March jobs report; February’s trade deficit, construction spending, factory inventories, & wholesale sales, et al

in addition to the Employment Situation Summary for March from the Bureau of Labor Statistics, this week’s releases included four reports that will input into 1st quarter GDP:  the BEA report on our International Trade for February, the February report on Construction Spending, the Full Report on Manufacturers’ Shipments, Inventories and Orders for February, and the February report on Wholesale Trade, Sales and Inventories, all from the Census Bureau….in addition, the Fed released the Consumer Credit Report for February, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $15.2 billion, or at a 4.8% annual rate, as non-revolving credit expanded at a 5.3% annual rate to $2,791.5 billion and revolving credit outstanding grew at a 3.5% rate to $1000.4 billion…

privately issued reports released this week included  the ADP Employment Report for March, the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 16.53 annual rate in March, down from the 17.47 million rate in February, and also the lowest since a 16.4 million rate in October 2014, and the Mortgage Monitor for February (pdf) Black Knight Financial Services…in addition, the week saw both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 57.2% in March, from 57.7% in February, which still suggests a modest expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.2% in March, down from 57.6% in January, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…  

Employers Add 98,000 Jobs in March, Unemployment Rate Drops to 4.5%

the Employment Situation Summary for March showed the weakest payroll job growth in 10 months, even as the unemployment rate dropped and the employment rate rose…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 98,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 238,000 to 216,000 and the payroll jobs increase for February was revised down from 235,000 down to 219,000…that means that this report represents a total of just 60,000 more seasonally adjusted payroll jobs than were reported last month, well below the past year’s average of 182,000 jobs per month…the unadjusted data shows that there were actually 670,000 more payroll jobs extant in March than in February, as normal seasonal job increases in sectors such as construction, administrative and waste services, and leisure and hospitality were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in March were weak but still spread through through both the goods producing and the service sectors, with only the retail sector dropping 29,700 jobs on a seasonally adjusted basis, as general merchandise stores cut 34,700 employees..the broad professional and business services sector added 56,000 jobs, as 16,800 more were employed in services to buildings and temporary help services added 10,500 workers….employment in health care rose by 13,500, with the addition of 8,700 jobs in hospitals…in addition, both the resource extraction and manufacturing sectors saw the addition of 11,000 jobs, with support activities for mining employing 8,800 more and metal fabrication factories adding 5,500….however, all the other major sectors, including construction, wholesale trade, transportation and warehousing, utilities, information, financial services, education, leisure and hospitality, and government, all saw little or no change in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.14 an hour in March, after it had increased by a revised 7 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.90 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in February, while hours for production and non-supervisory personnel slipped to 33.5 hours after 7 months at 33.6 hours…in addition, the manufacturing workweek was down 0.2 hours at 40.6 hours, and average factory overtime decreased by 0.1 hours to 3.2 hours…

meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 472,000 to 153,000,000, while the similarly estimated number of those unemployed fell by 326,000 to 7,202,000; which thus meant a net 145,000 increase in the total labor force…since the working age population had grown by 168,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 23,000 to 94,213,000….with the increase of those in the labor force  not much different than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.0%….at the same time, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, 0.1% to 60.1%…at the same time, the decrease in the number unemployed was also large enough to decrease the unemployment rate from 4.7% to 4.5%….meanwhile, the number who reported they were involuntarily working part time fell by 151,000 to 5,553,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 9.2% in February to 8.9% in March, the lowest since December 2007….

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

February Trade Deficit Falls 9.6% on Lower Imports of Cars and Cell Phones

our trade deficit fell by 9.6% February, as the value of our exports increased while the value of our imports decreased….the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell by $4.62 billion to $43.56 billion in February, from a January deficit that was revised from the originally reported $48.5 billion to $48.17 billion…the value of our February exports rose by $0.4 billion to $192.2 billion on a  $0.4 billion increase to $128.5 billion in our exports of goods and an increase of less than $0.1 billion to $61.4 billion in our exports of services, while our imports fell $4.3 billion to $240.6 billion on a $4.2 billion decrease to $193.4 billion in our imports of goods and a less than $0.1 billion increase to $43.0 billion in our imports of services…export prices averaged 0.3% higher in February, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage…

the increase in our February exports of goods came about as a result of higher exports of consumer goods, industrial supplies and of other goods, offset by decreases in our exports of foods and feeds and capital goods…referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $665 million to $17,143 million on a $522 million increase in our exports of pharmaceuticals and a $222 increase in our exports of gem diamonds….our exports of industrial supplies and materials rose by $411 million to $38,397 million on a $604 million increase in our exports of fuel oil and a $407 million increase in our exports of crude oil, which were partially offset by a $388 million decrease in our exports of nonmonetary gold….in addition, our exports of automotive vehicles, parts, and engines rose by $196 million to $13,817 million, and our exports of other goods not categorized by end use rose by $540 million to $4,949 million…partially offsetting those increases, our exports of foods, feeds and beverages fell by $676 million to $10,552 million on a $578 million decrease in our exports of soybeans, and our exports of capital goods fell by $623 million to $42,874 million on a $628 million decrease in our exports of civilian aircraft and a $381 million decrease in our exports of engines for civilian aircraft, which were partially offset by a $244 million increase in our exports of semiconductors..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of consumer goods and passenger cars were largely responsible for the decrease in February imports…our imports of consumer goods fell by $3,064 million to $48,997 million on a $1,865 million decrease in our imports of cellphones, a $275 million decrease in our imports of gem diamonds, a $205 million decrease in our imports of nonwool or cotton clothing and textiles, and a $201 million decrease in our imports footwear…our imports of automotive vehicles, parts and engines fell by $2,648 million to $29,113 million on a $2,107 million decrease in our imports of new and used passenger cars, a $322 million decrease in our imports of vehicle parts other than engines and tires, and a $236 million decrease in our imports of trucks, buses, and special purpose vehicles…in addition, our imports of other goods not categorized by end use fell by $213 million to $7,390 million…offsetting those decreases, our imports of industrial supplies and materials rose by $1,389 million to $43,410 million, as our imports of crude oil rose by $1,672 million and our imports of gold rose by $294 million, our imports of foods, feeds, and beverages rose by $263 million to $11,532 million, and our imports of capital goods rose by $124 million to $51,217 million on a $495 million increase in our imports of computers…

to gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here….from that table, we can figure that 4th quarter real exports of goods averaged 121,037.7 million monthly in chained 2009 dollars, while inflation adjusted 1st quarter goods exports were at 124,083 million and 124,506 million for January and February respectively in that same 2009 dollar quantity index representation…averaging January and February goods exports and then annualizing the change between that average and the average of the fourth quarter, we find that the 1st quarter’s real exports of goods are running at a 11.2% annual rate above those of the 4th quarter, or at a pace that would add about 0.92 percentage points to 1st quarter GDP…..in a similar manner, we find that our 4th quarter real imports of goods averaged 183,210.3 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 189,184 million and 184,216 million respectively after that same adjustment…that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 7.84% annual rate from those of the 4th quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 7.84% rate would thus subtract 0.90  percentage points from 1st quarter GDP….hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add 0.02 percentage points to 1st quarter GDP…

Construction Spending Rose 0.8% in February after January Revised Higher

the Census Bureau’s report on February construction spending (pdf)  estimated that the month’s seasonally adjusted construction spending would work out to $1,192.8 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.0%)* above the revised annualized rate of $1,192.2 billion of construction spending for January and 3.0 percent (±1.5%) above the estimated annualized level of construction spending for February last year…the January spending estimate was revised 0.3% higher, from $1,180.3 billion to $1,183.84 billion, while December’s construction spending was revised from $1,192.2  billion to $1,188.94 billion, which would suggest a small downward revision to 4th quarter GDP when the annual revisions are released later this summer…

private construction spending was at a seasonally adjusted annual rate of $917.36 billion in February, 0.8 percent (± 1.2 percent)* above the downwardly revised January estimate, with residential spending of $484.7 billion up 1.8% (±1.3 percent)* from the revised annual rate of $476.1 billion in January, while private non-residential construction spending of $435.3 billion was 0.3 percent (± 1.2 percent)* below the revised January estimate of $433.8 billion….meanwhile, public construction spending was estimated to be at an annual rate of $275.5 billion, 0.6 percent (±1.8 percent)* above the revised January estimate, with construction spending for public safety up 8.2% (±2.3%) to an annual rate of $8,021 million…

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

that index showed that aggregate construction costs were down 0.1% in February, after they had increased by 0.3% in January, decreased by 0.1% in December and increased by 0.1% in November…on that basis, we can estimate that February construction costs were roughly 0.2% more than those of December, 0.1% more than those of November, and 0.2% more than October…we then use those relative percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison….this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,188,941 in December, $1,191,468 in November, and $1,173,749 in October, while it was at $1,192,822 in February and $1,183,840 in January….thus to compare January’s nominal construction spending of $1,183,840 and February’s figure of $1,192,822  to inflation adjusted figures of the fourth quarter, our formula becomes:((1,192,822 +  1,183,840 *0.999)/2) / ((1,188,941 * 1.002 + 1,191,468 * 1.001 + 1,173,749 *1.002)/3) = 1.000883, meaning real construction spending over January and February was up by 0.0883% from that of the 4th quarter period, or up at a 0.35% annual rate…to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and that of January’s & February’s adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add just about 0.02 percentage points to 1st quarter GDP, assuming there is little change in real construction in March..

Factory Shipments Up 0.3%, Inventories Up 0.2%

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for February (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $4.8 billion or 1.0 percent to $476.5 billion, the seventh increase in eight months, following an increase of 1.5% in December, which was revised from the 1.2% increase reported  last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the February advance report on durable goods we reported on two weeks ago…this report now shows that new orders for manufactured durable goods rose by $4.2 billion or 1.8 percent to $236.0 billion in February, revised from the 1.7% increase to $235.4 billion figure that was published two weeks ago….

this report also indicated that the seasonally adjusted value of February factory shipments rose for the 11th time in 12 months, increasing by $1.4 billion or 0.3 percent to $480.0 billion, following a 0.3% increase in January….shipments of durable goods were up $0.8 billion or 0.3 percent from January at $239.4 billion, revised from the $239.2 billion figure reported by the durables report last week…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods were up by $0.6 billion or 0.2 percent to $240.5 billion, after the value of January’s shipments was revised from $239.5 billion to $240,529 million..

meanwhile, the aggregate value of February factory inventories rose for the 7th time in 8 months, increasing by $1.2 billion or 0.2 percent to $630.0 billion, after a January increase of 0.3% that was revised from the originally reported 0.2%…February inventories of durable goods increased in value by $0.8 billion or 0.2 percent to $385.2 billion, unchanged from the previously published figure, following a 0.1% increase in January durable inventories…..the value of non-durable goods’ inventories rose by $0.3 billion or 0.1 percent to $244.8 billion, following a revised 0.6% increase in January non-durable inventories…to gauge the effect of these February inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was statistically unchanged at $225,415 million in February; the value of work in process inventories was up 0.5% to $195,541 million, and materials and supplies inventories were valued 0.1% higher at $209,010 million…the February producer price index reported prices for finished goods increased 0.3%, prices for intermediate processed goods inventories were 0.4% higher, while prices for unprocessed goods were 0.2% lower….that would means that real finished goods inventories were roughly 0.3% lower, real inventories of intermediate processed goods were 0.1% higher, and real raw material inventory inventories were 0.3% higher.. 

February Wholesale Sales Up 0.6%, Wholesale Inventories Up 0.4%

the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $464.9 billion, up 0.6 percent (±0.4 percent) from the revised January level and 8.4 percent (±0.9 percent) higher than wholesale sales of January 2016… the January preliminary estimate of wholesale sales was revised from down 0.1 percent (±0.5 percent)* to up 0.3 percent (±0.7 percent)* in conjunction with an annual revision based on the results of the 2015 Annual Wholesale Trade Survey, which makes comparisons to previous published amounts nonsense.. February wholesale sales of durable goods rose 0.4% percent (+/-0.4%) from January and were up 7.3% prcent (+/-0.6%) from a year earlier, while wholesale sales of nondurable goods were up 0.7% percent (+/-0.2%) from January and were up were 12.4 percent (+/-0.9%) from last February…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold….

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at $594.2 billion at month end, an increase of 0.4 percent (+/-0.2%) from the revised January level and also 3.2 percent (±0.7 percent) higher than February a year ago, with the January preliminary inventory estimate revised downward but still 0.2% lower than December….inventories of durable goods were valued 0.2 percent (+/-0.2%)* higher than January and were valued 1.7 percent higher than February a year earlier, while the value of wholesale inventories of nondurable goods was up 0.7 percent (+/-0.2%) from January and was up 5.6 percent from last February…with the February producer price index for finished goods up by 0.3% and producer prices for intermediate goods up by 0.3%, most real additions to February inventories appear to be minor, and should have little impact on 1st quarter GDP growth…

 

(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

April 8 graphics

rig count summary:

April 7 2017 rig count summary

pipelinistan:

April 8 2017 Syria's proposed pipelines

oil inventories:

April 6 2017 oil supplies as of March 31

Posted in Uncategorized | Leave a comment

the looming natural gas supply crunch, and yet another record for US crude supplies in an otherwise slow week

oil prices opened the week lower, but then rose daily the rest of the week, after new data showed a smaller than expected addition to our oil supplies and rather large decreases in our supplies of gasoline and distillates…after closing last week 2.7% lower at $47.97 a barrel, pricing for the benchmark US crude oil for May delivery fell almost 2% on Monday morning, as hedge funds continued to unwind their record bullish positions…that selling ran into renewed buying by noon, however, as other traders focused on an agreement by OPEC and non-OPEC producers to look at extending their oil output cuts by another six months, and oil prices reversed and went on to close just 26 cents lower on the day at $47.73 a barrel…prices then rallied 64 cents to close at $48.37 a barrel on Tuesday, underpinned by news reports that production from western Libyan fields had been reduced by 252,000 barrels per day on renewed fighting…oil prices then rose Wednesday morning after Tuesday afternoon’s American Petroleum Institute report showed a modest increase in US oil inventories, then spiked higher yet on Wednesday afternoon after data from the Energy Information Administration showed a weekly increase in U.S. crude inventories that was less than half of market expectations, and went on to close the day 2.4% higher at $49.51 a barrel …that confluence of bullish news carried oil prices higher the remainder of the week, as they closed over $50 a barrel for the first time in over three weeks at $50.35 a barrel on Thursday, and then went on to close the month at $50.60 on Friday, up 5.5% for the week but still 6% lower for the year to date..

natural gas prices also moved higher this week, as trading for the April delivery contract expired and prices for May gas became the widely quoted front month price…April gas started the week lower, however, falling 2.4 cents to $3.052 per mmBTU (million British Thermal Units) on Monday…April prices then rose 4.4 cents to $3.096 on Tuesday, while natural gas for May was up 4.6 cents to $3.177 per mmBTU….the April natural gas contract then expired at an eight-week high of $3.175 per mmBTU on Wednesday, up 7.9 cents on the day, while the May contract rose 5.4 cents to close at $3.231 per mmBTU…with only May gas trading on Thursday, natural gas prices then fell 4 cents to close at $3.191 per mmBTU on Thursday, after the EIA’s Weekly Natural Gas Storage Report showed that natural gas in storage in the US fell 43 billion cubic feet to 2.049 trillion cubic feet in the week ended March 24th, roughly in line with expectations…natural gas prices were then little changed on Friday, shedding a tenth of a cent to close the week at $3.190 per mmBTU…

that Weekly Natural Gas Storage Report is about the only data underpinning natural gas prices at this time of year, since both demand for heating and demand for cooling are not major factors in the trading of May gas, and hence weather forecasts are barely mentioned….John Kemp of Reuters included several graphs derived from data from that EIA storage report in his Thursday mailing, one of which we’ll include and explain below..

April 1 2017 natural gas supply history as of March 24

the above graph comes from an emailed package of graphs from John Kemp, senior energy analyst and columnist with Reuters, wherein the red line shows our natural gas supplies in billions of cubic feet from January 2015 to March 24th of this year…the yellow line, for the prior year, thus shows our natural gas supplies in billions of cubic feet from January 2014 to the end of 2016, thus retracing some of what the red line shows…the light blue band then shows the prior 5 year range of our natural gas supplies, and thus from the left shows the range of our natural gas supplies from January 2010 through January 2014, extending to the right where it ends with the range of our natural gas supplies from the end of 2012 through the end of 2016…lastly, the blue dashes show the average of that 5 year range of our natural gas stocks that’s indicated by the light blue shading…note the obvious seasonal pattern; surplus natural gas is injected into storage each the spring and summer, then withdrawn for use during the heating season…..

by following the red line, we can see that our natural gas supplies were at least at a 5 year high for the time of year from October 2015 through November 2016, with October 2016 being the first time in our history that natural gas supplies topped 4 trillion cubic feet…however, since December of 2016, our natural gas supplies have been falling at a faster rate than normal, despite a warmer than normal winter (recall last week we showed that heating demand was down by 17%) and by the end of January had returned to merely average…supplies of gas have since recovered to above average, largely because of a record warm period that led to the first weekly injection into storage in February history, but they’re still more than 400 billion cubic feet below where they were at the same time in March a year ago….what that means is that at the current pace of natural gas production, we are not covering our needs from production at a normal pace even while winter temperatures have remained above normal…

going forward, we know that demand for our natural gas supplies will be greater than it was in the past …for starters, there are those 13 natural gas export trains now under construction that we looked at 4 weeks ago….when completed, they’re projected to be exporting roughly 9.4 billion cubic feet of natural gas per day, or about 10% of our current natural gas production…in addition, with natural gas prices depressed, US electric utilities have been retiring their old coal generation capacity and replacing it with natural gas generation….according to the EIA, gas-fired generating capacity is expected to rise by a further 8 percent before the end of 2018….but even this past year, before this new demand for natural gas comes online, our current field production of natural gas has been unable to maintain our natural gas supplies at an above normal level during a winter when heating demand was 17% below average…and as we have repeatedly stressed, and as was evident from the natural gas rig count graph we showed last week, natural gas drillers will not expand their drilling operations while prices for natural gas are below their break-even point…furthermore, natural gas futures prices are even lower, with most contract prices beyond April 2018 below $3 per mmBTU…so they continue to frack more wells than they are drilling, reducing their uncompleted well backlog as needed, just to maintain their cash-flow…thus, there is not as yet any sign that any of the natural gas that exporters and utilities expect will be there in the future will materialize….to put it quite simply, something’s gotta give…

The Latest Oil Stats from the EIA

the oil data for the week ending March 24th from the US Energy Information Administration showed that a combination of a big increase in the amount of oils refineries used and a big jump in our exports of crude oil used up almost all the oil we imported or produced, but we nonetheless still saw a small increase in our record high oil supplies for the 11th week out of the past twelve…our imports of crude oil decreased by an average of 83,000 barrels per day to an average of 8,224,000 barrels per day during the week, while at the same time our exports of crude oil rose by 460,000 barrels per day to an average of 1,010,000 barrels per day, which meant that our effective imports netted out to 7,214,000 barrels per day during the week, 543,000 barrels per day less than the prior week…at the same time, our crude oil production rose by 18,000 barrels per day to an average of 9,147,000 barrels per day,  which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,361,000 barrels per day during the cited week…

during the same week, refineries reportedly used 16,226,000 barrels of crude per day, 425,000 barrels per day more than they used during the prior week, while at the same time, 20,000 barrels of oil per day were being added to oil storage facilities in the US….thus, this week’s EIA oil figures would seem to indicate that we used or stored 115,000 less barrels of oil per day than were supplied by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom -115,000 barrel per day figure onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil”, which means they got that balance sheet number by backing into it, using the same arithmetic we just used in explaining it...

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports rose to an average of 8,022,000 barrels per day, now 0.7% above that of the same four-week period last year…at the same time, the 4 week average of our oil exports rose to 794,000 barrels per day, now 105.0% higher than the same 4 weeks a year earlier, as our overseas exports of our surplus light crude oil were barely underway in early 2016…the 20,000 barrel per day increase in our crude inventories came about on a 124,000 barrel per day increase in our commercially available crude supplies, which was partially offset by an 103,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 18 months ago

meanwhile, this week’s 18,000 barrel per day oil production increase resulted from a 25,000 barrel per day increase in output from the lower 48 states, while oil output from Alaska fell by 7,000 barrels per day from last week…the 9,147,000 barrels of crude per day that we produced during the week ending March 24th was up by 1.4% from the 9,022,000 barrels per day we produced during the equivalent week a year ago and the most we’ve produced in any week since the week ending February 5th 2016, while it was still 4.8% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US refineries were operating at 89.3% of their capacity in using those 16,226,000 barrels of crude per day, up from 87.4% of capacity the prior week, but still down from the year high of 93.6% of capacity in the first week of January, when they were processing 17,107,000 barrels of crude per day….their processing of crude oil continues to be on a par with the 16,234,000 barrels of crude that were being refined during the week ending March 25th, 2016, when refineries were operating at 90.4% of capacity….with the week’s big refining increase, gasoline production from our refineries rose by 257,000 barrels per day to 10,028,000 barrels per day during the week ending March 24th, the highest this year, and 6.3% more than the 9,430,000 barrels per day of gasoline that were being produced during the week ending March 25th a year ago…in addition, refineries’ production of distillate fuels (diesel fuel and heat oil) was also up, rising by 43,000 barrels per day to 4,872,000 barrels per day, which was nonetheless 1.1% lower the 4,927,000 barrels per day of distillates that were being produced during the week ending March 25th last year…

even with the large increase in our gasoline production, the EIA reported that our gasoline inventories again shrunk, decreasing by 3,747,000 barrels to 239,721,000 barrels as of March 24th, after they had already dropped by more than 12.4 million barrels over the prior 3 weeks….that was as our domestic consumption of gasoline rose by 324,000 barrels per day to a seasonal high of 9,524,000 barrels per day and as our gasoline exports rose by 16,000 barrels per day to 608,000 barrels per day, while our imports of gasoline rose by 196,000 barrels per day to 521,000 barrels per day….while our gasoline supplies are now down by more than 19.3 million barrels from the record high set 6 weeks ago, they’re only down 1.2% from last year’s March 25th high for the date of 242,560,000 barrels, and are still 4.6% above the 229,128,000 barrels of gasoline we had stored on March 27th of 2015…

our supplies of distillate fuels also fell this week, decreasing by 2,483,000 barrels to 152,910,000 barrels by March 24th, as the amount of distillates supplied to US markets, a proxy for our consumption, increased by 210,000 barrels per day to 4,222,000 barrels per day, even as our imports of distillates fell by 12,000 barrels per day to 115,000 barrels per day, and as our exports of distillates fell by 97,000 barrels per day to 1,120,000 barrels per day at the same time….while our distillate inventories are now 5.1% below the bloated distillate inventories of 161,185,000 barrels that we had stored on March 25th 2016, at the end of last year’s warm El Nino winter, they are still 20.2% higher than the distillate inventories of 127,174 ,000 barrels that we had stored on March 27th of 2015… 

finally, our commercial inventories of crude oil increased for the 11th time in the past 12 weeks, increasing by 867,000 barrels to another record high of 533,977,000 barrels by March 24th…at the same time, 724,000 barrels of oil from our Strategic Petroleum Reserve was sold, which left inventories in the SPR at 692,659,000 barrels, a quantity not considered available for commercial use….thus for current commercial purposes, we finished the week ending March 24th with 11.5% more crude oil in storage than the 479,012,000 barrels we had stored at the end of 2016, 6.0% more crude oil in storage than what was then a record 503,816,000 barrels of oil in storage on March 25th of 2016, 21.9% more crude than what was also then a record 437,983,000 barrels in storage on March 27th of 2015 and 53.3% more crude than the 348,423,000 barrels of oil we had in storage on March 28th of 2014…

This Week’s Rig Count

US drilling activity increased for the 21st time in the past 22 weeks during the week ending March 31st, and this week’s increase was also the 9th double digit rig increase in the past 11 weeks….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 15 rigs to 824 rigs in the week ending Friday, which was 374 more rigs than the 450 rigs that were deployed as of the April 1st report in 2016, and the most drilling rigs we’ve had running since Oct 2nd, 2015, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil increased by 10 rigs to 662 rigs this week, which was up by 300 from the 362 oil directed rigs that were in use a year ago, and more than double the 316 rigs working on May 27th 2016, but still down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations rose by 5 rigs to 155 rigs this week, which was also up from the 88 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…in addition, there are also now 2 rigs deployed that are classified as miscellaneous, compared to a year ago, when there were no such miscellaneous rigs at work… 

there were four additional drilling platforms that started operating in the Gulf of Mexico offshore from Louisiana this week, which boosted the Gulf of Mexico count to 22 rigs, still down from the 24 rigs that were drilling in the Gulf during the same week of 2016…that was also down from a total of 26 rigs that were working offshore of the US a year ago, when there were also rigs working offshore from Alaska and California, in addition to the 24 rigs that were drilling in the Gulf of Mexico at the time…

active horizontal drilling rigs increased by 12 rigs to 685 rigs this week, which is well more than double the May 27th 2016 nadir of 314 working horizontal rigs…that’s also up by 339 horizontal rigs from the 346 horizontal rigs that were in use in the US on April 1st of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, a total of 12 directional rigs were also added this week, bringing the directional rig count up to 70 rigs, which was also up from the 49 directional rigs that were deployed during the same week a year ago…meanwhile, the vertical rig count was down by 9 rigs to 58 rigs, which was still up from the 55 vertical rigs that were deployed during the same week last year….

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 31st, the second column shows the change in the number of working rigs between last week’s count (March 24th) and this week’s (March 31st) count, the third column shows last week’s March 24th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 1st of April, 2016…          

March 31 2017 rig count summary

it’s fairly obvious that almost all the increases can be accounted for by the 7 rig increase in Texas and the 6 rig increase in Louisiana, where the four new Gulf of Mexico rigs are included in the state count…what happened in the major basins is less obvious, however, because the increases in the Permian, the Eagle Ford, the Haynesville of Louisiana, and the Granite Wash of the Texas panhandle are almost entirely offset by decreases in active rigs in the Cana Woodford of Oklahoma, the Denver-Julesburg Niobrara chalk of the Rockies front range, the Williston of North Dakota and the Mississippian of the Kansas-Oklahoma border….the summary data tells us that there were 10 oil rigs and 4 gas rigs added in “other” basins , which are not named, and shall remain so for now, unless someone wants to dig through the individual wells records in the North America Rotary Rig Count Pivot Table (XLS)…also note that outside of the major producing states listed above, Mississippi also added a rig this week; they now have 5 rigs active, up from 2 rigs a year ago….

Posted in Uncategorized | Leave a comment

4th Quarter GDP Revision, February’s Income and Outlays

the key economic releases this week were the 3rd estimate of 4th quarter GDP and the February report on Personal Income and Spending from the Bureau of Economic Analysis…in addition, the Case-Shiller Home Price Index for January from S&P Case-Shiller reported that home prices during November, December and January averaged 6.0% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier…this week also saw the release of the last two regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +16.9 from last month’s 11 year high of +24.5, still suggesting ongoing expansion in the Texas oil patch economy, while the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to + 22 in March, it’s highest reading since April 2010, up from +17 in February from +12 in January, suggesting an accelerating expansion in that region’s manufacturing…

4th Quarter GDP Revised to Show Growth at a 2.1% Rate

the Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the 4th quarter, revised from the 1.9% growth rate indicated by the second estimate reported last month, as personal consumption expenditures and inventory investment were greater than was previously estimated, while losses from trade were worse than was previously estimated…..in current dollars, our fourth quarter GDP grew at a 4.2% annual rate, increasing from what would work out to be a $18,675.3 billion a year output rate in the 3rd quarter to a $18,869.4 billion annual rate in the 4th quarter, with the headline 2.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, also known as the GDP deflator, was applied to the current dollar change…

remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA press release…specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2012, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts…the pdf for the 2nd estimate for the 4th quarter, which this estimate revises, is here

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 3.5% annual rate in the 4th quarter, rather than the 3.0% growth rate reported last month, as a 5.5% increase in the growth rate of personal spending was deflated with an annualized 2.0% increase in the PCE price index, an inflation adjustment which was revised from the 1.9% PCE price index reported in the second estimate….real consumption of durable goods grew at a 11.4% annual rate, revised from 11.5% in the second estimate, and added 0.82 percentage points to GDP, as real output of motor vehicles rose at a 16.2% annual rate and accounted for 0.39 of that growth….real consumption of nondurable goods by individuals rose at a 3.3% annual rate, revised from the 2.8% increase reported in the 2nd estimate, and added 0.47 percentage points to 4th quarter growth, as lower real consumption of energy goods was the only drag on the quarter’s non-durables growth….meanwhile real consumption of services rose at a 2.4% annual rate, revised from the 1.8% rate reported last month, and added 1.11 percentage points to the final GDP tally, as an increase in the real output of health care services at a 5.6% rate accounted for more than half of the 4th quarter increase in services…

seasonally adjusted real gross private domestic investment grew at a 9.4% annual rate in the 4th quarter, revised from the 9.2% growth estimate made last month, as real private fixed investment was revised from growth at a 3.2% rate to growth at a 2.9% rate, while real inventory growth was greater than previously estimated…investment in non-residential structures was revised from shrinking at rate of 4.5% to shrinking at a 1.9% rate, while real investment in equipment grew at a 1.9% rate, unrevised from the 2nd estimate….meanwhile, the 4th quarter’s investment in intellectual property products was revised from growth at a 4.5% rate to growth at a 1.3% rate, while the growth rate of residential investment was also statistically unrevised at 9.6% annually…after revisions, the decrease in investment in non-residential structures subtracted 0.05 percentage points from the economy’s growth rate, investment in equipment added 0.11 percentage points, investment in intellectual property added 0.05 percentage points , and growth in residential investment added 0.35 percentage points to the change in 4th quarter GDP…

meanwhile, the growth in real private inventories was revised from the previously reported $46.2 billion in inflation adjusted growth to show inventory growth at an inflation adjusted $49.6 billion rate, which came after inventories had grown at an inflation adjusted $7.1 billion rate in the 3rd quarter, and hence the $42.5 billion positive change in real inventory growth from the 3rd quarter added 1.01 percentage points to the 4th quarter’s growth rate, revised from the 0.94 percentage point addition to inventory growth reported in the second estimate….since growth in inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their increase by $42.5 billion meant that real final sales of GDP were actually smaller than GDP by that much, and hence real final sales of GDP grew at a 1.1% rate in the 4th quarter, compared to the real final sales increase at a 3.0% rate in the 3rd quarter, when the change in inventories was smaller….

the previously reported decrease in real exports was revised lower with this estimate, while the reported increase in real imports was revised higher, and as a result our net trade was a greater subtraction from GDP than was previously reported…our real exports fell at a 4.5% rate, rather than at the 4.0% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their shrinkage subtracted 0.55 percentage points from the 4th quarter’s growth rate….meanwhile, the previously reported 8.5% increase in our real imports was revised to an 9.0% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.27 percentage points from 4th quarter GDP….thus, our weakening trade balance subtracted a net 1.82 percentage points from 4th quarter GDP, revised from the 1.70 percentage point GDP subtraction resulting from foreign trade that was indicated in the second estimate..

finally, there was also a downward revision to real government consumption and investment in this 3rd estimate, as the real growth rate for the entire government sector went from a 0.4% rate to a 0.2% rate…real federal government consumption and investment was statistically unchanged, however, as real federal spending for defense shrunk at a 3.6% rate and subtracted 0.14 percentage points from 4th quarter GDP, while all other federal consumption and investment grew at a 2.3% rate and added 0.06 percentage points to GDP…..note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…meanwhile, real state and local consumption and investment was revised from growth at a 1.3% rate in the 2nd estimate to growth at a 1.0% rate in this estimate, as state and local investment spending grew at a 3.3 rate and added 0.11 percentage points to 4th quarter GDP, while state and local consumption spending was little changed and had no statistical impact on GDP… 

our FRED bar graph for GDP below has been updated to reflect these latest GDP revisions…each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013…in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, and the real change in Federal government spending and investment is shown in  grey…those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are therefore shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, they’ll appear below the zero line…..it’s clear that the drop in exports and the surge in imports were the major negatives in the 4th quarter, and that with the increases in personal consumption expenditures, investment and inventories, the 4th quarter could have topped the third had our trade deficit merely remained flat.. 

3rd estimate 4th quarter 2016 GDP

Personal Income up 0.4% in February, Personal Spending up 0.1%, PCE Price Index up 0.1%

as you can see from the GDP chart above, our personal consumption expenditures (PCE) in blue are usually the major metric for determining the ultimate trajectory of GDP each quarter, and hence the key monthly release that inputs into GDP each quarter is the report on Personal Income and Outlays from the Bureau of Economic Analysis, which gives us the monthly data on our personal consumption expenditures (PCE) and the monthly PCE price index, which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated…this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they’re seasonally adjusted and at an annual rate, ie, in February’s case, this report tells us what income and spending would be for a year if February’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, and in the case of this month’s report they give us the percentage change in each annual metric from January to February…

thus, when the opening line of the press release for this report tell us “Personal income increased $57.7 billion (0.4 percent) in February“, that means that the annualized figure for personal income in February, $16,438.5 billion, was $57.7 billion, or a bit less than 0.4% greater than the annualized  personal income figure of $16,380.8 billion for January; the actual change in personal income from January to February is not given…similarly, annualized disposable personal income, which is income after taxes, rose by a bit more than 0.3%, from an annual rate of an annual rate of $14,357.6 billion in January to an annual rate of $14,402.2 billion in February…the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in February, the largest contributors to the $57.7 billion annual rate of increase in personal income were a $40.7 billion increase in wages and salaries and a $6.0 billion increase in rental income…

for the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at a $7.4 billion rate, or by less than 0.1 percent, as the annual rate of PCE rose from $13,098.6 billion in January to $13,106.0 in February, after the January PCE figure was revised up from the originally reported $13,065.8 billion annually…the current dollar increase in February spending resulted from a $9.4  billion annualized increase to $8,874.9 billion in annualized in spending for services, which was partially offset by a $1.3 billion decrease to $4,231.1 billion in spending for goods….total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $7.5 billion to $13,594.2 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $808.0 billion annual rate in February, up from the revised $770.9 billion in annualized personal savings in January… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.6% in February from January’s savings rate of 5.4%…  

before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….the BEA does that with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, also included in this report….looking at Table 9 in the pdf, we see that that index rose from 112.102 in January to 112.248 in February, a month over month inflation rate that’s statistically 0.1302%, which BEA reports as an increase of 0.1 percent, following the PCE price index increase of around 0.4% in January…applying that inflation adjustment to the nominal amount of spending left real PCE statistically 0.1% lower in February, after January’s real PCE increase was revised to down 0.2% from the previously reported 0.3% decrease…note that when those price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….that result is shown in table 7 of the PDF, where we see that February’s chained dollar consumption total works out to 11,676.1 billion annually, nearly 0.1% less than January’s 11,684.8 billion… 

finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter….while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 4th quarter was represented by 11,669.8 billion in chained 2009 dollars..(that’s the same figure shown in table 3 of the pdf for the 4th quarter GDP report)…by averaging the annualized chained 2009 dollar figures for January and February, 11,684.8 billion and 11,676.1 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have data for so far….when we compare that average of 11,680.45 to the 4th quarter real PCE of 11,669.8, we find that 1st quarter real PCE has grown at a 0.365% annual rate for the two months we do have (note the math to get that annual rate: (((11 684.8 + 11 676.1) / 2) / 11 669.8)^4 = 1.00365545…that means that if March real PCE does not improve from the average of January and February, growth in PCE would add just 0.25 percentage points to the growth rate of the 1st quarter, which would be the weakest contribution from PCE since the fourth quarter of 2009…  

 

(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

April 1st graphics

rig count summary:

March 31 2017 rig count summary

natural gas supplies:

April 1 2017 natural gas supply history as of March 24

4th quarter GDP:

3rd estimate 4th quarter 2016 GDP

Posted in Uncategorized | Leave a comment

US rig count at a 17 month high, oil supplies at another record, et al

US oil prices ended the week 81 cents lower than last week’s final quote, but price quotes for Friday of this week really shouldn’t be compared to those of last week, because each references a different contract month…i’ll explain that oil pricing quirk again, because the change-over of the quoted contract month sometimes even throws me when i’m not watching for it, as it did this week…

at any give time, contracts to buy or sell oil for the coming month and for dozens of months in the future are being traded on the New York Mercantile Exchange (NYMEX), the Chicago Mercantile Exchange (CME), and several other exchanges; for instance, here’s a list of contracts for US light oil currently being traded on the CME; you’ll see they quote different prices for the same kind of oil, by month, all the way out to December 2025…however, the media and most industry publications will only quote the price of oil for the “front month” contract, or the open contract for the month closest to the current date that’s still being traded…when trading in a given front month contract stops trading, several business days before the 1st of that month, the following month’s contract becomes the front month contract, and its price is then quoted in the media as the price of oil, usually without much of an indication that the ‘price of oil’ being quoted is for delivery in a different month than the price that was quoted by the same source 24 hours earlier…at the same time, those sites that display oil price charts will switch the chart of oil prices for the month that expired with a chart of prices for the new front month, and the price history of the new current month shown by those new charts is usually slightly skewed from the prices that had been shown on that same graph over the prior month…

and that change is what happened to oil prices this week….after closing last week at $48.78 a barrel, US WTI oil contracts for April delivery again headed lower on Monday after the prior week’s strong drilling & production data, closing down 56 cents at $48.22 a barrel…at the same time, the WTI oil contract for May delivery, also being actively traded, fell 40 cents from the prior week’s close of $49.31 a barrel to close Monday at $48.91….however, that trading and those prices for May were not reported anywhere, except for on trading related websites…oil prices for April fell another 88 cents on Tuesday, closing at $47.34 a barrel, the lowest price since the November OPEC deal, as traders anticipated the release of data showing a large increase in US oil inventories…since that was the last day of trading for April oil, a few sites covering the price of oil for that day also reported that the more actively traded May contract was also down 67 cents, or 1.4%, to $48.24 a barrel….then on Wednesday, with the April oil contract no longer being traded, many of the same media sites that had reported oil prices down 88 cents to $47.34 a barrel on Tuesday, reported oil down 20 cents to $48.04 on Wednesday, barely making note of the change in the contract month…with the May contract now being quoted as the price of oil, oil then fell 34 more cents on Thursday, closing at $47.70 a barrel, even as many media reports called it the 3rd oil price decrease in a row, even though prices for each separate contract had deceased every day this week…oil pries then rose a bit on Friday, closing the week at $47.97 a barrel, as oil traders positioned themselves for any possible bullish outcome of the coming OPEC meeting in Kuwait on Sunday to review the current level of compliance to the agreed to cuts…with the mid-week contract expiration, some sites properly explained that May oil prices were down $1.34 or 2.7% for the week, while others reported the 81 cent difference between last Friday’s April oil and this Friday’s May oil..

in most articles on oil prices, the contract month that is being quoted is further complicated by the wide difference in expiration dates between the US benchmark oil price, West Texas Intermediate, usually just written as WTI, and the widely quoted international price for North Sea Brent oil…contracts for WTI expire on the 4th US business day prior to the 25th calendar day of the month preceding the contract month, whereas contracts for Brent oil expire on the last business day of the second month preceding the relevant contract month; in other words, the April Brent contract expired on February 28th, and the price for the May contract has been the quoted price of Brent oil throughout March…so for most of each month, articles citing the price of the two benchmark oils are not only quoting different oil types, but also different settlement months…May Brent oil closed this week at $50.80 a barrel, down from $51.76 a barrel the prior Friday…

this week’s natural gas prices, however, were still referencing the price for natural gas to be delivered in April, and will be until March 29th, as trading in natural gas contracts don’t expire until 3 business days before the contract month…those prices were generally up this week, rising 4 out of 5 days, and ending at $3.076 per mmBTU, after closing the prior week at $2.948 per mmBTU…still, as we’ve noted before, prices at these levels are still low enough to discourage the exploitation industry from starting new drilling projects; leaving them just maintaining what they already have going, and only starting up new rigs when prices approach $4…a chart that came in one of the mailings from John Kemp at Reuters goes a long way towards explaining what has kept natural gas prices at these depressed levels over most of the last two years…

March 23 2017 heating demand as of March 17

the above graph comes from one of the emailed package of graphs from John Kemp, senior energy analyst and columnist with Reuters (see my footnote below) and it shows the cumulative population-weighted heating degree days for the 2016-17 heating season in red, the same metric for the 2015-16 heating season in yellow, and historical average for the same metric as a white dashed graph…heating degree days are the sum of the average number of degrees below a certain temperature at which it has been determined that buildings need to be heated..,for example, if 65 °F is determined to be the temperature wherein one needs heating, a day with an average temperature of 45 °F would add 20 degree days to the total, while a day with an average temperature of 30 °F would add 35 degree days to the cumulative total…heating degree days are calculated for many areas of the US, and are used by utilities to estimate demand for their output, and are used locally to schedule deliveries of heat oil…this graph shows the result when one takes that heating degree days metric each for area of the US and weighs it based on the population of those areas…ie, if for instance, New York City with a population of 8 million has 25 heating degree days of demand on a given date, it will count for 1000 times more in the total than a county of 8,000 in Wyoming where the measure of their heating demand was 55 degree days on that date…therefore, what this graph shows us is the relative demand for heating for the whole country, from the period beginning in July of each year, a time when there’s no demand for heating… so what we see here is that the US heating needs this season remain very close to those of the record warm 2016 heating season, when cumulative heating degree days were 17% below the average…that translates into 17% lower demand for natural gas heat, and 17% lower demand for heat oil…that reduced demand is the reason that natural gas prices have stayed below $3.00 per mmBTU for most of the last two years, and why drilling for natural gas dropped to an all time low last year, and has barely recovered, which you’ll see in the next graph…

March 25 2017 rig count history to march 17

above, we have a graph of the rig count history from 1991 until last week (ie, this week’s rig count is not yet included)…this graph comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of investment and economics research, run by Dr Ed Yardeni, and it shows the oil rig count over that 26 year history in violet, the natural gas rig count over that span in green, and then shows the total rig count, which would also occasionally include a miscellaneous rig or two, in red…you can see that natural gas drilling hit its most recent peak in 2010-2011, when natural gas prices were consistently over $4 per mmBTU, while the drilling peak prior to that, in 2008, saw natural gas prices spike to near $14 per mmBTU….since 2011, however, there was only one period in 2014 that saw natural gas prices top $4 per mmBTU, and if you look close, you can see that natural gas drilling briefly picked up at that time…otherwise, natural gas drilling has been in a long term decline since that 2011 peak of 992 rigs, sliding all the way down to 81 rigs in both the first and last week of August 2016…while they’ve increased since then, note that they’re still far below the 240 to 525 rig range that natural gas drillers were deploying even as far back as the early 90s..

The Latest Oil Stats from the EIA

the oil data for the week ending March 17th from the US Energy Information Administration showed a big jump in our imports of crude oil, resulting in another large surplus of crude for the 10th week out of the past 11, pushing our supplies of oil to yet another an all time high, even as our refineries ramped up production to a more seasonal pace…our imports of crude oil increased by an average of 902,000 barrels per day to an average of 8,307,000 barrels per day during the week, while at the same time our exports of crude oil fell by 167,000 barrels per day to an average of 550,000 barrels per day, which meant that our effective imports netted out to 7,757,000 barrels per day during the week, 1,069,000 barrels per day more than the prior week…at the same time, our crude oil production rose by 20,000 barrels per day to an average of 9,129,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,886,000 barrels per day during the cited week…

during the same week, refineries reportedly used 15,801,000 barrels of crude per day, 329,000 barrels per day more than they used during the prior week, while at the same time, 618,000 barrels of oil per day were being added to oil storage facilities in the US….thus, this week’s EIA oil figures would seem to indicate that we used or stored 469,000 less barrels of oil per day than were supplied by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom -469,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil”, which means they got that balance sheet number by backing into it, using the same arithmetic we just used in explaining it...

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports rose to an average of 7,863,000 barrels per day, still 3.0% below that of the same four-week period last year…at the same time, the 4 week average of our oil exports fell to 721,000 barrels per day, still 86.4% higher than the same 4 weeks a year earlier, as our overseas exports of our surplus light oil were barely underway in early 2016…the 608,000 barrel per day increase in our crude inventories included a 708,000 barrel per day increase in our commercially available crude supplies, which was partially offset by an 89,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 18 months ago…meanwhile, this week’s 20,000 barrel per day oil production increase was all from the lower 48 states, as oil output from Alaska was unchanged from last week…the 9,109,000 barrels of crude per day that we produced during the week ending March 17th was the most we’ve produced since the week ending February 12th last year, and was more than 1.0% more than the 9,038,000 barrels per day produced during the week ending March 18th, 2016, while it was still 5.0% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US refineries were operating at 87.4% of their capacity in using those 15,801,000 barrels of crude per day, up from 85.1% of capacity the prior week, but still down from the year high of 93.6% of capacity in the first week of January, when they were processing 17,107,000 barrels of crude per day….their processing of crude oil is now on a par with the 15,820,000 barrels of crude that were being refined during the week ending March 18th, 2016, when refineries were operating at 88.4% of capacity….with the week’s refinery pickup, gasoline production from our refineries rose by 231,000 barrels per day to 15,820,000 barrels per day during the week ending March 17th, which was 0.9% more than the 9,683,000 barrels per day of gasoline that were being produced during the week ending March 18th a year ago…in addition, refineries’ production of distillate fuels (diesel fuel and heat oil) was also up, rising by 139,000 barrels per day to 4,829,000 barrels per day, which was also up by 1.8% from the 4,742,000 barrels per day of distillates that were being produced during the week ending March 18th last year…

even with the increase in our gasoline production, the EIA reported that our gasoline inventories shrunk by 2,811,000 barrels to 243,468,000 barrels as of March 17th, after they had dropped by more than 9.5 million barrels over the prior 2 weeks….that was despite the fact that our domestic consumption of gasoline fell by 54,000 barrels per day to 9,200,000 barrels per day and remains 3.0% off the year ago pace, and was because our imports of gasoline fell by 247,000 barrels per day to 325,000 barrels per day as our gasoline exports rose by 57,000 barrels per day to 592,000 barrels per day…while our gasoline supplies are now down by nearly 15.6 million barrels from the record high set 5 weeks ago, they’re only down 0.7% from last year’s March 18th high of 245,074,000 barrels, and are still 4.3% above the 233,386,000 barrels of gasoline we had stored on March 20th of 2015… 

our supplies of distillate fuels also fell this week, decreasing by 1,190,000 barrels to 155,393,000 barrels by March 17th, even as the amount of distillates supplied to US markets, a proxy for our consumption, decreased by 397,000 barrels per day to 4,012,000 barrels per day, and as our imports of distillates rose by 48,000 barrels per day to 127,000 barrels per day, because our exports of distillates rose by 253,000 barrels per day to 1,217,000 barrels per day at the same time….while our distillate inventories are now 4.2% below the bloated distillate inventories of 162,260,000 barrels that we had stored on March 18th 2016, at the end of the warm El Nino winter of last year, they are still 23.5% higher than the distillate inventories of 125,849,000 barrels that we had stored on March 20th of 2015…  

finally, with the big jump in our net oil imports considerably more than the increase in refinery demand, our commercial inventories of crude oil increased for the 10th time in 11 weeks, increasing by 4,954,000 barrels to a record high 533,110,000 barrels by March 17th…at the same time, 628,000 barrels of oil from our Strategic Petroleum Reserve was sold, which left inventories in the SPR at 693,383,000 barrels, a quantity not considered available for commercial use….thus for current commercial purposes, we finished the week ending March with 11.3% more crude oil in storage than the 479,012,000 barrels we had stored at the end of 2016, 6.3% more crude oil in storage than what was then a record 501,517,000 barrels of oil in storage on March 18th of 2016, 23.1% more crude than what was also then a record 433,217,000 barrels in storage on March 20th of 2015 and 52.0% more crude than the 350,802,000 barrels of oil we had in storage on March 21st of 2014…

This Week’s Rig Count

US drilling activity increased for the 20th time in 21 weeks during the week ending March 24th, and we also had the 8th double digit rig increase in the past 10 weeks….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 20 rigs to 809 rigs in the week ending on this Friday, which was 345 more rigs than the 476 rigs that were deployed as of the March 25th report in 2016 and the most since Oct 2nd, 2015, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014 (see graph above)…

the count of rigs drilling for oil increased by 21 rigs to 652 rigs this week, which was up from the 372 oil directed rigs that were in use a year ago, and more that double the 316 rigs working on May 27th 2016, but still down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations fell by 2 rigs to 155 rigs this week, which was still up from the 92 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008…in addition, another rig that was classified as miscellaneous was added this week, and we now have two of those, in contrast to a year ago, when there were no such miscellaneous rigs at work…  

a drilling platform that had been working offshore from Louisiana in the Gulf of Mexico was shut down this week, which reduced the current Gulf of Mexico count to 18 rigs, down from the 27 rigs that were drilling in the Gulf during the same week of 2016…that was also down from a total of 28 rigs working offshore of the US a year ago, when there was also a rig working offshore from California, in addition to the 27 rigs that were drilling in the Gulf of Mexico at the time…in addition, one of the rigs that had been set up to drill through an inland lake in Louisiana was also shut down, leaving the inland waters rig count at 4, the same as it was a year ago..

active horizontal drilling rigs increased by 15 rigs to 673 rigs this week, which is well more than double the May 27th 2016 total of 314 working horizontal rigs…that’s also up by 314 horizontal rigs from the 359 horizontal rigs that were in use in the US on March 25th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, a total of 8 vertical rigs were added this week, bringing the vertical rig count up to 78 rigs, which was also up from the 53 vertical rigs that were deployed during the same week a year ago…meanwhile, the directional rig count was down by 3 rigs to 58 rigs, which was still up from the 52 directional rigs that were deployed during the same week last year….

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 24th, the second column shows the change in the number of working rigs between last week’s count (March 17th) and this week’s (March 24th) count, the third column shows last week’s March 17th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 25th of March, 2016…          

March 24 2017 rig count summary

as you can see, the Permian basin of western Texas & southeastern New Mexico saw the largest drilling increase again, after a few weeks where not much changed in that basin…increases in the Eagle Ford of south Texas and the Barnett shale near Dallas also added to the Texas total, while the reasons for the 7 rig increase in Oklahoma aren’t so clear, since the two rig increase in the Cana Wordford are the only shale basin targeting rigs added in the state…i’d assume that the other new Oklahoma rigs were of the vertical drilling sort…also note the addition of two rigs in the Marcellus, one in Pennsylvania, and one in West Virginia, which came despite the 2 rig reduction in the natural gas rig count…gas rigs that were removed were not from a major basin, but were rather from a markdown of rigs from “other” areas, the names of which are not included in Baker Hughes summary data..

as noted, a graph that i included above was from an emailed package of graphs from John Kemp, a senior energy analyst and columnist with Reuters, who advises that his mailing list is open to anyone…you can ask for his daily digest by emailing john.kemp@tr.com or you can follow him on twitter, @ https://twitter.com/JKempEnergy where he seems to post much of what he otherwise emails…

Posted in Uncategorized | Leave a comment

February’s durable goods, new home sales, existiing home sales

widely watched reports that were released this past week were the advance report on durable goods for February and the February report on new home sales, both from the Census bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)…the week also saw the release of the Regional and State Employment and Unemployment Summary for February from the BLS, and the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which rose to +0.34 in February from –0.02 in January, after January’s index was revised from the -0.05 reported last month…as a result, the 3 month average of that index rose to +0.17 in February, up from a revised +0.02 in January, which indicates that national economic activity has been slightly above the historical trend over recent months…in addition, this week also saw the release of the Kansas City Fed manufacturing survey for March, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index at +20 in March, up from +14 in February and its highest reading since March 2011, indicating an accelerating expansion in that region’s manufacturing…

February Durable Goods: New Orders Up 1.7%, Shipments Up 0.3%, Inventories Up 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $3.9 billion or 1.7 percent to $235.4 billion in February, after January’s new orders were revised from the $230.4 billion reported last month to $231.5 billion, now 2.3% more than December’s new orders…as a result, year to date new orders are now up by 1.6% from those of 2016…the volatile monthly new orders for transportation equipment were responsible for the month’s increase, as new transportation equipment orders rose $3.3 billion or 4.3 percent to $80.4 billion, on a 47.6% increase to $12,681 million in new orders for commercial aircraft….excluding orders for transportation equipment, new orders still rose 0.4%, while excluding just new orders for defense equipment, new orders rose 2.3%….however, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $93 million or 0.1% to $64,641 million…

meanwhile, the seasonally adjusted value of February shipments of durable goods, which will be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.6 billion or 0.3 percent to $239.2 billion, after the value of January shipments was revised from from $478.3 billion to $478.3 billion, still down 0.1% from December…higher shipments of machinery led the February increase, as they increased by $0.3 billion or 0.9 percent to $31.1 billion…at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.8 billion or 0.2 percent to $385.1 billion, after December inventories were revised from $383.8 billion to $384.3 billion, now up 0.1% from December….

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, fell for the eighth time in 9 months, decreasing by just $0.2 billion to $1,114.7 billion however, following a January decrease of 0.3% to $1,114.94 billion, which was revised from the previously reported 0.4% decrease to $1,114.3 billion…a $1.1 billion or 0.1 percent decrease to $752.7 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.2% to $361,982 million…the unfilled order book for durable goods is now 1.5% below the level of last February, with unfilled orders for transportation equipment now 3.3% below their year ago level, mostly on a 4.6% decrease in the backlog of orders for commercial aircraft…

New Home Sales Reported Higher in February

the Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 592,000 homes annually during the month, which was 6.1 percent (±17.3 percent)* above the revised January annual sales rate of 558,000 new home sales and 12.8 percent (±18.0 percent)* above the estimated annual rate that new homes were selling at in February of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from February sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in January were revised from the annual rate of 555,000 reported last month to an annual rate of 558,000, and new home sales in December, initially reported at an annual rate of 536,000 and revised to a 535,000 rate last month, were revised down to a 530,000 a year rate with this report, while November’s annualized new home sales rate, initially reported at an annual rate of 592,000 and revised up to a 598,000 a year rate last month, were revised back down to a 573,000 rate with this release…

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 49,000 new single family homes sold in February, up from the estimated 41,000 new homes that sold in January and up from the 38,000 that sold in December…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $296,200, down from the median sale price of $308,200 in January and down from the median sales price of $311,300 in February a year ago, while the average February new home sales price was $390,400, up from the $355,300 average sales price in January, and up from the average sales price of $349,400 in February a year ago….a seasonally adjusted estimate of 266,000 new single family houses remained for sale at the end of February, which represents a 5.4 month supply at the February sales rate, down from the 5.7 months of new home supply reported in January…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 592,000 Annual Rate in February and A few Comments on February New Home Sales..

February Existing Home Sales 3.7% Lower

the National Association of Realtors (NAR) reported that existing home sales fell by 3.7% from January to February on a seasonally adjusted basis, projecting that 5.48 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 5.4% above the annual sales rate projected in February of a year ago….the NAR also reported that the median sales price for all existing-home types was $228,400 in February, up from the revised $227,300 in January, and 8.1% higher than in February a year earlier, which they report as “the 60th consecutive month of year-over-year gains”…..the NAR press release, which is titled “Existing-Home Sales Stumble in February“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually transpired during the month…this unadjusted data indicates that roughly 315,000 homes sold in February, down 1.3% from the 319,000 homes that sold in January, but up by 0.3% from the 314,000 homes that sold in February of last year….that same pdf indicates that the median home selling price for all housing types rose by half a percent, from a revised $227,300 in January to $228,400 in February, while the average home sales price inched up to $270,100 from the $269,500 average sales price in January, while it was up 5.8% from the $255,300 average home sales price of February a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: “Existing-Home Sales Stumble in February” and A Few Comments on February Existing Home Sales..

 

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

Posted in Uncategorized | Leave a comment