more on US LNG export capacity additions, another record for crude supplies, et al

oil prices finished lower this week, but still remained in the same $2 trading range that they’ve been in for most of this year… prices barely budged on Monday, as US crude for April rose 6 cents, or 0.1%, to settle at $54.05 a barrel while the expiring April contract for Brent crude, the international benchmark price, fell 6 cents, or 0.1%, to $55.93 a barrel…US crude futures then gave up 4 cents of their Monday gains in trading on Tuesday, as traders anticipated that the after market release of oil industry inventory data from the American Petroleum Institute would show an eighth consecutive increase in US crude supplies…oil prices then slipped 18 cents to $53.83 as the expected inventory build materialized, but its impact was muted by news that OPEC compliance with the pledged output cuts had risen to 94% in February…prices then fell more than 2 percent on Thursday to close at $52.61 a barrel after news that Russian crude production remained unchanged in February, therefore meaning they were still producing 200,000 barrels per day more than they had promised…oil prices then found support on Friday after reports emerged that extra production cuts by the Saudis put OPEC compliance near 100%, and went on to close the week at $53.33 a barrel, up 72 cents for the day but still down 66 cents for the week…

natural gas prices, meanwhile, were up every day this week after Monday, but still ended lower than their February 17th print and more than 28% below their post Christmas high….while there is typically little daily news to indicate the underlying reasons for natural gas price changes, Monday saw April natural gas prices fall to $2.693 per mmBTU, after last week’s March contract expired at $2.787 per mmBTU…from there it climbed to $2.774 per mmBTU on Tuesday, to $2.799 per mmBTU on Wednesday, to $2.804 per mmBTU on Thursday, and finally to $2.827 per mmBTU on Friday, up 5 cents from last week, despite the fact that the weekly natural gas storage report showed a net increase of 7 billion cubic feet for the week ending February 24th, the first time surplus gas was ever added to storage in February

of course, these daily quotes are for April natural gas at the Henry Hub in Louisiana, and actual natural gas selling prices vary widely across the country….at the time Henry Hub gas for March was selling for at $2.62/MMBtu on Wednesday, down 77 cents month over month, gas at the Algonquin city gates in Ontario was trading at $3.26/MMBtu, down $4.13 month on month, gas at the New England border was selling for $2.98/MMBtu, while three large terminals in the Appalachians saw gas below $2…that depressed price for Appalachian natural gas is a function of still inadequate pipeline capacity, which keeps natural gas prices for heating and electricity in our region lower than the rest of the country, while simultaneously slowing further increases in drilling and associated fracking…we can expect that advantage to end soon, given the pipelines that are now under construction, or soon to start….

the EIA’s Natural Gas Weekly Update for the week ending March 1, 2017 featured a ‘news for the week’ headline of “U.S. liquefaction capacity continues to expand“, and since our own focus of last week’s newsletter was on the expansion of LNG exports, we’ll start today with a graph from that EIA weekly report, which will provide us with a timeline for the expansion of that export capacity..

March 4 2017 LNG capacity additions under construction

the above graphic, taken from this week’s Natural Gas Weekly Update, shows the expected completion time and the natural gas capacity for each of the liquefied natural gas (LNG) trains now under construction in the US…each of these trains are color coded as to which LNG plant they are part of, and the size of the bar represents the capacity in billions of cubic feet of gas per day that the train is expected to process when it’s completed…briefly, each of these “trains” takes raw natural gas as it comes out of the delivery pipeline and removes all the impurities that are normally in the raw gas that can’t be included in LNG because they freeze at different temperatures than methane, then lowers the temperature of the pure methane to approximately −260 °F, at which point the gas becomes liquid and thus takes up about 1/600th the volume of natural gas in the gaseous state…it is then stored in supercooled tank farms at the terminal until it is ready to be loaded onto ocean going tankers…(btw, if LNG should ever come in contact with even cold water, it will explode to 600 times its volume)

the sky blue bars above represent trains 4 and 5 of the Sabine Pass LNG facility at Sabine Pass, Louisiana, on the Gulf of Mexico at the Texas border, which now has three LNG trains already in operation…the “nameplate capacity” of each of the Sabine Pass trains is 0.7 billion cubic feet of gas per day, but the three existing trains are now processing 2.3 billion cubic feet of gas per day, so i assume these capacities aren’t cast in stone…the 4th train of Sabine Pass is expected to be operational in the 3rd quarter of this year, and thus will shortly boost our national natural gas exports up to 3.0 cubic feet of gas per day…following that, train 1 of the export facility at Cove Point Maryland, indicated by the brown bar, is expected to add another 0.7 billion cubic feet of gas per day of liquefaction and export capacity in the 4th quarter of this year….Cove Point was originally an LNG import and storage terminal, so what were once distribution pipelines from that facility will now be the pipelines that will be delivering fracked gas from the Marcellus and Utica shales to that terminal for export..

the rest of the liquefaction and export capacity now under construction will not be complete until the second half of 2018 or later…Elba Island LNG, located in Georgia, is shown in grey and featured in  this week’s Natural Gas Weekly Update…Elba Island will be using a new technology that will consist of ten small-scale liquefaction trains, each with a capacity to liquefy approximately 33 million cubic feet per day (MMcf/d), with 6 to be completed in the 3rd quarter of next year, and 4 to be added at the beginning of 2018, for a total project export capacity of 0.35 billion cubic feet per day…at the same time, the first train of Cameron LNG Liquefaction Project in Hackberry, Louisiana, indicated in green, will add another 0.7 billion cubic feet of gas per day of liquefaction and export capacity in the 3rd quarter of next year, with additional 0.5 billion cubic feet of gas per day trains to be added at that facility in the 4th quarter of 2018 and the 3rd quarter of 2019…Cameron trains 4 and 5, currently on the drawing board, are not included in the above graphic of under construction facilities…

in the 4th quarter of 2018, the first train of the Freeport Liquefaction and Export Project, indicated by orange bars, will be completed, adding another 0.7 billion cubic feet of gas per day of liquefaction and export capacity, and they’ll add similar sized trains in the 2nd quarter and 4th quarter of 2019…they already have 20 year contracts to sell the output of that LNG terminal to Toshiba, BP, Osaka Gas and Chubu Electric, which means they’ll have a claim to US natural gas production before Americans will…lastly, the first two trains of the Corpus Christi Liquefaction facility, shown in a wine color, will be added in the 1st and second quarters of 2019…this was originally an LNG import and regasification terminal run by Cheniere Energy, the parent of the Sabine Pass facility, and is being refitted to liquefy and export LNG…when the plants represented by the graphic above are completed, the US is projected to have a 9.4 billion cubic feet per day liquefaction and export  capacity, the third largest in the world, just behind that of Australia and Qatar…that would represent about 10% of our total natural gas production, assuming there no major changes in our own consumption over the next three years..

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 24th from the US Energy Information Administration indicated that our imports of crude oil increased from the prior week’s depressed levels, that our refinery activity also increased from last week’s two year low but remained below normal, and that we again had a surplus of crude added to our stockpiles for the 8th week in a row, which were thus at another an all time high…our imports of crude oil rose by an average of 303,000 barrels per day to an average of 7,589,000 barrels per day during the week, while at the same time our exports of crude oil fell by 490,000 barrels per day to an average of 721,000 barrels per day, which meant that our effective imports netted out to 6,868,000 barrels per day for the week, 793,000 barrels per day more than last week…at the same time, our crude oil production rose by 31,000 barrels per day to an average of 9,032,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 15,900,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,664,000 barrels of crude per day during the week, 393,000 barrels per day more than during the prior week, while at the same time, 214,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we used or stored 22,000 less barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom -22,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that balance sheet number by backing into it, using the same arithmetic we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports fell to an average of 8.185 million barrels per day, now just 5.1% higher than the same four-week period last year…meanwhile, the 4 week average of our oil exports was at 881,000 barrels per day, which is noted as 122.5% higher that a year earlier…that apparent big jump in our oil exports has led some in the media to suggest our oil exports are replacing those oil exports held off the global markets by OPEC…however, that’s a percentage increase off a very small base, and our year to date oil exports which averaged have 763,000 barrels per day only represent 341,000 more barrels per day than last year’s average of 421,000 barrels per day….at the same time, our oil imports have increased by 413,000 barrels per day from a year ago, from an average of 7,871,000 barrels per day during the first 8 weeks of 2016 to an average of 8,284,000 barrels per day this year….what appears to be happening is that we are exporting light sweet crude which we have an abundance of, and importing heavier sour crudes which our refineries are optimized to use…so while our oil exports may rise as we unload our surplus light oil, because we’re importing even more oil to replace what we’re exporting, our exports are not a threat to the OPEC cuts..

meanwhile, this week’s 31,000 barrel per day oil production increase was facilitated by a 32,000 barrel per day increase in oil production in the lower 48 states, while at the same time oil output from Alaska fell by 1,000 barrels per day…our crude oil production of 9,032,000 barrels during the week ending February 24th was the most we’ve produced since mid-March of last year and was only a half percent lower than the 9,077,000 barrels of crude per day that we produced during the week ending February 26th of last year, while it remained 6.0% below our record for oil production of 9,610,000 barrels per day that we set during the week ending June 5th 2015  ..

US refineries were operating at 86.0% of their capacity in using those 15,664,000 barrels of crude per day, up from 84.3% of capacity the prior week, but down from the year high of 93.6% of capacity seven weeks earlier, when they were processing 17,107,000 barrels of crude per day….their processing of oil is also still down by 1.2% from the 15,852,000 barrels of crude that were being refined during the week ending February 26th, 2016, when refineries were operating at 88.3% of capacity….but even with the refinery pickup, gasoline production from our refineries was little changed, rising by just 27,000 barrels per day to 9,456,000 barrels per day during the week ending February 24th, which as it turns out was 1.3% more than the 9,335,000 barrels per day of gasoline that were being produced during the week ending February 26th a year ago, when gasoline output inexplicably slumped for a week…at the same time, refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 288,000 barrels per day to 4,755,000 barrels per day, which was still a bit less than the 4,801,000 barrels per day of distillates that were being produced during the week ending February 26th last year… 

with the nominal increase in our gasoline production, the EIA reported that our gasoline inventories fell by 546,000 barrels to 255,889,000 barrels as of February 24th, as our domestic consumption of gasoline inched up by 23,000 barrels per day to a still below normal 8,686,000 barrels per day, while our gasoline exports rose by 43,000 barrels per day to 891,000 barrels per day and our gasoline imports rose by 90,000 barrels per day to 457,000 barrels per day…however, even with this week’s inventory draw down, our gasoline supplies were at an all time high for the 3rd week in February, as they were up slightly from the 254,989,000 barrels of gasoline that we had stored on February 26th of last year, while they were 6.6% above the 240,060,000 barrels of gasoline we had stored on February 20th of 2015… 

even with the large increase in our distillates production, our supplies of distillate fuels also fell, decreasing by 925,000 barrels to 165,133,000 barrels by February 24th, which was still much less of a drop than the 4,924,000 barrel drawdown of distillates last week…that was as the amount of distillates supplied to US markets, a proxy for our consumption, fell by 479,000 barrels per day to 3,813,000 barrels per day, and as our imports of distillates rose by 81,000 barrels per day to 210,000 barrels per day, while our exports of distillates rose by 277,000 barrels per day to 1,284,000 barrels per day….even so, our distillate inventories are still 0.4% higher than the distillate inventories of 160,715,000 barrels of February 26th during the warm winter of last year, and 33.5% above the distillate inventories of 122,976,000 barrels of February 27th, 2015…  

finally, with the increase in our net oil imports significantly larger than the increase in refinery demand, we again had surplus crude remaining, and hence our inventories of crude oil rose for the 8th week in a row to yet another record, as they increased by 1,501,000 barrels to 520,184,000 barrels by February 24th…thus we ended the week with 8.6% more crude oil in storage than the 479,012,000 barrels we ended 2016 with, 6.9% more crude oil in storage than the then record 486,699,000 barrels we had stored on February 26th of 2016, 26.8% more crude than the 410,246,000 barrels of oil we had in storage on February 27th of 2015 and 56.5% more crude than the 332,453,000 barrels of oil we had in storage on February 28th of 2014…so you can all see what those record supplies look like, we’ll include a picture of the interactive graph that accompanies the ending stocks of crude oil page at the EIA, which is much easier to understand than the complicated graphs on this that we’ve featured recently…

March 4 2017 crude supplies for February 24th

This Week’s Rig Count

US drilling activity increased for the 17th time in 18 weeks during the week ending March 3rd, but just barely….Baker Hughes reported that the total count of active rotary rigs running in the US increased by just 2 rigs to 752 rigs in the week ending on this Friday, which was still 267 more rigs than the 489 rigs that were deployed as of the March 4th report in 2016, but far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the count of rigs drilling for oil rose by 7 rigs to 609 rigs this week, which was up from the 392 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations fell by 5 rigs to 146 rigs this week, which was still up from the 97 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…there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work…   

one more drilling platform was added to those working in the Gulf of Mexico this week, this time offshore from Texas, which brought the Gulf of Mexico count up to 18, still down from 24 during the same week of 2016…that also brought the total US offshore count for the week up to 18 rigs, all in the Gulf of Mexico, down from 24 offshore rigs a year ago, when they also were all in the Gulf of Mexico…

the number of horizontal drilling rigs working in the US increased by 9 rigs to 633 rigs this week, which is now up by 244 horizontal rigs from the 389 horizontal rigs that were in use in the US on March 4th 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 62, which was also up from the 58 vertical rigs that were deployed during the same week a year ago…on the other hand, 8 directional rigs were taken out of service during the week, cutting the directional rig count back to 61, which was still up from the 42 directional rigs that were deployed during the same week last year….

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of March 3rd, the second column shows the change in the number of working rigs between last week’s count (February 24th) and this week’s (March 3rd) count, the third column shows last week’s February 24th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 4th of March, 2016…        

March 3 2017 rig count summary

as you can see above, the rig count increases this week were in the oil basins that saw their largest expansion earlier in the decade and have been more or less ignored recently, as the Permian and the SCOOP / STACK in Oklahoma’s Cana Woodford have been in ascendancy….the Eagle Ford of south Texas, which once hosted 259 rigs, added 5 this week to bring their total back up to 69 rigs, while the Williston basin of North Dakota, home of Bakken crude, which had 224 rigs at that time, added 3 rigs this week to get their count back up to 38 rigs…meanwhile, the three major gas basins, the Marcellus, the Utica, and the Haynesville, each saw one rig pulled out, while 2 gas rigs were also removed from unnamed “other basins”…since Pennsylvania saw a 2 rig decrease and the Ohio rig count remained unchanged at 19 rigs, it’s apparent that the Utica shale rig which was shut down this week had been drilling in Pennsylvania..

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4th quarter GDP revision, January income and outlays, construction spending, and durable goods

the key economic releases of the past week were the 2nd estimate of 4th quarter GDP and the January report on Personal Income and Spending from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for January and the January report on Construction Spending, both from the Census bureau….this week also saw the release of the last two regional Fed manufacturing surveys for February: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +24.5 from last month’s +22.1, an 11 year high, suggesting a boom like expansion in the Texas oil patch economy, while the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +17 in February from +12 in January, also suggesting an accelerating expansion in that region’s manufacturing…

privately issued reports released this week included the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 17.47 rate in February, virtually unchanged from the 17.48 million annual rate in January, and also little changed from the 17.43 million annual sales rate in February a year ago; the Case-Shiller Home Price Index for December from S&P Case-Shiller, which reported that home prices nationally during October, November and December averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier, and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 57.7% in February, up from 56.0 in January,  which suggests a stronger expansion in manufacturing firms nationally, and the February Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 57.6%, up from 56.5% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in February…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… 

4th Quarter GDP Growth Remains at a 1.9% Rate

the Second Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.9% rate in the 4th quarter, unrevised from the advance estimate reported last month, as personal consumption expenditures were greater than initially estimated, but both private and state and local investment grew less than was first estimated…..in current dollars, our fourth quarter GDP grew at a 3.9% annual rate, increasing from what would work out to be a $18,675.3 billion a year output rate in the 3rd quarter to a $18,855.5 billion annual rate in the 4th quarter, with the headline 1.9% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.0%, aka the GDP deflator, was applied to the current dollar change…

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

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 3.0% annual rate in the 4th quarter, up from the 2.5% growth rate reported last month…that growth rate was arrived at by deflating the annualized dollar amount of consumer spending with the PCE price index, which indicated consumer inflation at a 1.9% annual rate in the 4th quarter, which was revised from the 2.0% inflation rate that was applied to PCE in the first estimate…real consumption of durable goods grew at a 11.5% annual rate, which was revised from the 10.9% growth indicated in the advance report, and added 0.83  percentage points to GDP, as real output of motor vehicles rose at a 16.0% annual rate and accounted for 0.39 of that growth…..real consumption of nondurable goods by individuals rose at a 2.8% annual rate, revised from the 2.3% increase reported in the 1st estimate, and added 0.40 percentage points to 4th quarter economic growth, as lower consumption of energy goods was the only drag on the quarter’s non-durables growth…in addition, consumption of services rose at a 1.8% annual rate, revised from the 1.3% rate reported last month, and added 0.81 percentage points to the final GDP tally, as an increase in the real output of health care services at a 5.8% rate accounted for three-fourths of the 4th quarter increase in services…

seasonally adjusted real gross private domestic investment grew at a 9.2% annual rate in the 4th quarter, revised from the 10.7% growth estimate made last month, as real private fixed investment was revised from growth at a 4.2% rate to growth at a 3.2% rate, while real inventory growth was smaller than previously estimated…investment in non-residential structures was revised from shrinking at rate of 5.0% to shrinking at a 4.5% rate, while real investment in equipment was revised to show growth at a 1.9% rate, revised from the 3.1% growth rate previously reported…in addition, the 4th quarter’s investment in intellectual property products was revised from growth at a 6.4% rate to growth at a 4.5% rate, and the growth rate of residential investment was revised from 10.2% to 9.6% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.12 percentage points from the economy’s growth rate, investment in equipment added 0.11 percentage points, investment in intellectual property added 0.18 percentage points , and growth in residential investment added 0.35 percentage points to the change in 4th quarter GDP…

meanwhile, the growth in real private inventories was revised from the originally reported $48.7 billion in inflation adjusted growth to show inventory growth at an inflation adjusted $46.2 billion rate, which came after inventories had grown at an inflation adjusted $7.1 billion rate in the 3rd quarter, and hence the $39.1 billion positive change in real inventory growth from the 3rd quarter added 0.94 percentage points from the 4th quarter’s growth rate, revised from the 1.00 percentage point addition from inventory growth reported in the advance estimate….since growth in inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their increase by $39.1 billion meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP grew at a 0.9% rate in the 4th quarter, which was statistically unchanged from the advance estimate, compared to the real final sales increase at a 3.0% rate in the 3rd quarter, when the change in inventories was smaller….

the previously reported decrease in real exports was revised lower with this estimate, but the reported increase in real imports was revised higher, and as a result our net trade was little changed from what was previously reported…our real exports fell at a 4.0% rate rather than the 4.3% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their shrinkage subtracted 0.50 percentage points from the 4th quarter’s growth rate….meanwhile, the previously reported 8.3% increase in our real imports was revised to an 8.5% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.20 percentage points from 4th quarter GDP….thus, our weakening trade balance subtracted a net 1.70 percentage points from 4th quarter GDP, the same GDP subtraction resulting from foreign trade that was indicated in the advance estimate..

finally, there was also a downward revision to real government consumption and investment in this 2nd estimate, as the real growth rate for the entire government sector went from a 1.2% rate to a 0.4% rate…real federal government consumption and investment was statistically unchanged, however, as real federal spending for defense shrunk at a 3.4% rate and subtracted 0.14% percentage points from 4th quarter GDP, while all other federal consumption and investment grew at a 2.3% rate and added 0.06 percentage points to GDP…..note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…meanwhile, real state and local consumption and investment was revised from growth at a 2.6% rate in the first estimate to growth at a 1.3% rate in this estimate, as state and local investment spending grew at a 7.7 rate and added 0.14 percentage points to 4th quarter GDP, while state and local consumption spending was little changed and had no statistical impact on GDP…

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

4th quarter 2016 GDP 2nd estimate

Personal Income up 0.4% in January, Personal Spending up 0.2%, PCE Price Index up 0.4%

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

thus, when the opening line of the press release for this report tell us “Personal income increased $63.0 billion (0.4 percent) in January“, they mean that the annualized figure for personal income in January, $16,370.8 billion, was $63.0 billion, or a bit less than 0.4% greater than the annualized  personal income figure of $16,307.8 billion for December; the actual change in personal income from December to January is not given…similarly, annualized disposable personal income, which is income after taxes, rose by almost 0.3%, from an annual rate of an annual rate of $14,305.3 billion in December to an annual rate of $14,345.4 billion in January…the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in January, the largest contributors to the $63.0 billion annual rate of increase in personal income were a $33.7 billion increase in wages and salaries and a $11.4 billion increase in proprietors’ income….

for the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $22.2 billion, or 0.2%, which means the rate of personal consumption expenditures rose from $13,043.5 billion annually in December to $13,065.8 billion annually in January; at the same time, the December PCE figure was revised up from the originally reported $13,032.1 billion annually, a revision that was already incorporated into this week’s GDP estimate…and as you know, before January’s personal consumption expenditures are used in the 1st quarter GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….that’s done with the price index for personal consumption expenditures, which is included in Table 9 in the pdf for this report, which is a chained price index based on 2009 prices = 100….that PCE price index rose from 111.598 in December to 109.956 in January, giving us a month over month inflation rate of 0.434%, which BEA rounds to a 0.4% increase in reporting it here….applying that 0.434% inflation adjustment to the smaller increase in January PCE means that real PCE actually fell by 0.2616% in January, which the BEA reports as a 0.3% decrease…comparing the annualized January real PCE of 11,657.5 in chained 2009 dollars that we get from from Table 7 of this release to the annualized real PCE of 11,655.0 in chained dollars that was reported in table 3 of the 4th quarter GDP revision, we find that real PCE is barely growing at a 0.02% annual rate so far in the 1st quarter, or at a pace that would be considered statistically unchanged, and thus would add nothing to the growth of 1st quarter GDP…

with our disposable personal income up by 0.3% and our personal consumption expenditures up by 0.2%, there was thus an increase in our personal savings rate for January from a month earlier…to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and which came in at a $13,549.7 billion annual rate in January, and subtracts that from the annual rate of disposable personal income, to show personal savings growing at a $795.7 billion annual rate in January, up from the $779.5 billion that we would have ‘saved”’ over a year at December’s savings pace…this small increase left the personal savings rate, or personal savings as a percentage of disposable personal income, at 5.5% in January, up from the savings rate of 5.4% in December…

Construction Spending Fell 1.0% in January after December and November Revised Higher

the Census Bureau’s report on January construction spending (pdf)  estimated that January’s seasonally adjusted construction spending would work out to $1,180.3 billion annually if extrapolated over an entire year, which was 1.0 percent (±1.0%)* below the revised annualized estimate of $1,192.2 billion for construction spending in December but 3.1 percent (±1.5%) above the estimated annualized level of construction spending of January last year…the December spending estimate was revised 0.9% higher, from $1,181.5 billion to $1,192.2 billion, while November’s construction spending was revised from $1,184.4 billion to $1,191.5 billion, which together would suggest an upward revision of 0.16 percentage points to 4th quarter GDP when the third estimate is released at the end of March…

private construction spending was at a seasonally adjusted annual rate of $911.6 billion in January, 0.2 percent (±0.8 percent)* above the revised December estimate, with residential spending of $476.4 billion up 0.5% (±1.3 percent)* from the upwardly revised annual rate of $433.1 billion in December, while private non-residential construction spending of $435.3 billion was statistically unchanged  (±0.8 percent)* from the revised December estimate of $435.4 billion….meanwhile, public construction spending was estimated to be at an annual rate of $268.7 billion, 5.0 percent (±1.8%) below the revised December estimate, with spending for water utilities down 12.1% (±8.7%) to an annual rate of $10,368 million and spending for public safety down 16.8% (±2.3%) to an annual rate of $7,181 million…

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

that index showed that aggregate construction costs were up 0.3% in January, after they had fallen 0.1% in December and increased by 0.1% in November…on that basis, we can estimate that January construction costs were roughly 0.2% more than those of November, and 0.3% more than October…we then use those percentages to inflate lower priced spending figures for each of the 4th quarter  months, which is arithmetically the same as deflating January construction spending, for purposes of comparison….this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,192,150 in December, $1,191,468 in November, and $1,173,749 in October…thus to compare January’s nominal construction spending of $1,180,333 million to inflation adjusted figures of the fourth quarter, our formula becomes: (1,180,333 / (((1,192,150 *1.003)+( 1,191,468 * 1.002) + (1,173,749 *1.003)) / 3) = 0.992753, meaning real construction spending in January was down 0.625% vis a vis that of the 4th quarter, or down at a 2.87% annual rate…to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and January’s spending as a fraction of 4th quarter GDP, and find that January construction spending is falling at a rate that would subtract 0.21 percentage points from 4th quarter GDP, if there is no improvement in real constrctuion over the next two months..

January Durable Goods: New Orders Up 1.8%, Shipments Down 0.1%, Inventories Unchanged

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $4.0 billion or 1.8 percent to $230.4 billion in January, after December’s new orders were revised from the  $227.0 billion reported last month to $226.3 billion, now 0.8% less than November’s new orders…January’s new orders were also up by 1.4% from those of January 2016…the volatile monthly new orders for transportation equipment were responsible for the increase, as new transportation equipment orders rose $4.3 billion or 6.0 percent to $76.4 billion, on a 69.9% increase to $7,978 million in new orders for commercial aircraft….excluding orders for transportation equipment, new orders fell 0.2%, while excluding just new orders for defense equipment, new orders rose 1.5%…. at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $237 million or 0.4% to $64,573 million…

meanwhile, the seasonally adjusted value of January shipments of durable goods, which will included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, decreased by $0.2 billion or 0.1 percent to $238.3 billion, after the value of December shipments was revised from from $238.0 billion to $238.564 billion, now up 1.6% from November…lower shipments of machinery drove the January decrease, falling $0.5 billion or 1.6 percent to $30.7 billion…at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by just $0.1 billion to $383.8 billion, after December inventories were revised from $384.351 billion to $383.742 billion, now down 0.1% from November….a $0.27 billion or 2.4 percent increase to $11,269 billion in inventories of defense aircraft was the largest inventory increase, while a $0.56 billion or 1.6 percent decrease to $34 billion in inventories of motor vehicles was the largest decrease…

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, fell for the seventh time in 8 months, decreasing by $4.0 billion or 0.4 percent to $1,114.3 billion, following a December decrease of 0.7% to $1,118.3 billion, which was revised from the previously reported 0.6% decrease to $1,119.4 billion…a $5.6 billion or 0.7 percent drop to $752.9 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.4% to $361,417 million…the unfilled order book for durable goods is now 2.0% below the level of last January, with unfilled orders for transportation equipment now 3.9% below their year ago level, mostly on a 4.5% decrease in the backlog of orders for motor vehicles…    

 

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

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March 4th graphics

crude oil supplies:

March 4 2017 crude supplies for February 24th

natural gas LNG capacity under construction:

March 4 2017 LNG capacity additions under construction

rig count summary:

March 3 2017 rig count summary

4th quarter GDP:

4th quarter 2016 GDP 2nd estimate

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the coming LNG export wave; oil refining at a two year low, refinery utilization at a 4 year low, oil exports at all time high

oil again traded in a narrow price range this week, ending about 1.0% higher at $53.99, although such a week over week comparison really shouldn’t be made, because this week’s prices were for April delivery, while last week’s price quotes were for March oil…after closing last week at $53.40 a barrel, March oil traded 22 cents higher on the Presidents’ Day holiday for settlement on Tuesday as traders again played rising U.S. drilling activity against OPEC production cuts….prices then rose to near three-week highs on Tuesday after OPEC Secretary General Mohammad Barkindo told an oil conference that compliance with the output cuts was above 90 percent and that oil supplies would fall, with the expiring March contract closing out at $54.06 and the new front month April contract up 1% to $54.37…prices for April oil then fell about 1.5% on Wednesday on expectations of another surge in U.S. inventories, which were to be reported after the market closed at 4:30 PM, with that April contract closing at $53.59 a barrel…however, oil prices bounced back to close at $54.45 a barrel on Thursday after API estimates of supply indicated a small draw, with distillates seeing the largest draw since October 2014…oil prices then fell back on Friday, after EIA data showed an increase in both crude production and inventories, and yet another record high for the later, and ended the session 46 cents lower at $53.99 a barrel….

on the other hand, natural gas prices took another tumble this week, with the contract for March falling from a quote of $2.834 per mmBTU on Monday to $2.564 per mmBTU on Tuesday, as the post holiday markets opened to record warmth across a broad swath of the country…that price for March natural gas then recovered a bit in light trading, to $2.592 per mmBTU on Wednesday and to $2.617 per mmBTU on Thursday, when trading in the March natural gas contract expired…prices for the April natural gas contract then rose 3.8 cents to close at $2.787 on Friday, as increasing power loads and modestly higher peak power forecasts helped support prices

as we pointed out last week, natural gas drilling activity has typically slowed at these price levels, only picking up when price quotes approach $4 per mmBTU, such that drillers can usual contract to sell their initial high output at prices above those levels…so while indications are that contract prices will stay below those break even levels in the near term, the specter that natural gas exports will eventually put pressure on supplies and raise prices to stimulate more drilling is still a threat we’ll have to deal with…that was brought to the fore by two reports that were released this week, both of which forecast higher future demand for US LNG (liquefied natural gas) exports…

the first report, released Monday, was Royal Dutch Shell’s Outlook, an annual report which had previously been released by British Gas (BG), who Shell bought out early last year…they expect global natural gas demand to average an annual increase of 2% a year between 2015 and 2030, with LNG demand expected to rise at twice that rate, at 4 to 5% per year…in the year just ended, LNG import demand grew by 17 million tons to 265 million tons…the bar graph below from Shell shows where most of the growth in LNG imports came from last year:

February 25 2017 LNG import growth

the above graphic comes from page 9 of the the slide booklet of the 2017 Shell LNG Outlook and it shows the counties that increased their LNG imports last year, and by how much…in addition, those countries who were not LNG importers in 2015 are indicated in red, so all of their 2016 imports thus represent increased demand…note the US is the 3rd from the left, as even we increased LNG imports a bit last year…according to Shell, future demand for LNG will come from 2 groups of countries; those where LNG will be needed to replace declining domestic production, which includes countries such as India, Thailand, Malaysia, Indonesia, Kuwait, the Emirates, and Egypt, and those where LNG will supplement existing pipeline or domestic supplies, such as China, southern Europe and eastern Europe…

the second report that projected rising LNG demand was from the Wednesday release of the EIA’s daily “today in energy” series, and was titled Liquefied natural gas exports expected to drive growth in U.S. natural gas trade…projecting from the Annual Energy Outlook 2017 base reference case, they expect us to become a net exporter of natural gas on an average annual basis by 2018…this will occur as our imports of natural gas from Canada fall and as our LNG exports increase, as they expect four more LNG export facilities that are currently under construction to be completed by 2021…the lead graphic from that report, which we’ll include below, shows how this plays out over the next 20 years…

February 23 22017 natural gas trade projections

the above graphic, which we’ve copied from Wednesday’s release Today in Energy, shows our imports of natural natural gas in trillions of cubic feet as a negative below the zero line, and our exports of natural gas in  trillions of cubic feet as a positive above the zero line, with historical data represented for the years from 1980 to 2016, and projections shown for the years from 2017 to 2040…below the zero line, our natural gas pipeline imports from Canada are shown in pink, and our LNG imports are represented by light blue…above the line, our natural gas pipeline exports to Mexico are represented by the burnt orange shading, our pipeline exports to Canada are represented by the rose shaded section, and our projected LNG exports from existing and under construction port facilities are represented by the navy blue shaded part of the graph…while we’ve had weeks in 2017 where our exports may have exceeded our imports, and will likely have such weeks again in 2017, this projection is on an annual basis, and according the EIA, we were a small natural gas net importer in 2016 and will again be an importer in 2017….clearly, our current LNG exports are still so small they barely show up in 2016 on a graph of this scale…

right now, only one U.S. export facility is currently in operation, Sabine Pass, on the Gulf of Mexico border between Texas and Louisiana, where just 4.5 million tons per annum is operational, and 27 million tons per annum is still under construction… however, the Federal Energy Regulatory Commission has approved natural gas export terminals with a capacity of 17 billion cubic feet (bcf) per day, which would represent the offshoring of about 19% of current U.S. natural gas production…furthermore, if all terminals for which applications are pending or expected are included, the quantity of our LNG exports goes up to 42 billion cubic feet (bcf) per day, or about 47 percent of our current natural gas production…right now, roughly 40% of our natural gas production comes from the old legacy gas fields in the south, primarily in Texas and Louisiana, while the other 60% of our output comes from 7 shale basins, with the Marcellus and the Utica account for roughly half of that…should all these export terminals be pushed through, however, almost all of the new gas will have to come from the pure natural gas shale plays, the Marcellus, the Utica, and the Haynesville, which means there will be a massive expansion of drilling and fracking to meet these natural gas export requirements…

Australia is a bit ahead of us in exporting LNG, and their experience should give us a sense of what our coming LNG exports will do to U.S. natural gas prices…contracts for natural gas exports are written well in advance of delivery, and as a result Australians living in the country’s eastern region ended up paying more than twice as much for natural gas last winter than did Japanese customers taking delivery of liquefied natural gas (LNG) from the same fields…the same could easily happen here…presently, US gas futures prices are generally below $3 per mmBTU, while current LNG prices in Japan are over $7 per mmBTU…even worse, just a couple weeks ago Spain was paying more than $10 per mmBTU for LNG…if an US gas exporter contracts to deliver LNG to Japan or Spain at those prices, they’ll get the gas from US shale production before US customers who dont have a contract do…if that should occur during a cold snap in mid winter, a shortage of natural gas could develop domestically, sending our prices skyrocketing…and in such a case, some of us who cant afford the higher priced natural gas simply wont get it….we know this happens, because just three years ago an LP gas shortage developed in the US for exactly the same reason, and as US LP gas prices spiked while our LP gas exports soared, a North Dakota Standing Rock Sioux woman was found dead, froze to death in her mobile home, with an empty propane tank…we can expect the same to happen here once natural gas prices rise to levels beyond which those on fixed income can afford it…

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 17th from the US Energy Information Administration showed that our imports of crude oil fell to the lowest level since October and our refining of that crude oil fell for the 6th week in a row to the lowest rate in two years, leaving us with a small surplus of crude to add to our stored oil supplies, which thus were at another an all time high…our imports of crude oil fell by an average of 1,205,000 barrels per day to an average of 7,286,000 barrels per day during the week, while at the same time our exports of crude oil rose by 185,000 barrels per day to an average of 1,211,000 barrels per day, which meant that our effective imports netted out to 6,075,000 barrels per day for the week, 1,390,000 barrels per day less than last week…at the same time, our crude oil production rose by 24,000 barrels per day to an average of 9.001,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 15,076,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,271,000 barrels of crude per day during the week, 187,000 barrels per day less than during the prior week, while at the same time, 81,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we used or stored 276,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 276,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that “unaccounted for crude oil” is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that balance sheet number by backing into it, using the same arithmetic we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports fell to an average of 8.36 million barrels per day, still 7.5% higher than the same four-week period last year…at the same time our crude oil exports at 1,211,000 barrels per day was another new record for oil exports, beating the record set last week, and as a result our crude oil exports are now averaging 3 times what we were exporting last February…meanwhile, this week’s 24,000 barrel per day oil production increase included a 17,000 barrel per day increase in oil production in the lower 48 states and a 7,000 barrel per day increase in output from Alaska…topping 9 million barrels per day for the first time since last April, our crude oil production for the week ending February 17th was just 1.1% lower than the 9,102,000 barrels of crude that we produced during the week ending February 19th of last year, while it remained 6.3% below our June 5th 2015 record oil production of 9,610,000 barrels per day…

the 15,271,000 barrels of crude per day that were refined this week was down by 10.7% from the 17,107,000 barrels per day being refined during the first week of this year, and 2.4% less than the 15,685,000 barrels being refined during the same week last year….US refineries were operating at 84.3% of their capacity in the week ending February 17th, their lowest operating rate in nearly 4 years, down from 85.4% of capacity the prior week and down from the 87.3% capacity utilization rate during the week ending February 19th year ago…since we’re at an interim nadir for refinery throughput and capacity utilization this week, we’ll include a graph of what that looks like compared to historical trends below…

February 23 2017 refinery throughput for Feb 17

the above graph comes from an emailed package of graphs from John Kemp, who is a senior energy analyst and columnist with Reuters (see my footnote below)…this graph shows US refinery throughput in thousands of barrels 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 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…there is an obvious seasonality to oil refining, with demand highest in the summer and again around the holidays, but we can still see that for most all of 2016 and the first five weeks of 2017, oil refining was either at seasonal record highs or near the top of the average range…however, with domestic inventories of gasoline, distillates and most other refined products also at record levels in recent weeks, storage space for refined products has been stretched to its limits, profit margins for refineries fell to the lowest in a year, and thus refiners have cut back on the amount of oil they processed…

however, even though they refined less oil this week, gasoline production from those refineries still rose by 479,000 barrels per day to 9,429,000 barrels per day during the week ending February 17th, which was still 5.4% less than the 10,009,000 barrels per day of gasoline that were produced during the week ending February 19th a year ago…meanwhile, refineries’ production of distillate fuels (diesel fuel and heat oil) also rose, increasing by 136,000 barrels per day to 4,467,000 barrels per day, which was up fractionally from the 4,438,000 barrels per day of distillates that were being produced during the week ending February 19th last year, during a mild El Nino winter… 

however, even with the increase in our gasoline production, the EIA reported that our gasoline inventories fell by 2,628,000 barrels to 256,435,000 barrels as of February 17th, in the second drop in our gasoline supplies in the past 8 weeks…that happened as our domestic consumption of gasoline rose by 230,000 barrels per day to a still below normal 8,663,000 barrels per day, while our gasoline exports rose by 293,000 barrels per day to 848,000 barrels per day and our gasoline imports fell by 238,000 barrels per day to 367,000 barrels per day…however, even with this week’s inventory draw down, our gasoline supplies are up by nearly 29.3 million barrels since Christmas, remain statistically on a par with the 256,457,000 barrels of gasoline that we had stored on February 19th of last year, and are still 6.8% above the 240,014,000 barrels of gasoline we had stored on February 20th of 2015… 

similarly, even with the increase in our distillates production, our supplies of distillate fuels fell by 4,924,000 barrels to 165,133,000 barrels by February 17th, as the amount of distillates supplied to US markets, a proxy for our consumption, rose by 439,000 barrels per day to 4,292,000 barrels per day, and as our imports of distillates fell by 87,000 barrels per day to 129,000 barrels per day and as our exports of distillates were up 15,000 barrels per day to 1,007,000 barrels per day….even so, our distillate inventories are still 2.7% higher than the distillate inventories of 160,715,000 barrels of February 19th last year, and 33.4% above the distillate inventories of 124,698,000 barrels of February 20th, 2015…  

finally, with the major curtailment in our refining, we again had surplus crude remaining, and hence our inventories of crude oil rose for the 7th week in a row, increasing by 564,000 barrels to 494,762,000 barrels by February 17th, which was yet another record for our crude supplies…thus we ended the week with 8.2% more crude oil in storage than the 479,012,000 barrels we ended 2016 with, 8.9% more crude oil in storage than the then record 476,325,000 barrels we had stored on February 19th of 2016, 29.7% more crude than the 399,943,000 barrels of oil we had in storage on February 20th of 2015 and 56.7% more crude than the 331,024,000 barrels of oil we had in storage on February 21st of 2014…   

This Week’s Rig Count

US drilling activity increased for the 16th time in 17 weeks during the week ending February 24th, but the 5 week string of double digit rig count increases has finally ended….Baker Hughes reported that the total count of active rotary rigs running in the US increased by just 3 rigs to 754 rigs in the week ending on this Friday, which was 251 more rigs than the 502 rigs that were deployed as of the February 26th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the number of rigs drilling for oil rose by 5 rigs to 602 rigs this week, which was up from the 400 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations fell by 2 rigs to 151 rigs this week, which was still up from the 102 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…there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work…   

the drilling platform that had been working offshore from Alaska was shut down this week, coincidentally the same week that we learned that an offshore gas pipeline under the Cook Inlet sprung a leak…that left the total US offshore count for the week at 17 rigs, all in the Gulf of Mexico, down from 27 offshore rigs a year ago, when again they were all in the Gulf of Mexico…at the same time, a rig was set up on an inland lake in southern Louisiana, where there are now 4 of them, up from two inland water rigs a year ago…

.the number of horizontal drilling rigs working in the US increased by 10 rigs to 624 rigs this week, which is now up by 227 rigs from the 397 horizontal rigs that were in use in the US on February 26th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, 3 directional rigs were shut down during the week, cutting the directional rig count back to 69, which was still up from the 47 directional rigs that were deployed during the same week last year…in addition, a net of 4 vertical rigs were stacked this week, reducing the vertical rig count to 61, which was still up from the 58 vertical rigs that were deployed during the same week a year ago…

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary 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 February 24th, the second column shows the change in the number of working rigs between last week’s count (February 17th) and this week’s (February 24th) count, the third column shows last week’s February 17th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 26th of February, 2016…        

February 24 2017 rig count summary

again, this week’s drilling changes were mostly about Texas, where they added 8 rigs, including 3 in the Permian in west Texas and another 3 in the Eagle Ford of south Texas…2 more rigs were also added in the Cana Woodford, site of the hot SCOOP and STACK plays…two rigs were shut down in Alaska, including the one offshore, and a net of two were pulled from Louisiana; otherwise, not much changed…note that outside of the major producing states shown above, Indiana also had their only active rig shut down this week; that left them unchanged from a year ago, though, when the state also had no drilling activity…

* * * * *

as i noted, one of the graphs that i included above was from an emailed package of graphs from John Kemp, a senior energy analyst and columnist with Reuters…i had used two of his graphs taken from his twitter account the prior week and in so doing, noted a twitter message from him which said: SIGN UP to receive a free daily digest of best in energy news + my research notes by emailing john.kemp@tr.com
so i requested to be included on his daily digest mailing list and he responded: With pleasure.  If you know anyone else who might like to receive the daily digest and my research notes, please encourage them to contact me and I will add their emails to the circulation as well.  The mailing list is open to anyone interested in energy. Very best wishes.  John. 
i am now receiving a daily mailing of links & graphics, copies of his columns as published, and what appears a weekly pdf of graphs… so if anyone is interested in receiving the same, please write to John Kemp as noted above…alternatively you can also follow him on twitter, @ https://twitter.com/JKempEnergy where he seems to post much of what he otherwise mails…since i dont use twitter, his emails work best for me…

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new home sales and existing home sales for January

the only two widely watched reports that were released this past week were the January report on new home sales from the Census bureau and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…we also saw the release of the Chicago Fed National Activity Index (CFNAI) for January, a weighted composite index of 85 different economic metrics, which fell to -0.05 in January from +0.18 in December, which was revised from the +0.14 reported last month…at the same time, the 3 month average of that index rose to -0.02 in January, up from a revised  -0.03 in December, which still indicates that national economic activity has been slightly below the historical trend over recent months…in addition, this week also saw the release of the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index at +14, up from +9 in January, its highest reading since June 2011, indicating an ongoing expansion in that region’s manufacturing…

New Home Sales Little Changed in January

the Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 555,000 homes annually, which was 3.7 percent (±18.5%)* above the revised December annual sales rate of 535,000 new single family homes and 5.5 percent (±25.4 percent)* above the estimated annual rate that new homes were selling at in January of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December, or even from January sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in December were revised from the annual rate of 536,000 reported last month to an annual rate of 535,000, and new home sales in November, initially reported at an annual rate of 592,000 and revised to a 598,000 rate last month, were revised down to a 575,000 a year rate with this report, while October’s annualized new home sales rate, initially reported at an annual rate of 563,000 and revised up to a 571,000 a year rate last month, were revised back down to a 568,000 rate with this release…

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 41,000 new single family homes sold in January, up from the estimated 38,000 new homes that sold in December but down from the 46,000 that sold in November…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $312,900, down from the median sale price of $316,200 in December but up from the median sales price of $291,100 in January a year ago, while the average January new home sales price was $360,900, down from the $378,900 average sales price in December, and down from the average sales price of $365,600 in January a year ago….a seasonally adjusted estimate of 265,000 new single family houses remained for sale at the end of January, which represents a 5.7 month supply at the January sales rate, down from the 5.8 months of new home supply reported in December…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 555,000 Annual Rate in January and A few Comments on January New Home Sales

January Existing Home Sales 3.3% Higher

the National Association of Realtors (NAR) reported that existing home sales rose by 3.3% from December to January on a seasonally adjusted basis, projecting that 5.69 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was just 0.7% above the annual sales rate projected in January of a year ago…December sales are now shown to have been at a 5.51 million annual rate, revised up from the 5.49 million annual rate indicated by last month’s report…the NAR also reported that the median sales price for all existing-home types was $228,900 in January, down from $233,300 in December, but 7.1% higher than in January a year earlier, which they report as “the 59th consecutive month of year-over-year gains”…..the NAR press release, which is titled “Existing-Home Sales Jump in January“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually transpired during the month…this unadjusted data indicates that roughly 320,000 homes sold in January, down by 26.8% from the 437,000 homes that sold in December, but up by 6.0% from the 302,000 homes that sold in January of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures to show a month over month increase….that same pdf indicates that the median home selling price for all housing types fell 1.9%, from a revised $233,300 in December to $228,900 in January, while the average home sales price was $271,000, down 1.4% from the $274,900 average sales price in December, but up 5.2% from the $257,700 average home sales price of January a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: “Existing-Home Sales Jump in January” and A Few Comments on January Existing Home Sales

 

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

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February 25th graphics

refinery throughput:

February 23 2017 refinery throughput for Feb 17

rig count summary:

February 24 2017 rig count summary

2016 natural gas import increases:

February 25 2017 LNG import growth

natural gas imports and exports:

February 23 22017 natural gas trade projections

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record highs for US oil exports, gasoline and crude supplies; monthly OPEC and DUC reports, et al

oil contracts once again traded in a narrow price range this week, sliding by 90 cents a barrel to $52.93 a barrel on Monday, and then gradually clawing more than half of that drop back to end the week at $53.40 a barrel, down less than 1% for the week…oil traders seem to believe that the OPEC production cuts will eventually dent the supply glut, which has kept prices from falling below current levels, while US crude inventories continue to pile up, holding back any price increases…rather than discussing how prices moved, we’ll just include a current graph so you can see for yourself…

February 18 2017 crude oil prices

the graph above shows the daily closing prices per barrel of oil over the past 3 months for the March contract for the US benchmark oil, West Texas Intermediate (WTI), as stored or to be delivered to the Cushing Oklahoma storage depot…we can see how oil prices jumped 14% during the last week of November, after the OPEC deal was announced, inched up a bit from there to approach $55 a barrel in December, and then slipped back to the $52 to $54 a barrel range over the past 6 weeks…this is a far cry from the 5% a day price changes we saw over most of 2015 and 2016, and we should figure that kind of volatility will return once prices break out of this narrow range…

next we’ll include a similar graph of natural gas prices, so you can all see what’s happened to them as our winter has turned warmer than expected:

February 17 2007 natural gas prices

the above graph shows the daily closing contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in March at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US…as you can see, natural gas contract quotes have been sliding since Christmas, at a time when a cold snap brought on the largest December drawdown of natural gas supplies in 6 years…at that time, the then current January contract hit a 2 year high of $3.93 per mmBTU, which ultimately led to a nominal increase in drilling for gas early this year…historically, however, natural gas drilling activity has been on a long downtrend from the 1,606 natural rigs that were deployed on August 29th, 2008, only increasing briefly in late 2009 and early 2010 and again in 2014 in the months after natural gas prices briefly rose above $4.00 per mmBTU, but ultimately sliding to just 82 rigs on June 3rd, 2016 after gas price had earlier slipped below $2 per mmBTU…so although this week has seen another small rig increase, that’s probably drilling that was contracted for earlier in the year…absent such contracts, we should expect gas drilling to slow down again until such time as natural gas prices rise appreciably from these levels…

OPEC’s February report

Monday of this past week saw the release of the OPEC Monthly Oil Market Report for February (covering January data), so we’ll look at that first, because it’s the production data in this report, not the IEA estimates that we looked at last week, that will determine, by OPEC’s own standards, whether their members have complied with the agreed to production cuts or not…this first table is from page 59 of the OPEC pdf and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled…for all their official production measurements, OPEC uses “secondary sources”, such as analyst’s reports from satellites and shipping data, as an impartial adjudicator of their output quotas and production cuts, to resolve any potential disputes that might arise if each member reported their own figures…this is also the data we typically see quoted in the media, other than in independent analysis by energy research divisions of organizations such as Platts and Reuters that’ll have their own numbers.. 

February 18 2017 January OPEC production

here we see that the official data shows that OPEC production was down by 890,200 barrels per day in January, from a December oil production total that was revised 56,000 barrels per day lower from what was reported last month…(for your reference, here is the December table before those revisions)…recall that OPEC committed to reducing their production by 1.2 million barrels per day, so these initial figures show they’re not there yet….these figures are also somewhat less than the 1.04 million barrels per day that the IEA said that OPEC had cut last week, but IEA numbers were higher for December, so their total of 32.06 million barrels per day in January production is closer to OPEC’s figure…the IEA showed that the Saudis had cut 560,000 barrels per day to end January at 9.98 million barrels per day, whereas these official numbers indicate the Saudis cut 496,000 barrels per day to end at 9.946 million barrels per day…the IEA also showed smaller cuts for Iraq and the Emirates, two major producers who have only cut half what they promised, than OPEC shows, so these figures would seem to indicate that the cooperation with the cuts is more evenly spread than IEA figures had indicated, even if it was less overall… 

the next table, also from page 59 of the OPEC pdf, shows the oil production that each of the members reported to OPEC (for those that did report)…this data is considered suspect because of the many incentives OPEC members have to fudge their data, and is rarely reported by the media, but i’m including it as a curiosity, because OPEC members are quite obviously reporting that they’ve cut their output more than the official figures show…what stands out below is that the Saudis claimed to have cut 717,600 barrels per day, while the official totals “from secondary sources” above show they’ve actually only cut 496,200 barrels per day….that’s important because Saudi claims are usually reported by the media, and often move the price of oil…

February 18 2017 January reported OPEC production

next, we’ll include a graph of the OPEC data for all members included in this report, so we can see how this month’s production stacks up next to historical figures…

February 16 2017 OPEC Januaary outpul

the above graph, taken from the ‘OPEC oil charts” page at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to January 2017…obviously, we can see that OPEC production is down quite a bit over the past two months from their record production of 33,374,000 million barrels per day in November, in their run-up before the agreement was reached, but note that their current production is still more than what they were producing last April and May of 2016, and every other month before that, including last January, when they produced 31,628,000 barrels per day (a figure i arrived at by subtracting Indonesian production from the 14 member total they reported last year.pdf) …that means that despite all of the hullabaloo they’ve made over cutting production, their January 2017 production of 32,139,000 barrels per day is still 1.6% more oil than they were producing in January 2016…

this next graphic we’ll include, as the heading tells us, shows us both OPEC and world oil production monthly on the same graph, from February 2015 to January 2017, and it also comes from page 59 of the February OPEC Monthly Oil Market Report…the pale 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, and that’s shown on the right scale…global oil production fell to 95.82 million barrels per day in January, and OPEC production thus represented 33.5% of what was produced globally, a decrease from 34.0% in December…but even with the two months of cuts we can obviously see here, global oil supply is still in surplus, as the table after this graph will show..

February 18 2017 January world oil supply

the table below comes from page 34 of the February 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…while the changes by region from quarter to quarter may be interesting, the reason we’re including this table here today is for the forecast for oil demand in the first quarter of 2017, which is shown on the “Total world” line of the second column…projections are that during the first three months of this year, all oil consuming areas of the globe will use 94.84 million barrels of oil per day, up from the 94.62 millions of barrels of oil per day they used in 2016…but as OPEC showed us in the supply section of this report and the summary supply graph above, even with the production cuts, the world’s oil producers were still producing 95.82 million barrels per day during January…that means that even after all the production cuts have take place, there was still a surplus of around a million barrels per day in global oil production…

February 18 2017 January world oil demand

The Latest Oil Stats from the EIA

this week’s oil data for the week ending February 10th from the US Energy Information Administration showed that our imports of crude oil fell back from last week’s record but remained elevated, while our refining of that oil fell for the 5th week in a row to the second lowest rate in a year, and as a result there was another large surplus of crude added to our oil supplies, which were thus boosted to an all time high…our imports of crude oil fell by an average of 881,000 barrels per day to an average of 8,491,000 barrels per day during the week, while at the same time our exports of crude oil rose by 459,000 barrels per day to an average of 1,026,000 barrels per day, which meant that our effective imports netted out to 7,465,000 barrels per day for the week, 1,340,000 barrels per day less than last week…at the same time, our crude oil production slipped by 1,000 barrels per day to an average of 8,977,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,442,000 barrels per day during the week…

meanwhile, refineries reportedly used 15,458,000 barrels of crude per day during the week, 435,000 barrels per day less than during the prior week, while at the same time, 1,361,000 barrels of oil per day were being added to oil storage facilities in the US…thus, this week’s EIA oil figures seem to indicate that we consumed or stored 377,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 377,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents “unaccounted for crude oil”…that is further described in the glossary of the EIA’s weekly Petroleum Status Report as “the arithmetic difference between the calculated supply and the calculated disposition of crude oil.”, which means they got that number by backing into it, using the same method we just illustrated.....

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports inched up to an average of 8.491 million barrels per day, 9.9% higher than the same four-week period last year…we should also note that our crude oil exports of 1,026,000 barrels per day is a new record for oil exports, beating the prior record set in the first year of this year by 299,000 barrels per day…so you’ll be sure to see that, we’ll include a self explanatory.graph of that jump in our exports from the EIA’s crude oil exports page, directly below…..

February 18 2017 crude oil exports for February 10

meanwhile, this week’s 1,000 barrel per day oil production decrease included a 6,000 barrel per day increase in oil production in the lower 48 states, offset by a 7,000 barrel per day decrease in output from Alaska…our crude oil production for the week ending February 10th was 1.7% lower than the 9,135,000 barrels of crude that we produced during the week ending February 12th of last year, while it remained 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day…

US refineries were operating at 85.4% of their capacity in using those 15,458,000 barrels of crude per day, down from 87.7% of capacity the prior week, and down from the year high of 93.6% of capacity just five weeks earlier, when they were processing 17,107,000 barrels of crude per day….their processing of oil is also down by 2.5% from the 15,848,000 barrels of crude that were being refined during the week ending February 12th, 2016, when refineries were operating at 88.3% of capacity….with the refinery slowdown, gasoline production from our refineries fell by 854,000 barrels per day to 8,950,000 barrels per day during the week ending February 10th, which was 7.5% less than the 9,675,000 barrels per day of gasoline that were being produced during the week ending February 12th a year ago…at the same time, refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 271,000 barrels per day to 4,531,000 barrels per day, which was 2.8% less than the 4,663,000 barrels per day of distillates that were being produced during the week ending February 12th last year, also during a mild winter…

however, even with the big drop in our gasoline production, the EIA reported that our gasoline inventories rose by 2,846,000 barrels to a record 259,063,000 barrels as of February 10th, in the sixth increase in our gasoline supplies in 7 weeks…that happened as our domestic consumption of gasoline fell by 508,000 barrels per day to 8,433,000 barrels per day, again well below normal for this time of year…in addition, our gasoline exports, which have often served to reduce our excess supplies, fell by 447,000 barrels per day to 555,000 barrels per day, while our imports of gasoline fell by 207,000 barrels per day to 604,000 barrels per day, making for the first week our gasoline imports exceeded our gasoline exports since the week ending October 14th…since this week’s gasoline supplies are at an all time time high, we’ll include a graph of their recent history here…

February 16 2017 gasoline inventory as of Feb 3

the above graph comes from the twitter feed of John Kemp, who is an energy analyst and columnist with Reuters…it shows US gasoline stores in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our supplies, or the middle of the daily range, traced by the blue dashes over each day of the year…the graph also shows our 2016 gasoline inventories traced weekly in a yellow line, with our year to date 2017 gasoline supplies represented in red…thus we can clearly see that for almost all of 2016, our gasoline supplies were at a seasonal high for every given date, and so far in 2017, our weekly totals have broke those year old 2016 records…

and that’s what happened this week…last year, on February 12th, our gasoline supplies rose to a new record of 258,693,000 barrels, beating the February 13th 2015 record of 243,132,000 barrels by 6.4%…this week’s 259,063,000 barrels thus topped last year’s record by just a small fraction, but it is still a new record nonetheless…recent years have shown that gasoline supplies usually start to fall after the 2nd week of February, (which is clearly visible on the graph), so that may very well happen again this year…still, our gasoline stores are now up by nearly 32 million barrels since Christmas, and on track to continue setting seasonal records higher than those set last year..

meanwhile, the big drop in distillates production served to reduce our supplies of distillate fuels by 689,000 barrels to 170,057,000 barrels by February 10th, as the amount of distillates supplied to US markets, a proxy for our consumption, fell by 57,000 barrels per day to 3,853,000 barrels per day, and as our exports of distillates fell by 105,000 barrels per day to 992,000 barrels per day…even so, our distillate inventories are still 4.7% higher than the distillate inventories of 162,375,000 barrels of February 12th last year, and 33.5% above the distillate inventories of 127,409,000 barrels of February 13th, 2015… 

lastly, the ongoing elevated level of our oil imports, combined with slack refining, led to another large addition to our weekly inventories of crude oil, which rose by 9,527,000 barrels to 518,119,000 barrels by February 10th, thus topping the previous record high oil supply of 512,095,000 barrels set on April 29th 2016…so another record high calls for yet another graph…

February 16 2017 oil inventory as of Feb 3

like the previous graph, this graph also comes from the twitter feed of John Kemp, who seems to post several graphs daily, along with other energy news…also like the prior graph, this one shows US oil supplies in thousands of barrels by “day of the year” for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our oil supplies for any day traced by the blue dashes over each day of the year…this graph also shows our 2016 oil inventories traced weekly in yellow, with our year to date 2017 oil supplies in red…the difference here, as we saw last week, is that our 2016 oil supplies were not just fractionally higher than those of 2015, they averaged more than 10% higher, while 2015 oil supplies ran as much as a third higher than those of 2014…thus the 2017 oil inventories are that much higher again, and we’ve now set a new record for oil supplies on the 41st day of the year, which unlike gasoline supplies, tend to continue to rise seasonally until at least the 120th day of each year (when refining for summer gasoline supplies picks up)….thus, our oil supplies on February 10th were 9.6% higher than the then February record 472,823,000 barrels that we had stored on February 12th of 2016, 32.3% higher than the previous mid-February record of 391,516,000 barrels in storage on February 13th of 2015, and 56.6% higher than the closer to normal 330,956,000 barrels of oil that we had stored on February 12th of 2014…

This Week’s Rig Count

US drilling activity increased for the 15th time in 16 weeks during the week ending February 17th, with the five week increase of 92 drilling rigs still the largest 5 week increase since January 2010…Baker Hughes reported that the total count of active rotary rigs running in the US increased by 10 rigs to 751 rigs in the week ending on this Friday, which was 237 more rigs than the 514 rigs that were deployed as of the February 19th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014…

the number of rigs drilling for oil rose by 6 rigs to 597 rigs this week, which was up from the 413 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 153 rigs this week, which was also up from the 101 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…there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work…   

four drilling platforms offshore from Louisiana in the Gulf of Mexico were shut down this week, while one was added offshore from Texas, which reduced the net Gulf of Mexico rig count down to 17, which was also down from the 25 rigs working in the Gulf a  year ago…the total US offshore count for the week was thus cut back to 18 rigs, as a drilling operation is still going on in the offshore waters off Alaska…..

the number of horizontal drilling rigs working in the US increased by 7 rigs to 614 rigs this week, which is now up by 184 rigs from the 413 horizontal rigs that were in use in the US on February 19th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…in addition, 6 directional rigs were added during the week, bringing the total directional rig count up to 72, up from the 66 directional rigs that were deployed during the same week last year…on the other hand, a net of 3 vertical rigs were stacked this week, reducing the vertical rig count to 65, which was still up from the 50 vertical rigs that were deployed during the same week a year ago…

as usual, the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary 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 February 17th, the second column shows the change in the number of working rigs between last week’s count (February 10th) and this week’s (February 17th) count, the third column shows last week’s February 10th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 19th of February, 2016…        

February 17 2017 rig count summary

as you can see from the above tables, the rig count story this week was all Texas, but not so much in the Permian basin as it has been lately, as the 16 Texas rig increases were fairly widespread, with 8 different Texas oil and gas districts seeing increases, while 2 districts saw drilling cut back…the unusual activity was the 5 rig increase in the Granite Wash basin of the eastern Texas panhandle and adjacent Oklahoma area, where all 13 rigs there are now drilling for oil, versus a year ago, when 7 out of the 10 rigs deployed there were drilling for natural gas…as for the increase of 4 rigs targeting natural gas, none were in our area, as 3 were added in the Haynesville and one was added in the Eagle Ford, while obviously the Ohio and Pennsylvania rig counts remained unchanged…also note that outside of the major producing states shown above, Mississippi saw a rig added this week; they now have 3 rigs working, up from just one rig during the same week a year ago..

DUC report for January

this week also saw the release of the EIA’s Drilling Productivity Report for January, which once again showed another increase in uncompleted wells nationally, mostly as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin…we had expected that with oil prices above $50, some of the DUC well backlog would be completed, but this report again showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5,289 in December to 5,391 in January….a possible cause for this increase that i hadn’t considered until this week might be a shortage of competent fracking crews…an article at Rigzone this week titled Bringing Back Our People: Industry Combats Workforce Challenges cites their problem as previously laid off workers who will probably never return to the oil industry….since the oil field layoffs started in early 2015, we’ve now gone nearly two years with just skeleton fracking crews operating in much of the country, and many of those who had worked in the oil fields before have since found work elsewhere…fracking has also gotten much more complex over that period, so putting together a fracking crew familiar with the latest techniques has become that much harder…

like in December, all of the January DUC increases were oil wells; the Permian basin, which includes the Wolfcamp and several other shale plays in these stats, saw its total count of uncompleted wells rise from 1,673 in November to 1,757 in January, in keeping with the increase in drilling that we’ve seen in that basin…at the same time, DUCs in the Niobrara chalk of the Rockies front range rose by 13, to 708 in January, and DUCs in the Eagle Ford of south Texas increased by 11 to 1,255…on the other hand, the Marcellus saw a small decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 610 in December to 600 in January…in addition; the Utica also showed a decrease of five uncompleted wells and thus had only 98 DUCs remaining in January…for the month, DUCS in the 4 oil basins tracked by the EIA (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 107 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) fell by 15 wells, as they have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered….  

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