June jobs report; May’s trade deficit, construction spending and factory inventories..

in addition to the Employment Situation Summary for June from the Bureau of Labor Statistics, this week’s major releases included three May reports that will input into 2nd quarter GDP: the BEA report on our International Trade for May, and the May report on Construction Spending, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for May, both from the Census Bureau….privately issued reports released this week included  the ADP Employment Report for June, the light vehicle sales report for June from Wards Automotive, which estimated that vehicles sold at a 16.41 annual rate in March, down from the 16.58 million rate in May, and the lowest since October 2014, and both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the June Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 57.8% in June, up from 54.9% in May, which suggests a stronger expansion in manufacturing firms nationally, and the June Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 57.4%, up from 56.9% in May, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in June…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…  

Employers Add 222,000 Jobs in June, Unemployment Rate Up 0.1% as More Look for Work

the Employment Situation Summary for June indicated moderate payroll job growth, while the employment rate, the unemployment rate, and the labor force participation rate all rose …seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 222,000  jobs in June, after the payroll job increase for May was revised up from 138,000 jobs to 152,000, and the April increase was revised up from 174,000 jobs to 207,000, which meant that the combined number of jobs created over those two months was 47,000 more than was previously reported….the unadjusted data shows that there were actually 599,000 more payroll jobs extant in June than in May, as large seasonal job increases typical for sectors such as construction, trade and transportation, and leisure and hospitality were normalized by the seasonal adjustments…

seasonally adjusted job increases were spread through throughout government and the private goods producing and service sectors, while only the information sector saw a loss of 4,000 jobs…employment in health care and social assistance rose by 59,100, with the addition of 11,700 jobs in hospitals and 11,500 in individual and family services….the leisure and hospitality sector added a seasonally adjusted 36,000 jobs, with the addition of 29,300 more jobs in bars and restaurants….the broad professional and business services sector added 35,000 jobs, as 14,400 more workers found work with employment services….the government sector also added 35,000 jobs, with 13,600 of those in local education systems and 22,200 more in other local government jobs….financial activities employed another 17,000, with 9,500 of those in real estate…and, after adjustment, the construction sector still saw 16,000 more jobs, as specialty trade contractors hired 18,500 more than in May…meanwhile, the other major sectors, including manufacturing, mining, wholesale and retail, transportation and warehousing, utilities, and private education, all saw smaller increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 4 cents to $26.25 an hour, after it had increased by a revised 3 cents an hour in May; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $22.03 an hour…employers also reported that the average workweek for all private payroll employees increased 0.1 hour to 34.5 hours, while hours for production and non-supervisory personnel rose by 0.1 hour to 33.7 hours…similarly, the manufacturing workweek rose by 0.1 hour to 40.8 hours, while factory overtime was unchanged at 3.3 hours..

at the same time, the seasonally adjusted extrapolation from the June household survey estimated that the count of those employed rose by an estimated 245,000 to 153,168,000, while the similarly estimated number of those unemployed rose by 116,000 to 6,977,000; which together meant that June saw a net increase of 361,000 in the total labor force…since the working age population had grown by 190,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 170,000 (rounded) to 94,813,000….the increase of those in the labor force was enough to raise the labor force participation rate 0.1% to 62.8%….at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.1%…in addition, the increase in the number counted as unemployed was also large enough to raise the unemployment rate from 4.3% to 4.4%….meanwhile, the number who reported they were involuntarily working part time rose by 107,000 to 5,326,000 in June, which was also enough to raise the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.4% in May to 8.6% in June, as 204,000 more reported “slack work or business conditions” than in May..

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

May Trade Deficit Down 2.3% on Improved Balance in Autos and Consumer Goods

our trade deficit decreased by 2.3% in May as the value of our exports increased and our imports decreased….the Census report on our international trade in goods and services for May indicated that our seasonally adjusted goods and services trade deficit fell by $1.1 billion to $46.5 billion in May from a April deficit of $47.59 billion, which was slightly revised from the $47.62 billion reported last month…the value of our May exports rose by $0.9 billion (rounded) to $192.0 billion on a $0.2 billion increase to $127.2 billion in our exports of goods and a $0.6 billion increase to $64.8 billion in our exports of services, while our imports fell $0.2 billion to $238.5 billion on a $0.6 billion decrease to $194.7 billion in our imports of goods while our imports of services rose $0.4 billion to $43.8 billion…export prices were on average 0.7% lower in May, so the relative real amount of May exports would be higher than the nominal amount by that percentage, while import prices were 0.2% lower, meaning real imports were on average greater than the nominal dollar values reported here by that percentage….

the increase in our May exports could be accounted for by higher exports of consumer goods and of automotive vehicles, parts, and engines, which were partially offset by a decrease in exports of foods, feeds, and beverages…. referencing the Full Release and Tables for May (pdf), in Exhibit 7 we find that our exports of  of consumer goods rose by $885 million to $16,741 million on a $456 million increase in our exports of cellphones, a $271 million increase in our exports of pharmaceuticals, and a $257 million increase in our exports of jewelry….in addition, our exports of automotive vehicles, parts, and engines rose by $619 million to $13,179 million on a $437 million increase in our exports of new and used passenger cars…offsetting those increases, our exports of foods, feeds and beverages fell by $711 million to $11,195 million on a $577 million decrease in our exports of soybeans, our exports of capital goods fell by $450 million to $43,117 million on a decrease of $292 million in exports of civilian aircraft, our exports of industrial supplies and materials fell by $118 million to $37,442 million on a $627 million decrease in exports of petroleum products other than fuel oil, and our exports of other goods not categorized by end use fell by $116 million to $5,108 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of consumer goods was the major reason for the May decrease in our imports and trade deficit…our imports of consumer goods fell by $1,466 million to $49,473 million on a $937 million decrease in our imports of cellphones, a $564 million decrease in our imports artwork and antiques, and a $241 million decrease in our imports of inorganic textiles… in addition, our imports of automotive vehicles, parts and engines fell by $722 million to $29,173 million on a $1,267 million decrease in our imports of new and used passenger cars, and our imports of foods, feeds, and beverages fell by $65 million to $11,383 million…offsetting the decreases in those categories, our imports of capital goods rose by $1251 million to $52,783 million on increases of $460 million in our imports of computers, $333 million in our imports of civilian aircraft, $293 million in our imports of semiconductors, and $228 million in our imports of civilian aircraft engines, and our imports of industrial supplies and materials rose by $104 million to $42,276 million, as our imports of crude oil rose by $456 million and our imports of fuel oil rose by $302 million, and our imports of other goods not categorized by end use rose by $225 million to $8,020 million….

to gauge the impact of April and May’s international trade on 2nd quarter domestic growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here…..from that table, we can compute that 1st quarter real exports of goods averaged 124,616 million monthly in 2009 dollars, while inflation adjusted April and May exports were at 123,760 million and 117,626 million respectively in the same 2009 dollar quantity index representation… annualizing the change between the first quarter and the April – May average, we find that the 2nd quarter’s real exports are running at a 0.8% annual rate below those of the 1st quarter, or at a pace that would subtract about 0.09 percentage points from 2nd quarter GDP if maintained through June…..in a similar manner, we find that our 1st quarter real imports averaged 186,836 million monthly in chained 2009 dollars, while inflation adjusted April and May imports were at 187,579 million and 187,787 million in inflation adjusted dollars respectively….that would indicate that so far in the 2nd quarter, our real imports have increased at a 1.8% annual rate from those of the 1st quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 1.8% rate would thus subtract about 0.24 percentage points from 2nd quarter GDP….hence, if the trade deficit at the April – May level is maintained through June, our deteriorating balance of trade in goods would subtract about 0.33 percentage points from the growth of 2nd quarter GDP….note that we have not attempted to compute the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on that trade, but that there were unusually large increases in both imports and exports of services trade in May that will likely have an impact as well…

Construction Spending Flat in  May after Prior Months Revised Higher

the Census Bureau report on construction spending for May (pdf) estimated that May’s seasonally adjusted construction spending would work out to $1,230.1 billion annually if extrapolated over an entire year, which was statistically unchanged from the revised annualized estimate of $1,230.4 billion of construction spending in April and 4.5 percent (±2.5 percent) above the estimated annualized level of construction spending in May of last year…the April spending estimate was revised 1.0% higher, from $1,218.5 billion to $1,230.4 billion, while the annual rate of construction spending for March was revised from $1,235.5 billion to $1,239.6 billion, and the annual rate of February construction spending was revised up from $1,221.7 billion to a $1,235.7 billion rate…combined, the revisions to February and March construction spending would suggest that 1st quarter GDP, which was released last week, will be revised higher when annual revisions to GDP are released in early August…construction spending tor the first 5 months of 2017 has now amounted to $469.2 billion, 6.1 percent (±1.3 percent) above the $442.4 billion in construction spending for the same 5 months of 2015…

the Census release gives us the following summary: “Spending on private construction was at a seasonally adjusted annual rate of $943.2 billion, 0.6 percent (±0.7 percent) below the revised April estimate of $949.3 billion. Residential construction was at a seasonally adjusted annual rate of $509.6 billion in May, 0.6 percent (±1.3 percent) below the revised April estimate of $512.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.6 billion in May, 0.7 percent (± 0.7 percent) below the revised April estimate of $436.7 billion. In May, the estimated seasonally adjusted annual rate of public construction spending was $286.9 billion, 2.1 percent (±5.3 percent) above the revised April estimate of $281.0 billion. Educational construction was at a seasonally adjusted annual rate of $74.3 billion, 5.1 percent (±3.3 percent) above the revised April estimate of $70.7 billion. Highway construction was at a seasonally adjusted annual rate of $90.6 billion, 0.9 percent (±16.9 percent) below the revised April estimate of $91.5 billion.”

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments…. however, gauging the impact of revised April and May construction spending as reported here on GDP is difficult because all figures given in this report are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…accurately adjusting construction for price changes is no easy matter, either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities construction….in lieu of trying to find and adjust for all of those obscure price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed to make an estimate..

that index indicated that aggregate construction costs were up 0.1% in the month of May, up 0.4% in April, up 0.2% in March, down 0.1% in February and up 0.3% in January….on that basis, we can estimate that May construction costs were roughly 0.5% greater than those of March, 0.7% greater than those of February and 0.6% greater than those of January, and obviously 0.1% greater than those of April…we then use those percentages to inflate spending for April and for each of the months of the first quarter, which is arithmetically the same as deflating April and May construction spending vis-a vis the 1st quarter for comparison purposes, and then compare the inflation adjusted average of the 1st quarter months to the inflation adjusted average of the 2nd quarter months…construction spending in millions of dollars for the five months in question is given as 1,230,094 for May, 1,230,381 for April, 1,239,564 for March, 1,235,700 for February, and 1,223,501 for January, which we can see is going to result in a quarter over contraction…since we want to know the inflation adjusted rate of contraction, then, our calculation becomes  (((1,230,094 + (1,230,381 *1.001))/2 ) / ( ( (1,239,564 *1.005) +(1,235,700 *1.007) + (1,223,501 *1.006))/3)) ^ 4 = .96982, which means that construction spending has been shrinking at a 3.0% annual rate over the first 2 months of the second quarter…if June shows no improvement, that contraction in construction would be enough to subtract roughly 0.20 percentage points from 2nd quarter GDP in those components that it influences…

Factory Shipments Up 0.1% May, Factory Inventories Down 0.1% in Plus to GDP

the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $3.7 billion or 0.8 percent to $464.9 billion in May, following an decrease of 0.3% to $468.6 billion in April, which was revised from the 0.2 percent decrease to $469.0 billion increase reported last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week…this report showed that new orders for manufactured durable goods fell by $1.9 billion or 0.8 percent to $229.1 billion, revised from the previously published 1.1% decrease to $228.2 billion…

this report also indicated that the seasonally adjusted value of May factory shipments rose for the fifth month out of the last six, increasing by $0.6 billion or 0.1 percent to $471.5 billion, following statistically insignificant increase in April, which was essentially unrevised…shipments of durable goods were down by $0.6 billion or 0.2 percent to $231.6 billion, revised but virtually unchanged from what was published two weeks ago…meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods fell $1.8 billion or 0.8 percent to $235.7 billion, as a 3.4% decrease in the value of shipments from refineries drove the decrease…

meanwhile, the aggregate value of May factory inventories fell for the 1st time in the past seven months, decreasing by $0.3 billion or 0.1 percent to $648.9 billion, following a April increase of 0.1% that was virtually unrevised from the previously published figure….inventories of durable goods increased in value by $0.9 billion or 0.2 percent to $395.8 billion, virtually unchanged from the increase that was reported was reported in the advance report….the value of non-durable goods’ inventories decreased by decreased $1.3 billion or 0.5 percent to $253.1 billion, following a decrease of 0.4% in April….

to gauge the effect of these May 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 fell by 0.4% to $226,342 million; the value of work in process inventories was little changed at $200,050 million, and materials and supplies inventories were valued 0.3% higher at $222,512 million…the May producer price index reported that prices for finished goods decreased 0.5%, prices for intermediate processed goods were 0.1% higher, while prices for unprocessed goods were 3.0% lower….assuming similar valuations for inventories, that would suggest that May’s real finished goods inventories were roughly 0.1% higher, real inventories of intermediate processed goods were 0.1% lower, while real raw material inventory inventories were 3.3% higher…since 1st quarter inventories were virtually unchanged, a large drag on GDP, any inventory increases in the 2nd quarter will boost 2nd quarter GDP…

 

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

Posted in Uncategorized | Leave a comment

graphics & tables for July 8

rig count summary

July 7 2017 rig count summary

natural gas production:

July 4 2017 natural gas monthly production

natural gas exports

July 8 2017 natural gas exports 

July 2017 US natural gas exports by country

natural gas imports

July 8 2017 natural gas imports

July 2017 US natural gas imports by country

natural gas supplies

July 8 2017 natural gas stocks as of June 30

heating demand:

March 23 2017 heating demand as of March 17

Posted in Uncategorized | Leave a comment

oil prices rise 7%, but are still down more than 14% in 2017, in the largest first half price drop in 19 years…

oil prices rose every day this week, capped by a big jump on Friday afternoon that was propelled by the first drop in the rig count in 24 weeks…the rally, which actually started on Thursday of last week, has been underpinned by short covering hedge funds, who had amassed a near record short position in the five main futures and options contracts linked to crude oil as oil prices fell going into last week….what that means is that they were contracting to sell oil that they didn’t own, in the expectation that prices would fall further, and they could then buy oil at a lower price later to fulfill their contracts and make a profit…however, once prices began to rise, some of them were forced to buy oil to close their positions, hence forcing even further increases in the price of oil and hence more force buying…since the latest data on those trades are as of last Tuesday, their positions as of this weekend are unknown, but such a short covering rally might yet last another week or more, meaning oil prices could continue to rise without a fundamental reason for doing so (just as prices previously fell as the hedge funds sold short, gambling on a further decline…)

after closing last week at $43.01 a barrel, up from the prior Wednesday’s intraday low of $42.05, US oil for August delivery rose another 37 cents to close at $43.38 a barrel on Monday, in what was largely seen as bargain hunting buying…oil prices then rose nearly two percent on Tuesday, ending the session at $44.24 a barrel, on the aforementioned short covering, and expectations that crude inventories would decline for a third consecutive week, further bolstered by a weak dollar, which makes commodities priced in dollars more expensive…while the expected drop in crude inventories did not materialize (both the American Petroleum Institute and the EIA indicated small increases in oil supplies) oil prices rallied again anyway on Wednesday, as the EIA data did show an unexpected drop in gasoline supplies, and the largest drop in US oil field production since August of last year, with front month oil futures ending the day up another 50 cents, or 1.1%, at $44.74 per barrel….on the heels of that report of a drop in production, oil prices ran up to a two week high of $45.45 a barrel on Thursday morning, before falling back in the afternoon and ending Thursday’s session at $44.93 a barrel.…while up a bit in overseas trading Friday morning, oil was mostly unchanged on Friday until Baker Hughes reported the first decrease in oil drilling in 6 months, after which oil prices rallied throughout the afternoon, and ended Friday’s trading $1.11 higher at $46.04 a barrel, a gain of 2.5% for the day and 7 percent for the week….oil prices have hence risen seven days in a row, the longest rally this year, following on the heels of a 5 week slump, which had been the longest losing streak since the summer of 2015…thus, despite 8 percent recovery in oil prices over the last 7 days of June, oil prices still ended the month 14.3% lower than where they started the year, which turned out to be the largest first half price drop since 1998

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering details for the week ending June 23rd, showed a modest increase in US oil imports and a larger than normal sale of oil from the Strategic Petroleum Reserve, which were accompanied by a rather large pullback in operations at US refineries, resulting in an addition to our commercial stocks of crude for only the 2nd time out of the last twelve weeks…our imports  of crude oil rose by an average of 140,000 barrels per day to an average of 8,016,000 barrels per day during the week, while at the same time our exports of crude oil rose by 11,000 barrels per day to an average of 528,000 barrels per day, which meant that our effective imports netted out to 7,488,000 barrels per day during the week, 129,000 barrels per day more than during the prior week…at the same time, our field production of crude oil fell by 100,000 barrels per day to an average of 9,250,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,738,000 barrels per day during the cited week…

during the same period, refineries reportedly used 16,890,000 barrels of crude per day, 262,000 barrels per day less than they used during the prior week, while at the same time a net of 184,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 32,000 more barrels per day than what refineries reported they used during the week…to account for that discrepancy, the EIA inserted a (-32,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as “unaccounted for crude oil”…

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports slipped to an average of 7,484,000 barrels per day, now 2.3% above the imports of the same four-week period last year…the 184,000 barrel per day decrease in our total crude inventories came about on a 201,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was negotiated in a Federal budget deal 20 months ago, while our commercial stocks of crude oil increased by 17,000 barrels per day at the same time…this week’s 100,000 barrel per day decrease in our crude oil production resulted from a 55,000 barrel per day decrease in oil output from wells in the lower 48 states, likely due to tropical storm Cindy disruptions of output in the Gulf, and a 45,000 barrels per day decrease in oil output from Alaska, which was due to maintenance …the 9,250,000 barrels of crude per day that we produced during the week ending June 23rd was still 5.5% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 7.3% from the 8,622,000 barrel per day output during the during the same week a year ago, while it was still 3.7% below the June 5th 2015 record oil production of 9,610,000 barrels per day…

US oil refineries were operating at 92.5% of their capacity in using those 16,890,000 barrels of crude per day, which was down from 94.0% of capacity the prior week, and closer to normal for this time of year…the amount of oil refined this week was still above the seasonal norm, however, 1.2% more than the 16,695,000 barrels of crude per day.that were being processed during week ending June 24th, 2016, when refineries were operating at 93.0% of capacity, and roughly 9% above the 10 year average of 15.6 million barrels of crude per day for the 3rd week of June….

even with the slowdown in refining, however, gasoline production from our refineries increased by 171,000 barrels per day to 10,334,000 barrels per day during the week ending June 23rd, the third highest weekly gasoline output in US history…that gasoline output was thus 3.8% higher than the 9,959,000 barrels of gasoline that were being produced daily during the comparable week a year ago….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) slipped by 7,000 barrels per day to 5,244,000 barrels per day, still near a seasonal high and 4.4% more than the 5,021,000 barrels per day of distillates that were being produced during the week ending June 24th last  year…..  

the increase in gasoline production notwithstanding, our end of the week gasoline inventories decreased by 894,000 barrels to 240,972,000 barrels by June 23rd, the 2nd modest drop after two large builds…this week’s gasoline supplies were reduced because our imports of gasoline fell by 338,000 barrels per day to 571,000 barrels per day, which more than offset a decrease of 278,000 barrels per day to 9,538,000 barrels per day in our domestic consumption of gasoline while the 5,000 barrels per day increase to 662,000 barrels per day in our gasoline exports had little impact on the weekly change…with the week’s modest decrease in our gasoline supplies, our gasoline inventories are still at a seasonal high for this week of the year, 0.8% above the prior seasonal record 238,998,000 barrels that we had stored on June 24th a year ago, 11.2% higher than the 216,737,000 barrels of gasoline we had stored on June 26th of 2015, and 12.7% more than the 213,742,000 barrels of gasoline we had stored on June 27th of 2014…  

even with little change in our distillates production, our supplies of distillate fuels fell by 223,000 barrels to 152,272,000 barrels during the week ending June 16th, after increasing by 5,762,000 barrels over the prior three weeks….factors accounting for the difference of this week’s distillates supplies were our exports of distillates, which rose by 360,000 barrels per day to 1,386,000 barrels per day, while our imports of distillates rose by 52,000 barrels per day to 139,000 barrels per day, and while the amount of distillates supplied to US markets fell by 129,000 barrels per day to 4,029,000 barrels per day….nonetheless, our distillate supplies are still 1.2% higher than the 150,513,000 barrels that we had stored on June 24th, 2016, and 12.1% higher than the distillate inventories of 135,820,000 barrels that we had stored on June 26th of 2015…

finally, with slowdown of US refining, our commercial supplies of crude oil rose for only the 2nd time in the past 12 weeks, as our oil inventories inched up by 118,000 barrels to 509,213,000 barrels as of June 23rd… we thus finished the week with 6.3% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 2.7% more crude oil in storage than the 495,941,000 barrels of oil in storage on June 24th of 2016….compared to the same week in prior years, before our oil glut became so extreme, we ended the week with 17.5% more crude than the 433,223,00 barrels in of oil that were in storage on June 26th of 2015, and 44.2% more crude than the 353,229,000 barrels of oil we had in storage on June 20th of 2014…    

This Week’s Rig Counts

US drilling activity decreased for the first time in the past 24 weeks, and for the 3rd time in the past 52 weeks, during the week ending June 30th, with oil drilling pulling back and drilling for natural gas inching up….Baker Hughes reported that the total count of active rotary rigs running in the US decreased by a net of 1 rig to 940 rigs in the week ending Friday, which was 509 more rigs than the 431 rigs that were deployed as of the July 1st report in 2016, but still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil decreased by 2 rigs to 756 rigs this week, which was still up by 415 oil rigs over the past year, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations increased by 1 rig to 184 rigs this week, which was 95 more rigs than the 89 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008….

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 21 platforms, up from the 18 rigs working in the Gulf a year ago…however, the drilling platform that had been working offshore from Alaska was shut down this week, so the total US offshore count fell to 21 rigs, up from 19 rigs a year ago, at which time there was one rig drilling offshore from Alaska in addition to those in the Gulf…active horizontal drilling rigs were unchanged a 792 rigs this week, still up by 460 from the 332 horizontal rigs that were in use in the US on July 1st of last year, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….the vertical rig count was also unchanged at 77 rigs this week, which was up from the 61 vertical rigs that were deployed during the same week last year….on the other hand, the directional rig count was down by 1 rig to 71 directional rigs this week, which was still up from the 38 directional rigs that were deployed during the same week last year…

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 30th, the second column shows the change in the number of working rigs between last week’s count (June 23rd) and this week’s (June 30th) count, the third column shows last week’s June 23rd active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 1st of July, 2016…        :

June 30 2017 rig count summary

there’s not much to see here, in what has to have been the quietest week for rig changes this year…only three states saw any change in their count at all; Alaska and Colorado both saw one rig shut down, while Texas saw one added…..the district details on Texas do indicate some movement of 4 rigs in the 3 districts of the Eagle Ford, and one more rig than what was added in the Permian, but elsewhere everything was unchanged…if you’re curious, the lone new natural gas rig was added in the Arkoma Woodford of Oklahoma, as the rig added in the Haynesville was targeting oil, in the first oil drilling in that natural gas basin since last July…

Posted in Uncategorized | Leave a comment

1st Quarter GDP revision, Reports on May’s Personal Income and Outlays and Durable Goods

the key economic releases of the past week were the 3rd estimate of 1st quarter GDP from the Bureau of Economic Analysis, and the May report on Personal Income and Spending, also from the BEA, which includes 2 months of data on personal consumption expenditures and hence accounts for 46% of 2nd quarter GDP….other widely watched releases included the May advance report on durable goods and the Case-Shiller house price indexes for April from S&P Case-Shiller, who saw their national home price index rise 5.5% from the same month’s report a year ago…this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for May, a weighted composite index of 85 different economic metrics, which fell from a upwardly revised +0.57 in April to -0.26 in May…that left the 3 month average of the index at +0.04, indicating national economic activity has been pretty close to the historical trend over these recent months…in addition, this week also saw the results of the last two Fed manufacturing surveys for June;  the Texas area manufacturing survey from the Dallas Fed reported its broadest general business activity index slipped from +17.2 in May to +15.0 in June, indicating that Texas manufacturing activity continued to expand, but at a slightly slower pace, while the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index rose from +1 in May to +7 in June, indicating a modest pickup in that region’s manufacturing…

1st Quarter GDP Revised to Show Growth at a 1.4% Rate on Deflator Revision

the Third Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 1.4% annual rate in the quarter, revised from the 1.2% growth rate reported in the second estimate last month, as personal consumption of services was revised higher and the GDP deflator was revised lower….in current dollars, our first quarter GDP grew at a 3.4% annual rate, same as was reported in the 2nd estimate, increasing from what would extrapolate to $18,869.4 billion annually in the 4th quarter to an annualized $19,027.1 billion in the 1st quarter, with the headline 1.4% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging more than 1.9%, revised from 2.2%, was applied to the current dollar change…

recall that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the third estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release…specifically, we cite the data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2013; from table 2, which shows the contribution of each of the components to the GDP figures for those months and years; from table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; from table 4, which shows the change in the price indexes for each of the components; and from table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts….the full pdf for the 1st quarter second estimate, which this estimate revises, is here

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 1.1% annual rate in the 1st quarter, up from the 0.6% growth rate reported last month, as a 3.5% increase in the rate of personal spending in the quarter was deflated with an annualized 2.4% increase in the PCE price index, an inflation adjustment which was essentially unrevised from the second estimate….real consumption of durable goods fell at a 1.6% annual rate, which was revised from the 1.4% decrease shown in the second estimate, and subtracted 0.11 percentage points from GDP, as a drop in consumption of automobiles & parts at a 14.4% rate more than offset an increase in real consumption of recreational goods and vehicles and other durable goods…real consumption of nondurable goods by individuals rose at a 1.6% annual rate, revised from the 1.2% increase reported in the 2nd estimate, and added 0.23 percentage points to 1st quarter growth, as relatively large increases in real consumption of food and other non-durables more than offset small decreases in real consumption of clothing and energy goods ….meanwhile real consumption of services rose at a 1.4% annual rate, revised from the 0.8% rate reported last month, and added 0.64 percentage points to the final GDP tally, as the growth in consumption of both health care and financial services were revised to more than double that shown in the 2nd estimate….

on the other hand, seasonally adjusted real gross private domestic investment grew at a 3.7% annual rate in the 1st quarter, revised from the 4.8% growth estimate reported last month, as real private fixed investment grew at a 11.0% rate, rather than at the 11.9% rate reported in the second estimate, while the contraction in inventory growth was somewhat larger than previously estimated…real investment in non-residential structures was revised from growth at a 28.4% rate to growth at a 22.6% rate, while real investment in equipment was revised to show growth at a 7.8% rate, up from the 7.2% growth rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 6.7% rate to growth at a 6.4% rate, and the growth rate of residential investment was also revised lower, from 13.8% to 13.0% annually…after those revisions, the increase in investment in non-residential structures added 0.56 percentage points to the 1st quarter’s growth rate, the increase in investment in equipment added 0.42 percentage points to the quarter’s growth, greater investment in intellectual property added 0.26 percentage points, while growth in residential investment added 0.48 percentage points to the increase in 1st quarter GDP…

meanwhile, the growth in real private inventories was revised from the $4.3 billion in inflation adjusted dollars reported last month to show inventory grew at an inflation adjusted $2.6 billion rate in the 1st quarter…this came after inventories had grown at an inflation adjusted $49.6 billion rate in the 4th quarter, and hence the $47.0 billion smaller real inventory growth than in the 4th quarter subtracted 1.11 percentage points from the 1st quarter’s growth rate, revised from the 1.07 percentage point subtraction due to slower inventory growth shown in the second estimate….however, since slower growth in inventories ultimately indicates that less of the goods produced during the quarter were left “sitting on the shelf”, that decrease by $47.0 billion meant that real final sales of GDP were actually greater than GDP by that much, and therefore the BEA finds that real final sales of GDP rose at a 2.6% rate in the 1st quarter, revised from 2.2% rate shown in the second estimate…

the previously reported increases in both real exports and in real imports were both revised higher, but exports saw the larger increase, and as a result our net trade was a slightly larger addition to GDP rather than was previously reported…our real exports grew at a 7.0% rate, revised from the 5.8% rate in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their increase added 0.82 percentage points to the 1st quarter’s growth rate….meanwhile, the previously reported 3.8% increase in our real imports was revised to a 4.0% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, that increase subtracted 0.59 percentage points from 1st quarter GDP….thus, our improving trade balance added a net 0.23% percentage points to 1st quarter GDP, rather than the 0.13% percentage point addition resulting from our improving foreign trade balance that was indicated by the second estimate..

finally, there were also small revisions to real government consumption and investment in this 3rd estimate, as the entire government sector shrunk at a 0.9% rate, revised from the 1.1% shrinkage of government indicated by the 2nd estimate….real federal government consumption and investment was seen to have shrunk at a 2.0% rate from the 4th quarter in this estimate, which was unrevised from the 2nd estimate…real federal outlays for defense showed shrinkage at a 3.9% rate, same as the rate previously reported, still subtracting 0.16% percentage points from 1st quarter GDP, while all other federal consumption and investment grew at a 0.9% rate and added 0.02 percentage points to 1st quarter GDP….note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…meanwhile, real state and local consumption and investment contracted at a 0.2% rate in the quarter, which was revised from the 0.6% shrinkage shown in the 2nd estimate, and subtracted 0.02 percentage points from 1st quarter GDP, as real growth in state and local consumption expenditures added 0.05 percentage points, while real state and local investment shrunk at a 3.7% rate and subtracted 0.07 percentage points from the quarter’s growth…

our FRED bar graph below has been updated with these latest GDP revisions…each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013…in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is shown in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, and the real change in Federal government spending and investment is shown in grey…then, those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are therefore shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, they’ll appear below the zero line…it’s fairly clear from this graph that the weak growth in the first quarter was due to the smallest increase in real personal consumption expenditures since the 2nd quarter of 2013, but it’s also worth noting that fixed private investment in red was a greater contributor to GDP than PCE, with its greatest growth since the first quarter of 2012…  

3rd estimate 1st quarter 2017 GDP

May Personal Income up 0.4%, Spending up 0.1%; 2 Months PCE Would Add 1.84 Percentage Points to Q2 GDP

the May report Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 2nd quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for more than 69% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated….this same report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those are not the current monthly change; rather, they’re seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if May’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from April to May….

thus, when the opening line of the press release for this report tell us “Personal income increased $67.1 billion (0.4 percent) in May“, they mean that the annualized figure for seasonally adjusted personal income in May, $16,487.9 billion, was $67.1 billion, or a bit more than 0.4% greater than the annualized  personal income figure of $16,420.8 billion for April; the actual, unadjusted change in personal income for April to May is not given…similarly, annualized disposable personal income, which is income after taxes, rose by nearly 0.5%, from an annual rate of an annual rate of $14,418.4 billion in April to an annual rate of $14,490.1 billion in May….the contributors to the increase in personal income and disposable personal income can be viewed in table 1 of the Full Release & Tables (pdf) for this release, also as annualized amounts, and were led by a $39.8 billion increase to $2,345.6 billion annually in interest and dividend income, while wages and salaries rose by just $6.6 billion annually to $8,383.9 billion in May…

for the personal consumption expenditures (PCE) that we’re most interested in, BEA reports that they increased at a $7.3 billion annual rate, or by less than 0.1 percent, as the annual rate of PCE rose from $13,206.7 billion in April to $13,214.0 in May; that happened as the April PCE figure was revised up from the originally reported $13,108.4 billion annually and March PCE was revised up from $13,008.9 billion to $13,157.5 billion, a change that was already captured by the 3rd estimate of 1st quarter GDP we reported on earlier….the current dollar increase in May spending resulted from a $27.1 billion increase to $8,988.5 billion in annualized spending for services, which was offset by $19.8 billion annualized decrease to an annualized $4,225.5 billion annualized in spending for goods….total personal outlays for May, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $9.8 billion to $13,699.1 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $791.0 billion annual rate in May, up from the revised $728.8 billion annualized personal savings in April… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.5% in May from April’s savings rate of 5.1%…

as you know, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….the BEA achieves that by computing a price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, and which is included in Table 9 in the pdf for this report…that index fell from 112.198 in April to 112.127 in May, a month over month deflation rate that’s statistically -0.0633%, which BEA reports as an decrease of 0.1 percent, following the PCE price index increase of 0.2% they reported for April…applying that inflation adjustment to the nominal amounts of spending left reported real PCE up 0.1% in May, after an April real PCE increase of 0.2% …notice that when those PCE price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….that result is shown in table 7 of the PDF, where we see that May’s chained dollar consumption total works out to 11,785.0 billion annually, 0.1189% more than April’s 11,771.0 billion, a difference that the BEA reports as 0.1%, even as full fractions are used in all the computations…

however, to estimate the impact of the change in PCE on the change in GDP, such month over month changes don’t help us much, since GDP is reported quarterly…thus we have to compare April and May’s real PCE to the the real PCE of the 3 months of the first quarter….while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 11,701.3 billion in chained 2009 dollars..(note that’s the same as is shown in table 3 of the pdf for the revised 1st quarter GDP report)….then, by averaging the annualized chained 2009 dollar figures for April and May, 11,771.0 billion and 11,785.0  billion respectively, we can get an equivalent annualized PCE for the two months of the 2nd quarter that we have data for so far….when we compare that average of 11,778.0 to the 1st quarter real PCE of 11,701.3, we find that 2nd quarter real PCE has grown at a 2.65% annual rate for the two months of the 2nd quarter we have data for…(note the math to get that annual rate: (((11,785.0  + 11,771.0)/ 2)/11,701.3) ^ 4 = 1.02648….that’s a pace that would add 1.84 percentage points to the growth rate of the 2nd quarter by itself, even if there is no improvement in June PCE from that average… 

May Durable Goods: New Orders Down 1.1%, Shipments Up 0.8%, Inventories Up 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for May (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $2.5 billion or 1.1 percent to $228.2 billion in May, following a revised decrease of 0.9% in April’s new orders, which had originally been reported as a 0.7% decrease…however, year to date new orders are still 2.8% higher than they were a year ago…..as is usually the case, the volatile monthly change in new orders for transportation equipment drove the May headline change, as those transportation equipment orders fell $2.7 billion or 3.4 percent to $75.4 billion, partly on a 30.8% decrease to $3,719 million in new orders for defense aircraft….excluding new orders for transportation equipment, other new orders were up 0.1% in May, but the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were still down 0.2% at $62,885 million…

the seasonally adjusted value of May’s shipments of durable goods, which represent inputs into various components of 2nd quarter GDP before adjusting for changes in prices, increased by $1.8 billion or 0.8 percent to $234.9 billion, after April shipments decreased by 0.3%…again, shipments of transportation equipment drove the change, as they rose $1.5 billion or 1.9 percent to $78.8 billion, as the value of shipments of motor vehicles rose 1.3% to $54,257 million…excluding that volatile sector, the value of other shipments of durable goods rose 0.2%, and are now 2.5% higher year to date than a year ago…. meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 10th time in 11 months, increasing by $0.7 billion or 0.2 percent to $395.4 billion, after April inventories were revised from $649.7 billion to $650.0 billion, a 0.2% increase from March…inventories of motor vehicles led the increase, rising $274 million or 0.8 percent to $34,476 million…

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, fell for the first time in three months, decreasing by $2.3 billion or 0.2 percent to $1,120.1 billion, following a April increase of 0.2% to $1,122.4 billion, revised from $1,123.0 billion…a $3.4 billion or 0.4% decrease to $762.8 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment were up 0.3% to $357,317 million….compared to a year earlier, the unfilled order book for durable goods is still 1.4% below the level of last May, with unfilled orders for transportation equipment 3.5% below their year ago level, on a 4.7% decrease in the backlog of orders for commercial aircraft…

 

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

Posted in Uncategorized | Leave a comment

tables & graphs for July 1st

rig count summary:

June 30 2017 rig count summary

3rd estimate 1st quarter GDP:

3rd estimate 1st quarter 2017 GDP

Posted in Uncategorized | Leave a comment

oil hits ten month low; prices now below average breakeven for all US oil basins

oil prices fell for the 5th week in a row this week, now the longest losing streak since the summer of 2015, with the new front month price for August oil closing the week at $43.01 a barrel, down 4.4% from its close of $44.97 a barrel the prior week, after seeing its price dip to as low as $42.05 a barrel mid week….in the process, oil prices plumbed levels not seen since November of 2016, when the widely anticipated OPEC production cut was rumored to be on the rocks…this week’s price drop thus means that all the price appreciation that OPEC had realized by cutting their production since the beginning of this year has been lost, as prices are now back to the level they were at before their attempt to control the supply of oil was formally announced…we’ll include a graph of the daily oil prices over that entire 7 month stretch, so you can see how the price changes transpired, and to save me a lot of words in trying to explain it…

June 24 2017 daily oil prices

the above graph is a Saturday screenshot of the live interactive 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 one day of oil trading between October 10th, 2016 and June 23rd, wherein 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 on 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…this type of graph, called a candlestick, also shows the range of oil prices outside of the opening and closing price for any given day as a thin ‘wick’ above or below the “candlestick” part of the graph… 

so, on this graph we can see that oil prices fell to close as low as $43.14 a barrel on Friday November 11th, battered that week by Trump’s election, a report of record OPEC production, and the largest US oil output increase in the prior 18 months…while oil prices fell to as low as $42.20 a barrel the next Monday (see the wick on Nov 14?), oil prices rose from there as the markets turned their focus to the end of the month OPEC meeting…oil prices were still as low as $45 a barrel on November 29th, the day before the OPEC meeting, where upon they jumped 14% in the three days following that meeting to approach $52 a barrel...oil prices then stayed roughly between $51 and $54 a barrel over the next three months, before breaking to the downside as US oil stockpiles hit a new record in early March…oil prices attempted to rally in late March and again in early May, but never reached their December to February highs, then finally started into the downturn we’re now in after the OPEC ,meeting on May 25th, when they announced a nine-month extension of their ineffective production cuts, sending oil prices tumbling

with US oil prices currently below $45 a barrel, it should now start to become unprofitable to drill in even the most productive US basins, as we can see by the graphic below, which as the heading tells us, shows us the breakeven prices for drilling new wells:

June 16, 2017 breakeven prices for new wells

the above graphic, which i found on twitter, is from the Dallas Fed, and graphs the responses from oil company executives to their survey question, “what oil price does your firm need to profitably drill a new well”, which they asked in a Fed survey that took place between March 15th and March 23rd of this year…in the graph, the blue, red, yellow, orange and green bars represent the price range of responses for the Midland, SCOOP/STACK, Eagle Ford, Delaware, and central Permian basins respectively, with the size of the colored bar representing the range of the responses the oil execs gave for each basin, and the black line and dots representing the average of those responses for each basin…thus, what the graphic shows is that in the Permian’s Midland basin (blue), 13 oil execs responded that they could break-even with prices as low as $25 a barrel to as high as $65 a barrel, with the average response for those drilling in the Midland basin at $46 a barrel…similarly, for the 8 oil execs drilling in the SCOOP/STACK of central Oklahoma, responses were that they could break even in prices ranging between $35 a barrel and $75 a barrel, with the average response for those drilling in that basin at $47 a barrel….next, four Eagle Ford oil execs said they could break even in a range between $40 and $55 a barrel, with an average breakeven of $48 a barrel; ten drillers in the Permian Delaware said they could break even in a range between $30 and $60 a barrel, also with an average of $48 a barrel; and 13 oil execs who were drilling in the Central Permian said they could break even in a range between $35 and $65 a barrel, with an average of $50 a barrel….next, the purple bar represents responses the Dallas Fed got from oil company executives who were exploring non-shale oil deposits; there were 40 responses from such executives, with some feeling they could break-even at $20 oil, and others saying they needed at least $100 a barrel oil to be profitable…as you can see, the average price needed for non-shale oil was $53 a barrel…lastly, the turquoise bar represents the responses the Dallas Fed got from other shale plays, which would include the Bakken of North Dakota; the eight responses from those other plays were between $45 and $65 a barrel, with an average break-even price of $55 a barrel…

thus, with oil closing this week near $43 a barrel, it’s below the average price needed to break-even in all US oil basins, which means that at least half, but not all, of those who were active in the oilfields at the time of this March survey would find themselves unprofitable at today’s oil prices…that doesn’t mean that they would stop drilling for oil today; most have contracted for the work they’ll be doing this month several months ago at higher prices, and even so, many will continue to try to keep the oil flowing even if its unprofitable because that’s what they do…estimates are that there is a 3 month to 6 month lag between a change in the price of oil and the associated pace of drilling for it; & that somewhat fits with what we’ve observed; early this year, for instance, we saw a long period of double digit increases in drilling rig additions that lasted until April 28th, 2 months after the price of oil broke from the $53 a barrel average of February…if that pattern holds, it would  likely take until mid-August or later before we see the slowdown in drilling that should result from the collapse of oil prices that we’ve seen over the past month…furthermore, considering that there’s a 7 month backlog of completed but still unfracked wells in the 4 major US oil basins, US oil production might continue rising until next year, given that the output of many of those still unfracked wells has probably already been contracted for at a price higher than today’s..

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering details for the week ending June 16th, showed that US refineries experienced a modest throughput reduction but continued to operate at above seasonally levels, while both our crude oil imports and our crude oil exports were somewhat lower, and hence it was again necessary to withdraw oil from storage for the 10th time out of the last eleven weeks…our imports  of crude oil fell by an average of 149,000 barrels per day to an average of 7,876,000 barrels per day during the week, while at the same time our exports of crude oil fell by 205,000 barrels per day to an average of 517,000 barrels per day, which meant that our effective imports netted out to 7,359,000 barrels per day during the week, 59,000 barrels per day more than during the prior week…at the same time, our field production of crude oil rose by 20,000 barrels per day to an average of 9,350,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,709,000 barrels per day during the cited week… 

during the same period, refineries reportedly used 17,152,000 barrels of crude per day, 104,000 barrels per day less than they used during the prior week, while at the same time 462,000 barrels of oil per day were being pulled out of oil storage facilities in the US….thus, this week’s EIA oil figures seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 19,000 more barrels per day than what refineries reported they used during the week…to account for that discrepancy, the EIA inserted a (-19,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as “unaccounted for crude oil”…

details from the weekly Petroleum Status Report show that the 4 week average of our oil imports fell to an average of 8,057,000 barrels per day, now just 2.0% above the imports of the same four-week period last year…the 462,000 barrel per day decrease in our total crude inventories came about on a 350,000 barrel per day withdrawal from our commercial stocks of crude oil and a 112,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was part of a Federal budget deal 20 months ago….this week’s 20,000 barrel per day increase in our crude oil production resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states, which was partially offset by a 5,000 barrels per day decrease in oil output from Alaska…the 9,350,000 barrels of crude per day that we produced during the week ending June 9th was 6.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 7.8% from the 8,677,000 barrel per day output during the during the same week a year ago, while it was still 2.7% below the June 5th 2015 record oil production of 9,610,000 barrels per day… 

US oil refineries were operating at 94.0% of their capacity in using those 17,152,000 barrels of crude per day, which was down from 94.4% of capacity the prior week, but still the 4th highest refinery capacity utilization rate this year…the amount of oil refined this week was also still above the seasonal norm, 3.9% more than the 16,505,000 barrels of crude per day.that were being processed during week ending June 17th, 2016, when refineries were operating at 91.3% of capacity, and roughly 11% above the 10 year average of 15.45 million barrels of crude per day for the 2nd week of June….

even with the modest slowdown in refining, gasoline production from our refineries increased by 320,000 barrels per day to 10,163,000 barrels per day during the week ending June 16th…however, that gasoline output was still 1.2% lower than the 10,289,000 barrels of gasoline that were being produced daily during the comparable week a year ago….at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) also increased, rising by 97,000 barrels per day to a near seasonal high of 5,251,000 barrels per day, which was also 6.0% more than the 4,956,000 barrels per day of distillates that were being produced during the week ending June 17th last  year…..  

even with the jump in gasoline production, our end of the week gasoline inventories decreased by 578,000 barrels to 241,866,000 barrels by June 16th, after increasing by 5,420,000 barrels over the prior two weeks…this week’s gasoline supplies were reduced because our domestic consumption of gasoline jumped by 547,000 barrels per day to 9,816,000 barrels per day, after falling by 553,000 barrels per day the prior two weeks… meanwhile, our gasoline exports rose by 132,000 barrels per day to 657,000 barrels per day, while our imports of gasoline rose by 339,000 barrels per day to 909,000 barrels per day at the same time…with the week’s modest decrease in our gasoline supplies, our gasoline inventories are still at a seasonal high for this week of the year, 1.8% above the prior seasonal record 237,631,000 barrels that we had stored on June 17th a year ago, 10.7% higher than the 218,494,000 barrels of gasoline we had stored on June 19th of 2015, and 12.5% more than the 214,977,000 barrels of gasoline we had stored on June 20th of 2014…  

with the increase in distillates production, our supplies of distillate fuels rose by 1,079,000 barrels to 152,495,000 barrels during the week ending June 16th, after increasing by 4,683,000 barrels the prior two weeks….factors in the difference of this week’s increase in supplies were the amount of distillates supplied to US markets, which rose by 113,000 barrels per day to 4,158,000 barrels per day, and our exports of distillates, which fell by 97,000 barrels per day to 1,026,000 barrels per day, while our imports of distillates rose by 26,000 barrels per day to 87,000 barrels per day….even though our distillate supplies are still virtually unchanged from the 152,314,000 barrels that we had stored on June 17th, 2016, when a glut of heat oil supplies persisted after last year’s warm El Nino winter, they’re 11.8% higher than the distillate inventories of 135,428,000 barrels that we had stored on June 19th of 2015, following a more normal winter… 

finally, with the continuation of well above seasonal refining, our commercial supplies of crude oil fell for the tenth time in the past 11 weeks, as our oil inventories fell by 2,451,000 barrels to 509,095,000 barrels as of June 16th, as unaccounted for crude oil was not a major factor…however, we still finished the week with 6.3% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 1.8% more crude oil in storage than the 499,994,000 barrels of oil in storage on June 17th of 2016….compared to the same week in prior years, when the oil glut was not so extreme, we ended the week with 18.2% more crude than the 430,837,000 barrels in of oil in storage on June 19th of 2015, and 42.9% more crude than the 356,384,000 barrels of oil we had in storage on June 20th of 2014…    

This Week’s Rig Counts

US drilling activity increased for the 23rd week in a row, for the 33rd time in the past 34 weeks, and for the 50th time in the past 52 weeks during the week ending June 23rd, with oil drilling increasing while drilling for natural gas slowed….Baker Hughes reported that the total count of active rotary rigs running in the US increased by 8 rigs to 941 rigs in the week ending Friday, which was 520 more rigs than the 421 rigs that were deployed as of the June 24th report in 2016, and the most drilling rigs we’ve had running since April 17th, 2015, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil increased by 11 rigs to 758 rigs this week, which was up by 428 oil rigs over the past year, and the most oil rigs that were in use since April 10th 2015, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the count of drilling rigs targeting natural gas formations decreased by 3 rigs to 183 rigs this week, which was still 93 more rigs than the 90 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008….

there was no change in the Gulf of Mexico rig count this week, where drilling continues from 21 platforms, up from 20 a year ago…we also still had drilling from one platform offshore from Alaska this week, which means the total US offshore count is at 22 rigs, up from 21 rigs a year ago, when there was also one rig drilling offshore from Alaska…in addition, drilling also started from a platform on an inland lake in southern Louisiana this week, where there are now 4 rigs working, up from the 3 rigs working on inland waters last year at this time…

the count of rigs that were set up to drill horizontally increased by 10 rigs to 792 horizontal rigs this week, which was up by 467 from the 325 horizontal rigs that were in use in the US on June 24th of last year, while they are still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014….at the same time, 3 more directional rigs were also started up this week, increasing the active directional rig count to 72 rigs, which was up from the 43 directional rigs that were deployed during the same week a year ago…however, the vertical rig count was down by 5 rigs to 77 vertical rigs this week, which was still up from the 53 vertical rigs that were deployed during the same week last year…

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 23rd, the second column shows the change in the number of working rigs between last week’s count (June 16th) and this week’s (June 23rd) count, the third column shows last week’s June 16th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 24th of June, 2016…        :

June 23 2017 rig count summary

as you can see, the largest increases this week were in Oklahoma, where 5 rigs were added, including those in the Cana Woodford, the Ardmore Woodford, and the Granite Wash basin near the Texas panhandle, and North Dakota, where the 3 rigs that were added were in the Williston shale….strangely, Texas was almost a no-show this week, unusually quiet in most oil districts, with just one rig added in the Permian and a net no change in the state…just about everything else that changed is obvious from those tables, except for the 3 rig decrease in natural gas rigs…2 of those came out of the Arkoma Woodford in Oklahoma, where there was simultaneously an increase of 2 rigs drilling for oil, resulting in the zero net change we see above, and the other was in another region, not otherwise included in Baker Hughes summary totals…

Posted in Uncategorized | Leave a comment

May’s new and existing home sales

the only widely watched reports released over the past week were the May report on new home sales from the Census bureau and the May report on existing home sales from the National Association of Realtors (NAR)….in addition, this week also saw the release of the Kansas City Fed manufacturing survey for June, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico…they reported their broadest composite index rose to +11 in June, up from +8 in May and +7 in April, suggesting a steady expansion of manufacturing in the 10th District…

May’s New Homes Sales and Prices Might Have Been Higher Than April’s

the Census report on New Residential Sales for May (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 610,000 homes annually during the month, which was 2.9 percent (±13.0 percent)* above the revised April rate of 593,000 new single family homes a year and 8.9 percent (±21.9 percent)* above the estimated annual rate that new homes were selling at in May of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether May new home sales rose or fell from those of April or even from those in May a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….hence, these initial new home sales reports are not very reliable and often see significant revisions…with this report; sales new single family homes in April were revised from the annual rate of 569,000 reported last month to a 593,000 a year rate, March’s annualized home sale rate, initially reported at 621,000, was revised from last months upward revision of 642,000 to 644,000, while the annual rate of February’s sales, revised from 592,000 to an annual rate of 587,000 last month, were again revised higher, to an annual rate of 615,000…

the annual rates of sales reported here are extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 58,000 new single family homes sold in May, up from the 57,000 new homes that sold in April, but down from the 61,000 new homes that sold in March….the raw numbers from Census field agents further estimated that the median sales price of new houses sold in May was a record $345,800, up from the median sales price of $310,200 in April, while the average May new home sales price was $406,400, also a record high, up from a $367,700 average in April, and up from the average sales price of $350,000 in May a year ago….a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of May, which represents a 5.3 month supply at the May sales rate, down from a 5.7 month supply in April….for more details and graphics on this report, see Bill McBride’s two posts, New Home Sales increase to 610,000 Annual Rate in May and A few Comments on May New Home Sales

Existing Home Sales Rose 1.1% in May

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose by 1.1% from April to May, projecting that 5.62 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 2.7% greater than the annual sales rate projected in May of a year ago…that came after an annual sales rate of 5.56 million homes in April, which was revised from the originally reported 5.57 million annual sales rate, and an annual home sales rate of 5.70 million in March…the NAR also reported that the median sales price for all existing-home types in May was $252,800, which topped the prior record $247,600 median price set last June and was 5.8% higher than a year earlier, which they report is “the 63rd straight month of year-over-year gains”……the NAR press release, which is titled Existing-Home Sales Rise 1.1 Percent in May; Median Sales Price Ascends to New High, 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), which gives us a close approximation to the actual number of homes that sold each month…this data indicates that roughly 555,000 homes sold in May, up by 24.2% from the 447,000 homes that sold in April and 5.7% more than the 525,000 homes that sold in May of last year, so we can see there was again a seasonal adjustment in the annualized published figures of over 23% to correct for the typical springtime increase in home sales…that same pdf indicates that the median home selling price for all housing types rose 3.2%, from a revised $245,000 in April to $252,800 in May, while the average home sales price was $294,600, up 2.4% from the $287,800 average in April, and up 4.9% from the $280,900 average home sales price of May a year ago, with the regional average home sales prices ranging from a low of $235,100 in the Midwest to a high of $389,700 in the West…for additional coverage with long term graphs on this report, see “NAR: “Existing-Home Sales Rise 1.1 Percent in May”” and “A Few Comments on May Existing Home Sales” from Bill McBride at Calculated Risk…

 

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

Posted in Uncategorized | Leave a comment