May 28th graphics

oil & gas output for the US, Russia, & Saudi Arabia:

May 23 2016 US Russia SaudiArabia output

1st quarter GDP revision:

1st quarter 2016 GDP 2nd estimate

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update on oil prices & what’s moving them, another big fudge in EIA data, rig count still edging down..

we haven’t covered the ongoing increase in the price of oil while we’ve been focused on the Utica shale over the past couple weeks, so we’ll try to catch up on that first…the major factors that have been influencing oil prices over the past three weeks have been disruptions in the output of several producing counties that have reduced the total supply of oil to US and global markets….the largest of those disruptions, and the one having the most impact on the US, has been the out of control wildfires that have been burning for 3 weeks in the tar sands area of Alberta province in Canada and have now consumed a million and a quarter acres…that tar sands fire story has received fairly extensive coverage as it caused the evacuation of Fort McMurray, Alberta’s 3rd largest city, and knocked out an estimated 1 million barrels, or 40%, of Canada’s daily oil production…over the same period, there was an acceleration of rebel attacks on oil facilities and pipelines in Nigeria over the past two weeks, which started with 3,153 incidences of pipeline puncturings over the 12 months ending March and culminated in full scale attacks which shut down Chevron and Shell export terminals the week before last, shutting in 250,000 barrels per day of oil exports from Shell and 160,000 barrels per day from the Chevron operation and up tp as many as 800,000 barrels per day as Eni production was later knocked out…those and other disruptions prompted Goldman Sachs, who had been forecasting $20 a barrel oil earlier this year, to turn bullish on oil prices, driving US crude oil prices up $1.51 a barrel to close at $47.72 on Monday of this week after hitting a six-month high earlier that day…they included a graphic timeline of the current and expected oil supply disruptions along with their revised forecast, a copy of which we’re including below…

2016 oil outages Goldman via zero hedge

the above graphic, taken from an article at Zero Hedge about the disruptions impacting the price of oil, shows a timeline of those oil production shutdowns that have taken place or are expected to continue over the period from February to December of this year…countries which have had or will have their oil output impacted are color coded across the bottom of the graphic, and the period and size of the expected oil output disruption is thus shown by the width of the corresponding band in the graphic, with the size of the disruption indicated in thousands of barrels of oil per day on the scale on the left….for instance, the March Kirkuk-Ceyhan oil pipeline sabotage, shown in grey, shut down Iraq’s largest crude oil export line and knocked out over 500,000 barrels per day for almost a month, and as deliveries to Turkey are not expected to resume, an ~ 200,000 barrel per day grey bar extends from that outage through December, indicating expected future losses…in the current period, we see a large spike of 1,000,000 barrels per day of oil lost as a result of the Canadian fires in a smokey blue-grey color, the Nigerian shutdown in the darkest blue on the graph, and the Libyan export shutdown in red, all starting at roughly the same time, leading to nearly two and a half million barrels of oil being lost to the oil markets as of the current period, or enough to actually create a shot term oil deficit…while we see that Goldman expects the Canadian situation to be resolved by June, they expect Libyan supplies to be curtailed till August, and expect less that half of the Nigerian output to be restored before the end of the year…to show you how all of these oil supply disruptions have affected the price of oil, we’ll include a graph of US oil prices below…

May 21 2016 closing price front month oil future

the above graph comes from a page at WTRG Economics which has the specifications for the WTI oil contract and it shows the daily closing price of the current oil contract over the past year…thus, unlike the graph we usually use, this graph shows the price of oil for June delivery from April 20th to May 20th, and before that shows the price of oil for May delivery from March 22nd to April 20th (trading for each contract expires on the third business day prior to the 25th calendar day of the month prior to the delivery month)…thus this graph captures the price of oil that’s quoted daily by the media, and also shows when the price of oil for March delivery dropped as low as $26 a barrel in mid-February, a low never reached by other contracts….this week, the price of oil ran up to close as high as $48.35 a barrel on Wednesday, before falling back on the surprise report of an inventory buildup, to close the week at $47.75 a barrel as indicated, still up almost 4% for the week…as it turns out, the June oil contract expired on Friday, and hence the contract for July delivery, now priced at $48.41 a barrel, is now being quoted as the current price of oil….

The Latest US Oil Stats and Fudge Factor from the EIA

we’re going to start off our review of the Petroleum Status reports for the week ending May 13th from the Energy Information Administration with the adjustment on line 13 of the EIA balance sheet (pdf), because this week’s adjustment is by far the most significant change in the accounting of where our oil came from and where it went this week…to review, the footnote for line 13 identifies the adjustment as “Unaccounted-for Crude Oil, a balancing item”….the Glossary at the end of the EIA’s weekly Petroleum Status Report (62 pp pdf) further explains that “Unaccounted-for Crude Oil represents the arithmetic difference between the calculated supply and the calculated disposition of crude oil. The calculated supply is the sum of crude oil production plus imports minus changes in crude oil stocks. The calculated disposition of crude oil is the sum of crude oil input to refineries, crude oil exports, crude oil burned as fuel, and crude oil losses.”…as we pointed out last week, data for each of the oil statistics presented by the EIA weekly is collected and published separately, and often times they don’t add up, due to variations in the samplings used for each statistic, so that adjustment line is essentially a fudge factor to account for the differences between the amount of oil coming into the system every day and the amount of oil going out, either as products used by consumers or as barrels stored…

the adjustment thus described this week was a positive 480,000 barrels per day…that means that the apparent amount of oil that ended up in refinery products or in storage or otherwise used at the end of the week was 480,000 barrels per day more than we should have had based on our oil production and imports over the same period….compounding that error in this week’s data, last week’s adjustment was minus 375,000 barrels of oil per day, meaning 375,000 barrels of oil that we appeared to have produced or imported last week did not show up in the final figures…does that mean that oil that disappeared last week showed up this week?  that could be part of what happened, but these statistical discrepancies don’t always end up resolved at the end of any given period; for instance, over the last 4 weeks, the adjustment has averaged +107,000 barrels per day; year to date, the average is minus 60,000 barrels per day…the more important point is that our week to week comparisons become meaningless when there is a total swing in the adjustment of 855,000 barrels per day, or almost one-tenth the level of our production, from last week to this week, as the change in the fudge factor dwarfs the changes in all the important metrics..

with that in mind, then, this week’s data showed production of crude oil from US wells fell by 11,000 barrels per day, from an average of 8,802,000 barrels per day during the week ending May 6th to an average of 8,791,000 barrels per day during the week ending May 13th ….that was 6.7% below the 9,419,000 barrels per day that we were producing during the second week of May last year, and 8.5% below the 9,610,000 barrel per day peak of our oil production that we saw during the week ending June 10th of last year…our oil production has now been down 16 out of the last 17 weeks and has now dropped by 444,000 barrels per day since the week ending January 15th…

meanwhile, the EIA reported that our imports of crude oil rose by 22,000 barrels per day, from an average of 7,655,000 barrels per day during the week ending May 6th to an average of 7,677,000 barrels per day during the week ending May 13th …that was 6.6% more than the 6,881,000 barrels of oil per day we imported during the week ending May 15th a year ago, while the EIA’s weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports has slipped to the 7.6 million barrel per day level, which was still 8.8% more than our oil import rate of the same four-week period last year…   

with the apparent supply of oil thus little changed from last week, inputs of crude oil into US refineries increased by 192,000 barrels per day during the week ending May 13th from the prior week, averaging 16,371,000 barrels per day, now almost 1.0% higher than the 16,213,000 barrels per day US refineries were using during the same week last year….the US refinery utilization rate rose to 90.5% from 89.1% the prior week, but it’s still well below the 92.4% utilization rate for US refineries that we saw during the week ending May 15th last year…so with the US supply of crude from imports and oilfields fairly flat and US refineries using 192,000 barrels per day more than last week, you’d figure that refineries would have had to pull some oil out of storage to meet their needs, wouldn’t you?  well, that’s not what the EIA reported; they say that we had a surplus of crude, and hence our stockpiles of crude oil in storage increased by 1,310,000 barrels to 541,294,000 barrels as of May 13th…that’s the second highest week end total we’ve ever seen, topped only by the 543,394,000 barrels we had stored on April 29th….it’s also 12.3% higher than the 482,165,000 barrels of oil we had stored as of May 15th, 2015, and 38.3% higher than the 391,297,000 barrels of oil we had stored on May 16th of 2014….

at any rate, even with more oil apparently being refined, our refinery production of gasoline fell by 54,000 barrels per day, averaging 9,997,000 barrels per day during the week ending May 13th, down from the average 10,051,000 barrels of gasoline per day produced during the week ending May 6th…that was 3.6% more than the 9,651,000 barrels of gasoline per day we were producing during the same week last year, however, as our year to date gasoline output is still running well ahead of last years pace…at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) increased, rising by 160,000 barrels per day to 4,770,000 barrels per day during week ending May 13th, which was still 1.5% lower than our distillates production of 4,844,000 barrels per day during the same week of 2015…    

even with the elevated level of gasoline production, our gasoline inventories fell by 2,496,000 barrels to 238,068,000 barrels, from the 240,564,000 barrels of gasoline we had stored on May 6th…that was as our imports of gasoline fell by 88,000 barrels per day to 691,000 barrels per day during the week ending May 13th, and as the gasoline supplied to US markets rose by 97,000 barrels per day to a near record 9,755,000 barrels per day, just shy of the 9,762,000 barrel per day record gasoline consumption we saw during the week ending August 18th of 2007…but despite the big drawdown of gasoline supplies, this week’s gasoline supplies were still 6.3% higher than the 223,936,000 barrels of gasoline that we had stored on May 15th last year, and thus our gasoline stores are still categorized as “well above the upper limit of the average range” for this time of year.. 

our distillate fuel inventories also fell, dropping by 3,170,000 barrels to end the week at 152,162,000 barrels….that’s a fairly normal spring planting season drawdown on distillates supplies, and since distillate inventories were already elevated after the warmer than normal winter reduced heat oil consumption, distillate inventories are still 19.1% higher than the 127,724,000 barrels of distillates we had stored at the same time last year…thus, like gasoline, our stores of distillates are also still characterized as “well above the upper limit of the average range” for this time of year…  

This Week’s Rig Count

this week saw the smallest net drop in the the number of active rigs drilling in the US thus far this year, but it was still a drop from the record low of last week, so once again we have another record low for drilling activity this week, as the US rig count has now dropped for 39 weeks in a row and set new all time lows for the past 11 consecutive weeks…..Baker Hughes reported that the total count of active rotary rigs running in the US was down by 2 rigs to 404 rigs as of May 20th, which was also down from the 885 rigs that were working as of the May 22nd report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014… the count of rigs drilling for oil was unchanged at 318, which was still down from the 659 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 2 to a record low 85, which was down from the 222 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that was set on August 29th, 2008…there was also one rig deployed that was classified as miscellaneous, unchanged from last week but down from the 4 miscellaneous that were operating a year ago….

there were, however, rigs added both offshore and on inland waters this week…a net of two more drilling platforms were deployed in the Gulf of Mexico this week than last; that came as the lone platform offshore of Texas was shut down and three started drilling offshore of Louisiana…those changes brought the Gulf of Mexico active rig count back up to 23, still down from 28 a year ago, and brought the total offshore count up to 24, down from 29 a year ago….at the same time, there were also 3 rigs set up to drill through inland lakes in southern Louisiana this week, which brought the inland waters rig count up to 5, up from the 3 rigs that were deployed drilling on inland waters at the end of the same week last year…

the count of working horizontal drilling rigs was down by 1 rig to 314 rigs this week, which was down from the 683 horizontal rigs that were in use on May 22nd  of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, 5 vertical rigs were also stacked, leaving 48 vertical rigs still working, which was down from the 117 vertical rigs that were in use at the end of the same week a year earlier…however, the directional rig count rose by 4 rigs to 42, which was still down from the 85 directional rigs that were up and running in the US during the same week last year…    

for the details on which states and which shale basins saw changes in drilling activity this past week, we’re again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes…  the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of May 20th, second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the fourth column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was May 22nd of 2015:

May 20 2016 rig count summary

we can see from these tables that this week’s net change of two rigs hides a lot of changes in activity that one wouldn’t notice without checking these details…for instance, in the second table we see that the Permian basin of western Texas saw three rigs added, but even so, the entirety of the state of Texas was still down by 8 rigs to 173 rigs this week, and down from 373 rigs a year ago…since rig reductions in the Eagle Ford of south Texas and the Barnett Shale of the Dallas-Ft Worth area only account for part of that, it’s be a fair guess that the most of the conventional vertical oil rigs that were pulled out this week probably came from that state…also note that the first table above only includes the major producing states, and hence the retirement of the single rig that had been operating in Alabama was missed by this overview…a year ago, there were 2 rigs deployed in Alabama…

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April consumer prices, industrial production, housing construction, and existing home sales

the most widely watched reports released this past week were the April Consumer Price Index from the Bureau of Labor Statistics, the Fed’s report on Industrial Production and Capacity Utilization for Aprilthe April report on New Residential Construction from the Census Bureau, and the April report on existing home sales from the National Association of Realtors (NAR)….in addition, this week also saw the release of the Regional and State Employment and Unemployment for April from the BLS and the Chicago Fed National Activity Index (CFNAI) for April…the latter, a weighted composite index of 85 different economic metrics, rose from a downwardly revised –0.55 in March to +0.10 in April, which left the 3 month average of the index at –0.22, indicating national economic activity was below the historical trend over those recent months….we also had the release of the first two regional Fed manufacturing indexes for May: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index fall from +9.6 in April to -9.0 in May, indicating a return to recessionary conditions in First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions was unchanged at -1.8 in May, its eighth negative reading in nine months, also implying an ongoing slowdown in that region’s manufacturing… 

CPI Up 0.4% in April on Higher Priced Gasoline, Services

the consumer price index rose 0.4% in April, the greatest increase in 26 months, as energy commodities and core services were higher….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.4% in April after rising 0.1% in March and falling by 0.2% in February….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 238.132 in March to 239.261 in April, which left it statistically 1.13% higher than the 236.599 index reading of last April….regionally, prices for urban consumers have risen 1.8% in the West, 0.9% in the South, 0.8% in the Midwest, and 1.9% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people…with higher energy prices leading the April advance, seasonally adjusted core prices, which exclude food and energy, rose by just 0.2% for the month, with the unadjusted core index rising from 246.358 to 246.992, which is now 2.15% ahead of its year ago reading of 241.802…

the seasonally adjusted energy price index rose by 3.4% in April after rising by 0.9% in March and falling by 6.0% in February and by 2.8% in both December and January, and thus the energy index still remains 8.9% lower than it was in April a year ago….prices for energy commodities were 7.8% higher while the index for energy services fell by 0.1%, after a 0.2% increase in March….the increase in the energy commodity index included a 8.1% increase in the price of gasoline, the largest component, and a 1.9% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 0.4% decrease…within energy services, the index for utility gas service rose by 0.6% after falling by 0.7% in March, leaving utility gas priced 6.5% lower than it was a year ago, while the electricity price index fell by 0.3%, after rising by 0.4% in March…energy commodities are still priced 14.2% below their year ago levels, with gasoline averaging 13.8% lower than it was a year ago…meanwhile, the energy services price index is 3.1% lower than last April, as even electricity prices have fallen 2.1% over that period..

the seasonally adjusted food price index rose 0.2% in April, after it rose by 0.2% in March, as prices for food purchased for use at home rose 0.1% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.3% while average prices at full service restaurants rose 0.1%…among food at home categories, the price index for cereals and bakery products was up 0.3% as prices for flour and prepared flour mixes rose 2.2% and cookie prices rose 1.6% while cakes and cupcakes fell 1.3% and prices for rice were 1.2% lower…at the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.1% as prices for eggs were 6.3% lower and beef and veal prices averaged a 0.6% decrease while pork prices averaged 2.0% higher on 3.1% higher priced bacon…the index for dairy products was 0.4% higher, as cheese prices rose 0.7% while prices for whole milk were 0.2% lower… the fruits and vegetables index, meanwhile, fell 0.5% in April after falling by 1.9% in March as prices for both fresh fruits and for fresh vegetables averaged a 1.1% decrease, led by a 4.7% drop in tomato prices, while prices for processed fruits and vegetables rose 1.6% on a 2.5% increase in prices for frozen vegetables…meanwhile, the index for beverages and beverage materials was 0.3% higher as carbonated drinks prices rose 1.5% while instant and freeze dried coffee was priced 1.4% lower… lastly, prices in the other foods at home category averaged a 0.5% increase as prices for sugar and artificial sweeteners rose 2.9% and margarine was priced 2.6% higher….among food line items, only apples, which are now priced 10.5% higher than a year ago, have seen price changes greater than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.2% in April after rising 0.1% in March and  0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.1% while the composite for all services less energy services was 0.3% higher….among the commodity components, which will be used by the Bureau of Economic Analysis to adjust April retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.4% on a 0.5% decrease in prices for bedroom furniture and a 0.7% decrease in the index for tools, hardware, outdoor equipment and supplies…at the same time, the apparel price index was 0.3% lower on a 3.1% decrease in prices for girls apparel and a 2.5% decrease in prices for infants’ and toddlers’ apparel…prices for transportation commodities other than fuel were also down 0.3%, as prices for new cars were down 0.4% while new trucks and used cars were 0.3% lower….on the other hand, prices for medical care commodities were 0.5% higher on 0.7% higher prescription drug prices, while the recreational commodities index rose 0.2% as prices for sports vehicles including bicycles rose 2.3%, which was only partially offset by 4.2% lower prices for photographic equipment…..likewise, the education and communication commodities index was 0.7% higher as a 2.6% increase in prices for  telephone hardware, calculators, and other consumer information items and 1.6% increase in prices for college textbooks was only partially offset by a 0.6% decrease in prices for personal computers and peripheral equipment, while lastly a separate index for alcoholic beverages rose 0.2$ on a 0.6% increase in prices for beer and ale, while the index for ‘other goods’ was unchanged despite a 1.5% decrease in prices for infants’ equipment…

within services, the price index for shelter rose 0.3% on a 0.3% increase in both rents and in owner’s equivalent rent while costs for lodging away from home at hotels and motels fell 0.5%, and costs for water, sewers and trash collection were 0.5% higher….medical care services also rose 0.3% as glasses and eye care services and dental services both rose 0.7%…at the same time, the transportation services index rose 0.7% on a 1.2% increase in motor vehicle insurance and a 1.1% increase in airline fares….meanwhile, the recreation services index rose 0.4% after rising 0.5% in both February and March as video & audio services including rental prices rose 2.0% and admissions to sporting events rose 0.8%… on the other hand, the index education and communication services was unchanged in April as a 1.7% decrease in postage and delivery services offset 0.3% higher college tuition and 0.4% higher elementary and high school tuition and fees……lastly, other personal services were up 0.2% on a 0.6% increase in the financial services index…among core prices, the 10.2% year over year increase in moving and storage expenses was the only line item with an annual increase greater than 10%, while only telephones, which were priced 10.8% lower, and televisions, which are now 16.1% cheaper, saw their prices drop by more than 10% over the past year…

with this release, we can now attempt to estimate the economic impact of the retail sales figures from last week, which saw nominal sales rise 1.3%…for the most accurate estimate, and the way the BEA will be figuring 2nd quarter GDP at the end of July, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, April’s clothing store sales, which rose by 1.0% in dollars, should be adjusted with the price index for apparel, which indicated prices were down by 0.3%, to show us that real retail sales of clothing were actually up by 1.3% in April…then, to get a GDP relevant quarterly change, we’d have to compare such adjusted real clothing sales for April with the similarly real clothing consumption for the 3 months of the first quarter, January, February and March, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually….the short cut we usually take to get a ballpark estimate of real sales is to apply the composite price index of all commodities less food and energy commodities, which was down 0.1%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales…those sales were up by just about 1.4% in April, while their composite price index was down 0.1%, leaving real retail sales excluding food and energy sales up by roughly 1.5%…then, for the rest of the retail aggregate, we find sales at grocery stores were up 1.1% in April, while prices for food at home were up 0.1%, suggesting a real increase of around 1.0% in the quantity of food purchased for the month…next, sales at bars and restaurants were up 0.3% in dollars, and those dollars bought 0.2% less, so real sales at bars and restaurants were only up by about 0.1%…and while gas station sales were up 2.2%, gasoline prices were up 3.4%, suggesting a real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don’t have the breakout on that…weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in April were up slightly less than 1.3% from March…then, to get an approximation of the real adjusted changes for the 3 months of the first quarter, we check Table 9 in the pdf for the March personal income and outlays report, which shows real sales of goods were down 0.2% in March and down 0.6% in February….that means real, inflation adjusted April retail sales were 1.1% higher than those of February but only 0.5% higher than those of January….that still leaves real retail sales at an average of 1.0% greater than those of the first quarter, which is growth at annual rate of more than 4.0%, a pace which if continued throughout May and June, would add roughly 0.96 percentage points to 2nd quarter GDP……

Industrial Production Up 0.7% in April on Normal Weather

April gains in industrial production were stronger than expected as a return more seasonable temperatures brought utility usage back to normal from seasonally lower than normal levels in March….the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.7% in April after falling by a revised 0.9% in March…industrial production is still down 1.1% from a year ago, but that’s an improvement from last month’s year over year decrease of 2.0%…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.1 in April from 103.5 in March, which was originally reported at 103.4…at the same time, the February reading for the index was revised up from 104.0 to 104.4, January’s index remained unchanged at 104.6, and December’s index was revised from 104.1 to 104.0…despite the month over month increase in the April industrial production index, however, it remains below the average of the 1st quarter months, so to the extent that this report plays into GDP, April’s level still suggests a net subtraction from GDP in the components that this report influences…

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3, from 103.1 in March to 103.4 in April, while the manufacturing index for January was revised down from 103.5 to 103.4 after the December index was revised down from 103.1 to 103.0…the April increase left the manufacturing index 0.4% higher than a year earlier, unchanged from March, as year ago figures had also seen a 0.3% increase…. meanwhile, the mining index, which includes oil and gas well drilling, fell from 104.4 in March to 102.0 in April, after March mining was revised up from 103.9….the mining index has still been down 8 months in a row, however, and is 13.4% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 5.8% from the depressed level of March, increasing from 97.2 in March to 102.8 in April…with the utility index now closer to normal after being depressed by a warmer than normal winter, it’s now 0.4% above the level of a year ago for the first time since September 2015…

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, and which indicated that seasonally adjusted capacity utilization for total industry rose to 75.4% in April from 74.9% in March; after March was revised from 74.8%….capacity utilization for all manufacturing industries rose from an unrevised 75.1% in March to 75.3% in April; utilization of NAICS durable goods production facilities rose from 75.5% in March to 75.9% in April, while capacity utilization for non-durables fell from 75.4% in March to 75.3% in April….capacity utilization for the mining sector fell to 72.5% in April, from 74.0% in March, which was originally published as 73.7%, while utilities were operating at 78.6% of capacity during April, up from the revised 74.4% of capacity during March, which was originally reported as 73.7%…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…. 

April Shows Little Discernible Change in Housing Construction Trends

the April report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,172,000, which was 6.6 percent (±10.2%)* above the revised March estimated seasonally adjusted annual rate of 1,099,000 housing units started, but which was still 1.7 percent (±10.1%)* below last April’s rate of 1,192,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, April housing starts could have been down by 3.6% or up by as much as 16.8% from those of March, with even larger revisions subsequently possible…in this report, the annual rate for March housing starts was revised from the 1,089,000 reported last month to 1,099,000, while February starts, which were first reported at a 1,178,000 annual rate, were revised up from last month’s initial revised figure of 1,194,000 annually down to 1,213,000 annually with this report….those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 108,000 housing units were started in April, up from the 89,600 units started in March…of those housing units started in April, an estimated 73,800 were single family homes and 32,400 were units in structures with more than 5 units, up from the revised 62,400 single family starts and 26,500 units started in structures with more than 5 units in March….

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in April, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,116,000 housing units, which was 3.6 percent (±1.3%) above the revised March annual rate of 1,077,000 permits, but 5.3 percent (±1.3%) below the rate of permit issuance in April a year earlier…the annual rate for housing permits issued in March was revised from 1,086,000 to 1,177,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 98,400 housing units were issued in April, up from the estimated 97,700 new permits issued in March…those April permits included 67,500 permits for single family homes, unchanged from March, and 28,200 permits for housing units in apartment buildings with 5 or more units, up from 27,300 such multifamily permits a month earlier… 

Existing Home Sales Rise 1.7% in April

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose 1.7% from March to April, projecting that 5.45 million homes would sell over an entire year if the April home sales pace were extrapolated over that year, which was also 6.0% greater than the annual sales rate projected in April of a year ago…that came after an annual sales rate of 5.36 homes in March, which was revised from the originally reported 5.33 million annual sales rate, and an annual home sales rate of 5.07 million in February…the NAR also reported that the median sales price for all existing-home types in March was $232,500, which was 6.3% higher than a year earlier, which they tell us is “the 50th consecutive monthly year over year increase in home prices”, even though month to month price changes are quite volatile…the NAR press release, which is titled Existing-Home Sales Rise in April for Second Straight Month, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

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 471,000 homes sold in April, up by 11.9% from the 421,000 homes that sold in March and 4.9% more than the 405,000 homes that sold in April of last year, so we can see there was a seasonal adjustment in the published figures of over 10% to correct for the typical increase in spring home sales…that same pdf indicates that the median home selling price for all housing types rose 5.0% from a revised $221,500 in March to $232,500 in April, while the average home sales price was $275,000, up 4.0% from the $264,400 average in March, and up 4.2% from the $263,900 average home sales price of April a year ago, with the regional average home sales prices ranging from a low of $215,100 in the Midwest to a high of $364,700 in the West…for additional coverage with long term graphs on this report, see “Existing Home Sales increased in April to 5.45 million SAAR” and “A Few Comments on April 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 from the aforementioned GGO posts, contact me…)    

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May 21 graphics

oil prices:

May 21 2016 closing price front month oil future

record gasoline demand:

May 2016 gasoline demand for May 13

mid-May 2016 oil outages projection via Goldman:

2016 oil outages Goldman via zero hedge

May 20th rig counts:

May 20 2016 rig count summary

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more on the Utica shale, oil supplies drop as EIA fudge factor swings by 664,000 bpd, drilling drops again, etc

you’ll recall that after looking at the new maps of the Utica/Pt Pleasant “plays” from the EIA last week, wherein we discovered that our part of the state was sitting on top of the thickest areas of the Utica, that i could not understand why our area had not yet been targeted for extensive horizontal drilling, given that the Utica was even closer to the surface in this part of the state than in those areas currently being fracked…among the reasons i suspected was that it was “possible that the shale in those areas [that are being drilled] have a higher hydrocarbon content than the shale in our area”…it turns out that’s exactly the case…searching for sites that would provide that information, i came across a 2012 USGS paper titled “Assessment of Undiscovered Oil and Gas Resources of the Ordovician Utica Shale of the Appalachian Basin Province” (pdf) which included among other graphics a map showing the percentage of organic carbon content for the Utica and Point Pleasant formations that we’re including below…

May 14 2016 Utica organic carbon percent

this map shows the extent of the exploitable areas of the Utica shale reservoir in blue and the extent of the Point Pleasant in violet and as the descriptive footnote indicates, the percentage of total organic carbon by weight in those shale layers, which is indicated by isolines marked 1, 2, and 3 across the face of the map…thus, the area in southeast Ohio between the 2 and 3 isolines indicates that the underlying Utica shale has a total organic carbon content of between 2% and 3%….similarly, the area in northwest PA adjacent to the Ohio border also has a total organic carbon content of between 2% and 3%…below our part of the state, in fact below almost all of northern Ohio east of a Toledo-Findlay line, the total organic carbon content of the Utica shale is between 1% and 2%…now, this is certainly a very generalized map and it’s likely there’s far more variation than these few lines indicate, but for our purposes it’s probably all we really need to know…generally speaking, fracking the shale in the south eastern part of the state would yield almost twice as much hydrocarbon per ton of rock as in the northeast counties…so despite that fact that the Utica is both thicker and somewhat shallower in our part the state, the economics dictate that the drilling is concentrated in the “sweet spots” where the hydrocarbon content is twice what we have below us…

now, there’s another map of the Utica shale that i stumbled on to this week that we should also take a look at, because it shows that different areas of the Utica will yield larger amounts of crude oil than natural gas and vise-versa……

May 14 2016 Utica source rock maturation status

the above map comes from a page of maps on “the Utica shale blog”, produced by a Pennsylvania geologist…the maps show which parts of the Utica are likely to produce oil and which are likely to produce gas, apparently based on a regression analysis of core samples of the shale taken from a number of locations…as i gather from wikipedia and other reading, maturity of a rock formation is an indication how long and at what temperature and pressure the organic matter in a formation has been subjected to, which in turn determines the state of those hydrocarbons in the rock…thus those areas of the Utica in western Ohio and Kentucky marked immature include kerogens and incompletely formed oil, probably because they remained shallow, whereas those areas of the Utica in eastern Pennsylvania and southern New York marked overmature have been subjected to so much heat & pressure as to drive [some of?] the gas out…in between, the hydrocarbons exist as oil in northern and central Ohio as shown in green, and they exist as dry gas (mostly methane) in western Pennsylvania and central New York, while in a narrow band of the Utica from western New York through northwest Pennsylvania and eastern Ohio, hydrocarbons exist as wet gas, which is defined differently by different sources. but “gases having more than about 20 bbls/MMscf of condensate” seems as good as any…the same USGS paper on the Utica that we sourced our first graph from says “the gas / oil boundary is typically based on 20,000 cubic feet of natural gas per barrel of oil’…

an EIA map we looked at last week showed that most of the Utica shale wells were in counties around Columbiana, Carroll, Harrison, and points south, and thus a large majority of the wells drilled in the Ohio Utica so far appear to be in that pink band, indicating they’ve been drilling for the wet gas…this exists as a gas under pressure underground but includes condensates at atmospheric pressure at the surface…that’s because it not only includes the natural gas methane that we’re familiar with as used for domestic heating purposes, but increasing quantities of ethane, propane, butane, pentane, and possibly even more complex hydrocarbons which fall under the ‘natural gas liquids’ category…those are generally more valuable petrochemical feedstocks, and dry gas contains little or none of those…the other reason we’ve included this map is to point out that the hydrocarbons in Utica shale that’s under this part of the state appear to exist as oil, not as natural gas or as gas liquids…that oil shale area would include Cuyahoga Lake, Ashtabula and most of Portage and Geauga counties (except for Parkman), while Trumbull is split and Mahoning is largely wet gas…so my previous assumptions that we’d be subject to immediate exploitation dui to natural gas exports and the rising prices they’d bring seems to be unfounded…

The Latest US Oil Stats and Fudge Factor from the EIA

Wednesday’s Petroleum Status reports for the week ending May 6th from the Energy Information Administration indicated that our crude oil production fell a bit again and that our imports of oil were virtually unchanged, while US refineries saw another modest increase in the amount of oil that they used…production of crude oil from US wells fell for the 15th time in the past 16 weeks, dropping by 23,000 barrels per day, from an average of 8,825,000 barrels per day during the week ending April 29th to an average of 8,802,000 barrels per day during the week ending May 6th….that’s now 6.1% below the 9,373,000 barrels per day we were producing during the first week of May last year, and 8.4% below the 9,610,000 barrel per day peak of our oil production that was hit during the week ending June 10th of last year…

meanwhile, our imports of crude oil rose by just 5,000 barrels per day, from an average of 7,660,000 barrels per day during the week ending April 29th to an average of 7,665,000 barrels per day during the week ending May 6th…that was 11.2% more than the 6,881,000 barrels of oil per day we imported during the week ending May 8th a year ago, and the EIA’s weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports was still at the 7.8 million barrel per day level, which was still 8.4% more than our oil import rate of the same four-week period last year…  

at the same time, inputs of crude oil to US refineries averaged 16,179,000 barrels per day during the week ending May 6th, which was 193,000 barrels per day more than 15,986,000 barrels per day they used during the prior week….while that happens to be 1.3% more than the 15,968,000 barrels per day that US refineries were using the same week last year, our refining over the past couple of months is still about one percent below last year’s pace for this time of year….in fact, the US refinery utilization rate actually fell to 89.1% of operable capacity last week, from the 89.7% capacity utilization rate of the week ending April 29th, and it remains well below the capacity utilization rate of 91.2% that we saw during the week ending May 8th of 2015…that’s in contrast to the average over 95% of capacity that US refineries ran during a 10 week stretch in the middle of last summer… 

however, in the face of just that modest increase in refining, the 2.8 million barrel surplus of crude oil that we saw build up last week was completely reversed, and the EIA reported that 3.4 million barrels of oil was withdrawn from storage to meet our needs this week…now, anyone with basic math skills knows that doesn’t add up, but we never see any oil or energy news and analysis site mention it, much less see it questioned by the regular media…you see, data for each of these oil metrics reported every week is gathered independently of the others; ie, some EIA analysts are responsible for the data on imports, some for the data on field production, some for consumption, some for the amount of oil and petroleum products in storage, and some for the inputs and outputs of our refineries…then on each Wednesday all these reports are published together, led by the weekly U.S. Petroleum Balance Sheet….with independent sources of the data that is included on the balance sheet, it’s almost always the case that reports of oil arriving from several sources do not match the reports of oil used by several others….the EIA resolves those differences with an “adjustment” entry on line 13 of the balance sheet (pdf), which is really no more than a fudge factor used to bring the oil inputs and oil outputs into balance (the footnote says the adjustment was “formerly known as Unaccounted-for Crude Oil, a balancing item”)….this week’s adjustment was minus 375,000 barrels of oil per day, meaning 375,000 barrels of oil that we appear to have produced or imported this week did not show up in the final figures…last week the adjustment was a positive 288,000 barrels per day, which means that the apparent oil that ended up in products or in storage at the end of the week was 288,000 barrels per day more than we should have had…thus the swing in this fudge factor from last week to this week was 664,000 barrels per day, certainly enough to throw off any realistic analysis of what’s happening with our crude oil supply nationally, and even worse, quite a bit more than would be needed to significantly move the global price of oil…since that weekly adjustment has become such a significant factor that no one else seems to be reporting, we’re just going to have to include a report of that factor in our own coverage every week henceforth…

nonetheless, with more oil apparently being refined, our refinery production of gasoline rose by 240,000 barrels per day, averaging 10,051,000 barrels per day during the week ending May 6th, up from the average 9,811,000 barrels of gasoline per day produced during the week ending April 29th…turns out, that was the first time our gasoline output topped 10 million barrels per day in a week in any May, and the most gasoline we’ve produced in any week since the week ending August 14th of last year…at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 21,000 barrels per day to 4,610,000 barrels per day during week ending the 6th, which was still 250,000 barrels per day, or 5.1% lower than our distillates production during the same week of 2015…    

however, even with that record output of gasoline, our gasoline inventories fell for the first time in 3 weeks, decreasing from 241,795,000 barrels on April 29th to 240,564,000 barrels on May 6th….that was as our imports of gasoline fell by 167,000 barrels per day to 779,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 156,000 barrels per day to 9,658,000 barrels per day, the most we’ve consumed in any week this year, and the highest weekly consumption level in early May since prior to the great recession… nonetheless, this week’s gasoline supplies were still 6.1% higher than the 226,710,000 barrels of gasoline that we had stored on May 8th last year, which were at the time the highest for the first full week of May in the EIA records…thus our gasoline stores are still categorized as “well above the upper limit of the average range” for this time of year..

meanwhile, our distillate fuel inventories fell by 1,647,000 barrels on continued elevated demand from the Midwest states, to end the week at 155,332,000 barrels…this is a normal spring planting season drawdown on distillates, and since distillate inventories were already bloated after the warmer than normal winter reduced heat oil consumption, distillate inventories are still 21.1% higher than the 128,270,000 barrels of distillates we had stored at the same time last year…thus, like gasoline, stores of distillates are also characterized as “well above the upper limit of the average range” for this time of year… 

lastly, after that 375,000 barrels of oil per day disappeared someplace this week, we found it necessary to withdraw 3,410,000 barrels of oil from our stockpiles of crude oil in storage to meet our needs, and hence our inventories of oil as of May 6th fell to 539,984,000 barrels, the first drop in 5 weeks and only the 2nd weekly decrease this year…so although we didn’t set a new record for oil stores this week, we’ve still increased our inventories of crude oil by nearly 57.7 million barrels since the beginning of this year..thus our oil supplies are still 11.4% higher than the 484,839,000 barrels of oil we had stored as of May 8th, 2015, and 35.5% higher than the 398,523,000 barrels of oil we had stored on May 9th of 2014….

This Week’s Rig Counts

at any rate, at least we set another record low for drilling activity this week, as the US rig count has now set new all time lows for 10 consecutive weeks….Baker Hughes reported that the total count of active rotary rigs running in the US was down by 9 more rigs to 406 rigs as of May 13th, which was also down from the 888 rigs that were working as of the May 15th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014… the count of rigs drilling for oil fell by 10 rigs to 318, which was down from 660 oil directed rigs a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 1 to 87, which was still down from the 223 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that was set on August 29th, 2008… 

two of the rigs that were shut down this week had been drilling in the Gulf of Mexico, so the Gulf rig count is now down to 21, while the total offshore count fell to 22, as we still have an offshore platform working off the Cook Inlet in Alaska…this week’s count was down from 33 rigs in the Gulf of Mexico and 34 total offshore that were in use on May 15th of 2015…there was also a rig removed that had been drilling on an inland lake in southern Louisiana this week, which left the inland waters rig count at 2, down from the 4 rigs deployed drilling on inland waters at the end of the same week last year…

the count active horizontal drilling rigs was down by 3 to 315 rigs this week, which was down from the 685 horizontal rigs that were in use on May 15th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, 6 more directional rigs were also stacked, leaving just 38 directional rigs still working, which was down from the 89 directional rigs that were in use at the end of the same week a year earlier…meanwhile. the vertical rig count was unchanged at 53, which was still down from the 114 vertical rigs that were up and running in the US during the same week last year…   

for the details on which states and which shale basins saw changes in drilling activity this past week, we’re again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes…  the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins…in both tables, the first column shows the active rig count as of May 13th, second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the fourth column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was May 15th of 2015:

May 13 2016 rig counts

so for example, we can see from the above that the active rig count in the Permian basin of western Texas was down by 5 rigs to 134, which was down from the 233 rigs that were working that basin a year ago, which contributed to the loss of 7 rigs in Texas, as shown in the upper table, where they now have 181 rigs still working in the state, down from 373 a year earlier…we can also see that the Haynesville shale of Louisiana, a natural gas basin, had a rig added, which likely accounts for the increase of 1 gas drilling rig, as the Marcellus and Utica counts were unchanged…that addition did not allay the 3 rig drop in Louisiana drilling, however, as the inland water rigs and both of the Gulf of Mexico rigs that were shut down this week had previously been counted for that state…notice that the state table above does not include Indiana, which saw a rig set up and start drilling this week, the first drilling activity in that state in more than a year…

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April retail sales and producer prices, March wholesale and business inventories, and March JOLTS

major releases of this past week included the Retail Sales report for April and the Business Sales and Inventories report for March, both from the Census bureau, the Producer Price Index for April, and the Import-Export Price Indexes for April from the Bureau of Labor Statistics, and the the Job Openings and Labor Turnover Survey (JOLTS) for March, also from the BLS…preceding the Business Inventories report, the Census also released the March report on Wholesale Trade, Sales and Inventories, which feeds into the former… the Import-Export Price Indexes indicated import prices rose 0.3% in April, largely on higher oil prices, while export prices averaged a 0.5% increase in an across the board gain…that data will be used to adjust trade figures for April when they’re published 3 weeks from now…

April Retail Sales Up 1.3% in Broad Based Increase

this week’s retail sales report for April was preceded by an April 29th benchmark revision based on the results of the 2014 Annual Retail Trade Survey and the final results from the 2012 Economic Census, which revised prior estimates of retail sales back to 1992 broadly higher…thus this release reports changes from that revision, as if the prior reports we’ve covered had never been published…from that revised figure for March then, the Advance Retail Sales Report for April (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $453.4 billion for the month, which was a increase of 1.3 percent (±0.5%)* from March sales of $447.8 billion and 3.0 percent (±0.7%) above the adjusted sales of April of last year….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 2.0%, from $460,078 in March to $450,888 in April, while they were up 2.9% from the $438,217 million of sales in April a year ago, so we can see that it took a seasonal adjustment to turn those headline April sales that positive….

once again, we are including below the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf….taking into account the benchmark revision, the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from March to April in the first sub-column, and then the year over year percentage change for those businesses since last April in the 2nd column; the second pair of columns gives us the revision of last month’s March advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the February to March change under “Feb 2016 revised” and the revised March 2015 to March 2016 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance March estimates, before the benchmark revision, is here….

April 2016 retail sales

looking at the above table, it’s clear that a 3.2% jump to $92,574 million in seasonally adjusted sales at motor vehicle and parts dealers was in part responsible for the surprise strength in April sales, but even without that jump in automotive sales, other retail sales still increased by 0.8% to $360,864 million…2.2% higher sales at gasoline stations were a factor, but at $32,637 million they’re a smaller part of the aggregate than they were when gasoline prices were higher…other retailers showing well above average increases in April sales included non-store retailers, including catalog and online, which saw sales rise by 2.1% to $45,238 million; miscellaneous store retailers, where sales rose 1.5% to $10,534 million; groceries, where sales rose 1.1% to $52,237 million; clothing stores, where sales rose 1.0% to $21,402 million; and drug stores, where sales rose 0.9% to $27,725 million…only building material and garden supply stores, where sales fell 1.0% to $29,468, saw lower sales in April, but note their year over year sales are still up 8.2%

April Producer Prices Rise 0.2%

the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.2% in April as prices for finished wholesale goods rose by 0.2%, while margins of final services providers rose by 0.1%…this followed a March report that showed the overall PPI had decreased 0.1%, with prices for finished goods up 0.2% while final demand for services was down 0.2%….producer prices are now unchanged from a year ago, but still down 1.3% from two years ago, as most of the prices reductions relating to lower oil and commodity prices were seen in early 2015…

as we noted, the index for final demand for goods, aka ‘finished goods’, was up 0.2% in April for the second month in a row, after falling by 0.6% in each month from December thru February, as the index for wholesale energy prices rose 0.2%, the price index for wholesale foods was 0.3% lower, and the index for final demand for core wholesale goods (ex food and energy) rose by 0.3% in April…major price changes were seen in wholesale eggs for fresh use, which were down by 29.5%, and by home heating oil, which fell by an adjusted 30.5%, as unseasonable price swings have distorted the monthly seasonally adjusted prices for heat oil all year…pet foods, which were up 2.7% in April, saw the largest price change among core goods…

meanwhile, the index for final demand for services rose by 0.1% in April after falling 0.2% in March, as the index for final demand for trade services fell 0.1%, the index for final demand for transportation and warehousing services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.3% higher….noteworthy among trade services, seasonally adjusted margins for fuels and lubricants retailers were 11.5% higher, while margins for TV, video, and photographic equipment retailers were 3.9% lower…among transportation and warehousing services, margins for air transportation of freight fell 5.1% and margins for airline passenger services fell 1.7%…in the core final demand services index, margins for passenger car rentals rose 8.9% and margins for portfolio management services were 4.5% higher..

this report also showed the price index for processed goods for intermediate demand increased by 0.3%, after falling in each of the prior nine months, as intermediate processed goods prices still remain 4.6% lower than in April a year ago…. the price index for processed foods and feeds fell 0.3%, while prices for intermediate energy goods rose by 0.5% and the price index for processed goods for intermediate demand less food and energy was 0.3% higher…meanwhile, the price index for intermediate unprocessed goods was up by 2.6% after rising by 2.5% in March, in the only increases in that index since June of last year…driving that increase was a 9.0% jump in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs was down 1.9%, and producer prices for raw materials other than food and energy materials were up 3.5%, following a 2.1% increase in March… this raw materials index remains 12.3% lower than it was a year ago, as more than half of the year over year decrease of 26.4% seen in November has now been given up…

lastly, the price index for services for intermediate demand was 0.1% higher in April after it fell 0.3% in March, on a 0.4% increase in the index for trade services for intermediate demand and a 0.1% increase in the core price index for services less trade, transportation, and warehousing for intermediate demand, while the index for transportation and warehousing services for intermediate demand was 0.5% lower…major contributors to the rise in prices for services for intermediate demand were the 4.5% increase in intermediate portfolio management services and a 0.9% increase in index for business loans (partial)…over the 12 months ended in April, the year over year price index for services for intermediate demand, which has never turned negative, remains 0.9% higher than it was a year ago…   

March Wholesale Sales Up 0.7%, Wholesale Inventories Up 0.1%

the March report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $430.7 billion, up 0.7 percent (+/-0.5%) from the revised February level, but still down 2.0% percent (+/-1.4%) from wholesale sales of March 2015… the February preliminary estimate was revised $0.1 billion lower than reported last month, which the Census considers ‘virtually unchanged’ … March wholesale sales of durable goods were down 0.2 percent (+/-0.7%)* from last month and were down 0.4 percent (+/-1.9%)* from a year earlier, with a 2.2% decrease in wholesale sales of plumbing and heating equipment and supplies showing the largest drop for the month, while wholesale sales of electrical and electronic goods rose 1.3%….wholesale sales of nondurable goods were up 1.6 percent (+/-0.7%) from February but were down 3.5 percent (+/-1.9%) from last March, with wholesale sales petroleum and petroleum products up 13.5% on higher prices…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 sold….

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this March report estimated that wholesale inventories were valued at a seasonally adjusted $583.6 billion at month end, an increase of 0.1 percent (+/-0.4%)* from the revised February level and 0.3 percent (+/-1.6%)* higher than in March a year ago, with the February preliminary estimate revised downward $0.4 billion or almost 0.1% at the same time….inventories of durable goods were down 0.1 percent (+/-0.4%)* from February, and down 2.2 percent (+/-1.6%)* from a year earlier, with inventories of metals and minerals down 2.0% on lower prices, while inventories of motor vehicle and parts were up 1.0%…at the same time, the value of wholesale inventories of nondurable goods were up 0.5 percent (+/-0.7%)* from February and were up 4.6 percent (+/-1.9%) from last March, as the value of inventories of raw farm products fell 4.2% while wholesale inventories of petroleum and petroleum products rose 3.3%…since the BEA assumed an increase in non-motor-vehicle merchant wholesale inventories for March when computing 1st quarter GDP, and since non-vehicle inventories were actually fairly flat, this report suggests a possible subtraction of several basis points from the next 1st quarter GDP revision…

March Business Sales Up 0.3%, Business Inventories Up 0.4%

following the release of the April retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for March (pdf), which incorporates the revised March retail data 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 $1,289.2 billion in March, up 0.3 percent (±0.2%) from February’s revised sales, but down 1.7 percent (±0.5%) from March sales of a year earlier…note that total February sales were also revised up by almost 0.1%, from $1,284.4 billion to $1,285.2 billion, although that does include the retail benchmark revision….manufacturer’s sales rose by 0.5% from February to $464,674 million in March, while retail trade sales, which exclude restaurant & bar sales from the March retail sales we reported earlier, fell 0.3% to $393,859 million, and wholesale sales rose 0.7% to $430,671 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,818.6 billion at the end of March, up 0.4 percent (±0.1%) from February, and 1.5 percent (±0.5%) higher than in March a year earlier…the value of end of February inventories was revised down by less than 0.1%, from the $1,812.1 billion reported last month to $1,810,560 million with this report…seasonally adjusted inventories of manufacturers were estimated to be valued at $635,070 million, 0.2% higher than in February, inventories of retailers were valued at $599,924 million, 1.0% greater than February, while inventories of wholesalers were estimated to be valued at $583,582 million at the end of March, up 0.1% from February…when computing advance figures for GDP without this data, the BEA had assumed an increase in non-motor-vehicle retail inventories for March; we certainly have that, but since the BEA didn’t put precise data behind its assumption, it’s difficult to determine if, and how much, the retail increase included here is more than was assumed by the BEA….

Job Openings Up, Hiring and Firing Down in March

the Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 149,000, from 5,608,000 in February to 5,757,000 in March, after February’s job openings were revised higher, from 5,445,000 to 5,608,000…March jobs openings were also 11.1% higher than the 5,180,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed rose to 3.9% in March from 3.8% in February, also up from 3.5% a year ago…the greatest increase in job openings was in the large professional and business services category, where openings rose by 124,000 to 1,225,000, while job openings in retail fell by 80,000 to 569,000 (see table 1 for more details)…like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in March, seasonally adjusted new hires totaled 5,292,000, down by 218,000 from the revised 5,510,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed fell from 3.8% to 3.7%, which was still better than the hiring rate of 3.6% in March a year earlier (details of hiring by industry since September are in table 2)….meanwhile, total separations also fell, by 114,000, from 5,159,000 in February to 5,045,000 in March, while the separations rate as a percentage of the employed fell from 3.6% to 3.5%, which was the same separations rate as in March a year ago (see table 3)…subtracting the 5,045,000 total separations from the total hires of 5,292,000 would imply an increase of 247,000 jobs in March, a bit more than the revised payroll job increase of 208,000 for March reported by the April establishment survey last week, but still not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings… 

breaking down the seasonally adjusted job separations, the BLS finds that 2,980,000 of us voluntarily quit their jobs in March, up by 25,000 from the revised 2,955,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, which was still up from 1.9% a year earlier (see details in table 4)….in addition to those who quit, another 1,671,000 were either laid off, fired or otherwise discharged in March, down by 137,000 from the revised 1,808,000 who were discharged in February, as the discharges rate fell to 1.2% of all those who were employed during the month, from 1.3% in February and from 1.4% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 395,000 in March, down from 397,000 in February, for an ‘other separations’ rate of 0.3%, which was unchanged….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release


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

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May 14th graphics

April retail sales:

April 2016 retail sales

May 13th rig counts:

May 13 2016 rig counts

percentage organic carbon in Utica shale:

May 14 2016 Utica organic carbon percent

maturation of Utica source rock:

May 14 2016 Utica source rock maturation status

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