Wednesday, August 22, 2018

Connecting Three Dots, But No Analysis, No Explanation -- And I Don't Have Anything Else To Say About This Right Now -- August 22, 2018

Connecting three dots, but no explanation. I have no explanation for this.

The first dot: American consumers have only so much money to spend each week. That's a fact. How much they have from week to week, from month to month, from year to year, varies, but it is a fact (and a dot) that American consumers have only so much money to spend each week. Some of that money is spent on mortgage/rent; some on food; some on public transportation; some on gasoline; some on college expenses; some on casinos; some at the mall; some at the Dollar Store, but Americans only have so much money to spend each week.

The second dot, from this link:

The third dot:
Economy: the retail numbers being reported this week are simply sensational ....

Two questions:
  • do all three dots connect? and, if so,
  • why?

Gasoline demand: yesterday afternoon -- US EIA says US Gulf Coast gasoline stocks build as refining holds above historic norms. Refiners have been operating at or near 98.1% capacity for several weeks now.

Gasoline demand: is a red herring, 2016 --- Forbes -- from the columnist who forecast the death of the Bakken, Art Berman. 


As far as I can tell, no one has done a serious analysis of why gasoline demand is lagging this year compared to last year.

Any explanation has to take into consideration that this is a recent phenomenon. At wore, it's a 12-month shift; at best it's a six-month shift. 

Long-term trends in driving habits, buying habits, etc, can't explain a sudden change like this. I also don't buy any argument in which arbitragers are "playing" the game differently this year. The EIA data is straightforward: the EIA is simply tabulating reports from all US refineries: how much gasoline did each refinery deliver. (But this could be the explanation -- see below.)

That's why I rule out two things immediately as possible explanations for the decrease in gasoline demand year-over-year:
  • "the Amazon effect" -- this is a long-term trend; this did not happen "overnight"
  • EVs -- another long-term trend; can't explain a year-over-year change in gasoline demand that we are seeing now
Other possibilities:
  • Art Berman would suggest it has to do with exports of gasoline -- see the linked Forbes article above
  • thirty-party storage facilities (like those owned by the Koch Bros?) are ordering less gasoline for storage (either their tanks are filled, or they don't want to be hold gasoline in storage that might fall further in price)

In the Forbes article above, Art Berman argues "gasoline demand" is a "red herring" because of gasoline export data. Maybe it is, maybe it isn't.

But he uses a very, very misleading chart to try to prove his point.

A quick glance at this chart suggests that the US exports way more gasoline than it produces (impossible, of course); and that the US exports way more gasoline than it actually consumes domestically (absurd).

Look at that graph and what I just said jumps out at you.

You have to read the very, very small print (and on the computer screen it's even more difficult): the left x-axis, measure in 10s of thousands, is "total product supplied and sales." Meanwhile the x-axis on the right is measured in hundreds.

On the left, the chart maxes out at 11,000,000 bbls; on the right, it maxes out at 600 bbls (and, in fact, the green line -- exports -- only goes to 400,000 bbls --- 400,000 / 10,000,000 = 4%.

I assume Art Berman would suggest that the drop in US gasoline demand in the summer of 2018 is due to a decrease in US gasoline exports.

Let's check, from the EIA, this data:

Nope. Exports are increasing. Significantly. To meet that demand, refiners have to maximize operating capacity. And they have to "deliver" on that "gasoline demand." The EIA "gasoline demand" data includes gasoline that will be exported.

So, in fact, domestic consumption (demand) is even worse than the "gasoline demand" graph suggests.

If, in fact, that domestic US gasoline demand is lower year-over-year, I have some thoughts but will not post those thoughts for now. But I think the "three dots" explain a lot.

Enerplus With Permits For A 7-Well "Aussie Animal" Pad Where The Antelope Roam And Where Seldom Is Heard A Discouraging Word -- August 22, 2018

The only discouraging words: among the faux environmentalists and the occasional cowboy / cowgirl whose horse steps in a gopher hole. 

Active rigs:

Active Rigs62523276193

Ten new permits:
  • Operators: Enerplus (7); Liberty Resources; Iron Oil Operating; Ballard Petroleum
  • Fields: Antelope (McKenzie); North Tioga (Burke); Bear Butte (McKenzie); Chatfield (Bottineau)
  • Comments: Enerplus with permits for a 7-well "Aussie animal" pad in SESW 23-152-94;

Iron Oil: over at "Bakken operators":
Iron Oil: first mentioned on the blog, July 18, 2017
Three permits canceled:
  • Newfield: three Johnsrud Federal permits in McKenzie County
Two permits renewed;
  • BR: two State Dodge permits in McKenzie County
Three producing wells (DUCs) reported as completed:
  • 33610, 1,268, Hess, SC-Gene-154-98-0805H-3, Truax, t8/18; cum --
  • 33830, 661, Hess, CA-E Burdick-155-95-2017H-8, Capa, t7/18; cum --
  • 33263, n/d, Whiting, Wold Federal 44-7-5XH, Banks, t7/17; cum --

The Market, Energy, And Political Page, T+8 -- August 22, 2018

Economy: for the archives. "They" said this could never happen again in the US. "They" said the jobs were never coming back. "They" said and "they" said ....

TSA and airline security: this is why the TSA and the federal government do not trust state-issued driver's licenses. The "undocumented resident" who killed Mollie Tibbets in Iowa? Immigration and Customs Enforcement (ICE) agents said that Rivera, of Mexico, had been in the U.S. illegally for four to seven years.
Yarrabee Farms, which had hired Rivera, initially said he passed a federal E-Verify check, which is intended to maintain a database of I-9 forms and tax records of employees across the country. On Wednesday, however, co-owner and manager Dane Lang said that the farm used a different program that a family member wrongly thought was E-Verify. The farm used Social Security Administration data in the vetting process, Lang said. 
Lang added that Rivera provided a state-issued photo ID and social security card.
EIA: today's weekly report;
  • US crude oil inventories decreased by a whopping 5.8 million bbls; WTI climbs 3%
  • refineries operating at 98.1% -- identical to last week
  • imports down 1.5 million from that incredible number last week; now at 7.5 million bbls of imported oil
  • gasoline production: slightly below "threshold" at 10.2 million b/d
  • distillate fuel production: slightly below "threshold" at 5.4 million b/d
  • gasoline supplied to the market: continues to trend down
  • distillate supplied to the market: down almost 8% from same period last year (huge data point?)
  • jet fuel supplied to market: up almost 4% year-over-year
Dead: Saudi Aramco officially kills any idea of going public: as predicted on the blog when this idea was first floated. This is a non-story. Except for one thing. The timing. The announcement comes just days after Elon Musk tweeted that he had financing secure for taking Tesla private, and many folks suggested that he had an agreement with Prince Salman to go forward with taking Tesla private. Interesting, huh?

Gasoline demand:
  • strong, strong economy
  • longest bull run on history
  • regardless of what pundits might say, gasoline has been very inexpensive this past summer; and yet, 
  • gasoline demand really, really lagging year-over-year
  • from this link

News from "the swamp":

Legacy Fund Monthly Deposit Drops; Active Rigs Jump To 61 -- August 22, 2018

Longest "bull run" in history.

Legacy fund: August, 2018, deposit takes unexpected dip; deposit at $58 million; below July deposit of $62 million; slightly below June deposit; link here;

S & P 500 hits all-time high.

Dow holds overnight despite setback for Trump.

WTI: climbs almost 2%; now just over $67; is the worst "recent' pullback over? Rigzone article here;
Headlines from WJS:
Back to the Bakken

Wells coming off the confidential list today, Wednesday: none.

Active rigs:

Active Rigs61523276193

RBN Energy: Tellurian's Driftwood LNG: gas reserves, pipelines, liquefaction and export docks.
With global demand for LNG rising and U.S. natural gas producers needing markets for their burgeoning output, it’s not a question of whether another round of U.S. liquefaction/LNG export facilities will be built, but which developer will be first and when it will make its final investment decision (FID). Odds are that the initial FID for this “next round” of projects is only months away, but as for the specific developer and project that will lead the pack, that has yet to be determined. We do know, however, that a handful of projects appear to be making real progress, and today we consider one of them: Tellurian’s Driftwood LNG project near Lake Charles, LA.
This is the second episode in our series on the next round of U.S. liquefaction/LNG export projects. Previously, we discussed the roller-coaster ride that U.S. LNG has been on for the past 20-odd years — and some odd years they’ve been. Through the 1990s and the first two-thirds of the 2000s, U.S. natural gas production was close to flat, so the general thinking was that U.S. gas output had peaked, and that over time the country would need to import increasing amounts of LNG to meet its gas demand. In 2005, the Energy Information Administration (EIA) estimated that by 2015 the U.S. would be importing the LNG equivalent of nearly 12 Bcf/d, and that by 2025, the nation would be importing LNG volumes equal to nearly 18 Bcf/d. A number of LNG import terminals were constructed to handle the expected inflow. It became clear by 2010-11, however, that the Shale Revolution — and the resulting boom in U.S. gas production — had eliminated the need for LNG imports. All of a sudden, many of the companies that had just finished building LNG import terminals started exploring the possibility of adding liquefaction plants at those sites to export LNG instead.