natural gas prices hit 25 year low; crude supplies and oil + oil product supplies again at new all-time highs

oil prices fell for the 2nd week in the past three this week, on a resurgence of covid-19 cases in the US and globally, which threatened the chance for an economic recovery…after rising nearly 10% to $39.75 a barrel last week on signs of rising demand and on the apparent success of the OPEC+ output cuts, the contract price of US light sweet crude for July delivery opened 1.5% lower on Monday on White House trade adviser Peter Navarro’s comments that the trade deal with China was “over”, but moved back up after Trump tweeted that the trade agreement was “fully intact” and finished 71 cents higher at $40.46 a barrel on tighter supplies from major producers and an improvement in the long-term demand outlook as trading in the July oil contract expired…now quoting the price of US light sweet crude for August delivery, which had ended last week at $39.83 a barrel and risen 90 cents to $40.73 a barrel on Monday, oil prices moved lower on Tuesday, as a rising number of Covid-19 cases sparked demand fears, and as traders braced for reports expected to show swelling U.S. crude inventories and ended down 36 cents at $40.37 a barrel…oil prices then opened below $40 Wednesday morning following a surprisingly large crude build reported by API overnight and then went on to fall $2.36 or nearly 6% to $38.01 a barrel after the EIA confimed that U.S. crude supplies had hit another record and as mounting coronavirus cases in the US, China, Latin America and India unnerved speculators and pressured oil prices…but oil prices found support on Thursday as data showed that fewer Americans had filed for unemployment benefits last week and that orders for key capital goods had rebounded in May and ended 71 cents higher at $38.72 a barrel, as data provided to Reuters showed road traffic in some of the world’s major cities had returned to 2019 levels in June…oil prices then pulled back on Friday as a record rise in U.S. coronavirus cases and growing infections in parts of the world pointed to long-term challenges for a recovery in crude-oil demand and ended down 23 cents at $38.49 a barrel, thus posting a weekly drop of 3.6%, after record U.S. crude inventory data had dragged prices lower midweek

meanwhile, natural gas prices tumbled to their lowest level since 1995 after a big storage injection was reported Thursday and barely rebounded from there, thus ending lower for a 4th straight week….after falling 3.6% to $1.669 per mmBTU on falling LNG exports last week, the contract price of natural gas for July delivery slipped another half cent on Monday as rising natural gas output offset forecasts for warmer-than-normal weather and higher air conditioning demand over the next two weeks…natural gas prices fell another 2.7 cents on Tuesday, as a weakened heat outlook further weighed on July contract prices, and then fell another 4 cents to a two-month low of $1.597 on Wednesday on forecasts of a big weekly storage build…natural gas prices collapsed over 14 cents to a 25-year low of $1.440 per mmBTU on Thursday after the EIA reported that big build, prompting fears that underground storage caverns would be full by the end of the summer, before ending the session off 11.5 cents at $1.482 per mmBTU….prices then edged up 1.3 cents to finish the week still down more than 10% at $1.495 per mmBTU on Friday despite ongoing demand destruction from expanding coronavirus cases, on a continued slowing of gas output, a small rise in pipeline and LNG exports, and an increase in cooling demand..

Since we haven’t looked at natural gas prices lately, we’ll ​first ​include a graph of their recent trajectory below..

June 27 2020 natural gas prices

the above graph is a screenshot of the interactive daily price chart for the July natural gas futures contract at Barchart.com, and it shows the range of prices, in dollars per mmBTU, for​ ​​the​ July natural gas futures contract as a vertical bar for each day over the past year…one can barely see it in this view, but each bar has two small horizontal appendages: the one on the left is the opening price for the day the bar indicates, while the appendage on the right is the day’s closing price…

​next, we’ll include a graph of ​natural gas prices going back 30 years, to 1990:

June 27 2020 natural gas prices max

​this graph also came from ​​the same the interactive daily price chart for the July natural gas futures contract at Barchart.com​, but we have reset the interactive feature to show the maximum price history, which displays the range of natural gas prices over each month in that history as a vertical bar​…since the July 2020 contract was not trading over that history, this had the effect of changing the focus of the graph to the prices for the nearest monthly natural gas contract that was trading at any given time, which is the same as what is being quoted as ‘the price of natural gas’ daily…​however, since trading in the July natural gas contract expired​ on​ Friday, ​this and other longer term graphs now reflect natural gas prices for ​the ​August​ gas contract​, which averaged about 5 cents higher than the July contract prices we’ve discussed today…​nonetheless, it’s stil clear that natural gas prices have fallen to their lowest level since 1995..​

the natural gas storage report from the EIA for the week ending June 19th indicated that the quantity of natural gas held in underground storage in the US rose by 120 billion cubic feet to 3,012 billion cubic feet by the end of the week, which left our gas supplies 739 billion cubic feet, or 32.5% higher than the 2,273 billion cubic feet that were in storage on June 19th of last year, and 466 billion cubic feet, or 16.9% above the five-year average of 2,546 billion cubic feet of natural gas that has been in storage as of the 19th of June in recent years….the 120 billion cubic feet that were added to US natural gas storage this week was well above the consensus forecast from S&P Global Platts’ survey of analysts calling for a 107 billion cubic feet increase, and was way more than the average of 73 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and it was also above the 103 billion cubic feet addition of natural gas to storage during the corresponding week of 2019… it was also the most natural gas added to storage during any June week in the modern record, and also the 3rd largest natural gas storage increase in the past decade…

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 19th indicated that a sizable increase in our oil production was almost enough to cover a large increase our oil exports, again leaving us with surplus oil to add to our stored commercial supplies of crude oil for the 3rd week in a row, and for the 30th time in the past forty-one weeks….our imports of crude oil fell by an average of 102,000 barrels per day to an average of 6,540,000 barrels per day, after falling by an average of 222,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 695,000 barrels per day to an average of 3,157,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,383,000 barrels of per day during the week ending June 19th, 797,000 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 rose by 500,000 barrels per day to 11,000,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,383,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,840,000 barrels of crude per day during the week ending June 19th, 239,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 490,000 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 53,000 barrels per day more 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 (-53,000) 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 average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed….(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 6,556,000 barrels per day last week, which was 11.6% less than the 7,415,000 barrel per day average that we were importing over the same four-week period last year….the 490,000 barrel per day net addition to our total crude inventories included 284,000 barrels per day that were added to our Strategic Petroleum Reserve, and 206,000 barrels per day that were being added to our commercially available stocks of crude oil ….this week’s crude oil production was reported to be up by 500,000 barrels per day to 11,000,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was up by 500,000 barrels per day to 10,600,000 barrels per day, while a 1,000 barrel per day increase in Alaska’s oil production to 362,000 barrels per day had no impact on the rounded national total….last year’s US crude oil production for the week ending June 21st was rounded to 12,100,000 barrels per day, so this reporting week’s rounded oil production figure was about 9.1% below that of a year ago, yet still 30.5% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 74.6% of their capacity while using 13,840,000 barrels of crude per day during the week ending June 19th, up from 73.8% of capacity during the prior week, but excluding the 2005 & 2008 hurricane​-related refinery ​interruptions, still one of the lowest refinery utilization rates of the last thirty years…hence, the 13,840,000 barrels per day of oil that were refined this week were still 20.2% fewer barrels than the 17,337,000 barrels of crude that were being processed daily during the week ending June 21st, 2019, when US refineries were operating at 94.2% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 438,000 barrels per day to 8,794,000 barrels per day during the week ending June 19th, after our refineries’ gasoline output had increased by 217,000 barrels per day over the prior week… however, since our gasoline production is still recovering from a multi-year low, this week’s gasoline output was still 16.3% lower than the 10,512,000 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 63,000 barrels per day to 4,561,000 barrels per day, after our distillates output had decreased by 264,000 barrels per day over the prior week…but even after this week’s increase in distillates output, our distillates’ production was 14.0% less than the 5,305,000 barrels of distillates per day that were being produced during the week ending June 21st, 2019….

even with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 6th time in 9 weeks and for the 14th time in 21 weeks, falling by 1,673,000 barrels to 255,322,000 barrels during the week ending June 19th, after our gasoline supplies had decreased by 1,666,000 barrels over the prior week…our gasoline supplies decreased this week because the amount of gasoline supplied to US markets increased by 738,000 barrels per day to 8,608,000 barrels per day, while our imports of gasoline rose by 174,000 barrels per day to 704,000 barrels per day, and while our exports of gasoline fell by 209,000 barrels per day to 286,000 barrels per day….even after this week’s inventory decrease, our gasoline supplies were still 9.9% higher than last June 21st’s gasoline inventories of 232,225,000 barrels, and roughly 9% above the five year average of our gasoline supplies for this time of the year…  

with the increase in our distillates production, our supplies of distillate fuels increased for the eleventh time in 23 weeks and for the 16th time in 38 weeks, rising by 249,000 barrels to 174,720,000 barrels during the week ending June 19th, after our distillates supplies had decreased by 1,358,000 barrels over 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 89,000 barrels per day to 3,466,000 barrels per day, and because our exports of distillates fell by 173,000 barrels per day to 1,128,000 barrels per day, while our imports of distillates fell by 94,000 barrels per day to 69,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 39.4% above the 125,380,000 barrels of distillates that we had stored on June 21st, 2019, and about 28% above the five year average of distillates stocks for this time of the year…

finally, even with the drop in our crude oil output and the decrease in our oil imports, our commercial supplies of crude oil in storage rose for the 19th time in twenty-two weeks and for the 34th time in the past 52 weeks, increasing by 1,442,000 barrels, from a record high of 539,280,000 barrels on June 12th to another all time high of 540,722,000 barrels on June 19th…that meant our our commercial crude oil inventories were around 16% above the five-year average of crude oil supplies for this time of year, and around 54% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the third week of June, 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 2018, except for during last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of June 19th were 15.2% above the 469,576,000 barrels of oil we had in commercial storage on June 21st of 2019, 29.8% above the 416,636,000 barrels of oil that we had in storage on June 22nd of 2018, and 6.2% above the 509,213,000 barrels of oil we had in commercial storage on June 16th of 2017…  

furthermore, once again checking the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 3,932,000 barrels this week to ​yet ​another record high of 1,450,655,000 barrels, 11.6% more than the 1,299,928,000 barrel total of the same week a year ago…   

This Week’s Rig Count

the US rig count fell for the 16th week in a row during the week ending June 26th, but just by the minimum, leaving the rig count down by 66.6% over that fifteen week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 1 rig to 265 rigs this past week, which was the fewest active rigs in Baker Hughes records going back to 1940 and 139 fewer rigs than the all time low prior to this year, and was also down by 702 rigs from the 967 rigs that were in use as of the June 28th report of 2019, and 1,664 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 188 oil rigs this week, after falling by 10 oil rigs the prior week, leaving oil rig activity at its lowest since June 12, 2009, which was also 605 fewer oil rigs than were running a year ago, and less than an 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 75 natural gas rigs, matching the lowest number of natural gas rigs running in at least 80 years, down by 98 natural gas rigs from the 173 natural gas rigs that were drilling a year ago, and less than a twentieth of 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, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there was just one such “miscellaneous” rig deployed, drilling a test well in Sandusky county Ohio..

the Gulf of Mexico rig count was unchanged at 11 rigs this week, with all of those rigs drilling for oil in Louisiana’s offshore waters…that matches the fewest number of rigs working in the Gulf or offshore nationally in Baker Hughes offshore records dating back to 1968, and was 15 fewer rigs than the 26 rigs drilling in the Gulf a year ago, when 24 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters…there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of last winter…

the count of active horizontal drilling rigs decreased by 4 rigs to 234 horizontal rigs this week, which was the fewest horizontal rigs active since December 30th, 2005, and hence is a new 14 year low for horizontal drilling…it was also 610 fewer horizontal rigs than the 840 horizontal rigs that were in use in the US on June 28th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count increased by 2 to 20 directional rigs this week, but those were still down by 48 from the 68 directional rigs that were operating during the same week of last year…at the same time, the vertical rig count rose by 1 rig to 15 vertical rigs this week, but those were also still down by 44 from the 59 vertical rigs that were in use on June 28th 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 June 19th, the second column shows the change in the number of working rigs between last week’s count (June 12th) and this week’s (June 19th) count, the third column shows last week’s June 12th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running 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 21st of June, 2019…    

June 26 2020 rig count summary

as you can see, there was very little change in drilling activity ​anywhere this week, suggesting that prices have risen high enough that drillers are no longer anxious 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 no changes in either Texas Oil District 8, which is the core Permian Delaware, or in Texas Oil District 7C and Texas Oil District 8A, the southern and northern reaches of the Permian Midland respectively…with the rig count in the Texas Permian thus unchanged, that means that the rig that was shut down in New Mexico would have been drilling in the western Permian Delaware to account for the 1 rig decrease in the Permian basin rig count nationally…​.​the lone rig that was added in Texas this week was Texas Oil District 3, which we usually attribute to the Eagle Ford shale, but rigs in that basin were unchanged this week, so the ​District 3 rig was ​apparently ​targeting some other unnamed formation…elsewhere, the rig pulled out of Colorado had been drilling in the Denver-Julesburg Niobrara chalk, and the rig pulled out of Wyoming had been drilling in another basin not tracked by Baker Hughes, while the rig added in Oklahoma was drilling in the Cana Woodford, where the rig count rose to 6 but was still down from 49 rigs a year ago…we should also note that there were no changes in natural gas rigs anywhere in the country this week…

+

Posted in Uncategorized | Leave a comment

1st Quarter GDP Revision, May’s Reports on Personal Income and Outlays, Durable Goods, and New & Existing Home Sales

The key economic releases of the past week were the 3rd estimate of 1st quarter GDP from the Bureau of Economic Analysis and the May report on Personal Income and Spending, also from the BEA, which includes two months of 2nd quarter data on personal consumption expenditures and hence accounts for 46% of 2nd quarter GDP….other widely watched releases included the May advance report on durable goods and the May report on new home sales, both from the Census bureau, and the May report on existing home sales from the National Association of Realtors (NAR)….this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for May, a weighted composite index of 85 different economic metrics, which rose from a downwardly revised a record low –17.89 in April to to +2.61 in May; that left the 3 month average of the index at –6.65 in May, up from –7.50 in April, still indicating national economic activity has been in a deep recession over these recent months…

In addition, this week also saw the results of two more regional Fed manufacturing surveys for June; the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to 0 in June, up from -27 in May, indicating that an equal number of that region’s manufacturers reported a deeper slowdown as those who reported a return to growth, and the Kansas City Fed manufacturing survey for June, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +1 in June, up from -19 in May and up from the a record low of – 30 in April, also indicating that this region’s manufacturing has stabilized a lower level…

1st Quarter GDP Contraction Rate Remains at 5.0% in 3rd Estimate

The Third Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that the real output of our goods and services decreased at a 5.0% annual rate in the quarter, revised but statistically unchanged from the 5.0% growth rate reported in the second estimate last month, as upward revisions to domestic fixed investment and government outlays were offset by downward revisions to inventories and exports…in current dollars, our first quarter GDP fell at a 3.56% annual rate, decreasing from what would work out to be a $21,729.1 billion a year rate in the 4th quarter of last year to a $21,539.7 billion annual rate in the 1st quarter of this year, with the headline 5.0% annualized rate of decrease in real output arrived at after an annualized inflation adjustment averaging 1.4%, aka the GDP deflator, was computed and applied to the current dollar change of each of the GDP components….

As we review this month’s revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change usually a bit over 4 times of that what actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes now chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the Full Release & Tables for the third estimate of 1st quarter GDP, which is linked to on the BEA’s main GDP page…specifically, we’ll be using table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2016; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP  components; and table 4, which shows the change in the price indexes for each of the GDP components…the full pdf for the 1st quarter’s 2nd estimate, which this estimate revises, is here

Real personal consumption expenditures (PCE), the largest component of GDP, were revised but still showed contraction at a 6.8% annual rate in the 1st quarter, the same contraction rate reported last month…that PCE contraction figure was arrived at by deflating the 5.9% lower rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer price inflation grew at a 1.3% annual rate in the 1st quarter, same PCE inflation rate that was published a month ago….real consumption of durable goods fell at a 13.8% annual rate, which was revised from the 13.2% drop shown in the second estimate, and subtracted 1.03 percentage points from GDP, as a drop in real consumption of automobiles at a 30.0% rate accounted for more than four-fifths of the decrease in durable goods….however, real consumption of nondurable goods by individuals rose at a 8.0% annual rate, revised from the 7.7% increase rate reported in the 2nd estimate, and added 1.08 percentage points to 1st quarter economic growth, as a increase in the real consumption of food at home at a 30.4% annual rate more than offset decreased consumption of clothing and energy goods….at the same time, consumption of services shrunk at a 9.8% annual rate, revised from the 9.7% contraction rate reported last month, and subtracted 4.78 percentage points from the final GDP tally, as an annualized 16.5% contraction in health care services accounted for 45% of the 1st quarter decrease in services…

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 10.2% annual rate in the 1st quarter, revised from the 10.5% contraction estimate reported last month, as real private fixed investment shrunk at a 1.3% rate, rather than at the 2.4% rate reported in the second estimate, while business and farm inventories fell by more than had been previously estimated…real investment in non-residential structures was revised from shrinking at a 3.9% rate to growing at a 2.6% rate, while real investment in equipment was revised to show it contracted at a 16.6% rate, revised from the 16.7% contraction rate reported in the 2nd estimate…at the same time, the 1st quarter’s investment in intellectual property products was revised from real growth at a 1.0% rate to real growth at a 1.3% rate, and growth in real residential investment was revised from a 18.5% annual rate to growth at a 18.2% rate…after those revisions, the growth in investment in non-residential structures reduced the decrease in 1st quarter GDP by 0.07 percentage points, while the decrease in investment in equipment subtracted 0.99 percentage points from the quarter’s growth…partly offsetting that, the increase in investment in intellectual property added 0.06 percentage points and the increase in residential investment added 0.65 percentage points to the 1st quarter’s growth rate…

At the same time, the decrease in real private inventories was revised from the previously reported $67.2 billion in inflation adjusted dollars to show inventories shrunk at an inflation adjusted $74.8 billion rate…this came after inventories had grown at an inflation adjusted $13.1 billion rate in the 4th quarter, and hence the $87.8 billion negative change in real inventories from those of the 4th quarter subtracted 1.56 percentage points from the 1st quarter’s growth rate, revised from the 1.43 percentage point subtraction due to inventory growth shown in the second estimate….however, since shrinking inventories indicates that less of the goods produced during the quarter were left “sitting on the shelf” or in a warehouse, that decrease by $87.8 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA found that real final sales of GDP only fell at a 3.5% rate in the 1st quarter, revised from the 3.7% rate of decrease shown in the second estimate…

The previously reported decrease in real exports was revised even lower, while the decrease in real imports was also greater than previously reported, and with those changes mostly offsetting one another, our net trade was a just slightly smaller addition to GDP than was previously reported…our real exports of goods and services shrunk at a 9.0% rate in the 1st quarter, revised from the 8.7% contraction rate shown in second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their decrease conversely subtracted 1.06 percentage points from the 1st quarter’s growth rate, revised from the 1.02 percentage point subtraction shown last month…meanwhile, the previously reported 15.5% decrease in our real imports was revised to a 15.7% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced in the US, their decrease conversely added 2.37 percentage points to 1st quarter GDP, revised from the 2.34 percentage point addition shown a month ago….thus, the improving trade balance that accompanied the collapse in trade added a rounded 1.31 percentage points to 1st quarter GDP, down from the 1.32 percentage point addition resulting from an improving foreign trade balance that was indicated by the advance estimate..

Finally, there were also revisions to real government consumption and investment in this 3rd estimate, as the entire government sector is now shown to have grown at a 1.1% rate, revised from the 0.8% growth rate for government indicated by the 2nd estimate….real federal government consumption and investment was seen to have grown at a 2.0% from the 4th quarter in this estimate, which was revised from the 1.9% growth rate shown in the 2nd estimate, as real federal outlays for defense grew at a 1.1% rate, revised from the 1.0% shown a month ago, and added 0.05 percentage points to 1st quarter GDP, while all other federal consumption and investment grew at a upwardly revised 3.1% rate and added 0.09 percentage points to GDP, revised from the 0.08 percentage point addition shown last month…meanwhile, real state and local consumption and investment grew at a 0.5% rate in the quarter, revised from the 0.2% growth rate in the 2nd estimate, and added 0.06 percentage points to 1st quarter GDP, which was revised from the 0.02 addition shown in the second estimate…note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thereby indicating an increase in the output of those goods or services…

May Personal Income Down 4.2%, Spending up 8.2%; 2 Months PCE Would Subtract 29.06 Percentage Points from Q2 GDP

The May report Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 2nd quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated….this same report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they’re seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much national income and spending would change over a year if May’s change in seasonally adjusted income and spending were extrapolated over an entire year…..however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from April to May….

Thus, when the opening line of the news release for this report tell us “Personal income decreased $874.2 billion (4.2 percent) in May“, they mean that the annualized figure for seasonally adjusted personal income in May, $19,839.3 billion, was $874.2 billion, or a bit more than 4.2% less than the annualized  personal income figure of $20,713.5 billion for April; the actual, unadjusted change in personal income from April to May is not given here…similarly, annualized disposable personal income, which is income after taxes, fell by nearly 4.9%, from an annual rate of an annual rate of $18,698.6 billion in April to an annual rate of $17,787.5 billion in May….the reasons for the decrease in personal income and disposable personal income can be viewed in table 1 of the Full Release & Tables (pdf) for this release, also as annualized amounts, and were due to a $1,097.8 billion decrease to $5,290.1 billion in personal current transfer receipts from government programs, partially reversing the $3,027.7 increase in personal current transfer receipts in April as coronavirus stimulus checks went out, and which more than offset a $258.3 billion increase to $8,733.3 billion in wages and salaries, partially reversing the $839.7 billion decrease in April’s wages and salaries due to the lockdown…again, remember those are all annualized figures…

For the personal consumption expenditures (PCE) that we’re interested in, BEA reports that they increased at a $994.5 billion annual rate, or by roughly 8.2 percent, partially rebounding from the decreases of 12.6% in April and 6.6% in March, as the annual rate of PCE rose from $12,168.2 billion in April to $13,162.6 billion in May…that was after the April PCE figure was revised up from the originally reported $12,013.3 billion annually and March PCE was revised from an annual rate of $13,906.8 billion to an annual rate of $13,925.8 billion, a revision that was already captured by the 3rd estimate of 1st quarter GDP we reported on earlier….the current dollar increase in May spending included a $338.8 billion or 28.6% increase to an annualized $1,523.9 billion in spending for durable goods, a $208.6 billion or 7.7% increase to an annualized $2,910.7 billion in spending for non-durable goods and a $447.1 billion or 5.4% increase to $8,728.0 billion in annualized spending for services….total personal outlays in May, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $989.9 billion to a $13,666.1 billion annual rate, which left national personal savings, which is disposable personal income less total outlays, at a $4,121.4 billion annual rate in May, down from the revised record $6,022.4 billion annualized personal savings in April… as a result of that decrease, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 23.2% in May, after April’s record savings rate was revised from 33.0% to 32.2%…

As you know, before those personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….that’s done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is computed by the BEA and included in Table 9 in the pdf for this report….that index rose from 110.006 in April to 110.112  in May, a month over month inflation rate that’s statistically 0.09636%, which BEA reports as an increase of 0.1 percent, following a similarly rounded PCE price index decrease of 0.5% reported for April…applying that May inflation adjustment to the nominal amounts of spending left reported growth in real PCE at 8.1% in May, after a real PCE decrease of 12.2% in April and a real PCE decrease of 6.4% in March….note that when those PCE price indexes are applied to each month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in those familiar chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….those results are shown in table 7 of the PDF, where we see that May’s chained dollar consumption total works out to 11,954.8 billion annually, 8.0689% more than April’s 11,062.2 billion, a difference that the BEA reports as 8.1%, even as the full decimal fractions are used in all their computations…

  However, to estimate the impact of the change in PCE on the change in GDP, such month over month changes don’t help us much, since GDP is reported quarterly…thus we have to compare April and May’s real PCE to the the real PCE of the 3 months of the first quarter….while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 13,179.0 billion in chained 2012 dollars..(note that’s the same as is shown in table 3 of the pdf for the revised 1st quarter GDP report)….then, by averaging the annualized chained 2012 dollar figures for April and May, 11,062.2 billion and 11,954.8 billion respectively, we can get an equivalent annualized PCE for the two months of the 2nd quarter that we have data for so far….when we compare that average of 11508.5 billion to the 1st quarter real PCE representation of 13,179.0 billion, we find that 2nd quarter real PCE has fallen at a 41.85% annual rate for the two months of the 2nd quarter that we have data for at this point…(note the math used to get that annual growth rate: 1 – ((( 11,062.2 + 11,954.8) /2 ) / 13,179.0 ) ^ 4  = 0.418506)….that’s a pace that would subtract 29.06 percentage points from the growth rate of the 2nd quarter by itself, with that computation based on the unlikely assumption that there’d be no improvement in June PCE from the April-May average…

May Durable Goods: New Orders Up 15.8%, Shipments Up 4.4%, Inventories Up 0.1%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for May (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $26.6 billion or 15.8 percent to $194.4 billion in May, following a revised decrease of 18.1% to $167.8 billion in April’s new orders, which had originally been reported as a 17.2% decrease to $170.0 billion…however, year to date new orders are still running 13.6% lower than they were a year ago, despite the May increase….as is usually the case, the volatile monthly change in new orders for transportation equipment led the May headline increase, as those transportation equipment orders rose $20.9 billion or 80.7 percent to $46.9 billion, as the $8.6 billion cancellation in new orders for commercial aircraft indicated for April was reversed to a $3.1 billlion increase and new orders for motor vehicles rose 27.5% to $28.2 billion….excluding new orders for transportation equipment, other new orders just rose 4.0% in May, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 3.2% to $62,729 million…

Meanwhile, the seasonally adjusted value of May’s shipments of durable goods, which will ultimately be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, rose for the first time in 3 months, increasing by $8.4 billion or 4.4 percent to $198.5 billion, after April shipments were revised from a decrease of 17.7% to $192.3 billion to a decrease of 18.6% to $190.1 billion….shipments of transportation equipment led the May increase, as they rose $5.0 billion or 12.1 percent to $46.5 billion, while shipments of nondefense capital goods excluding aircraft rose 1.8% to $62,371 million…

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 3rd consecutive month, increasing by $0.3 billion or 0.1 percent to $425.1 billion, after the value of end of April inventories were revised from $425.6 billion to $424.8 billion, now just a statistically insignificant increase from March…a $1.3 billion or 0.9 percent increase to $144.1 billion in the value of inventories of transportation equipment was responsible for the May inventory increase, as inventories of other durable goods fell 0.4% to $281.0 billion…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the first time in three months, increasing by $0.8 billion or 0.1 percent to $1,108.6 billion, following an April decrease of 1.5% to $1,107.77 billion, revised from the 1.6% decrease to $1,107.8 billion reported a month ago…a $0.3 billion increase to $760.0 billion in unfilled orders for transportation equipment was responsible for part of the increase, but unfilled orders excluding transportation equipment orders were also up 0.1% to $348,571 million…. compared to a year ago, the unfilled order book for durable goods is now 4.1% lower than the level of last May, with unfilled orders for transportation equipment 5.7% below their year ago level, on a 4.3% decrease in the backlog of orders for motor vehicles and a 10.3% decrease in the order book for commercial aircraft…

New Homes Sales Reported Higher in May; Prices Also Higher

The Census report on New Residential Sales for May (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 676,000 homes annually during the month, which was 16.6 percent (±15.5 percent) above the revised April rate of 580,000 new single family homes a year and 12.7 percent (±23.5 percent)* above the estimated annual rate that new homes were selling at in May of last year….the asterisk indicates that based on their small sampling, Census could not be certain whether May new home sales rose or fell from those of May a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….hence, these initial new home sales reports are not very reliable and often see significant revisions…with this report, sales of new single family homes in April were revised from the annual rate of 623,000 reported last month to a 615,000 annual rate, and March’s annualized home sale rate, initially reported at 627,000, was revised from last months downwardly revised figure of 619,000 to a 612,000 rate, while the annual rate of February’s sales, initially reported at an annual rate of 765,000 and revised from a revised annual rate of 741,000 to an annual rate of 717,000 last month, were further revised to an annual rate of 716,000 with this report…

The annual rates of sales reported here are extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 64,000 new single family homes sold in May, up from the 54,000 new homes that sold in April, and up from the estimated 59,000 new homes that sold in March….the raw numbers from Census field agents further estimated that the median sales price of new houses sold in May was at $317,900, up from the median sales price of $303,000 in April, and up from the median sales price of $312,700 in May of last year, while the average May new home sales price was $368,800, up from a $352,300 average price in April, but down from the average home sales price of $379,100 in May a year ago….a seasonally adjusted estimate of 318,000 new single family houses remained for sale at the end of May, which represents a 5.6 month supply at the May sales rate, down from a revised 6.7 month supply in April….for more details and graphics on this report, see Bill McBride’s two posts on this month’s report, “New Home Sales increased to 676,000 Annual Rate in May. and “A few Comments on May New Home Sales”….

Existing Home Sales Fell 9.7% in May; Median Sale Price Also Slips 0.7% from April

The National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell 9.7% from April to May, projecting that 3.91 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 26.6% lower than the annual sales rate projected in May of a year ago….that came after homes sold at an annual sales rate of 4.33 million in April, which was unrevised from last month’s report, and an annual home sales rate of 5.27 million in March, and an annual home sales rate of 5.76 million in February…the NAR also reported that the median sales price for all existing-home types in May was $284,600, which was 2.3% higher than in May a year earlier, which they report “marks 99 straight months of year-over-year gains“….the NAR press release, which is titled Existing-Home Sales Fall 9.7% in May While NAR Expects Strong Rebound in Coming Months, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distr essed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes  sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this data indicates that roughly 372,000 homes sold in May, down by 0.3% from the 373,000 homes that sold in April and 31.4% less than the 542,000 homes that sold in May of last year, so we can see the effect of the seasonal adjustment to reduce the large springtime increase typical for May home sales…that same pdf indicates that the median home selling price for all housing types fell 0.7%, from a revised $286,700 in April to $284,600 in May, while the average home sales price was at $319,300, down 0.6% from the $321,100 average in April, but up 1.5% from the $314,600 average home sales price of May a year ago, with the regional average home sales prices ranging from a low of $252,600 in the Midwest to a high of $422,300 in the West…for additional details and long term graphs on this report, see “NAR: Existing-Home Sales Decreased to 3.91 million in May, Rebound Expected in Coming Months” and “Comments on May Existing Home Sales” from Bill McBride at Calculated Risk..

 

(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…)      

Posted in Uncategorized | Leave a comment

tables and graphs for June 27th

rig count summary:

June 26 2020 rig count summary

natural gas prices:

June 27 2020 natural gas prices

natural gas prices max history:

June 27 2020 natural gas prices max

Posted in Uncategorized | Leave a comment

global oil surplus at 8.6 million bpd, despite 6.3 million bpd OPEC cuts; wells drilled and wells completed lowest on record

May’s surplus oil output was at 8.6 million barrels per day, despite OPEC cuts of 6.3 million bpd; US wells drilled and wells completed were lowest on record; the DUC backlog was 16.5 months; US offshore rigs were at a record low; while US oil supplies & oil+products supplies were record highs.

oil prices rose for the 7th week out of the past eight this week, on signs of rising demand and on the apparent success of the OPEC+ output cuts…after falling more than 8% to $36.26 a barrel last week on fears of a second wave of the coronavirus, the contract price of US light sweet crude for July delivery opened lower and slid to as low as $34.48 a barrel early Monday, as new coronavirus infections hit China and the US, stoking fears of weak fuel demand, but rebounded from those early losses after the UAE energy minister voiced confidence that OPEC+ countries would meet their commitments and reported signs that oil demand was picking up, and ended Monday 86 cents higher at $37.12 a barrel…oil prices then followed a stock market rally higher on Tuesday, rising $1.26, or 3.4% to settle at $38.38 a barrel, after the International Energy Agency increased its oil demand forecast for 2020, citing higher than expected consumption during the lockdowns…but oil prices gave up some of those gains in post-settlement trade Tuesday evening after the American Petroleum Institute reported U.S. crude inventories rose by more than was expected, and thus opened lower & fell to $37.21 a barrel early Wednesday but finished off the day’s lows at $37.96 a barrel after the EIA reported that domestic product supplies had declined and oil traders weighed the data in the monthly OPEC report…oil prices rose more than 2% on Thursday on the output cut compliance indicated by that OPEC report to settle 88 cents higher at $38.84 per barrel after major producers at a meeting of the Joint Ministerial Monitoring Committee (JMMC), which monitors compliance with OPEC output quotas, moved to ensure that certain countries made up for failing to fully meet their reduction targets last month….oil prices pushed higher in early trade on Friday after OPEC producers and their allies reaffirmed their supply cut commitments and two major oil traders said demand was recovering well and went on to finish 91 cents higher at a ten week high of $39.75 a barrel, a gain of nearly 10% for the week, as Iraq and Kazakhstan submitted “compensations schedules” to the JMMC to make up for falling short of their pledges to reduce output

natural gas prices. on the other hand, ended lower for the 3rd straight week, as lower gas output and warmer weather forecasts weren’t enough to offset the impact of falling exports…after falling 2.9% to a two-week low of $1.731 per mmBTU last week on milder weather that reduced demand for air conditioning, the contract price of natural gas for July delivery tumbled 6.2 cents to a one month low $1.669 per mmBTU on Monday, on forecasts for lower demand over the next two weeks than was previously expected, despite a report of slowing production…prices then fell another 5.5 cents to a two month low on Tuesday, as already depressed LNG exports were reported still lower, while natural gas production was reported higher….but prices recovered 2.4 cents of their losses on Wednesday, on a forecast for warmer weather and greater demand in the coming week…natural gas prices held steady at $1.638 per mmBTU on Thursday, as a continued drop in LNG exports offset the forecast for an increase in demand next week and then rose 3.1 cents to finish the week at $1.669 per mmBTU, as forecasts for warmer weather and higher air conditioning demand over the next two weeks intensified… 

the natural gas storage report from the EIA for the week ending June 12th indicated that the quantity of natural gas held in underground storage in the US rose by 85 billion cubic feet to 2,892 billion cubic feet by the end of the week, which left our gas supplies 722 billion cubic feet, or 33.3% higher than the 2,170 billion cubic feet that were in storage on June 12th of last year, and 419 billion cubic feet, or 16.9% above the five-year average of 2,473 billion cubic feet of natural gas that has been in storage as of the 12th of June in recent years….the 85 billion cubic feet that were added to US natural gas storage this week was above the consensus forecast from S&P Global Platts’ survey of analysts calling for a 79 billion cubic feet increase, but it was a bit less than the average of 87 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, and it was well below the 117 billion cubic feet addition of natural gas to storage during the corresponding week of 2019… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 12th indicated that even with a big drop in our oil production and a modest decrease our oil imports, we still had surplus oil to add to our stored commercial supplies of crude oil for the 3rd time in six weeks, and for the 29th time in the past forty weeks….our imports of crude oil fell by an average of 222,000 barrels per day to an average of 6,642,000 barrels per day, after rising by an average of 685,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 23,000 barrels per day to an average of 2,462,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,180,000 barrels of per day during the week ending June 12th, 245,000 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 fell by 600,000 barrels per day to 10,500,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,680,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,600,000 barrels of crude per day during the week ending June 12th, 116,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 421,000 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 659,000 barrels per day more 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 plugged a (-659,000) 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 average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media usually treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill for oil, we’ll continue to report them as is, just as they’re watched & believed as accurate by most everyone in the industry…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,721,000 barrels per day last week, which was still 10.0% less than the 7,467,000 barrel per day average that we were importing over the same four-week period last year….the 421,000 barrel per day net addition to our total crude inventories included 247,000 barrels per day that were added to our Strategic Petroleum Reserve, and 174,000 barrels per day that were being added to our commercially available stocks of crude oil ….this week’s crude oil production was reported to be down by 600,000 barrels per day to 10,500,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 600,000 barrels per day to 10,100,000 barrels per day, while a 1,000 barrel per day increase in Alaska’s oil production to 361,000 barrels per day had no impact on the rounded national total….last year’s US crude oil production for the week ending June 14th was rounded to 12,200,000 barrels per day, so this reporting week’s rounded oil production figure was about 13.9% below that of a year ago, yet still 24.6% 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 73.8% of their capacity while using 13,600,000 barrels of crude per day during the week ending June 12th, up from 73.1% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years…hence, the 13,600,000 barrels per day of oil that were refined this week were still 21.2% fewer barrels than the 17,264,000 barrels of crude that were being processed daily during the week ending June 14th, 2019, when US refineries were operating at 93.9% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries was also higher, increasing by 217,000 barrels per day to 8,356,000 barrels per day during the week ending June 12th, after our refineries’ gasoline output had increased by 360,000 barrels per day over the prior week… however, since our gasoline production is still recovering from a multi-year low, this week’s gasoline output was still 19.8% lower than the 10,423,000 barrels of gasoline that were being produced daily over the same week of last year….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 264,000 barrels per day to 4,498,000 barrels per day, after our distillates output had increased by 48,000 barrels per day over the prior week…after this week’s decrease in distillates output, our distillates’ production was 16.6% less than the 5,371,000 barrels of distillates per day that were being produced during the week ending June 14th, 2019….

even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week decreased for the 5th time in 8 weeks and for the 13th time in 20 weeks, falling by 1,666,000 barrels to 256,995,000 barrels during the week ending June 12th, after our gasoline supplies had increased by 866,000 barrels over the prior week…our gasoline supplies decreased this week because our imports of gasoline fell by 99,000 barrels per day to 530,000 barrels per day, and because our exports of gasoline rose by 187,000 barrels per day to 495,000 barrels per day, while the amount of gasoline supplied to US markets decreased by 30,000 barrels per day to 7,870,000 barrels per day….but even with this week’s inventory decrease, our gasoline supplies were still 10.2% higher than last June 14th’s gasoline inventories of 233,221,000 barrels, and roughly 10% above the five year average of our gasoline supplies for this time of the year…  

with the decrease in our distillates production, our supplies of distillate fuels decreased for the twelfth time in 22 weeks and for the 22nd time in 37 weeks, falling by 1,358,000 barrels to 174,471,000 barrels during the week ending June 12th, after our distillates supplies had increased by 1,568,000 barrels over the prior week….our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 253,000 barrels per day to 3,555,000 barrels per day, while our imports of distillates fell by 14,000 barrels per day to 163,000 barrels per day and our exports of distillates fell by 112,000 barrels per day to 1,301,000 barrels per day,…even after this week’s inventory decrease, our distillate supplies at the end of the week were still 36.5% above the 127,821,000 barrels of distillates that we had stored on June 14th, 2019, and about 28% above the five year average of distillates stocks for this time of the year…

finally, even with the drop in our crude oil output and the decrease in our oil imports, our commercial supplies of crude oil in storage rose for the 18th time in twenty-one weeks and for the 33rd time in the past 52 weeks, increasing by 1,215,000 barrels, from a record high of 538,065,000 barrels on June 5th to another all time high of 539,280,000 barrels on June 12th…that meant our our commercial crude oil inventories were around 15% 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 second week of June, 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 year and a half, except for during last summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of June 12th were 11.8% above the 482,364,000 barrels of oil we had in commercial storage on June 14th of 2019, 26.4% above the 426,527,000 barrels of oil that we had in storage on June 15th of 2018, and 5.9% above the 509,095,000 barrels of oil we had in commercial storage on June 16th of 2017…  

furthermore, once again checking the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 7,085,000 barrels this week to another record high of 1,446,723,000 barrels, 10.3% more than the 1,311,841,000 barrel total of the same week a year ago…  

OPEC’s Monthly Oil Market Report

Wednesday of this past week saw the release of OPEC’s June Oil Market Report, which covers OPEC & global oil data for May, and hence it gives us a picture of the global oil supply & demand situation during the first month of the two month agreement between OEC, the Russians, and other oil producers to cut production by 9.7 million barrels a day from an elevated October 2018 baseline….before we start, ​i have to caution that estimating oil demand while most countries on the planet are restarting their economies after a month or two of lockdown is pretty ​speculative, and hence the demand figures we’ll be reporting this month should be considered as having a much larger margin of error than we’d normally expect from this report..

the first table from this monthly report that we’ll review is from the page numbered 44 of this month’s report (pdf page 54), 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… 

May 2020 OPEC crude output via secondary sources

as we can see from the above table of oil production data, OPEC’s oil output ​was cut by 6,300,000 barrels per day to 24,195,000 barrels per day during May, from their revised April production total of 30,495,000 barrels per day…however that April output figure was originally reported as 30,412,000 barrels per day, which means that OPEC’s April production was revised 83,000 barrels per day higher with this report, and hence May’s production was, in effect, a 6,213,000 barrel per day decrease from the previously reported OPEC production figures (for your reference, here is the table of the official April OPEC output figures as reported a month ago, before this month’s revisions)…

from the above table, we can also see that production decreases of 3,160,000 barrels per day from the Saudis, 1,364,000 barrels per day from the Emirates, 921,000 barrels per day from Kuwait, and 340,000 barrels per day from Iraq accounted for the lion’s share of the May decrease, even as every other OPEC producer except for Iran, whose production is exempt from the agreement, also made appropriate production cuts…to facilitate understanding how each of the OPEC members have been adhering to their production cut agreement, we’ll next include a 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….

April 13th 2020 OPEC   emergency cuts

the above table was taken from an article at Zero Hedge, and it shows the oil production baseline in thousands of barrel per day off of which each of the oil producers will cut from in the first column, a number which is based on each of the producer’s October 2018 output, ie., a date before the past year’s and past quarter’s output cuts took effect; the second column shows how much each participant will cut in thousands of barrel per day, which is 23% of the October 2018 baseline for all participants except for Mexico, while the last column shows the production level each participant has agreed to after that 23% cut…​sanctioned OPEC members Iran ​and Venezuela and war-torn Libya are exempt from these cuts…

with a net 6,300,000 barrels per day decrease in their production, it appears that OPEC has exceeded the 6,084,000 barrels per day they had committed to cut…however, the baseline for the May thru July cuts is OPEC’s production of October 2018, and the 6,300,000 barrels per day drop in their production represents the output change since April, so we can’t really compare the two…moreover, production of some of the OPEC members is still well above their target level…for instance, Iraq had committed to cut their production by 1,061,000 barrels per day and only produce 3,592,000 barrels per day in May, but they only cut their production by 340,000 barrels per day in May, and thus produced 4,165,000 barrels per day, 572,000 barrels per day more than they were supposed to…

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 June 2018 to May 2020, and it comes from page 45 (pdf page 55) of the June OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent monthly OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale….

May 2020 OPEC report global oil supply

including the 6,300,000 barrel per day ​cut in OPEC’s production from what they produced a month earlier, OPEC’s preliminary estimate indicates that total global oil production decreased by a rounded 10.04 million barrels per day to average 89.89 million barrels per day in May, a reported decrease which apparently came after May ‘s total global output figure was revised lower by 470,000 barrels per day from the 99.46 million barrels per day of global oil output that was reported a month ago, as non-OPEC oil production fell by a rounded 3,740,000 barrels per day in May after that revision, with lower oil production from Russia, the US, Kazakhstan, Oman, Canada, Azerbaijan, Norway and Mexico the major reasons for the non-OPEC output decrease in May…with the big decrease in May’s global output, the 89.89 million barrels of oil per day produced globally in May were 8.2 million barrels per day, or 8.4% less than the revised 98.09 million barrels of oil per day that were being produced globally in May a year ago, the 5th month of OPECs first round of production cuts (see the June 2019 OPEC report (online pdf) for the originally reported May 2019 details)…with this month’s big drop in OPEC’s output, their May oil production of 24,195,000 barrels per day fell to 26.9% of what was produced globally during the month, down from the 30.5% share OPEC contributed in April, and the 28.7% global share they had in March…OPEC’s May 2019 production, which included 529,000 barrels per day from former member Ecuador, was reported at 29,876,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year produced 5,152,000, or 17.6% fewer barrels per day of oil in May than what they produced a year ago, when they accounted for 30.4% of global output…

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

May 2020 OPEC report global oil demand

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

OPEC is estimating that during the 2nd quarter of this year, all oil consuming regions of the globe will be using an average of 81.30 million barrels of oil per day, unrevised from their estimate for the 2nd quarter a month ago, largely reflecting coronavirus related demand destruction….meanwhile, 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 still producing 89.89 million barrels per day during May, which would imply that there was a surplus of around 8,590,000 barrels per day in global oil production in May, still 10.6% greater than the demand estimated for the month… 

in addition to ​noting ​the May surplus, the downward revision of 470,000 barrels per day to April’s global output that’s implied in this report, means that the record 18,160,000 barrels per day of global oil surplus we had ​previously ​figured for April would now be revised to a surplus of 17,690,000 barrels per day…since we had also figured a 18,068,000 barrels per day surplus in March, and since March supply & demand were unrevised in this report, that means the record oil surplus now occurred in March rather than in April…although OPEC reports that their demand figure for the first quarter is unchanged from the last report, we note that the table shows that it fell from 92.40 million barrels per day to 92.39 million barrels per day, which we’ve lightly circled in green…al​though that ​is essentially just a rounding error, the 92.40 million barrels per day​ figure​ is the number we used to figure January’s and February’s surplus…hence we should also revise our February surplus oil production estimate from 2,190,000 barrels per day to 2,180,000 barrels per day, and revise our January surplus oil production estimate from 1,220,000 barrels per day to 1,210,000 barrels per day…

This Week’s Rig Count

the US rig count fell for the 15th week in a row during the week ending June 19th, and is now down by 66.5% over that fifteen week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 13 rigs to 266 rigs this past week, which was the fewest active rigs in Baker Hughes records going back to 1940 and 138 fewer rigs than the all time low prior to this year, and was also down by 701 rigs from the 967 rigs that were in use as of the June 21st report of 2019, and 1,663 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 10 rigs to 189 oil rigs this week, after falling by 7 oil rigs the prior week, leaving oil rig activity at its lowest since June 12, 2009, which was also 600 fewer oil rigs than were running a year ago, and less than an 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 fell by 3 to 75 natural gas rigs, which was the least natural gas rigs running in at least 80 years, and down by 102 natural gas rigs from the 177 natural gas rigs that were drilling a year ago, and less than a twentieth of 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, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there was ​just ​one such “miscellaneous” rig deployed, drilling a test well in Sandusky county Ohio..

the Gulf of Mexico rig count was down by 2 to 11 rigs this week, with all of those rigs drilling for oil in Louisiana’s offshore waters…that was the fewest number of rigs working in the Gulf or offshore nationally in Baker Hughes offshore records dating back to 1968, and 13 fewer rigs than the 24 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters…there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of last winter…

the count of active horizontal drilling rigs decreased by 12 rigs to 234 horizontal rigs this week, which was the fewest horizontal rigs active since January 20th, 2006, and hence is a new 14 year low for horizontal drilling…it was also 612 fewer horizontal rigs than the 846 horizontal rigs that were in use in the US on June 21st of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count decreased by 4 to 18 directional rigs this week, and those were also down by 50 from the 68 directional rigs that were operating during the same week of last year…on the other hand, the vertical rig count rose by 3 rigs to 14 vertical rigs this week, but those were still down by 39 from the 53 vertical rigs that were in use on June 21st 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 June 19th, the second column shows the change in the number of working rigs between last week’s count (June 12th) and this week’s (June 19th) count, the third column shows last week’s June 12th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running 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 21st of June, 2019…    

June 19 2020 rig count summary

the net of the basin totals shown above is a decrease of 11 rigs, and since we had 1​2​ horizontal rigs removed nationally this week, ​an additional horizontal rig would have had to have been shut down in ​an​other basin not tracked separately by Baker Hughes and hence not shown above….checking the rig counts in the Texas part of Permian basin, we find that 3 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while two rigs were added in Texas Oil District 7C, or the southern Permian Midland, and one rig was added in Texas Oil District 8A, or the northern Permian Midland​ ​at the same time…with the total rig count in the Texas Permian thus unchanged, that means that all five rigs that were shut down in New Mexico would have been drilling in the western Permian Delaware to account for the 5 rig decrease in the Permain basin rig count nationally…elsewhere in Texas, rigs were pulled out of Texas Oil District 2 and Texas Oil District 4, which would account for the 2 rigs removed from the Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and touches on both of those Oil Districts…in addition, a rig was also removed from Texas Oil District 6, which accounts for the rig pulled from the Haynesville shale, since the Haynesville rig count in northern Louisiana remained unchanged at 21​…mean​while​,​ Louisiana’s count was down by 2 because of the removal of the two rigs that had been drilling in the state’s offshore waters….elsewhere, the rig pulled out of North Dakota was the Williston basin rig, and the rig pulled out of Oklahoma was the last Arkoma Woodford natural gas rig….that Arkoma Woodford​ ​rig, the rig pulled out of the Texas Haynesville, and the removal of a natural gas rig from West Virginia’s Marcellus account for the decrease of three natural gas rigs this week, and ​that leaves nothing else on the board unexplained…

DUC well report for May

Monday of this past week saw the release of the EIA’s Drilling Productivity Report for June, which includes the EIA’s May data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions….for the fourteenth time in fifteen months, this report showed a decrease in uncompleted wells nationally in M​a​y, as both the drilling of new wells and completions of drilled wells decreased, but drilling decreased by more…..for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 33 wells, falling from a revised 7,624 DUC wells in April to 7,591 DUC wells in May, which ​was also 12.6% fewer DUCs than the 8,681 wells that had been drilled but remained uncompleted as of the end of May of a year ago…this month’s DUC ​decrease occurred as 428 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during May, down by 287 from the 715 wells that were drilled in April and the lowest number of wells drilled in the history of this report, while 461 wells were completed and brought into production by fracking, a decrease of 262 well completions from the 723 completions seen in April, and down by 65% from the 1,317 completions seen in May of last year, and also the lowest number of completions ​in one month ​since completions have been reported by the EIA….at the May completion rate, the 7,591 drilled but uncompleted wells left at the end of the month represents a 16.5 month backlog of wells that have been drilled but are not yet fracked, up from the 10.8 month DUC well backlog of a month ago, with a recognition that this normally indicative backlog figure is being skewed by record low completions…

both oil producing regions and natural gas producing regions saw a net DUC well decrease​s​ in May, even as some basins still showed small increases…the number of uncompleted wells remaining in Oklahoma’s Anadarko basin decreased by 15 in May, falling from 677 at the end of April to 662 DUC wells at the end of May, as 14 wells were drilled into the Anadarko basin during May while 29 Anadarko wells were being fracked….there was also a decrease of 13 DUC wells in the Eagle Ford of south Texas, from 1,362 DUC wells at the end of April to 1,349 DUCs at the end of May, as 55 wells were drilled in the Eagle Ford during May, while 68 already drilled Eagle Ford wells were completed…in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range decreased by 5 to 478, as 35 Niobrara wells were drilled in May while 40 Niobrara wells were completed…on the other hand, DUCs in the Permian basin of west Texas and New Mexico increased by 6, from 3,462 DUC wells at the end of April to 3,468 DUCs at the end of May, as 201 new wells were drilled into the Permian, while 195 wells in the region were being fracked….at the same time, DUC wells in the Bakken of North Dakota increased by 3, from 861 DUC wells at the end of April to 864 DUCs at the end of May, as 33 wells were drilled into the Bakken in May, while 30 of the drilled wells in that basin 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 532 DUCs at the end of April to 513 DUCs at the end of May, 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 1 to 257, as 29 wells were drilled into the Haynesville during May, while 28 of the already drilled Haynesville wells were fracked during the same period….thus, for the month of May, DUCs in the five major oil-producing basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a net of 24 wells to 6,821 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 9 wells to 770 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas…

+

Posted in Uncategorized | Leave a comment

May’s reports on retail sales, industrial production; and new home construction; April’s business inventories

Major releases of the past week included the reports on Retail Sales for May and Business Sales and Inventories for April, both from the Census bureau; the report on Industrial Production and Capacity Utilization for May from the Fed, and the May report on New Residential Construction, also from the Census Bureau…in addition, this week also saw the release of the Regional and State Employment and Unemployment Summary for May from the Bureau of Labor Statistics, 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 Fed regional manufacturing reports for June: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose to -0.2 in June, up from -48.5 in May, indicating that the contraction in First District manufacturing has stabilized at a depressed level… meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose from -43.1 in May to +27.5 in June, its first positive reading since February, a change which they explain was because “Forty-six percent of the firms reported increases [in their manufacturing activity] this month (up from 15 percent last month), while 19 percent reported decreases (down from 58 percent).” …understand that after a lockdown, just turning on a light switch would represent an increase in activity for some of those companies…

May Retail Sales Rose 17.7% After April Sales Were Revised 2.2% Higher

Seasonally adjusted retail sales rose a record 17.7% in May after retail sales for April were revised 2.2% higher….the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $485.5 billion for the month, which was an increase of 17.7 percent (±0.5%) from April’s revised sales of $412.6 billion but 6.3 percent (±0.7 percent) below the adjusted sales of May of last year…April’s seasonally adjusted sales were revised from the $403.9 billion reported last month to $412.6 billion, while March sales were revised from $483.5 billion to $481.5 billion, which meant that March to April percent change was revised from a decrease of 16.4 percent (±0.5%) to a decrease of 14.7 percent (± 0.2 percent)…. estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 23.1% before adjustment, from $410,190 million in April to $504,802 million in May, while they were down 7.7% from the $547,130 million of sales in May a year ago…

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

May 2020 retail sales table

While this month’s 17.7% increase in sales was a record jump, we have to realize it was from the depressed level of April, which followed on the heels of the widespread coronavirus shuttering of many retail establishments in March….hence, while sales at furniture stores rose 89.7% in May, their sales were still down 21.5% from a year ago…similarly, while sales at electronics and appliance stores were up 50.5% in May, they were still 29.9% lower than in May a year ago….and in an even more extreme example, even though sales at clothing stores jumped by 188% in May, they were still 63.4% lower than sales in clothing stores a year ago…however, there are some business types which saw a year over year improvement…even after elevated sales in March and April, grocery stores sales were still 14.4% higher than in May of last year; since it’s unlikely that Americans are eating that much more than a year ago, this suggests ongoing at home stockpiling of essentials after the shortages of some items in March and April…sales at building material and gardens supply stores were also up 16.4% year over year, suggesting that those stuck at home are spending more on their own houses and property…similarly, sales at sporting goods, musical instrument, book stores, and other recreational stores were up 4.9% year over year, suggesting we’re still spending to keep ourselves entertained during this period of reduced social activity…

To compute May’s real personal consumption of goods data for national accounts from this May retail sales report, the BEA will use the corresponding price changes from the May consumer price index, which we reviewed last week…we would normally make an attempt to estimate that figure by using the broad composite price index of all goods less food and energy goods to adjust the majority of May’s retail sales increases for inflation, but given the wide range of changes in each of the types of sales in this month’s report, our shortcut method would be prone to introduce more inaccuracies than tolerable in our estimation, so we’ll forego that effort this month…to get a more accurate estimation of the change in May’s personal consumption of goods, we would need to adjust each of the types of sales shown above by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 44.1% in May, the May price index for transportation commodities other than fuel was 0.1% higher, which would mean that real sales at auto & parts dealers were 44.0% higher. once the price increase is taken into account…on the other hand, while nominal sales at clothing stores rose 188.0%, the apparel price index was 2.3% lower at the same time, which means that the 188% increased cash outlay bought even more clothes in May, and hence real sales of clothing for national accounts purposes rose by nearly 195%

another reason to be cautious about reading too much into this one month jump in retail sales is that not all of it will make it to the bottom line of GDP…for instance, if the rebound of auto sales all came out of inventories of vehicles that were not sold in March and April, the corresponding reduction of inventories will subtract from GDP by the same amount that the increased sales added to it…similarly, if all the increased furniture, TVs and clothing that sold in May came from imported goods, the corresponding imports of furniture, TVs and clothing will subtract from GDP by the same amount that the increased sales of those goods added to it….the only way that increased retail sales adds to GDP without an offset is if it indicates an increase in the amount of goods produced for those sales domestically; in general, goods in that catagory would include in the increased sales of groceries, gasoline, and building materials…much more important to the ultimate trajectory of GDP will be personal consumption of services, which accounts for 47% of each month’s GDP….here we’d have to know if health care services, transportation services, recreation services and food services and accommodations have increased over the month; indications are they have not; most hospitals were still restricting elective procedures, jet fuel demand was still down by more than two thirds, no baseball was played in May, restaurants were only only cautiously reopening and hotel occupancy was still down by more than 50%…

Industrial Production Up 1.4% in May After April Revised Down 1.4%; Capacity Utilization Up 0.8% After 0.9% Downward Revision

Industrial production increased in May after production for April was revised lower…the Fed’s G17 release on Industrial production and Capacity Utilization for May reported that industrial production increased 1.4% in May after falling by a revised 12.5% in April and by a revised 4.6% in March, which left total output 15.3% lower than a year ago, down from last month’s -15.0% year over year figure…the industrial production index, which is benchmarked for average 2012 production to be equal to 100.0, rose from a revised 91.3 in April to 92.6 in May, after the April reading for the index was revised down from 92.6 to 91.3, the March index was revised up from 104.3 to 104.4, the February index was revised from 109.3 to 109.4, the January index was revised from 109.1 to 109.2, and the December index was revised from 109.6 to 109.7…

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 3.8%, from 84.0 in April to 87.3 in May, after the April manufacturing index was revised from 85.5 to 84.0, the March index was revised from 99.1 to 99.4, the February manufacturing index was revised from 104.9 to 105.0, and the January manufacturing index was also revised from 104.9 to 105.0, leaving manufacturing output 16.5% lower than it was a year ago… meanwhile, the mining index, which includes oil and gas well drilling, fell from 122.7 in April to 114.3 in May, after the April index was revised down from from the originally reported 123.4, which left the mining index 14.1% lower than it was a year earlier….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, fell 2.3% to 96.8 in May, after April’s index was revised from 99.3 to 99.1, leaving the utility index 8.0% below it’s year earlier level…

This report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 64.8% in May from 64.0% in April, after capacity utilization for April was revised down from the 64.9% reported a month ago….capacity utilization for all manufacturing industries rose from a downwardly revised 60.0% in April to 62.2% in May, as utilization of NAICS durable goods production facilities rose from a revised 54.0% in April to 57.1% in May, while capacity utilization for non-durables manufacturers rose from 67.1% to 68.5%…at the same time, capacity utilization for the mining sector fell to 75.4% in May, from 81.2% in April, which was originally reported as 81.7%, while utilities were operating at 69.1% of capacity during May, down from the revised 70.9% of capacity during April, which was was originally reported at 71.1% ….for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….  

New Housing Starts Higher, New Permits Much Higher in May

The May report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 974,000 in May, which was  4.3 percent (±15.5 percent)* above the revised April estimated annual rate of 934,000 housing unit starts, but was 23.2 percent (±6.2 percent) below last May’s rate of 1,286,000 housing starts a year…the asterisk indicates that Census does not have sufficient data to determine whether housing starts actually rose or fell from April to May, with the figure in parenthesis the most likely range of the change indicated; in other words, May’s housing starts could have just as easily been down by 11.2% or up by as much as 19.8% from those of April, with even larger revisions possible…in this report, the annual rate for April’s housing starts was revised from the 891,000 estimated last month to 934,000, while March housing starts, which were first reported at a 1,216,000 annual rate, were revised from last month’s initial revised annual figure of 1,276,000 down to 1,269,000 annually with this report….

The annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 89,300 housing units were started in May, up from the 84,800 units started in April but down from the 104,500 units started in March…of those housing units started in May, an estimated 62,600 were single family homes and 26,000 were units in structures with more than 5 units, identical to the revised 62,600 single family starts in April, but up from the 21,300 units started in structures with more than 5 units at the same time…

The monthly data on new building permits, with a smaller margin of error and hence usually smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in May, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,220,000 housing units, which was 14.4 percent (±1.1 percent) above the revised April permit rate of 1,066,000, but 8.8 percent (±1.0 percent) below the rate of permit issuance in May a year earlier….the annual rate for housing permits issued in April was revised from the 1,074,000 reported a month ago to 1,066,000…quoting the report for the annualized figures on the types of permits: “Single-family authorizations in May were at a rate of 745,000; this is 11.9 percent (±1.9 percent) above the revised April figure of 666,000. Authorizations of units in buildings with five units or more were at a rate of 434,000 in May. .”

Again, the annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed that permits for roughly 105,100 housing units were issued in May, up from the revised estimate of 96,000 new permits issued in April, but down from the 115,900 units permitted in March….the May figure included permits for an estimated 66,100 single family units, up from 63,600 in April, and permits for 35,700 units in structures with more than 5 units, up from 29,800 in April….for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 974 Thousand Annual Rate in May and Comments on May Housing Starts

April Business Sales Down 14.4%, Business Inventories Down 1.3%

Following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,184.8 billion in April, down 14.4 percent (±0.2 percent) from March revised sales,and down 18.4 percent (±0.3 percent) from April sales of a year earlier…note that total March sales were revised from the originally reported $1,386.1 billion to $1,384.1 billion, and as a result the March decrease from February increased from 4.9% to 5.1%….manufacturer’s sales were down 13.5% from March at $406,763 million in April, and retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, fell 12.7% to $382,654 million, while wholesale sales fell 16.9% to $395,355 million..

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,981.2 billion at the end of April, down 1.3 percent (±0.1%) from March, and 2.2 percent (±0.4 percent) lower than in April a year earlier…the value of end of March inventories was revised from the $2,012.5 billion reported last month to $2,007.0 billion with this release, now a 0.3% decrease from February…seasonally adjusted inventories of manufacturers were estimated to be valued at $686,476 million, 0.4% lower than in March, inventories of retailers were valued at $644,366 million, 3.7% less than in March, while inventories of wholesalers were estimated to be valued at $650,398 million at the end of April, up 0.3% from March.

With the release of the factory inventory data two weeks ago, we judged that the real change in April factory inventories would have a very large positive impact on the growth rate of 2nd quarter GDP; likewise, with the release of the wholesale inventory last week, we felt wholesale inventories would also have a substantial positive impact on the growth rate of 2nd quarter GDP…….since the April producer price index reported that prices for finished goods were on average 3.3% lower, that means that the real decrease in retail inventories was only around 0.4% for the month…however, since real retail inventories saw a substantial increase in the first quarter, albeit more than offset by decreases in factory and wholesale inventories, the real decrease in April retail inventories would thus have a substantial negative impact on 2nd quarter GDP, again partly offsetting the positive impact of factory and wholesale inventories..

 

(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…)      

Posted in Uncategorized | Leave a comment

tables and graphs for June 20th

retail sales:

May 2020 retail sales table

rig count summary:

June 19 2020 rig count summary

OPEC’s May oil output:

May 2020 OPEC crude output via secondary sources

global oil supply:

May 2020 OPEC report global oil supply 

global oil demand:

May 2020 OPEC report global oil demand

Posted in Uncategorized | Leave a comment

US crude inventories and total commercial crude plus total products inventories both at record highs…

oil prices fell this week for the first time in seven weeks on fears that a second wave of the coronavirus would damage the embryonic economic recovery….after rising 11% to $39.55 a barrel last week on improving US economic data and on the prospect that OPEC would extend their production cuts, the contract price of US light sweet crude for July delivery initially moved higher on the weekend extension of the OPEC cuts on Monday, but reversed to end $1.38 lower at $38.19 a barrel as the Saudis, the Emirates and Kuwait rescinded the additional voluntary cuts they had undertaken in the wake of the collapse of May oil prices… however, optimism that the announced supply cuts would more than offset demand weakness returned on Tuesday as oil prices regained 75 cents of their Monday loss to close at $38.94 a barrel…oil prices opened lower Wednesday on an API report of crude inventory build, and then tumbled to as low as $37.73 a barrel after the EIA confirmed a big build in U.S. crude oil inventories, as well as an increase in fuel inventories, but then rallied to close 66 cents higher at $39.60 per barrel on a weak dollar and the Fed’s plans to keep interest rates at near zero through 2022…​however, the bottom dropped out of oil prices on Thursday, as they tumbled more than 10% at one point amid a broader market selloff as fears over second wave of coronavirus cases hit the market and finished $3.26, or 8% lower at $36.34 a barrel after Reuters reported U.S. coronavirus cases had surpassed 2 million, renewing concerns about a new wave of demand destruction…prices continued falling on Friday and were down more than 5% to $34.48 early in the session, but staged a gradual recovery the remainder of the day to finish just 8 cents lower at $36.26 a barrel….still, for the week, prices were down more than 8%, posting their worst week since the week ending April 24th...

natural gas prices also finished lower this week, largely on milder weather that reduced demand for air conditioning….after falling 3.6% lower to $1.782 per mmBTU on lower LNG exports last week, the contract price of natural gas for July delivery edged up seven-tenths of a cent on Monday as a slowdown in natural gas output offset forecasts for lower air conditioning demand and a drop in LNG exportsmilder weather and lower LNG exports pushed prices 2.2 cents lower Tuesday, but they moved back up 1.3 cents on Wednesday despite those lower demand concerns on another report of slowing output…. natural gas prices climbed another 3.3 cents to $1.813 mmBTU on Thursday as the weekly natural gas storage report met traders expectations, but then fell 8.2 cents, or 4.5% on Friday to a two-week low of $1.731 per mmBTU, on forecasts for milder weather and weaker cooling demand, and declining LNG exports, thus ending the week 2.9% below the prior Friday’s close..

the natural gas storage report from the EIA for the week ending June 5th indicated that the quantity of natural gas held in underground storage in the US rose by 93 billion cubic feet to 2,807 billion cubic feet by the end of the week, which left our gas supplies 748 billion cubic feet, or 36.3% higher than the 2,059 billion cubic feet that were in storage on June 5th of last year, and 421 billion cubic feet, or 17.6% above the five-year average of 2,386 billion cubic feet of natural gas that has been in storage as of the 5th of June in recent years….the 93 billion cubic feet that were added to US natural gas storage this week was just below the consensus forecast from S&P Global Platts’ survey of analysts calling for a 95 billion cubic feet increase, while it was ​near the average of 94 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years, but ​it ​was well below the 107 billion cubic feet addition of natural gas to storage during the corresponding week of 2019… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending June 5th showed that due to an increase our oil imports and a decrease in our oil exports, we ​had​ surplus oil to ​add to ​our stored commercial supplies of crude oil for the 2nd time in five weeks, and for the 28th time in the past thirty-nine weeks….our imports of crude oil rose by an average of 685,000 barrels per day to an average of 6,864,000 barrels per day, after falling by an average of 1,021,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 355,000 barrels per day to an average of 2,439,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,425,000 barrels of per day during the week ending June 5th, 1,040,000 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 fell by 100,000 barrels per day to 11,100,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,525,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,484,000 barrels of crude per day during the week ending June 5th, 178,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 1,134,000 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 906,000 barrels per day more 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 plugged a (-906,000) 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 average daily consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media usually treats these weekly EIA figures as gospel and since these figures often drive oil pricing and hence decisions to drill for oil, we’ll continue to report them​ as is​, just as they’re watched & believed as accurate by most everyone in the industry…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 6,630,000 barrels per day last week, which was still 13.3% less than the 7,336,000 barrel per day average that we were importing over the same four-week period last year….the 1,134,000 barrel per day net addition to our total crude inventories included 317,000 barrels per day that were added to our Strategic Petroleum Reserve, and 817,000 barrels per day that were being added to our commercially available stocks of crude oil ….this week’s crude oil production was reported to be down by 100,000 barrels per day to 11,100,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 100,000 barrels per day to 10,700,000 barrels per day, while a 20,000 barrel per day decrease in Alaska’s oil production to 360,000 barrels per day was not enough to have an impact on the rounded national total….last year’s US crude oil production for the week ending June 7th was rounded to 12,300,000 barrels per day, so this reporting week’s rounded oil production figure was about 9.8% below that of a year ago, yet still 31.7% 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 73.1% of their capacity while using 13,484,000 barrels of crude per day during the week ending June 5th, up from 71.8% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years…hence, the 13,484,000 barrels per day of oil that were refined this week were still 21.0% fewer barrels than the 17,064,000 barrels of crude that were being processed daily during the week ending June 7th, 2019, when US refineries were operating at 93.2% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries was ​also higher, increasing by 360,000 barrels per day to 8,139,000 barrels per day during the week ending June 5th, after our refineries’ gasoline output had increased by 608,000 barrels per day over the prior week… however, since our gasoline production is still rebounding from a multi-year low, this week’s gasoline output was still 20.8% lower than the 10,276,000 barrels of gasoline that were being produced daily over the same week of last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 48,000 barrels per day to 4,762,000 barrels per day, after our distillates output had decreased by 66,000 barrels per day over the prior week…but even after this week’s increase in distillates output, our distillates’ production was still 9.1% less than the 5,239,000 barrels of distillates per day that were being produced during the week ending June 7th, 2019….

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 3rd time in 7 weeks and for the 7th time in 19 weeks, rising by 866,000 barrels to 258,661,000 barrels during the week ending June 5th, after our gasoline supplies had increased by 2,795,000 barrels over the prior week…our gasoline supplies increased by less this week than last because the amount of gasoline supplied to US markets increased by 351,000 barrels per day to 7,900,000 barrels per day, and because our imports of gasoline fell by 153,000 barrels per day to 629,000 barrels per day, while our exports of gasoline rose by 45,000 barrels per day to 308,000 barrels per day….with this week’s inventory increase, our gasoline supplies were 10.1% higher than last June 7th’s gasoline inventories of 234,913,000 barrels, and roughly 11% above the five year average of our gasoline supplies for this time of the year…  

with the increase in our distillates production, our supplies of distillate fuels increased for the tenth time in 21 weeks and for the 15th time in 36 weeks, rising by 1,568,000 barrels to 175,829,000 barrels during the week ending June 5th, after our distillates supplies had increased by 9,934,000 barrels over the prior week….our distillates supplies rose by much less this week than last because the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 584,000 barrels per day to 3,302,000 barrels per day, and because our exports of distillates rose by 673,000 barrels per day to 1,413,000 barrels per day, while our imports of distillates rose by 14,000 barrels per day to 177,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 37.0% above the 128,372,000 barrels of distillates that we had stored on June 7th, 2019, and about 29% above the five year average of distillates stocks for this time of the year…

finally, with the jump in our oil imports and the drop in our exports, our commercial supplies of crude oil in storage rose for the 17th time in twenty weeks and for the 32nd time in the past 52 weeks, increasing by 5,720,000 barrels, from 532,345,000 barrels on May 29th to an all time high of 538,065,000 barrels on June 5th…that meant our our commercial crude oil inventories were around 14% above the five-year average of crude oil supplies for this time of year, and 52.3% above the prior 5 year (2010 – 2014) average of our crude oil stocks for the first week of June, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels and continued rising….since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of June 5th were 10.8% above the 485,470,000 barrels of oil we had in commercial storage on June 7th of 2019, 24.4% above the 432,441,000 barrels of oil that we had in storage on June 8th of 2018, and 5.2% above the 511,546,000 barrels of oil we had in commercial storage on June 9th of 2017…  

furthermore, if we check the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have increased by 9,709,000 barrels ​this week ​to a record high of 1,439,638,000 barrels, 9.7% more than the 1,312,314,000 barrel total of the same week a year ago… 

This Week’s Rig Count

the US rig count fell for the 14th week in a row during the week ending June 12th, and is now down by 64.8% over that fourteen week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by ​5 rigs to 279 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940 and 125 fewer rigs than the prior all time low, also down by 690 rigs from the 969  rigs that were in use as of the June 14th report of 2019, and 1,640 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 7 rigs to 199 oil rigs this week, after falling by 16 oil rigs the prior week, leaving oil rig activity at its lowest since June 19, 2009, which was also 589 fewer oil rigs than were running a year ago, and less than an 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 rose by 2 to 78 natural gas rigs, which was still down by 103 natural gas rigs from the 181 natural gas rigs that were drilling a year ago, and still less than a twentieth of 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, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there were no such “miscellaneous” rigs deployed..

the Gulf of Mexico rig count was unchanged at 13 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana’s offshore waters…that’s now 11 fewer rigs than the 24 rigs drilling in the Gulf a year ago, when 22 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters…there are no rigs operating off other US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of this past winter…

the count of active horizontal drilling rigs decreased by 7 rigs to 246 horizontal rigs this week, which was the fewest horizontal rigs active since February 10th, 2006, and hence is a new 14 year low for horizontal drilling…it was also 606 fewer horizontal rigs than the 852 horizontal rigs that were in use in the US on June 14th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the directional rig count decreased by 2 to 22 directional rigs this week, and those were also down by 46 from the 68 directional rigs that were operating during the same week of last year…on the other hand, the vertical rig count rose by 4 rigs to 11 vertical rigs this week, but those were still down by 38 from the 49 vertical rigs that were in use on June 14th 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 June 12th, the second column shows the change in the number of working rigs between last week’s count (June 5th) and this week’s (June 12th) count, the third column shows last week’s June 5th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running 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 14th of June, 2019…    

June 12 2020 rig count summary

the net of the basin totals shown above is a decrease of 4 rigs, so to have had 7 horizontal rigs removed nationally this week, 3 more horizontal rigs would have had to have been shut down in other basins not tracked separately by Baker Hughes….checking the rig counts in the Texas part of Permian basin, we find that 4 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while a rig was added in Texas Oil District 7C, or the southern Permian Midland, at the same time…since the overall Permian rig total was down by 4 rigs, that means that one rigs that was shut down in New Mexico would have been drilling in the western Permian Delaware, and the other had likely been drillng in one of those “other” New Mexico basins not tracked by Baker Hughes, such as the San Juan….elsewhere in Texas, one rig was pulled out of Texas Oil District 1, while a rig was added in Texas Oil District 2, which could represent activity in​ the Eagle Ford shale​​, which stretches in a relatively narrow band through the southeastern part of the state and touches on both of those Oil Districts…in addition, two rigs started drilling in Texas Oil District 6, which accounts for the 2 rig increase in the Haynesville shale, since the northern Louisiana rig count remained unchanged at 21, while a rig was pulled out of Texas Oil District 10, which would account for the Granite Wash removal…elsewhere, the rig pulled out of North Dakota was the Williston basin rig, but the Oklahoma rig reduction is not accounted for in the basin table and hence it must have been operating in one of those “other basins” not tracked separately by Baker Hughes…the 2 rigs added in the Haynesville this week account for the week’s natural gas rig increase, and while two natural gas rigs were also added in Pennsylania’s Marcellus, they were offset the removal of two natural gas rigs from West Virginia’s Marcellus at the same time…

+

+

note: there’s more here

Posted in Uncategorized | Leave a comment

May’s consumer and producer prices; April’s wholesale sales and JOLTS

Major reports released during the past week included the May Consumer Price Index, the May Producer Price Index, the May Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for April, all from the Bureau of Labor Statistics; and the April report on Wholesale Trade, Sales and Inventories from the Census Bureau… this week also saw the release of the Mortgage Monitor for April (pdf) from Black Knight Financial Services, which indicated that 6.45% of mortgages were delinquent in April, up from 3.39% delinquent in March, and up from the 3.47% delinquency rate of April 2019, and that 0.40% of mortgages remained in the foreclosure process in April, down from 0.42% of all mortgages in March and down from 0.50% a year ago….the graph below from the Mortgage Monitor shows the mortgage delinquency rate by property value; it seems noteworthy that the delinquency rate for mortgages under $100,000 is more than three times that of mortgages of over $1 million:

June 8 2020 April Mortgage Monitor delinquency rate by property value

Consumer Prices Fell 0.1% in May on Lower Prices for Gasoline, Clothing, & Car Insurance

The consumer price index fell 0.1% in May, as lower prices for energy, clothing, lodging, and transportation services were only partly offset by higher prices for food, rent, and medical services…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell by 0.1% in May, after falling by 0.8% in April and 0.4% in March, 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, 0.1% in August and rising by 0.3% last July…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually inched up from 256.389 in April to 256.394 in May, which left it statistically 0.1179% higher than the 256.092 index reading of May of last year, which is reported as a 0.1% year over year increase, down from the 0.3% year over year increase reported a month ago….with lower prices for energy mostly offset by higher prices for food, seasonally adjusted core prices, which exclude food and energy, also fell by 0.1% for the month, as the unadjusted core price index fell from 266.089 to 265.799, which left the core index 1.222% ahead of its year ago reading of 262.590, which is reported as a 1.2% year over year increase, down from the 1.4% year over year increase that was reported for April…

The volatile seasonally adjusted energy price index fell 1.8% in May, after falling 10.1% in April, 5.8% in March, 2.0% in February and 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 now 18.9% lower than in May a year ago…the price index for energy commodities was 3.5% lower in May, while the index for energy services was 0.5% lower, after rising 0.1% in April….the energy commodity index was down 3.5% due to a 3.5% decrease in the price of gasoline, the largest component, and a 6.3% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.0% higher…within energy services, the price index for utility gas service rose 0.8% after rising 0.2% in April but is still 0.3% lower than it was a year ago, while the electricity price index fell 0.8% after rising 0.1% in April….energy commodities are now averaging 33.2% lower than their year ago levels, with gasoline prices averaging 33.8% lower than they were a year ago, while the energy services price index is down 0.2% from last May, as electricity prices are also 0.2% lower than a year ago…

The seasonally adjusted food price index rose 0.7% in May, after rising 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 being unchanged last June, July & August, as the price index for food purchased for use at home was 1.0% higher in May, after a 2.6% jump in April, while the index for food bought to eat away from home was 0.4% higher, as average prices at fast food outlets were 0.6% higher while prices at full service restaurants rose 0.2% and food prices at employee sites and schools were on average 0.2% higher…

In the food at home categories, the price index for cereals and bakery products was 0.2% lower as average bread prices fell 1.8%, prices for fresh biscuits, rolls, muffins fell 0.7%, and the price index for cakes, cupcakes, and cookies fell 0.9% on a 3.1% drop in cookie prices…on the other hand, the price index for the meats, poultry, fish, and eggs group was 3.7% higher even though egg prices fell 4.8%, as the price index for beef and veal rose 10.8%, and the price index for pork was 2.7% higher… meanwhile, the seasonally adjusted index for dairy products was 1.0% higher, even as milk prices fell 0.4%, as prices for ice cream & related products rose 2.5% and the index for other dairy products rose 1.9%…in addition, the fruits and vegetables index was 0.5% higher as the price index for fresh vegetables rose 1.3% and the price index for frozen fruits and vegetables rose 2.8%…at the same time, the beverages index was unchanged as the price index for carbonated drinks fell 0.9% while the price index for noncarbonated juices and drinks rose 0.4%….lastly, the index for the ‘other foods at home’ category was also unchanged, as the price index for sugar and sugar substitutes rose 1.2% while soup prices fell 3.3% and the price index for snacks fell 1.2%…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 May, the price index for beef and veal is now 18.2% higher, the price of pork chops are up 14.0%, the price index for the index for pork roasts, steaks, and ribs has risen 13.1%, and the price of eggs, which is up 13.5%, are the only food items with a price change greater than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which fell by 0.1% in May, after falling by 0.4% in April and by 0.1% in March, 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 0.2% lower in May, while the more heavily weighted composite for all services less energy services was unchanged….among the goods components, which will be used by the Bureau of Economic Analysis to adjust May’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.6% higher, as the price index for living room, kitchen, and dining room furniture rose 1.3% and the index for bedroom furniture rose 0.8%, while the price index for window coverings fell 2.4%….at the same time, the apparel price index was 2.3% lower on a 4.1% decrease in the price index for men’s suits, sport coats, and outerwear, a 9.7% decrease in the price index for women’s dresses, and a 5.3% decrease in the price index for women’s underwear, nightwear, swimwear, and accessories…on the other hand, the price index for transportation commodities other than fuel was 0.1% jigher as prices for new cars rose 0.3%, prices for used cars and trucks fell 0.4%, tire prices rose 1.2%, and the price index for vehicle parts and equipment other than tires rose 1.5%….meanwhile, prices for medical care commodities were also 0.1% higher, even as prescription drugs prices fell 0.2%, because non-prescription drugs prices rose 0.4% and the price index for peronal medical equipment rose 1.5%…at the same time, the recreational commodities index was unchanged as a 0.9% decrease in TV prices, a 1.2% decrease in prices for recorded music and music subscriptions and a 1.9% drop in prices for photographic equipment were offset by a 1.6% increase in prices for recreational books, a 0.6% increase in the price index for toys, games, hobbies and playground equipment, a 0.6% increase in the price index for sporting goods, and a 2.0% increase in the price index for sewing machines, fabric and supplies…on the other hand, the education and communication commodities index was 0.1% lower on a 0.1% decrease in the price index for college textbooks and a 0.8% decrease in the price index for computers, peripherals, and smart home assistants…lastly, a separate price index for alcoholic beverages was 0.8% higher, while the price index for ‘other goods’ was 0.3% lower on a 0.8% decrease in the index for cosmetics, perfume, bath, nail preparations and implements and a 2.3% decrease in the index for infants’ equipment..

Within core services, the price index for shelter was 0.2% higher as rents rose 0.3% and homeowner’s equivalent rent rose 0.3% while prices for lodging away from home at hotels and motels fell 1.8%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.2%, and other household operation costs were on average 0.1% lower on a 2.4% drop in moving, storage, freight expense….meanwhile, the price index for medical care services was 0.6% higher, as the price index for dental services rose 1.1%, the price index for physicians’ services rose 0.7% and the price of health insurance rose 1.1%… on the other hand, the transportation services price index was 3.6% lower as the price index for car and truck rental fell 3.5%, airline fares fell 4.9% and vehicle insurance costs fell 8.9%….however, the recreation services price index rose 1.3% as the index for cable and satellite television service rose 0.5% and the index for admission to to movies, theaters, and concerts rose 2.2%…at the same time, the index for education and communication services was 0.1% higher as elementary and high school  tuition and fees rose 0.5% and postage rose 0.3%….lastly, the index for other personal services was also up 0.1% as the price index for funeral services rose 0.2%, and the index for tax return preparation and other accounting fees was 0.3% higher…

Among core line items, prices for televisions, which are now averaging 15.6% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 12.5% since last May, the the price index for rental of video discs and other media, which has fallen 14.8% from a year ago, the price index for women’s dresses, which has fallen by 26.2% in the past year, the price index for women’s outerwear, which has fallen by 15.7% from a year ago, the price index for women’s suits and separates, which is down 10.4% year over year, the price index for men’s suits, sport coats, and outerwear, which has fallen by 15.8% in the past year, the price index for infants’ and toddlers’ apparel, which has fallen by 11.4% in the past year, prices for car and truck rental, which are down 19.2% in a year’s time, vehicle insurance, which has fallen 14.3% since last year, airline fares, which are now down by 28.8% since last May, and the price index for computer software and accessories, which is down 10.5% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 19.7% over the past year, and the price index for window coverings, which has risen 11.1% from a year ago, are the only line items to have increased by a double digit magnitude over that span….  

Producer Prices Rose 0.4% in May on Higher Energy and Food Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in May, as prices for finished wholesale goods averaged 1.6% higher, while margins of final service providers averaged 0.2% lower…that followed an April report wherein the PPI fell 1.3%, the largest drop in the history of the index, as prices for finished wholesale goods averaged 3.3% lower, and average margins of final services providers decreased by 0.2%, a March report that had the PPI down 0.2%, as prices for finished wholesale goods averaged 1.0% lower, while average margins of final services providers increased by 0.2%, a now revised February report that showed the PPI had fallen 0.4%, with prices for finished wholesale goods averaging 0.9% lower, while average margins of final services providers fell by 0.2%, and a re-revised January report that indicates the PPI had risen 0.3%, as prices for finished wholesale goods had been on average 0.3% higher, while margins of final services providers also increased by 0.3%…on an unadjusted basis, producer prices are still 0.8% lower than a year ago,  up from the 1.2% 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 0.1% for the month, and is now 0.4% lower than in May a year ago, down from the 0.3% year over year decrease shown in April…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 1.6% higher in May, after being 3.3% 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, 0.3% lower in August, 0.3% higher in July, 0.5% lower in June, and 0.2% lower in May of last year….the finished goods index rose 1.6% in May because the price index for wholesale energy goods was 4.5% higher, after falling by 19.0% in April, 6.7% in March, 3.6% in February but after rising by 0.2% in January, and because the price index for wholesale foods rose 6.0%, after falling 0.5% in April, being unchanged in March, falling 1.6% in February, and being unchanged in January, while the index for final demand for core wholesale goods (excluding food and energy) was unchanged, after falling 0.4% in April, rising 0.2% in March and being unchanged in February…wholesale energy prices were higher due to 43.9% jump in wholesale prices for gasoline and a 54.0% increase in wholesale prices for liquefied petroleum gas, even as wholesale prices for home heating oil fell 34.6%, while the wholesale food price index rose 6.0% on a 69.1% jump in wholesale prices for beef and veal and an 11.4% increase in the wholesale price index for fresh fruits and melons….among wholesale core goods, the wholesale price index for industrial chemicals fell 4.3% and the wholesale price index for office and store machines and equipment fell 1.2%, while wholesale prices for iron & steel scrap rose 11.3% and the wholesale price index for light motor trucks rose 1.2%%..

At the same time, the index for final demand for services fell 0.2% in May, after falling 0.2% in April, rising 0.2% in March, falling a revised 0.2% in February, and rising by a revised 0.3% in January, as the index for final demand for trade services fell 0.8%, the index for final demand for transportation and warehousing services rose 1.5%, and the core index for final demand for services less trade, transportation, and warehousing services was unchanged… among trade services, seasonally adjusted margins for fuels and lubricants retailers fell 13.1%, margins for automobile retailers fell 10.2%, and margins for TV, video, and photographic equipment and supplies retailers fell 9.0%, while margins for RVs, trailers, and campers retailers rose 11.2% … among transportation and warehousing services, margins for airline passenger services rose 12.2% and margins for air transportation of freight rose 1.4% …among the components of the core final demand for services index, margins for arrangement of cruises and tours fell 18.2%, and margins for securities brokerage, dealing, investment advice, and related services fell 10.0%, while margins for dental care rose 6.5%, margins for arrangement of vehicle rentals and lodging rose 5.3%, and margins for passenger car rental rose 4.8%…

This report also showed the price index for intermediate processed goods rose 0.1% in May, after falling 3.7% in April, 1.1% in March, 0.9% in February and 0.2% in January….the price index for intermediate energy goods rose 0.1%, as refinery prices for gasoline rose 43.9% and producer prices for liquefied petroleum gas rose 54.0%, while refinery prices for residual fuels fell 38.9%, refinery prices for jet fuel fell 12.6% and refinery prices for No. 2 diesel fuel fell 16.2%…meanwhile, prices for intermediate processed foods and feeds rose 6.4%, as the producer price index for meats rose 40.4% and the index for processed fruits and vegetables rose 1.4%…at the same time, the core price index for intermediate processed goods less food and energy fell 0.6% as the producer price index for basic organic chemicals fell 5.2% and the producer price index for steel mill products decreased 3.1%… prices for intermediate processed goods are still 6.8% lower than in May a year ago, the 13th 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 8.9% in May, after falling 13.7% in April, 8.0% in March, a revised 7.2% in February and a revised 1.1% in January….that was as the May price index for crude energy goods rose 26.5% as crude oil prices rose 41.6% and as unprocessed natural gas prices rose 36.5%, while the price index for unprocessed foodstuffs and feedstuffs rose 4.5% on a 64.9% increase in producer prices for slaughter chickens and a 41.6% increase in producer prices for slaughter hogs…at the same time, the index for core raw materials other than food and energy materials rose 0.6%, as prices for wastepaper fell rose 18.3%, the price index for unprocessed iron & steel scrap increased 11.3%, and the price of copper base scrap rose 3.3%….this raw materials index is still 19.4% lower than a year ago, as the year over year change on this index remained negative all last year…

Lastly, the price index for services for intermediate demand fell 0.4% in May, after falling 1.6% in April, 0.1% in March, a revised 0.2% in February, but rising a revised 0.2% in January…the price index for intermediate trade services was 0.6% higher, as margins for intermediate chemicals and allied products wholesalers rose 1.8% and margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.7%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.5% higher, as the intermediate price index for transportation of passengers (partial) rose 12.2% and the price index for air transportation of freight rose 1.4%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing was 0.9% lower, as the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 10.0%, the intermediate price index for business loans (partial) fell 9.9%, and the price index for radio advertising time sales fell 25.9%…over the 12 months ended in May, the year over year price index for services for intermediate demand is now 1.6% 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…

Job Openings, Hiring and Firing, and Job Quitting all way down in April

The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by by 965,000, from 6,011,000 in March to 5,046,000 job openings in April, after March job openings were revised 180,000 lower, from 6,191,000 to 6,011,000…April’s jobs openings were also 30.7% lower than the 7,284,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed fell from 3.8% in March to 3.7% in April, and it was down from 4.6% a year ago…the greatest percentage decrease in April job openings was in the leisure and hospitality sector, where openings fell by 210,000 to 454,000, while job openings in professional and business services fell by 309,000 to 883,000… (details on job openings by industry and region can be viewed in Table 1)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to 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 April, seasonally adjusted new hires totaled 3,524,000, down by 1,587,000 from the revised 5,111,000 who were hired or rehired in March, as the hiring rate as a percentage of all employed fell from 3.4% to 2.7%, which was also down from the 4.0% hiring rate in April a year earlier (details of hiring by industry since December are in table 2)….meanwhile, total separations also fell, by 4,755,000, from 14,643,000 in March to 9,888,000 in April, as the separations rate as a percentage of the employed fell from 9.7% in March to 7.5% in April, which was stiil way up from the separations rate of 3,8% in April a year ago (see table 3)…subtracting the total hires of 3,524,000 from the 9,888,000 total separations would imply an decrease of 6,364,000 jobs in April, quite a bit less than the revised payroll job increase of 20,687,000 for April reported by the May establishment survey last week, with only 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 1,786,000 of us voluntarily quit our jobs in April, down by 1,003,000 from the revised 2,789,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, fell from 1.8% in March to 1.4% in April, which was also down from 2.3% a year earlier (see details in table 4)….in addition to those who quit, another 7,716,000 were either laid off, fired or otherwise discharged in April, down by 3,773,000 from the revised 11,489,000 who were discharged in March, as the discharges rate fell from 7.6% to 5.9% of all those who were employed during the month, which was still way up the 1.3% rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 386,000 in April, up from 366,000 in March, for an ‘other separations’ rate of 0.3%, up from 0.2% in March and from in April a year ago….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

April Wholesale Sales Down 16.9%, Wholesale Inventories Up 0.3%

The April report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $395.4 billion, down 16.9 percent (+/-0.5%) from the revised March sales level, and down 20.7 percent (±0.7 percent) from wholesale sales of April 2019… the March preliminary sales estimate was revised from the $475.0 billion reported last month to $475,572 million, which meant the February to March percent change was revised from the preliminary estimate of a decrease of 5.2 percent (±0.5 percent) to a decrease of 5.1 percent (±0.5 percent)….as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as any goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this April report estimated that wholesale inventories were valued at a seasonally adjusted $650.4 billion at month end, an increase of 0.3 percent (+/-0.2%) from the revised March level but 2.8 percent (±0.9 percent) lower than in April a year ago, with the March preliminary estimate revised from $650.7 billion to $648.7 billion at the same time, now down 1.1% from February….

That $2.0 billion downward revision to March wholesale inventories will reduce 1st quarter GDP by 0.04 percentage points ..meanwhile, April wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the April producer price index, appears to indicate a real wholesale inventory increase on the order of 4% heading into the 2nd quarter, which, after the $30.4 billion decrease in real wholesale inventories that was indicated by the key source data and assumptions (xls) in the second estimate of 1st quarter GDP., will have a substantial positive impact on the growth rate of 2nd quarter GDP…

 

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

Posted in Uncategorized | Leave a comment

tables and graphs for June 13

rig count summary:

June 12 2020 rig count summary

mortgage delinquency rate by property value:

June 8 2020 April Mortgage Monitor delinquency rate by property value

Posted in Uncategorized | Leave a comment

distillates demand falls to 28 year low, distillates supplies rise to 37 year high

oil prices rose for a sixth straight week to close at a 3 month high this week on improving US economic data and on hopes that OPEC would announce an extension of their production cuts at a meeting rescheduled for Saturday….after rising 6.7% to $35.49 a barrel last week on the apparent success of the OPEC+ production cuts, the contract price of US light sweet crude for July delivery opened lower on Monday as oil traders hedged bets in advance of the possible OPEC+ meeting this week to discuss whether to extend  production cuts beyond June​,​ but steadied to finish down just 5 cents at $35.44 a barrel as rising U.S.-China tensions weighed on sentiment even in the face of reports that OPEC and Russia were close to a deal on extending output cuts…oil opened higher and continued rising through Tuesday on reports that Saudi Arabia and Russia were close to inking a two-month extension of the current oil production cuts through September 1st and finished $1.37 higher at $36.81 a barrel as economic activity began to recover after the easing of coronavirus lockdownsoil prices​ then​ erased most of Tuesday’s gains early on Wednesday on doubts that the OPEC meeting would go ahead as planned, but rallied late iin the session to finish 48 cents higher at $37.29 a barrel as prices were supported by a reported drawdown of U.S. crude inventoriesoil prices were little changed on Thursday as investors awaited a decision from crude producers on whether to extend their record output cuts and settled 12 cents higher $37.41 a barrel…oil prices ​spiked higher early on Friday after an unexpected drop in the US jobless rate and then rallied to a $2.14 increase at $39.55 a barrel on Opec’s decision to bring forward to Saturday their discussion of extended output cuts, thus finishing the week more than 11% higher, with both US and international prices finishing at their highest level since March 6th

Meanwhile, natural gas prices finished the week lower as traders watched the daily changes in natural gas output and US LNG exports​ for supply & demand clues​… after slipping 3.2 cents or 1.7% to $1.849 per mmBTU last week on falling demand for LNG, the contract price of natural gas for July delivery opened lower on Monday despite forecasts for warmer weather and higher air conditioning demand and tumbled to a 4% loss at $1.774 per MMBTU, as US LNG exports continued to drop in the face of record low gas prices in Europe and Asia…natural gas traded in a narrow range on Tuesday and finished three-tenths of a cent higher, and then rose 4.4 cents to $1.821 per mmBTU on Wednesday on improving supply and demand balances, as traders watched a tropical storm that could disrupt Gulf Coast production and as LNG exports edged up with higher gas prices in Europe…natural gas ended little changed at $1.822 per mmBTU on Thursday as rising LNG exports offset a smaller-than-expected weekly storage build and an increase in natural gas output, but then fell back 4 cents to end the week 3.6% lower at $1.782 per mmBTU on forecasts for milder weather and lower air conditioning demand through mid-June.

the natural gas storage report from the EIA for the week ending May 29th indicated that the quantity of natural gas held in underground storage in the US rose by 102 billion cubic feet to 2,714 billion cubic feet by the end of the week, which left our gas supplies 762 billion cubic feet, or 39.0% higher than the 1,952 billion cubic feet that were in storage on May 29th of last year, and 422 billion cubic feet, or 18.4% above the five-year average of 2,292 billion cubic feet of natural gas that has been in storage as of the 29th of May in recent years….the 102 billion cubic feet that were added to US natural gas storage this week was less than the consensus forecast for a 111 billion cubic feet increase from a survey of analysts by S&P Global Platts, while it was close to the average 103 billion cubic feet of natural gas that have been added to natural gas storage during the same week over the past 5 years and was somewhat below the 118 billion cubic feet addition of natural gas to storage during the corresponding week of 2019… 

The Latest US Oil Supply and Disposition Data from the EIA

US oil data from the US Energy Information Administration for the week ending May 29th showed that due to a drop our oil imports, a decrease in crude production, an increase in refining, and a big addition to the SPR, we had to withdraw oil from our stored commercial supplies of crude oil for the third time in four weeks, and for the 11th time in the past thirty-eight weeks….our imports of crude oil fell by an average of 1,021,000 barrels per day to an average of 6,179,000 barrels per day, after risng by an average of 2,003,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 382,000 barrels per day to an average of 2,794,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,385,000 barrels of per day during the week ending May 29th, 639,000 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 fell by 200,000 barrels per day to 11,200,000 barrels per day, and hence our daily supply of oil from the net of our trade in oil and from well production totaled an average of 14,585,000 barrels per day during this reporting week..

meanwhile, US oil refineries reported they were processing 13,307,000 barrels of crude per day during the week ending May 29th, 316,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA’s surveys indicated that a net of 278,000 barrels of oil per day were being added to the supplies of oil stored in the US….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 1,001,000 barrels per day more 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 plugged a (-1,001,000) 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 ​average​ daily​ ​consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting an error or errors of that magnitude in the oil supply & demand figures we have just transcribed…however, since the media usually treats these weekly EIA figures as gospel and since these numbers often drive oil pricing and hence decisions to drill for oil, we’ll continue to report them, just as they’re watched & believed as accurate by most everyone in the industry…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….   

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to an average of 5,992,000 barrels per day last week, which was still 18.3% less than the 7,336,000 barrel per day average that we were importing over the same four-week period last year….the 278,000 barrel per day net addition to our total crude inventories included a record 574,000 barrels per day that were added to our Strategic Petroleum Reserve, which was partly offset by a 297,000 barrels per day withdrawal from our commercially available stocks of crude oil ….this week’s crude oil production was reported to be down by 200,000 barrels per day to 11,200,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was down by 200,000 barrels per day to 10,800,000 barrels per day, while a 32,000 barrel per day decrease in Alaska’s oil production to 380,000 barrels per day was not enough to have an impact on the rounded national total….last year’s US crude oil production for the week ending May 31st was rounded to 12,400,000 barrels per day, so this reporting week’s rounded oil production figure was about 9.7% below that of a year ago, yet still 32.9% 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 13,307,000 barrels of crude per day during the week ending May 29th, up from 71.3% of capacity during the prior week, but still among the lowest refinery utilization rates of the last thirty years…hence, the 13,307,000 barrels per day of oil that were refined this week were 21.4% fewer barrels than the 16,938,000 barrels of crude that were being processed daily during the week ending May 31st, 2019, when US refineries were operating at 91.8% of capacity….

with the increase in the amount of oil being refined, gasoline output from our refineries was quite a bit higher, increasing by 608,000 barrels per day to 7,779,000 barrels per day during the week ending May 29th, after our refineries’ gasoline output had increased by 5,000 barrels per day over the prior week… however, since our gasoline production i​s still recovering from ​a multi-year low, this week’s gasoline output was still 22.6% lower than the 10,049,000 barrels of gasoline that were being produced daily over the same week of last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 66,000 barrels per day to 4,714,000 barrels per day, after our distillates output had decreased by 24,000 barrels per day over the prior week…after this week’s decrease in distillates output, our distillates’ production was 12.8% less than the 5,404,000 barrels of distillates per day that were being produced during the week ending May 31st, 2019….

with the big increase in our gasoline production, our supply of gasoline in storage at the end of the week increased for the 2nd time in 6 weeks and for the 6th time in 18 weeks, rising by 2,795,000 barrels to 257,795,000 barrels during the week ending May 29th, after our gasoline supplies had decreased by 724,000 barrels over the prior week…our gasoline supplies also increased this week because our imports of gasoline rose by 490,000 barrels per day to 782,000 barrels per day, while our exports of gasoline rose by 53,000 barrels per day to 263,000 barrels per day, while the amount of gasoline supplied to US markets increased by 296,000 barrels per day to 7,549,000 barrels per day ….with this week’s inventory increase, our gasoline supplies were 10.1% higher than last May 31st’s gasoline inventories of 234,149,000 barrels, and roughly 10% above the five year average of our gasoline supplies for this time of the year…  

even with the decrease in our distillates production, our supplies of distillate fuels increased for the ninth time in 20 weeks and for the 14th time in 35 weeks, rising by 9,934,000 barrels to a 37 year high of 174,261,000 barrels during the week ending May 29th, after our distillates supplies had increased by 5,495,000 barrels over the prior week….our distillates supplies rose by more this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 548,000 barrels per day to a 28 year low of 2,718,000 barrels per day, and because our exports of distillates fell by 135,000 barrels per day to 740,000 barrels per day, while our imports of distillates rose by 8,000 barrels per day to 163,000 barrels per day….after this week’s inventory increase, our distillate supplies at the end of the week were 34.7% above the 129,372,000 barrels of distillates that we had stored on May 31st, 2019, and about 28% above the five year average of distillates stocks for this time of the year…

finally, with the big drop our oil imports, the big addition to the SPR​, ​the increase in refining, and ​the drop in production​, our commercial supplies of crude oil in storage fell for the 3rd time in nineteen weeks and for the twentieth time in the past 52 weeks, decreasing by 2,077,000 barrels, from a 38 month high of 534,422,000 barrels on May 22nd to 532,345,000 barrels on May 29th….but with near steady increases this year and three record increases over past 9 weeks, our commercial crude oil inventories are still 12% above the five-year average of crude oil supplies for this time of year, and nearly 50% above the prior 5 year (2010 – 2014) average of crude oil stocks for the end of May, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels and ​continued rising….since our crude oil inventories have generally been rising over the past year and a half, except for during this past summer, after generally falling until then through most of the prior year and a half, our crude oil supplies as of May 29th were 10.2% above the 483,264,000 barrels of oil we had in commercial storage on May 31st of 2019, 21.9% above the 436,584,000 barrels of oil that we had in storage on June 1st of 2018, and 3.7% above the 513,207,000 barrels of oil we had in commercial storage on June 2nd of 2017…  

furthermore, if we check the total of our commercial oil supplies and the stockpiles of all the refined product made from oil, we find those supplies have just increased by 15,144,000 barrels to a record high of 1,429,929,000 barrels, 9.7% more than the 1,303,043,000 barrel total of the same week a year ago… 

This Week’s Rig Count

the US rig count fell for the 13th week in a row during the week ending June 5th, and is now down by 64.2% over that t​hirteen week period….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 17 rigs to 284 rigs this past week, which was the fewest rigs deployed in Baker Hughes records going back to 1940 and 120 fewer rigs than the prior all time low, also down by 691 rigs from the 975 rigs that were in use as of the June 7th report of 2019, and 1,645 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 16 rigs to 208 oil rigs this week, after falling by 15 oil rigs the prior week, leaving oil rig activity at its lowest since June 19, 2009, which was also 583 fewer oil rigs than were running a year ago, and less than a seventh of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014….at the same time, the number of drilling rigs targeting natural gas bearing formations was down by 1 to 76 natural gas rigs, which was the least natural gas rigs running in at least 80 years​, down by 110 natural gas rigs from the 186 natural gas rigs that were drilling a year ago, and less than a twentieth of 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, two rigs classified as ‘miscellaneous’ continued to drill this week; one on the big island of Hawaii, and one in Lake County, California… a year ago, there were no such “miscellaneous” rigs deployed..

the Gulf of Mexico rig count was up by one to 13 rigs this week, with all of those Gulf rigs drilling for oil in Louisiana’s offshore waters…that’s still ten fewer rigs than the rig count in the Gulf a year ago, when 21 rigs were drilling offshore from Louisiana and two rigs were operating in Texas waters…there are no rigs operating off ​other ​US shores at this time, nor were there a year ago, so the Gulf of Mexico rig count is equal to the national rig count, just as it has been since the onset of this past winter…

the count of active horizontal drilling rigs decreased by 18 rigs to 253 horizontal rigs this week, which was the fewest horizontal rigs active since April 21st, 2006, and hence is a new 14 year low for horizontal drilling…it was also 602 fewer horizontal rigs than the 855 horizontal rigs that were in use in the US on June 7th of last year, and less than a fifth of the record of 1372 horizontal rigs that were deployed on November 21st of 2014…meanwhile, the vertical rig count was unchanged at 7 vertical rigs this week, but those were down by 39 from the 46 vertical rigs that were operating during the same week of last year…on the other hand, the directional rig count increased by 1 to 24 directional rigs this week, but those were still down by 50 from the 74 directional rigs that were in use on June 7th 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 June 5th, the second column shows the change in the number of working rigs between last week’s count (May 29th) and this week’s (June 5th) count, the third column shows last week’s May 29th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running 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 7th of June, 2019…    

June 5 2020 rig count summary

the basin totals above show a net decrease of 18 rigs, matching the number of horizontal rigs removed nationally this week, so hopefully the above table accounts for all the changes in activity this week has brought us….checking the rig losses in the Texas part of Permian basin, we find that 4 rigs were pulled out of Texas Oil District 8, or the core Permian Delaware, while the rig count in other Texas Permian basin districts remained unchanged…since the overall Permian rig total was down by 7 rigs, that means that the 3 rigs that were shut down in New Mexico must have been drilling in the western Permian Delaware, to account for the national Permian basin reduction of 7 rigs…​.​elsewhere in Texas, 5 rigs were pulled out of Texas Oil District 1, and 5 rigs were pulled out of Texas Oil District 2, while a rig was added in Texas Oil District 3, and another rig was added in Texas Oil District 4…together, the changes in those districts account for the 9 rig reduction in Eagle Ford shale, which stretches in a relatively narrow band through the southeastern part of the state and thus touches on those 4 Oil Districts, and also account​ for ​the additon of a rig in that region that doesn’t target the Eagle Ford, possibly the directional ​drilling ​rig that was added this week…in other states, Oklahoma saw a one rig reduction despite the rig added in the Cana Woodford because rigs were concurrently pulled out of the Ardmore Woodford and the Granite Wash, which borders on the Texas panhandle, while Louisiana saw a one rig reduction despite the addition of the rig in the Gulf of Mexico because rigs were concurrently pulled out of the Haynesville shale in the northwest and from a non-shale basin in the southern part of the state…that Haynesville shale rig, and the rig removed from the Granite Wash basin, were the only natural gas rig reductions this week, while a rig taretting natural gas started drilling in one of those “other” basins not tracked separately by Baker Hughes at the same time…

+

Posted in Uncategorized | Leave a comment