Another Exciting Day In The Bakken -- January 15, 2015; First Time Claims Rise "Much More" Than Anticipated; Oil Has Risen Almost 10% In 24 Hours

It's been a long time since I've been up this early -- I couldn't wait to start blogging. It's "job watch" day -- one of my favorite days of the week, to see the spin.

Actually, that's only partially true. I was eager to see the granddaughters and take them to school. My wife had been doing that for the past few weeks (I don't know when that switched from me taking them to school to my wife taking them to school; it just sort of happened). I was eager to follow-up the discussion with our old granddaughter on the three Greek philosophers that got the ball rolling.

But for now, the Bakken and the jobs report.

Did you all see that oil was up about 6% yesterday and I see this morning WTI is up about 3%. Of course when oil is below $50/bbl, these moves don't mean a lot in "raw dollars" but the trends are very, very important.

Note this very, very long Bloomberg article. It was filled with data points but it was the two last paragraphs that summed things up best:

Crude may fall below a six-month forecast of $39 a barrel and rallies could be thwarted by the speed at which lost shale production can recover, Jeff Currie, New York-based head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television yesterday.

"Shale has fundamentally changed this market," he said. "The lead time between when you put money in the ground and when you get production has collapsed from three to four years, all the way down to 30 days." 

Active rigs in North Dakota:

	1/15/2015	01/15/2014	01/15/2013	01/15/2012	01/15/2011
Active Rigs	157	187	185	200	163

 RBN Energy: Where has all the ethane gone?

Lately the ethane market seems out of whack.  Ethane production continues to increase even as it’s become the lowest margin (highest cost) feedstock for Gulf Coast petrochemical crackers – it’s main market.  Ethane production by processing plants has been at an all-time high since June this year even as ethane prices fell to historical lows.  Meanwhile, ethane inventories have fallen from their recent peak in July.  How can all that make sense?  Today we speculate as to what may be going on.

Ethane was the highest margin (lowest cost) feedstock for Gulf Coast petrochemical crackers for almost all of the past five years as shale production resulted in increasing supplies putting downward pressure on ethane prices.  Most of the time it was a much more profitable feedstock than other NGLs -- propane, butane or natural gasoline, and vastly better than naphtha and gas oil. 

Over the 2013-2014 period, the margin for ethane on the Gulf Coast averaged about 50 cents per pound of ethylene ($.50/lb), while propane came in at $.42/lb. Normal butane was about $.40/lb while natural gasoline brought up the rear at $.24/lb. 

Now as of the first week in 2015, those numbers are flipped around.  The best margin is propane, still at $.42/lb, while butane is at $.39/lb and natural gasoline is $.37/lb.  Poor ethane is sitting at $.34/lb, partially due to more dramatic price declines for the other NGLs and partially because of the impact of lower ethylene prices. 

Granted this is still a pretty darned good margin from a historical perspective, so it’s not like the petchems are dealing with anything like what oil producers are going through right now.  But still, it is a big reversal for the margin on the NGL which was supposed to be the rising star of a half-dozen new world scale petrochemical plants expected to be completed between 2017 and 2020. 

Their answer to the question is interesting. 

Okay, the jobs report; it will be interesting to see the AP, CNBC, and the Bloomberg spin. These are the dry numbers from Kitco News. 

First-time claims for US unemployment benefits rose by much more than anticipated in the week ended January 10th, according to a report released by the Labor Department on Thursday.

The Labor Department said initial  jobless claims climbed to 316,000, an increase of 19,000 from the previous week's revised level of to 297,000.

Economists had expected  jobless claims to inch up to 295,000 from the 294,000 originally reported for the previous week.

I noticed this was not a headline story over at Yahoo!Finance.  Had there been even a slight improvement, it would have been headline news. But here we go again; can't wait for the spin.

Headline at Morningstar: jobless claims hit highest level since September. First paragraph: applications for unemployment benefits surge 19,000 to 316,000. And here's the spin (it's unclear what the numbers mean):

So-called initial claims are prone to sudden swings after the holiday season, so it's unclear if the increase reflects any deterioration in what's been a rapidly improving U.S. labor market.

Headline at Bloomberg: jobless claims in US unexpectedly climb to four-month high. And here's the spin (it's just seasonal; it happens every year; no big deal):

More Americans unexpectedly filed applications for unemployment benefits last week, indicating companies let go of seasonal workers following the holidays.

“It happens at the beginning of every calendar quarter and the beginning of every year, so it’s difficult to seasonally adjust at this time,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected claims would jump to 325,000. “People are finding work. The labor market is fine.”

Reuters spin (hey, the labor market is firming up -- it's been firming up for 18 weeks):

It has remained below 300,000, which is associated with a firming labor market, for 18 weeks.

AP headline at m.roanoke.com: applications for US jobless aid climb to 18-week high. Here's the spin (hey, the level remains near historically low levels; never mind we're 8 years into a recovery having put a gazillion dollars into stimulus):

The end of the holiday season led to more Americans seeking unemployment benefits last week, raising the number of applications to an 18-week high. Still, the level remains near historically low levels.

And, of course, the best spin:

The four-week average, a less volatile measure, rose 6,750 to 298,000. That average has plunged 11.4 percent in the past 12 months, staying at historically low sub-300,000 levels since September.

And that, folks, is why I love waking up early every Thursday morning: just to read the Obama-press releases on the unemployment numbers.

It gives me something to do while waiting for the NDIC to post the initial production numbers for wells coming off the confidential list today. 

By the way, did anyone notice that no one talks about all the folks that have dropped out of the labor force? That only comes up once in awhile and usually with the monthly US unemployment report.

It's kind of funny. After the initial post, I go back and fix typographical errors. Re-reading some of the spin reminds me of the good old days, back in middle school, when I read Mad Magazine -- before the price went up and I could no longer afford the magazine.

So, how did the market respond? Futures were down before the unemployment numbers were released. After the numbers were released, the market went "green." The investors know what Janet Yellen knows.

And oil is up almost 4%. 

Disclaimer: oh, you guys and gals should know what the disclaimer is by now. I post it at least once every day and it's always at the "welcome/disclaimer." But for those who might not know, this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. I'm not even sure you want to read what's here; it is very, very biased, written by someone who is inappropriately exuberant about the Bakken and similarly exuberant about the opportunities young folks have these days.