779,000 barrels of crude per day during the week ending September 4th, 1,089,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 247,000 barrels of oil per day were being added to the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports and from oilfield production was 547,000 barrels per day less than what was added to storage plus what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+547,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there​ must be an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…but since most everyone treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells, we’ll continue to report them​ as published​, just as they’re watched & believed to be accurate by most everyone in the industry… (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,492,000 barrels per day last week, which was 18.1% less than the 6,6694,000 barrel per day average that we were importing over the same four-week period last year….the rounded 247,000 barrel per day net addition to our total crude inventories was as 290,000 barrels per day were being added to our commercially available stocks of crude oil while 44,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is also being leased for commercial use, so by rights the recent SPR ​additions and withdrawals should be included in​ our​ commercial suppl​ies​….this week’s crude oil production was reported to be 300,000 barrels per day higher at 10.000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states rose by 300,000 barrels per day to 9,500,000 barrels per day, while Alaska’s oil production fell by 5,000 barrrels per day to 459,000 barrels per day but still added 500,000 barrels per day to the rounded national total….last year’s US crude oil production for the week ending September 6th was rounded to 12,400,000 barrels per day, so this reporting week’s rounded oil production figure was 19.4% below that of a year ago, yet still 18.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 71.8% of their capacity while using 12,779,000 barrels of crude per day during the week ending September 4th, down from 76.7% of capacity during the prior week, and excluding the 2005 and 2008 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the last thirty years…hence, the 12,779,000 barrels per day of oil that were refined this week were 27.0% fewer barrels than the 17,495,000 barrels of crude that were being processed daily during the week ending September 6th of last year, when US refineries were operating at 95.1% of capacity….

with the big drop in the amount of oil being refined, gasoline output from our refineries was also much lower, decreasing by 604,000 barrels per day to 8,930,000 barrels per day during the week ending September 4th, after our refineries’ gasoline output had increased by 16,000 barrels per day over the prior week…and since our gasoline production is still recovering from a multi-year low in the wake of this Spring’s covid lockdown, this week’s gasoline output was 13.8% less than the 10,360,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 381,000 barrels per day to a three year low of 4,398,000 barrels per day, after our distillates output had decreased by 343,000 barrels per day over the prior week…and after this week’s big decrease in distillates output, our distillates’ production was 17.7% less than the 5,341,000 barrels of distillates per day that were being produced during the week ending September 6th, 2019….

with the big decrease in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 8th time in 10 weeks and for the 23rd time in 32 weeks, falling by 2,954,000 barrels to 231,905,000 barrels during the week ending September 4th, after our gasoline supplies had decreased by 4,320,000 barrels over the prior week…our gasoline supplies decreased by less this week even with the drop in production because the amount of gasoline supplied to US markets decreased by 396,000 barrels per day to 8,390,000 barrels per day, while our imports of gasoline fell by 3,000 barrels per day to 574,000 barrels per day and while our exports of gasoline rose by 140,000 barrels per day to 709,000 barrels per day….but even after the large gasoline inventory drawdowns of recent weeks, our gasoline supplies were still 1.3% higher than last September 6th’s gasoline inventories of 228,904,000 barrels, and roughly 3% above the five year average of our gasoline supplies for this time of the year… 

meanwhile, with the big drop in our distillates production, our supplies of distillate fuels decreased for the sixth time in 23 weeks and for the 27th time in 48 weeks, falling by 1,675,000 barrels to 177,195,000 barrels during the week ending September 4th, after our distillates supplies had also decreased by 1,675,000 barrels during the prior week….our distillates supplies fell again this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 205,000 barrels per day to 3,713,000 barrels per day, and even as our exports of distillates fell by 182,000 barrels per day to 1,084,000 barrels per day, while our imports of distillates fell by 6,000 barrels per day to 160,000 barrels per day…but even after this week’s inventory decrease, our distillate supplies at the end of the week were still 29.1% above the 136,226,000 barrels of distillates that we had in storage on September 6th, 2019, and about 20% above the five year average of distillates stocks for this time of the year…

finally, with the rebound​  in our oilfiled production and the increase in our oil imports, our commercial supplies of crude oil in storage rose for the 23rd time in thirty-four weeks and for the 37th time in the past year, increasing by 2,033,000 barrels, from 498,401,000 barrels on August 28th to 500,434,000 barrels on September 4th…after that increase, our commercial crude oil inventories were still around 14% above the five-year average of crude oil supplies for this time of year, and almost 54% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the first weekend of September, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories have generally been rising ​over the past two years, except for during the past two summers, after generally falling ​over the year and a half​ prior to ​September of 2018, our crude oil supplies as of September 4th were 20.3% above the 416,068,000 barrels of oil we had in commercial storage on September 6th of 2019, 26.3% more than the 396,194,000 barrels of oil that we had in storage on September 7th of 2018, and 8.2% above the 462,353,000 barrels of oil we had in commercial storage on September 1st of 2017…    

This Week’s Rig Count

the US rig count fell for the first time in four weeks during the week ending September 11th, ​and​ it ​is now down by 68.1% over the recent 27 week drilling pullback….Baker Hughes reported that the total count of rotary rigs running in the US fell by 2 to 254 rigs this past week, which was also down by 632 rigs from the 886 rigs that were in use as of the September 13th report of 2019​…..​that was also 150 fewer rigs than the all time low prior to this year, and 1,675 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil decreased by 1 rig to 180 oil rigs this week, after increasing by 1 oil rig the prior week, leaving us with 553 fewer oil rigs than were running a year ago, and less than a eighth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations also decreased by one to 71 natural gas rigs, which was also down by 82 natural gas rigs from the 153 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil & gas, three rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, one in Sonoma County, California​, and one in the Permian basin in Eddy County, New Mexico…a year ago, there were no such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count remained at 15 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and three drilling for oil offshore from Texas…that was 10 fewer Gulf rigs than the 25 rigs drilling in the Gulf a year ago, when all 25 Gulf rigs were drilling offshore from Louisiana…while there are no rigs operating off ​of ​other US shores at this time, a year ago there was​ also​ a rig deployed offshore from Alaska, so this week’s national offshore count is down by 11 from the national offshore rig count of 26 a year ago…also note that in addition to those rigs offshore, a rig continues to drill through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling in inland waters..

The count of active horizontal drilling rigs was down by 6 to 214 horizontal rigs this week, which was also 562 fewer horizontal rigs than the 776 horizontal rigs that were in use in the US on September 13th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count was up by 1 to 21 directional rigs this week, but those were still down by 36 from the 57 directional rigs that were operating during the same week of last year….in addition, the vertical rig count rose by 3 to 19 vertical rigs this week, but those were still down by 34 from the 53 vertical rigs that were in use on September 13th of 2019….as of this week, 84.3% of all US drilling is being done by horizontal rigs, which is the lowest percentage horizontal rig deployment since September 8th, 2017….on the other hand, 7.5% of US drilling is ​now ​being done by vertical rigs, and that’s the highest percentage vertical rig deployment since the same date..

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 11th, the second column shows the change in the number of working rigs between last week’s count (September 4th) and this week’s (September 11th) count, the third column shows last week’s September 4th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 13th of September, 2019…    

September 11 2020 rig count summary

there were ​a few ​more changes this week than is evident from just looking at the above tables….checking the rig counts in the Texas part of Permian basin, we find that 5 rigs were added in Texas Oil District 8, which is the core Permian Delaware, while 4 rigs were pulled out of Texas Oil District 7C, which roughly aligns with the southern ​part of the ​Permian Midland, and another rig was pulled out of Texas Oil District 8A, which corresponds to the northern Permian Midland, ​thus ​leaving the Texas ​rig ​count ​in the ​Permian​ ​unchanged…since the national Permian basin rig count was down by one, that means that the rig that was pulled out of New Mexico must have been drilling in the far western Permian Delaware, to balance the national rig count on that basin…elsewhere in Texas, a rig was pulled out of Texas Oil District 6 near the Louisiana border, which thus accounts for the decrease in the Haynesville shale basin we see above…in addition to that natural gas rig ​removal from the Haynesville shale, two more natural gas rigs were ​also ​pulled out of West Virginia’s Marcellus this week, which you also see above…however, the national natural gas rig count was only down by one because a ​​vertical rig was set up to drill for natural gas in a shallow formation in Kanawha county, West Virginia that was not targeting the Marcellus, and another rig targeting natural gas began drilling in Andrews County, Texas, one of the Texas Oil District 8 additions in the Permian basin we noted previously, and the only Permian rig targeting natural gas that is active at this time…

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August’s consumer prices and producer prices; July’s wholesale trade and JOLTS

Major reports released this past week included the August Consumer Price Index, the August Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) report for July, all from the Bureau of Labor Statistics, and the Wholesale Trade, Sales and Inventories report for July from the Census Bureau…this week also saw the Consumer Credit Report for July from the Fed, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.3 billion in July, or at a 3.6% annual rate, as non-revolving credit expanded at a 4.8% rate to $3,144.2 billion while revolving credit outstanding contracted at a 0.4% rate to $994.7 billion…

This week’s major privately issued report was the Mortgage Monitor for July (pdf) from Black Knight Financial Services, which reported that 6.91% of mortgages were delinquent in July, down from the 7.59% that were delinquent in June, but well up from the 3.64% delinquency rate of July of 2019, and that a record low 0.36% of mortgages remained in the foreclosure process in July, same percentage as in June, but down from the 0.49% that were in foreclosure a year ago….

Consumer Prices Rose 0.4% in August on Higher Prices for Gasoline, Used Cars, Clothing, & Appliances

The consumer price index rose 0.4% in August, as higher prices for gasoline, used vehicles, appliances, clothing, and vehicle rentals were only partly offset by lower prices for groceries and utilities …the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.4% in August, after rising by 0.6% in July and by 0.6% in June, falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, 0.2% in November, 0.2% in October, 0.1% in September, and rising by 0.1% last August…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 259.101 in July to 259.918 in August, which left it statistically 1.3096% higher than the 256.558 index reading of August of last year, which is reported as a 1.3% year over year increase, up from the 1.0% year over year increase reported a month ago….with higher prices for energy offset by lower prices for groceries, seasonally adjusted core prices, which exclude food and energy, also rose by 0.4% for the month, as the unadjusted core price index rose from 267.703 to 268.756, which left the core index 1.7364% ahead of its year ago reading of 264.169, which is reported as a 1.7% year over year increase, up from the 1.6% the year over year increase that was reported for July…

The volatile seasonally adjusted energy price index rose 0.9% in August, after rising 2.5% in July, 5.1% in June, falling by 1.8% in May, by 10.1% in April, 5.8% in March, 2.0% in February and by 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% in October, but after falling 0.8% in September, falling 1.4% in August and rising 0.9% last July, and is still 9.0% lower than in August a year ago…the price index for energy commodities was 2.0% higher in August, while the index for energy services was 0.2% lower, after being unchanged in July….the energy commodity index was up 2.0% due to a 2.0% increase in the price of gasoline, the largest component, and a 3.9% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.7% lower…within energy services, the price index for utility gas service fell 0.2% after falling 1.0% in July and is now 0.5% lower than it was a year ago, while the electricity price index fell 0.2% after rising 0.3% in July….energy commodities are still averaging 16.7% lower than their year ago levels, with gasoline prices averaging 16.8% lower than they were a year ago, while the energy services price index is now down 0.1% from last August, as electricity prices are also 0.1% lower than a year ago…

The seasonally adjusted food price index rose 0.1% in August, after falling 0.4% in July, rising 0.6% in June, 0.7% in May, 1.5% in April, 0.3% in March, 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but after being unchanged last June, July & August, as the price index for food purchased for use at home was 0.1% lower in August, after falling 1.1% in July, while the index for food bought to eat away from home was 0.3% higher, as average prices at fast food outlets were 0.4% higher and prices at full service restaurants rose 0.1%, while this month’s data for food prices at employee sites and schools is missing…

In the food at home categories, the price index for cereals and bakery products was 0.2% lower even though average bread prices rose 0.5%, because the price index for fresh cakes and cupcakes fell 2.2%, the price index for frozen and refrigerated bakery products, pies, tarts, and turnovers fell 1.7%, and the price index for breakfast cereal fell 2.0%….at the same time, the price index for the meats, poultry, fish, and eggs group was 1.7% lower as the price index for beef and veal fell 4.4%, egg prices fell 3.0%, and the price index for pork was 2.0% lower… on the other hand, the seasonally adjusted index for dairy products was 1.5% higher, as milk prices rose 3.6% and the index for cheese and related products was 2.6% higher…in addition, the fruits and vegetables index was 0.2% higher as the price index for fresh fruits rose 1.4%, the price index for dried beans, peas, and lentils rose 1.9%, and the price index for frozen fruits and vegetables rose 0.7%…meanwhile, the beverages price index was 0.1% higher as the price index for tea and beverage materials other than coffee rose 1.3%….lastly, the price index for the ‘other foods at home’ category was 0.5% higher, as the price index for sugar and sweets rose 0.9%, prices for peanut butter rose 1.0%, the price index for olives, pickles, relishes rose 2.2% and the price index for prepared salads rose 2.1%…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last August, the price index for uncooked beef roasts has risen 12.1%, the price index for beef and veal other than those cuts listed separately rose 10.0%, the price index for pork other than chops, ham and bacon is up 14.7%, the price index for poultry other than chicken is 11.3% higher, and the price index for dried beans, peas, and lentils is up 10.3% over the  year, while only apples, bananas and instant coffee prices have declined over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.4% in August, after rising by 0.6% in July and by 0.2% in June, falling by 0.1% in May, by 0.4% in April and by 0.1% in March, but after rising by 0.2% in February, 0.2% in January, 0.1% December, 0.2% November, 0.1% October, 0.2% in September, 0.2% in August, and by 0.3% last July, the composite price index of all goods less food and energy goods was 1.0% higher in August, while the more heavily weighted composite for all services less energy services was 0.2% higher….

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust August’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 1.0% higher, as the price index for major appliances rose 4.8% on a 5.6% increase in prices for laundry equipment, the price index for window coverings rose 3.7%, and the price index for dishes and flatware increased by 2.9%….at the same time, the apparel price index was 0.6% higher on a 5.1% increase in the price index for men’s pants and shorts, a 4.9% increase in the price index for women’s dresses, a 2.0% increase in the price index for girls’s apparel, and a 2.0% increase in the price index for women’s footwear…in addition, the price index for transportation commodities other than fuel was 2.1% higher even as new car prices were unchanged as prices for used cars and trucks rose 5.4% and tire prices rose 0.5%….however, prices for medical care commodities were 0.1% lower, as prescription drugs prices fell 0.2% and the price index for medical equipment and supplies fell 1.2%…on the other hand, the recreational commodities index was 1.1% higher on a 4.2% increase in the price index for video equipment other than TVs, a 15.0% increase in the price index for sewing machines, fabric and supplies, a 2.2% increase in the price index for recorded music and music subscriptions, and a 1.9% increase in the price index for pets, pet supplies, accessories…at the same time, the education and communication commodities index was 0.5% higher on a 1.0% increase in the price index for computers, peripherals, and smart home assistants and a 0.8% increase in the price index for educational books and supplies…lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was down 0.2% on a 3.9% drop in the price index for stationery, stationery supplies, gift wrap..

Within core services, the price index for shelter was 0.1% higher as rents rose 0.1% and homeowner’s equivalent rent rose 0.1% while prices for lodging away from home at hotels and motels rose 1.1%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.6%, and other household operation costs were on average 0.5% higher on a 2.6% increase in moving, storage, freight expense….meanwhile, the price index for medical care services was 0.1% higher, as the price index for care of invalids and elderly at home rose 1.1% and the price of health insurance rose 0.9%… at the same time, the transportation services price index was unchanged as the price index for car and truck rental rose 4.0%, airline fares rose 1.2% and vehicle insurance costs rose 0.5%, while intercity bus fares fell 1.5% and the index for intracity mass transit fell 10.3%…meanwhile, the recreation services price index rose 0.5% as the index for admissions to movies, theaters, and concerts rose 1.5%, the index for veterinarian services rose 0.5% and the index for also rose 0.5%….in addition, the index for education and communication services was 0.1% higher as the price index for wireless telephone services rose 0.8% and the index for delivery services rose 0.3%…lastly, the index for other personal services was unchanged as the price index for haircuts and other personal care services fell 0.3% while the index for apparel services other than laundry and dry cleaning was 0.4% higher…

Among core line items, prices for televisions, which are still averaging 12.5% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.9% since last August, the price index for men’s suits, sport coats, and outerwear, which has fallen 17.1% from a year ago, the price index for women’s dresses, which has fallen by 17.0% in the past year, the price index for women’s outerwear, which has fallen by 12.5% from a year ago, the price index for women’s suits and separates, which has fallen by 11.6% in the past year, the price index for lodging away from home including hotels and motels, which has fallen by 13.1% in the past year, the price index for Intracity mass transit, which has fallen by 11.8% in the past year, and airline fares, which are now down by 23.2% since last August, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is still up by 17.4% over the past year, the price index for laundry equipment, which has risen 13.7% from a year ago, and the price index for infants’ equipment, which is up 10.9% from last August, are the only line items to have increased by a double digit magnitude over that span….  

Producer Prices rose 0.3% in August on Higher Trade Margins, Higher Prices for Core Goods and Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in August, as prices for finished wholesale goods averaged 0.1% higher while margins of final service providers averaged 0.5% higher…that followed a July report that had the PPI 0.6% higher, as prices for finished wholesale goods averaged 0.8% higher while margins of final service providers averaged 0.5% higher, a June report that had the PPI 0.2% lower, even as prices for finished wholesale goods averaged 0.2% higher, because the more heavily weighted margins of final service providers averaged 0.3% lower, a now revised May report that has the PPI 0.8% higher, as prices for finished wholesale goods averaged 1.8% higher, while margins of final service providers averaged 0.3% higher, and a re-revised April report wherein the PPI now fell 1.3%, as prices for finished wholesale goods averaged 3.0% lower, while average margins of final services providers decreased by 0.4%….on an unadjusted basis, producer prices are still 0.2% lower than a year ago, up from the 0.4% year over year decrease indicated by last month’s report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.3% for the month, and is now 0.3% higher than in August a year ago, up from the 0.1% year over year increase shown in July…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.1% higher in August, after being 0.8% higher in July, 0.2% higher in June, 1.8% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, 0.2% higher in December, 0.3% higher in November, 0.5% higher in October, 0.2% lower in September, and 0.3% lower in August of last year….the finished goods index rose 0.1% in August even as the price index for wholesale energy goods was 0.1% lower, after it had risen by 5.3% in July, by 7.7% in June and 6.3% in May, but after it had fallen by 18.2% in April, 9.1% in March, and 3.9% in February, while the price index for wholesale foods fell 0.4%, after falling 0.5% in July, 5.2% in June, rising 6.1% in May, and falling a revised 0.5% in April, while the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher, after being 0.3% higher in July….wholesale energy prices averaged lower due to a 1.4% decrease in wholesale prices for gasoline and a 38.1% decrease in wholesale prices for home heating oil, while wholesale prices for No.2 diesel fuel rose 6.1%, while the wholesale food price index fell 0.4% on a 9.9% decrease in wholesale prices fro fresh eggs, a 4.2% decrease in the wholesale price index for fresh fruits and melons, and a 3.7% decrease in the wholesale price index for grains….among wholesale core goods, the wholesale price index for plastic resins and materials rose 4.0%, the wholesale price index for mobile homes rose 1.8%, and the wholesale price index for jewelry, platinum and karat gold rose 4.2%…

At the same time, the index for final demand for services rose 0.5% in August, after rising 0.5% in July, falling 0.3% in June, rising a revised 0.3% in May, and falling a revised 0.4% in April, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services rose 0.2%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher… among trade services, seasonally adjusted margins for automobile retailers rose 10.6%, margins for TV, video, and photographic equipment and supplies retailers rose 4.7%, margins for hardware, building materials, and supplies retailers rose 6.8%, margins for RVs, trailers, and campers retailers rose 23.8%, and margins for machinery and vehicle wholesalers rose 1.7%… among transportation and warehousing services, margins for airline passenger services fell 3.3% while margins for truck transportation of freight rose 1.6%…among the components of the core final demand for services index, the index for securities brokerage, dealing, investment advice, and related services rose 5.0%, the index for portfolio management rose 2.4%, margins for arrangement of cruises and tours rose 36.2%, and margins for passenger car rental rose 2.8%, while margins for arrangement of vehicle rentals and lodging fell 6.0%…

This report also showed the price index for intermediate processed goods rose 0.6% in August, after rising 1.5% in July, 0.9% in June, and a revised 0.4% in May, but after falling a revised 3.6% in April and 1.5% in March….the price index for intermediate energy goods rose 1.7%, as producer prices for natural gas sold to electric utilities rose 11.4%, producer prices for liquefied petroleum gas rose 7.0%, refinery prices for residual fuels rose 10.2%, and refinery prices for No. 2 diesel fuel rose 6.1%…meanwhile, prices for intermediate processed foods and feeds fell 0.5%, as the producer price index for dairy products fell 0.4% and the producer price index for prepared animal feeds fell 0.4%…at the same time, the core price index for intermediate processed goods less food and energy rose 0.5% as the producer price index for plywood rose 10.6%, the producer price index for softwood lumber increased 14.9%, the producer price index for building paper and board rose 10.0%, and the producer price index for copper and brass mill shapes rose 3.2%…prices for intermediate processed goods are still 2.6% lower than in August a year ago, the 16th consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 7.0% in August, after falling 0.7% in July, rising 3.1% in June and a revised 9.6% in May, but after falling a revised 12.6% in April and 8.5% in March….that was as the August price index for crude energy goods rose 11.7% as crude oil prices rose 11.4% and unprocessed natural gas prices rose 22.8%, while the price index for unprocessed foodstuffs and feedstuffs rose 7.0% on a 16.7% increase in producer prices for raw milk, a 24.7% increase in producer prices for slaughter hogs, and a 10.4% increase in producer prices for slaughter cattle…at the same time, the index for core raw materials other than food and energy materials rose 1.7%, as prices for copper base scrap rose 9.0%, the price index for nonferrous metal ores increased 6.5%, and the price of aluminum base scrap rose 3.1%….however, this raw materials index is still 9.0% lower than a year ago, as the year over year change on this index has been negative since the beginning of last year…

Lastly, the price index for services for intermediate demand rose 0.7% in August, after rising 0.7% in July, 0.2% in June, falling revised 0.4% in May, and falling a revised 1.7% in April…the price index for intermediate trade services was 1.2% higher, as margins for intermediate hardware, building material, and supplies retailers rose 6.8% and margins for intermediate metals, minerals, and ores wholesalers rose 5.3%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.1% lower, as the intermediate price index for arrangement of freight and cargo fell 9.6% and the intermediate price index for transportation of passengers (partial) fell 3.2%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing was 0.9% higher, as the price index for internet advertising space sales (excluding Internet ads sold by print publishers) rose 9.8%, the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 5.0%, and the price index for radio advertising time sales also rose 5.0%…over the 12 months ended in August, the year over year price index for services for intermediate demand is still 0.6% lower than it was a year ago, after turning negative year over year in April for the first time in the history of this index…

July Wholesale Sales Were Up 6.4%; Wholesale Inventories Were Down 0.3%

The July report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $479.2 billion, up 6.4 percent (±0.5 percent) from the revised June level, but down 4.0 percent (±0.9 percent) from wholesale sales of July 2019… the June preliminary estimate was revised up $0.8 billion or 0.2% to $458.1 billion from the $457.3 billion sales reported last month, which is now 9.0% more than May’s sales, revised from the 8.8% increase reported last month…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this July report estimated that wholesale inventories were valued at a seasonally adjusted $632.3 billion at month end, down 0.3 percent (+/-0.2%) from the revised June level and 5.6 percent (±0.9 percent) lower than in June a year ago, with the June preliminary estimate revised from the $633.3 billion reported a month ago to $634.2 billion, now a 1.3% decrease from May….

That $0.9 billion upward revision to June wholesale inventories will increase 2nd quarter GDP by about 0.02 percentage points…meanwhile, July’s wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the July producer price index, appears to indicate a real wholesale inventory decrease on the order of 1.1% heading into the 3rd quarter….however, since the key source data and assumptions (xls) for the second estimate of 2nd quarter GDP indicates a real decrease of $49.5 billion in wholesale inventories on a NIPA basis, July’s real inventory decrease will fall well short of that drop and hence will result in a substantial boost to 3rd quarter GDP…

Job Openings and Job Quitting were up in July, Hiring and Firing were Down

The Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 617,000, from 6,001,000 in June to 6,618,000 in July, after June’s job openings were revised 112,000 higher, from the 5,889,000 reported a month ago to 6,001,000 with this report…July’s jobs openings were still 8.5% lower than the 7,236,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.2% in June to 4.5% in July, but was down from 4.6% in July a year ago….the 172,000 job opening increase to 841,000 openings in the retail trade sector appears to be the largest percentage increase for this month, while the decrease from 725,000 to 663,000 bar and restaurant job openings looks to be the largest percentage decrease… (see table 1 for more details)…like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in July, seasonally adjusted new hires totaled 5,787,000, down by 1,183,000 from the revised 6,970,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed fell from 5.1% in June to 4.1% in July, while it was still up from 4.0% in July a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 108,000, from 4,899,000 in June to 5,007,000 in July, while the separations rate as a percentage of the employed was unchanged at 3.6%, which was still down from the 3.8% separations rate in July a year ago (see table 3)…subtracting the 5,007,000 total separations from the total hires of 5,787,000 would imply an increase of just 780,000 jobs in July, far less than the revised payroll job increase of 1,734,000 for July reported by the August establishment survey last week….at least some of that difference likely due to the difference in the date of the surveys, which is at month end for this report but is during the week of the 12th for the employment situation…

Breaking down the seasonally adjusted job separations, the BLS finds that 2,949,000 of us voluntarily quit our jobs in July, up by 345,000 from the revised 2,605,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, rose to 2.1% of total employment, up from 1.9% in June but down from 2.4% in July a year earlier (see details in table 4)….in addition to those who quit, another 1,721,000 were either laid off, fired or otherwise discharged in July, down by 274,000 from the revised 1,995,000 who were discharged in June, as the discharges rate fell from 1.4% to 1.2% of all those who were employed during the month, which left it unchanged from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 337,000 in July, up from 300,000 in June, for an ‘other separations’ rate of 0.2%, which was the same rate as in June and as in July of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

 

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

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table for September 12th

rig count summary:

September 11 2020 rig count summary

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oil production at 32 month low in wake of Laura; gasoline demand, LNG exports, oil imports & refining also hit…

oil prices finished lower for the first week in the past five as the dollar strenghtened and as equities sold off on fears of a slowing recovery….after rising 1.5% to $42.97 a barrel last week as two hurricanes shut down 80% of Gulf oil production, the contract price of US light sweet crude for October delivery opened the week lower but found support early Monday after data showed a stronger-than-expected pickup in China’s service sector, but then moved broadly lower to finish down 36 cents at $42.61 a barrel amid ongoing uncertainty about the outlook for demand…oil prices then edged higher on Tuesday as better-than-expected U.S. manufacturing activity data spurred hope for a post-pandemic economic recovery and settled at $42.76 a barrel, up 15 cents on the day…but the price for the benchmark US crude reversed course on Wednesday, as the EIA reported that US gasoline demand fell sharply in the latest week, indicating that economic recovery from the pandemic might be slower than expected, ​as oil tumbled $1.25, or 3% to a one month low of $41.51 a barrel, even as the hurricane-driven draw from crude supplies was much larger than expected…oil prices moved sharply lower again on Thursday as the U.S. stock market sold off sharply but regained most of an early 3% drop to close off 14 cents at $41.36 a barrel as weekly unemployment data fed fears of a slow economic recoveryanother stock market selloff pressured prices early Friday as ​US crude crashed more than 4% before recovering to finish down $1.60 at $39.77 a barrel, as coronavirus flare-ups around the world threatened oil consumption at a time when the OPEC and its allies were easing their historic output curbs and increasing production…oil prices thus finished the week more than 7% lower, closing below $40 a barrel for the first time since early July amid concerns over prospects for demand, losses in the stock market and strength in the U.S. dollar

natural gas prices also finished lower for the first week in five as the​ August​ heat wave broke and demand fell in the wake of Hurricane Laura….after rising 3.3% to $2.657 per mmBTU last week as storms in the Gulf shut down 60% of US offshore production, the contract price of natural gas for October delivery fell 2.7 cents to $2.630 per mmBTU on Monday as weather forecasts turned cooler and less-than-expected damage from Hurricane Laura and lower LNG exports weighed on pricesweak LNG exports and a cool September outlook continued to pressure prices midweek as they fell 10.3 cents on Tuesday and the​n​ another 4.1 cents on Wednesday, as hurricane Laura had turned the weather cooler and reduced electric power consumption in its wake due to widespread outages…natural gas prices steadied Thursday, inching up a tenth of a cent to $2.487 per mmBTU, after forecasts for warmer weather and the report of a below-normal storage build were offset by a recovery in ​the ​production shut in by the hurricanes…natural gas turned higher on Friday, supported by expectations of a recovery in LNG exports after they had dropped last week, with prices settling 10.1 cents, or 4.1%, higher at $2.588 per mmBTU…but even after that jump, prices for October gas still finished the week 2.6% lower as the threat to supplies that had kept prices higher in recent weeks abated..

the natural gas storage report from the EIA for the week ending August 28th indicated that the quantity of natural gas held in underground storage in the US rose by 35 billion cubic feet to 3,455 billion cubic feet by the end of the week, which left our gas supplies 538 billion cubic feet, or 18.4% greater than the 2,917 billion cubic feet that were in storage on August 28th of last year, and 407 billion cubic feet, or 13.4% above the five-year average of 3,048 billion cubic feet of natural gas that have been in storage as of the 28th of August in recent years….the 35 billion cubic feet that were added to US natural gas storage this week were in line with the forecast of a 34 billion cubic foot increase from an S&P Global Platts” survey of analysts, but it was much less than the 77 billion cubic feet addition of natural gas to storage during the corresponding week of 2019, and also well less than the average of 66 billion cubic feet of natural gas that has been added to natural gas storage during the same week over the past 5 years..  

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending August 28th showed that because of big storm-related drops in our oil productiion and ​in ​our oil imports, we needed to withdraw oil from our stored supplies for the sixth week in a row and for the 8th time in the past thirteeen weeks…our imports of crude oil fell by an average of 1,016,000 barrels per day to an average of 4,900,000 barrels per day, after rising by an average of 185,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 361,000 barrels per day to an average of 3,002,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 1,898,000 barrels of per day during the week ending August 28th, 655,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, the production of crude oil from US wells was reportedly 1,100,000 barrels per day lower at 9,700,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 11,598,000 barrels per day during this reporting week​. the smallest daily oil supply figure since Hurricane Ike hit in 2008​..

meanwhile, US oil refineries reported they were processing 13,868,000 barrels of crude per day during the week ending August 28th, 844,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,523,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 747,000 barrels per day less than what our oil refineries reported they used during the week….to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+747,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the average daily supply of oil and the data for the average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there is an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill or complete wells​, we’ll continue to report them, just as they’re watched & believed to be accurate by most everyone in the industry… (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 5,542,000 barrels per day last week, which was 20.2% less than the 6,941,000 barrel per day average that we were importing over the same four-week period last year….the 1,523,000 barrel per day net withdrawal from our total crude inventories was as 1,337,000 barrels per day were being pulled out of our commercially available stocks of crude oil and 186,000 barrels per day were being withdrawn from the oil supplies in our Strategic Petroleum Reserve, space in which is also being leased for commercial use….this week’s crude oil production was reported to be 1,100,000 barrels per day lower at 9,700,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states fell by 1,200,000 barrels per day to 9,​200,000 barrels per day, while Alaska’s oil production rose by 22,000 barrrels per day to 464,000 barrels per day and added ​500,000 barrels per day to the rounded national total (which is the EIA’s math, not mine)….last year’s US crude oil production for the week ending August 30th was rounded to 12,400,000 barrels per day, so this reporting week’s rounded oil production figure was 21.8% below that of a year ago, yet still 15.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 76.7% of their capacity while using 13,868,000 barrels of crude per day during the week ending August 28th, down from 82.0% of capacity during the prior week, and excluding the 2005 and 2008 hurricane-related refinery interruptions, one of the lowest refinery utilization rates of the last thirty years…hence, the 13,868,000 barrels per day of oil that were refined this week were 20.2% fewer barrels than the 17,381,000 barrels of crude that were being processed daily during the week ending August 30th of last year, when US refineries were operating at 94.8% of capacity….

even with the decrease in the amount of oil being refined, gasoline output from our refineries was a bit higher, increasing by 16,000 barrels per day to 9,534,000 barrels per day during the week ending August 28th, after our refineries’ gasoline output had increased by 118,000 barrels per day over the prior week…but with our gasoline production still recovering from a multi-year low, this week’s gasoline output was still 7.2% less than the 10,272,000 barrels of gasoline that were being produced daily over the same week of last year….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 343,000 barrels per day to 5,122,000 barrels per day, after our distillates output had increased by 380,000 barrels per day over the prior week… after this week’s big decrease in distillates output, our distillates’ production was 7.3% less than the 5,154,000 barrels of distillates per day that were being produced during the week ending August 30th, 2019….

with the small increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 7th time in 9 weeks and for the 22nd time in 31 weeks, falling by 4,320,000 barrels to 234,859,000 barrels during the week ending August 28th, after our gasoline supplies had decreased by 4,583,000 barrels over the prior week…our gasoline supplies decreased by less this week as the amount of gasoline supplied to US markets decreased by 375,000 barrels per day to 8,786,000 barrels per day, while our imports of gasoline rose by 38,000 barrels per day to 577,000 barrels per day and while our exports of gasoline fell by 51,000 barrels per day to 569,000 barrels per day….but even after th​e large inventory drawdowns of recent weeks, our gasoline supplies were still 2.3% higher than last August 30th’s gasoline inventories of 229,586,000 barrels, and roughly 4% above the five year average of our gasoline supplies for this time of the year…  

meanwhile, with the big drop in our distillates production, our supplies of distillate fuels decreased for the sixteenth time in 37 weeks and for the 26th time in 48 weeks, falling by 1,75,000 barrels to 177,195,000 barrels during the week ending August 28th, after our distillates supplies had increased by 1,388,000 barrels during the prior week….our distillates supplies fell this week even though the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 40,000 barrels per day to 3,918,000 barrels per day, because our exports of distillates rose by 172,000 barrels per day to 1,266,000 barrels per day, while our imports of distillates rose by 37,000 barrels per day to 166,000 barrels per day…but even after this week’s inventory decrease, our distillate supplies at the end of the week were 33.0% above the 133,522,000 barrels of distillates that we had in storage on August 30th, 2019, and about 23% above the five year average of distillates stocks for this time of the year…

finally, with the drop in our oilfiled production and the drop in our oil imports, our commercial supplies of crude oil in storage fell for the 11th time in thirty-three weeks and for the 16th time in the past year, decreasing by 9,362,000 barrels, from 507,763,000 barrels on August 21st to 498,401,000 barrels on August 28th….but even after that big decrease, our commercial crude oil inventories were still around 14% above the five-year average of crude oil supplies for this time of year, and 53% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the last weekend of August, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories have generally been rising since September of 2018, except for during the past two summers, after generally falling until then through most of the prior year and a half, our crude oil supplies as of August 28th were 17.8% above the 422,980,000 barrels of oil we had in commercial storage on August 30th of 2019, 24.1% more than the 401,490,000 barrels of oil that we had in storage on August 31st of 2018, and 7.8% above the 462,353,000 barrels of oil we had in commercial storage on September 1st of 2017…    

This Week’s Rig Count

the US rig count rose for the 2nd time in the past half year during the week ending September 4th, but it is still down by 67.8% over that twenty-six week period….Baker Hughes reported that the total count of rotary rigs running in the US rose by 2 to 256 rigs this past week, which was still 148 fewer rigs than the all time low prior to this year,  down by 662 rigs from the 916 rigs that were in use as of the September 6th report of 2019, and 1,673 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began to flood the global oil market in their first attempt to put US shale out of business….

The number of rigs drilling for oil increased by 1 rig to 181 oil rigs this week, after decreasing by 3 oil rigs the prior week, leaving us with 557 fewer oil rigs than were running a year ago, and less than a eighth of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 72 natural gas rigs, which was still down by 88 natural gas rigs from the 160 natural gas rigs that were drilling a year ago, and was also less than a twentieth of the modern era high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to those rigs drilling for oil & gas, three rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, one in Eddy County, New Mexico, and one in Sonoma County, California… a year ago, there were no such “miscellaneous” rigs deployed…

The Gulf of Mexico rig count rose by 2 to 15 rigs this week, with 12 of those rigs drilling for oil in Louisiana’s offshore waters and three drilling for oil offshore from Texas…that was 11 fewer Gulf rigs than the 26 rigs drilling in the Gulf a year ago, when 25 Gulf rigs were drilling offshore from Louisiana and one was deployed in Texas waters…while there are no rigs operating off other US shores at this time, a year ago there were also two rigs deployed offshore from Alaska, so this week’s national offshore count is down by 13 from the national offshore rig count of 28 a year ago…also note that in addition to those rigs offshore, drill​ing continues​ through an inland body of water in St Mary County, Louisiana this week, while a year ago there were no rigs drilling in inland waters..

The count of active horizontal drilling rigs was down by 1 to 220 horizontal rigs this week, which was still 563 fewer horizontal rigs than the 783 horizontal rigs that were in use in the US on September 6th of last year, and less than a sixth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count was was unchanged at 20 directional rigs this week, and those were also down by 47 from the 67 directional rigs that were operating during the same week of last year….on the other hand, the vertical rig count rose by 3 to 16 vertical rigs this week, but those were still down by 33 from the 48 vertical rigs that were in use on September 6th of 2019….

The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of September 4th, the second column shows the change in the number of working rigs between last week’s count (August 28th) and this week’s (September 4th) count, the third column shows last week’s August 28th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running during the count before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 6th of September, 2019…    

September 4 2020 rig count summary

as has been the case most of the summer, there were only a few changes in drilling activity again this week, with only two rig removals and just four rig additions, suggesting that prices are currently high enough that drillers are no longer trying to shut down money-losing operations, but not high enough to encourage the addition of new rigs to the field….checking the rig counts in the Texas part of Permian basin, we find that just one rig was shut down Texas Oil District 8, which is the core Permian Delaware, while rigs ​operating ​in the​ ​other Texas Permian basin districts were unchanged….since the national Permian basin rig count was unchanged, that means that the miscellaneous rig that was added in New Mexico must have been set up to drill in the far western Permian Delaware to balance the national count, a fact which we have confirmed by cross checking the North America Rotary Rig Count Pivot Table…elsewhere, the rig that was pulled out of North Dakota had been drilling in the Williston basin, while the 3 rigs that we added in Louisiana include the gas rig ​addition ​in the Haynesville shown above and the 2 oil rigs that were added to the Gulf of Mexico fleet…the natural gas rig count remains unchanged, however, because the rig that was pulled out of the Texas Permian Delaware had been targetting natural gas, even as all the rigs now remaining in the Permian are drilling for oil…

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August’s jobs report; July’s trade deficit, construction spending & factory inventories

In addition to the Employment Situation Summary for August from the Bureau of Labor Statistics, this week also saw the release of three July reports that provide us with initial input data to 3rd quarter GDP, and in some cases suggest revisions to 2nd quarter GDP: the July report on our International Trade from the Bureau of Economic Analysis, and the July report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for July, both from the Census Bureau…In addition, this week saw the release of the last regional Fed manufacturing survey for August: the Dallas Fed’s Texas Manufacturing Outlook Survey, which also covers adjacent western Louisiana and southeastern New Mexico, reported its general business activity index rose to +8.0 in August, up from -3.0 in July, and the first positive reading in five months, indicating a tentative recovery in the depressed Texas area economy…

The week’s major privately issued reports included the ADP Employment Report for August; the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 15.19 million annual rate in August, up from the 14.52 million annual rate reported in July, but down from the 16.99 million annual rate in August a year ago; and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the August Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.0% in August, up from 54.2% in July, and the highest reading since November 2018, and the August Services Report On Business; which saw the NMI (non-manufacturing index) slip to 56.9% in August, down from 58.1% in July, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July…

Employers Added 1,371,000 Jobs in August; Unemployment Rate Fell to 8.4% as 3,756,000 Found Work

The Employment Situation Summary for August indicated that the strong rebound in payroll jobs from their April nadir continued for a 4th consecutive month, and that the unemployment rate fell by 1.8% to 8.4%, while the employment rate rose 1.4% to 56.5%….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 1,371,000 jobs in August, after the payroll job increase for July was revised down from 1,763,000 to 1,734,000, and the payroll jobs increase for June was revised down from 4,791,000 to 4,781,000…those revisions mean that the combined number of jobs created over those two months was 39,000 less than was previously reported…the unadjusted data shows that there were actually 1,535,000 more payroll jobs in August, after July had seen an end of the school year related decrease of 960,200 education jobs that were adjusted away, so the impact of this month’s seasonal adjustments was minor by comparison …

Seasonally adjusted job increases were spread throughout the private goods producing and service sectors and government, with a 2,000 job drop in the resource extraction trades the only sector showing a decrease…federal government payrolls increased by 251,000, with the hiring of 238,000 temporary 2020 Census workers, while the retail sector saw an increase of 248,900 jobs, with 116,400 workers returning to jobs in general merchandise stores, 22,300 more employed by motor vehicle and parts dealers, and 21,000 returning to jobs in electronics and appliance stores….the broad professional and business services category added 197,000 jobs, as 123,600 workers found jobs with employment services and 14,400 were hired by architectural and engineering services…meanwhile, the leisure and hospitality sector added a seasonally adjusted 174,000 jobs, with the return of of 133,600 jobs in bars and restaurants and 19,100 more employed in performing arts and spectator sports….local government payrolls increased by 95,000, with an increase of 63,300 in local government jobs outside of education and another 31,700 working in local school districts… at the same time, employment in health care and social assistance rose by 90,100, with the addition of 26,500 jobs in doctor’s offices and 23,600 jobs in dentist’s offices….other increases included the addition of 78,100 jobs in transportation and warehousing, with 34,400 of those in warehousing and storage, and 74,000 more jobs in “other services”, which included 30,800 jobs with membership associations and organizations, 28,700 repair and maintenance jobs, and 13,900 jobs with personal and laundry services…there were also 36,000 more jobs in the financial sector, with 23,100 of those in real estate, while employment in manufacturing increased by 29,000, with 12,100 of those working in food manufacturing plants….other August job additions included 16,000 jobs in construction, 15,000 in the information sector, and 13,500 in wholesale trade…

The establishment survey also showed that average hourly pay for all employees rose by 11 cents an hour to $29.47 an hour, after it had increased by a revised 4 cents an hour in July; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 18 cents to $24.81 an hour, after it had decreased by a revised 10 cents an hour in July…employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.6 hours in August, while hours for production and non-supervisory personnel was unchanged at 34.0 hours…meanwhile, the manufacturing workweek increased by 0.3 hours to 40.0 hours, while average factory overtime rose by a tenth of an hour to 3.0 hours…

At the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who would self-report being employed rose by an estimated 3,756,000 to 147,288,000, while the similarly estimated number of those who would be counted as unemployed fell by 2,788,000 to 13,550,000; which together meant that August saw an increase of 968,000 to 160,838,000 in the total labor force.…since the working age population had grown by 185,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 783,000 to 99,720,000, and that the labor force participation rate increased by 0.3% to 61.7%….at the same time, the jump in number employed vis-a-vis the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 1.4% to 56.5%…at the same time, the decrease in the number counted as unemployed was enough to lower the unemployment rate as a percentage of the labor force from 10.2% to 8.4%….meanwhile, the number who reported they were involuntarily working part time fell by 871,000 to 7,572,000 in August, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 16.5% in July to 14.2% in August….

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

July Trade Deficit Rose 18.9% to an 11 Year High After 2nd Quarter Deficits Revised Much Higher

Our trade deficit rose by 18.9% in July as the value of both our exports and our imports increased, but the value of our imports increased by almost twice as much….the Commerce Dept report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit increased by $10.1 billion to $63.6 billion in July from a revised June deficit of $53.5 billion, which had previously been reported at $50.7 billion…trade figures going back to January were revised with this report, which on net left the 2nd quarter trade deficit $9.6 billion higher than was previously reported, suggesting a large downward revision to 2nd quarter GDP, the magnitude of which depends on the 1st quarter revisions…after rounding, the value of our July exports rose by $12.6 billion, or 8.1 percent, to $168.1 billion on a $12.3 billion increase to $115.5 billion in our exports of goods, and an increase of less than $0.4 billion to $52.6 billion in our exports of services, while our imports rose by $22.7 billion, or 10.9 percent, to $231.7 billion on a $21.5 billion increase to $196.4 billion in our imports of goods and a $1.2 billion increase to $35.3 billion in our imports of services…export prices were on average 0.8% higher in July, so the month’s real exports were less than their nominal amount by that percentage, while import prices were 0.7% higher, meaning that our real imports were also smaller than their nominal value by that percentage..

The increase in our July exports included increases in all end use categories, let by greater exports of automotives and parts, consumer goods, industrial supplies and capital goods…referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of automotive vehicles, parts, and engines rose by $3,849 million to $12,161 million on a $2,103 million increase in our exports of new and used passenger cars, an $882 million increase in our exports of parts and accessories of vehicles other than engines, chassis, and tires, and a $505 million increase in our exports of trucks, buses, and special purpose vehicles, and that our exports of consumer goods rose by $2,602 million to $14,899 million on a $694 million increase in our exports of gem diamonds and a $648 million increase in our exports of artwork, antiques, and other collectibles….at the same time, our exports of industrial supplies and materials rose by $2,512 million to $35,317 million on a $1,138 million increase in our exports of crude oil, a $446 million increase in our exports of petroleum products other than fuel oil, and a $282 million increase in our exports of fuel oil, and our exports of capital goods rose by $2,473 million to $37,719 million on a $831 million increase in our exports of semiconductors, a $492 million increase in our exports of engines for civilian aircraft, and a $384 million increase in our exports of electric apparatuses…in addition, our exports of foods, feeds and beverages rose by $231 million to $10,185 million on a $196 million increase in our exports of meat and poultry, and our exports of other goods not categorized by end use rose by $641 million to $4,894 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that our imports also rose in all end use categories, and were also led by increased imports of automotives and parts, industrial supplies and materials, capital goods and consumer goods…our imports of automotive vehicles, parts and engines rose by $7,729 million to $26,357 million on a $3,702 million increase in our imports of new and used passenger cars, a $2,482 million increase in our imports of parts and accessories of vehicles other than engines, chassis, and tires, a $697 million increase in our imports of engines and engine parts, and a $589 million increase in our imports of trucks, buses, and special purpose vehicles, and our imports of industrial supplies and materials rose by $4,353 million to $39,758 million on a $1,325 million increase in our imports of finished metal shapes, an $876 million increase in our imports of nonmonetary gold, a $689 million increase in our imports of crude oil, and a $482 million increase in our imports of other precious metals…at the same time, our imports of capital goods rose by $4,069 million to $53,845 million on a $1,691 million increase in our imports of civilian aircraft, a $423 million increase in our imports of electric apparatuses, a $362 million increase in our imports of generators and accessories, and a $280  million increase in our imports of industrial engines, and our imports of consumer goods rose by $3549 million to $54,004 million on an increase of $1694 million in our imports of cellphones, a $794 million increase in our imports of cotton clothing and household goods, a $704 million increase in our imports of furniture, a $554 million increase in our imports of appliances, a $429 million increase in our imports of toys, games, and sporting goods, a $346 million increase in our imports of jewelry, and a $321 million increase in our imports of televisions, which were partly offset by a $1,640 million decrease in our imports of pharmaceuticals….in addition. our imports of foods, feeds, and beverages rose by $395 million to $12,798 million on a $237 million increase in our imports of alcoholic beverages other than bear and wine, and our imports of other goods not categorized by end use rose by $1,373 million to $8,528 million…

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

The July figures show surpluses, in billions of dollars, with South and Central America ($2.9), OPEC ($1.5), Hong Kong ($1.4), Brazil ($0.8), United Kingdom ($0.6), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($28.3), European Union ($13.1), Mexico ($11.5), Japan ($3.4), Germany ($3.0), Taiwan ($2.8), France ($2.5), India ($2.0), Italy ($1.8), South Korea ($1.5), Singapore ($1.0), and Canada ($0.5). 

  • • The deficit with Mexico increased $2.5 billion to $11.5 billion in July. Exports increased $2.4 billion to $17.8 billion and imports increased $4.9 billion to $29.3 billion. 
  • • The deficit with China increased $1.6 billion to $28.3 billion in July. Exports increased $0.1 billion to $9.5 billion and imports increased $1.7 billion to $37.8 billion. 
  • • The surplus with South and Central America increased $1.2 billion to $2.9 billion in July. Exports increased $1.3 billion to $9.7 billion and imports increased $0.1 billion to $6.8 billion.

To gauge the impact of July trade in goods on 3rd quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except they are not annualized here….from that table, we can compute that 2nd quarter real exports of goods averaged 113,766 million monthly in 2012 dollars, while inflation adjusted July exports were at 133,728 million in that same 2012 dollar quantity index representation… figuring the annualized change between the two figures, we find that July’s real exports of goods are running at a 90.9% annual rate above those of the 2nd quarter, or at a pace that would add about 3.70 percentage points to 3rd quarter’s GDP if they were continued through August and September…..in a similar manner, we find that our 2nd quarter real imports averaged 196,062 million monthly in chained 2012 dollars, while the similarly inflation adjusted July imports were at 224,215 million…that would indicate that so far in the 3rd quarter, our real imports have grown at annual rate of roughly 71.0% from those of the 2nd quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 71.0% rate would subtract about 5.66 percentage points from 3rd quarter GDP….hence, if the July trade deficit is maintained throughout the 3rd quarter, our deteriorating balance of trade in goods over that of the 2nd quarter would subtract about 1.96 percentage points from the growth of 3rd quarter GDP….note, however, that we have not even computed the impact of the less volatile change in services here because the BEA does not provide inflation adjusted data on those, and we don’t have an easy way to adjust for all their price changes…

Construction Spending Rose 0.1% in July after 2nd Quarter Spending was Revised Higher

The Census Bureau report on construction spending for July (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,364.6 billion annually if extrapolated over an entire year, which was more than 0.1 percent (±1.2 percent)* above the revised annualized estimate of $1,362.8 billion of construction spending in June but 0.1 percent (±1.6 percent)* below the estimated annualized level of construction spending in July of last year….the June construction spending estimate was revised nearly 0.6% higher, from $1,355.2 billion to $1,362.8 billion, while the annual rate of construction spending for May was revised more than 0.3% higher, from $1,364.7 billion to $1,369,363 billion….on net, those revisions would suggest a upward revision of 0.10 percentage points to 2nd quarter GDP when the third estimate is released at the end of September, assuming the net impacts from the inflation adjustments are similar to those we saw in the 2nd estimate…

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,013.5 billion, 0.6 percent (±0.5 percent) above the revised June estimate of $1,007.2 billion. Residential construction was at a seasonally adjusted annual rate of $546.6 billion in July, 2.1 percent (±1.3 percent) above the revised June estimate of $535.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $466.9 billion in July, 1.0 percent (±0.5 percent) below the revised June estimate of $471.6 billion.
  • Public Construction: In July, the estimated seasonally adjusted annual rate of public construction spending was $351.1 billion, 1.3 percent (±2.0 percent)* below the revised June estimate of $355.6 billion. Educational construction was at a seasonally adjusted annual rate of $82.2 billion, 3.0 percent (±1.8 percent) below the revised June estimate of $84.7 billion. Highway construction was at a seasonally adjusted annual rate of $99.0 billion, 3.1 percent (±5.9 percent)* below the revised June estimate of $102.1 billion.

Construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of July spending reported in this release on 3rd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment, so in lieu of trying to adjust for all of those different price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an approximate estimate…

That price index showed that aggregate construction costs were up 0.6% in July, after falling 0.3% in June and falling 0.1% from April to May…on that basis, we can estimate that July construction costs were roughly 0.3% more than those of May and  0.2% more than those of April, and obviously 0.6% more than those of June…we then use those percentages to inflate the lower priced spending figures for each of those months, which is arithmetically the same as deflating July construction spending, for comparison purposes…annualized construction spending in millions of dollars for the second quarter is given as 1,362,823 for June, 1,369,363 for May, and 1,387,936 for April, while it was at 1,364,565 million in July …thus to compare July’s inflation adjusted construction spending to that of the first quarter, our arithmetic formula becomes: 1,364,565 / (((1,362,823 * 1.006) + (1,369,363 *1.003) + (1,387,936 * 1.002)) / 3) = 0.989967, meaning real construction spending in July was down 1.0% vis a vis the 2nd quarter, or down at a 4.0% annual rate…to figure the effect of that change on GDP,  we take the difference between the second quarter spending average and that of July and take that result as a fraction of 2nd quarter GDP, and find that aggregate July construction spending is falling at a rate that would subtract approximately 0.34 percentage points from 3rd quarter GDP should we see no improvement from July’s adjusted figures in August or September…

Factory Shipments Up 4.6% in July, Factory Inventories Down 0.5%

The July Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $27.8 billion or 6.4 percent to $466.1 billion in July, following an increase of 6.4% to $438.2 billion in June, which was revised from the 6.2% increase to $437.2 billion reported last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the July advance report on durable goods we reported on last week…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that here:

  • Summary: New orders for manufactured goods in July, up three consecutive months, increased $27.8 billion or 6.4 percent to $466.1 billion, the U.S. Census Bureau reported today. This followed a 6.4 percent June increase. Shipments, also up three consecutive months, increased $21.3 billion or 4.6 percent to $479.5 billion. This followed a 10.0 percent June increase. Unfilled orders, down four of the last five months, decreased $8.3 billion or 0.8 percent to $1,084.3 billion. This followed a 1.4 percent June decrease. The unfilled orders-to-shipments ratio was 6.70, down from 7.01 in June. Inventories, down following two consecutive monthly increases, decreased $3.1 billion or 0.5 percent to $687.2 billion. This followed a 0.5 percent June increase. The inventories-to-shipments ratio was 1.43, down from 1.51 in June.
  • New orders for manufactured durable goods in July, up three consecutive months, increased $23.7 billion or 11.4 percent to $231.1 billion, up from the previously published 11.2 percent increase. This followed a 7.7 percent June increase. Transportation equipment, also up three consecutive months, led the increase, $19.6 billion or 35.7 percent to $74.7 billion. New orders for manufactured nondurable goods increased $4.2 billion or 1.8 percent to $235.0 billion.
  • Shipments of manufactured durable goods in July, up three consecutive months, increased $17.1 billion or 7.5 percent to $244.6 billion, up from the previously published 7.3 percent increase. This followed a 15.2 percent June increase. Transportation equipment, also up three consecutive months, led the increase, $12.7 billion or 17.9 percent to $83.2 billion. Shipments of manufactured nondurable goods, up three consecutive months, increased $4.2 billion or 1.8 percent to $235.0 billion. This followed a 5.3 percent June increase. Petroleum and coal products, also up three consecutive months, led the increase, $2.3 billion or 6.5 percent to $38.3 billion.
  • Unfilled orders for manufactured durable goods in July, down four of the last five months, decreased $8.3 billion or 0.8 percent to $1,084.3 billion, unchanged from the previously published decrease. This followed a 1.4 percent June decrease. Transportation equipment, down five consecutive months, drove the decrease, $8.5 billion or 1.1 percent to $735.0 billion.
  • Inventories of manufactured durable goods in July, down two consecutive months, decreased $2.7 billion or 0.6 percent to $421.8 billion, down from the previously published 0.5 percent decrease. This followed a 0.1 percent June decrease. Fabricated metal products, also down two consecutive months, led the decrease, $0.9 billion or 1.6 percent to $51.7 billion. Inventories of manufactured nondurable goods, down following two consecutive monthly increases, decreased $0.5 billion or 0.2 percent to $265.4 billion. This followed a 1.4 percent June increase. Chemical products, down two of the last three months, led the decrease, $0.2 billion or 0.2 percent to $96.4 billion.

To estimate the effect of those July factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories decreased by 0.6% to $244,324 million; the value of work in process inventories fell 0.4% to $205,699 million, and materials and supplies inventories were valued 0.4% lower at $237,193 million.…meanwhile, the July producer price index reported that prices for finished goods were on average 0.8% higher, that prices for intermediate processed goods were on average 1.5% higher, while prices for unprocessed goods were 0.7% lower….assuming similar valuations for like types of inventories, that would suggest that July’s real finished goods inventories were about 1.4% lower, that real inventories of intermediate processed goods about 1.9% lower, and real raw material inventory inventories were about 0.3% higher…since real NIPA factory inventories were a bit higher in the 2nd quarter, the fact that this report appears to indicate a real decrease in aggregate July factory inventories would therefore have a corresponding negative impact on the growth rate of 3rd quarter GDP….however, with total business inventories down sharply in the 2nd quarter, the negative impact of falling factory inventories is likely to be offset by less severe contraction, or even growth of inventories at the retail and wholesale levels…

 

(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 picked from the aforementioned GGO posts, contact me…)

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table for Sept 5th

rig count summary:

September 4 2020 rig count summary

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