Monday Madness: Battleship

Posted: July 10, 2023

In this episode we talk about a surprise in the rig count, a lack of serious labor, and a growing aggression from the Iranian Navy for tankers.


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Audio Transcript

Alrighty everyone, welcome back! This is Tavis Kilian with RARE PETRO bringing you a brand new episode of Monday Madness on July 10, 2023. We are barreling through this month, and this year for that matter. As a matter of fact, August 7th is technically the halfway point of summer, and it is going to be here before you know it, so continue to make the most of the good season. Get in some pools, go for a run, hit the beach, or have a cookout! Soon enough it’ll be fall, and then 2024, and then the price of a barrel of oil will be over $150 a barrel. Okay that last part may have been a bit optimistic, so I’ll cut the jokes and get straight to the content.

First… commodity prices! Last Monday we were only rockin a $70 barrel of WTI, but it climbed to $71, and then $72. Right at the end of Friday we saw this crazy rally before close that brought it $73.40 and then everyone held their breath. I woke up extra exited today because when I checked, we were on the good side of $74 this morning. Now, we’ve talked about this a lot. Monday is an incredibly volatile day, even more so if you have a crazy one and a half dollar jump just moments before last week’s close. I wanted to believe it would stay this high, but something inside of me knew it likely wasn’t true. Already, the price has fallen to $73, and it sure doesn’t look like it is going up anytime soon. Still, this isn’t all entirely bad. We haven’t seen such a quick and aggressive change in price like this for several months now, so it is something new. No guarantee new things will keep happening, but I’ve plotted out a bit of geometry on my own and I think this fall will have some nice things in store for us. But let’s pull it back to the present. Brent saw the same volatility, but the spread maintains that $5 difference we started to observe over the past 2 weeks. If we are lucky (we being us WTI folks) that spread will continue to blossom. Natural gas is performing exactly how we expected given the gentle sine wave pattern of 60 cent changes. I really don’t expect this to change anytime soon unless other heating commodities see some crazy change before winter, so please just hold tight and be patient with this one. Just as an aside, the OPEC basket is up about as much as WTI so perhaps we are seeing some globalized results from those supply cuts announced by Saudi Arabia and Russia.

Next is the rig count. I’ve got great news! After months of drawdowns we finally have a positive bump to the rig count. 6 more rigs bringing the US total to 680 which is 72 fewer than we had this time last year. Now this is of course just one week of good news. I would not be surprised if we saw a 10 rig drop next week, so let’s not bust out the party favors just yet. Not a lot of change basin by basin this week. 2 more rigs in the Haynesville, 1 more in the Permian, and 1 less in the Eagle Ford. Little more action at the state level as Louisiana is up 7 rigs (probably why the Haynesville did so well), New Mexico up 3, and Wyoming up 1. On the negative side is Colorado who is down one and Texas who is down 4. The Gulf of Mexico was able to add one to its total as well. I’m starting to think Texas’ weekly change is a much better indicator of rig count trends so my money is on a decline next week. Anyone who wants to take a $5 bet against me is welcome to email me their challenge and venmo account at The rigs that primarily went up in Louisiana seemed to be targeting gas in horizontal and a few directional holes. Again, we just saw 9 weeks of declines losing us 81 rigs, so a one boost in rig count by 6 from primarily one state is likely not going to reverse the trend.

The last statistic to touch on is our inventory report Thirsty Thursday which is once again being written by yours truly. As always, I’ll give you the quick and dirty here on the podcast, but it is much better enjoyed with the weekly cocktail and fantastic figures to enhance your understanding of what is going on in the commodity space. You can find it at Here’s what you may have missed: Last week’s inventory news was a big surprise as we nearly had a drawdown of 10 million barrels. This week they predicted a much smaller 1 million barrel drawdown, but managed to exceed expectations with a 1.5 million barrel drawdown. The API predicted a larger drawdown at 1.8 million barrels but blew that out of the water with a reported 4.4 million barrel drawdown. While the weekly graph makes it look like there is still plenty of work to be done to fight the first 2 months of builds, the EIA’s total crude graphs shows that while there have been slight bumps from builds, it has ultimately been trending downwards since the start of this year. That is not to say that we are too low. We are smack dab in the middle of the 5 year historical range, but that is primarily due to a big 55 million barrel build from a few weeks around Christmas. Gasoline prices have stalled out, and (surprisingly) somehow slightly decreased through the holiday weekend. There was even a significant drawdown as we lost 2.5 million barrels of national supply between now and last report. It equates to a little more than a 1% change, but you wouldn’t know that by looking at pump prices. Gas prices are down 2 cents nationally on the week. Washington is still home to the most expensive gallon of gasoline at $4.975 which has been the case for about a month. As a matter of fact, Mississippi also continues to hold its title of cheapest gallon at $2.966. Diesel is 3 cents cheaper this week once more which means over the month it has cooled off 6.5 cents despite trending back downward and rubbing up against the record low for a 5 year range. On the other side of the spectrum is propane which is absolutely chart topping at the moment. I’m talking record after record each week! It seems like we never fully came down in supply from the most recent year long cycle giving it a bit of a boost to work with through now. Could be potentially cheap heating oil if you have the ability to pursue that. 

But that wraps up the stats. Next it’s time to get into some news stories. The first one features the American workforce, or rather – the lack thereof. While we’ve discussed how materials are more expensive than they were last time we saw $70 oil, labor costs a whole lot more too. This is an especially worrisome problem considering just how much potential the LNG market has to explode right now. Labor is an inflationary concern, and people are finding opportunities outside of the energy industry or just not touching it at all. Contracts for LNG export terminals are working on training programs and creating as much project efficiency as possible so that once one project is finished, the next starts immediately. Otherwise you might have a 2 month lapse and people just can’t stack up the cash to float through that long of a pause. Because of that lots of labor ends up jumping ship to find something more stable. An LNG boom is nearly primed for liftoff, but these materials and labor challenges are definitely pushing back on it. The good news is that we are still seeing a record number of projects approved that could push our daily export capacity to 18 billion cubic feet. That is a lot of gas and would do wonders to cement the US’s position as a global leader in the natural gas space. Something to keep an eye as you look at the loads of LNG projects being approved globally. Let’s hope we don’t lose pace.

In slightly more… exciting news, the US navy is now intervening in the Gulf of Oman. About a month ago we talked about how Iran had seized 2 more tankers in a rather short time frame. On the 5th, the navy got involved at 1:00 AM with an Iranian naval vessel that approached a Marshall Islands-flagged tanker in international waters. According to a statement, “The Iranian vessel departed the scene when U.S. Navy guided-missile destroyer USS McFaul arrived on station,” adding that the Navy had deployed surveillance assets including maritime patrol aircraft. Just a few hours later, the navy received a distress call from a Bahamas-flagged oil tanker while the ship was a little more than 20 miles off the coast of Oman, still in international waters. A different Iranian naval vessel had stopped this ship. When the US navy arrived at this location a few small arms and crew-served weapons were already being fired in long bursts on the Bahaman ship. No casualties were sustained, but the living spaces got lit up a little bit. The Iranian vessel dipped as soon as the US navy ship arrived. Iranian authorities have not yet released an official comment from the matter. Almost 20 vessels have been either attacked or seized by Iran since just 2021. This is especially concerning because about 1/5th of the world’s supply of seaborne crude travel into the Gulf of Oman and through the Strait of Hormuz which is a narrow chokepoint between Iran and Oman. If the Iranian navy really wanted to get busy with it… they could make some serious supply shifts. As if someone is keeping score, Iran likes to point out that the US confiscated cargo of an Iranian oil tanker in April in the US Gulf, but if I had to guess, we were likely confirming the origin and legitimacy of this likely Russian oil. Tensions are high, and it might be a great time to become a pirate and pick through the potential wreckage.
But that is all we have for this episode. We thank you for always tuning in and joining us as we become some of the best energy professionals we can be. If you would like to find more content, we push some of our favorite news sources to our website While you are there, we also have quite a bit of other video, podcast, and written content. Heck, you can even find a lot of our stuff on YouTube. RARE PETRO is all about learning everything we can in this space, and we welcome you along for the ride. It is free after all. This has been Tavis Kilian with RARE PETRO, and until we see you next time, take care everybody!


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