OPEC cuts still not reducing global glut; US sees the largest crude oil inventory draw this year

Both oil and natural gas prices moved higher last week, as both commodities saw larger than expected withdrawals of supplies from storage, while oil prices were also underpinned by expectations that OPEC would extend their production cuts when they meet in Vienna later this month.    An expression of confidence in that extension from Saudi energy minister Khalid al-Falih on Monday buttressed the rebound from last week’s crash, as oil rose 21 cents to close at $46.43 a barrel.  Prices then moved lower on Tuesday, closing at $45.88 a barrel, after the EIA raised its forecast on domestic crude output for this year and next, and cut its 2017 price outlook…however, when the weekly EIA report showed the largest crude oil inventory draw since December, oil prices surged as much as 4% before settling at $47.33 a barrel, a gain of 3% on the day…momentum from that rally carried into Thursday, as oil added 50 cents more to close at $47.83 a barrel, on news that top OPEC officials were pondering even deeper cuts…oil prices then slipped on Friday, after Baker Hughes reported the US oil rig count rose for the 17th straight week, but stabilized by the end of the day, with June crude closing at $47.84 a barrel, up a penny for the session and up 3.5% for the week..

OPEC’s May oil report

since the OPEC production cuts are the main factor underpinning oil prices, and hence the ongoing increases in US drilling, we’ll start by taking a quick look at OPEC May Oil Market Report (covering April OPEC & global data), which was released on Thursday of this week…we’re going to look at how much oil OPEC produced in April vis a vis global production, and then determine if they are yet meeting their intended outcome of reducing the global glut of oil that’s been building up over the past three years, as most OPEC countries were producing flat out over that period….the first table from the May report that we’ll include here is from page 60 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings are labeled…for all their official production measurements, OPEC uses data from these “secondary sources”, such as analyst’s reports from satellites and shipping data, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures… 

April 2017 OPEC cude output via secondary sources

from this table of official production data, we can see that OPEC oil output was down by a statistically insignificant 18,200 barrels per day in April, to 31,732,000 barrels per day, from a March oil production total of 31,750,000 barrels per day, a figure that was revised 178,000 barrels per day lower than what was reported last month…(for your reference, here is the table of the official March figures before these revisions)…recall that OPEC committed to reducing their production by 1.2 million barrels per day from their October levels (shown here, with Indonesia, who is no longer a member), so these figures show that the total production of the remaining 13 members is within a half percent of the level they agreed to cut back to….but note that over 60 thousand barrels of this month’s reduction came from Libya, a country that was exempt from the cuts, because their production had been disrupted by domestic unrest….news over the past few weeks indicates they’ve restored over 180,000 barrels per day of production from two oil fields in the western part of the country, and a report just a few days ago indicated that Libya’s oil production is now running above 800,000 barrels per day (bpd) for the first time since 2014, so we can thus expect that May OPEC production will be that much higher…

that expected output bounce in the May report notwithstanding, there were also interesting divergent April production figures that the OPEC members reported to the OPEC Secretariat, which are shown in the next table…

April 2017 OPEC members crude output as reported to OPEC

the above table, also from page 60 of the OPEC pdf, shows the oil production in thousands of barrels per day that each of the members reported to OPEC (for those that did report)…although this data is considered suspect because of the many incentives OPEC members have to fudge their reporta, we noticed that almost all the OPEC members reported higher production than was attributed to them by the official secondary sources…note especially that Iraq, who has been a laggard on the production cuts, reported they produced 4,531,000 barrels per day in April, vs their official figure of 4,373,000 barrels per day…likewise, Venezuela reported that they produced 2194,000 barrels per day in April, whereas the official data indicates they produced 1,956,000 barrels per day…if the reported numbers were lower than the official tallies, they might be suspect, but OPEC members have no reason to report that they produced more than they did, because higher oil output numbers would indicate that they’re not in compliance with the cuts they agreed to…so if anything, these self reported number indicate that the official output production figures may be an understatement of the oil supply that was actually available in April…

this next graphic we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from May 2015 to April 2017, and it comes from page 61 of the May OPEC Monthly Oil Market Report….the light blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale…

April 2017 OPEC report, global supply

preliminary data graphed above indicates that global oil production slipped to 95.81 million barrels per day in April, down by 0.41 million barrels per day from a March total of 96.22 million barrels per day, which was revised .040 million barrels per day higher from the 95.81 million barrels per day global oil output that was reported a month ago…that figure was also 0.83 million barrels per day higher than what was being produced globally a year ago, and more than .90 million barrels per day greater than the global oil supply of two years ago…OPEC’s production of 31,732,000 barrels per day thus represented 33.1% of what was produced globally, an increase from the 33.0% OPEC share in March, which was originally reported as 33.3%, because global supply had been underestimated last month…OPEC’s April 2016 production, excluding Indonesia, was at 31,709,000 barrels per day, so even after the production cuts, they are still producing a bit more than they were producing a year ago, and roughly 0.20 million more barrels per day than what they were producing in May of 2015, when they were supposedly producing flat out…

however, even with the four recent months of production cuts we can obviously see on the above graph, there is still a surplus of oil supply being produced globally, as the next table that we’ll include will show us..   

April 2017 global oil demand estimate via OPEC

the table above comes from page 37 of the May OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC’s forecast for oil demand by region and globally over 2017 over the rest of the table…on the “Total world” line of the third column, we’ve circled in blue the figure we’re interested in, which is their estimate for global oil demand for the current second quarter of 2017…

OPEC’s estimate is that during the 2nd quarter of this year, all oil consuming areas of the globe will be using 95.33 million barrels of oil per day, down from the 95.44 millions of barrels of oil per day they were using in the first quarter but up from the 95.12 millions of barrels of oil per day they were using in 2016…but as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with their production cuts, the world’s oil producers were still producing 95.81 million barrels per day during April…that means that even after all the production cuts have taken place, there continued to be a surplus of around 480,000 barrels per day in global oil production in April…in addition, global production for March was revised higher, to 96.22 million barrels per day, so that means the global oil surplus during March was therefore around 780,000 barrels per day, based on the revised first quarter global demand figure of 95.44 million barrels per day shown above…furthermore, February’s oil production was 0.23 million barrels per day higher than that of March, so the global oil surplus in February now looks to have been over a million barrels per day, as was January’s, which we showed when we reviewed that report three months ago…so despite 4 months of OPEC production cuts, nearly a hundred million barrels of oil have been added to the global oil glut since the 1st of the year

The Latest US Oil Data from the EIA

this week’s US oil data for the week ending May 5th from the US Energy Information Administration indicated a large drop in our refining of crude oil from the record levels of the past two weeks, but an even larger drop in our oil imports, which when combined with an increase in our oil exports, meant that refiners withdrew the most oil out of storage in any week so far this year…our imports of crude oil fell by an average of 644,000 barrels per day to an average of 7,620,000 barrels per day during the week, while at the same time our exports of crude oil rose by 155,000 barrels per day to an average of 693,000 barrels per day, which meant that our effective imports netted out to 6,927,000 barrels per day during the week, 799,000 barrels per day less than during the prior week…at the same time, our field production of crude oil rose by 21,000 barrels per day to an average of 9,314,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,241,000 barrels per day during the cited week…

during the same period, refineries reportedly used 16,759,000 barrels of crude per day, 418,000 barrels per day less than they used during the prior week, while 821,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s EIA oil figures seem to indicate that our total supply of oil from net imports, production and from storage was 310,000 more barrels per day than what refineries used…to account for that discrepancy, the EIA inserted a (-310,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the supply of oil and the consumption data balance out, which they label in their footnotes as “unaccounted for crude oil”

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports fell to an average of 8,152,000 barrels per day, still 5.0% above the imports of the same four-week period last year…the 828,000 barrel per day decrease in our total crude inventories came about on a 750,000 barrel per day withdrawal from our commercial stocks of crude oil and a 79,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 19 months ago…this week’s 21,000 barrel per day crude oil production increase resulted from a 16,000 barrel per day increase in oil output from wells in the lower 48 states and a 5,000 barrels per day increase in oil output from Alaska…the 9,293,000 barrels of crude per day that we produced during the week ending April 28th topped last week’s 20 month high and means our oil output is up by 6.2% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 5.8% from the 8,802,000 barrel per day output during the during week ending May 6th a year ago, while it’s now only 3.1% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US oil refineries were operating at 91.5% of their capacity in using those 16,759,000 barrels of crude per day, which was down from 93.3% of capacity the prior week, and down from the year’s high of 94.1% the week before that…however, the 16,759,000 barrels of crude per day that refineries used during the week ending May 5th was still 3.6% more than the 16,179,000 barrels of crude per day.that were being processed during week ending May 6th, 2016, when refineries were operating at 89.1% of capacity, and 10.7% above the 10 year average for the 1st week in May of 1,625,000 barrels of crude per day….

even with the week’s big refining pullback, gasoline production from our refineries increased by 269,000 barrels per day to 10,052,000 barrels per day during the week ending May 5th, possibly making up for thw lower than logical gasoline production we’d seen during the prior two weeks…gasoline production for the week was virtually the same as the 10,521,000 barrels of gasoline that were being produced daily during the comparable week a year ago….on the other hand, refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 145,000 barrels per day to 4,956,000 barrels per day, which was still 7.5% more than the 4,610,000 barrels per day of distillates that were being produced during the week ending May 6th last year…..

even with the big increase in gasoline production, our gasoline inventories decreased by a nominal 150,000 barrels to 241,232,000 barrels as of May 5th, after they had increased by more than 5 million barrels over the prior three weeks….gasoline supplies were reduced this week because our domestic consumption of gasoline rose by 252,000 barrels per day to 9,408,000 barrels per day, even as our imports of gasoline rose by 260,000 barrels per day to 953,000 barrels per day, while our gasoline exports fell by 15,000 barrels per day to 717,000 barrels per day….even with the increase in our gasoline supplies, however, they are still fractionally higher than the 240,564,000 barrels that we had stored on the equivalent day a year ago, 6.3% higher than the 226,710,000 barrels of gasoline we had stored on May 8th of 2015, and 13.5% more than the 212,408,000 barrels of gasoline we had stored on May 9th of 2014…

with the decrease in distillates production, our supplies of distillate fuels fell by 1,587,000 barrels to 148,768,000 barrels during the week ending May 5th; contributing to the decrease was a 112,000 barrel per day increase to 1,159,000 barrels per day in our exports of distillates, while our imports of distillates rose by just 3,000 barrels per day to 115,000 barrels per day….at the same time, the amount of distillates supplied to US markets, a proxy for our consumption, decreased by 117,000 barrels per day to 4,139,000 barrels per day….while our distillate supplies are still 4.2% below the 155,332,000 barrels that we had stored on May 6th, 2016, after the glut of heat oil that followed last year’s warm El Nino winter, they remain 16.0% higher than the distillate inventories of 128,270,000 barrels that we had stored on May 8th of 2015, following a more normal winter… 

finally, the large drop in oil imports, combined with a jump in oil exports, meant that our commercial inventories of crude oil fell for the 5th week in a row, as they decreased by 5,247,000 barrels to 522,525,000 barrels as of May 5th, in the largest decrease of 2017….nonetheless, we still finished the week with 9.1% more crude oil in storage than the 479,012,000 barrels we had stored on December 30th, and 2.8% more crude oil in storage than the 508,487,000 barrels of oil in storage on May 6th of 2016…compared equivalent dates in prior years, we ended the week with 15.6% more crude than the 451,888,000 barrels in storage on May 8th of 2015, and 42,4% more crude than the 366,951,000 barrels of oil we had in storage on May 9th of 2014…

This Week’s Rig Counts

US drilling activity increased for the 27th time in the past 28 weeks during the week ending May 12th, while drilling for oil increased for the 17th week in a row….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 885 rigs in the week ending Friday, which was 479 more rigs than the 406 rigs that were deployed as of the May 13th report in 2016, and the most drilling rigs we’ve had running since August 21st, 2015, while it was 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 9 rigs to 712 rigs this week, which was more than double the 318 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 17th 2015, while it was still down by more than half 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 one rig to 172 rigs this week, which was still almost double the 87 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…since we don’t often see a good graph that shows both oil and gas rig counts, we’ll include this one here:

May 12 2017 rig count

the above graph was posted on Friday on the twitter account of John Kemp, senior energy analyst with Reuters, and it show the US oil rig count from 1990 to this current week in red, and the natural gas rig count over the same period in yellow…here we can see that the expansion of fracking in the US really started as a boom in exploitation of the natural gas basins, as the count of horizontal drilling rigs rose from under 200 in 2005 to over 600 through the summer of 2008, before the onset of recession cut natural gas prices and hence drilling for it…when we came out of the recession, horizontal drilling picked up again, but this time it was for oil, as the horizontal rig count rose from under 400 to over 1,000 by 2011…while all drilling collapsed with the price war initialed by OPEC in November of 2014, it was natural gas rigs that fell to their lowest level in history at 81 rigs, from whence they’ve barely recovered…as we’ve pointed out, at this level of drilling for natural gas, old wells are being depleted faster than new wells are brought into production, and if US natural gas exports continue to expand as planned, we’ll facing a natural gas shortage in the US as soon a we see a normal winter…

returning to the rig count, two more of the idled offshore drilling platforms in the Gulf of Mexico offshore from Louisiana started back up this week, which bought the the Gulf of Mexico count back up to 20 rigs, still down from the 21 working in the Gulf of Mexico a year earlier….including the single rig drilling offshore from Alaska, our total offshore count is now up to 21 rigs, but also still down from a total of 22 offshore a year ago…on the other hand, one of the drilling platforms that was drilling through an inland lake in southern Louisiana was shut down this week, which cut the inland waters rig count back to 4 rigs, still up from the 2 rigs working on inland lakes a year ago…

rigs that were drilling horizontally increased by 8 to 742 horizontal rigs this week, which was the most horizontal rigs in use since April 10th of 2015 and up from the the 315 horizontal rigs that were in use in the US on May 13th 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 net of 1 vertical rig was added this week, bringing the vertical rig count up to 77, which was also up from the 53 vertical rigs that were deployed during the same week last year….however, 1 directional rig was pulled out this week, reducing the directional rig count down to 66 rigs, which was still up from the 38 directional rigs that were deployed during the same week a year ago…

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 May 12th, the second column shows the change in the number of working rigs between last week’s count (May 5th) and this week’s (May 12th) count, the third column shows last week’s May 5th active rig count, the 4th column shows the change between the number of rigs running on 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 the 13th of May, 2016…       

May 12 2017 rig count summary

as we’ve seen many times this year, the increase in drilling was all about the Permian in western Texas; except for those 8 new horizontal rigs drilling for oil there, we have almost no net changes….Louisiana’s count was unchanged, as the two rig increase offshore in the Gulf and another rig added in the northern half of the state was offset by 3 rigs shut down in the south, including the one on an inland lake…Oklahoma managed to cut two rigs despite the 2 rig increase in the Cana Woodford, as at least one that offset those was a gas rig that was shut down in the Mississippian Lime, which straddles the Kansas border…also note that Ohio added a rig, with another gas directed rig in the Utica; the Utica rig count is now at 24 rig, up from 10 rigs in Ohio’s Utica a year ago…there was no change in drilling activity this week in the states not shown above, while 2 oil rigs and one gas rig were pulled out of basins other than those listed…

 

note:  there’s more here

Posted in Uncategorized | Leave a comment

April consumer and producer prices, and retail sales; March business inventories and job openings

regular monthly reports that were released this week included the the April Consumer Price Index, the April Producer Price Index, and the April Import-Export Price Index from the Bureau of Labor Statistics, and the Retail Sales report for April, the Wholesale Trade, Sales and Inventories report for March, and the Business Sales and Inventories report for March from the Census Bureau…in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for March…

Consumer Prices Rose 0.2% in April on Higher Energy and Shelter Costs

the consumer prices increased by 0.2% in April, as higher prices for energy and shelter more than offset lower prices for most other goods and services…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.2% in April, after it had dropped 0.3% in March, but after it had risen 0.1% in February, 0.6% in January, 0.3% in December, 0.2% in November, 0.4% in October, 0.3% in September, and 0.2% in August….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 244.524 in April from 243.801 in March, which left it statistically 2.200% higher than the 239.261 index reading in April of last year…with higher prices for energy a major contributor to the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 251.290 to 251.642, which left the core index 1.883% ahead of its year ago reading of 246.992…

the volatile seasonally adjusted energy price index increased by 1.1% in April, after it had fallen by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September…thus, energy prices are now averaging 9.3% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016…prices for energy commodities were 1.3% higher in April, while the index for energy services rose by 0.9%, after falling 0.3% in March….the increase in the energy commodity index included a 1.2% increase in the price of gasoline, the largest component, and a 3.8% seasonally adjusted increase in the index for fuel oil, even as the underlying price of fuel oil fell 0.3% on an unadjusted basis…within energy services, the index for utility gas service rose by 2.2% after falling by 0.8% in March, but utility gas is still priced 12.0% higher than it was a year ago, while the electricity price index was up 0.6%, after it slipped 0.1% in March….energy commodities are still priced 14.5% above their year ago levels, with gasoline prices averaging 14.3% higher than they were a year ago.…meanwhile, the energy services price index is 4.4% higher than last April, as even electricity prices have increased by 2.4% over that period..

the seasonally adjusted food price index rose 0.2% in April, after rising 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged for the 6 prior months, as prices for food purchased for use at home rose 0.2% while prices for food bought to eat away from home also rose 0.2%, with average prices at fast food outlets up 0.3%, while average prices at full service restaurants were 0.2% higher…in the food at home categories, the price index for cereals and bakery products decreased by 0.3% as prices for flour and mixes were 1.7% lower…the price index for the meats, poultry, fish, and eggs group was down 0.6% as pork prices fell 0.7%, chicken prices fell 1.9%, and fresh fish prices fell 2.1%, while the index for dairy products was 0.2% lower on 1.3% decrease in the price of milk….the fruits and vegetables index, on the other hand, was 2.2% higher on a 5.1% increase in prices for fresh vegetables, led by an 18.0% increase in the price of lettuce….the beverages index was 0.3% lower as noncarbonated juices and drink prices fell 0.5%….lastly, prices in the ‘other foods at home’ category were on average 0.1% higher, as olives, pickles and relishes averaged a 3.1% decrease while frozen and freeze dried foods rose 1.7%…..among food at home line items, only eggs, which are still priced 15.8% lower than a year ago, and lettuce, which is now up 14.3% year over year, have seen price changes greater than 10% over the past year…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.1% in April after falling by 0.1% in March but after rising by 0.2% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% last April, May and June, the composite of all goods less food and energy goods was down 0.2%, while the more heavily weighted composite for all services less energy services was 0.1% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust April retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.3%, as prices for furniture and bedding fell 0.6% and laundry equipment fell 1.2%…the apparel price index was also 0.3% lower, led by a 2.5% decrease in prices for men’s apparel….prices for transportation commodities other than fuel were down 0.2%, as prices for new vehicles fell 0.2% and prices for used cars and trucks fell 0.5%…prices for medical care commodities were 0.8% lower on a 0.9% decrease in prescription drug prices….in addition, the recreational commodities index fell 0.5% on 5.2% lower prices for sewing machines and fabric supplies and 1.2% lower priced toys, while the education and communication commodities index was 0.7% lower on a 1.2% decrease in prices for college textbooks and a 0.9% decrease in prices for computer software…lastly, a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 1.9% on a 4.5% increase in prices for cigarettes…

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in owner’s equivalent rent, and a 2.4% increase in lodging away from home at hotels and motels, while the household operations services index was up 0.1%….the index for medical care services was unchanged as prices for hospital services rose 1.0% while physicians services fell 1.2%…meanwhile, the transportation services index was 0.2% lower on a 1.6% decrease in car and truck rental and a 2.9% decrease in intercity train fare…the recreation services price index was unchanged, as higher video and audio services were offset by lower admissions and club fees…the index for education and communication services was 0.2% lower as charges for wireless telephone services were 1.7% lower…lastly, the index for other personal services was up 0.1% as laundry and dry cleaning services were 0.4% higher…among core prices, only televisions, which are still 17.9% cheaper than a year ago, and wireless phone services, which have now dropped 12.9% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude.. 

April Retail Sales Up 0.4% after March Sales Revised Higher

this week’s retail sales report for April was preceded by an April 26th benchmark revision based on the results of the 2015 Annual Retail Trade Survey, which revised prior estimates of retail sales all the way back to 1992…thus this release reports changes from that revision, as if the prior reports we’ve covered had never been published…from that revised figure for March then, the Advance Retail Sales Report for April (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $474.9 billion for the month, which was a increase of 0.4 percent (±0.5%)* from March sales of $473.1 billion and 4.5 percent (±0.9 percent) above the adjusted sales of April of last year…March sales were originally reported at $470.8 billion, down 0.2% from February; they are now indicated to have risen 0.1%….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 3.6%, from $484,144 in March to $466,734 in April, while they were up 1.0% from the $ 461,954 million of sales in April a year ago…..

once again, we are including below the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf….taking into account the benchmark revision, the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from March to April in the first sub-column, and then the year over year percentage change for those businesses since last April in the 2nd column; the second pair of columns gives us the revision of last month’s March advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the February to March change under “Feb 2017 revised” and the revised March 2016 to March 2017 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance March estimates, before the benchmark revision, is here….

April 2017 retail sales table

because April consumer prices were generally lower across the board, real sales for April will tend to be higher than those shown above; the exceptions are for food, where prices rose 0.2%, and for gasoline sales, where prices rose 1.2%…ie, the 0.2% food price increase, combined with the 0.4% decrease in grocery store sales, would imply that real food consumption was down by 0.6%…on the other hand, the 0.6% decrease in furniture prices implies a real increase of 0.1% in the quantity of furniture sold, despite the 0.5% decrease in furniture store sales…likewise, the 0.8% nominal increase in sales at auto dealerships implies at least a 1.0% increase in real unit auto sales, since new vehicles prices were down 0.2% and prices for used cars and trucks were 0.5% lower…without working out the precise details on an item by item basis, we’d estimate that real retail sales were up around 0.6% in April, maybe more, in a strong start to 2nd quarter PCE…

Producer Prices Rose 0.5 in April on Higher Food and Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in April, as prices for finished wholesale goods increased 0.5%, while margins of final services providers increased by 0.4%…this followed a March that indicated the PPI was 0.1% lower, with prices for finished wholesale goods down 0.1%, while margins of final services providers also decreased by 0.1%, and a February report that indicated the PPI was 0.3% higher, with prices for finished wholesale goods up 0.3%, while margins of final services providers increased by 0.4%….on an unadjusted basis, producer prices are now 2.5% higher than a year earlier, up from the 2.3% YoY increase indicated a month ago, for the largest year over year increase since February 2012…

as noted, the price index for final demand for goods, aka ‘finished goods’, rose by 0.5% in April, after falling by 0.1% in March, but after rising by 0.3% in February, 1.0% in January, 0.6% in December, 0.1% in November, 0.3% in October, and 0.5% in September.. the index for wholesale energy prices rose 0.8%, the price index for wholesale foods rose 0.9%, and the index for final demand for core wholesale goods (ex food and energy) rose 0.3%…the largest wholesale energy price change was a 5.2% increase in wholesale prices for liquefied petroleum gas, while the wholesale food price index moved up on increases of 19.8% for fresh fruits and 28.5% for fresh and dry vegetables….among wholesale core goods, prices for industrial chemicals increased 1.2%, while wholesale prices for cigarettes moved up 2.2%..

at the same time, the index for final demand for services rose by 0.4% in April, after falling by 0.1% in March but after after rising by 0.4% in February, and by 0.2% in January, as the index for final demand for trade services was down 0.3%, while the index for final demand for transportation and warehousing services rose 0.7%, and the index for final demand for services less trade, transportation, and warehousing services was 0.8% higher….among trade services, seasonally adjusted margins for major household appliances retailers decreased 8.5% while margins for fuels and lubricants retailers fell 14.6%…among transportation and warehousing services, margins for airline passenger services were 2.0% higher…in the core final demand for services index, margins for loan services (partial) rose 4.1% and margins for securities brokerage, dealing, and investment advice rose 6.6%..

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after rising 0.1% in March, 0.4% in February, 1.1% in January, and by a revised 0.6% in December… the price index for intermediate energy goods rose 1.3%, while prices for intermediate processed foods and feeds fell 0.6%, and the core price index for processed goods for intermediate demand less food and energy was 0.5% higher…prices for intermediate processed goods are now 5.4% higher than in April a year ago, now the sixth consecutive year over year increase, after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

meanwhile, the price index for intermediate unprocessed goods rose 3.3% in April, after falling 4.2% in March and 0.2% in February, but after rising 4.0% in January and 7.3% in December…the index for crude energy goods rose 14.1% as crude oil prices rose 15.7%, while the price index for unprocessed foodstuffs and feedstuffs fell 2.3%, as the index for slaughtered hogs fell 10.7%…in addition, the index for core raw materials other than food and energy materials fell 0.7%, as wholesale prices for iron and steel scrap fell 5.2% and wholesale prices for paper scrap fell 6.3% … this raw materials index is now up 13.9% from year ago, in contrast to a prior year over year decrease of 26.4% that we saw just 17 months ago, in November of 2015…

lastly, the price index for services for intermediate demand was 0.9% higher in April, after being 0.2% lower in March, 0.5% higher in February, and 0.2% higher in January and in December.. the index for trade services for intermediate demand was 0.7% higher, as margins for chemical products wholesalers and hardware, building material, and supplies wholesalers both rose 2.5%…the index for transportation and warehousing services for intermediate demand was up 0.4%, as intermediate prices for air transportation of passengers rose 1.9%…meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand rose 1.0%, as the intermediate price index for loan services (partial) rose 4.5% percent…over the 12 months ended in February, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.6% higher than it was a year ago…  

March Business Sales Unchanged, Business Inventories Up 0.2%

after the release of the April retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for March (pdf), which incorporates the revised March retail data from that April report and the earlier published March 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 $1,361.0 billion in March, actually unchanged (±0.1 percent)* from February’s revised sales, but up 6.5 percent (±0.4 percent) from March sales of a year earlier…note that total February sales were concurrently revised up from the originally reported $1,360.7 billion to $1,361.0 billion, still a 0.2% increase from January….manufacturer’s sales fell 0.1% to $478,815 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, rose 0.1% to $416,686 million, while wholesale sales were virtually unchanged at $465,492 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,840.8 billion at the end of March, up 0.2 percent (±0.1%) from the end of February, and 2.6 percent (±0.3%) higher than in March a year earlier…at the same time, the value of end of February inventories was revised down from the $1,839.9 billion reported last month to $1,836,877 million, now just 0.2% higher than January….seasonally adjusted inventories of manufacturers were estimated to be valued at $629,747 million, statistically unchanged from February, and inventories of retailers were valued at $616,522 million, 0.5% more than in February, while inventories of wholesalers were estimated to be valued at $594,563 million at the end of March, 0.2% higher than in February… 

Job Quitting Increases in March; Job Openings, Hiring, and Layoffs Little Changed

the Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 61,000 to 5,743,000 in March, after February job openings were revised down 61,000 from the originally reported 5,743,000…March’s jobs openings were still down from the 5,852,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 3.8% in March, while it was down from the 3.9% rate of March a year ago…(details on job openings by industry and region can be viewed in Table 1)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in March, seasonally adjusted new hires totaled 5,260,000, up by 11,000 from the revised 5,249,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed remained unchanged at 3.6% in March, which was down from the 3.7% hiring rate in March a year earlier (details of hiring by sector since October are in table 2)….meanwhile, total separations rose by 80,000 to 5,088,000 in March, as the separations rate as a percentage of the employed rose from 3.4% to 3.5%, same as a year ago (see table 3)…subtracting the 5,071,000 total separations from the total hires of 5,314,000 would imply an increase of 178,000 jobs in March, more than double the revised payroll job increase of 79,000 for March reported in the April establishment survey last week but still within the expected +/-115,000 margin of error in these incomplete samplings

breaking down the seasonally adjusted job separations, the BLS founds that 3,116,000 of us voluntarily quit our jobs in March, up from the revised 3,036,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, while it was up from 2.0% a year earlier (see details in table 4)….in addition to those who quit, another 1,615,000 were either laid off, fired or otherwise discharged in March, up by 21,000 from the revised 1,594,000 who were discharged in February, as the discharges rate remained unchanged at 1.1% of all those who were employed during the month…meanwhile, other separations, which includes retirements and deaths, were at 357,000 in March, down from 378,000 in February, for an ‘other separations rate’ of 0.2%, down from 0.3% in February and in March of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release…   

 

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

Posted in Uncategorized | Leave a comment

tables and graphs for May 13th

retail sales:

April 2017 retail sales table

rig count summary:

May 12 2017 rig count summary

rig count graph:

May 12 2017 rig count

official OPEC crude production:

April 2017 OPEC cude output via secondary sources

reported OPEC crude production:

April 2017 OPEC members crude output as reported to OPEC

global oil supply:

April 2017 OPEC report, global supply

global oil demand:

April 2017 global oil demand estimate via OPEC

Posted in Uncategorized | Leave a comment

oil prices crash to 5 month low; OPEC well drilling increases even as oil output cut extension is affirmed

this past week saw oil prices crash back to levels we last saw before OPEC announced their production cuts at the end of November, which, if it holds, should serve to take some wind out of the sails of that drilling surge we’ve been seeing in this country over the last 6 months…the ability of OPEC ‘s cuts to relieve the oil glut had been questioned for some time now, but it was questions as to whether Russia would cooperate or not that precipitated the big Thursday selloff, that temporarily saw oil prices fall more than 8% in one day, before recovering a bit…

after closing last week at $49.33 a barrel, the price of US crude oil for June delivery continued falling on Monday, ending the day at $48.84 a barrel, as rising crude output from Libya and increased U.S. drilling threatened to reverse the effects of the OPEC production cuts…prices then tumbled $1.18 a barrel in a late day selloff on Tuesday, as the latest Reuters survey of OPEC production that showed compliance had fallen slightly was accompanied by a slew of other bearish news, including soaring fuel oil exports from Iraq and ongoing elevated crude exports from other OPEC countries, with June oil closing at $47.66 a barrel, the lowest front-month contract price since March 21st…oil  prices then inched back up on Wednesday, closing at $47.82 a barrel, even as the EIA inventory data showed a lower than expected drawdown of 930,000 barrels, against market estimates of as much as 3 million barrelsoil prices then crashed on Thursday to their lowest level since the OPEC deal was announced, apparently after a Russian spokesman said no decision had yet been made on extending the oil output cut production deal, with US crude closing down $2.30 a barrel, or 4.8% at $46.47…prices continued falling in after hours trading Thursday evening, and were down as much as 3.9% more to $43.76 a barrel during Friday morning trading in Asia, before recovering to above the prior close before the US markets opened on Friday…US oil prices then bounced back from those 5 month lows in US trading on Friday, following assurances by the Saudis that Russia was ready to join OPEC in extending production cuts, as bargain hunters pushed prices back up 70 cents to close the week at $46.22 a barrel, still a loss of 6.3% for the week

since we’re just off of 5 month lows for the price of oil, we’ll take a quick look at what a graph of the track of recent prices looks like….

May 6th 2017 oil price chart

the above graph below is a screenshot of the interactive oil price graph at Trading Economics, an online platform that provides historical data, economic forecasts, and trading recommendations…each bar on the above graph represents oil prices for one day of oil trading between November 10, 2016 and May 5th, wherein green bars represent days when the price of oil went up, and red bars represent days when the price of oil went down…on green or up days, the day’s starting oil price is at the bottom of the bar and the price at the end of the day is at the top of the bar, while on red down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar…this type of graph is called a candlestick, as the range of oil prices outside of the opening and closing price for any given period is indicated by a thin ‘wick’ above or below the “candlestick” part of the graph…thus we can see that on Friday morning, even though the price of oil was up 70 cents on the day, the price had briefly dipped below $44 a barrel in off hours trading…this graph also includes trading at the end of November, just before OPEC announced their production cuts on November 30th…after that announcement, prices jumped 14.2% in three days, and then continued to rise to $54 by late December, staying in the $51 to $54 range for 3 months….although we’ve just seen oil price drop around 15% over the past three weeks, my sense is that the bloom came off the OPEC rose in early March, when the price of oil broke out of its trading range and fell nearly 10%, as US crude supplies ran a streak of nine new record highs in a row….i think oil prices would have stayed below $50 a barrel since then, had it not been for the US missile attack on Syria, which precipitated the 10% price spike that you see on the chart above at the end of March into early April…absent that, this week’s drop can be seen as a confirmation and continuation of the price drop that started in early March…

The Latest US Oil Data from the EIA

this week’s US oil data for the week ending April 28th from the US Energy Information Administration indicated a substantial drop in our oil imports, which was offset by an almost as large drop in our oil exports, and a modest pullback in our refining of crude from last week’s record levels, with the net result that we had to take a small amount of oil out of storage to meet refining needs for the fourth week in a row…our imports of crude oil fell by an average of 648,000 barrels per day to an average of 8,264,000 barrels per day over the week, while at the same time our exports of crude oil fell by 614,000 barrels per day to an average of 538,000 barrels per day, which meant that our effective imports netted out to 7,726,000 barrels per day during the week, just 34,000 barrels per day less than during the prior week…at the same time, our field production of crude oil rose by 28,000 barrels per day to an average of 9,293,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 17,019,000 barrels per day during the cited week…

at the same time, refineries reportedly used 17,177,000 barrels of crude per day, 108,000 barrels per day less than they used during the prior week, while 343,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s EIA oil figures seem to indicate that our total supply of oil from net imports, production and from storage was 185,000 more barrels per day than what refineries used…to account for that discrepancy, the EIA inserted a -185,000 barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the supply of oil and the consumption data balance out, which they label in their footnotes as “unaccounted for crude oil”

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports rose to an average of 8,216,000 barrels per day, still 4.9% above the imports of the same four-week period last year…the 343,000 barrel per day decrease in our total crude inventories came about on a 133,000 barrel per day withdrawal from our commercial stocks of crude oil and a 210,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 19 months ago…this week’s 28,000 barrel per day crude oil production increase resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states and a 3,000 barrels per day increase in oil output from Alaska…the 9,293,000 barrels of crude per day that we produced during the week ending April 28th topped last week’s 20 month high and is now up by 6.0% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 4.0% from the 8,938,000 barrel per day output during the during week ending April 29th a year ago, while it was still 3.3% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US oil refineries were operating at 93.3% of their capacity in using those 17,177,000 barrels of crude per day, which was down from 94.1% of capacity the prior week, even as this week’s oil throughput was still the 2nd most oil we’ve refined in any week on record…the 17,177,000 barrels of crude per day refinery throughput was also 7.4% more than the 15,986,000 barrels of crude per day.that were being processed during week ending April 29th, 2016, when refineries were operating at 89.7% of capacity…

even with the week’s nominal refining pullback, gasoline production from our refineries increased by 73,000 barrels per day to 9,783,000 barrels per day during the week ending April 28th, which was still a bit less than the 9,811,000 barrels of gasoline that were being produced daily during the comparable week a year ago….in addition, refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 38,000 barrels per day to 5,101,000 barrels per day, which was 11.2% more than the 4,589,000 barrels per day of distillates that were being produced during the week ending April 29th last year…..

with the increase in gasoline production, our gasoline inventories increased by a nominal 191,000 barrels to 241,232,000 barrels as of April 28th, after they had increased by more than 4.9 million barrels over the prior two weeks….this week’s lower gasoline surplus came about because our imports of gasoline fell by 223,000 barrels per day to 693,000 barrels per day, while our gasoline exports rose by 107,000 barrels per day to 732,000 barrels per day….meanwhile our domestic consumption of gasoline fell by 50,000 barrels per day to 9,156,000 barrels per day, and continues to run at a pace 3% below that of a year ago… with the increase in our gasoline supplies, they are now just a small fraction off the 241,795,000 barrels that we had stored on the equivalent day a year ago, while they are 5.9% higher than the 227,852,000 barrels of gasoline we had stored on May 1st of 2015, and 13.2% more than the 213,180,000 barrels of gasoline we had stored on May 2nd of 2014…

meanwhile, even with the nominal increase in distillates production, our supplies of distillate fuels still fell by 562,000 barrels to 150,355,000 barrels during the week ending April 28th, because the amount of distillates supplied to US markets, a proxy for our consumption, increased by 589,000 barrels per day to 4,256,000 barrels per day…that was even as our exports of distillates fell by 34,000 barrels per day to 1,037,000 barrels per day and as our imports of distillates rose by 58,000 barrels per day to 112,000 barrels per day at the same time…while our distillate inventories are still 4.2% below the 156,979,000 barrels that we had stored on April 29th, 2016, following last year’s warm El Nino winter, they remain 15.0% higher than the distillate inventories of 130,773,000 barrels that we had stored on May 1st of 2015, following a more normal winter… 

finally, with a near record amount of crude still going to our refineries, our commercial inventories of crude oil fell for the 4th week in a row, as they decreased by 930,000 barrels to 527,772,000 barrels as of April 28th….nonetheless, we still finished the week with 10.2% more crude oil in storage than the 479,012,000 barrels we had stored on December 30th, and 3.1% more crude oil in storage than what was then a record high of 512,095,000 barrels of oil in storage on April 29th of 2016…we also ended the week with 16.2% more crude than the 454,079,000 barrels in storage on May 1st of 2015, and 44.2% more crude than the 366,004,000 barrels of oil we had in storage on May 2nd of 2014…

This Week’s Rig Counts

US drilling activity increased for the 26th time in the past 27 weeks during the week ending May 5th, but it was the smallest increase in the past 9 weeks….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 7 rigs to 877 rigs in the week ending Friday, which was 462 more rigs than the 415 rigs that were deployed as of the May 6th report in 2016, and the most drilling rigs we’ve had running since August 28th, 2015, while it was 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 6 rigs to 703 rigs this week, which was more than double the 328 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 24th 2015, while it was still down by more than half 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 also rose by 2 rigs to 173 rigs this week, which was also more than double the 86 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…meanwhile, one of the rigs that was classified as miscellaneous was shut down this week, leaving one, same as the miscellaneous rig count of a year ago…

one of the idled offshore drilling platforms offshore from Louisiana in the Gulf of Mexico started back up this week, which bought the the Gulf of Mexico count back up to 18 rigs, still down from the 23 working in the Gulf of Mexico a year earlier….the week also saw the first drilling offshore from Alaska this year, which brought the total offshore count up to 19 rigs, also still down from a total of 24 offshore a year ago…in addition, there was an additional drilling platform set up on an inland lake in southern Louisiana this week, which took the inland waters rig count up to 5 rigs, up from the 3 rigs on inland lakes a year ago…

rigs that were drilling horizontally increased by 4 to a two year high of 734 horizontal rigs this week, which was up from the the 318 horizontal rigs that were in use in the US on May 6th 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 net of 4 directional rigs were added this week, bringing the directional rig count up to 67, which was also up from the 44 directional rigs that were deployed during the same week last year….however, 1 vertical rig was pulled out this week, reducing the vertical rig count down to 76 rigs, which was still up from the 53 vertical rigs that were deployed during the same week a year ago…

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 May 5th, the second column shows the change in the number of working rigs between last week’s count (April 28th) and this week’s (May 5th) count, the third column shows last week’s April 28th active rig count, the 4th column shows the change between the number of rigs running on 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 the 6th of May, 2016…       

May 5 2017 rig count summary

as you can see, there were a lot of changes this week, despite the smaller net increase…by itself, that 7 rig increase in the Permian basin of western Texas and southeast New Mexico could have accounted for the entire week’s increase, while other Texas basins saw no net change…the 4 rig increase in Louisiana includes the one in the Haynesville, and the aforementioned Gulf of Mexico and inland lakes rigs…meanwhile, the 7 rig drop in Oklahoma looks like it can be accounted for in total by rig shutdowns in the three Woodford basins and in the Mississippian, which straddles the Kansas border…the 3 rig drop in the Marcellus includes one in Pennsylvania, one in West Virginia, and one in New York…i had missed that the March 17th startup of that well in New York had targeted the Marcellus, assuming they wouldn’t try fracking in a state where it was banned; now that rig has shut down….also note that the total count for the major basins is negative; that’s because 6 oil rigs and 4 gas rigs started drilling in other unnamed basins…we would venture a guess that one of them is on the Alaskan north slope, where they are trying fracking for the first time…another might be in the Rogersville shale, since Kentucky, not shown above, also added a drilling rig this week, in their first drilling since December 2nd…(NB: after further research, the new Kentucky rig proved to be a directional rig in Bell county, outside of the Rogersville on most maps)

International Rig Counts for March

Baker Hughes also released the international rig counts for April on Friday, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end….Baker Hughes reported that an average of 1,917 rigs were drilling for oil and natural gas around the globe in April, which was down from the 1985 rigs that were drilling around the globe in March, but up from the 1,424 rigs that were working globally in April of last year….another Spring-thaw related pullback in Canadian drilling was the reason for the drop, the 2nd global decrease after 9 months of increases, as the average Canadian rig count fell to 108 rigs in April from 253 rigs in March, which was still up from the 41 Canadian rigs that were deployed in March a year earlier, while the average US rig count rose from 789 rigs in March to 853 rigs in April, which was also up from the average of 437 rigs that were working in the US in April a year ago….outside of Northern America, the International rig count rose by 13 rigs to 956 rigs in April, which was also up from 946 international rigs a year ago, as increases in drilling in the Middle East, Asia and Africa were only partially offset by smaller decreases in drilling activity in Latin America and Europe..

drilling rigs deployed in the Middle East increased by 3 rigs to 389 rigs in April, up from 384 rigs a year earlier, after their drilling activity had increased by 4 rigs in March…both Pakistan and OPEC member Iraq added 3 rigs for the month, as the Pakistan count rose to 24 rigs, up from 23 rigs a year ago, while the Iraqis had 46 rigs deployed, up from 43 rigs a year earlier…on the other hand, Egypt shut down 3 rigs over the month, which cut them back to 27 active rigs, down from 30 rigs a year earlier…other drilling rig changes in the region included OPEC members Qatar and Abu Dhabi, who added one rig each, bringing them up to 12 rigs and 49 rigs respectively, while Kuwait and Oman shut down one rig each, cutting them back to 53 rigs and 56 rigs respectively…the Saudis stood pat with 119 rigs, which was down from the 123 rigs they were operating a year ago..

at the same time, drilling activity in the Asia-Pacific region was up by a net of 7 rigs to 205 rigs in March, which was also up from the 179 rigs working in the region a year earlier…Australia added 3 rigs and now have 16 rigs active, up from 6 rigs a year earlier…the Japanese started drilling for the first time this year with 3 rigs, also up from none a year ago…2 rigs were started offshore from China, where there are now 19 rigs active, down from 26 offshore rigs a year ago…Myanmar also added 2 rigs and now have 3 rigs working, same as a year ago…the Philippines also added a rig and now have two, same as a year ago…on the other hand, Brunei, Bangladesh, and Thailand all pulled out rigs in April, which left Brunei and Bangladesh with none, and left Thailand with 13 rigs still working…

meanwhile, the Latin American region saw their active drilling rig count decrease by a net of 3 rigs to 182 rigs, down from 203 rigs in April of last year, and down from 321 rigs as recently as September of 2015, as the region had idled 92 rigs over the first 6 months of 2016…Argentina shut down 9 rigs during the month, which cut their total back to 49 rigs, down from 73 rigs a year ago…Bolivia pulled out 2 rigs and thus had 3 active during the month, also down from 5 rigs a year ago, and Brazil cut back one rig and now has 15 active…on the other hand, Mexico added 4 rigs and thus had 22 rigs active, still down from 23 rigs a year earlier…OPEC member Venezuela added 2 rigs, bringing their total to up to 56 rigs, down from 69 rigs a year earlier.. .in addition, Trinidad added a rig and now has 7 rigs active, both Peru and Chile added a rig each, giving them both 2 rigs, with Peru up from 1 rig a year ago and Chile still down from 3 rigs a year ago…

drilling activity was also lower Europe, decreasing by 3 rigs to 91 rigs in April, which was still up from the 90 rigs that were working in Europe last April…Turkey shut down 2 rigs, leaving 21, which left them down from 29 rigs a year ago…in addition, offshore platforms were idled in several countries…Germans also shut down 2 rigs, leaving 2 active, down from 4 rigs a year earlier….Italy and Sakhalin Island also shut down 1 rig each, leaving them with 3 rigs and 11 rigs respectively…at the same time, Norway added two offshore figs and now have 17 rigs offshore, same as a year ago, and Austria started up their first rig in 2 years…

meanwhile, drilling on the African continent outside of Egypt saw a net increase of 9 rigs to 89 rigs in April, which was still down from the 90 rigs working in Africa last year at this time…OPEC member Algeria added 6 rigs and now have 57 rigs active, up from 55 a year ago…OPEC member Angola added two rigs and now has 4 rigs active…in addition, Gabon added their first rig since June of last year…finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China’s offshore area, with an average of 19 rigs active in April, were included in the Asian totals here, apparently based on satellite intel, which is also the way much of the international oil production and export data is collected…

Posted in Uncategorized | Leave a comment

April’s jobs report; March incomes and outlays, trade deficit, construction spending, and factory inventories

the major economic releases from the past week that we’ll review today include the Employment Situation Summary for April from the Bureau of Labor Statistics, and four March reports that include metrics which were either estimated or included in last week’s advance estimate of 1st quarter GDP:  the March report on Personal Income and Spending from the Bureau of Economic Analysis, the Commerce Dept report on our international trade in goods and services for March, and the March report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for March, both from the Census Bureau…in addition, the Consumer Credit Report for March was released by the Fed this week, and it showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $16.4 billion, or at a 5.2% annual rate, as non-revolving credit expanded at a 6.2% annual rate to $2,805.8 billion and revolving credit outstanding grew at a 2.4% rate to $999.8  billion…

privately issued reports released this week included the ADP Employment Report for April, the light vehicle sales report for April from Wards Automotive, which estimated that vehicles sold at a 16.81 annual rate in April, up from the 16.53 million rate in March, but down 3% from the 17.23 million annual rate in April a year ago, and the Mortgage Monitor for March (pdf) Black Knight Financial Services, which indicated that mortgage delinquencies fell 14.08% in March to their lowest rate in 11 years, while foreclosure starts rose 4.15% to 60,030, still 17.2% lower than a year ago….in addition, the week saw both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the April Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 54.8% in April, from 57.2% in March, which suggests a slower expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 57.5% in April from 55.2% in March, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in April…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 211,000 Jobs in April, Unemployment Rate Drops to 4.4%

the Employment Situation Summary for April indicated a modest increase in payroll job growth, while the employment rate rose even as the participation rate dropped…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 211,000 jobs in April, after the previously estimated payroll job increase for March was revised down from 98,000 to 79,000, while the payroll jobs increase for February was revised up from 219,000 to 232,000…that means that this report represents a total of 205,000 more seasonally adjusted payroll jobs than were reported last month, a bit above the past year’s average of 186,000 jobs per month…the unadjusted data shows that there were actually 1,026,000 more payroll jobs extant in April than in March, as seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were normalized by the seasonal adjustments…

seasonally adjusted job increases in April were spread through throughout both the goods producing and the service sectors, with only the information sector losing 7,000 jobs on a seasonally adjusted basis, as telecommunications companies cut 5,300 employees….the leisure and hospitality sector added 55,000 jobs, with the addition of 26,200 spots in bars and restaurants….the broad professional and business services sector added 39,000 jobs, as 9,900 more than normal for this time of year were employed in services to buildings….employment in health care and social assistance rose by 36,800, with the addition of 17,100 jobs in individual and family services…meanwhile, 19,000 more were employed by financial services, with the addition of 14,000 jobs by insurance carriers…in addition, the other major sectors, including construction, manufacturing, mining, retail, wholesale trade, transportation and warehousing, utilities, education, and government, all also saw small increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $26.19 an hour in April, after it had increased by a revised 2 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents to $21.96 an hour…employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.4 hours in April, after the March workweek was revised 0.1 hour lower, while hours for production and non-supervisory personnel rose to 33.7 hours after 8 months at 33.6 hours…in addition, the manufacturing workweek was up 0.1 hours at 40.7 hours, while average factory overtime decreased by 0.1 hours to 3.2 hours…

meanwhile, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 156,000 to 153,156,000, while the similarly estimated number of those unemployed fell by 146,000 to 7,056,000; which should have meant a net 10,000 increase in the total labor force, but the BLS logged it as a 12,000 increase…since the working age population had grown by 174,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 162,000 to 94,375,000….with the increase of those in the labor force a bit smaller than the increase in the civilian noninstitutional population, it was enough to lower the labor force participation rate 0.1% to 62.9%….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 60.2%…in addition, the decrease in the number unemployed was also large enough to lower the unemployment rate from 4.5% to 4.4%….meanwhile, the number who reported they were involuntarily working part time fell by 81,000 to 5,272,000 in April, which was also enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.9% in March to 8.6% in April, the lowest since November 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.. 

March Personal Income Rose 0.2%, Personal Spending Little Changed, PCE Price index Down 0.2%

this week’s Monday release of the March Income and Outlays report from the Bureau of Economic Analysis was actually concurrent with the release of the advance report on 1st quarter GDP on the prior Friday, and much of the data in this report has already been included in that report…and like that report, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if March’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from February to March….thus, when the opening line of the press release for this report tell us “Personal income increased $40.0 billion (0.2 percent) in March…“, it means that the annualized figure for all types of personal income in March, $16,472.8 billion, was $40.0 billion, or more than 0.2% greater than the annualized personal income figure for February; the actual increase in personal income in March over February is not given….similarly, disposable personal income, which is income after taxes, also rose by more than 0.2%, from an annual rate of $14,393.5 billion in February to an annual rate of $14,428.5 billion in March…

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for March, which were included in the change in real PCE in 1st quarter GDP that we reviewed last week, rose at a $5.7 billion annual rate to a level of $13,099.5 billion in consumer spending annually, less than a 0.1% increase from February, which itself was revised down from the originally reported annual rate of $13,106.0 billion to $13,093.7 billion…the current dollar increase in March spending included a $34.0 billion annualized increase in spending for services, offset by a $19.6 billion decrease in annualized spending for durable goods, and a $8.7 billion decrease in annualized spending for non durable goods…total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $4.9 billion to $13,579.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $849.1 billion annual rate in March, up from the revised $819.0 billion in annualized personal savings in February…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.9%, from 5.7% in February, which itself was originally reported at 5.6%..

while our personal consumption expenditures accounted for 68.8% of our first quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption…..that’s done with the price index for personal consumption expenditures, which is also included in this report, which is a chained price index based on 2009 prices = 100….from Table 9 in the pdf for this report, we find that that index fell from 112.264 in February to 112.005 in March, giving us a negative month over month inflation rate of -0.2307%, which the BEA reports as a decrease of -0.2%….at the same time, Table 11 gives us a year over year PCE price index increase of 1.8%, and a core price increase, excluding food and energy, of 1.6% for the past year, both still below the Fed’s inflation target….applying the March inflation adjustment to the change in March PCE shows that real PCE was up 0.2756%, which BEA reports as a 0.3% increase in their press release and in the tables…note that when those PCE price indexes are applied to a given month’s annualized current dollar PCE, it yields that month’s annualized real PCE in chained 2009 dollars, which aren’t really dollar amounts at all, but merely the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP…

March Trade Deficit Little Changed as Lower Imports Offset Lower Exports

our trade deficit was slightly lower in March, after our February deficit was revised slightly higher…the Census report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit fell by $0.05 billion to $43.71 billion in March, from a February deficit that was revised from the originally reported $43.56 billion to $43.76 billion…the value of our March exports fell by $1.7 billion to $191.0 billion on a $2.1 billion decrease to $126.3 billion in our exports of goods and an increase of $0.4 billion to $64.7 billion in our exports of services, while our imports also fell $1.7 billion to $234.7 billion on a $1.7 billion decrease to $191.8 billion in our imports of goods and a less than $0.1 billion decrease to $42.9 billion in our imports of services…export prices averaged 0.2% higher in March, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.2% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage…

the decrease in our March exports of goods came about as a result of lower valued exports of industrial supplies and materials and of automotive goods, offset by an increase in our exports of capital goods…referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $1,779 million to $36,586 million on a $617 million decrease in our exports of fuel oil, a $595 million decrease in our exports of other petroleum products, a $253 million decrease in our exports of crude oil, and a $224 million decrease in our exports of natural gas….in addition, our exports of automotive vehicles, parts, and engines fell by $851 million to $12,959 million on $814 million lower exports of passenger cars, and our exports of consumer goods fell by $588 million to $16,553 million on a $695 million decrease in our exports of pharmaceuticals and a $418 decrease in our exports of gem diamonds….partially offsetting those decreases, our exports of capital goods rose by $696 million to $43,561 million on a $377 million increase in our exports of engines for civilian aircraft and a $364 million increase in our exports of telecommunications equipment, our exports of foods, feeds and beverages rose by $290 million to $10,809 million, and our exports of other goods not categorized by end use rose by $421 million to $5,356 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of all categories of goods other than passenger cars were responsible for the decrease in March imports…our imports of capital goods fell by $920 million to $50,311 million on a $326 million decrease in our imports of civilian aircraft and a $240 million decrease in our imports of computers….our imports of industrial supplies and materials fell by $709 million to $42,786 million, as our imports of crude oil fell by $590 million and our imports of other petroleum products fell by $436 million…in addition, our imports of consumer goods fell by $517 million to $48,478 million on a $307 million decrease in our imports of toys, games and sporting goods, our imports of foods, feeds, and beverages fell by $510 million to $11,001 million, and our imports of other goods not categorized by end use fell by $200 million to $7,194 million….partially offsetting those decreases, our imports of automotive vehicles, parts and engines rose by $1145 million to $30,283 million on a $1,108 million increase in our imports of new and used passenger cars…

in the advance report on 1st quarter GDP last week, our March trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP  release…that report estimated that our March goods trade deficit was at $64.8 billion on a Census adjusted basis, up 1.4% from February, on goods exports of $125.5 billion and goods imports of $190.3 billion…this report revises that and shows that our actual goods trade deficit in March on a Census basis was at $64.2 billion, on adjusted goods imports of $191.8 billion and adjusted goods exports of $125.8 billion…at the same time, the February goods trade deficit was revised higher from the advance figures by a bit more than $1.2 billion…those revisions from the previously published data mean that the 1st quarter trade deficit in goods was $0.6 billion more than was included in last week’s GDP report, or roughly $2.5 billion on an annualized basis, which would subtract about 0.06 percentage points from 1st quarter GDP when the 2nd estimate is published at the end of May….

Construction Spending Fell 0.2% in March after Prior Months Were Revised Much Higher

the Census Bureau’s report on construction spending for March (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,218.3 billion annually if extrapolated over an entire year, which was 0.2 percent (±2.1%)* below the revised annualized February estimate of  $1,220.7 billion, but 3.6 percent (±1.5 percent) above the estimated annualized level of construction spending in March of last year…the annualized February construction spending estimate was revised 2.3% higher, from $1,192.8 billion to $1,220.7 billion, while the annual rate of construction spending for January was revised 1.3% higher, from $1,183.84 billion to $1,198.78 billion…

private construction spending was at a seasonally adjusted annual rate of $940.2 billion in March, little changed (± 3.3 percent)* from the revised February estimate of $940.1 billion, which had been previously reported at $917.36 billion…residential spending was at a  $503.4 billion rate, up 1.2 percent (±1.3 percent)* from the revised annual rate of $497.4 billion in February, while private non-residential construction spending of $436.8 billion was 1.3 percent (± 3.3 percent)* below the revised February estimate of $442.6 billion….meanwhile, public construction spending was estimated to be at an annual rate of $278.1 billion in March, 0.9 percent (±2.0 percent)* below the revised February estimate of $280.7 billion, with construction spending for education down 2.0 percent (±2.6 percent)*  to an annual rate of $70.2 billion…

with the upward revisions, construction spending for all three months of the 1st quarter was higher than was reported by the BEA in their advance estimate of GDP last week….as we saw above, annualized construction spending for January was revised $14.94 billion higher, and annualized construction spending for February was revised $27.9 billion higher…in reporting 1st quarter GDP, the BEA’s technical note (pdf) indicated that they had estimated March residential construction would be $0.9 billion more than that of the previously reported February figure, with single family construction valued at $258.2 billion and multifamily construction valued at $62.3 billion, and that March nonresidential construction would be valued at $433.2 billion, $0.5 billion more than that of the reported February figure…with this report, March residential construction spending at a $503.4 billion rate was up by $6.0 billion from the revised February figure, with new single family construction valued at $258,479 million annually and new multifamily construction at $66,080 million, while March nonresidential construction spending was at $436,785 billion, down $5.9 billion from the revised February figure…hence, total private construction spending in March was roughly $7.67 billion more, at an annual rate, than the figures used by the BEA to compute 4th quarter GDP…therefore, over the 3 months, the annualized figure for 1st quarter construction spending would have thus averaged $16.84 billion more than the figure used by the BEA when computing 1st quarter GDP, which would mean that this report implies a 0.41 percentage point upward revision to 1st quarter GDP, assuming there aren’t major revisions to prices…

March Factory Shipments Down 0.1%, Inventories Flat

the Full Report on Manufacturers’ Shipments, Inventories, & Orders for March (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $0.8 billion or 0.2 percent to $478.2 billion, the eighth increase in nine months, following an increase of 1.2% in February, which was revised from the 1.0% 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 March advance report on durable goods we reported on last week…this report now shows that new orders for manufactured durable goods rose by $2.1 billion or 0.9 percent to $239.4 billion in March, revised from the 0.7% increase to 238.7 billion figure that was published last week….

this report also indicated that the seasonally adjusted value of March factory shipments fell for the 1st time in 8 months, decreasing by $0.5 billion or 0.1 percent to $478.8 billion, following a 0.2% increase in February….shipments of durable goods were up $0.6 billion or 0.3 percent from February at $240.1 billion, revised from the 0.2% increase reported by the durables report last week…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods were down by $1.3 billion or 0.5 percent to $238,746 million, after the value of February’s shipments was revised from $240.5 billion to $240,050 million..

meanwhile, the aggregate value of March factory inventories fell for the first time in six months, decreasing by a statistically insignificant $0.1 billion to $629.7 billion, after a February increase of 0.2%…March inventories of durable goods increased $0.7 billion or 0.2 percent to $386.0 billion, revised up from the previously published 0.1 percent increase, following a 0.2 percent February increase…..the value of non-durable goods’ inventories fell by $0.8 billion or 0.3 percent to $243.73 billion, following little change in February non-durable inventories…however, the BEA’s technical note for 1st quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase at a seasonally adjusted annual rate of $18.1 billion in March, so after annualizing the actual decrease, that would indicate that they overestimated the 1st quarter GDP inventory component by about $28.1 billion on an annualized basis, which would seem to imply that 1st quarter GDP will have to be adjusted downwards by 0.67 percentage points to account for what this report shows..

 

(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

May 6 graphics

rig count summary:

May 5 2017 rig count summary

oil prices:

May 6 2017 oil price chart

May 6th 2017 oil price chart

Posted in Uncategorized | Leave a comment

US oil refining at an all time high, topping previous year’s summertime records…

based on recommendations from an OPEC panel meeting last Friday and statements from the major producers, it’s now broadly accepted that OPEC will be extending their production cuts after June, although that won’t be made official till they meet on May 25th….with that as a given, oil traders have turned their attention to recent oil supply and shipment data, and found that global oil supplies remain adequate and shipments of oil continue to set new records, and they’ve thus deemed the OPEC production cuts we’ve seen so far to be ineffective…as a result, oil again traded lower this week, ending down another 29 cents a barrel, after last week’s $3.98 a barrel, 7.4% plunge….

after opening higher on Monday, US crude for June delivery fell after a report that Russian oil output might climb to its highest rate in 30 years if the OPEC and non-OPEC producers did not agree extend their cuts, and closed at $49.23 a barrel, down 39 cents from last Friday’s close….prices then edged up in choppy trade on Tuesday in anticipation of the weekly American Petroleum Institute and EIA oil inventory reports, which were expected to show a third consecutive weekly draw of around 1.6 million barrels, with U.S. June futures closing 33 cents higher at $49.56 a barrel, their first increase in 7 trading days….with the API report showing a smaller than expected decrease in supplies, oil prices opened lower on Wednesday morning, but then spiked to as high as $50.20 a barrel in early afternoon, after the EIA report showed the largest draw on crude inventories thus far this year, but then later retreated after analysts noted the EIA report also showed gasoline and distillate stockpiles grew, while U.S. production and imports increased, with prices hanging on to a gain of 6 cents on the day tp close at $49.62 per barrel….oil prices then extended the Wednesday afternoon selloff on Thursday, after the big jump in gasoline supplies knocked gasoline prices down to their lowest April price in 8 years, and after the restart of two oilfields in Libya added more crude to an already bloated global market, with oil prices closing down 1.3% for the day at $48.97 a barrel, a one month low…prices then edged back up on Friday, as traders who had earlier sold oil they didn’t own bought it back to close out their positions before the end of the month, thus forcing a 36 cent increase in prices that left oil priced at $49.33 a barrel at the close…

natural gas pricing for the week was a little more complicated, because trading in the natural gas contract for May delivery expired on Wednesday, and after that the quoted price of natural gas was referencing the June contract…after closing last week at $3.101 per mmBTU (million British thermal units), May natural gas fell 3.5 cents on Monday to close at $3.066 per mmBTU, a four week low, on expectations that warmer-than-normal weather and light heating demand would mean higher-than-usual additions to supplies through mid-May…prices for May natural gas then fell another 2.3 cents on Tuesday to close at $3.043 per mmBTU, as lower spot prices for natural gas in New England weighed on the expiring futures contractnatural gas prices then turned higher on Wednesday on forecasts of cooler weather, with the expiring May contract closing up 9.9 cents at 3.142 per mmBTU, while the contract for June natural gas, which had gained a half cent on Tuesday, rose another 10.6 cents to close at on Wednesday $3.271 per mmBTU…now quoting the June contract, natural gas retreated 3.2 cents on Thursday to close at $3.239, after the EIA’s weekly natural gas storage report showed a 74 billion cubic feet addition to US supplies, 2 billion cubic feet more than the industry had expected…prices for June natural gas then rose 3.7 cents on Friday to close the week at $3.276 per mmBTU, as a report indicated an average 12-month decline rate of 51 percent for existing wells in the Marcellus…that would mean, for instance, that a typical well in the Marcellus that started producing at 10 million cubic feet per day a year ago is now yielding only 4.9 million cubic feet per day, which in turn means that natural gas “producers have to drill at a breakneck pace just to keep output stable

The Latest US Oil Data from the EIA

the big story from the US oil data for the week ending April 21st from the US Energy Information Administration was that US refineries processed more crude than in any other week in our history, so despite a concurrent big jump in our oil imports, we had to take oil out of storage to meet refining needs for the third week in a row…our imports of crude oil increased by an average of 1,102,000 barrels per day to an average of 8,912,000 barrels per day during the week, while at the same time our exports of crude oil rose by 587,000 barrels per day to an average of 1,152,000 barrels per day, which meant that our effective imports netted out to 7,760,000 barrels per day during the week, 515,000 barrels per day more than during the prior week…at the same time, our crude oil production rose by 13,000 barrels per day to an average of 9,265,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 17,025,000 barrels per day during the cited week…

at the same time, refineries reportedly used a record 17,285,000 barrels of crude per day, 347,000 barrels per day more than they used during the prior week, while 592,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s EIA oil figures seem to indicate that our total supply of oil from net imports, production and from storage was 332,000 more barrels per day than what refineries used…since that oil couldn’t have just vanished, the EIA inserted a -332,000 barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the supply and demand data balance out, which they label in their footnotes as “unaccounted for crude oil”

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports rose to an average of 8,113,000 barrels per day, now 4.9% above the imports of the same four-week period last year…the 592,000 barrel per day decrease in our total crude inventories came about on a 520,000 barrel per day withdrawal from our commercial stocks of crude oil and a 72,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was planned 19 months ago…this week’s 13,000 barrel per day crude oil production increase resulted from a 20,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 7,000 barrels per day decrease in oil output from Alaska…the 9,265,000 barrels of crude per day that we produced during the week ending April 21st was another 20 month high, up by 5.6% from the 8,770,000 barrels per day we were producing at the end of 2016, and up by 3.7% from the 8,938,000 barrel per day output during the during week ending April 22nd a year ago, while it was still 3.6% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US oil refineries were operating at 94.1% of their capacity in using that record 17,285,000 barrels of crude per day, up from 92.9% of capacity the prior week, and the highest capacity utilization since the last week in November 2015…since we now have a new record for the amount of oil refined in any one week, we’ll include a graph here of what that looks like, compared to recent refining history…

April 26 20017 refinery throughput  for April 21

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters…this graph shows US refinery throughput in thousands of barrels per day by “day of the year” for the past ten years, with the past ten year range of our refinery throughput on any given date shown in the light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year…the graph also shows the number of barrels of oil refined for each week in 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented in red…from that we can note that for most all of 2016 and through most of 2017, US oil refining was either at seasonal record highs or near the top of the average range…however, we can also note there is normally a seasonal swing for oil refining, with demand for their products highest in the summer and again around the holidays, so for a refining record to be set this early in the year is truly an outlier…the 17,285,000 barrels of crude per day refined during the week ending March 21st beat the previous record of 17,107,000 set during the first week of 2017 by more than 1%; it was also 9.1% more than the 15,847,000 barrels per day that were being refined during the week ending April 22nd of 2016, when refineries were running at 88.1% of capacity…

even with the week’s refining increase, gasoline production from our refineries decreased by 84,000 barrels per day to 9,710,000 barrels per day during the week ending April 21st, which was still 2.3% more than the 9,507,000 barrels of gasoline that were being produced daily during the comparable week a year ago….in addition, refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 87,000 barrels per day to 5,150,000 barrels per day, which was 4.6% more than the 4,622,000 barrels per day of distillates that were being produced during the week ending April 22nd last year….meanwhile, there were small increases in refinery production of residual fuels, jet fuel, propane/propylene, and other refined products, but not enough to account for the 347,000 barrel per day increase in the amount of oil refined…

however, even with the drop in our gasoline production, the EIA reported that our gasoline inventories increased by 3,369,000 barrels to 241,041,000 barrels as of April 21st, after they had increased by 1,542,000 barrels the prior week….that additional surplus came about because our imports of gasoline rose by 73,000 barrels per day to 916,000 barrels per day, and as our gasoline exports fell by 23,000 barrels per day to 625,000 barrels per day, while our domestic consumption of gasoline fell by 17,000 barrels per day to 9,206,000 barrels per day…we’ll take a look at a graph of that, too, since our gasoline supplies have started increasing at a time of year when they’re normally being drawn on…

April 26 20017 gasoline inventories for April 21

like the earlier graph, this graph comes from that emailed package of oil graphs from John Kemp, and it also shows our gasoline supplies in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our gasoline supplies on any given date shown in the light blue shaded area, and with the median level of our gasoline supplies over the 10 year period traced by the blue dashes over each day of the year…the graph also shows our gasoline supplies in thousands of barrels for each week in 2016 traced weekly by a yellow line, and our year to date oil refining during 2017 traced by a red line…from that we can see that for all of 2016 and through the first month of 2017, US oil refining was continuously at record high for each time of year, with an all time record of 259,063,000 barrels of gasoline supply set during the week ending February 10th of this year…however, even though our gasoline inventories were being drawn on for the following 8 weeks, shrinking by nearly 23 million barrels over that period, they’ve now recovered nearly 5 million barrels of that drawdown, and are now just a small fraction off the 241,259,000 barrels we had stored on the equivalent day a year ago…moreover, current gasoline inventories are now 6.0% higher than the 225,738,000 barrels of gasoline we had stored on April 24th of 2015, and 13.9% more than the 211,572,000 barrels of gasoline we had stored on April 25th of 2014…

similarly, even with the nominal decrease in distillate’s production, our supplies of distillate fuels rose by 2,651,000 barrels to 148,266,000 barrels during the week ending April 21st, because the amount of distillates supplied to US markets, a proxy for our consumption during that warm week, decreased by 510,000 barrels per day to 3,667,000 barrels per day, and as our exports of distillates fell by 348,000 barrels per day to 1,071,000 barrels per day even as our imports of distillates fell by 113,000 barrels per day to 54,000 barrels per day at the same time…while our distillate inventories are still 4.6% below the 158,240,000 barrels that we had stored on April 22nd, 2016, following last year’s warm El Nino winter, they are now 16.7% higher than the distillate inventories of 129,270,000 barrels that we had stored on April 24th of 2015, following a more normal winter… 

finally, with a record amount of crude going to our refineries, our commercial inventories of crude oil fell for the 3rd week in a row, decreasing by 3,641,000 barrels to 528,702,000 barrels as of April 21st, in the largest weekly drop since December 30th….however, we still finished the week with 10.4% more crude oil in storage than the 479,012,000 barrels we had stored on December 30th, and 3.8% more crude oil in storage than what was then a record 509,311,000 barrels of oil in storage on April 22nd of 2016, and 15.4% more crude than what was also then a record 458,181,000 barrels in storage on April 24th of 2015, and 43.8% more crude than the 367,576,000 barrels of oil we had in storage on April 25th of 2014…

This Week’s Rig Count

US drilling activity increased for the 25th time in the past 26 weeks during the week ending April 28th, and the week’s increase was also the 12th double digit rig increase in the past 15 weeks….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 13 rigs to 870 rigs in the week ending Friday, which was 450 more rigs than the 420 rigs that were deployed as of the April 29th report in 2016, and the most drilling rigs we’ve had running since August 28th, 2015, while it was 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 9 rigs to 697 rigs this week, which was more than double the 332 oil directed rigs that were in use a year ago, and the most oil rigs that were in use since April 24th 2015, while it was still way 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 also rose by 4 rigs to 171 rigs this week, which was up from the 87 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 were also 2 rigs in use that were classified as miscellaneous, compared to a year ago, when there was one miscellaneous rig at work… 

three more drilling platforms that had been working offshore from Louisiana in the Gulf of Mexico were shut down this week, which left 17 offshore rigs still drilling in the Gulf, down from the 24 working in the Gulf of Mexico a year earlier….that was also down from the total of 25 offshore rigs that were deployed a year ago, as there was also an drilling platform working in the Cook Inlet offshore from Alaska during the equivalent week of 2016…however, there was an additional drilling platform set up on an inland lake in southern Louisiana this week, which brought the inland waters rig count back up to 4 rigs, the same as a year ago…

active horizontal drilling rigs increased by 12 rigs to 730 rigs this week, which was up from the the 324 horizontal rigs that were in use in the US on April 29th 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 net of 3 directional rigs were added this week, bringing the directional rig count up to 63, which was also up from the 46 directional rigs that were deployed during the same week last year….however, 2 vertical rigs were pulled out this week, reducing the vertical rig count down to 77 rigs, which was still up from the 50 vertical rigs that were deployed during the same week a year ago…

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 April 28th, the second column shows the change in the number of working rigs between last week’s count (April 21st) and this week’s (April 28th) count, the third column shows last week’s April 21st active rig count, the 4th column shows the change between the number of rigs running on 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 the 29th of April, 2016…     

April 28 2017 rig count summary

once again, most of this week’s new drilling rigs were deployed in Texas, and although it’s not evident from the above, the Permian in west Texas saw an addition of 5 rigs, as did the Eagle Ford of south Texas…what appears to have happened is that 3 of the rigs that were drilling in the Permian in southeastern New Mexico were moved across the border to Texas this week, which is only apparent when looking at the rig counts from the separate Texas oil and gas districts (pdf map), so the net Permian count was only up 2 rigs…other than that, Oklahoma added 3 rigs with the addition of 4 rigs in the Cana Woodford, and Louisiana ended up with a net change of zero after 3 rigs were pulled out of the Gulf, one was added on an inland lake in southern Louisiana, a natural gas rig was added in the Haynesville in the north, and another rig was added in the southern half of the state…deployment of all 12 additional horizontal rigs is evident from the basin counts above, while the four new natural gas rigs were added in the Haynesville and 3 other unnamed basins….also note that of the states not shown above, Florida saw it’s first drilling rig in operation since July 2015 start this week, while one rig was shut down in Mississippi, where there is now just 1 rig still active, down from 3 rigs a year ago….

Posted in Uncategorized | Leave a comment