Utica productivity tripled in 2 years; gasoline supplies at a summer high, oil drilling jumps most in 79 months

oil prices continued to erode this week as traders and the media continued to focus on the increasing glut of refined products…after closing at $45.24 a barrel on Monday, down from last Friday’s $45.95, oil fell again late Tuesday to close at $44.65 a barrel after the American Petroleum Institute’s estimates showed an unexpected increase in gasoline supplies…..prices steadied on Wednesday when the EIA confirmed that gasoline inventory increase, but also showed the ninth consecutive weekly crude drawdown as trading for August oil expired….prices then sank to close at $44.75 a barrel on Thursday in a delayed reaction to the EIA report, which also showed the combination of oil and product stockpiles at a new all-time high…oil then traded below $44 a barrel on Friday as the media picked up on the gasoline glut story, and stayed depressed Friday afternoon to close at $44.19 a barrel, after the rig count report showed the largest percentage increase in oil drilling rigs since December 2009…since it’s probably easier to look at a picture of how oil prices have slumped than to read text, we’ll include a graph of the daily price changes over the past three months below…

July 23 2016 oil prices

this graph now shows daily prices per barrel over the past 3 months for the September contract of the US benchmark oil, West Texas Intermediate (WTI)…since this graph only shows prices for September delivery, the earlier prices quoted for the expired August contract are not shown, but the trajectory has been the same…it appears that the springtime oil price rally, which saw oil prices nearly double from near $26 a barrel in late February to over $50 a barrel by early June, is now over, having succumbed to the British vote to exit the European Union, which broke the three month uptrend…

July Drilling Productivity Report

in a report of interest to us in Ohio, this week the EIA released the Drilling Productivity Report for July, which estimates the output of oil and gas per working rig from the seven major US shale basins, including the Utica shale, and projects output for the next month, based on their recent data from existing oil and natural gas wells…note that this report does not distinguish between oil-directed rigs and gas-directed rigs, because more than half of the existing wells produce both oil and gas, irregardless of the targeted formation…we’ll start with the summary table of drilling production projections by region, which is from under Tab 2 on the web landing page for the report (note that the report itself is a series of pdfs linked to on the sidebar, under “contents“)

July 2016 drilling productivity by region

the above table shows the expected output of oil and natural gas for July and August for the 7 major shale basins, which together account for 92% of US shale output… oil in thousands of barrels per day is shown in the 3 columns on the left, while projections for natural gas in million cubic feet per day is shown in the three columns to the right…note the change columns in each case is in units, not percent, and thus total oil production in most basins other than the Permian is expected to fall on the order of 4%, while the percentage drop in total US production of natural gas is primarily from the Eagle Ford and Niobrara (map from the report of all 7 regions is here)

the next table, from under Tab 1 of the report, shows the drilling productivity for new wells on a per rig basis…the EIA estimates new-well production per rig using several months of recent data on total production from new wells for each field, divided by the region’s monthly rig count….here, in all regions, drilling productivity for new wells is still expected to increase monthly from July to August, as it has over the history of fracking extraction…

July 2016 drilling productivity report

the next two graphs, from the Year-over-year summary (pdf), show the expected drop in August production from old wells, as compared to the decrease from old wells in August a year ago…in general, these graphs shows us the expected well depletion rate for the existing wells in each basin…

July 2016 legacy oil production

above is the expected decrease in thousands of barrels per day for the wells currently producing oil in each basin…again, since this is in units of decrease, rather than percentage, it tells us the obvious, that those basins with the largest amount of current production will see the largest decreases…anyone who wants to work out the percentage declines for each basin based on our first table can do so….what is noteworthy here is that for the most part, the decreases going forward will be less than in 2015, because of the larger percentage of old wells which deplete somewhat slower…the Utica, with a large percentage of relatively newer wells, is the only basin where the August 2016 oil depletion rate is expected to be greater than that of last year

July 2016 legacy natural gas production

like the oil graph, the natural gas bar graph above shows us the expected August decrease in million cubic feet per day for the wells currently producing gas in each basin, against the similar decrease in August 2015…once again, for most basins, the decreases in natural gas output going forward will be less than they were in 2015, because of the larger percentage of old wells..the exceptions are again the Utica, with it’s larger percentage of newer wells, and the Permian, which has been producing more natural gas recently than it had in the legacy years…

the next two graphs we’ll include are for oil and natural gas productivity for new Utica wells…once again, the EIA is estimating August output from new wells based on recent historical data on total production from new wells divided by the region’s average monthly rig count, lagged by two months…in this first graph below, the total Utica rig count since 2007 is shown in black, while the output of oil per rig from new wells is shown as a brown graph over that same span…

July 2016 Utica oil productivity EIA

in the second graph of this set below, the total Utica rig count is again shown in black, while the output of natural gas from new wells per rig in thousand cubic feet per day in shown in blue…now, look closely as those productivity lines, brown above for oil and blue below for natural gas…we can see that oil output per new Utica well has quadrupled from under 100 barrels per day to nearly 400 barrels per day in the short span from mid 2014 to mid 2016…similarly, natural gas output per new Utica well has tripled, from 2,500,000 cubic feet per day to 7,500,000 cubic feet per day over the same 2 year span (after it had quadrupled in the prior two years, so there’s been a twelve-fold increase per new well in 4 years)…also notice that neither the brown line for oil nor the blue line for natural gas shows any sign of topping out, ie, if the trend continues, we might even expect another tripling two years hence…so, why such a exponentially increasing rate of productivity? in part, it’s because the frackers are getting better at what they do; ie, their fracking techniques have improved…but another big factor is that with prices depressed, they’re no longer fracking half the state willy-nilly, like Chesapeake did during the McClendon era…they are only fracking in those locations where they believe that profitable production is pretty much a sure thing, and hence they’re now producing as much gas and oil from new wells running a dozen rigs than McClendon & his boys did two years ago with 4 dozen rigs..

July 2016 Utica nat gas productivity EIA

The Latest Oil Stats from the EIA

Wednesday’s release of US oil data for the week ending July 15th by the Energy Information Administration indicated that our oil imports rebounded back to above recent averages, that our refineries ramped back up to seasonal levels to use all those extra imports, and as a result another small portion of our monstrous glut of crude oil was converted into a glut of refined products…our caveat for this review is that this week’s crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance out was +498,000 barrels per day, which meant that 498,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production and import figures, meaning one or several of this week’s metrics were incorrect by that amount, errors which are typically due to inadequacies in gathering or reporting that data…that makes for the 4th week in a row when we’ve seen a large positive adjustment, and as a result this year’s cumulative daily average of that weekly statistical adjustment has also turned positive by 18,000 barrels per day, after several months of being negative…during most of the weeks earlier this year, much of what we appeared to have produced or imported did not show up in the final consumption or inventory figures, and that statistical aberration has now completely reversed..

our field production of crude oil inched up for the 2nd week in a row, as oil output from US wells rose by 9,000 barrels per day to an average of 8,494,000 barrels per day during the week ending July 15th….again, like last week, the entirety of the increase resulted from a 38,000 barrel per day increase from Alaska, while production in the lower 48 was down 29,000 barrels per day….even with the back to back increases, our oil output still remained 725,000 barrels per day below the pace we saw at the beginning of this year, and was still 11.1% lower than the 9,562,000 barrels we produced during the week ending July 17th of 2015, and 11.6% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…

at the same time, the EIA reported that our imports of crude oil rose by an average of 293,000 barrels per day to an average of 8,134,000 barrels per day during the week ending July 15th, nearly a million barrels per day, or nearly 13% more than the 7,199,000 barrels of oil per day we were importing during the week ending July 17th a year ago…at the same time, the 4 week average of our imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) actually slipped back to an 8.0 million barrel per day level, which was only 5.9% higher than during the same four-week period last year…   

meanwhile, usage of that crude oil by U.S. refineries rose by 319,000 barrels per day from the prior week during the week ending July 15th, as the US refinery utilization rate rose to 93.2% during the week, up from 92.3% of capacity during the week ending July 8th…this week’s refinery throughput was virtually unchanged from the 16,870,000 barrels per day US refineries used during the week ending July 17th last year, however, when US refineries were operating at 95.5% of capacity..

even with the increase in refining, however, our refineries’ production of gasoline fell back from the elevated levels of last week, dropping by 168,000 barrels per day to an average of 10,050,000 barrels per day during the week ending July 15th…that was 0.6% lower than the 10,109,000 barrels per day of gasoline produced in the same week last year, but about 2% higher than last July’s average output…at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also slipped, falling by 30,000 barrels per day to 5,004,000 barrels per day during the week ending July 15th….that also put distillates output 1.4% below the 5,073,000 barrels per day that was being refined the same week last year, which was on a par with distillates output for that month…it’s a bit puzzling to see output of both gasoline and distillates down with such a large increase in refinery inputs, but i see no easy explanation; production of propane/propylene was up by 55,000 barrels per day to 1,734,000 barrels per day, and output of residual fuels was up by 24,000 barrels per day to 413,000 barrels per day, but production of jet fuel was also down, albeit by an insignificant 5,000 barrels per day to 1,722,000 barrels per day…

even with the large drop in our output of gasoline, our gasoline inventories rose again, by 911,000 barrels to 241,000,000 barrels as of July 15th, the fourth increase in the past 5 weeks, at a time of year when our gasoline supplies are usually being used up; in fact, July 15th saw the highest summertime level for gasoline supplies in the EIA’s weekly records….contributing to the increase in gasoline inventories was a 57,000 barrel per day increase in our gasoline imports to 897,000 barrels per day, which was also 62,000 barrels per day more than the 815,000 barrels of gasoline we imported during the same week a year earlier….as a result, this week’s gasoline inventories were 11.4% higher than the 216,285,000 barrels of gasoline that we had stored on July 17th last year, and also 10.6% higher than the 217,871,000 barrels of gasoline we had stored on July 18th of 2014… thus our gasoline supplies remain categorized by the EIA as “well above the upper limit of the average range” for this time of year..   

at the same time, our distillate fuel inventories fell by 216,000 barrels to 152,783,000 barrels on July 15th, using up a small portion of the 4,058,000 barrel distillates inventory increase to 152,997,000 barrels we saw a week ago…since our distillate inventories have continued to run far above the normal level after the warm winter reduced US heat oil consumption, our distillate inventories as of July 15th were still 8.0% higher than the 141,515,000 barrels of distillates we had stored as of July 17th last year, and 21.3% higher than our distillates supplies as of July 18th 2014, and thus they were again characterized as “well above the upper limit of the average range” for this time of year…    

finally, as our refineries more than kept pace with our increased imports, we again needed to withdraw 2,342,000 more barrels of oil from our stocks of crude in storage to meet the week’s need, as thus our crude oil inventories fell to 519,462,000 barrels as of July 15th….but that’s a fairly normal withdrawal rate for this time of year, and it left us with 12.0% more oil in storage than the 463,885,000 barrels we had as of the same weekend a year earlier, and 40.0% more oil than we had stored on July 18th of 2014….with our oil supplies thus continuing to beat the seasonal records we set most every week in 2015, it should go without saying that our crude oil supplies also remain “well above the upper limit of the average range” for this time of year…”  

This week’s rig counts

US drilling activity increased for the 7th week out of the last 8 during the week ending July 22nd, with oil rigs seeing their largest percentage increase since December 2009, despite the lower prices for crude…..Baker Hughes reported that the total number of active rotary rigs running in the US was up by 15 rigs to 462 rigs as of Friday, which was still down from the 876 rigs that were deployed as of the July 24th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil this week rose by 14 rigs to 371, 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 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by a single rig to 88 this week, which was also down from the 216 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there were also three rigs drilling this week that were classified as miscellaneous, up by 2 rigs from last week and also up by 2 miscellaneous rigs from the same week a year ago….  

however, despite the large overall increase in drilling, three of the platforms that had been drilling offshore in the Gulf of Mexico were shut down this week, which reduced the Gulf of Mexico active rig count to 18 rigs, down from the 31 rigs working in the Gulf of Mexico a year ago…since there is also an offshore platform still working off the Cook Inlet in Alaska, the total offshore count fell to 19, also down from 31 a year ago….meanwhile, the inland waters rig count was unchanged at 3, down from the 4 rigs that were deployed drilling on inland waters at the end of the same week last year…  

the number of working horizontal drilling rigs also increased for the 7th time in 8 weeks, rising by 13 rigs to 357, which still was down from the 662 horizontal rigs that were in use on July 24th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, one directional rig and one vertical rigs were also added…that brought the working directional rig count up to 44 rigs, which was still down from the 83 directional rigs that were in use at the end of the same week a year earlier, and brought the vertical rig count up to 61 rigs as of July 22nd, which was nonetheless down from the 131 vertical rigs that were drilling 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’ll again 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 July 22nd, the second column shows the change in the number of working rigs over the last week, the third column shows the prior week’s rig count, the 4th column shows the change in the number of rigs running from the equivalent week in July 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 July 24th of 2015:  

July 22 2016 rig count summary

what’s immediately obvious from looking at those tables is that the entirely of the jump in drilling activity could be accounted for by the 15 rig increase in Texas, with an increase of 8 rigs in the west Texas Permian basin, 3 more rigs in the Barnett shale near Dallas/Ft Worth, and two additional rigs in the Eagle Ford of the southern part of the state…other states were relatively static, with only California up two rigs to 7 and Louisiana down two rigs to 44 showing a rig count change greater than 1, with the later accounted for by the 3 rig drop in the Gulf of Mexico…not included in the list of major state variances above, Nevada drillers started running a single rig this week, their first since last September, which left them unchanged from the 1 rig they had working a year ago…

Posted in Uncategorized | Leave a comment

June’s new housing construction and existing home sales

it’s been a slow week, with the June report on New Residential Construction from the Census Bureau and the June report on existing home sales from the National Association of Realtors (NAR) the only two reports with a broad following that were released this week….other reports released this week included Regional and State Employment and Unemployment for June from the BLS, and the Philadelphia Fed Manufacturing Survey for July, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +4.7 in June to -2.9 in July, suggesting a return to the contraction in that region’s manufacturing… in addition, this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for June, a weighted composite index of 85 different economic metrics, which rose from a downwardly revised -0.56 in May to +0.16 in June…that still left the 3 month average of the index at –0.39, indicating national economic activity has been well below the historical trend during the 2nd quarter…

New Housing Construction Little Changed in June, New Permits Down 13% from Last June

the June report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in June was at a seasonally adjusted annual rate of 1,189,000, which was 4.8 percent (±13.5%) above the revised May estimated annual rate of 1,136,000 housing units started, but which was still 2.0 percent (±12.9%) below last June’s pace of 1,213,000 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, June’s housing starts could have been down by 8.7% or up by as much as 18.3% from those of May, with even larger revisions possible…in this report, the annual rate for May housing starts was revised from the 1,164,000 reported last month to 1,136,000, while April starts, which were first reported at a 1,172,000 annual rate, were revised down from last month’s initial revised figure of 1,076,000 annually to 1,155,000 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 111,600 housing units were started in June, up from the 106,200 units started in May…of those housing units started in June, an estimated 76,700 were single family homes and 33,300 were units in structures with more than 5 units, up from the revised 71,100 single family starts but down from the 34,700 units started in structures with more than 5 units in May…

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 June, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,153,000 housing units, which was 1.5 percent (±1.3%) above the revised May rate of 1,136,000 permits, but 13.6 percent (±0.6%) below the rate of building permit issuance in June a year earlier…the annual rate for housing permits issued in May was revised from 1,138,000 to 1,136,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 114,000 housing units were issued in June, up from the revised estimate of 107,700 new permits issued in May…the June permits included 74,400 permits for single family homes, up from 70,200 in May, and 36,600 permits for housing units in apartment buildings with 5 or more units, up from 34,900 such multifamily permits a month earlier… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.189 Million Annual Rate in June and Comments on June Housing Starts

Existing Home Sales Up 1.1% in June

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose 1.1% from May to June, projecting that 5.57 million homes would sell over an entire year if the June home sales pace were extrapolated over that year, a pace that was also 3.0% greater than the annual sales rate projected in June of a year ago, and the highest monthly annual rate since February 2007…that came after an annual sales rate of 5.51 million homes in May, which was revised from the originally reported 5.53 million annual sales rate, and an annual home sales rate of 5.43 million in April…the NAR also reported that the median sales price for all existing-home types in June was $247,700 in June, up from $238,900 in May and 4.8% higher than in June a year earlier, which they report as “the 52nd consecutive monthly year over year increase in home prices”…..the NAR press release, which is titled “Existing-Home Sales Ascend Again in June, First-time Buyers Provide Spark“, 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 unadjusted data indicates that roughly 583,000 homes sold in June, up by 11.0% from the 525,000 homes that sold in May, but just 1.9% more than the 572,000 homes that sold in June of last year, so we can see there was again a seasonal adjustment in the annualized published figures of over 10% to correct for the typical early summer increase in home sales…that same pdf indicates that the median home selling price for all housing types rose 3.8%, from a revised $238,900 in May to $247,700 in June, while the average home sales price was $292,100, up 4.0% from the $280,900 average in May, and up 4.2% from the $280,200 average home sales price of June a year ago, with the regional average home sales prices ranging from a low of $235,900 in the Midwest to a high of $379,900 in the West…for additional coverage with long term graphs on this report, see “Existing Home Sales increased in June to 5.57 million SAAR” and “A Few Comments on June 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…)        

Posted in Uncategorized | Leave a comment

July 23rd graphics

oil prices:

July 23 2016 oil prices

drilling productivity by region:

July 2016 drilling productivity by region

drilling productivity for new wells:

July 2016 drilling productivity report

legacy oil production:

July 2016 legacy oil production

legacy natural gas production:

July 2016 legacy natural gas production

oil productivity for new Utica wells:

July 2016 Utica oil productivity EIA

natural gas productivity for new Utica wells:

July 2016 Utica nat gas productivity EIA

rig count summary:

July 22 2016 rig count summary

Posted in Uncategorized | Leave a comment

June’s retail, consumer & producer prices, & industrial production; May’s wholesale & business inventories, JOLTS, & Mortgage Monitor

most of this week’s important reports were released on Friday morning, including Retail Sales for June and Business Sales and Inventories for May, both from the Census bureau, the June Consumer Price Index from the Bureau of Labor Statistics, and the report on Industrial Production and Capacity Utilization for June from the Fed…before those, Thursday saw the the June Producer Price Index from the BLS, while earlier in week the BLS also released the June Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for May, while the Census Bureau released the May report on Wholesale Trade, Sales and Inventories leading up to the composite business inventories report of Friday…the week also saw the Mortgage Monitor for May (pdf) from Black Knight Financial Services and the Empire State July Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, and which reported their headline general business conditions index fell from + 6.0 to +0.6, suggesting First District manufacturing was little changed from last month…

June Retail Sales up 0.6% After May Revised 0.3% Lower

seasonally adjusted retail sales rose 0.6% in June after retail sales for April and May were revised lower….the Advance Retail Sales Report for June (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $457.0 billion during  the month, which was an increase of 0.6 percent (±0.5%)* from May’s revised sales of $454.4 billion and 2.7 percent (±0.7%) above the adjusted sales in June of last year…May’s seasonally adjusted sales were revised from the $455.6 billion originally reported to $454.4 billion, while April sales were also revised lower, from $453.6 billion, to $453.4 billion, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 1.5%, from $469,523 million in May to $462,314 million in June, while they were up 3.1% from the $448,229 million of sales in June 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 pair of columns below gives us the seasonally adjusted percentage change in sales for each type of retail business from May to June and the year over year percentage change for those businesses since last June; the second pair of columns gives us the revised figures for May’s report, with April to May and the May 2015 to May 2016 change shown; for your reference, our copy of this same table as it appeared in the May report, before this month’s revisions, is here….lastly, the third pair of columns shows the percentage change of the recent 3 months of sales (April, May and June) from the preceding three months (January, February and March) and from the same three months of a year ago….

June 2016 retail table

June Consumer Prices Up 0.2% on Higher Energy Prices, Rents

the consumer price index rose 0.1% in June, as price increases for fuels and core services were partially offset by lower prices for food and core commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.2% in June after rising 0.2% in May, 0.4% in April and 0.1% in March….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 240.236 in May to 241.038 in June, which left it statistically 1.01% higher than the 238.638 index reading of last June….regionally, prices for urban consumers have risen 1.6% in the West, and 0.8% everywhere else over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people…with lower food prices mostly offsetting higher energy prices, seasonally adjusted core prices, which exclude food and energy, also rose by 0.2% for the month, with the unadjusted core index rising from 247.554 to 247.821, which puts it 2.26% ahead of its year ago reading of 242.354…

the volatile seasonally adjusted energy price index rose by 1.3% in June after rising by 1.2% in May and 3.4% in April but falling by more than 11.5% over this past winter, and thus the energy price index still remains 9.4% lower than it was in June a year ago….prices for energy commodities were 3.3% higher while the index for energy services fell by 0.5%, after rising by 0.2% in May….the increase in the energy commodity index included a 3.3% increase in the price of gasoline, the largest component, and a 3.3% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 2.5% increase…within energy services, the index for utility gas service fell by 0.4% after rising by 1.7% in May, as utility gas was still priced 5.0% lower than it was a year ago, while the electricity price index fell by 0.5%, after falling by 0.2% in May…energy commodities are still priced 15.3% below their year ago levels, with gasoline prices averaging 16.4% lower than they were a year ago…meanwhile, the energy services price index is 2.5% lower than last June, as even electricity prices have fallen 1.8% over that period..

the seasonally adjusted food price index fell 0.2% in June, after it fell by 0.2% in May, as prices for food purchased for use at home fell 0.3% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.1% while average prices at full service restaurants rose 0.2%…for food at home, all major grocery store food group price indexes declined except for the price index for cereals and bakery products, which was 0.1% higher on a 0.5% increase in prices for white bread….the price index for the meats, poultry, fish, and eggs group fell by 0.7% as prices for eggs fell 5.7%, poultry prices fell 0.9%, and beef prices averaged 0.8% lower….the index for dairy products was 0.3% lower, as milk prices fell 1.0% and cheese prices fell 0.7%… the fruits and vegetables index fell 0.1% in June after falling by 0.7% in May and 0.5% in April as a 0.2% decrease in prices for fresh vegetables, including a 2.4% drop in lettuce prices, were offset by 0.3% higher prices for processed fruits and vegetables…the beverages index was 0.7% lower on a 1.5% decrease in prices for frozen noncarbonated juices and drinks and a 1.9% drop in prices for non-coffee beverage materials including tea.. lastly, prices in the other foods at home category were on average unchanged as 2.8% higher prices for margarine offset a 3.3% drop in prices for peanut butter…..among food line items, only eggs, which are now priced 26.9% lower than a year ago, and ground beef, which has fallen by 10.5%, have seen a price change 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 June after rising by 0.2% in April and May, the composite of all goods less food and energy goods fell by 0.2%, while the composite for all services less energy services was 0.3% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust May retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.3% on a 1.1% decrease in prices for major appliances, the apparel price index was 0.4% lower, and prices for transportation commodities other than fuel were down 0.5%, as prices for used cars and trucks were down 1.1% after falling 1.3% in May…at the same time, prices for medical care commodities were 1.1% higher on a 1.3% increase in prescription drug prices…meanwhile, the recreational commodities index fell 0.9% as TV prices fell another 2.7%, and the education and communication commodities index was 0.1% lower as a 2.0% price drop for telephone hardware offset a 1.9% increase in prices for educational books and supplies…lastly a separate index for alcoholic beverages rose 0.1% on a 0.8% increase in prices for whiskey bought for use at home, while the index for ‘other goods’ was unchanged. 

within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents and a 0.3% increase in owner’s equivalent rent while costs for lodging away from home at hotels and motels rose 0.6%, and costs for water, sewers and trash collection were 0.2% higher….the index for medical care services rose 0.2% as physicians’ services rose 0.3%, the transportation services index rose 0.3% on a 3.4% increase in car and truck rentals…meanwhile, the recreation services index rose 0.6% as video & audio rental services rose 1.9% and admissions to sporting events rose 3.3%… at the same time, the index for education and communication services rose 0.1% as a 0.6% decrease in landline telephone services was offset by 0.5% higher college tuition…lastly, other personal services were up 0.4% on a 1.3% increase in tax return preparation and other accounting fees and a 0.6% increase in legal fees…among core prices, a 13.0% increase in ship fares and a 12.1% year over year increase in moving and storage expenses were the only line items with annual increases greater than 10%, while only televisions, which are now 19.5% cheaper than a year ago, saw prices drop by more than 10% over the past year…

Estimating the Change in Real June Retail Sales Using the June CPI

with this June CPI release, we can now attempt to estimate the economic impact of the June retail sales figures we covered earlier, which saw nominal sales rise 0.6%…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, June’s clothing store sales, which fell by 1.0% in dollars, should be adjusted with the price index for apparel, which indicated prices for clothing were down by 0.4%, which tells us that real retail sales of clothing were actually down by 0.6% in June.  Then, to get a GDP relevant quarterly change, we’d have to compare such adjusted real clothing sales for April, May and June with the similarly adjusted 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 quick and dirty estimate of the change in real sales for the month is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of aggregate retail sales.  those sales were up by more than 0.5% in June, while their composite price index was down 0.2%, meaning that real retail sales excluding food and energy sales were up by more than 0.7%.  then, for the rest of the retail aggregate, we find sales at grocery stores were up 0.3% in June, while prices for food at home were down 0.3%, suggesting a real increase of around 0.6% in the quantity of food purchased for the month.  Next, sales at bars and restaurants were down 0.3% in dollars, but those dollars also bought 0.2% less, so real sales at bars and restaurants were down by about 0.5%.  And while gas station sales were up 1.2%, gasoline prices were up 3.3%, suggesting a substantial real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don’t have the detailed info on that.  Weighing the food and energy components at roughly 30% of total retail sales, and core sales at 70%, we can estimate that the aggregate of real retail sales in June were up about 0.6% from those of May…

next, to see how the change in real June sales impacts the change in 2nd quarter GDP, we have to compare those June sales to those of the first quarter…however, to get an approximation of the real adjusted changes for June vis a vis the 3 months of the first quarter, we have to adjust the changes for the downward revision to April and May sales that were included in the June report; ie., with May sales revised downward by roughly 0.3%, that means June real sales are only up by about 0.4% from previously published figures…using Table 7 in the pdf for the May personal income and outlays report, which gives us already inflation adjusted changes for the prior months, we find that real sales of goods were up 0.1% in February, up 0.3% in March, 1.5% in April, and 0.6% in May…since the downward revision to May’s growth was 0.278%, and the downward revision to April’s growth was less than half a percent, a 0.3% revision to May will suffice for our estimate….that revision leaves our revised month over month real sales growth at 0.1% in February, 0.3% in March, 1.5% in April, 0.3% in May, and 0.6% in June…that works out to more than 1.7% real growth in retail sales from the first quarter to the 2nd….in national accounts terms, that’s real growth in consumption of goods at an annual rate of almost 7.0%, a pace that will add at approximately 1.66 (+/-0.10) percentage points to 2nd quarter GDP from the goods portion of personal consumption expenditures alone..

Industrial Production Up 0.6% in June on Hot Weather and Jump in Auto Output

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.6% in June after falling by a revised 0.3% in May…industrial production is still down 0.7% from a year ago, as it fell at a 1.0% annual rate in the 2nd quarter, the 3rd consecutive quarterly decrease…to the extent that this report plays into GDP, that quarterly drop suggests a net subtraction from GDP of that magnitude in the components that this report influences…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.1 in June from 103.5 in May, which was originally reported at 103.6…at the same time, the April reading for the index was revised down from 104.0 to 103.8…

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.4, from 102.8 in May to 103.2 in June, largely due to a 6.3% increase in motor vehicle assemblies, more than reversing the May decrease, and returning the year over year change in the manufacturing index to a positive 0.4%…. meanwhile, the mining index, which includes oil and gas well drilling, saw its second increase in a row, as it rose from 102.5 in May to 102.7 in June, although it remains 10.5% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.4% in June after falling a revised 0.9% in May, as warmer weather than is typical for June boosted use of air conditioning and brought the utility index back to 0.5% above its year earlier reading…

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 June from 74.9% in May….capacity utilization by NAICS durable goods production facilities rose from 75.5% in May to 76.1 in June, while capacity utilization for non-durables slipped from 74.9% to 74.8%….capacity utilization for the mining sector rose to 73.6% in June, up from 73.2% in May, which was originally reported as 73.1%, while utilities were operating at 73.1% of capacity during June, up from their 77.5% of capacity during May…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….   

Producer Prices Rise 0.5% in June on Higher Energy Prices and Retail Margins

the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.5% in June as prices for finished wholesale goods rose by 0.8%, while margins of final services providers rose by 0.4%…this followed a May report that showed the overall PPI had increased 0.4%, with prices for finished goods up 0.7% while final demand for services rose 0.2%….producer prices are now up 0.3% from a year ago, the largest year over year increase since December 2014, as most of the price decreases 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 0.8% in June, after rising by 0.7% in May and 0.2% in April, as the index for wholesale energy prices rose 4.1% from May to June, the price index for wholesale foods was 0.9% higher, while the index for final demand for core wholesale goods (ex food and energy) was unchanged…major wholesale price changes included a 17.0% increase for home heating oil, and a 9.9% increase in prices for gasoline, which alone accounted for half of the rise in the wholesale goods index…despite the rise in wholesale foods overall, wholesale eggs were 25.9% lower, for the largest decrease in this final demand for goods category…

meanwhile, the index for final demand for services rose by 0.4% in June after rising 0.2% in May, 0.1% in April and falling 0.2% in March, as the index for final demand for trade services rose 0.7%, the index for final demand for transportation and warehousing services rose 0.5%, and the core services index for final demand for services less trade, transportation, and warehousing services was 0.4% higher….noteworthy among trade services, seasonally adjusted margins for fuels and lubricants retailers were 22.8% higher, margins for major household appliances retailers were 17.3% higher, and margins TV, video, and photographic equipment and supplies retailers were 13.6% higher….among transportation and warehousing services, margins for airline passenger services rose 2.4%…in the core final demand services index, margins for cable and satellite subscriber services rose 3.0% and margins for securities brokerage, dealing, investment advice, and related services were 3.6% higher..

this report also showed the price index for processed goods for intermediate demand increased by 0.9%, after rising 0.8% in May and 0.3% in April but falling in each of the prior nine months, as intermediate processed goods prices still remain 4.1% lower than in June a year ago…. the price index for processed foods and feeds rose 1.7%, prices for intermediate energy goods rose by 4.0% while the price index for processed goods for intermediate demand less food and energy was 0.2% higher…meanwhile, the price index for intermediate unprocessed goods was up by 2.8% in June after rising by 1.3% in May, 2.6% in April and 1.9% in March, in the only increases in that index since June of last year…driving that May increase was a 8.5% increase in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs rose 0.4%, and the index for core raw materials other than food and energy materials was 0.3% lower…. this raw materials index is now 11.4% 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 retraced…

lastly, the price index for services for intermediate demand was 0.8% higher in June after falling 0.2 in May and rising 0.1% in April, on a 0.8% increase in the core price index for services less trade, transportation, and warehousing for intermediate demand and a 1.1% increase in the index for trade services for intermediate demand, while the index for transportation and warehousing services for intermediate demand was 0.4% higher…driving the increase in prices for services for intermediate demand was a 1.7% decrease in the index for loans services (partial) and higher indexes for services related to securities brokerage and dealing; machinery and equipment parts and supplies wholesaling…over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative, is now 1.6% higher than it was a year ago…    
May Wholesale Inventories up 0.1%, Total Business Inventories Up 0.2%

in advance of the composite business inventories release on Friday, the Census released their report on Wholesale Trade, Sales and Inventories for May (pdf) on Tuesday, which indicated that seasonally adjusted sales of wholesale merchants rose 0.5 percent (+/-0.5%)* to $435.5 billion from the revised April estimate of $433.2 billion, but were still down 2.5 percent (+/-1.1%) from May a year earlier…April’s preliminary wholesale sales estimate was revised downward $1.0 billion or 0.2 percent….May sales of durable goods were up 0.6 percent (+/-0.7%) from April, but were down 0.6 percent (+/-1.6%) from a year earlier, while sales of nondurable goods were up 0.5 percent (+/-0.5%) from April, but were down 4.1 percent (+/-1.8%) from last May…at the same time, this release reported that seasonally adjusted wholesale inventories were valued at $589.2 billion at the end of May, 0.1% (+/-0.2%)* higher than the revised April level and 0.5 percent (+/-1.2%)* above last May’s level, while April’s preliminary inventory estimate was revised upward $0.5 billion or 0.1%…wholesale durable goods inventories were up 0.1 percent (+/-0.4%)* from April but were down 2.3 percent (+/-1.2%) from a year ago, while inventories of nondurable goods were up 0.2 percent (+/-0.2%) from April and were up 5.1 percent (+/-1.6%) from last May…

then on Friday, following the release of the June retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for May (pdf), which incorporates the revised May retail data from that June report and the 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 $1,291.8 billion in May, up 0.2 percent (±0.2%)* from April revised sales, but down 1.4 percent (±0.4%) from May sales of a year earlier…note that total April sales were revised from the originally reported $1,290.2 billion to $1,288,674 million….manufacturer’s sales were statistically unchanged from April at $456,524 million in May, while retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.2% to $399,837 million, and wholesale sales rose 0.5% to $435,473 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,810.0 billion at the end of May, up 0.2 percent (±0.1%) from April, and 1.0 percent (±0.5%) higher than in May a year earlier…the value of end of April inventories was revised down slightly from the $1,807.1 billion reported last month to $1,807.0 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $619,676 million, 0.1% lower than in April, inventories of retailers were valued at $601,151 million, 0.5% more than in April, while inventories of wholesalers were estimated to be valued at $589,154 million at the end of May, up 0.1% from April…all categories of business inventories are adjusted for price changes for national accounts data using item appropriate price indexes from the producer price index…since May producer prices for goods averaged a 0.7% increase, real business inventories for the month will thus be lower than April by about 0.5%, which itself was lower than at the end of the 1st quarter by an average of 0.1%…unless there is an inordinate build of inventories in June, the change from the $69.6 billion real inventory increase we saw in the 1st quarter could subtract as much as 2.00 percentage points from second quarter GDP… 

Job Openings, Hiring and Firing All Down in May

the Job Openings and Labor Turnover Survey (JOLTS) report for May from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 345,000, from 5,845,000 in April to 5,500,000 in May, after April job openings were revised higher, from 5,788,000 to 5,845,000…May jobs openings were still 2.1% higher than the 5,384,000 job openings reported in May a year ago, as the job opening ratio expressed as a percentage of the employed fell from 3.9% in April to 3.7% in May, while it was unchanged from a year ago…the greatest drop in job openings was in wholesale trade, where openings fell by 104,000 to 151,000, while job openings in professional and business services rose by 60,000 to 1,021,000 (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, which are linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in May, seasonally adjusted new hires totaled 5,036,000, down by 49,000 from the revised 5,085,000 who were hired or rehired in April, as the hiring rate as a percentage of all employed was unchanged at 3.5%, but also down from the hiring rate of 3.6% in May a year earlier (details of hiring by industry since January are in table 2)….meanwhile, total separations also fell, by 63,000, from 5,015,000 in March to 4,952,000 in May, while the separations rate as a percentage of the employed slipped from 3.5% to 3.4%, which was the same separations rate as in May a year ago (see table 3)…subtracting the 4,952,000 total separations from the total hires of 5,036,000 would imply an increase of 84,000 jobs in May, somewhat more than the revised payroll job increase of 11,000 for May reported by the June 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 2,895,000 of us voluntarily quit their jobs in May, down by 14,000 from the revised 2,909,000 who quit their jobs in April, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.0% 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 1,667,000 were either laid off, fired or otherwise discharged in May, down by 41,000 from the revised 1,708,000 who were discharged in April, as the discharges rate remained at 1.2% of all those who were employed during the month, the same as a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 390,000 in May, down from 398,000 in April, 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

Mortgage Delinquencies and New Foreclosures Up in May, Mean Time in Foreclosure At Record 1092 Days

the Mortgage Monitor for May (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 574,035 home mortgages, or 1.13% of all mortgages outstanding, remaining in the foreclosure process at the end of May, which was down from 595,235, or 1.17% of all active loans, that were in foreclosure at the end of April, and down from 1.59% of all mortgages that were in foreclosure in May of last year…..these are homeowners who at least had a foreclosure notice served but whose homes had not yet been seized, and the May “foreclosure inventory” now represents the lowest percentage of homes that were in the foreclosure process since the summer of 2007… new foreclosure starts, which have been volatile from month to month, rose to 62,085 in May from 58,728 in April but were down from 70,400 in May a year ago; new foreclosures over the past three months have been on a par with the level before the mortgage crisis began…

in addition to homes in foreclosure, BKFS data also showed that 2,152,935 mortgages, or 4.25% of all mortgage loans, were at least one mortgage payment overdue but not in foreclosure at the end of May, up from the 4.24% of homeowners with a mortgage who were more than 30 days behind in April, but down from the mortgage delinquency rate of 4.51% in May a year earlier…of those who were delinquent in May, 719,283 home owners, or 1.42% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was down from 730,179 such “seriously delinquent” mortgages in April…combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,726,970 mortgage loans, or 5.38% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of May, and that 1,293,318, or 2.55% of all homeowners, were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

for the details of the historical mortgage crisis metrics covered by the Mortgage Monitor, we’re including below that part of the monthly table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 16 of the pdf, which for some reason they made harder to read than it already was….the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past 5 months and for each January shown going back to January 2005…in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…with the pickup in new foreclosures, the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has slipped back to 519 days and is still down from the April 2015 record of 536 days, while the average time of delinquency for those who’ve been in foreclosure without a resolution has increased again and at 1092 days has again topped the record set last month…that means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year’s new foreclosure starts were all less than 5 months old, suggests that many foreclosures started early in the crisis are still not yet completed…  

May 2016 LPS loan counts and days delinquent table

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

Posted in Uncategorized | Leave a comment

gasoline, distillates & other inventories continue to pile up; demand for them may not be as advertised…

both oil and natural gas prices were only modestly changed from last week, although oil did see a 5% spike on Tuesday that was reversed by a 5% drop on Wednesday…after closing Monday at a two month low of $44.74 a barrel, down from last week’s closing price of $45.41 on continued concern about the refined products glut, US oil prices rose by more than $2 a barrel to close at $46.80 a barrel on Tuesday, largely due to technical factors, wherein traders who had earlier sold oil they didn’t own had to buy oil during a global market rally to cover their contract obligations…however, oil prices fell right back to where they started the week on Wednesday, after EIA data showed a big buildup of gasoline, distillates, and other oil products, as well as an increase in crude oil production…after Wednesday’s close at $44.75 a barrel, oil prices rebounded on to close at $45.68 a barrel on Thursday amid a stock market rally and falling dollar, which made globally traded commodities more expensive in dollars….prices then continued to rise early on Friday after bullish economic releases and later on news of a coup attempt in Turkey and a new pipeline attack in Nigeria, and ended the week at $45.95 a barrel, up a bit more than one percent on the week…

in contrast to the daily gyrations in oil that ended the week with just a small change, natural gas prices moved little each day this week after a 10 cent drop from last week to close at $2.702 per million British Thermal Units (mmBTU) on Monday…with no particular news moving prices, natural gas rose to $2.733 per mmBTU on Tuesday and then to $2.737 per mm-BTU on Wednesday, before falling back to $2.727 per mmBTU on Thursday, after the EIA’s Weekly Natural Gas Storage Report indicated that natural-gas inventories grew by 64 billion cubic feet last week in contrast to the 56 bcf growth expected by forecasters… that left working gas in underground storage in the US as of July 8th at 3,243 billion cubic feet, 18.5% more than the same week a year ago, and 22.1% more than our 5 year average of natural gas stores at this time of year…gas prices then rose by 2.9 cents to close the week at $2.756 per mmBTU as traders finally paid a bit of attention to the weather forecast…now, while this week’s changes in the price of natural gas aren’t exactly newsworthy, what is notable is that despite forecasts for a record setting heatwave over most of the country over the coming two weeks, natural gas prices have been unable to rally out of their trading range…that leads us to believe that natural gas prices have probably seen their high for the year, because if expected air conditioning demand during a record July heatwave can’t move prices, it’s hard to see that much else can…thus, in the face of the slightest bearish news on natural gas, we can probably expect to see another drop in prices, which should hold new drilling, which has already been at record lows, to a minimum…..

The Latest Oil Stats from the EIA

this week’s release of oil data for the week ending July 8th by the US Energy Information Administration indicated a modest increase in our national output of crude oil, a significant drop in our oil imports, and sizable increases in our supplies of refined products, despite an unseasonable cutback in refining….meanwhile, this week’s crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was +452,000 barrels per day, which meant that 452,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week’s metrics were incorrect by that amount, errors which are typically due to miscues in reporting or gathering that data…that makes for the 3rd week in a row when we’ve seen a large positive adjustment, which have served to bring this year’s cumulative daily average of that weekly statistical adjustment factor down 0 barrels per day, which amazingly means that despite these large weekly errors, figures for the year to date have completely balanced out…

as we expected, last week’s large drop in our field production of crude oil was partially reversed when oil production from Alaska, which had inexplicably fallen by 156,000 barrels per day last week, rose by 71,000 barrels per day this week, and thus was responsible for a 57,000 barrel per day increase to an average of 8,622,000 barrels per day of crude oil from US wells during the week ending July 8th….that increase – just the 3rd in the last 23 weeks – still left the week’s oil production 11.3% lower than the 9,562,000 barrels we produced during the week ending July 10th of 2015, and 11.7% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year…our oil production for the week ending July 8th was thus 734,000 barrels per day lower than we what were producing at the beginning of this year… 

at the same time, the EIA reported that our imports of crude oil fell by 522,000 barrels per day to an average of 7,841,000 barrels per day during the week ending July 8th, which was still 487,000 barrels per day, or 6.6% more than the 7,354,000 barrels of oil per day we were importing during the week ending July 10th a year ago…at the same time, the 4 week average of our imports reported by the EIA’s weekly Petroleum Status Report (62 pp pdf) actually increased to an 8.1 million barrel per day level, which was 11.2% higher than the same four-week period last year…  

meanwhile, crude oil usage by US refineries fell by 143,000 barrels per day, to average of 16,544,000 barrels of crude per day in this week’s report…that was as the US refinery utilization rate fell for the 2nd week in a row to 92.3% for the week ending July 8th, down from 92.5% of capacity the prior week and from 93.0% of capacity 2 weeks ago, and in contrast with the refinery utilization rate of 95.3% during the week ending July 10th last year…this was to be expected, considering the product supply glut development we saw last week, wherein cargoes were left stuck sitting in New York harbor for lack of storage space; refining fell by 88,000 barrels per day on the east coast, and by 90,000 barrels per day in the Midwest, while it rose by a seasonal 60,000 barrels per day in the West, where the supply of products is closer to normal…crude oil refined this week was thus 1.7% lower than the 116,825,000 barrels per day US refineries used during the week ending July 10th last year, and also 1.0% lower than the equivalent week in 2014…

even with the pullback in refining, however, US refineries production of gasoline rose by 210,000 barrels per day to 10,218,000 barrels per day during week ending July 8th…that came even as east coast refineries were cutting back their gasoline production by 230,000 barrels per day, although that comes with the caveat that the regional gasoline production stats shown in this week’s Petroleum Status Report are out of balance by 432,000 barrels per day…that increase meant that this week’s gasoline production was 5.8% greater than the 9,658,000 barrels per day of gasoline produced during the equivalent week a year ago, despite the refinery slowdown….and also despite the refinery slowdown, their output of distillate fuels (diesel fuel and heat oil) also rose during this week, climbing by 82,000 barrels per day to 5,034,000 barrels per day during the week ending July 8th…however, that was still 1.2% below our distillates production of 5,093,000 barrels per day during the week ending June 10th of last year……         

with the large increase in gasoline production, our end of the week gasoline inventories rose by 1,213,000 barrels to 240,089,000 barrels as of July 8th, just a few thousand barrels from what we had stored on May 20th, before the driving season officially began on Memorial day…contributing to this week’s increase in gasoline supplies was a 55,000 barrel per day increase to 820,000 barrels per day in our gasoline imports and a drop of 84,000 barrels per day in the amount of gasoline supplied to US markets, which fell to 9,671,000 barrels per day…as a result of that addition to supplies, this week’s gasoline inventories were 10.1% higher than the 218,010,000 barrels of gasoline that we had stored on July 10th last year, and 11.9% higher than the 214,492,000 barrels of gasoline we had stored on July 11th of 2014, meaning our gasoline supplies are still categorized by the EIA as “well above the upper limit of the average range” for this time of year..  

one caveat to that figure for gasoline supplied to US markets, which is widely considered a proxy for gasoline consumption…we quote the weekly figures for that metric, largely because we write weekly, and the weekly figures are what the news media and the markets respond to…but as we’ve tried to point out, the weekly figures are just ballpark estimates, and as we’ve seen from the weekly “adjustment” metrics, which we’ve been calling the EIA’s “fudge factor”, those weekly estimates seldom come close to balancing between oil input and product output, sometimes by a large amount…however, once the discrepancies in the data are ironed out,the EIA also publishes monthly data, which come out two months or more later than the current week…a little over a week ago, Bloomberg’s energy analyst Julian Lee checked the difference between the weekly and the monthly figures, and found that our apparent booming demand for gasoline and oil products, which we reported were at record levels three weeks ago, is largely an illusion; that once the accurate monthly data comes in, this year’s demand for gasoline has yet to top last years…the same goes for all the other refined products across the products spectrum, which you can see in this chart below, which comes from the aforementioned Bloomberg article

July 2 weekly vs monthly oil demand

this graph shows the monthly difference between the oil products demand statistics published weekly, shown in navy blue, and the oil products demand statistics published monthly, shown in teal blue, since the beginning of 2014…this total products graph includes not only gasoline, but also distillates, kerosene type jet fuels, residual oils, propane/propylene and other products, although gasoline does account for roughly half the total…you can see that over the past two years, the weekly estimates of demand for product have generally been excessive, and that since April of 2015, the weekly estimates of ‘product supplied’ have consistently been higher than what the final monthly readings have shown to be the case…and although the recent weekly data has shown that our consumption of oil products was at record levels in June, it has not yet been confirmed by the more accurate monthly data, which as of April appeared to be heading in the opposite direction, implying a revision of a whopping 800,000 barrels a day...

returning to this week’s data, our distillate fuel inventories rose by 4,058,000 barrels to end the week at 152,997,000 barrels, as distillates were added to storage in every region of the country, bumping our distillate inventories up to the highest since the week ending May 6th…as our distillate inventories had already been so much above normal level after the warm winter reduced US heat oil consumption, our distillate inventories as of July 8th were thus 8.3% higher than the 141,280,000 barrels of distillates we had stored at the same weekend last year, and 23.1% higher than our distillates supplies as of July 11th 2014, and therefore they’re also characterized as “well above the upper limit of the average range” for this time of year…   

finally, even with the drop in refining, the larger drop in our imports meant that we needed to withdraw 2,546,000 more barrels of oil from our stocks of crude in storage to meet the week’s need, as thus our crude oil inventories fell by that amount to 521,804,000 barrels as of July 8th…but since national oil inventories even fell by more in the equivalent year ago week, this week’s stores were still 13.1% higher than the 461,417,000 barrels of oil we had stored as of July 10th, 2015, and 39.1% higher than the 375,040,000 barrels of oil we had stored on July 11th of 2014….with our oil inventories thus continuing to be that much higher than the seasonal records we set most every week in 2015, it’s obvious that our crude oil supplies are also “well above the upper limit of the average range” for this time of year…”  

This week’s rig counts

even with the nominally lower prices for oil and gas, US drilling activity increased for the 6th week out of the past 7 weeks during the week ending July 15th, as contracting and hiring for this week’s new drilling was probably already underway weeks ago, when prices were higher…..Baker Hughes reported that the total count of active rotary rigs running in the US increased by 7 rigs to 447 rigs as of July 15th, which was still down from the 857 rigs that were deployed as of the July 17th report last year, and down from the recent high of 1929 rigs that were in use the week before the OPEC meeting of Thanksgiving 2014…the number of rigs drilling for oil this week rose by 6 rigs to 357, which was still down from the 638 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by a single rig to 89 this week, which was down from the 218 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008…there was also still one rig running this week that was classified as miscellaneous, unchanged from last week and unchanged from the same week a year ago….  

of the drilling rigs that were added this week, three were offshore on drilling platforms in the Gulf of Mexico, which brought the Gulf of Mexico active rig count back up to 21 rigs, which was still down from 31 Gulf of Mexico rigs a year ago…that also increased the total offshore rig count to 22, as there still is an offshore platform working off the Cook Inlet in Alaska….at the same time, there was a rig removed that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count down to 3, which was still up from the 2 rigs that were deployed drilling on inland waters at the end of the same week last year…  

the number of working horizontal drilling rigs also increased for the 6th time in 7 weeks, but only by one this week, as the count of active horizontal rigs increased to 344 rigs, which still was down from the 650 horizontal rigs that were in use on July 17th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, 7 directional rigs were added, bringing the directional rig count up to 43, which was still down from the 84 directional rigs that were in use at the end of the same week a year earlier…meanwhile, the vertical rig count fell by a single rig to 60 rigs this week, which was also down from the 123 vertical rigs that were drilling 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’ll again 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 July 15th, the second column shows the change in the number of working rigs over the last week, the third column shows the July 8th rig count, the 4th column shows the change in the number of rigs running from the equivalent week in July 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 July 17th of 2015: 

July 15 2016 rig count summary

from these tables we can see that New Mexico and Louisiana by themselves accounted for the entirely of this week’s drilling increase, with other states adding or idling one rig a piece as noted…also note that the net of 1 additional horizontal rig this week came by way of shutting down at least 6 such rigs, including 4 that had been drilling into the Barnett shale of the Dallas-Ft Worth area, and adding at least 7 horizontal drillers elsewhere…among states not shown above, Idaho saw the addition of 1 rig this week, their first since December, as a year ago they had no rigs running…Illinois also saw their rig count increase by 1 to 3 rigs; that was up from the 2 rigs they were running in the same week last year, and Mississippi also saw the addition of 1 rig, giving them 2, which was down from the 4 rigs deployed in Mississippi on July 17th of 2015…meanwhile, Nebraska had its only active rig shut down this week, a year ago they were running two in the state….in addition, the rig that started drilling in Hawaii on April 29th wrapped up whatever it was doing there and was pulled out this week; a year ago, there were no rigs in Hawaii…

Posted in Uncategorized | Leave a comment

July 16th graphics

rig count summary:

July 15 2016 rig count summary

June retail sales

June 2016 retail table

non-current loan counts:

May 2016 LPS loan counts and days delinquent table

Posted in Uncategorized | Leave a comment

oil & gas prices fall as products pile up on east coast, international rig counts for June, et al

contract prices for both crude oil and natural gas dropped around 7% this week, each for different reasons, and neither as part of a general market selloff….after closing last week at $48.99 a barrel, US WTI oil prices fell right out of the gate on Tuesday, following the Monday holiday, as gasoline prices tanked on an east coast oversupply situation that saw cargoes being turned away from New York for lack of storage space, suggesting that some east coast refineries would need to curtail operations, thus exacerbating the oil glut…with refineries thus squeezed, oil ended Tuesday down over 5% to $46.50 a barrel, its biggest daily drop since early September 2015…however, Wednesday brought the estimates of oil supply from the American Petroleum Institute, which indicated that crude inventories had fallen by 6,736,000 million barrels over the prior week, more than twice the drop expected, so oil prices reversed course and rose more than 2.5% before dropping back to settle at $47.43 a barrel, up 1.78%, or 83 cents on the day…however, Thursday brought the official oil inventory figures from the Dept of Energy, which showed oil inventories had only declined by 2,223,000 barrels, which set off another wave of selling, which sent oil prices down $2.29, or 4.8%, to close the day at $45.14 a barrel…then, with news from the Labor Dept on Friday that employers had added 278,000 jobs, twice the number some had expected, economic fundamentals drove oil prices higher on Friday, as oil prices clawed back 27 cents, to close the week at $45.41 a barrel, down 7.3%, for the largest weekly percentage loss since the week ended Feb. 5th..

the drop in the contract price for natural gas, on the other hand, was pretty much a one day affair, as after dropping 7.5% on Tuesday, the daily price changes for the remainder of the week were less than 1% in either direction…recall that last week we looked at natural gas prices for the first time in 3 months because they’d just completed a one month, 80 cent run-up to $2.987 per mmBTU, the highest contract price in 13 months…that was apparently too much too fast for most traders, because a Platts report that natural gas production had increased by 350 million cubic feet a day over the first few days of July from June’s average average of 70.8 billion cubic feet a day, combined with an errant forecast for cooler weather for the next ten days sent prices tumbling to $2.764 per mmBTU, down 22.3 cents on the day, their biggest one day drop since October…with most other weather forecasts calling for warmer weather ahead, natural gas prices inched back up 2.2 cents on Wednesday, closing at 2.786 per mmBTU….prices then slipped back to $2.777 per mmBTU on Thursday, despite new forecasts for a power consuming heatwave for the eastern half of the country, and an EIA gas storage report that injections into storage totaled 39 billion cubic feet (Bcf) for the week ending July 1, quite a bit less than the 77 bilion Bcf addition we’d normally see at this time of year…that was probably because working gas stockpiles remained at 3,179 Bcf, which was 20% more than a year-ago and 23% above the five-year average for this week…the low injection rate and heat wave news may have finally sunk in on Friday, as gas prices rose 2.4 cents on the day to finish the week at $2.801, a loss of more than 6.2% for the week…

The Latest Oil Stats from the EIA

the oil data for the week ending July 1st, released by the US Energy Information Administration on Thursday of this week because of the Monday holiday, indicated a big jump in our oil imports, a large drop in our output of crude oil, crude refining levels that were virtually unchanged from a week earlier, and modest withdrawals of crude oil and refined products from storage…meanwhile, the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was +176,000 barrels per day, down from last week’s +537,000 barrels per day, which still meant that 176,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week’s metrics were off by that amount, errors which are typically due to miscues in reporting or gathering that data…however, the past two weeks have served to bring the cumulative daily average of that weekly statistical adjustment factor down to -17,000 barrels per day, which means that figures for the year to date are almost coming into balance…

at any rate, the EIA reported that our imports of crude oil rose by 808,000 barrels per day to an average of 8,363,000 barrels per day during the week ending July 1st, after falling 884,000 barrels per day to an average of 7,555,000 barrels per day during the week ending June 24th…this week’s imports were at the 3rd highest weekly level in the last 34 months and 14.3% higher than our imports of 7,316,000 barrels per day the same week a year earlier, but as you’ve seen, oil imports are quite volatile week to week, so the EIA’s weekly Petroleum Status Report (62 pp pdf) reports imports as a 4 week moving average…that summary showed that the 4 week average of our imports rose back to the 8.0 million barrel per day level, which was 11.6% higher than the same four-week period last year…  

at the same time, the EIA reported that our field production of crude oil fell by 194,000 barrels per day, from an average of 8,622,000 barrels per day during the week ending June 24th to an average of 8,428,000 barrels per day during the week ending July 1st…that appears to be the largest one week drop in our oil output since the last week of August 2012, a production drop that was precipitated at that time by the movement of Hurricane Isaac through the Gulf of Mexico…thus such a drop in output would certainly be a matter of concern if the drop were more widespread, but as it was,156,000 barrels per day of that output drop was cut from Alaska output, which must have had issues that weren’t reported on…production in the lower 48 states was down by a modest 38,000 barrels per day to 8,088,000 barrels per day, and if Alaska production returns to the mean, that would suggest we might see a overall production rebound….as it was, this week’s oil production was 12.2% below our production of 9,604,000 barrels per day during the same week of 2015, and the lowest since the same amount of oil was produced during the week ending May 9th of 2014….

during the same week, U.S. refineries’ crude oil usage slipped by an insignificant 8,000 barrels per day, from the average of 16,695,000 barrels of crude per day they used during the week ending June 24th to an average of 16,687,000 barrels for the week ending July 1st….that was as the US refinery utilization rate fell to 92.5% during the week, from 93.0% of capacity the prior week, which was still below the refinery utilization rate of 94.7% during the week ending July 3rd last year…nonetheless, this week’s refinery throughput was still a half percent higher than the 16,596,000 barrels per day refinery throughput of that week last last year, and also higher than any prior equivalent week in the 34 recent years of EIA data, so they’re not exactly slouching…

with refineries throughput little changed, their production of gasoline rose by 59,000 barrels per day to 10,018,000 barrels per day, up from the 9,959,000 barrels per day we produced during the week ending June 24th, which was also 1.5% more than the 9,868,000 barrels of gasoline per day we were producing during the same week last year…at the same time, our refineries output of distillate fuels (diesel fuel and heat oil) fell by 69,000 barrels per day to 4,952,000 barrels per day during the week ending July 1st, which was 2.7% below our distillates production level of 5,092,000 barrels per day during the week ending July 3rd of last year…

with the small increase in gasoline production, our end of the week gasoline inventories fell by just 122,000 barrels to 238,876,000 barrels as of July 1st, as our gasoline imports fell by 139,000 barrels per day to 747,000 barrels per day and gasoline supplied to US markets rose by 46,000 barrels per day to 9,755,000 barrels per day….that means our midsummer gasoline inventories are still a quarter million barrels above the level of the pre-driving season gasoline inventories of May 27th, and thus our gasoline supplies remained 9.6% higher than the 217,952,000 barrels of gasoline that we had stored on July 3rd last year, and 11.5% higher than the 214,321,000 barrels of gasoline we had stored on July 4th of 2014….thus our gasoline supplies are still categorized by the EIA as “well above the upper limit of the average range” for this time of year..  …

now here’s where the sticky wicket we mentioned earlier comes in; despite the fact that our summer inventories of gasoline are always lower than our winter inventories, this summer our gasoline inventories have remained high on the east coast, even as they were reduced somewhat seasonally elsewhere…as a result, storage is at capacity on the east coast, and full vessels of refined product remain anchored outside of New York Harbor with no where to offload their products…ultimately, such full storage is also forcing regional refineries to curtail their production…the EIA’s weekly Petroleum Status Report (62 pp pdf) reports on and includes graphs of the stores of oil and each of the major refined products nationally and by region, so we’ll include the graph of the east coast gasoline inventory history below, so you can see what’s happened…

July 9th 2016 PADD 1 gasoline stocks as of July 1st

in the graph above, copied from figure 2 on page 12 of the EIA’s weekly Petroleum Status Report (62 pp pdf), the blue line shows the recent track of East Coast gasoline inventories over the period from January 2015 to July 1st, 2016, while the grey shaded area represents the range of East Coast gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, basically showing us the normal range of East Coast gasoline inventories as they fluctuated from season to season over the 5 years prior to the year and a half shown by the blue line….(note that PADD = Petroleum Administration for Defense District, one of the 5 regions of the country that the EIA keeps separate records for…a map of the 5 PADDs is here; PADD 1 includes all the states on the east coast plus W. Virginia..)   from this graph above, we can see that gasoline supplies in this region first breached 65 million barrels in February of 2015 when they rose to over 70 million barrels, then topped that record by 2 million barrels this this winter…however, instead of falling in the spring and summer as they usually do, regional gasoline inventories rose to hit a new record at the end of June, only slightly backing off this week; (note that the five years prior to this years data now includes the record 70 million barrels level set in 2015)…you can check page 12 of this weeks Petroleum Status Report for similar graphs of the other PAD districts, and you’d see that they’re all down somewhat normally for this time of year…but that doesn’t ease the glut in the New York area, because all the product pipelines were built to deliver product into that densely populated area, not send products out…

the regional graphs for distillate fuel inventories, which you can find on page 14 of the Petroleum Status Report, show the same situation for PADD 1, which is exacerbated by a similar oversupply in Europe, the normal export destination for surplus distillates…for the week ending July 1st, our distillate fuel inventories fell by 1,574,000 barrels to end the week at 148,939,000 barrels, as again distillates were withdrawn from storage in every region except the east coast…but since our distillate inventories have been well above normal since the El Nino winter reduced US heat oil consumption, our distillate inventories are still 8.4% higher than the 137,461,000 barrels of distillates we had stored as of July 3rd last year, and 22.3% higher than our distillates supplies as of July 4th 2014, and thus they’re also characterized as “well above the upper limit of the average range” for this time of year…   

finally, with the big increase of imports, the withdrawal of oil from our stocks of crude in storage was a slightly lower than normal 2,223,000 barrels for the week, leaving our oil inventories at 524,350,000 barrels as of July 1st…however, that was still 12.6% higher than the 465,763,000 barrels of oil we had stored as of July 3rd, 2015, and 37.1% higher than the 382,565,000 barrels of oil we had stored on July 4th of 2014….with our oil inventories thus continuing to be that much higher than the seasonal records we set most every week in 2015, our crude oil supplies are also  “well above the upper limit of the average range” for this time of year…”   

This Week’s Rig Counts

US drilling activity increased for the 5th week week out of the past 6 during the week ending July 8th, following a string of 41 consecutive weeks without a net increase in total active rigs…..Baker Hughes reported that the total count of active rotary rigs running in the US increased by 9 rigs to 440 rigs during the week ending July 8th, which was down from the 863 rigs that were deployed as of the July 10th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014…the number of rigs drilling for oil this week rose by 10 rigs to 351, which was down from the 645 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations again fell by a single rig to 88 as of July 8th, which was down from the 217 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas that were deployed on August 29th, 2008…there was also still one rig running this week that was classified as miscellaneous, unchanged from last week and no different than the miscellaneous count of the same week a year ago….  

the number of working horizontal drilling rigs also increased for the fifth time in six weeks, as their count rose by 11 rigs to 343 rigs this week, which was still down from the 654 horizontal rigs that were in use on July 10th of last year, and down from the record of 1372 horizontal rigs that were in use on November 21st of 2014…during this same week, a net of two directional rigs were pulled down, leaving 36 directional rigs still working, which was down from the 88 directional rigs that were drilling at this time last year….meanwhile, the vertical rig count was unchanged at 61 rigs, which was still down from the 121 vertical rigs that were drilling 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’ll again 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 July 8th the second column shows the change in the number of working rigs since July 1st, the third column shows the July 1st rig count, the 4th column shows the change in the number of rigs running from the equivalent 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 July 10th of 2015: 

July 8 2016 rig count summary

International Rig Counts for June

Friday also saw the monthly release of the international rig counts for June, which unlike the weekly count, is an average of the number of rigs running in each country during the month, rather than the total of those drilling at month end….Baker Hughes reported that an average of 1407 rigs were drilling for oil and natural gas around the globe in June, which was up from the 1,405 rigs that were drilling around the globe in May but down from the 2,136 rigs that were working globally in June of last year…increased North American drilling accounted for the global increase for the first time since July of 2015, as the average US rig count rose from 408 rigs in May to 417 rigs in June, which was still down from 861 rigs in June a year ago, while the average Canadian rig count rose from 42 rigs in May to 63 in June, again still down from 129 rigs in June a year earlier….outside of Northern America, the International rig count fell by 28 rigs to 927 in June, which was also down from 1,158 rigs a year ago, as every other region of the globe saw a decrease in drilling activity for the month…

drilling in the Middle East fell for the 5th time in the past 6 months, as the region’s activity was down by 2 rigs to a June average of 389, which was also down from the 401 rigs deployed in the Middle East a year earlier…the regional pullback was entirely accounted for by the idling of 3 rigs working offshore, lowering the offshore count to 49, which was one more than the 48 rigs the Middle East had working offshore in June a year ago….the largest drilling activity decline was in Oman, where their active rig count fell from 69 to 66, which was also down from the 71 rigs working in Oman last year at this time….both Egypt and Iraq saw two rigs idled in June; for Egypt, that left 26 rigs running, down from 41 rigs a year earlier, and for Iraq, that left 41 rigs working, down from the 53 rigs they had deployed in June of 2015…on the other hand, Pakistan saw the addition of 3 more rigs, after they had added 4 rigs in May; that brought their average June count up to 30 rigs, which was also up from the 17 rigs that were drilling in Pakistan a year earlier…meanwhile, the Saudis also added a rig, bringing their active rig count up to 124, which was also up from the 121 rigs they had deployed last June….the Saudis have been averaging a deployment of 125 rigs over the past year, which is up from their average of 105 rigs in 2014, so their drilling has not skipped a beat as oil prices fell by more than half..

at the same time, the Latin American countries pulled out another 10 rigs, after pulling out 15 rigs in both April and May, and hence the region is now down by 92 rigs since the first of the year…Latin America averaged 178 rigs in June, including 31 offshore, down from the total of 314 rigs, which included 62 offshore rigs, that were active in Latin America in June of 2015….Argentina saw the largest drop, as they were down by 8 rigs to 63, which was down from the 104 rigs that were in use in Argentina a year ago…Venezuela idled 7 more rigs, after shutting down 9 in May, and they’re thus down to 53 active rigs, from the 66 rigs that were deployed in Venezuela in June of last year…Mexico also shut down 2 rigs in June, leaving 20 still working; that was down from the 51 rigs working Mexico in June of last year…on the other hand, Ecuador restarted 3 rigs in June, bringing their active count back up to 5 rigs, which was still down from the 15 rigs they were running a year earlier, and Columbia, which had cut their active rig count from 30 all the way down to 2 over the nine months ending April, added 2 rigs in June after adding 3 in May, which brought them back up to 7 rigs, which was still down from the 26 rigs they had deployed last June…

meanwhile, the Asia-Pacific region had 182 drilling rigs working in June, down from 190 rigs working in May, and down from the 215 rigs working the region a year earlier, with the Asia-Pacific offshore count steady at 86…Australia, Indonesia, and Thailand each cut 3 rigs, leaving Australia with 3 rigs working, down from 15 a year earlier, leaving Indonesia with 16 rigs, down from 23 a year earlier, and leaving Thailand with 12 rigs, down from the 19 rigs the Thais were running last June…at 29, there were also 2 fewer rigs working offshore of China, down from 31 rigs in May but still up from the 24 rigs working offshore of China in June a year ago…at the same time, Indian drillers started 6 additional rigs, bringing the count in India to 108 rigs, still down from 113 rigs a year earlier…

elsewhere, countries in Africa shut down 4 rigs in June, leaving 87 still in use, down from the 103 rigs working the African continent last year at this time…Algerians accounted for half the decrease, as they were down 2 rigs to 53, which was still up from the 51 rigs Algeria had active a year earlier…Nigeria, Cameroon, and South Africa each idled a rig, leaving 5 in Nigeria and left none working in either Cameroon and South Africa…at the same time, Congo restarted the rig they had idled in May, and now have 2 rigs running, down from 3 a year earlier….lastly, the rig count in Europe also fell by 4 to 91 in June, which was down from the 113 rigs working in Europe a year ago at this time…Sakhalin island, off the east coast of Russia but included in the European count, idled two rigs, leaving 8 rigs still active, same as a year ago…at the same time, Norway, Denmark and Iceland each shut down a rig; for Denmark and Iceland, that reverses their additions in May, for Norway, it’s a reduction to 16 rigs, down from 19 a year earlier…the United Kingdom also added a fracking rig in June, which is currently their only land based rig, as they also had none on land a year ago…finally, note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China’s offshore area, with an average of 29 rigs active in June, is included in the Asian totals here…   

Posted in Uncategorized | Leave a comment