first quarter oil prices rise most in 10 years; first quarter rig count drops most in 3 years

oil prices rose for a 4th straight week despite a Trump attempt to drive them lower this past week and thus ended March with the largest quarterly price increase since 2009after rising just 0.4% to $59.04 a barrel last week, prices for US crude to be delivered in May drifted lower on Monday, as concerns about a global economic slowdown more than offset the prospect of tighter crude supply, with prices finishing 22 cents lower at $58.82 a barrel…but oil prices rose nearly 2 percent on Tuesday as traders turned their attention to geopolitical factors, including U.S. sanctions on Iran and Venezuela, that were tightening global supplies, with US crude ending $1.12 higher at $59.94 a barrel…an early Wednesday rally to $60.22 was cut short, however, when the EIA surprised traders by reporting ​an increase in US crude supplies and record production, with May WTI oil falling 53 cents for the day and settling at $59.41 per barrel…oil prices then fell more than 2% to $58.20 on Thursday morning, after Trump tweeted it’s ‘very important that OPEC increase the flow of oil’ because prices are too high, but then recovered from those losses and subsequently rallied above pre-tweet levels before slipping back to settle 11 cents lower at $59.30 a barrel..​.​.momentum from the Trump tweet recovery carried into Friday, as oil prices opened 23 cents higher and then rallied to as high as $60.73 a barrel after weekly data from Baker Hughes showed the number of oil rigs fell by eight and went on to close 84 cents, or 1.4% higher at $60.14 a barrel, the highest closing price since Nov. 9th and a 32% increase ​over the first quarter, the​ ​biggest quarterly rise in a decade

with all the media headlines touting that largest quarterly oil price rise since 2009, it seems a little perspective is in order, so we’ll include a graph that shows daily US oil prices over the last six months…

March 30 2019 oil prices

the above graph is a Saturday afternoon screenshot of the interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets…each bar on the above graph represents oil prices for a day of oil trading between October 1st, 2018 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down…for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while for red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar…also slightly visible on this “candlestick” style graph are the faint grey “wicks” above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day…so while you can see that prices have rallied steadily since the first of the year, and are now up 32% for the 1st quarter, they are still more than 21% lower than the 4 year high of $76.41 a barrel that they closed at on October 3rd 2018, less than 6 months ago…put another way, while prices are up $18 from their Christmas​ eve​ low, they’re still $16 below where they were in early October (​and ​note that since the above graph includes off market and after hours trading, the prices shown above do not correspond exactly to the NYMEX exchange prices we have been quoting..  

while oil prices were pushing higher, natural gas prices fell quite steadily on progressively warmer April forecasts following a gain of just two-tenths of a cent on Monday…quoting natural gas for April delivery at the beginning of the week, prices for that contract fell 4​.2​ cents ​over the next two days ​before expiring at $2.713 per mmBTU on Wednesday…then natural gas prices for May delivery, which had ended last week priced at $2.767 per mmBTU and had fallen 4.8 cents by Wednesday’s close, ​​fell another seven-tenths of a cent on Thursday and 5 cents more on Friday to end the week down 10.5 cents at $2.662 per mmBTU, pressured by warm weather and the report of a weak supply draw

the natural gas storage report for the week ending March 22nd from the EIA ​showed that the quantity of natural gas held in storage in the US fell by 36 billion cubic feet to 1,107 billion cubic feet over the week, which meant our gas supplies ended the period 285 billion cubic feet, or 20.5% below the 1,392 billion cubic feet that were in storage on March 23rd of last year, and 551 billion cubic feet, or 33.2% below the five-year average of 1,658 billion cubic feet of natural gas that have typically remained in storage after three full weeks of March….this week’s 36 billion cubic feet withdrawal from US natural gas supplies was slightly more than the 33 billion cubic feet withdrawal that analysts surveyed by S&P Global Platts had expected, but it was less than the average of 41 billion cubic feet of natural gas that have been withdrawn from US gas storage during the same March week over the last 5 years…. 

with the past week’s temperatures generally above normal over the lower 48 states, and with Cheniere’s Sabine Pass LNG export faculty partly down for maintenance, it appears that this will have been the last storage report of this heating season to show a draw on supplies, as most heating needs in the moderate temperatures of April should be able to be met out of current production…analysts at S&P Global Platts are calling for an injection of 16 billion cubic feet of natural gas into storage for the week ending March 29th and then a 32 billion cubic feet injection for the following week…the national weather service’s 8 to 14 day forecast ​on Saturday ​had indicated a high probability of much above normal temperatures for every place east of the Great Plains, and a better than average chance of above normal temperatures almost everywhere else, so the chances of a late winter cold spell affecting supplies nationally now seem slim…that does not preclude some areas still seeing natural gas shortfalls, though…as Platts points out, the 62 billion cubic feet left in storage in the Rockies region is almost one-quarter lower than at any other time in EIA’s historical data, and further draws were expected on nearly empty regional storage fields this weekend as a cold front sweeps the region…but from after that until next fall, we should be seeing additions to storage, so the immediacy we’ve associated with these reports over the past several months should now be by the boards…

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending March 22nd, indicated modest decreases in both our crude oil imports and our oil exports, but an addition to our commercial supplies of crude, as oil that was unaccounted shifted from the demand side of the balance sheet last week to the supply side this week…our imports of crude oil fell by an average of 392,000 barrels per day to an average of 6,540,000 barrels per day, after rising by an average of 186,000 barrels per day the prior week, while our exports of crude oil fell by an average of 506,000 barrels per day to 2,886,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,654,000 barrels of per day during the week ending March 22nd, 114,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reported to be unchanged from last week at 12,100,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,754,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 15,831,000 barrels of crude per day during the week ending March 22nd, 367,000 fewer barrels per day than the amount of oil they used during the prior week, while over the same period 400,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US…..therefore, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 477,000 fewer barrels per day than what was added to storage plus the oil refineries reported they used during the week…to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+477,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”….since last week’s unaccounted oil was at -812,000 barrels per day, that means 1,289,000 million barrels of oil per day miraculously appeared on the US oil balance sheet from one week to the next, meaning that any comparison of figures from this week to last week is pretty much meaningless.. (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports rose to an average of 6,805,000 barrels per day last week, still 11.7% less than the 7,703,000 barrel per day average that we were importing over the same four-week period last year…. the 400,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the oil stored in our Strategic Petroleum Reserve remained unchanged…this week’s crude oil production was reported to be unchanged at 12,100,000 barrels per day because the rounded estimate for output from wells in the lower 48 states was unchanged at 11,600,000 barrels per day, while a ​5,000 barrel per day increase in Alaska’s oil production to 48​9,000 barrels per day was not enough to make a difference in the rounded national total…last year’s US crude oil production for the week ending March 23rd was at 10,433,000 barrels per day, so this reporting week’s rounded oil production figure was 16.0% above that of a year ago, and 43.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 86.6% of their capacity in using 15,831,000 barrels of crude per day during the week ending March 22nd, down from 88.9% of capacity the prior week, and quite a bit lower than before Venezuelan imports of heavy crude that Gulf Coast refineries are optimized to use were cut off….​similarly, the 15,831,000 barrels per day of oil that were refined this week were down by 5.7% from the 16,795,000 barrels of crude per day that were being processed during the week ending March 23rd, 2018, when US refineries were operating at 92.3% of capacity… 

with the decrease in the amount of oil being refined, the gasoline output from our refineries was also lower, falling by 268,000 barrels per day to 9,657,000 barrels per day during the week ending March 22nd, after our refineries’ gasoline output had increased by 190,000 barrels per day the prior week….with that decrease in the week’s gasoline output, this week’s gasoline production was 6.3% less than the 10,305,000 barrels of gasoline that were being produced daily during the same week last year….​at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) ​inched up​ by 2,000 barrels per day to 4,925,000 barrels per day, after that output had increased by 67,000 barrels per day the prior week…but after this week’s small increase, the week’s distillates production was 1.7% above the 4,844,000 barrels of distillates per day that were being produced during the week ending March 23rd, 2018…. 

with the decrease in our gasoline production, the supply of gasoline left in storage at the end of the week fell by 2,883,000 barrels to 238,620,000 barrels over the week to March 22nd, after supplies had fallen by 4,587,000 barrels over the prior week….the draw from our gasoline supplies was smaller this week than last because the amount of gasoline supplied to US markets decreased by 285,000 barrels per day to 9,124,000 barrels per day, after increasing by 269,000 barrels per day the prior week, while our exports of gasoline rose by 34,000 barrels per day to 693,000 barrels per day, and while our imports of gasoline fell by 105,000 barrels per day to 688,000 barrels per day…after having reached a record high nine weeks ago, our gasoline inventories are now fractionally lower than last March 23rd’s level of 239,593,000 barrels, even as they remain roughly 2% above the five year average of our gasoline supplies at this time of the year…

with little change in our distillates production, our supplies of distillate fuels fell for the 19th time in twenty-seven weeks, decreasing by 2,075,000 barrels to 130,167,000 barrels during the week ending March 22nd, after our distillates supplies had decreased by 4,127,000 barrels over the prior week…the draw on our distillates supplies was smaller this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 490,000 barrels per day to 4,216,000 barrels per day, and because our imports of distillates rose by 93,000 barrels per day to 195,000 barrels per day, while our exports of distillates rose by 291,000 barrels per day to 1,200,000 barrels per day…but even with this week’s inventory decrease, our distillate supplies ended the week 1.0% above the 128,954,000 barrels that we had stored on March 23rd, 2018, while falling to roughly 5% below the five year average of distillates stocks for this time of the year…

finally, with the sudden reappearance of some of the crude that had gone missing for two weeks, our commercial supplies of crude oil in storage increased for the seventh time in 10 weeks, rising by 2,800,000 barrels over the week, from 439,483,000 barrels on March 15th to 442,283,000 barrels on March 22nd…however, with a total draw of over 13.4 million barrels in the 2 previous weeks, our crude oil inventories were still roughly 2% below the recent five-year average of crude oil supplies for this time of year, while remaining around 30% above the prior 5 year (2009 – 2013) average of crude oil stocks after the third full week of March, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had mostly been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of March 22nd were still 2.9% above the 429,949,000 barrels of oil we had stored on March 23rd of 2018, but ​at the same time, still 17.2% below the 533,977,000 barrels of oil that we had in storage on March 24th of 2017, and 12.2% below the 503,816,000 barrels of oil we had in storage on March 25th of 2016…        

This Week’s Rig Count

US drilling rig activity fell for the sixth week in a row and is now down by more that 7% so far this year, which is the largest drilling pullback in any quarter since the first quarter of 2016….Baker Hughes reported that the total count of rotary rigs running in the US fell by 10 rig to 1016 rigs over the week ending March 29th, which was still 13 more rigs than the 993 rigs that were in use as of the March 30th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market…  

the count of rigs drilling for oil fell by 8 rigs to 816 rigs this week, which was still 19 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 2 rigs to 190 natural gas rigs, which was 4 rigs less than the 194 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

drilling activity offshore in the Gulf of Mexico increased by 3 rigs to 23 rigs this week, which was more than double the 11 rigs active in the Gulf a year ago, which was the lowest on record at that time…at the same time, a drilling platform set up on an inland body of water in southern Louisiana was shut down, leaving just two of those so-called “inland water rigs” ​left ​active, in contrast to the 4 inland waters rigs active in the state a year earlier…

the count of active horizontal drilling rigs decreased by 9 rigs to 891 horizontal rigs this week, which was still 21 more horizontal rigs active than the 870 horizontal rigs that were in use in the US on March 30th of last year, but was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..at the same time, the vertical rig count decreased by 2 rigs to 51 vertical rigs this week, which was also down by 12 rigs from the 63 vertical rigs that were in use during the same week of last year….on the other hand, the directional rig count increased by 1 rig to 64 directional rigs this week, which was also up by 4 rigs from the 64 directional rigs that were operating on March 30th of 2018… 

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major ​oil & gas ​producing states, and the second table shows the 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 29th, the second column shows the change in the number of working rigs between last week’s count (March 22nd) and this week’s (March 29th) count, the third column shows last week’s March 22nd active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 30th of March, 2018…  

March 29 2019 rig count summary

for the second week in a row, half of this week’s rig decrease was due to rigs being shut down in the Permian of western Texas and New Mexico, where a total of 4,004 uncompleted wells could be reducing their incentive to drill more…​this week, ​all 5 of those Permian rig reductions were pulled out of Texas Oil District 8, which would correspond to the core Permian Delaware, while Permian rigs in New Mexico and the Midland basin were unchanged…also in Texas, another 5 oil rigs were pulled out of the Eagle Ford​ in the southeast​, where a 9th natural gas rig was concurrently started up…Texas drillers managed to hold the statewide reductions to 6 rigs primarily through the addition of 3 rigs in the panhandle Texas Oil District 10, two of which were the Granite Wash ​basin ​additions you see above, with one of those targeting natural gas…the once highly touted STACK/SCOOP play in the Cana Woodford of Oklahoma also saw a 3 rig reduction this week and is now down by 14 rigs from a year ago, while the old Bakken shale in the Williston basin saw three rigs added and is now pulling ahead of its year ago totals…despite the 2 gas additions we’ve cited, natural gas rigs ended down two because one of the 3 natural gas rigs that had been drilling in the Arkoma Woodford of Oklahoma was replaced by an oil rig, and 3 natural gas rigs in basins not tracked separately by Baker Hughes were concurrently shut down…also note that other than the usual major producing states shown above, Virginia also saw a ​directional ​drilling rig start up ​in Campbell County ​this week, in only the second time there was drilling activity in the state since 2014…

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note:  there’s more here

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4th quarter GDP revision; February’s income and outlays, housing starts and new home sales; January’s trade deficit

The key economic releases from the Bureau of Economic Analysis this week included what they are still calling “the 3rd estimate” of 4th quarter GDP, even though the 1st estimate was cancelled, and the February report on Personal Income and Spending, which only includes spending data from January, since that data is dependent on delayed Census reports…meanwhile, delayed reports that were released this week included International Trade for January from the Commerce Dept, and February’s New Residential Construction and February’s New Home Sales from the Census Bureau…

The week also saw the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which fell to –0.29 in February from –0.25 in January, after January’s index was revised up from the –0.43 reported last month…as a result, the 3 month average of that index fell to -0.18 in February, from a neutral reading of zero in January, which indicates that national economic activity has been somewhat below the historical trend over recent months…in addition, the Case-Shiller Home Price Index for January from S&P Case-Shiller reported that home prices during November, December and January averaged 4.3% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier, down from 4.6% year over year increase in December, revised from the 4.7% increase reported in the December report last month…

This week also saw the release of the last three regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +8.3 from last month’s +13.1, still suggesting a ongoing expansion in the Texas energy centered 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 fell to +10 in March, down from +16 in February, but up from -2 in January, also suggesting a continuing modest expansion in that region’s manufacturing, and the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to 10 in March, up from 1 in February and 5 in January, likewise indicating a modest expansion among 10th District manufacturers…

4th Quarter GDP Revised to Indicate Growth at a 2.2% Rate

The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.2% rate in the 4th quarter, revised from the 2.6% growth rate indicated by the initial estimate reported last month, as personal consumption expenditures, fixed investment and growth of government were smaller than was previously estimated, while the negative impact of the trade deficit was less than was previously estimated….in current dollars, our fourth quarter GDP grew at a 4.06% annual rate, increasing from what would work out to be a $20,658.2 billion a year output rate in the 3rd quarter to a $20,865.1 billion annual rate in the 4th quarter, with the headline 2.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.7%, aka the GDP deflator, was applied to the current dollar change…that GDP deflator had previously been reported at 1.8%..

As we review the revision details below, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times the change that actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 4th quarter GDP, which is linked to on the BEA’s GDP landing page, where you can also find links to just the tables on Excel and other technical notes about this release…specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2014, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components….the pdf for the 4th quarter initial estimate, which this estimate revises, is here

Seasonally adjusted real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 2.5% annual rate in the 4th quarter, rather than the 2.8% growth rate reported last month, as growth of consumer spending in dollars at a 4.0% annual rate was deflated with the PCE price index, which indicated consumer inflation grew at a 1.5% annual rate in the 4th quarter, unrevised from the initial estimate….real consumption of durable goods grew at a 3.6% annual rate, revised from 5.9% in the second estimate, and added 0.25 percentage points to GDP, as real output of motor vehicles grew at a 9.0% annual rate and accounted for four-fifths of that durable goods growth….real consumption of nondurable goods by individuals rose at a 2.1% annual rate, revised from the 2.8% increase reported in the initial estimate, and added 0.29 percentage points to 4th quarter growth, as all categories of non-durables saw their output grow in the quarter….at the same time, real consumption of services grew at a 2.4% annual rate, unrevised from last month, and added 1.12 percentage points to the final GDP tally, as consumption of household services accounted for nearly two-thirds of the 4th quarter increase in services…

Meanwhile, real gross private domestic investment grew at a 3.7% annual rate in the 4th quarter, revised from the 4.6% growth estimate made last month, as the growth rate of real private fixed investment was revised from a 3.9% rate to a 3.1% rate, while real inventory growth was a bit less than was previously estimated…investment in non-residential structures was revised from shrinking at a 4.2% rate to shrinking at a 3.9% rate, while real investment in equipment was revised to show growth at a 6.6% rate, revised from the 6.7% growth rate previously reported…in addition, the 4th quarter’s investment in intellectual property was revised from growth at a 13.1% rate to growth at a 10.7% rate, while the contraction rate of residential investment was revised from 3.5% to 4.7% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.12 percentage points from the economy’s growth rate, increased investment in equipment added 0.39 percentage points, our investment in intellectual property added 0.46 percentage points, while the slowdown in residential investment subtracted 0.18  percentage points from the change in the growth rate of 4th quarter GDP…

At the same time, the inflation adjusted growth of real private inventories was revised from the previously reported $97.1 billion to show inventories had grown at an $96.8 billion rate, which came after inventories had grown at an inflation adjusted $89.8 billion rate in the 3rd quarter, and hence the $7.0 billion positive change in real inventory growth from the 3rd quarter to the 4th added 0.11 percentage points to the 4th quarter’s growth rate, revised from the 0.13 percentage point addition to GDP due to inventory growth reported in the initial estimate….however, since growth in inventories indicates that more of the goods produced during the quarter were left in storage or “sitting on the shelf”, their increase by $7.3 billion in turn means real final sales of GDP were actually smaller by that amount, and hence real final sales of GDP grew at a 2.1% rate in the 4th quarter, which was still up from the real final sales growth rate of 1.0% in the 3rd quarter, when the much greater increase in inventory growth meant that the quarter’s growth in real final sales was considerably lower…

The previously reported increase in real exports was revised a bit higher with this estimate, while the reported increase in real imports was revised a bit lower, and hence our net trade was a smaller subtraction from GDP than was previously reported…our real exports grew at a 1.8% rate, rather than at the 1.6% rate reported in the initial estimate, and since exports are added to GDP because they are part of our production that was not consumed in or added to investment in our country, their growth added 0.22 percentage points to the 4th quarter’s growth rate, revised from the 0.19 percentage point addition from exports shown last month….meanwhile, the previously reported 2.7% rate of increase in our real imports was revised to an 2.0% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 0.30 percentage points from 4th quarter GDP, revised from the 0.41 percentage point subtraction shown last month….thus, our weaker trade balance subtracted a net of 0.8 percentage points from 4th quarter GDP, revised from the 0.22 percentage point GDP subtraction resulting from foreign trade that was indicated in the initial estimate..

Finally, there was a reversal in real government consumption and investment in this estimate, as the entire government sector is now seen to have shrunk at a 0.4% rate, revised from the 0.4% growth rate reported a month ago…real federal government consumption and investment was seen to have grown at a 1.1% rate in this estimate, down from the 1.6% growth rate shown in the initial estimate, as real federal outlays for defense grew at a 6.4% rate and added 0.24 percentage points to 4th quarter GDP, revised from the 6.9% growth rate shown previously, while growth in all other federal consumption and investment was revised from contracting at a 5.6% rate to a contraction at a 6.1% rate, which thus subtracted 0.16 percentage points from 4th quarter GDP…meanwhile, real state and local consumption and investment was revised from shrinking at a 0.3% rate in the first estimate to shrinking at a 1.3% rate in this estimate, as state and local investment spending shrunk at an 8.8% rate and subtracted 0.18 percentage points from 4th quarter GDP, while state and local consumption spending grew at a 0.4% rate and added 0.03 percentage points to GDP….note that government outlays for social insurance are not included in this government 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…. 

Personal Income up 0.2% in February, Personal Spending up 0.1% in January, PCE Price Index down 0.1%

Since our personal consumption expenditures account for nearly 70% of GDP, they 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 is the report on Personal Income and Outlays from the Bureau of Economic Analysis…however, with Census reports on retail sales and some services surveys still running behind schedule because of the January government shutdown, this month’s report includes Personal Income for February and Personal Outlays for January, instead of the usual report encompassing all February data…so while this report gives us 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, that data, as well as the monthly savings rate, is all for January, while only the monthly personal income data and disposable personal income are new for February…

Note that because this report feeds in to GDP and other national accounts data, the change reported for each of the metrics reported on is not the current monthly change; rather, the amounts are seasonally adjusted and at an annual rate; ie, it tells us what income and spending would be for a year if the month’s adjusted income and spending were extrapolated over an entire year….hence, when the opening line of the January summary for this report tell us “Personal income decreased $22.9 billion (-0.1 percent) in January“, that means that the annualized figure for all US personal income in January, $17,999.7 billion, was $22.9 billion, or a more than 0.1% less than the annualized personal income figure of $18,022.6 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, fell by a bit more than 0.2%, from an annual rate of an annual rate of $15,948.3 billion in December to an annual rate of $15,913.4 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…there, we see that the reason for the $22.9 billion annual rate of decrease in January personal income was a $107.0 billion drop in interest and dividend income, reversing December’s unusual gains; wages and salaries, meanwhile, saw a $30.2 billion increase…

In February, on the other hand, personal income increased at an annual rate of $42.0 billion, or by more than 0.2%, from an annualized $17,999.7 billion in January to an annualized $18,041.7 billion in February…at the same time, disposable personal income increased at a $31.3 billion annual rate, or by a bit less than 0.2%, from a $15,913.4 billion annual rate in January to a $15,944.7 billion annual rate in February…the major reason for the February increase in personal income was a $27.7 billion rate of increase in wages and salaries, while proprietor’s income also contributed, rising at a $11.8 billion rate..

For the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $8.6 billion, or by less than 0.1%, from a $14,157.4 billion annual rate in December to a $14,166.0 billion annual rate in January; at the same time, the December PCE figure was revised down from the originally reported $14,176.2 billion annually, a revision that was already incorporated into this week’s 4th quarter GDP estimate (this report, although usually released a business day later than the GDP release, is computed concurrently)….total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $6.3 billion to $14,725.1 billion annually in January, which left total personal savings, which is disposable personal income less total outlays, at a $1,188.3 billion annual rate in January, down from the revised $1,229.5 billion in annualized personal savings in December… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 7.5% in January from the December savings rate of 7.7%, which had been a three year high…

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 shown in Table 9 in the pdf for this report, which is a chained price index based on 2012  prices = 100….that PCE price index fell from 108.938 in December to 108.873 in January, giving us a month over month inflation rate of -0.05967%, which BEA rounds to a 0.1% decrease in reporting it in text and tables here….then, applying that -0.05967% inflation adjustment to the small increase in January PCE shows that real PCE rose by 0.12048% in January, which the BEA reports as a 0.1% increase…note that when those PCE price indexes are applied to a given month’s annualized PCE in current dollars, it gives us that month’s annualized real PCE in those same chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to that of another….that result is shown in table 7 of the PDF, where we see that January’s chained dollar consumption total works out to 13,011.9 billion annually, 0.12% more than December’s 12,996.3 billion, statistically the same as the real PCE decrease we just computed..

However, to estimate the impact of the change in January PCE on the change in GDP, the change from December doesn’t help us much, since GDP is reported quarterly…thus we have to compare January’s real PCE to the the real PCE of the 3 months of the third quarter….while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in this report, where we find that the annualized real PCE for the 4th quarter was represented by 13,032.3 billion in chained 2012 dollars..(ie, that’s the same as what’s shown in table 3 of the pdf for the 4th quarter GDP report)….when we compare January’s real PCE representation of 13,011.9 billion to the 4th quarter real PCE figure of 13,032.3 billion, we find that real PCE is shrinking at a 0.624% annual rate so far in the 1st quarter….that’s a rate that would mean that if January real PCE does not improve during February and March, growth in PCE would subtract 0.41 percentage points from the growth rate of 1st quarter GDP…

Trade Deficit Fell 14.6% in January, Led by Lower Imports of Capital Goods, Oil

Our trade deficit fell 14.6% in January, almost reversing the 18.8% increase in December, as the value of our exports increased and the value of our imports decreased…the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $8.8 billion to $51.1 billion in January, from a December deficit which was revised from $59.8 billion to $59.9 billion….the value of our January exports rose by a rounded $1.9 billion to $207.3 billion on a $1.8 billion increase to $137.4 billion in our exports of goods and an increase of $0.2 billion to $70.0 billion in our exports of services, while our imports fell by $6.8 billion to $258.5 billion on a $6.5 billion decrease to $210.7 billion in our imports of goods and a $0.3 billion decrease to $47.8 billion in our imports of services…export prices averaged 0.6% higher in January, so real exports were smaller than their nominal value by that percentage, while import prices were also 0.6% higher, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage….

The increase in our January exports of goods was mostly due to higher exports of soybeans and of automotive vehicles, which were partially offset by a decrease in our exports of civilian aircraft…referencing the Full Release and Tables for January (pdf), in Exhibit 7, we find that our exports of foods, feeds and beverages rose by $1,253 million to $10,849 million on a $910 million increase in our exports of soybeans, and that our exports of automotive vehicles, parts and engines rose by $1,218 million to $13,529 million on a $726 million increase in our exports of passenger cars and a $299 million increase in our exports of trucks, buses, and special purpose vehicles…in addition, our exports of consumer goods increased by $669 million to $17,765 million on a $325 million increase in our exports of gem diamonds and a $283 million increase in our exports of jewelry…partially offsetting the increases in those end use categories, our exports of capital goods fell by $778 million to $45,922 million on a $1,277 million decrease in our exports of civilian aircraft and a $270 million decrease in our exports of industrial engines, partly offset by a $385 million increase in our exports of computer accessories and a $213 million increase in our exports of medicinal equipment…in addition, our exports of industrial supplies and materials fell by $299 million to $43,397 million on a $264 million decrease in our exports of organic chemicals and a $238 million decrease in our exports of fuel oil, and our exports of other goods not categorized by end use fell by $277 million to $5,382 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that our imports in all end use categories decreased in January, led by lower imports of capital goods and of industrial supplies and materials…our imports of capital goods fell by $2,962 million to $57,017 million on a $946 million decrease in our imports of computer accessories, a $723 million decrease in our imports of semiconductors, a $704 million decrease in our imports of civilian aircraft, a $473 million decrease in our imports of telecommunications equipment, a $385 million decrease in our imports of generators and accessories, and a $299 million decrease in our imports of industrial machines other than those itemized separately, while at the same time our imports of drilling & oilfield equipment rose by $308 million, our imports of civilian aircraft parts rose by $307 million, and our imports of computers rose by $295 million…meanwhile, our imports our imports of industrial supplies and materials fell by $2,323 million to $43,756 million as the value of our imports of crude oil fell by $1,359 million, our imports of nonmonetary gold fell by $253 million, and our imports of other precious metals fell by $219 million, and our imports of consumer goods fell by $334 million to $55,160 million as a $667 million decrease in our imports of furniture and a million decrease in our imports of appliances were partially offset by a $494 million increase in our imports of cellphones and a $223 million increase in our imports of toys, games, and sporting goods…in addition, our imports of foods, feeds, and beverages fell by $318 million to $12,264 million on a $218 million decrease in our imports of fish and shellfish, our imports of automotive vehicles, parts and engines fell by $172 million to $31,936 million, and our imports of other goods not categorized by end use fell by $330 million to $8,851 million…

To gauge the impact of January trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012  dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here….from that table, we can figure that 4th quarter real exports of goods averaged 148,107.7 million monthly in chained 2012 dollars, while inflation adjusted January goods exports were at 149,741 million in that same 2012 dollar quantity index representation… annualizing the change between the two figures, we find that January’s real exports of goods are thus running at a 4.48% annual rate above those of the 4th quarter, or at a pace that would add about 0.37 percentage points to 1st quarter GDP growth if continued through February and March…in a similar manner, we find that our 4th quarter real imports of goods averaged 235,498 million monthly in chained 2012 dollars, while inflation adjusted goods imports in January were at 233,558 million…that would indicate that so far in the 1st quarter, we have seen our real imports of goods decrease at a 3.25% annual rate from those of the 4th quarter…since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 3.25% rate would conversely add another 0.39 percentage points to 1st quarter GDP….hence, if our January trade in goods deficit is maintained at the same level throughout the 1st quarter, our improving balance of trade in goods would add about 0.76 percentage points to the growth of our 1st quarter GDP….note, however, that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don’t have easy access to the details on all their price changes… 

Housing Starts, Permits Reported Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,162,000, which was 8.7 percent (±10.3 percent)* below the revised estimated January annual rate of 1,273,000, and was 9.9 percent (±11.5 percent)* below last February’s rate of 1,290,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been up by 1.6% or down by as much as 19.0% from those of January, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for January housing starts was revised from the 1,230,000 reported earlier this month to 1,273,000, while December starts, which were first reported at a 1,078,000 annual rate, were revised from last month’s initial revised figure of 1,037,000 annually to a 1,140,000 annual rate with this report….

these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 81.300 housing units were started in February, down from the 85,100 units that were started in January but up from the 76,000 units that were started in December…of those housing units started in February, an estimated 55,700 were single family homes and 25,200 were units in structures with more than 5 units, down from the revised 63,700 single family starts in January but up from the 20,100 units started in structures with more than 5 units in January…

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,296,000, which was 1.6 percent (±1.2 percent) below the revised January annual rate of 1,317,000 permits, and was 2.0 percent (±1.7 percent) below the rate of building permit issuance in February a year earlier…the annual rate for housing permits issued in January was revised down from the originally reported 1,345,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 90,200 housing units were issued in February, down from the revised estimate of 94,400 new permits issued in January, with single family permits down from 58,100 to 57,700 and permits for units in structures of more than 5 units down from 33,300 to 30,000….for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.162 Million Annual Rate in February and Comments on February Housing Starts

February New Home Sales Reported Higher

The Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 667,000 homes annually during the month, which was 4.9 percent (±14.4 percent)* above the revised January annual sales rate of 636,000, and 0.6 percent (±13.1 percent)* above the estimated annual rate that new homes were selling at in February of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from February sales of a year ago, with the figures in parenthesis representing the 90% confidence range for the reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in January were revised from the annual rate of 607,000 reported last month to an annual rate of 636,000, and new home sales in December, initially reported at an annual rate of 621,000 and revised to a 652,000 rate earlier this month, were revised down to a 588,000 a year rate with this report, while November’s annualized new home sales rate, initially reported at an annual rate of 657,000 and revised from a 599,000 rate to a 628,000 annual rate two weeks ago, were revised back down to a 612,000 annual 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 56,000 new single family homes sold in February, up from the estimated 49,000 new homes that sold in January and up from the 41,000 that sold in December, and up from the 54,000 that sold in February a year ago…the raw estimates from Census field agents further indicated that the median sales price of new houses sold in February was $315,300, up from the median sale price of $303,900 in January but down from the median sales price of $ 327,200 in February a year ago, while the average February new home sales price was $379,600, up from the $358,000 average sales price in January, and up from the average sales price of $373,600 in February a year ago….a seasonally adjusted estimate of 340,000 new single family houses remained for sale at the end of February, which represents a 6.1 month supply at the February sales rate, down from the revised 6.5 months months of new home supply in January…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increased to 667,000 Annual Rate in February and A few Comments on February New 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 picked from the aforementioned GGO posts, contact me…)      

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graphics and tables for March 30th

rig count summary:

March 29 2019 rig count summary

oil prices:

March 30 2019 oil prices

natural gas consumption:

March 25 2019 natural gas consumption

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DUC well backlog falls to 6.5 months on jump in completions; oil supplies see largest draw since July

after rising to a 4 month high midweek on the largest drop in US crude supplies since July, oil prices ended the week little changed after renewed fears of economic weakness knocked prices back…after ending last week 4.4% higher at $58.52 a barrel on lower inventories and supply disruptions, prices for US crude to be delivered in April rose 57 cents to $59.09 a barrel on Monday, supported by another OPEC commitment to continue supply cuts til June, and signs of a drop in U.S. crude supplies….an early rally then stalled on Tuesday after reports of Chinese pushback in trade talks, but oil prices still held near multi-month highs as OPEC reported higher “conformity” with their production cut agreement, with US crude finishing just 6 cents lower at $59.03 a barrel…prices then slumped 70 cents early Wednesday, but rallied later to a new 2019 high, after the EIA reported the largest oil storage drop since July, with the April oil contract expiring 80 cents higher at $59.83 a barrel while the contract for May crude rose 93 cents to $60.23 a barrel…May oil prices pulled back from those mulitmonth highs on Thursday after the Fed signaled there would be no rate increases in 2019, citing concerns over global growth prospects, which could threaten energy demandoil prices then tanked with equity markets on Friday as fears of a global slowdown spread, falling to as low as $58.28 a barrel, but recovered to finish down 94 cents at $59.04 a barrel, thus managing to eke out a third straight weekly gain, with May oil finishing up 0.4% from its week-ago finish

natural gas prices, meanwhile, finished lower, as cold weather forecasts early in the week, which had pushed gas prices 5.5 cents higher on Monday and 2.4 cents higher on Tuesday, gave way to warmer weather models and lower natural gas prices later in the week, when prices of natural gas for April delivery fell 5.4 cents on Wednesday, rose a tenth of a cent with the storage report on Thursday, and then fell 6.8 cents on Friday, to end the week at $2.753 per mmBTU, a decrease of 1.5% from the prior week’s $2.795 per mmBTU close..

the natural gas storage report for the week ending March 15th from the EIA indicated that the quantity of natural gas held in storage in the US fell by 47 billion cubic feet to 1,143 billion cubic feet over the week, which meant our gas supplies ended the period 315 billion cubic feet, or 21.5% below the 1,458 billion cubic feet that were in storage on March 16th of last year, and 556 billion cubic feet, or 32.7% below the five-year average of 1,699 billion cubic feet of natural gas that have typically remained in storage after two full weeks of March….this week’s 47 billion cubic feet withdrawal from US natural gas supplies was close to the 48 billion cubic feet withdrawal that analysts surveyed by S&P Global Platts had expected, but it was less than the average of 56 billion cubic feet of natural gas that have been withdrawn from US gas storage during the same winter week over the last 5 years….

with the heating season coming to a close soon, we’ll include a graphic that includes this year’s and last year’s weekly change in natural gas inventories, as well as the long term averages, so we can get an idea what to expect, and what it will take to bring our current natural gas supplies back into the normal range…

March 23 2019 natural gas storage as of March 15

the above graph was copied from a blog post at Bespoke Weather that was published on Thursday of this week, shortly after the release of the natural gas storage report…on this graph, weekly withdrawals from natural gas storage in billions of cubic feet are shown below the zero line, and weekly additions to natural gas storage in billions of cubic feet are shown above the zero line; hence, the dark blue graph for 2019 shows this year’s weekly withdrawals year to date, the red graph shows 2018’s weekly additions and withdrawals of natural gas from storage, the green graph shows the 5 year average weekly change of natural gas in storage, and the orange graph shows the historical average weekly change of natural gas supplies in EIA data going back to 1992…

at the bottom far left corner in red you can see the record withdrawal of 359 billion of cubic feet of natural gas during the first week in January of 2018, and a withdrawal of 288 billion cubic feet during the third week of January 2018 that would have also been a record withdrawal if not for the first week; which combined lowered our natural gas supplies to 17.5% below normal to start last year, a deficit which persisted throughout the summer, despite near normal additions to storage….then, for the week ending November 16th 2018, you can see the big red spike downward that represented the largest drop in our natural gas supplies ever in mid-November, which came after our natural gas supplies had already started the winter at a 15 year low, and thus left us in an even more precarious situation…however, our supply deficit began to recover with the smallest Christmas-week withdrawal in 13 years, as you can see in the red spike higher on the far right side of the graphic, beginning a trend which persisted into January, when our withdrawals of natural gas remained well below normal, as you can see in the far left of the blue graph…

then, as you can see in the blue 2019 graph, our cold February and early March this year have more recently resulted in above normal withdrawals of gas from storage, up until this week, which have thus left our supplies 32.7% below the 5 year average of natural gas in storage, and 21.5% below last year’s already well below normal levels…observed weather and forecasts indicate that the next two weeks should see withdrawals of gas from storage close to normal, before we head into April, when our natural gas needs should be able to be met out of production….nonetheless, our supplies as of this report are still 315 billion cubic feet below where they were on the same date last year, so to merely bring our supplies of gas back to the low levels that we started this past winter at, we have to add an average of 10 billion cubic feet more natural gas to storage each week this spring and summer than we did last year…on the graphic above, that would mean the blue graph would have to consistently stay above the red one through the next seven months, just to avoid going into the winter of 2020 in worse shape than we started this past winter..

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending March 15th, indicated a big increase in our crude oil exports and a correspondingly large withdrawal from our commercial supplies of crude….our imports of crude oil rose by an average of 186,000 barrels per day to an average of 6,932,000 barrels per day, after falling by an average of 255,000 barrels per day the prior week, while our exports of crude oil rose by an average of 846,000 barrels per day to 3,392,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,540,000 barrels of per day during the week ending March 15th, 660,000 fewer barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was estimated to be 100,000 barrels per day greater than last week at 12,100,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,640,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 16,198,000 barrels of crude per day during the week ending March 15th, 178,000 more barrels per day than the amount of oil they used during the prior week, while over the same period 1,370,000 barrels of oil per day were reportedly being withdrawn from the oil that’s in storage in the US…..therefore, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 812,000 more barrels per day than the oil refineries reported they used during the week….to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (-812,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”….with that large of a disparity, we have to figure one or more of this week’s oil metrics is in error by a statistically significant amount.. (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports fell to an average of 6,649,000 barrels per day last week, now 11.2% less than the 7,487,000 barrel per day average that we were importing over the same four-week period last year…. the 1,370,000 barrel per day decrease in our total crude inventories all came out of our commercially available stocks of crude oil, as the oil stored in our Strategic Petroleum Reserve remained unchanged…this week’s crude oil production was reported to be 100,000 barrels per day higher at 12,100,000 barrels per day because the rounded estimate for output from wells in the lower 48 states rose by 100,000 barrels per day to 11,600,000 barrels per day, while a 4,000 barrel per day increase in Alaska’s oil production to 484,000 barrels per day was not enough to make a difference in the rounded national total…last year’s US crude oil production for the week ending March 16th was at 10,407,000 barrels per day, so this reporting week’s rounded oil production figure was 16.3% above that of a year ago, and 43.6% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 88.9% of their capacity in using 16,198,000 barrels of crude per day during the week ending March 15th, up from 87.6% of capacity the prior week, but still a bit lower than before Venezuelan imports of heavy crude​ that Gulf Coast refineries are optimized to use were cut off….the 16,198,000 barrels per day of oil that were refined this week were down by 3.5% from the 16,777,000 barrels of crude per day that were being processed during the week ending March 16th, 2018, when US refineries were operating at 91.7% of capacity… 

with the increase in the amount of oil being refined, the gasoline output from our refineries was also higher, rising by 190,000 barrels per day to 9,925,000 barrels per day during the week ending March 15th, after our refineries’ gasoline output had decreased by 117,000 barrels per day the prior week….with that increase in ​​the week’s gasoline output, ​this week’s gasoline production​ was​ little changed from the 9,932,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 67,000 barrels per day to 4,923,000 barrels per day, after that output had decreased by 63,000 barrels per day the prior week….after this week’s increase, the week’s distillates production was more than 9.3% above the 4,503,000 barrels of distillates per day that were being produced during the week ending March 16th, 2018…. 

even with the increase in our gasoline production, the supply of gasoline left in storage at the end of the week fell by 4,587,000 barrels to 241,503,000 barrels over the week to March 15th, after supplies had fallen by 4,624,000 barrels over the prior week….our gasoline supplies continued to fall again this week because the amount of gasoline supplied to US markets increased by 269,000 barrels per day to 9,409,000 barrels per day, after increasing by 78,000 barrels per day the prior week, even as our exports of gasoline fell by 272,000 barrels per day to 659,000 barrels per day, while our imports of gasoline rose by 220,000 barrels per day to 793,000 barrels per day…after having reached a record high eight weeks ago, our gasoline inventories are now fractionally below last March 16th’s level of 243,065,000 barrels, even as they remain roughly 2% above the five year average of our gasoline supplies at this time of the year…

likewise, even with the increase in our distillates production, our supplies of distillate fuels fell for the 18th time in twenty-six weeks, decreasing by 4,127,000 barrels to 132,242,000 barrels during the week ending March 15th, after our distillates supplies had increased by 383,000 barrels over the prior week…our distillates supplies decreased by this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 753,000 barrels per day to 4,706,000 barrels per day, and because our imports of distillates fell by 136,000 barrels per day to 102,000 barrels per day, while our exports of distillates fell by 177,000 barrels per day to 909,000 barrels per day…but even with this week’s inventory decrease, our distillate supplies ended the week 0.9% above the 131,044,000 barrels that we had stored on March 16th, 2018, but fell to roughly 4% below the five year average of distillates stocks for this time of the year…

finally, with the big jump in this week’s oil exports, our commercial supplies of crude oil in storage decreased for the third time in 9 weeks, falling by 9,589,000 barrels over the week, from 449,072,000 barrels on March 8th to 439,483,000 barrels on March 15th…with that big draw, the largest since July of last year, our crude oil inventories are now roughly 2% below the recent five-year average of crude oil supplies for this time of year, but remain around 30% above the prior 5 year (2009 – 2013) average of crude oil stocks after the second full week of March, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had mostly been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of March 15th were still 2.6% above the 428,306,000 barrels of oil we had stored on March 16th of 2018, while falling to 17.6% below the 533,110,000 barrels of oil that we had in storage on March 17th of 2017, and 12.4% below the 501,517,000 barrels of oil we had in storage on March 18th of 2016…       

This Week’s Rig Count

US drilling rig activity slowed for the fifth week in a row and is now down by 7% so far this year, as the lower prices for both oil and natural gas we’ve seen since year end​ combined with​ the large backlog of uncompleted wells​​ have continued to impact drilling decisions….Baker Hughes reported that the total count of rotary rigs running in the US fell by 10 rig to 1016 rigs over the week ending March 22nd, which was still 21 more rigs than the 995 rigs that were in use as of the March 23rd report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market…  

the count of rigs drilling for oil fell by 9 rig​s​ to 824 rigs this week, which was still 20 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations decreased by 1 to 192 natural gas rigs, which was just 2 more than the 190 natural gas rigs that were drilling a year ago, but way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

drilling activity offshore in the Gulf of Mexico was down by 2 rigs to 20 rigs this week, which was still up by 7 rigs from the 13 rigs active in the Gulf a year ago, which was a multiyear low at that time…the count of active horizontal drilling rigs decreased by 7 rigs to 900 horizontal rigs this week, which was still 30 more horizontal rigs active than the 870 horizontal rigs that were in use in the US on March 23rd of last year, but was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..at the same time, the vertical rig count decreased by 1 rig to 53 vertical rigs this week, which was also down by 10 rigs from the 63 vertical rigs that were in use during the same week of last year….in addition, the directional rig count was down by 2 to 63 directional rigs this week, which was ​still ​up by 1 rig from the 62 directional rigs that were operating on March 23rd of 2018… 

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the 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 22nd, the second column shows the change in the number of working rigs between last week’s count (March 15th) and this week’s (March 22nd) count, the third column shows last week’s March 15th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 23rd of March, 2018…    

March 22 2019 rig count summary

as you can see, half of this week’s rig decrease was ​from the Permian of west Texas and New Mexico, which has now seen their uncompleted well total top 4,000, reducing the​ir​ incentive to drill more…in the Texas Permian, 3 rigs were pulled out of Texas Oil District 8, which would generally correspond to the core Permian Delaware, and one rig was removed from Texas Oil District 7C, or what would be the southern part of the Permian Midland basin…since a total of 5 rigs were pulled out of the Permian, one of them was th​erefore pulled ​out ​from the Permian Delaware in New Mexico, where there was thus also another rig shut down in another part of the state…other than the 4 rig decrease in Texas, you ​also ​see Louisiana’s rig count was down by 3; those included the 2 rigs ​shut down ​in the state’s Gulf of Mexico waters, and a gas ​rig pulled from the Haynesville shale in the northwest quadrant of the state…​in addition to that ​Haynesville natural gas​ rig, another gas rig was pulled out of the Arkoma Woodford in Oklahoma, while a natural gas rig was added in Ohio’s Utica shale…other than those 3, all other changes this week were oil directed rigs, including the 4 rigs shut down in basins not tracked separately by Baker Hughes, which are not shown above…

DUC well report for February

Monday of the  past week saw the release of the EIA’s Drilling Productivity Report for March, which includes the EIA’s February data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the 11th month in a row, this report showed an increase in uncompleted wells nationally in February, even as drilling of new wells decreased ​and completions of drilled wells increased….like most previous months, this month’s uncompleted well increase was largely due to an increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of western Texas and New Mexico, with modest increases of uncompleted wells in the Eagle Ford of south Texas and the Niobrara chalk of the Rockies front range also contributing…for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 93 wells, from a revised 8,483 DUC wells in January to 8,576 DUC wells in February, a 24.5% increase from the 6,887 wells that had been drilled but remained uncompleted as of the end of February a year ago…that was as 1,418 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during February, down by 14 from the 1,432 wells drilled in January, while 1,325 wells were completed and brought into production by fracking, a increase of 113 well completions from the 1,212 completions seen in January…at the February completion rate, the 8,576 drilled but uncompleted wells left at the end of the month represent a 6.5 month backlog of wells that have been drilled but not yet fracked…  

as has been the case for most of the past two years, the February DUC well increases were predominantly oil wells, with most of those in the Permian basin…the Permian basin saw its total count of uncompleted wells rise by 88, from 3,916 DUC wells in January to 4,004 DUCs in February, as 574 new wells were drilled into the Permian, but only 486 wells in the region were fracked…at the same time, DUC wells in the Eagle Ford of south Texas increased by 16, from 1,527 DUC wells in January to 1,543 DUCs in February, as 208 wells were drilled in the Eagle Ford during January, while 192 Eagle Ford wells were completed…over the same period, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range increased by 8 wells to 527, as 194 Niobrara wells were drilled in February while 186 Niobrara wells were being fracked…in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region also saw their uncompleted well inventory increase by 4 wells to 211, as 57 wells were drilled into the Haynesville during February, while 53 Haynesville wells were fracked during the same period… meanwhile, DUC wells in the Bakken of North Dakota rose by 1, from 722 DUC wells in January to 723 DUCs in February, as 113 wells were drilled into the Bakken in January, while 112 of the drilled wells in that basin were completed…

on the other hand, the number of DUC wells in the Anadarko basin region centered in Oklahoma decreased by 18 to 1,053, as 145 wells were drilled into the Anadarko basin during February while 163 Anadarko wells were being fracked….lastly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 6 wells, from 521 DUCs in January to 515 DUCs in February, as 1​27 wells were drilled into the Marcellus and Utica shales, while 1​33 of the already drilled wells in the region were fracked…..thus, for the month of February, DUCs in the five oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 95 wells to 7,850 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 2 wells to 726 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and natural gas…

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January’s factory inventories and wholesale sales: February’s existing home sales

This week’s major releases included two delayed reports that will provide inputs into 1st quarter GDP: the Full Report on Manufacturers’ Shipments, Inventories and Orders for January and the January report on Wholesale Trade, Sales and Inventories, both from the Census Bureau…we also had the regularly scheduled the Existing Home Sales Report for February from the National Association of Realtors (NAR), and the release of the Regional and State Employment and Unemployment Summary for February from the BLS, putting that monthly report back on it’s regular schedule, after the January report was released 3 weeks late last week due to an annual revision…in addition, this week also saw the release of the March Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose to +13.7 in March from -4.1 in February, indicating a return to growth for that region’s manufacturing…

January Factory Shipments Down 0.4%, Factory Inventories 0.5% Higher

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by a rounded $0.3 billion or by less than 0.1 percent to $500.5 billion in December, following a increase of 0.1% to $500.1 billion in December, which was revised from an increase of less than 0.1% to $499.9 billion that was reported for December earlier this month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as revised updates to the January advance report on durable goods which was released last week…on those durable goods orders revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in January, up two consecutive months, increased $0.3 billion or 0.1 percent to $500.5 billion, the U.S. Census Bureau reported today.  This followed a 0.1 percent December increase.  Shipments, down four consecutive months, decreased $1.8 billion or 0.4 percent to $503.1 billion.  This followed a 0.2 percent December decrease.  Unfilled orders, up following three consecutive monthly decreases, increased $1.4 billion or 0.1 percent to $1,181.9 billion.  This followed a 0.1 percent December decrease.  The unfilled orders‐to‐shipments ratio was 6.57, up from 6.55 in December.   Inventories, up twenty‐six of the last twenty‐seven months, increased $3.6 billion or 0.5 percent to $685.7 billion.  This followed a 0.1 percent December increase.  The inventories‐to‐shipments ratio was 1.36, up from 1.35 in December.
  • New Orders – New orders for manufactured durable goods in January, up three consecutive months, increased $0.9 billion or 0.3 percent to $255.3 billion, down from the previously published 0.4 percent increase.  This followed a 1.3 percent December increase.  Transportation equipment, up five of the last six months, drove the increase, $1.1 billion or 1.2 percent to $91.0 billion.  New orders for manufactured nondurable goods decreased $0.5 billion or 0.2 percent to $245.2 billion.
  • Shipments – Shipments of manufactured durable goods in January, down following two consecutive monthly increases, decreased $1.3 billion or 0.5 percent to $257.9 billion, unchanged from the previously published decrease.   This followed a 0.7 percent December increase.  Transportation equipment, also down following two consecutive monthly increases, led the decrease, $1.2 billion or 1.3 percent to $90.1 billion.  Shipments of manufactured nondurable goods, down three consecutive months, decreased $0.5 billion or 0.2 percent to $245.2 billion.  This followed a 1.1 percent December decrease.  Chemical products, down following five consecutive monthly increases, led the decrease, $0.3 billion or 0.5 percent to $66.5 billion.
  • Unfilled Orders – Unfilled orders for manufactured durable goods in January, up following three consecutive monthly decreases, increased $1.4 billion or 0.1 percent to $1,181.9 billion, unchanged from the previously published increase.  This followed a 0.1 percent December decrease.  Transportation equipment, also up following three consecutive monthly decreases, led the increase, $0.9 billion or 0.1 percent to $811.6 billion.
  • Inventories – Inventories of manufactured durable goods in January, up twenty‐four of the last twenty‐five months, increased $1.9 billion or 0.5 percent to $417.2 billion, up from the previously published 0.4 percent increase.  This followed a 0.3 percent December increase.  Transportation equipment, up four of the last five months, led the increase, $1.2 billion or 0.9 percent to $132.6 billion.  Inventories of manufactured nondurable goods, up following two consecutive monthly decreases, increased $1.8 billion or 0.7 percent to $268.5 billion.  This followed a 0.4 percent December decrease.  Petroleum and coal products, up following three consecutive monthly decreases, led the increase, $1.3 billion or 3.5 percent to $39.2 billion. 

To gauge the effect of January’s nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories increased 0.5% to $238,498 million; the value of work in process inventories was up 0.4% at $208,093 million, and materials and supplies inventories were valued 0.6% higher at $239,090 million…the producer price index for January indicated that prices for finished goods decreased 0.8%, that prices for intermediate processed goods were 1.4% lower, and that prices for unprocessed goods were on average 9.3% lower….assuming similar valuations for like inventories, that would suggest that January’s real finished goods inventories were about 1.3% greater than December, that real inventories of intermediate processed goods were about 1.8% greater, and that real raw material inventory inventories were around 9.9% greater…with the increase in factory inventories relatively small part of the 4th quarter quarter GDP inventory increase, such real factory inventory increases in January would point to another inventory boost to 1st quarter GDP..

January Wholesale Sales Up 0.5%, Wholesale Inventories Up 1.2%

The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $499.8 billion, up 0.5 percent (±0.7 percent)* from the revised December level, and 2.7 percent (±0.7 percent) higher than wholesale sales of January 2018… the December preliminary estimate of wholesale sales was revised up from $497.2 billion to $497.5 billion, which meant December’s sales were 0.9% below the November level, rather than 1.0% as was reported earlier this month…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $669.9 billion at month end, an increase of 1.2 percent (+/-0.4%) from the revised December level and 7.7 percent (±1.1) percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $661.8 billion to $662.0 billion, still an increase of 1.1% from November…

Like factory inventories, these wholesale inventories will also be adjusted the producer price index for January in national accounts data…with notable exceptions such as farm products, chemicals and petroleum, we’ve estimated that wholesale inventories are roughly 70% finished goods…with the January producer price index for finished goods down by 0.8%, and producer price indexes for intermediate goods & raw goods down by even more, we can thus project that January’s real wholesale inventories would be up by more than 2%…however, since the real wholesale inventory increase over the 4th quarter was greater than 3%, January’s wholesale inventories increase alone would not yet be enough to add to 1st quarter GDP…

February Existing Home Sales Rose 11.8%

The National Association of Realtors (NAR) reported that existing home sales increased by 11.8% from January to February on a seasonally adjusted basis, projecting that 5.51 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 1.8% below the 5.61 annual sales rate projected in February of a year ago….the January home sales pace was revised from the 4.94 million annual rate reported last month to a 4.93 million annual rate with this report…the NAR also reported that the median sales price for all existing-home types was $249,500 in February, 3.6% higher than in February a year earlier, which they report as “the 84th straight month of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Surge 11.8 Percent in February“,  is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened with home sales during the month…this unadjusted data indicates that roughly 312,000 homes sold in February, up 9.5% from the 285,000 homes that sold in January, but down by 2.2% from the 319,000 homes that sold in February of last year….that same pdf indicates that the median home selling price for all housing types rose fractionally from a revised $249,300 in January to $249,500 in February, while the average home sales price inched up to $288,200 from the $288,100 average sales price in January, and was up 2.7% from the $280,600 average home sales price of February a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.51 million in February and A Few Comments on February Existing Home Sales

 

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

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tables and graphs for March 23rd

rig count summary:

March 22 2019 rig count summary

natural gas storage changes:

March 23 2019 natural gas storage as of March 15

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largest March natural gas draw on record cuts supplies to 34% below normal; global oil surplus persists despite OPEC cuts

oil prices rose to a four month high before pulling back a bit this past week, as repeated power outages in Venezuela cut their oil exports to zero and the EIA reported a surprise drop in US crude supplies….after ending little changed at $56.07 a barrel on economic concerns last week, contract prices for US crude to be delivered in April rose 72 cents to $56.79 a barrel on Monday, lifted by comments from the Saudi oil minister that OPEC-led supply cuts would continue til at least June….oil prices then rallied to as high as $57.55 a barrel on Tuesday after a country wide power blackout in Venezuela disrupted both oil production and exports, but settled just 8 cents higher at $56.87 a barrel as the gains were limited by a report from the International Energy Agency that the surge in U.S. output would continue til 2024…oil prices then rose steadily throughout Wednesday, first due to a Tuesday evening report from the American Petroleum Institute showing an unexpected decline in oil and fuel supplies, and then in the afternoon after the weekly EIA data confirmed the drop in crude supplies and in gasoline inventories, with oil prices ending the day $1.37 higher at a 4 month high of $58.61 a barrel….oil extended those gains on Thursday, rising 35 cents to $58.61 a barrel, after the OPEC secretariat urged producers to continue supply cuts ahead of a meeting between representatives of Russia and the cartel….oil prices finally eased slightly on Friday after hitting a new 2019 high at $58.95 a barrel, as a slew of weak US economic reports renewed demand concerns, with oil closing 9 cents lower at $58.52 a barrel, but still finishing with a weekly gain of 4.4%, the sharpest weekly rise since the period ended Feb. 15th

natural gas prices, on the other hand, finished the week lower, as forecasts turned warmer and the last big withdrawal of gas from supplies for this winter was a bit less than traders had expected…prices of natural gas for April delivery were initially down 9.3 cents, or more than 3% to $2.772 per mmBTU on Monday, after forecasts for late March had turned warmer over the weekend….gas prices then pushed 1.2 cents higher on Tuesday and 3.6 cents higher on Wednesday, as traders anticipated what was to be a record storage report for March on Thursday…although natural gas contracts sold off with the release of the report, prices still ended Thursday 3.5 cents higher on concerns about depletion of the natural gas stored in salt domes in the Southwith a warmer forecast for late March released on Friday, prices then fell back 6 cents to end the week 2.4% lower at $2.795 per mmBTU…

the natural gas storage report for the week ending March 8th from the EIA indicated that the quantity of natural gas held in storage in the US fell by a March record 204 billion cubic feet to 1,186  billion cubic feet over the week, which meant our gas supplies ended the period 359 billion cubic feet, or 22.3% below the 1,545 billion cubic feet that were in storage on March 9th of last year, and 569 billion cubic feet, or 34.2% below the five-year average of 1,755 billion cubic feet of natural gas that have typically remained in storage after the first full week of March….this week’s 204 billion cubic feet withdrawal from US natural gas supplies was a bit less than the 209 billion cubic feet withdrawal that analyst’s surveys had forecast, but it was more than double the average of 99 billion cubic feet of natural gas that have been withdrawn from US gas storage during the same winter week over the last 5 years…. 

with a record March withdrawal of gas from storage this week, we’ll include below the summary table that heads up the Weekly Natural Gas Storage Report page at the EIA to bring you all up to date with where our supplies stand now… 

March 16 2019 natural gas in storage as of March 8

the above table came from Weekly Natural Gas Storage Report for March 8th, and it shows the amount of natural gas in storage as of March 8th in billions of cubic feet in each of 5 major US regions and in total in the first column, the amount of natural gas in storage on March 1st in the 2nd column, and the difference between the two in the third or “net change” column, with negative numbers in that column representing a natural gas withdrawal during the week…then, the 5th and 6th columns show the amount of natural gas in storage as of March 8th of last year, and the percentage change from last year to this year, while the last two columns show the five year average amount of gas in storage on March 8th for the years 2014 to 2018, and again the percentage change from that 5 year average to this year’s natural gas inventory on the same date… 

you can see from that table that natural gas storage facilities in the Eastern US saw a 49 billion cubic feet draw from their supplies over the week, which was well more than their average 34 billion cubic foot withdrawal during the same week over the past five years, and hence the region’s gas supply deficit rose to 22.5% below average for this time of year, up from the 16.4% shortfall shown on this table last week…at the same time, natural gas supplies in the Midwest fell by 51 billion cubic feet, also quite a bit higher than their normal 32 billion cubic feet pull for that date, as their supply deficit increased to 27.9% below the average for the second weekend of March, up from 21.4% below normal last week…meanwhile, the South Central region saw a 88 billion cubic feet drop in their supplies, way above their normal 23 billion cubic foot withdrawal, as their natural gas storage deficit increased from 23.5% to 33.5% below their five-year average for this time of year…at the same time, 7 billion cubic feet were pulled out of natural gas supplies in the sparsely populated Mountain region, which has only averaged a 4 billion cubic feet withdrawal during this same week over the last 5 years, and hence their gas supply deficit from normal rose to 43.1%, up from 39.2% a week ago…finally, 10 billion cubic feet of natural gas were withdrawn from storage in the Pacific region, in contrast to the 5 billion cubic feet normally withdrawn in those western states during the same week of March, and hence their natural gas supply deficit rose to 48.7% below normal for this time of year, up from 45.1% a week ago….  

even with natural gas supplies as depleted as they are now, and even with supplies in the Pacific and Mountain regions already at their modern day lows, it seems unlikely that we’d see any shortages any more at this time of year, since we’ve usually warmed enough nationally by April to begin adding surplus gas to storage for next winter….so it’s natural gas for next winter that we’ll have to be concerned about now, since our supplies as of this report are now 359 billion cubic feet below where they were on the same date in 2018…unless we can improve considerably on 2018’s surplus, and can add at least 10 billion cubic feet o​r more natural gas to storage each week this year than we did last year, we risk starting next winter with supplies lower than we started the current one, which was at a 15 year low at the time

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending March 8th, indicated a modest decreases in both our crude oil imports and our oil exports, but a withdrawal from our commercial supplies of crude, as oil that was unaccounted shifted from the supply side of the balance sheet to the demand side….our imports of crude oil fell by an average of 255,000 barrels per day to an average of 6,746,000 barrels per day, after rising by an average of 1,084,000 barrels per day the prior week, while our exports of crude oil fell by an average of 257,000 barrels per day to 2,546,000  barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,200,000 barrels of per day during the week ending March 8th, 2,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was estimated to be 100,000 barrels per day lower than last week at 12,000,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 16,200,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 16,020,000 barrels of crude per day during the week ending March 8th, 30,000 more barrels per day than the amount of oil they used during the prior week, while over the same period 522,000 barrels of oil per day were reportedly being withdrawn from the oil that’s in storage in the US…..therefore, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 732,000 more barrels per day than the oil refineries reported they used during the week….to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (-732,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”….since last week’s unaccounted oil was at +700,000 barrels per day, that means 1,432,000 million barrels of oil per day disappeared off the US oil balance sheet from one week to the next, meaning that any comparison of figures from this week to last week is essentially meaningless.. (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports rose to an average of 6,797,000 barrels per day last week, now 9.0% less than the 7,473,000 barrel per day average that we were importing over the same four-week period last year…. the 522,000 barrel per day decrease in our total crude inventories all came out of our commercially available stocks of crude oil, as the oil stored in our Strategic Petroleum Reserve remained unchanged…this week’s crude oil production was reported to be 100,000 barrels per day lower at 12,000,000 barrels per day because the rounded estimate for output from wells in the lower 48 states fell by 100,000 barrels per day to 11,500,000 barrels per day, while a  6,000 barrel per day decrease in Alaska’s oil production to 480,000 barrels per day was not enough to make a difference in the rounded national total…last year’s US crude oil production for the week ending March 9th was at 10,381,000 barrels per day, so this reporting week’s rounded oil production figure was 15.6% above that of a year ago, and 42.4% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 87.6% of their capacity in using 16,020,000 barrels of crude per day during the week ending March 8th, up from 87.5% of capacity the prior week, but still lower than before Venezuelan imports of heavy crude were cut off….the 16,020,000 barrels per day of oil that were refined this week were down by 0.9% from the 16,162,000 barrels of crude per day that were being processed during the week ending March 9th, 2018, when US refineries were operating at 90.0% of capacity… 

with little change in the amount of oil being refined, the gasoline output from our refineries was somewhat lower, falling by 117,000 barrels per day to 9,735,000 barrels per day during the week ending March 8th, after our refineries’ gasoline output had increased by 299,000 barrels per day the prior week….with that decrease in the week’s gasoline output, our gasoline production was 5.3% lower than the 10,280,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 63,000 barrels per day to 4,856,000 barrels per day, after that output had increased by 103,000 barrels per day the prior week….but even after this week’s decrease, the week’s distillates production was more than 8.4% above the 4,478,000 barrels of distillates per day that were being produced during the week ending March 9th, 2018…. 

with the decrease in our gasoline production, the supply of gasoline left in storage at the end of the week fell by 4,624,000 barrels to 246,090,000 barrels over the week to March 8th, after supplies had fallen by 4,227,000 barrels over the prior week….our gasoline supplies fell again this week in part because the amount of gasoline supplied to US markets increased by 78,000 barrels per day to 9,140,000 barrels per day, after increasing by 81,000 barrels per day the prior week, and because our exports of gasoline rose by 20,000 barrels per day to 931,000 barrels per day, even as our imports of gasoline rose by 18,000 barrels per day to 573,000 barrels per day…after having reached a record high seven weeks ago, our gasoline inventories are still fractionally above last March 9th’s level of 244,758,000 barrels, and remain roughly 2% above the five year average of our gasoline supplies at this time of the year…

even with the decrease in our distillates production, our supplies of distillate fuels rose for the 8th time in twenty-five weeks, increasing by 383,000 barrels to 136,369,000 barrels during the week ending March 8th, but after our distillates supplies had decreased by 2,393,000 barrels over the prior week…our distillates supplies increased by this week because our exports of distillates fell by 284,000 barrels per day to 1,086,000 barrels per day, while our imports of distillates fell by 8,000 barrels per day to 238,000 barrels per day, and because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 192,000 barrels per day to 3,953,000 barrels per day…with this week’s inventory increase, our distillate supplies ended the week 2.5% above the 133,066,000 barrels that we had stored on March 9th, 2018, but remained roughly 1% below the five year average of distillates stocks for this time of the year…

finally, while 1,432,000 million barrels of oil per day went missing from last week​’s stats​ to this week​’s​, our commercial supplies of crude oil in storage decreased for the second time in 8 weeks, falling by 3,862,000 barrels over the week, from 452,934,000 barrels on March 1st to 449,072,000 barrels on March 8th…but with weekly increases in 17 out of the past 25 weeks, our crude oil inventories are still roughly 2% above the recent five-year average of crude oil supplies for this time of year, and around 35% above the prior 5 year (2009 – 2013) average of crude oil stocks after the first full week of March, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories had mostly been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of March 8th were 4.2% above the 430,928,000 barrels of oil we had stored on March 9th of 2018, while falling to 15.0% below the 528,156,000 barrels of oil that we had in storage on March 10th of 2017, and 8.8% below the 492,160,000 barrels of oil we had in storage on March 11th of 2016…      

OPEC’s Monthly Oil Market Report

next we’re going to review OPEC’s March Oil Market Report (covering February OPEC & global oil data), which was released on Thursday of this past week, and which is available as a free download, and hence it’s the report we check for monthly global oil supply and demand data…the first table from this monthly report that we’ll look at is from the page numbered 60 of that report (pdf page 70), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures…

February 2019 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC’s oil output fell by 221,000 barrels per day to 30,549,000 barrels per day in February, from their revised January production total of 30,770,000 barrels per day…however that January figure was originally reported as 30,806,000 barrels per day, so that means their production for February was effectively a 257,000 barrel per day decrease from the previously reported figures (for your reference, here is the table of the official January OPEC output figures as reported a month ago, before this month’s revisions)…

as we can tell from the far right column on the table above, output cuts by Saudi Arabia and Venezuela alone accounted for this month’s production reduction, with the cut of 142,000 barrels per day in the oil output from Venezuela being​ involuntary,​ due to US sanctions on their exports….except for Iraq and Nigeria, the oil output from the other OPEC members shown above is pretty close to the output allocations assigned to each member after their December 7th meeting, when they agreed to cut 800,000 barrels per day as part of a 1.2 million barrel per day cut agreed to with Russia and other oil producers…this can be seen in the table of OPEC production allocations we’ve included below:

February 6 2019 Platts on OPEC allocations

the above table came from a February 6th post on Saudi cuts and OPEC allocations at S&P Global Platts, which has more details: the column of numbers shows average daily production quota in millions of barrels of oil per day for each of the OPEC members for the first 6 months of this year, as was agreed to at their December 2018 meeting…note that Venezuela and Iran, whose oil exports are being sanctioned by the Trump administration, and Libya, which has been beset by disruptive civil strife, are exempt from any production quotas, yet the oil output of all of them remains below that of the 4th quarter of 2018 shown in the fifth column of the OPEC production table above…

the next graphic we’ll include shows us both OPEC and world oil production monthly on the same graph, over the period from March 2017 to February 2019, and it comes from page 61 (pdf page 71) of the March OPEC Monthly Oil Market Report….on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale…     

February 2019 OPEC report global oil supply

OPEC’s preliminary estimate indicates that total global oil production fell by 0.16 million barrels per day to 99.15 million barrels per day in February, after January’s total global output figure was revised down by 10,000 barrels per day from the 99.32 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by a rounded 65,000 barrels per day in February after that revision, with increased oil output from US, the UK and Brazil the major reasons for the non-OPEC production increase…. the 99.15 million barrels per day produced globally in February was also 1.50 million barrels per day, or 1.5% higher than the revised 97.65 million barrels of oil per day that were being produced globally in February a year ago (see the March 2018 OPEC report online (pdf) for the originally reported February 2018 details)…after the February decrease in OPEC’s output, their February oil production of 30,549,000 barrels per day represented just 30.8% of what was produced globally during the month, down from the 31.0% share they reported for January….OPEC’s February 2018 production was reported at 32,186,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding Qatar from last year’s total and new member Congo from this year’s, are now producing 1,351,000 fewer barrels per day of oil than they were producing a year ago, with a 576,000 barrel per day decrease in output from Venezuela and a 1,070,000 barrel per day decrease in output from Iran from that time more than offsetting the year over year production increases of 245,000 barrels per day from the Emirates, 208,000 barrels per day from Iraq and 105,000 barrels per day from the Saudis…   

however, despite the 0.16 million barrels per day decrease in global oil output we’ve seen during February, on top of the revised 1.02 million barrels per day decrease in January, we still had a small surplus in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us… 

February 2019 OPEC report global oil demand

the table above comes from page 35 of the February OPEC Monthly Oil Market Report (pdf page 45), and it shows regional and total oil demand in millions of barrels per day for 2018 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2019 over the rest of the table…on the “Total world” line in the second column, we’ve circled in blue the figure that’s relevant for February, which is their revised estimate of global oil demand during the first quarter of 2018…       

OPEC’s estimate is that during the 1st quarter of this year, all oil consuming regions of the globe have been using 99.02 million barrels of oil per day, which was the same as their estimate of a month ago….meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, OPEC and the rest of the world’s oil producers were still producing 99.15 million barrels per day during February, which means that there was a surplus of around 130,000 barrels per day in global oil production as compared to the demand now estimated for the month…in addition, with the downward revision of 10,000 barrels per day to January’s output, the revised oil output surplus for January would now have been 290,000 barrels per day…

we should also note that the previous estimate for 2018’s oil demand was revised 40,000 barrels per day lower with this report, a figure which we’ve highlighted in green…that downward revision wasn’t evenly spread over the whole year, however, as the 2018 demand table on page 34 of the March OPEC Monthly Oil Market Report (pdf page 44) shows that demand for the 4th quarter was revised 210,000 barrels per day lower, and that demand for the 3rd quarter was revised 50,000 barrels per day lower, while oil demand for 2018’s 1st and 2nd quarter was unrevised from previously published figures…that means that for all of 2018, global oil demand exceeded production by roughly ​14,450,000 barrels, a comparatively tiny net oil shortfall that would be the equivalent of less than 3 and a half hours of global oil production at the revised December production rate…… 

This Week’s Rig Count

US drilling activity slowed for the fourth week in a row, while active rigs are still down 6% so far this year, as the lower prices for both oil and natural gas we’ve seen in recent weeks and the large backlog of uncompleted wells continue to impact drilling decisions….Baker Hughes reported that the total count of rotary rigs running in the US fell by 1 rig to 1026 rigs over the week ending March 15th, which was still 36 more rigs than the 990 rigs that were in use as of the March 16th report of 2018, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market…  

the count of rigs drilling for oil fell by 1 rig to 833 rigs this week, which was still 33 more oil rigs than were running a year ago, while it was well below the recent high of 1609 rigs that were drilling for oil on October 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations was unchanged at 193 natural gas rigs, which was just 4 more than the 189 natural gas rigs that were drilling a year ago, but way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

drilling activity offshore in the Gulf of Mexico was unchanged at 22 rigs this week, which is up by 9 from the 13 rigs active in the Gulf a year ago, which was sitting at a multiyear low at that time…the count of active horizontal drilling rigs increased by 3 rigs to 907 horizontal rigs this week, which was also 42 more horizontal rigs active than the 865 horizontal rigs that were in use in the US on March 16th of last year, but was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…..on the other hand, the vertical rig count decreased by 2 rigs to 54 vertical rigs this week, which was also down by 3 rigs from the 57 vertical rigs that were in use during the same week of last year….at the same time, the directional rig count was down by 2 to 65 directional rigs this week, which was also down from the 68  directional rigs that were operating on March 16th of 2018… 

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the 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 15th, the second column shows the change in the number of working rigs between last week’s count (March 8th) and this week’s (March 15th) count, the third column shows last week’s March 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 16th of March, 2018…   

March 15 2019 rig count summary

as you can see, the rig decreases this week were concentrated in the Cana Woodford and Mississippian Lime, which are both in Oklahoma, although the Mississippian formation does stretch into Kansas, while the week’s major drilling increase was in the Williston basin of North Dakota…those were all oil directed rigs, by the way; there were no net state or basin changes whatsoever in any natural gas rig metrics this week…in the Permian basin, which still accounts for more than half of the horizontal drilling nationally, single rig decreases are shown in Texas Oil District 8, which corresponds to the core Permian Delaware, and Texas Oil District 7C, or the southern Permian Midland basin, while a Permian rig was concurrently added in the Permian Delaware on the New Mexico side of the state line…meanwhile, the 3 rig increase in Alaska reverses the 4 rig decrease in the state the prior week, so those changes may have been weather related, rather than based on any economics of future production….we would also note that other than the changes shown above in the major producing states, Alabama also had its only rig pulled out this week, rendering the state rigless for the second time this year, in contrast to a year ago, when there was one rig active in the state….

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