Sunday, June 17, 2018

US gasoline demand hits an all time high; distillates supplies at a 10 year seasonal low; global oil supplies down in May

oil prices ended lower for the 4th week in a row as Trump ramped up his trade wars against both our allies and against China, and as it became increasingly evident that OPEC would agree to increase oil production when they meet in Vienna next week...after falling just 7 cents to $65.74 a barrel in volatile trading last week, prices for July delivery of WTI, the benchmark US oil reversed a morning slide and rose 36 cents to $66.10 a barrel on Monday, as comments from the Iraqi oil minister cast doubt as to whether OPEC members would actually boost output at their upcoming meeting...against the backdrop of a Saudi and UAE invasion of Yemen, prices then edged up another 26 cents to close at $66.36 a barrel on Tuesday, after the monthly OPEC report warned there's a high degree of uncertainty still hanging over the global oil markets this year...oil prices then pushed up to a two week high on Wednesday, closing at $66.36 a barrel for a gain of 28 more cents, after the weekly EIA report indicated a larger than expected drop in US crude supplies along with surprise drawdowns of gasoline and distillates inventories...crude prices then rose for a 4th day on Thursday after Saudi oil minister Al Falih said that while “it’s inevitable” that OPEC would agree to boost oil production, the increase in output would be "reasonable", with oil closing 25 cents higher at $66.89 a barrel...but oil prices then crashed on Friday morning, falling by as much as $2.60 to $64.29 a barrel, after Saudi Arabia and Russia said they have already boosted their production modestly, and would make it official at their meeting next week, and Trump imposed 25% tariffs on $50 billion worth of high tech Chinese imports and the Chinese responded immediately with their own tariffs on $50 billion of US goods, with oil prices steadying that afternoon to end down $1.83 for the day at $65.06 a barrel...US oil prices thus ended the week with a loss of 68 cents, or just over 1%, while the international benchmark Brent crude trading for August oil finished the week $3.02 or nearly 4% lower at $73.44 a barrel, dropping $2.50 a barrel on Friday alone...

meanwhile, natural gas prices ended the week higher, rising daily save for a tenth of cent pullback on Tuesday, and ending the week above $3 for the first time since January on a 5.7 cent increase to $3.022 on Friday, on a forecast for hot weather for much of the country, seen as an impediment to rebuilding underground inventories...the natural gas storage report for week ending June 8th from the EIA indicated that natural gas in storage in the US rose by 96 billion cubic feet to 1,913 billion cubic feet over the week, which left our gas supplies 785 billion cubic feet, or 29.1% below the 2,698 billion cubic feet that were in storage on June 9th of last year, and 507 billion cubic feet, or 21.0% below the five-year average of 2,420 billion cubic feet of natural gas that are typically in storage after the first week of June...a Bloomberg survey had forecast an addition to gas storage in a range of between 82 and 95 billion cubic feet, so this week's 96 billion cubic foot addition was above all expectations, and was also above the average 91 billion cubic foot weekly surplus of natural gas that is typically added to storage at this time of today's inventory levels, we'd have to add 1,877 billion cubic feet of natural gas to storage to match the 3,790 billion cubic feet we had stored after the first week of November last year, so figure we need an inventory build averaging over 89 billion cubic feet per week over the next 21 weeks to bring our gas supplies back up to a reasonable level going into winter....   

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending June 8th, indicated that due to a combination of lower oil imports, higher oil exports, and increased refining, we had to pull oil out of our commercial crude supplies for the ninth time in the past twenty weeks....our imports of crude oil fell by an average of 247,000 barrels per day to an average of 8,099,000 barrels per day during the week, after rising by 715,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 316,000 barrels per day to an average of 2,030,000 barrels per day during the week, which meant that our effective trade in oil over the week ending June 8th worked out to a net import average of 6,069,000 barrels of per day during the week, 563,000 barrels per day less than the net of our imports minus exports during the prior the same time, field production of crude oil from US wells rose by 100,000 barrels per day to a record high of 10,900,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,969,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using a seasonal high of 17,505,000 barrels of crude per day during the week ending June 8th, 136,000 barrels per day more than they used during the prior week, while at the same time 592,000 barrels of oil per day were reportedly being pulled out of oil storage in the US....hence, we can see that this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 56,000 more barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-56,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,059,000 barrels per day, which was 1.3% less than the 8,161,000 barrel per day average we imported over the same four-week period last year...the 592,000 barrel per day decrease in our total crude inventories all came out of our commercially available stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve was unchanged...this week's 100,000 barrel per day increase in our crude oil production was due to a 100,000 barrel per day increase in output from wells in the lower 48 states, while an 18,000 barrel per day decrease in oil output from Alaska was not subtracted from the final figures, with no explanation as to why...the 10,900,000 barrels of crude per day that were produced by US wells during the week ending June 8th were again the highest on record, 16.8% more than the 9,330,000 barrels per day that US wells were producing during the week ending June 9th of last year, and 29.3% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...

US oil refineries were operating at 95.7% of their capacity in using 17,505,000 barrels of crude per day during the week ending June 8th, up from 95.4% of capacity the prior week, as refineries will usually try to run flat out through the summer driving season...while the 17,505,000 barrels of oil that were refined this week were the most barrels refined this early in any year, they were still down fractionally from the off-season high of 17,608,000 barrels per day that were being refined during the last week of December 2017....this week's refinery throughput was also 1.4% higher the 17,256,000 barrels of crude per day that were being processed during the same week a year ago, when US refineries were operating at 94.4% of capacity.... 

with the increase in the amount of oil that was refined this week, gasoline output from our refineries was much higher, rising by 793,000 barrels per day to 10,451,000 barrels per day during the week ending June 8th, after our refineries' gasoline output had decreased by 775,000 barrels per day during the week ending June 1st....that big increase meant our gasoline production was 6.2% higher during the week than the 9,843,000 barrels of gasoline that were being produced daily during the week ending June 9th of last year...meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 213,000 barrels per day to 5,111,000 barrels per day, after rising to a seasonal high the prior a result, this week's distillates production was fractionally lower than the 5,154,000 barrels of distillates per day than were being produced during the week ending June 9th, 2017....  

however, even with the jump in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 2,271,000 barrels to 236,763,000 barrels by June 8th, the ninth decrease in 14 weeks, but just the 10th decrease in 31 weeks, as gasoline inventories, as usual, were being built up over the winter months.....our gasoline supplies decreased because the amount of gasoline supplied to US markets rose by 903,000 barrels per day to a record high of 9,879,000 barrels per day, and because our exports of gasoline rose by 69,000 barrels per day to 607,000 barrels per day, while our imports of gasoline rose by 47,000 barrels per day to 824,000 barrels per after this week's decrease, our gasoline inventories finished the week 2.4% lower than last June 9th's level of 242,444,000 barrels, even as they were still roughly 9.7% above the 10 year average of gasoline supplies for this time of the year...  

since the amount of gasoline supplied to US markets, seen as a measure of domestic demand and consumption, was at a record high this week, we'll include a graph of what that looks like, compared to its recent history...

June 13 2018 gasoline supplied as of June 8

the above graph came from a package of oil graphs on this report that John Kemp of Reuters emailed out on Wednesday (available as a pdf here), and it shows gasoline supplied to US markets in thousands of barrels per day by "day of the year" for the past ten years, with the past ten year range of our domestic gasoline demand for any given date shown in the light blue shaded area, and the median of our gasoline consumption, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year....the graph also shows the number of barrels of gasoline supplied for each week in 2017 traced weekly by a yellow line, and the year to date gasoline supplied for 2018 represented by the red John headlines at the top, that red line shows that gasoline supplied rose by 903,000 barrels to a record high of 9.88 million barrels per day with this week's report, which means it rose by more than 10% from the prior week's, you can see by the red line that "gasoline product supplied" is quite volatile, and during the prior week it had fallen to a 16 week low....if you recall our closing discussion on last week's report, we noted that all refinery "product supplied" metrics had dropped last week, resulting in what was the largest jump in product inventories in nearly 10 years, which we showed was a fluctuation similar to that of prior Memorial day this week's "record demand" is colored by that drop, as all product supplied metrics bounced back, as wholesalers and retailers rebuilt their own supplies, after the holiday drawdown..

meanwhile, with this this week's decrease in distillates production, our supplies of distillate fuels fell for the 8th time in 10 weeks, decreasing by 2,101,000 barrels to 114,693,000 barrels during the week ending June 8th...our distillate inventories decreased because the amount of distillates supplied to US markets, a proxy for our domestic consumption, jumped by 902,000 barrels per day to 4,404,000 barrels per day, after decreasing by 817,000 barrels per day the prior week, when distillate wholesalers were drawing on their own supplies, which they'd built in advance of the holiday weekend...meanwhile, our exports of distillates fell by 548,000 barrels per day from last week's near record to 1,111,000 barrels per day, while our imports of distillates decreased by 42,000 barrels per day to 104,000 barrels per day...since this week's inventory decrease comes after our distillate supplies fell by 14,452,000 barrels over the six weeks to May 18th, our distillate supplies for the week ending June 8th are now 24.3% below the 148,768,000 barrels that we had stored on June 9th, 2017, and roughly 16.1% lower than the 10 year average of distillates stocks for this time of the year...

with our supplies of distillates now at the lowest they've been at this time of year in 10 years, we'll take a look at a graph of what that looks like, compared to that 10 year history:

June 13 2018 distillate inventories as of June 8

again, this graph also comes from that weekly emailed package of oil graphs from John Kemp of Reuters, which is available as a pdf shows US distillate fuels inventories in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our distillates supplies on any given day of the year shown in the light blue shaded area, and the median of our distillates inventory, or the midpoint of the 10 year daily range, traced by the blue dashes over each day of the year...the graph also shows the number of thousands of barrels of distillates we had stored for each week in 2017 traced weekly by a yellow line, with our 2018 year to date distillates supplies for each week traced in red...notice in the light blue shaded area that there is normally a seasonality to distillates supplies, as they're normally built up during the summer when refineries are running flat out, and then drawn down and consumed during the winter months, when demand for heat oil is greatest...however, this year, when supplies of distillates should have been increasing during April and May as they typically do, they were falling instead, in part due to decreased production, but mostly because we have been exporting our distillates at near a record pace...thus we come to June 8th with our distillate supplies at a 10 year low for this time of year, after falling almost continuously since hitting an all time high of 170,746,000 barrels on February 3rd, 2017, as you can see above in the yellow graph line for 2017...

finally, with our oil exports rising and our oil imports falling while our refineries were using more oil, our commercial supplies of crude oil decreased for the 11th time in 2018 and for the 34th time in the past year, as our commercial crude supplies fell by 4,143,000 barrels during the week, from 436,584,000 barrels on June 1st to 432,441,000 barrels on June 8th...thus, after falling most of the past year, our oil inventories as of June 8th were 15.5% below the 511,546,000 barrels of oil we had stored on June 9th of 2017, 13.7% below the 500,911,000 barrels of oil that we had in storage on June 10th of 2016, and fractionally below the 435,771,000 barrels of oil we had in storage on June 12th of 2015, during a period when the US glut of oil had already begun to build from the nearly stable supply levels of the prior years...     

OPEC's Monthly Oil Market Report

we're going to take a look at OPEC's June Oil Market Report (covering May OPEC & global oil data) next, because it's available as a free download and hence it's the report we check for monthly global oil supply and demand data, rather than the paywalled report of the IEA that's widely reported in the media...the first table from this monthly report that we'll look at is from the page numbered 59 of that report (pdf page 67), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate...for all their official production measurements, OPEC uses an average of estimates from six "secondary sources", namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures...    

May 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC's oil output increased by 35,400 barrels per day in May to 31,869,000 barrels per day, from their April production total of 31,834,000 barrels per day....however, that April figure was originally reported as 31,930,000 barrels per day, so OPEC's oil production during May was actually 61,000 barrels per day lower than the previously reported April figures (for your reference, here is the table of the official April OPEC output figures as reported a month ago, before this month's revisions) you can tell from the far right column above, an increase of 85,500 barrels per day in the output from Saudi Arabia was the main reason that the cartel's output rose, with Algeria contributing a 39,000 barrel per day increase and Iraq's increase of 27,700 barrels per day, together more than offsetting the decreases of 53,500 barrels per day in Nigerian output, 42,500 barrels per day in Venezuelan output, and 24,300 barrels per day in Libyan output...however, with a quota of 10,060,000 barrels per day for the Saudis, and 1,040,000 barrels per day for the Algerians, both of those countries still remain well below their allocations, according to their original pact...and at 31,869,000 barrels per day, OPEC oil output is now 861.000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, with only Iraq's 4,455,000 barrel per day May output above their 4,350,000 barrel per day allocation... 

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from June 2016 to May 2018, and it comes from the page numbered 60 (pdf page 68) of the June OPEC Monthly Oil Market Report...on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the metrics for global output shown on the right scale...    

May 2018 OPEC report global oil supply

OPEC's preliminary data indicates that total global oil production rose by a rounded 270,000 barrels per day to a record 97.86 million barrels per day in May, after April's global output total was revised down by 300,000 barrels per day from the record 97.89 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 230,000 barrels per day in oil output for May was also 1.74 million barrels per day, or 1.8% higher than the 96.12 million barrels of oil per day that were being produced globally in May a year ago (see the June 2017 OPEC report online (pdf) for the year ago details)... OPEC's May oil production of 31,869,000 barrels per day thus represented just 32.6% of what was produced globally, the same percentage as in April, as oil output increases by the US, Canada, Brunei, Brazil, Kazakhstan, Azerbaijan, Ghana and Saudi Arabia were only partially offset by decreases in oil output seen in Mexico, Norway, the UK, Australia, Colombia, Egypt, China and Nigeria...OPEC's May 2017 production was at 32,139,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding their new member Equatorial Guinea, are now producing 140,000 fewer barrels per day of oil than they were producing a year ago, during the fifth month that their production quotas were in effect, with the recoveries of oil production in Libya and Nigeria now more than offset by the decrease in output from Venezuela, whose output is now running 571,000 barrels per day below what it was at last May...    

however, despite the record global oil output in May, the downward revisions to supply meant that we again saw a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us...

May 2018 OPEC report 2018 global oil demand

the table above comes from page 33 of the June OPEC Monthly Oil Market Report (pdf page 41), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC's estimate of oil demand by region and globally quarterly over 2018 over the rest of the table...on the "Total world" line of the third column, we've circled in blue the figure that's relevant for May, which is their revised estimate of global oil demand during the second quarter of 2018...     

OPEC's estimate is that during the 2nd quarter of this year, all oil consuming regions of the globe will be using 98.07 million barrels of oil per day, which is a small downward revision from their prior estimate of 98.08 million barrels of oil per day during the 2nd quarter....meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, after the OPEC and non-OPEC production cuts, the world's oil producers were only producing 97.86 million barrels per day during May, which means that there was a shortfall of around 220,000 barrels per day in global oil production vis-a vis estimated demand during the month...

at the same time as 2nd quarter global demand was revised 10,000 barrels per day lower, April's global output total was revised down by 300,000 barrels per day to 97,590,000 barrels per day, so that means that the shortfall for April now works out to 480,000 barrels per day, revised from the 190,000 barrel per day shortfall we had figured on a month ago...but as you see circled in green above, while global oil demand figures for the second quarter were revised slightly lower, global oil demand figures for the first quarter of 2018 were revised 60,000 barrels per day higher, which means that our previously computed oil surplus for the first quarter of 2018 will also have to be recomputed...based on the revisions of a month ago, we had figured a global oil surplus of 240,000 barrels per day for March, a global oil surplus of 420,000 barrels per day for February, and a global oil surplus of 260,000 barrels per day for January...each of those surplus figures thus have to be revised lower based on higher demand, so hence our new figures will show a surplus of 180,000 barrels per day for March, a surplus of 360,000 barrels per day for February, and a surplus of 200,000 barrels per day for January...totaling it all up, that means that for the first five months of 2018, global oil production exceeded demand by just 640,000 barrels, the equivalent of just 9 extra minutes of production at the May rate... 

This Week's Rig Count

US drilling activity decreased for the first time in the past twelve weeks and for just the 2nd time in the past 17 weeks during the week ending June 15th, as drilling for natural gas was curtailed while drilling for oil continued to increase...Baker Hughes reported that the total count of active rotary rigs running in the US decreased by 3 rigs to 1059 rigs over the week ending on Friday, which was still 126 more rigs than the 933 rigs that were in use as of the June 16th report of 2017, while it was down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC officially began their attempt to flood the global oil market... 

the count of rigs drilling for oil was up by 1 rig to 863 rigs this week, which was also 116 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the number of drilling rigs targeting natural gas formations fell by 4 rigs to 194 rigs this week, which was only 8 more gas rigs than the 186 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, addition, there continues to be two rigs operating that are considered to be "miscellaneous", in contrast to no such "miscellaneous" rigs in use a year ago....

drilling activity in the Gulf of Mexico and elsewhere in the US offshore was unchanged this week, with 19 platforms deployed in the Gulf and one drilling offshore from Alaska, down from 21 rigs drilling in the Gulf and one offshore from Alaska last June 16th...however, another platform was set up to drill through an inland lake in southern Louisiana this week, so now there are 4 such 'inland waters" rigs operating, an increase from the 3 inland waters rigs that were operating going into the same weekend a year ago...

in their first pullback in 9 weeks, the count of active horizontal drilling rigs decreased by 2 rigs to 932 horizontal rigs this week, which was 150 more horizontal rigs than the 782 horizontal rigs that were in use in the US on June 16th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the vertical rig count decreased by 1 rig to 60 vertical rigs this week, which was also down from the 82 vertical rigs that were in use during the same week of last year...on the other hand, the directional rig count was unchanged at 67 directional rigs this week, which was still down from the 69 vertical rigs that were deployed on June 16th of 2017...

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of June 15th, the second column shows the change in the number of working rigs between last week's count (June 8th) and this week's (June 15th) count, the third column shows last week's June 8th active rig count, the 4th column shows the change between the number of rigs running on Friday and those of the equivalent weekend report of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 16th of June, 2017...     

June 15 2018 rig count summary

as you can see from the above table, this week's small net decrease masked a number of both positive and negative changes in drilling nationally...of particular note was the 4 rig decrease in the Permian basin of west Texas and New Mexico, the largest pullback in the Permian since a similar number of rigs were shut down during the week ending February 2nd...looking at the changes in activity in the individual Texas oil districts in the state data, the core Permian areas appear to show a decrease of 6 rigs, so we can probably figure that two of the New Mexico rig increases were in the western part that basin...for once, the 4 rig decrease in rigs targeting natural gas is easily identifiable, as two rigs were pulled from the Marcellus (one from Pennsylvania and one from West Virginia), a rig targeting gas was pulled out of Oklahoma's Arkoma Woodford, and another gas rig was shut down in Ohio's Utica shale...activity in the Utica is now at 23 rigs, down from 28 rigs a year ago, so some Ohioans can be thankful, despite the state's deterioration otherwise.... also note that in addition to the changes shown in the major producing states in the top table above, this week also saw a rig added in Mississippi, while the only rig that had been operating in Montana was pulled out...Mississippi now has 4 rigs operating, up from 3 rigs a year ago, while the Montana rig appears to have just been moved across the North Dakota border, into another part of the Williston basin...


Rig Count Holds Steady as Ohio Permitting Slows – The number of oil and gas rigs operating in eastern Ohio’s Utica shale stood at 19 for the week ended June 9, as permit activity trickled to a near stop, according to the latest update from the Ohio Department of Natural Resources.ODNR reported that it awarded just two new permits for horizontal wells in the Utica last week, both to Ascent Resources Utica LLC for wells in Guernsey County.The agency released just one permit the previous week, indicating a slowdown in terms of permit interest over the last several weeks.As of June 9, ODNR has issued 2,837 permits for horizontal wells in the Utica. Of that number, 2,358 wells are drilled and 1,899 are producing.  No new permits were issued for the northern tier of the Utica, which includes Mahoning, Trumbull and Columbiana counties, according to ODNR. There were no new permits issued in nearby Lawrence and Mercer counties in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.

Community leaders cast wary eye on injection wells - Toledo Blade — Fears about the oil and gas industry’s disposal of briny waste fluids in injection wells drilled deep into the ground keep growing, even in areas that historically haven’t had much to worry about because of their karst-prone bedrock.The mere presence of karst — an extremely porous, environmentally sensitive, and relatively soft rock formation near many land surfaces around the world, including southeast Michigan and northwest Ohio — doesn’t necessarily rule out drilling. But it sends warning signals to take extra caution and, thus, often deters such activity.  But now, with a global fracking frenzy that began a decade ago in full swing, people who live in places once assumed to be off-limits to drilling and fracking are experiencing new levels of anxiety — especially when it comes to whether more karst-prone areas will soon host deep underground injection wells used to bury waste fluids.New regulatory rules approved this month in Michigan aim to give state officials more control over drilling operations.   State Sen. Dale Zorn (R., Ida), who in 2015 tried unsuccessfully to convince the Michigan legislature to pass a statewide ban on injection wells for karst-prone areas, called the Michigan Department of Environmental Quality’s past policies toward karst “very, very weak” and said he believes the new rules will help, but not end threats.“It’s never been an economic issue to me. It’s always been a safety issue,” Mr. Zorn said.Neal Thurber, a LaSalle Township resident who spent years drilling wells in the oil and gas industry, said karst-prone areas that allow injection wells into them are “taking on a very high level of risk for contamination for virtually no benefit.”

Coshocton County group opposes company's effort to accept more injection-well fluids -  Columbus Dispatch — A company operating injection wells in Coshocton County has asked regulators to allow a change in its permitting to accept industrial and other nonhazardous waste fluids instead of just oilfield brine.If Buckeye Brine is successful, it would mark the first time an Ohio Class II injection well was switched to a Class I.Operators say they’ve been pumping oilfield fluids into rock formations deep underground for several years without incident, that the facility was built to exceed injection-well standards and that the permitting change would provide an environmentally friendly alternative for disposing of nonhazardous waste fluids."We’ve operated flawlessly for five years," said Steve Mobley, company president. "We’re experienced at this business and we’re doing a good thing for the surface waters of the state and making industrial businesses better able to operate affordably."But a local environmental group opposes the move, citing continued concerns about toxic fluids being pumped into the ground. Coshocton Environmental and Community Awareness, or CECA (, and its supporters are posting "No Class I Injection Wells" signs along some roads in the vicinity and urging regulators to reject the application. A billboard with the message is planned along Route 16."You can’t take this rotten apple and make it good," said Tim Kettler, a member of the nonprofit advocacy group’s board. "Our position on this is this whole method of wastewater disposal is improper. It’s going to be our legacy, this 7 billion gallons of unknown wastewater ... beneath our community for our children and grandchildren."The signs have prompted debate in Coshocton, about an hour and a half northeast of Columbus. Community groups and some residents have visited the injection well site in recent weeks and been given tours of the operations and explanations of the company's proposal.

Penn State study: Spraying brine from drilling, fracking on roadways is hazardous - Pittsburgh Post-Gazette - Spreading wastewater from non-shale oil and gas drilling and fracking on unpaved roads is a cheap way for municipalities to suppress dust and melt snow, but a Penn State University study says the practice has potentially high costs for human health and the environment.The study, published in the journal “Environmental Science & Technology” last month, said the wastewater contains salts, radioactivity and organic contaminants “often many times higher than drinking water standards.”The toxicity of the wastewater is a concern because rain can wash heavy metals, oils and radium, a carcinogen, from roads into nearby water sources, the study said. “It’s true that breathing road dust is a health risk,” said William Burgos, a professor in PSU’s Department of Civil & Environmental Engineering and the study’s lead author. “But trading one environmental risk-driver for radium and hydrocarbons, well, I don’t know if that’s the best trade-off.” Mr. Burgos said the study’s analysis of wastewater used on roads in 14 townships found median radium levels between 1,200 and 1,500 picocuries per liter. The federal Safe Drinking Water Act limits radium levels in drinking water to 5 picocuries per liter, and radium in industrial waste discharges must be less than 60 picocuries per liter. “Road spreading of conventional oil and gas wastewater is the single largest source of radium being introduced into the environment in Pennsylvania,” Mr. Burgos said.

​Will Pennsylvania Regulators' Ties to Fracking Industry Influence Their Decision on the Mariner East pipeline? -  Opponents of a controversial Pennsylvania pipeline project are hoping that state regulators will uphold a judge’s decision to suspend the project. But the regulators’ extensive ties to the oil and gas industry raise serious concerns about conflicts of interest that may tilt the regulators toward favoring Sunoco, the pipeline company. As our new report shows, the PPUC’s decision may be tainted by conflicts of interest among commissioners, a majority of whom have ties to Pennsylvania’s oil and gas industry, including to Sunoco. The report, released last Friday, highlights the numerous relationships that 4 of 5 commissioners have to the fracking industry in Pennsylvania and, specifically, to the company behind the Mariner East project. This raises the serious question of how impartial a majority of commissioners – who built careers tied to the interests of the oil and gas industry – can be in regulating that same industry. Among other findings in the report are that Commissioner Norman J . Kennard is the former law partner of one of the attorneys representing Sunoco in the Mariner East case before the PPUC. Kennard was a partner at the firm Hawke, McKeon, Sniscak & Kennard (now called Hawke, McKeon & Sniscak) until around a decade ago. Kennard’s former partner, Thomas Sniscak, is currently representing Sunoco in its Mariner East proceedings. This means that Commissioner Kennard will be ruling on a case brought by his former law partner representing Sunono and the pipeline project.The report also finds that Commissioner David W. Sweet was a registered lobbyist for numerous fossil fuel companies – including EQT, Kinder Morgan, Koch Companies, NRG, and Philadelphia Energy Solutions – until 2015. Sweet is a former senior advisor on economic and energy policy to Governor Wolf, and he was part of the legal team that worked on behalf of the private equity firm Carlyle Group to arrange it acquisition – with Sunoco – of Philadelphia Energy Solutions, the largest oil refining complex on the eastern seaboard. After becoming 2/3 owner of the company with Sweet’s help, Carlyle Group raided PES, throwing it into hundreds of millions of dollars in debt while channelling at least $151 million in payments to itself – all while refusing to pay tens of millions in state taxes.

Pennsylvania allows ETP Mariner East 1 pipeline to resume service  (Reuters) - Pennsylvania's Public Utility Commission (PUC) voted on Thursday to allow Energy Transfer Partners LP's Sunoco Mariner East 1 natural gas liquids pipeline to return to service, reversing a suspension tied to safety concerns.The PUC stopped flows on Mariner East 1 through West Whiteland Township after sinkholes were discovered near the pipeline, prompting State Senator Andrew Dinniman to ask for an emergency order to suspend service.All five PUC commissioners voted to allow Mariner East 1 to resume service. Three of the five commissioners, however, also voted to prevent ETP from working on the Mariner East 2 and 2X pipelines in West Whiteland Township.The decision overturned the emergency order, which was granted last month by a PUC administrative law judge and stopped ETP from moving liquids through Mariner East 1 and working on Mariner East 2 and 2X in the Chester County town, located about 30 miles (48 kilometers) west of Philadelphia. Dinniman's district includes West Whiteland Township.It was not the first time Mariner East 1 was shut due to those sinkholes. The state stopped flows of liquids on Mariner East 1 for over eight weeks from March to May after the sinkholes were found, forcing producers like Range Resources Corp to find other ways to get their liquids to market.

Keep standards for gas wells - Pennsylvania has the oldest gas and oil industry in the United States, dating to the nation’s first commercial oil well, drilled in Venango County in 1859.That well, only about 70 feet deep, was the first of more than 300,000 that have been drilled since. They are distinct from the wells that characterize the relatively new gas industry that taps into the Marcellus and Utica shale formations thousands of feet deep. The Marcellus/Utica wells use modern deep-drilling technology and high-pressure “fracturing” to liberate gas trapped in the deep underground rock.Development of the new gas industry over the past 12 years prompted the state, belatedly, to update its laws and regulations covering the economics and environmental impact of large-scale drilling. Updated regulations covered the traditional industry and the new industry because the environmental concerns created by drilling are common even though the scope and techniques of the operations differ.Tuesday, the state House passed a bill, 111-84, that eliminates fundamental environmental regulations for the traditional gas industry.Sponsors complained that many smaller conventional well drillers can’t afford the same level of environmental compliance as the larger companies that dominate the shale industry.But the issue is environmental protection, and the House bill pretty much dispenses with it in several ways. It would allow drillers to spill 210 gallons of crude oil or 630 gallons of wastewater brine without reporting it to the Department of Environmental Protection. It also eliminates a requirement for drillers who damage a water supply to restore it to levels exceeding those of the Clean Water Act. The bill would take the commonwealth backwards by decades, in effect re-establishing standards for conventional wells as they were in 1984 — the last time the state revised drilling law prior to Act 13, the 2012 law that now governs drilling.

Shale Crescent USA Wants To Rebrand Region - Wheeling Intelligencer  — The area has been known by many names — the Upper Ohio Valley, Appalachia, the Rust Belt and Coal Country — in the past, but one organization hopes to rebrand the region in a way that will help it capitalize on its natural gas and other petrochemical reserves. Greg Kozera wants residents, community leaders and businesses to start using the term “Shale Crescent” when they refer to our area, which is situated atop some of the largest natural gas fields in the world. He presented his ideas Tuesday during a Wheeling Area Chamber of Commerce event at Wheeling Jesuit University. Development and hydraulic fracturing, or “fracking,” of those fields began about a decade ago, and those involved in mineral exploration have since determined that the Marcellus, Utica, Devonian and Rogersville shales lie layered beneath our feet. Those shales all contain rich petrochemical deposits that Kozera said could attract a broad variety of industrial interests to the region. Kozera is the marketing director for Shale Crescent USA, a nonprofit based in Marietta, Ohio. The group’s primary goal is to attract new, high-paying manufacturing jobs to the area atop those layers of shale, including parts of Ohio, West Virginia and Pennsylvania. With those jobs, organization members believe, will come an array of development and a higher standard of living for all. They also believe it is important to define and promote the geographic region, so it can better compete with areas such as the Gulf Coast, which have been the traditional locations for petrochemical production and related industries.

EXCLUSIVE: WV explosion of TransCanada Leach XPress occurred feet from adjacent NGL pipeline - I've been studying the Marshall County, WV explosion of Columbia Pipeline / TransCanada "Leach XPress" pipeline (LXP), on Nixon Ridge, just south of Moundsville WV for the last 4 days.  NO NEWS OUTLET is reporting the following facts:

  • 1: In addition to the LXP, which was permitted Jan 2017, and went into service Jan 2018, there is another new pipeline was was recently permitted, the Mountaineer XPress (MXP), with a terminus at Nixon Ridge to the LXP.  I believe it is now under construction.
  • 2: The failure of the LXP occurred mere feet from the Blue Racer Midstream NGL pipeline, in the same ROW.
  • 3: Also, from the published drone shots, it looks like there may have been construction activity in the area?

What has frustrated me, is that there is no one single data source to examine. These pipelines are so new (LXP, MXP), they are not yet in NPMS. So I had to assemble these maps painstakingly from a) NPMS, b) Google Earth, c) the EIS or EA of the LXP/MXP pipelines, and d) published photographs.  I am beginning to measure the impact radius, but the failure occurred in a valley, so the blast was constrained on two sides by mountains. So while this may not set any records, it was a BIG fire.

US regulators urge better oversight for pipeline cybersecurity -  The federal agency now charged with overseeing cybersecurity for U.S. pipelines is ill equipped to do the job, say two top regulators who want the role given to the Energy Department.The Federal Energy Regulatory Commission’s Neil Chatterjee, a Republican, and Richard Glick, a Democrat, wrote in an online article that the Transportation Security Administration can’t keep the pipeline network secure. The two FERC commissioners noted that the TSA has only six full-time workers overseeing more than 2.7 million miles of pipeline, and depends on voluntary cybersecurity standards, rather than mandatory ones.  Instead, Congress should give the job to “an agency that fully comprehends the energy sector and has sufficient resources to address this growing threat," the commissioners wrote.The plea, in an op-ed on the website Axios, follows a cyberattack in late March and early April in which several U.S. pipeline companies said their third-party electronic communications systems were shut down, with five confirming the disruptions were caused by hacking. While the cyberattack didn’t disrupt the supply of gas to homes and businesses, it underscored how energy companies are increasingly vulnerable to cyber threats and how even a minor attack can have ripple effects. "As abundant and affordable natural gas has become a major part of the fuel mix, the cybersecurity threats to that supply have taken on new urgency,"

TransCanada: No natgas flows through Leach Xpress in West Virginia -  TransCanada said last Friday it cannot move natural gas until further notice through the section of its Leach Xpress pipeline in West Virginia that ruptured last week, making customers seek other pipelines to ship their gas.The blast that shut the 160-mile pipe did not cause any injuries and was contained on the morning of June 7, TransCanada said.The 1.5 billion cubic feet per day (Bcf/d) capacity Leach Xpress in West Virginia and Ohio, which entered full service at the start of 2018, transports gas from the Marcellus and Utica Shale plays in Pennsylvania, Ohio and West Virginia, to consumers in the U.S. Midwest and Gulf Coast.Leach Xpress is part of the 12,000-mile Columbia Pipeline System, which TransCanada acquired in 2016, serves customers from New York to the Gulf of Mexico.Columbia, which operates the line, declared a force majeure on June 7 and said the damaged section of pipe could affect movement of roughly 1.3 Bcf/d, Kallanish Energy reports. One Bcf/d is enough gas for about 5 million U.S. homes. Alternative pipelines to route production around the outage include Energy Transfer Partners' Rover, Tallgrass Energy Partners’ Rockies Express, EQT Midstream Partners’ Equitrans and Enbridge's Texas Eastern Transmission, Reuters reported.

Appalachian producers finding alternate markets for natural gas liquids – Given the continued closure of the Energy Transfer Partners Mariner East 1 natural gas liquids pipeline by Pennsylvania officials, Appalachian gas producers who hold capacity on the line are finding alternatives to get their ethane and other NGLs to market. But exploration-and-production companies and market observers have expressed concern that continued closure of Mariner East 1 -- part of a system of pipelines to carry NGLs from plants in western Pennsylvania, Ohio and West Virginia to the export terminal at Marcus Hook, Pennsylvania -- could slow the growth of gas production in the region. In a notice to investors, Range Resources said it has "already executed agreements for some of the Mariner East ethane volume to be sold in alternate markets." The producer added that another option would be for the company to simply leave the ethane in the gas stream.In addition to Range's Mariner East 1 ethane capacity, the company said it has transportation or sales arrangements covering about 41,000 b/d of the NGL. For its propane production, Range said it has access to another NGL pipeline as well as to railcars, which will allow it to move the product to various domestic markets as well as to international export markets through the Marcus Hook terminal. Another Appalachian producer, EQT, also downplayed the impact of the shutdown of Mariner East 1 on its operations. In an email statement, an EQT spokeswoman said in regard to the Mariner East 1 shutdown, "our gas continues to move as planned without complication." Mariner East 1, a project of ETP's Sunoco Pipeline, remains offline following a decision last month by Pennsylvania Public Utilities Commission Administrative Law Judge Elizabeth Barnes, which prohibited the reopening of the line pending a final PUC order. The wide-ranging order also called for the stoppage of all operation, drilling and construction activities on Mariner East 2 and 2X pipelines. ETP is hoping that the ALJ's order will be overturned at the PUC's regular meeting Thursday, spokeswoman Lisa Dillinger said in an email Monday. "Many letters of support to overturn have been submitted to the PUC in advance of the meeting -- including from legislators, labor unions, and local townships," Dillinger said.

TransCanada working on Leach Xpress pipeline after West Virginia blast -- TransCanada Corp’s Columbia Gas Transmission (TCO) unit said it was working on a section of the Leach Xpress natural gas pipeline downstream of a pipe blast in West Virginia last week. That work will enable the Stagecoach-Leach Xpress meter in southeast Ohio to return to service, according to a notice to customers late Tuesday. The Stagecoach meter in Monroe County on the Ohio-West Virginia border connects to EQT Midstream Partners LP’s Strike Force South gathering fields in Monroe and Belmont counties in Ohio. Strike Force can also deliver to Energy Transfer Partners LP’s Rover and Enbridge Inc’s Texas Eastern Transmission (Tetco) pipelines. Columbia Gas said all other meters affected by the blast will remain at zero until the pipeline returns to service. The company said did not say when the full pipe would return to service, noting the site of the incident is in the restoration process. Columbia Gas told customers it will provide an update on the status of the pipe on June 18. The shutdown of Leach Xpress forced producers using the line to find other pipes to ship their gas out of the Marcellus and Utica shale regions of Pennsylvania, West Virginia and Ohio. Alternative pipelines include ETP’s Rover, Tallgrass Energy Partners LP’s Rockies Express (REX), EQT Midstream Partners LP’s Equitrans and Enbridge’s Tetco, according to analysts at S&P Global Platts. Columbia Gas, which declared a force majeure after the blast, said the damaged section of pipe could affect movement of about 1.3 billion cubic feet per day (bcfd). One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day. Energy analysts said overall output in the Appalachian region was little changed by the blast as producers, like Range Resources Corp and Southwestern Energy Co, found other pipes.

Natural gas pipeline agrees to pay $430,000 penalty for water pollution violations - Rover Pipeline LLC has agreed to pay the West Virginia Department of Environmental Protection $430,000 for water pollution violations in the state, according to a consent order made public Tuesday. The natural gas pipeline project and the DEP made the deal May 15, documents show, but the public comment period for the consent order ends July 13. The agreement is in response to notices of violation and cease-and-desist orders issued to Rover Pipeline dating back to April 2017, said Jake Glance, spokesman for the DEP. In all, the pipeline has received 18 notices of violation and two cease-and-desist orders, the most recent of which was issued on March 5, when the regulators said crews left trash and construction partially buried on site and failed to clean the roads around the construction site.The DEP also issued a cease-and-desist order in July 2017 for similar violations.The consent order references violations dating back to April 2017, including failing to control erosion and keeping sediment water from leaving construction sites.“The good news that I see is that [the] DEP was on top of it, that they did a good job documenting multiple violations and it shows the importance of oversight of these projects because this company did not appear to be acting in good faith,” said Angie Rosser, executive director of the West Virginia Rivers Coalition.Energy Transfer Partners, Rover Pipeline’s owner, also owns the Dakota Access Pipeline — the subject of protests and heightened attention over its being built in North Dakota. The 713-mile-long Rover Pipeline will move natural gas from processing plants in West Virginia, Ohio and Pennsylvania. Crews are building the pipeline in Doddridge, Tyler and Wetzel counties in West Virginia

Panel won't reconsider Mountain Valley Pipeline approval (AP) - A divided panel of federal regulators has denied requests from individuals and public interest groups to reconsider its approval of the Mountain Valley Pipeline. The Federal Energy Regulatory Commission on Friday issued an order turning down the requests. Two of the five commissioners dissented. Construction is currently underway on the approximately $3.5 billion, 300-mile natural gas pipeline, which will run through West Virginia and Virginia. The pipeline is scheduled to be in service by the end of the year. A number of legal challenges against it are pending. A pipeline spokeswoman said Friday that the commission's decision reaffirms its previous findings that there is a public need for the project. Whether there is true demand for the gas is something environmental groups and other opponents dispute. The dissenting commissioners raised questions about need and the impacts of climate change, among other things.  

Dominion Energy's Atlantic Coast Pipeline Suffers Setback - Dominion Energy, Inc.’s  Atlantic Coast Pipeline recently hit a regulatory roadblock, as a few environmental groups filed a petition with the Federal Energy Regulatory Commission (FERC) to halt the natural gas pipeline’s construction. Three environmental groups namely Sierra Club, the Defenders of Wildlife and the Virginia Wilderness Committee are the ones to oppose. They want construction work of the pipeline in West Virginia — which was authorized by FERC last month — to be stalled due to violation of the Endangered Species Act. The opponents claim that the federal appeals court refuted a required permit from the U.S. Fish and Wildlife Service and allowed construction to proceed anyway. The environmental groups allege that the pipeline’s developer did not have a valid Incidental Take Statement, as the federal agency did not set specific limits on damage that can be done to endangered species during construction and operation of the pipeline. While the owners of the pipeline project deny that the court rulings debunk the Fish and Wildlife Service's approval, the environmentalists demand the construction to be suspended until a revised Incidental Take Statement is issued. Making good on his campaign promises to rev up infrastructure spending, President Trump signed an executive order in January 2017 to accelerate the environment review process and approvals for the Atlantic Coast Pipeline. While the FERC greenlighted the pipeline project last November, it has been facing opposition on environmental, health and safety concerns.

Are the feds cherry-picking data to force pipelines through vulnerable communities? -  The government's energy regulator is facing allegations of cherry-picking data to approve pipeline projects that would disproportionately harm communities of color.According to academics, attorneys, and non-governmental organizations, the Federal Energy Regulatory Commission used unreliable statistical methods in its analysis of the proposed Atlantic Coast Pipeline, masking its high cost to African-American and Native-American communities.While the Commission concluded that the pipeline poses no environmental justice concerns, these minority groups say that their environment, health, and culture will be disproportionately imperiled if the development goes ahead as planned. FERC faced similar accusations over the Sabal Trail pipeline in 2016, indicating a pattern in how the federal government manages to force unwelcome energy infrastructure through vulnerable communities.The ACP is a 600-mile underground infrastructure project that will transport gas from hydraulic fracturing facilities in West Virginia down to Robeson County in North Carolina. The project includes three compressor stations. Dominion Energy is the lead developer on the pipeline, and President Donald Trump has labeled it a "priority" project. FERC conditionally approved the ACP in October of 2017, after its Environment Impact Statement concluded that there would be "no disproportionately high and adverse impacts on environmental justice populations." Duke Energy has claimed that the pipeline will benefit economically distressed communities by attracting jobs and development.Many people living in the area disagree. "It's going to be a lot of pollution in our community," says Robie Goins, a Lumbee Native American who lives in the evacuation zone of the pipeline's proposed route. "The people who are in low-income, poverty-stricken areas are targets for these types of projects. It's like we're being targeted by the big corporations. It's like they want to kill us all."

MEI projects Marcellus, Utica and Permian to supply 55% of US gas by 2030 -- McKinsey Energy Insights (MEI), the data and analytics specialist that provides distinctive insight to the global energy industry, forecasts that the Marcellus, Utica, and Permian shale plays will supply 55% of the North American gas market by 2030. The findings are reported in MEI’s latest North America Gas Outlook to 2030, which explores gas supply and demand projections to 2030.Yasmine Zhu, senior analyst at MEI, comments: “Continued improvements in technology have sustained North American gas production. Improved drilling and completions technology have led to enhanced recovery rates and efficiency, while innovations in water procurement and disposal are allowing operators to realize where additional savings can be made. We anticipate that further technical breakthroughs will continue to boost shale gas production and drive down costs, particularly over the next two to five years in marginal plays like the Haynesville.”Operators are also expected to target secondary plays from existing wells. These developments have substantially lowered breakeven costs, and MEI estimates that approximately 650 Tcf of gas—enough to meet over 25 years of North American demand—has a breakeven point below $2.8/MMBtu. Should recovering oil prices drive a boom in drilling, increasing oilfield services costs could influence the break-even price. By 2030, MEI expects that the Marcellus, Utica, and Permian shale plays will supply ~55% of the North American market. The Marcellus and Utica currently account for 27% of total US and Canadian supply, and MEI projects that percentage will grow to 40% by 2030. Of the anticipated associated gas growth, approximately 60% will come from the Permian, adding 14 Bcfd in 2030. However, additional infrastructure will be needed to keep pace with the rapid production growth and enable operators to capitalize on a higher wellhead price for export markets.

Marcellus, Permian Rig Counts Down as BHI's US Tally Falls by Three - A drop in natural gas-directed drilling, included a net declines in the Marcellus and Utica shales, drove the U.S. rig count lower for the week ended Friday, according to data from Baker Hughes Inc. (BHI). The domestic tally fell by three week/week (w/w) to 1,059 from 933 active units a year ago. Four natural gas rigs exited the patch to offset a net gain of one oil-directed unit. Directional units finished flat w/w, while two horizontal units and one vertical unit packed up, according to BHI. All of the week’s U.S. net declines occurred on land, as Gulf of Mexico activity held steady at 19 rigs and one rig returned to inland waters. In Canada, 27 rigs returned for the week, including 18 oil-directed rigs and nine gas-directed, leaving the Canadian tally at 139, down from 159 a year ago. The North American rig count climbed by 24 w/w to end at 1,198 units from 1,092 rigs at this time last year. Among plays, the Permian Basin saw the largest net change for the week, dropping four units to finish at 476 (368 a year ago). A more detailed breakdown of BHI data by NGI’s Shale Daily shows the declines focused in the “Other” portion of the Permian, with the Midland sub-basin dropping one unit w/w as the Delaware sub-basin added one. Meanwhile, the Marcellus Shale saw two rigs dropped for the week to finish at 54, putting it even with its gas-focused competitor in the Gulf Coast region, the Haynesville Shale. Other declines were in the Arkoma Woodford, the Cana Woodford and the Utica Shale, which each dropped one rig. Gainers among plays included the Williston Basin and the Eagle Ford Shale, which each added two units, while one rig returned in the Granite Wash, according to BHI. Among states, North Dakota and New Mexico each added three rigs for the week, while Louisiana picked up a rig to end at 60 active units. Texas posted the largest weekly net decline among states, dropping four units to finish at 534. Alaska dropped two rigs overall, while Colorado, Ohio, Pennsylvania and West Virginia dropped a rig a piece. 

Gap seen widening between US Northeast gas pipeline capacity, production - Natural gas pipeline takeaway capacity additions in the US Northeast production area have yet to spur the level of further output the market was expecting, making it difficult to fill the infrastructure during certain periods, according to S&P Global Platts Analytics.The perspective, offered during the first day of the LDC Gas Forum Northeast conference in Boston, comes as industry leaders analyze Appalachian Basin supply, demand and pricing fundamentals heading into the next decade.At issue is whether easing pipeline constraints are only temporary and the extent to which LNG export growth will encourage Marcellus and Utica shale producers to drill more. "New production is not there to fill these projects, and this is only going to get worse," Luke Jackson, a Platts Analytics senior energy analyst, told attendees at the conference. "On the surface, you'd say the Northeast is evolving. I would argue, 'Not so fast.'"   Total Northeast production reached 27.3 Bcf/d on several days towards the end of December. Since then, TransCanada's Leach XPress brought online its 1.5 Bcf/d of capacity while Energy Transfer Partners' Rover Pipeline has added about 1.5 Bcf/d of capacity as well. Despite those increases, total Northeast gas production averaged 27.2 Bcf/d in May and is averaging 27.3 Bcf/d thus far in June, data compiled by Platts Analytics show.Rather than spurring regional production growth, additional pipeline capacity has reshuffled production volumes among existing Northeast takeaway pipelines. Jackson said the gap between Northeast capacity and production could be as wide as 10 Bcf/d by late 2019.

Republicans propose penalties for states that oppose offshore drilling | TheHill: House Republicans unveiled a draft proposal this week that would place fines on states that block offshore gas and oil drilling. The Republican draft proposal, first reported by The Washington Post, will be discussed at the Natural Resources Committee on Thursday. It would allow states to disapprove of offshore drilling for gas and oil in half of its lease blocks without facing any penalties. However, states with proposed lease sales that disapprove of drilling in more than 50 percent of the blocks would have to pay a fee equal to at least one-tenth the estimated revenue the government would have made if it had leased the blocks. The proposal also sets up a revenue-sharing scheme for states that allow drilling. The move would help pressure local politicians to fall in line with President Trump Donald John TrumpTrump suggested that North Korean TV anchor should get a job in US: report AT&T announces it has completed acquisition of Time Warner Classified Israeli report raises questions about Trump-Kim summit: report MORE ’s plan to increase offshore leasing. Earlier this year, Trump called for offshore drilling in nearly all U.S. coastal waters, negating a drilling ban former-President Obama imposed near the end of his term. Many Democrats and some Republicans in coastal areas have resisted Trump’s plan, and some have pledged to keep the federal government from allowing offshore leasing in their states. The pushback led Trump’s interior secretary, Ryan Zinke to tell Congress he would scale back Trump’s plan. Democrats are opposed to the proposal, arguing it could cost states millions or billions in fees if they choose to oppose drilling. 

GOP offshore drilling proposal triggers debate --Republicans used a Natural Resources hearing Thursday to tout newly proposed legislation that would give states a larger share of royalties to incentivize them to back expanded offshore drilling. States that do not agree to allow offshore drilling, or that propose moratoriums on it, would see their share of revenue from federal drilling drop. Rep. Paul Gosar (R-Ariz.) touted the bill as a way to give states more authority, while saying they should not be able to veto lease sales. “While states are highly involved in the offshore lease planning process they do not have a veto over lease sales,” Gosar said at a Thursday House Natural Resources subcommittee on energy and mineral resources hearing. “It’s an acknowledgment that such an attempt to strand federal assets comes at the expense of the American taxpayer,” said Gosar, the subcommittee’s chairman. Rep. Rob Bishop (R-Utah), chairman of the House Natural Resources Committee, said the bill would be an example of federalism at its best. The bill, which was proposed this week, would take away management of offshore drilling from the Interior Department's Bureau of Land Management and place it in the hands of states. If a coastal state chooses to expand drilling and increase production of fossil fuels, they’d get a larger portion — 60 percent — of the royalties from the lease sale. 

Supporters of new Enbridge pipeline deliver petitions to Gov. Mark Dayton's office -   Supporters of a proposed new pipeline across northern Minnesota dropped off postcards and petitions containing 1,200 signatures at Gov. Mark Dayton’s office on Friday, the latest move in a drawn-out battle that is weeks away from a regulatory denouement.The Minnesota Public Utilities Commission is set to decide the fate of the controversial Line 3 project by Enbridge Inc. later this month after three years and several legal fights.Enbridge Inc. is seeking approval from state regulators to drain and seal up its aging crude oil Line 3 and construct a larger pipeline across a new, more southerly route.Petitions were signed by “a broad coalition” of supporters that include chambers of commerce, representatives of corn and soybean growers and construction trade unions, said a spokesman for Minnesotans for Line 3, which collected signatures during a five-month statewide canvassing effort.The group is led by United Piping Inc. CEO Bob Schoneberger, a former Enbridge employee whose company specializes in pipe construction for the oil and gas industry.Schoneberger did not respond to a request for comment.Mark Salmon, a retired member of Roofer’s Local 96 in Sturgeon Lake, Minn., said the project will add jobs and update aging infrastructure. He signed a card to show his support for what he called “a no-brainer.”“You’ve got old pipes and new technology that’s safer,” said Salmon, whose property is not affected by the proposed new route. “If you’re worried about the environment, why wouldn’t you want something that’s safer than something that’s been there for however many years and could bust?”The original Line 3 pipeline was laid in the 1960s. Enbridge says it is aging, corroding and operating at just over half capacity because of safety concerns. The new pipeline — which would begin in northern Alberta and end in Superior, Wis. — would restore the full flow of oil from Canada.

Staff members recommend state regulators approve controversial Enbridge pipeline project -- Allowing Enbridge to build a controversial new oil pipeline across northern Minnesota would be better for the environment than to continue relying on the aging, corroding pipeline that it would replace, according to staff for the Minnesota Public Utilities Commission.The PUC staff comments are a recommendation for a new Line 3, but they are not the final decision in regard to the project.After conducting four public meetings this month, the PUC is expected to determine whether the proposed $2.6 billion Line 3 project should get a "certificate of need" and, if so, what route the pipeline should take.As is common before PUC meetings, the commission's staff files briefing papers that sum up the issues. They often include PUC staff analysis and recommendations.In briefing papers filed Friday, PUC staff wrote: "A fair reading of the record would support the conclusion that, with respect to effects of the [Line 3] project on the natural environment, the consequences of granting a certificate of need for the project are more beneficial than denying it because of the risk of catastrophic failure of the existing line, despite it being operated at reduced pressure." The 1960s-vintage Line 3, one of six Enbridge pipelines that ferry Canadian oil across Minnesota, runs at only 51 percent capacity due to safety concerns. Enbridge said a new pipeline would be safer and would restore the full flow of oil. If a new Line 3 is denied, Enbridge plans to keep operating — and regularly repairing — the old one.

US EIA lowers 2018 Henry Hub spot gas price forecast by 2 cents to $2.99/MMBtu - The US Energy Information Administration Tuesday raised by 1.17 Bcf/d to 87.35 Bcf/d its second-quarter natural gas marketed production estimate for the US. EIA, in its June Short-Term Energy Outlook, also raised its Q3 marketed production forecast by 1.09 Bcf/d to 88.22 Bcf/d. The agency raised its natural gas consumption estimates by 0.83 Bcf/d to 69.95 Bcf/d for Q2, and by 0.36 Bcf/d to 69.54 Bcf/d for Q3. EIA lowered its forecast for Q2 Henry Hub natural gas spot prices 1 cent to $2.84/MMBtu. The Q3 forecast also dropped 1 cent from the previous month to $3.01/MMBtu. The agency projected Henry Hub natural gas prices would average $2.99/MMBtu for the full year and $3.08/MMBtu in 2019.

Soaring NGL Supplies May Soon Overwhelm Mont Belvieu Fractionation Capacity - The NGL sector is firing on all cylinders. Natural gas liquids production in the Permian, the SCOOP/STACK and other key basins is up, up, up. A number of new, ethane-consuming steam crackers are coming online along the Texas and Louisiana coast, most conveniently close to the NGL storage and fractionation hub in Mont Belvieu, TX. The export market for liquefied petroleum gases — propane and normal butane — is through the roof, averaging more than 1 MMb/d in the first five months of 2018 (almost all of it being shipped out of Gulf Coast ports), and ethane exports are strong too. What’s not to like? Well, NGLs don’t do anyone much good until they are fractionated into “purity products” like ethane, propane, normal butane etc., and the rapid run-up in U.S. NGL production — combined with the reluctance of producers to commit to new fractionation capacity — has the existing fractionation plants in Mont Belvieu running flat-out to keep up. Today, we begin a review of the NGL Capital of the Western World and considers why Mont Belvieu — as big as it is — is getting bigger.

US feedstocks imports climb above 300,000 b/d on ExxonMobil cargo: Census data - Feedstocks imports to the US from Europe, Africa and other sources rose back above 300,000 b/d in the first 10 days of June with support from a 410,000-barrel cargo shipped by BP and signed for by ExxonMobil, according to US Census Bureau data made public Monday. The Eagle Turin docked at Baton Rouge, Louisiana, June 6 with BP-sourced straight-run fuel oil that had been in storage in the Gulf of Mexico, according to data compiled by S&P Global Platts Analytics. Since late April, the Eagle Turin has been offloading oil from Gulf Coast floating storage for delivery across the region, according to S&P Global Platts' cFlow trade flow software. In the June 1-10 period, the US brought in 312,000 b/d of vacuum gasoil and straight run fuel oil, compared with imports of 198,000 b/d in the previous 10-day period -- May 22-31, the data show. US refiners typically are short 300,000-400,000 b/d of feedstocks and fill that need from sources in Northwest Europe, the Baltics, Russia, the Black Sea and Algeria. Companies signing for feedstocks imports June 1-10 included Marathon, Lukoil, Trafigura, Chevron, Statoil, Vitol, Repsol and Valero, the data show.

Permian oil will outpace all OPEC nations except Saudi Arabia -- The Permian Basin in West Texas is on track to produce more oil within five years than any OPEC nation except Saudi Arabia, positioning the Texas Gulf Coast to rival the Persian Gulf when it comes to oil and gas activity.  Crude volumes from the Permian will more than double by 2023, making the region the world’s third-largest producer after Russia and Saudi Arabia, according to the research and consulting firm IHS Markit. Most of that oil is headed to refineries and ports near Houston and Corpus Christi, as U.S. crude exports are expected to surge to nearly 5 million barrels a day by 2023, up from more than 2 million today.“In the past 24 months, production from just this one region — the Permian — has grown far more than any other entire country in world,” said Daniel Yergin, IHS Markit vice chairman.The comeback of the Permian, which today accounts for more than half the nation’s active oil drilling rigs, is among the the most remarkable stories in the industry’s history. At the beginning of the decade, the aging oil field was struggling with declining production. But advances in hydraulic fracturing, or fracking, and horizontal drilling pioneered by Houston companies such as EOG Resources, have tapped massive reserves of previously inaccessible oil and gas.By 2023, the shortage of pipelines to move oil, gas and natural gas liquids to Gulf Coast markets and beyond is expected to be alleviated by multibillion-dollar projects now underway or planned. Oil, petrochemical and liquefied natural gas companies are investing billions of dollars to process and export petroleum from the Permian and other shale plays, which, according to the International Energy Agency, has made the Gulf Coast a global trading center as vital to world’s energy needs as the Straits of Hormuz, through which tankers filled with Middle Eastern crude travel to the world’s markets.Near Corpus Christi, for example, the Houston exploration and production company Occidental Petroleum, is continuing to expand its crude export terminal at Ingleside. In 2017, Texas accounted for three-fourths of U.S. crude exports, which recently hit a weekly record in May of 2.6 million barrels a day. IHS Markit estimates that $308 billion in new spending is required to drill more than 40,000 new wells in the Permian needed to meet its projections. That’s more than double the $150 billion invested there from 2012 to 2017. The report also assumes that oil prices will continue to average at least $60 a barrel.

Permian Boom Jeopardized By Pipeline Troubles - The Permania, as someone called the oil industry and private equity rush to West Texas and New Mexico, has begun to take its toll on all those investors that saw it as the next huge thing. With production booming, pipeline capacity has become tight, and producers are forced to sell their crude at a painful discount to benchmarks. They are also losing billions in market capitalization. A recent story from Bloomberg estimated that over the last two weeks, eight of the biggest oil producers with a presence in the Permian have shed a collective US$15.6 billion in market value, or over US$1 billion per day, with some of the shares booking double-digit drops. It is an impressive turning of the tables. Just a year ago, everyone who had acreage in the Permian was a magnet for investors. The U.S. Geological Survey had upgraded the reserve estimates for the basin, especially thanks to a major upward revision of the Wolfcamp area. Producers boasted of being able to produce crude at ridiculously low production cost levels. And produce it they did, at a fast-increasing pace, which eventually clogged the pipes. The current pipeline capacity in the Permian is 3.1 million barrels daily. Railway capacity, according to S&P Platts, is around 315,000 bpd. However, the railway is mostly used to supply frac sand for the ever-hungrier wells. Production, as estimated by the Energy Information Administration, should this month reach 3.277 million bpd. And it will continue to rise. No wonder investors are worried. Some are so worried, in fact, that they are dropping their holdings in Permian players, even big names such as Concho Resources and Pioneer Resources. They are moving to producers with more diverse asset portfolios, Bloomberg reports, citing analysts. Pure-play Permian is no longer a stamp of guaranteed success. There is, of course, a solution to this problem, which has seen Midland crude trade at a discount of US$19 a barrel to international Brent. The solution is more pipeline capacity, and although it has been slow in coming, it is coming.

Exxon Mobil, Plains partner on Permian pipeline project - Exxon Mobil is joining the race to build out pipeline networks that stretch hundreds of miles across Texas to deliver crude oil from the booming Permian Basin to refining and port hubs near Houston.Exxon Mobil said Tuesday it plans to create a joint venture with Houston's Plains All American Pipeline to construct a multibillion-dollar pipeline stretching from west of Midland to the Houston and Beaumont areas that would carry oil and condensate. Plains and Oklahoma-based Magellan Midstream Partners recently expanded their BridgeTex oil pipeline, which has served as the major artery from West Texas to the Houston region. Permian oil production, however, is at a record high and rapidly rising and the lack of pipelines are creating bottlenecks that hamper the pace of growth and create discounts to Permian-produced oil.

Permian Basin Pipeline Will Carry Out 1 M Barrels of Crude Oil Per DayExxonMobil and Plains All American Pipeline announced Tuesday a joint pursuit to construct a multi-billion dollar pipeline that will transport more than 1 million barrels of crude oil and condensate per day from the oil-rich Permian Basin to the Texas Gulf Coast, the Houston Chronicle reported. The proposed pipeline will stretch hundreds of miles from both Wink and Midland, Texas to delivery points in Webster, Baytown and Beaumont, Texas, a news release from the companies stated.Despite governments around the world enacting measures to reduce carbon emissions to help fight climate change, the latest oil market forecast from the International Energy Agency (IEA) makes it clear that the world is yet to turn its back on fossil fuels.Production in the Permian shale field in western Texas has been booming. According IEA's Oil 2018 forecast, global oil production capacity is expected to grow by 6.4 million barrels a day (mb/d) to reach 107 mb/d by 2023. Much of that growth is led by the U.S. due to oil produced from fracking the Permian, where output is expected to double by 2023.However, there is currently not enough pipeline capacity to retrieve Permian oil, causing regional oil prices to deflate.But that bottleneck has opened up opportunities for pipeline developers in the region. Exxon said in January it plans triple Permian production to 600,000 oil-equivalent barrels by 2025, and spend more than $2 billion on transportation infrastructure to support its Permian operations. Houston-based Plains All American Pipeline is investing $1.6 billion in Permian expansions, but other pipelines are also in the works, according to Motley Fool. Epic Midstream has proposed a 440,000 barrel-per-day (bpd) crude oil pipeline in the region, so has Magellan Midstream Partners, which has proposed a 600,000 bpd pipeline.

The El Encino-To-Topolobampo Pipeline Nears Completion, And What It Means For Waha --Mexico has been slowly increasing import volumes of natural gas from the U.S., utilizing spare capacity in the newest pipelines south of the border that access supply from the Permian Basin’s Waha Hub. The recent increases have been muted somewhat by delays in completing other infrastructure inside of Mexico, but one of those big delays is about to be resolved. TransCanada’s long-awaited El Encino-Topolobampo Pipeline is finally nearing completion, and once it’s online there may be a surprisingly big gain in gas export volumes to Mexico. As most of this gas will be supplied directly from Waha, Mexico’s impact on Permian gas balances is likely to jump materially in the weeks ahead. Today, we examine the latest development in Mexico’s natural gas pipeline buildout and its effects north of the border. We last looked at the buildout of Mexico’s natural gas pipeline infrastructure in our Closer blog, where we took a deep dive into the most recent developments in Northwest Mexico, focusing on the Fermaca-built pipeline network. Prior to that, we wrote Welcome to the Future, in which we evaluated the evolving structure of Mexico’s pipeline transportation capacity market and its implications for flows and pricing of gas within the U.S.’s southern neighbor. That blog also discussed the role of Comisión Federal de Electricidad’s (CFE) marketing affiliate, CFEnergía, in marketing and trading gas and other fuels within Mexico. In today’s blog, we shift focus to the El Encino-Topolobampo Pipeline, which will link demand along the west coast of Mexico to the Permian, and the plan by CFEnergía to provide Permian-sourced gas to power plants along the new pipe.

Side Effect of Rising Oil Drilling: Indigestion for Gas Frackers - Higher oil prices are helping many American shale drillers. But they are hurting companies that frack for natural gas. As companies respond to rising oil prices by drilling more for it, they often unearth gas as a byproduct. That has further weighed on already low gas prices, pressuring shale frackers in regions that primarily produce gas. The average share price for the five top companies focused on the oil-rich Permian Basin in Texas and New Mexico are up more than 16% over the past year. Share prices for the top five producers focused on the Marcellus Shale in Appalachia, the country’s largest deposit of natural gas, are down more than 9%. “It’s going to be tough for the Marcellus for a while,” said Brian Lidsky, managing director at oil-and-gas research firm PLS Inc. “There is just a tidal wave of gas coming out of the Permian.” Like most shale drillers, those focused on natural gas in the Marcellus—a group that includes Cabot Oil & Gas, EQT Corp, Range Resources, Antero Resources, and Southwestern Energy have been under investor pressure to live within their means, curtail excessive spending and improve returns. And they have come closer to doing that. As a group, those companies spent about $106 million more than they made in the first quarter of 2018, according to a Wall Street Journal analysis of S&P Global Market Intelligence data. That is down from outspending cash flow by more than $274 million in the previous quarter and more than $735 million in first quarter of 2017. .Still, investors have been reluctant to put more money into gas drillers, and the reason is simple: Gas has been cheap for years and doesn’t look primed to go up soon. Demand for natural gas is predicted to rise globally over the next decade as many countries switch from coal-fired power plants to gas-powered ones. However, that isn’t expected to solve gas drillers’ problems in the short term.

Another fracking boom to beget another fracking bust; or will it? | TheHill: - Employers and community leaders in Midland, Texas are in a scramble to keep essential services operating as restaurant workers and school bus drivers are leaving their jobs for much more lucrative work in the oil patch.It’s another fracking boom reminiscent of the 2013 boom in South Texas’ Eagle Ford Shale. Such is life in the oil industry, characterized by boom-bust cycles ever since Edwin Drake discovered oil in western Pennsylvania in 1859. So why this latest oil and gas boom? Most people know that hydraulic fracturing (fracking) has stimulated steady growth in domestic oil and gas production (and exports). But fossil fuel consumption has been growing as well. Indeed, natural gas and coal still dominate the electric generation mix nationally and retain large market shares in places like New England (49 percent) and New York (29 percent) that seem to want to decarbonize.  Economic factors drive energy consumption decisions. While coal is losing market share because it can’t compete on price, oil and gas still can. Oil and gas frequently beat their competitors on price in the transportation and electric generation sectors, respectively, notwithstanding growing demand for electric cars and newly inexpensive wind and solar power. This boom has all the earmarks of past oil and gas booms: rapid and drastic increases in salaries and prices in host communities and concerns about the ability of local communities to manage the consequent social and economic disruptions, truck traffic, environmental impacts, etc. For every boom, there comes a bust. But some hypothesize that this boom might be different — longer lasting, because of the enormous size of the resource and international geopolitical factors that could keep the price of oil higher for longer.

Natural gas pipeline explosion rocks rural Kansas - A Southern Star Central Natural Gas pipeline exploded outside Hesston, Kansas, early Friday morning, sending flames shooting 75 to 100 feet into the sky, CBS Wichita affiliate KWCH reports.Southern Star spokesman Rob Southard said that the pipeline was shut off, with the fire burning up what was left. He said finding a cause could take weeks.Capt. Andy Wray, with Hesston Fire & EMS, told KWCH that the fire had spread from the pipeline to the surrounding wheat stubble field and grass, though fire crews were eventually able to contain it. He said support was requested from the American Red Cross and the Harvey County Emergency Response Team due to the heat and the high demand on firefighters.  No injuries were reported. Residents were asked to steer clear of the affected area.

In possible roadblock for Keystone XL, pipeline opponents gift land to Ponca  — For five years, opponents of the Keystone XL pipeline and members of the Ponca Indian Tribe have sown native tribal corn in the path of the controversial project as a form of resistance. Now they’ve planted another potential roadblock. Last weekend, Art and Helen Tanderup, who farm north of Neligh, Nebraska, deeded the 1.6-acre plot of native corn to the native inhabitants of the land, the Ponca. Selling the land to the Ponca means that TransCanada will have to negotiate with a new landowner, one that has special legal status as a tribe — a tribe that is opposed to the pipeline. The plot becomes the only tribally owned plot of land on the XL pipeline route in the U.S. “We want to protect this land. We don’t want to see a pipeline go through,” said Larry Wright Jr., the chairman of the Ponca Tribe of Nebraska. “If this adds another layer (of opposition) to that issue, we’re happy to be part of that.” TransCanada officials did not respond to requests for comment on Wednesday. The company has recently been holding meetings with landowners along the pipeline route across Nebraska that was recently approved by the State Public Service Commission.

Industry study claims Initiative 97 would cost Colorado billions; measure's proponents push back -- The Colorado Alliance of Mineral and Royalty Owners released a new study showing that if Initiative 97 is passed by voters, it would cost Coloradans roughly $26 billion in lawsuits, and its president says its passage would put an end to oil and gas development in Colorado. But the measure’s proponents say that’s not the case. “It basically shuts down the oil and gas development in the area,” said CAMRO President Neil Ray. Initiative 97 is a proposed ballot initiative that would prohibit oil and gas developments that aren’t on federal land from operating near occupied buildings less than 2,500 feet away.  Ray is a mineral and royalty owner himself who says owners will be probably fight back the initiative if it becomes a law.“Mineral and royalty owners would be denied their private property and wouldn't be able to develop their private property, which would lead to regulatory takings law suits and that would bankrupt the state,” he said.Grassroots organization Colorado Rising, which drafted the initiative, released a lengthy statement disputing the study and its president’s claims:

South Dakota High Court Blocks Bid to Halt Keystone XL -- The South Dakota Supreme Court disappointed an attempt by Native American tribes and state activists to block the Keystone XL pipeline on Wednesday, ruling that the lower court lacked jurisdiction to hear their appeal, The Associated Press reported.The Cheyenne River Sioux Tribe, Yankton Sioux Tribe and conservation and family agriculture group Dakota Rural Action had appealed a decision by a judge last year to uphold the Public Utilities Commission's decision to let the controversial pipeline cross the state.Dakota Rural Action attorney Robin Martinez called the decision "disappointing" on Thursday but affirmed that "fight is not over," The Associated Press reported further.Terry Cunha, the spokesperson for TransCanada Corp., the company behind the pipeline, told The Associated Press in an email that the company was pleased with the court's decision. TransCanada was in the news just last week when one of its natural gas pipelines exploded in West Virginia.

Bakken oil field barrel differential reaches all-time high - The Bakken shale crude differential in Williston, North Dakota, climbed to its highest recorded level Thursday despite a narrowed Brent-WTI spread, with Clearbrook barrels climbing to an eight-month high. Close to the Bakken oil fields, Williston barrels climbed 15 cents day on day to be assessed at NYMEX light sweet crude calendar-month average (WTI CMA) plus $1.75/b, on the back of a Dakota Access Pipeline trade heard and talked rebid 5 cents lower. This was the highest field barrel differential since S&P Global Platts began assessing Bakken in Williston in April 2014. Williston-origin Bakken for FOB transport on BNSF trains was heard traded at NYMEX WTI CMA plus $1.95/b. In the Midwest, Bakken crude in the Clearbrook, Minnesota, hub jumped 45 cents to be assessed at NYMEX WTI CMA plus $3.30 on a trade heard at that level. That was the highest Clearbrook differential since October 2017, when Midwest refiners had increased crude runs to cover production losses from Gulf Coast refineries damaged in the aftermath of Hurricane Harvey. "It is getting out of hand," a Bakken source said about the crude's continued rise. Bakken differentials have been rising amid Brent-WTI spreads remaining wide, making crude grades priced off of WTI more attractive to both domestic and international buyers than their Brent-linked counterparts. Despite a narrowed Brent-WTI spread during the day, Bakken maintained its rally. Platts assessed the front-month spread at $9.07/b, down 38 cents day on day. The spread peaked at $11.15/b last week, the widest in more than three years.

Canada acquires key pipeline link to Washington refineries - The Canadian government is purchasing  a vital link in Washington’s oil network — a nearly 70-mile pipeline spur running through Whatcom and Skagit counties that feeds crude oil to four refineries, according to financial-disclosure documents.This is a piece of the much larger acquisition of the Trans Mountain Pipeline — announced May 29 — that runs more than 700 miles from Edmonton, Alberta, to tidewater at Burnaby, British Columbia.The sale by Houston-based Kinder Morgan to the Canadian government is expected to improve the prospects for a $5.4 billion pipeline expansion strongly supported in Alberta but fiercely opposed in British Columbia and Washington state due to the risks of oil spills and the broader climate impacts of boosting production of crude extracted from oil sands. The sale is expected to close in August. The expansion would nearly triple the flow capacity through the Canadian mainline pipeline so that oil could be exported from Burnaby to California and Asia. But there also is an option — noted earlier this year in a Kinder Morgan financial-disclosure document — to more than double the capacity of the small Washington spur line. That would create the potential for exports from Washington, where tankers have a more direct path to the open ocean than those departing from Burnaby. But any move to export oil from an expanded pipeline through Washington would face huge pushback from tribes, environmentalists and their political allies.

Kinder Morgan Pipeline Leak Two Days Before Trudeau Buyout Was 48 Times Larger Than First Reported - Just two days before Canadian Prime Minister Justin Trudeau announced that his government would purchase Kinder Morgan's faltering and widely opposed Trans Mountain pipeline, British Columbia's Ministry of Environment said 100 liters of crude oil had leaked at a Kinder Morgan pipeline pump station north of Kamloops—but the company initially refused to confirm the severity of the spill.On Saturday, with its bailout from the Canadian taxpayer confirmed by Trudeau, Kinder Morgan declared after an investigation that, actually, 4,800 liters of crude oil had leaked during the May 27 spill—48 times more crude than first reported.While the Ministry of Environment said no waterways were affected by the leak, environmentalists and Canadian members of parliament highlighted the leak as a telling example of the dangers pipelines pose to people and the environment and continued denouncing Trudeau's buyout. .As Common Dreams reported, Trudeau announced late last month that his government would buy the Trans Mountain pipeline for $4.5 billion, a move environmentalists and Indigenous leaders denounced as an act of "immense moral cowardice" that betrayed the prime minister's rhetorical commitments to bold climate action. Trudeau's decision has since sparked opposition rallies nationwide, with green groups arguing that the billions of taxpayer money being used to rescue a leak-prone, "climate-destroying" pipeline should be spent on healthcare, education, and a just transition to a sustainable energy system.

First Nations offer to buy equity in pipeline to have say project's future -  After Justin Trudeau’s surprise announcement that the Canadian government would nationalize a contentious pipeline, indigenous protesters have been among the most vocal in their opposition to the Trans Mountain pipeline expansion project, arguing that the project trespasses on their territory and poses a risk to the environment.  Protests led by First Nations have amplified public unease of over the mega project – which will triple the flow of bitumen from Alberta to the coastal waters of British Columbia – as the country attempts to balance its fight against climate change with an economy driven largely by the energy industry. But the project may soon find an unlikely group of investors: both the Athabasca Tribal Council and the Athabasca River Métis Council – a consortium of 10 communities – have offered to buy equity in the pipeline.“This is not the indigenous community coming out and saying: ‘We’re pro pipeline.’ We’re pro Trans Mountain. We see the value in it,” said Ron Quintal, president of the Athabasca River Métis. “The only way we’re able to mitigate the environmental impacts is through ownership and having a say in these projects.”  The two councils recently met with federal officials, including the infrastructure minister, Amarjeet Sohi, to discuss their proposal.  This will not be the first time Canada’s First Nations have invested in the fossil fuel industries that have encroached on their land and disrupted traditional ways of life.  Last year, the Fort McKay First Nation and Mikisew Cree First Nation in Alberta purchased 49% of an oil storage facility – a deal worth more than half a billion dollars. Frog Lake Energy Resources Corp, an indigenous-run company, produces 3,000 barrels of oil a day. A large source of tension around Trans Mountain project centres on the idea of unceded lands: few formal treaties were ever signed between British Columbia’s colonial settlers and the indigenous population – whose descendants argue that they retain the right to control any development.

The legal fight to leave the dirtiest fossil fuels in the ground -- Tar sands are the dirtiest fossil fuels. These are low-quality heavy tar-like oils that are mined from sand or rock. Much of the mining occurs in Alberta Canada, but it is also mined elsewhere, in lesser quantities. Tar sands are the worst. Not only are they really hard to get out of the ground, requiring enormous amounts of energy; not only are they difficult to transport and to refine; not only are they more polluting than regular oils; they even have a by-product called ”petcoke” that’s used in power plants, but is dirtier than regular coal.This stuff is worse than regular oil, worse than coal, worse than anything. Anyone who is serious about climate change cannot agree to mine and burn tar sands. To maintain climate change below critical thresholds, tar sands need to be left in the ground.This fact is what motivated me to testify to the Minnesota Public Utilities Commission last November, to inform my state’s ruling commission about the impact of tar sands on the climate. Canadian energy company Enbridge has petitioned to put a pipeline through my state to carry this dirty tar to refining sites on the coast. The proposed pipeline is called “Line 3.” The pipeline would carry approximately 760,000 barrels per day – the new pipeline would make it easier and cheaper for the oil companies to transport tar sands and consequently, would boost their bottom line. We already move over two million barrels per day through Minnesota in Enbridge pipelines. This new pipeline would encourage them to extract and sell more tar sands. So, how much pollution would this pipeline carry? 170bn kilograms of carbon dioxide each year. The emissions are equal to approximately 50 coal power plants. These are huge numbers, but more importantly, approval of pipelines like this make it more likely that all of the tar sands in Alberta will be extracted. If that happens, global temperatures will increase by approximately 0.65°F (0.36°C). An astonishing number – approximately 3 decades worth of global warming.

Will Petronas's Stake Finally Make The LNG Canada Export Project A Reality? - Natural gas producers in Western Canada, with their share of U.S. and Eastern Canadian markets threatened by competition from producers in the Marcellus/Utica and other shale plays south of the international border, for years have seen prospective LNG exports to Asian markets as a panacea. But efforts to develop liquefaction “trains” and export terminals in British Columbia failed to advance earlier this decade — for starters, their economics weren’t nearly as favorable as those for U.S. projects like Sabine Pass LNG. Then, by 2016-17, global markets were awash in LNG as new Australian and U.S. liquefaction trains came online, and the BC LNG projects still alive were either delayed further or scrapped. Now, with LNG demand on the upswing and the need for additional LNG capacity in the early-to-mid 2020s apparent, the co-developers of LNG Canada — Shell, PetroChina, Korea Gas and Mitsubishi — have attracted a new and significant investor: Petronas, Malaysia’s state-owned oil and gas company and owner of Progress Energy Canada, which has vast gas reserves in Western Canada. Today, we continue our review of efforts to send natural gas and crude oil to Asian markets with a fresh look at the LNG project and TransCanada’s planned Coastal GasLink pipeline, which will deliver gas to it.

Oil Companies in Alaska Refreeze Melting Permafrost to Keep Drilling - A new industry is taking off in Alaska, as innovators help oil companies compensate for the irony that climate change is making oil exploration harder on the increasingly less frozen permafrost, NPR reported Monday.Ed Yarmak, for example, heads a company called Arctic Foundations that makes metal tubes filled with a refrigerant called thermosyphons. These are then partly buried in permafrost, where they pull heat from the ground."To be honest, climate change is pretty good business for our company," Yarmak told NPR. "We're in the business of making things colder."Yarmak said he had been selling the tubes to oil companies since the 1970s, but that business has only picked up with global warming, which is moving at double the speed in Alaska as it is in the rest of the country, according to NPR.Josh Kindred, who worked representing oil companies for the Alaska Oil and Gas Association, acknowledged the contradictions of the oil companies' predicament, victims of a problem their actions helped to cause."It is ironic, and it's challenging for a state that is so dependent on resource extraction but is also really feeling the impacts of climate change," Kindred said. Kindred said Alaska was too reliant on oil revenue to consider stopping operations.But many oil companies are hesitant to admit that climate change is posing problems. Companies NPR reached out to for comment chose not to be interviewed.

Rise in U.S. exports of jet fuel driven by Latin American and Caribbean countries --The United States exported 186,000 barrels per day (b/d) of jet fuel in 2017, the eleventh consecutive year of increasing gross jet fuel exports. Almost two-thirds (62%) of U.S. jet fuel exports went to countries in Latin America and the Caribbean, especially Mexico. Relatively high domestic production and a growing international aviation industry have established the United States as a net exporter of jet fuel for the seventh straight year. The United States exported jet fuel to 54 destinations in 2017, with 22% of these exports going to Mexico. U.S. exports of jet fuel to Mexico increased from 4,000 b/d in 2010 to 40,000 b/d in 2017 because of factors such as the liberalization of Mexico’s energy markets, increased air traffic, and low utilization at Mexico’s refineries. Many Caribbean and Central America countries have increased their imports of U.S. jet fuel because of a lack of sufficient refining capacity to meet domestic jet fuel demand.  U.S. refineries operated at record levels during 2017, working to produce enough jet fuel to support the growing export market. Petroleum products are typically exported from U.S. Gulf Coast ports, primarily Houston and New Orleans. About 80% of all U.S. jet fuel exports were shipped from the Gulf Coast in 2017.   The East Coast and West Coast regions of the United States remain net importers of jet fuel because of demand in metropolitan areas that host some of the busiest airports in the world. In particular, the West Coast has become increasingly reliant on jet fuel imports from Asian countries because regional consumption has outpaced production.

Venezuela crude oil output careens toward 1 million b/d - Venezuelan crude oil production is on the verge of sinking to 1 million b/d, and factors playing out this month will determine whether that level is reached early next year or within a few months. The Energy Information Administration projects Venezuela will hit 1 million b/d in second-quarter 2019, said analyst Lejla Villar, who develops projections for the monthly Short-Term Energy Outlook. "However, I am eagerly awaiting to see what the actual June production number falls to, which may very well accelerate the decline in production through 2019, pushing up this time line," she said. "If the worst-case scenario for June production comes true, then we could see Venezuela's production fall to 1 million b/d sooner." EIA's latest STEO report estimated Venezuelan output at 1.43 million b/d for May, down from 1.46 million b/d a month earlier and from 1.98 million b/d in May 2017. The International Energy Agency put May production at 1.36 million b/d and said it could fall to 800,000 b/d or even lower next year. S&P Global Platts estimated the country's May output at 1.36 million b/d, down from 1.41 million b/d in April, according to a survey of industry officials, analysts and shipping data.

Venezuela Won't Have Enough Oil To Export By 2019 - On May 21st President Donald Trump signed a new executive order prohibiting certain oil-related transactions with Venezuela. GlobalData, a leading data and analytics company, argues that the new sanctions are symbolic in comparison to the more targeted sanctions previously considered that would limit exports of Venezuelan crude oil to the U.S. Adrian Lara, Oil & Gas Analyst at GlobalData stated: “Crude oil production in Venezuela is practically falling at an average of 10% every quarter and has been since mid-2017. A scenario with oil production in the country losing at least another 500,000 barrels per day by the end of the year is not unrealistic. Having full additional sanctions imposed would certainly send a strong geopolitical message from the U.S. at the risk of generating more instability in the world supply markets.”GlobalData also forecast that Venezuelan crude oil production would fall to around one million barrels per day by the end of 2018. This is a steep decline from the three million barrels per day that Venezuela produced in 2011.  Platts reported this week that Venezuela has already warned eight international customers that it wouldn’t be able to meet its crude oil commitments to them in June. Venezuela’s state oil company PDVSA is contractually obligated to supply 1.495 million barrels per day to those customers in June, but only has 694,000 barrels per day available for export. Impacted U.S. oil companies reportedly include Chevron, “Conoco” and Valero. I suspect “Conoco” is really Phillips 66, the refining arm spun out of ConocoPhillips in 2012.Venezuela also reportedly has a severe backlog of crude deliveries at its main terminals, and this could temporarily halt PDVSA’s supply contracts if they are not cleared soon. The company has told some customers it may declare force majeure if they do not accept new delivery terms, including higher-cost and riskier seaborne transfers. Brent crude prices moved higher on the news. But if the GlobalData forecast is correct, then the temporary interruption of Venezuela’s exports may be permanent, as they will be plunging toward zero by the end of the year.

New study examines impacts of fracking on water supplies worldwide -- Using hydraulic fracturing to extract oil and natural gas from shale is a common technique used worldwide. Because the technique requires large amounts of water, however, it raises the question of whether it could lead to water shortages or competition with other water uses, especially agriculture. In a new paper in the AGU journal Earth's Future, Lorenzo Rosa and his colleagues evaluated the impacts of hydraulic fracturing on local availability for food production and other human and environmental needs globally.They found that 30 percent of shale deposits are located in arid regions where aquifers are already being heavily tapped for irrigating crops and 31 percent to 40 percent of shale deposits are in areas where water-stress would emerge or be exacerbated by fracking.The researchers conclude that in such places water management plans would be needed to ensure that fracking would not affect other human and environmental water needs.  The map below shows water stress within shale deposits. In water stressed areas, water is consumed at greater rates than the local water supply is replenished. Green, yellow, orange or red pixels represent areas where there are shale deposits and where freshwater is already being used at unsustainable rates. Areas with water stress indexes greater than one are where water consumption for human activities is unsustainable.

Pope Urges Oil Companies to Lead Clean Energy Transition in Unprecedented Vatican Conference - Pope Francis urged the leaders of big oil companies to see the light on climate change at a first-of-its kind conference held at the Vatican with oil executives, investors and Vatican experts, The Guardian reported Saturday."Civilisation requires energy, but energy use must not destroy civilisation," the pope said during remarks at the end of the conference, according to The Guardian.The current pope, who has emerged as a leader in the fight against climate change following his groundbreaking 2015 encyclical, urged the companies to lead the transition towards renewable energy and away from fossil fuels.He said they should strive "to be the core of a group of leaders who envision the global energy transition in a way that will take into account all the peoples of the earth, as well as future generations and all species and ecosystems," The New York Times reported.The pope also spoke with a great sense of urgency about the coming crisis. "There is no time to lose," he said, according to The New York Times."Will we turn the corner in time? No one can answer that with certainty," the pope said. "But with each month that passes, the challenge of energy transition becomes more pressing." The meeting, held Saturday behind closed doors at the Pontifical Academy of Sciences, included big names in the oil industry like the chairman of Exxon Mobil, the chief executive of BP, the chief executive of the Italian energy company Eni and representatives of Royal Dutch Shell, Norway's Equinor and Mexico's Pemex, according to The New York Times and the BBC.

Europe Is Awash With Oil Stored On Ships - While many analysts and agencies have already called the end of the global oil glut, oil held in floating storage in Europe is at an at least 18-month-high, also due to the booming U.S. oil exports that have displaced some of the traditional crude oil routes in the world. Oil in ships around European shores was 12.9 million barrels on average in May, accounting for 26 percent of all global floating storage, and more than Asia-Pacific’s 9.7 million barrels of oil stored, according to estimates by oil analytics company Vortexa, as carried by Reuters. In the two preceding months, March and April, the share of oil in floating storage in Europe accounted for 10 percent of the global storage, compared to 40 percent stored in the Asia-Pacific region. But in May, the volumes of oil held in Europe—including in the Mediterranean—exceeded the oil held off the Asia Pacific coasts for the first time since at least early 2015, according to Vortexa. Consultant Kpler has estimated that there are some 17 million barrels of oil stored on ships in northwest Europe—the highest since at least the beginning of 2016.Soaring U.S. exports have upended some traditional buying patterns, as China, India, and Indonesia have purchased more U.S. crude at the expense of African crude grades from OPEC members Nigeria and Angola, and of some Middle Eastern crudes.On the other hand, U.S. crude oil exports to Europe have also been rising lately, as U.S. oil is increasing in popularity with European refiners, often at the expense of oil cargoes from OPEC nations and Russia.The surge in U.S. production to record levels and the bottlenecks in parts of its biggest producing region, the Permian, have widened the WTI discount to Brent to more than $10 a barrel, up from $5 just two months ago. U.S. exports have also started to eat into OPEC’s market share on the prized Asian market.This has left Nigerian and Angolan crudes sitting in storage off European coasts. According to Kpler, Nigerian crude oil floating in the North Sea is a particularly unusual occurrence.

Dutch minister proposes faster Groningen output cuts – The Netherland’s Groningen gas field, once the largest onshore gas field in Europe, will produce less than 12 billion cubic meters per year (Bcm/y) by October 2020, the country’s economic affairs minister said Thursday.Eric Wiebes said in a letter to parliament the purchase of nitrogen to mixed with imported gas could lead to a reduction in gas extraction of between 1-1.5 Bcm beginning in October 2020. Construction of a new nitrogen plant in Zuiderbroek is underway. Once this plant is operational, around early 2022, gas production in Groningen could drop by another 7 Bcm, Wiebes said.  A reduction of gas exports from Groningen would further enable lower production, bringing forward the target of 12 Bcm/y by two years, Kallanish Energy reports.Following a series of earthquakes and seismic activity in the region due to gas extraction, the government has placed a cap on production of 21.6 Bcm this current gas year. From October, when the next gas year starts, a new cap will be effective. The previous plan was to shut the field by 2030.Wiebes said a draft plan for the next gas year will be published by the end of August. Groningen is operated by NAM – a 50-50 joint venture between Shell and ExxonMobil. The companies are said to be considering compensation claims for an early shutdown of operations.

European Natural Gas War Heats Up As Prices Rise -- Europe’s liquefied natural gas imports have surged sixteen percent (from 40.9 bcm in 2016 to 47.4 bcm in 2017) to become the third largest source of gas supply after Russia and Norway. The re-emergence of Europe as a major LNG market came after years of coal and nuclear power plant retirements as well as steep declines in Europe. In global gas markets, Europe looks like a bright star in terms of commercial opportunities over the next few years, as growing demand coincides with rising prices and strong imports. The United States, with four new LNG projects under construction, is in excellent position to seize the opportunity as a supplier in this dynamic market and assert the strategic role as it challenges Russia’s dominance as the region’s top gas supplier.  Europe’s energy market is undergoing structural changes that allowed natural gas to gain a larger share in the total energy mix over the last two years. After almost a decade of lackluster demand, market expectations for gas were tempered. Yet, contrary to this bearish outlook, gas consumption across the EU grew by 52 bcm (11%) between 2014 and 2016 and was called “one of the biggest surprises” by Venture Global LNG, Inc. The driving factor behind the recovery was the coal- to- gas move in the power sector that reduced Europe’s coal fired capacity to 156.6 GW in 2017 compared to 190 GW in 2010. National public policies and market forced the retirement of most remaining coal plants by 2030. As Europe’s need for gas increased, production from the North Sea and Groningen field in the Netherlands has been steadily declining. Groningen’s output, in particular, was slashed from 45 bcm in 2015 to 12 bcm in 2017. Dutch regulators expect to completely shut down Groningen production by 2030. This in turn will create a significant supply gap within the European gas market. As Europe’s gas demand grew in 2017 it turned first and foremost to Russia. Despite concerns over Russian dominance over supply, its export of “blue fuel” to Europe has grown to reach a record high 193.9 Bcf in 2017 - eight percent higher than its previous record set in 2016.

European natural gas injections show strength after record drawdown- Platts video - Despite European natural gas stocks being drawn down to record low levels at the end of the past winter and concern over storage economics this summer, injections have been strong, with stocks almost back to the same level as in 2017. Stuart Elliott, senior writer for European gas at S&P Global Platts, looks at the drivers of the European storage recovery and what to expect ahead of the coming winter.

Chinese Gas Pipeline Explosion Injures 24 People -- A natural gas pipeline operated by the state-owned China National Petroleum Corp. exploded in the southwestern Guizhou province on Sunday night. At least 24 people were "seriously injured," Xinhua reported Monday, citing local government authorities. Eight people are reportedly in critical condition and 16 in serious condition. No deaths were reported.The explosion occurred around 11:20 p.m. local time in the Shazi district of Qianxinan County.The pipeline was shut down and the fire was put out by 2:30 a.m. on Monday. An investigation into the gas leak is underway and authorities are still searching for any more casualties.The pipeline transports natural gas from Myanmar's Kyaukpyu port to southwest China, Reuters reported.A similar explosion happened on a nearby section of the pipeline in Shazi district in July 2017. That blast, which was caused by heavy rains and a landslide, took eight lives and injured 35, Xinhua reported then.The latest blast comes amid the Chinese government's efforts to boost natural gas to combat the country's notorious air pollution. Natural gas is considered "clean" because it emits 50 percent less carbon dioxide than burning coal. But the primary ingredient of natural gas is methane, a greenhouse gas about four times more powerful at trapping heat than CO2.

There's a gas pipeline deal to be done with Kim Jong Un. Any takers? - The idea of building a conduit to carry natural gas from the Russian Far East to South Korea has been around since the 1990s. From 2008 to 2011, as Russia’s gas giant, Gazprom PJSC, was building a pipeline as far as Vladivostok, the company signed a memorandum of understanding with North Korea and a framework agreement with Seoul’s Korea Gas Corp. to extend it south.It went nowhere, primarily because of the politics surrounding Kim’s bid to build up his nuclear and missile programs. With North Korea’s relations with the U.S., Seoul, and China now on the mend, and South Korea trying to reduce its dependence on coal and nuclear power, the pipeline would seem an obvious piece of economic diplomacy.The government in Seoul, at least, seems interested in bringing the proposal back to life. “Should the security situation on the Korean Peninsula improve, we will be able to review the LNG project involving the two Koreas and Russia,” South Korean Foreign Minister Kang Kyung-wha told a regional energy conference at the end of March, according to the state-owned Yonhap News Agency. Getting the North involved in such a project could “serve as a catalyst that helps ease geopolitical tensions in the region,” she said. Perhaps, but many obstacles stand in the way. Impoverished, unpredictable, and with a history of flouting international law, the government in Pyongyang would make a high-risk partner for something as capital-intensive as an energy pipeline. Even at the height of optimism about the project in 2012, when Gazprom was announcing it was ready to start work, a report by a Russian energy academic warned that “Russia cannot provide its South Korean counterparts with reliable guarantees of safe delivery,” because it lacked “real influence” over Pyongyang.

Global LNG trade continues to grow, especially from Australia and the United States - Global trade in liquefied natural gas (LNG) reached 38.2 billion cubic feet per day (Bcf/d) in 2017, a 10% (3.5 Bcf/d) increase from 2016 and the largest annual volume increase on record, according to the Annual Report on LNG trade by the International Association of Liquefied Natural Gas Importers (GIIGNL). In 2017, there were 19 LNG exporting countries and 40 LNG importing countries. Australia and the United States were among the countries with the largest increases (2.7 Bcf/d combined) in 2017 LNG exports. Besides Australia and the United States, several other countries also increased LNG exports in 2017. The return to service of Angola LNG and increases from several countries including Nigeria, Malaysia, Algeria, Russia, and Brunei added another 1.4 Bcf/d of LNG exports, more than offsetting a combined decline of 0.6 Bcf/d in exports from Qatar, Indonesia, Norway, Peru, the United Arab Emirates, and Trinidad.  Asian countries led the growth in global LNG imports, accounting for 74% (2.6 Bcf/d) of the increase in 2017. Japan remains the largest LNG importer, importing 11.0 Bcf/d in 2017. China had the largest growth in LNG imports globally (1.5 Bcf/d) and became the world’s second-largest LNG importer in 2017, surpassing South Korea. LNG imports also increased in South Korea, Pakistan, Taiwan, and Thailand, which collectively added 1.0 Bcf/d.  Europe increased its LNG imports by 1.4 Bcf/d, primarily in Spain, Italy, Portugal, France, and Turkey. LNG imports in the United Kingdom declined by 0.34 Bcf/d (35%), one of only two countries in Europe to experience declines in LNG imports, as lower winter heating demand from the residential sector and increased electricity generation from wind reduced the demand for natural gas. Growth in LNG trade was driven in part by new liquefaction capacity commissioned in Australia, the United States, and Russia, collectively adding 3.4 Bcf/d of liquefaction capacity. The world’s first floating liquefaction plant, Malaysia’s PFLNG Satu (0.2 Bcf/d capacity), was also commissioned in 2017. Since 2013, the United States and Australia have added a combined 9.67 Bcf/d of new liquefaction capacity, with another 8.3 Bcf/d expected to be completed by 2020. Including additions in the United States and Australia, liquefaction projects currently under construction are projected to increase global liquefaction capacity by 13.5 Bcf/d by 2022.

Global LNG trade jumped 10.3% to 393 Bcm in 2017: BP  -- Global LNG trade grew 10.3% in 2017 to 393.4 Bcm of gas equivalent, the fastest growth since 2010, BP said in its latest annual statistical review published Wednesday.  LNG supply growth leading to more price convergence Strong production growth -- aided by startup of new LNG trains in Australia and the US -- was met by equally strong demand growth from China, which accounted for almost half of the global expansion. Chinese LNG imports totaled 52.6 Bcm of gas equivalent last year, up 47% on the 35.9 Bcm it bought in 2016. Qatar remained the main global LNG supplier, with exports totaling 103.4 Bcm of gas equivalent, while the US saw its exports soar to 17.4 Bcm last year from just 4.3 Bcm in 2016 -- which was the first year of LNG supplies from the lower 48. Australia also saw its exports rise strongly by 28% to 75.9 Bcm last year, making it the world's second biggest LNG supplier by some distance. BP chief economist Spencer Dale said that while market observers had predicted an LNG supply "glut" given the wave of new supply projects that came online in the past few years, the result instead has been periods of unsustainably low prices rather than a build-up of idle capacity.

Natural Gas Flirts With Upside And Downside - Since its introduction in 1990, the NYMEX natural gas futures contract has traded in a range from $1.02 to $15.65 per MMBtu. Over recent years, the band has narrowed near the bottom end of the trading band. As the monthly chart illustrates, over the past three years, we have seen a narrowing trading range. In 2016, natural gas traded from $1.611 to $3.994, a $2.383 per MMBtu range. Last year, the range narrowed to under one dollar at 90.9 cents on the continuous futures contract. So far in 2018, the range has been from $2.53 to $3.661 or $1.131 per MMBtu. Even the range in 2016 is a far cry from past years. In the wild years of 2005 and 2008, the trading band for natural gas was $9.92 and $8.484 respectively. Interestingly, interest in the market is far greater these days than during the heyday of volatile conditions when speculators flocked to the natural gas futures arena. The natural gas market has matured and evolved in the United States over the past decade. The fact is that both the supply and demand side of the fundamental equation for the energy commodity has undergone dramatic changes. The discovery of massive reserves in the Marcellus and Utica shale regions of the United States and technological advances in hydraulic fracking has increased the supplies of natural gas at an exponential rate since the last time the price traded above the $10 per MMBtu level. At the same time, the cost of production has dropped because of both technology and, more recently, an energy-friendly administration in Washington DC that has cut regulations and decreased corporate tax rates. The lower price over recent years is the result of considerable increases in supplies at a lower cost.

Analysts call for 88 Bcf injection to US gas storage for seventh build of season - US gas in storage is expected to have increased by 88 Bcf last week as dipping production and rising temperatures foreshadow a string of slightly below-average builds in the weeks ahead, creating a bullish case for end-of-season levels. The US Energy Information Administration on Thursday is expected to report an 88 Bcf injection for the week ended June 8, according to a survey of analysts by S&P Global Platts. Responses to the survey were tight and ranged for a build of 81 Bcf to 95 Bcf. The EIA plans to release its weekly storage report at 10:30 am EST. An 88 Bcf injection would be more than the 82 Bcf build in the corresponding week last year but less than the five-year average build of 91 Bcf. This would only be the seventh injection of the year compared to the 10 net injections normally seen by this time. Over the past five years storage has added an average amount of 719 Bcf by now. This year, stocks have risen by 536 Bcf since the end of the heating season. In 2014, when in the injection season started at a low of 824 Bcf, storage fields had added 783 by early June. An injection within analysts' expectations of 88 Bcf would increase stocks to 1.905 Tcf. The deficit versus the five-year average would expand to 515 Bcf and the deficit versus last year in the corresponding week would shrink to 793 Bcf. The EIA reported a 92 Bcf injection for the week ended June 1. It increased inventories to 1.817 Tcf, which was 30.5% less than the year-ago inventory of 2.616 Tcf, and 22% less than the five-year average of 2.329 Tcf. 

EIA Shocks with 96 Bcf Storage Build; July Natural Gas Falls - The Energy Information Administration (EIA) reported a 96 Bcf build into storage inventories for the week ending June 8, considerably higher than even the most bearish of expectations. Nymex July natural gas futures initially appeared to take the surprise build in stride as the prompt month barely budged after the storage report’s 10:30 a.m. release.“Prices didn’t fall that much. We were at $2.97 when the number came out, then we dropped a penny,” INTL FC Stone’s Tom Saal said. By 11 a.m., the Nymex July contract had dropped to around $2.93, down 3.2 cents from Wednesday’s settle.The EIA’s reported 96 Bcf injection lifted storage inventories to 1,913 Bcf, 785 Bcf less than last year at this time and 507 Bcf below the five-year average of 2,420 Bcf.Before the EIA released the report, market consensus built around a build in the upper 80s Bcf range. EBW Analytics favored a slightly smaller build, while Bespoke Weather Services projected a 90 Bcf injection. Kyle Cooper of ION Energy Services expected a 93 Bcf build, and a Bloomberg survey had a range of 82-95 Bcf, with a median expectation of 90 Bcf. A Reuters poll also had a range of 82-95 Bcf, with a median expectation of 90 Bcf.Last year, the EIA reported an injection of 82 Bcf, while the five-year average build stands at 91 Bcf. The East region injected 26 Bcf into storage, while the Midwest injected 31 Bcf. Inventories in the South Central region rose by 27 Bcf.Saal said Thursday’s late-morning trading action was likely due to high-frequency traders that don’t necessarily care about such a large discrepancy in storage estimates versus the actual reported build. “The market is groping along now. There’s only so many things it can react to,” he said. Still, with weather forecasts showing cooler weather beginning next week, there could be some downside risk in play.

NYMEX July contract breaches $3/MMBtu on hot weather forecasts - The NYMEX July natural gas futures contract jumped 5.7 cents Friday to $3.022/MMBtu, the first time the prompt-month contract has reached above $3/MMBtu since late January, as hot weather in the coming days are likely to suppress storage-building efforts. Prices were last seen above the $3/MMBtu level in January. That came when a demand surge put storage levels at a 17.5% deficit to the five-year average for the week ended January 26, according to Energy Information Administration data.The price movement "is even more surprising after yesterday's bearish storage report," Myers said.The EIA reported a 96-Bcf injection to gas storage stocks Thursday for the week that ended June 8, a build well above market expectations. The current stock level of 1.913 Tcf is a 21% deficit from the five-year average of 2.42 Tcf, according to EIA. "The market believes that warm weather in the coming days is going to suppress the next storage injections," Myers said.Prices are likely to get further support from the National Weather Service forecast of above-average temperatures for much of the country while the Southwest region is likely to experience cooler weather than usual. US dry gas production slid a mere 100 MMcf day on day to 77.6 Bcf/d Friday, down 1% since the start of the week. Production is likely to rise to 78.3 Bcf/d over the next seven days, S&P Global Platts Analytics data showed.

July Natural Gas Surpasses $3 as Weather Models Point to Increased Heat - July natural gas was uncharacteristically active Friday as traders eyed increasingly hotter trends in the latest weather forecasts and the potential hotter temperatures may have on already below-normal storage inventories. The Nymex July gas futures contract settled 5.7 cents higher at $3.022.Spot gas prices were mixed as warmer weather was expected to lift demand in key eastern regions, but maintenance events and mild conditions in other areas sent prices tumbling. The NGI National Spot Gas Average climbed 1 cent to $2.62.Nymex July futures were strong from the start of trading, rising above $3 just before the open and climbing as high as $3.032 before easing a bit into the settle. At the forefront of Friday’s trading action were weather forecasts calling for more a very warm to hot pattern through the end of the month, with most days having greater than normal cooling degree days (CDD).  National demand was expected to increase over the weekend as hot high pressure shifted over the Great Lakes, Mid-Atlantic and East, where high temperatures of 90s were to be widespread, including in major cities from Chicago to New York City, NatGasWeather said.“This high pressure system is where hotter trends have held all week to add numerous CDDs/Bcf in demand,” the forecaster said. Demand is expected to soften late into the coming week week as weather conditions still looked quite comfortable across the central and northern United States with highs of 70s and 80s. Weather data also showed a weaker ridge over Texas and the South for less intense heat, NatGasWeather said. It will still be quite warm over the Southeast with upper 80s and 90s for regionally stronger demand, and likely hot over California into the Southwest as well with upper 80s to near 100. The hot upper ridge is expected to gain strength June 25-30 across the southern and central United States, including the Southeast and up the Mid-Atlantic Coast. “Where the data could be a little hotter is across the Great Lakes and Northeast. Although, it wouldn't take much of a shift with the hot dome of high pressure further north or east for the pattern to look much more bullish,”

Hong Kong’s CK infrastructure bids over $9 billion for Australian pipeline company -  Victor Li, the new chairman of Hong Kong’s CK Infrastructure Holdings Ltd., moved to expand the empire built by his billionaire father, Li Ka-shing, by offering more than $9 billion for Australian pipeline operator APA Group. The elder Mr. Li was known to be a fan of buying assets that offered stable returns and the APA bid shows the younger Mr. Li is continuing that strategy. It also demonstrates that Victor Li is committed to expanding an empire that includes ports and property businesses in China, electric utilities in Australia and mobile phone networks in the U.K. Li Ka-shing retired last month. APA operates more than 9,000 miles of gas pipelines in Australia. It also owns or has interests in gas-storage facilities, gas-fired power stations and wind farms. Its portfolio of assets is valued at more than $15 billion. On Wednesday, APA said it would open its books to a CKI-led consortium after receiving a conditional offer worth 11 Australian dollars (US$8.33) a share in cash. APA left the door open to other bidders. A formal offer would need approval from Australia’s antitrust regulator and the Foreign Investment Review Board. The CKI offer came at a 33% premium to APA’s Tuesday closing price. It values APA at more than $9.3 billion. The APA bid comes at a challenging time for the Li family’s CK Hutchison Holdings Ltd. conglomerate, which owns a majority stake in CKI. Chinese competitors are eating away at its port and property businesses in Hong Kong and mainland China, while regulators have blocked bids worth more than $10 billion for a mobile phone operator in the U.K. Political uncertainty in the U.K. also poses a risk to CK Hutchison as more than a third of its operating profit comes from there. CKI is one of the largest foreign investors in Australian infrastructure. It owns SA Power Networks, an electricity distributor in South Australia state, Melbourne electricity supplier CitiPower, gas distributor Australian Gas Networks Ltd. and an electricity distributor and a renewable-energy transmission business in Victoria state.

Unsold Nigerian July crude oil pegged at 20 million-34 million barrels - Nigerian oil has been slow to sell this month as bidders for the country's July-loading heavy and light sweet crudes have been absent from the market. Market participants pegged the amount of unsold Nigerian barrels loading in July at 20 million-34 million barrels, amounting to roughly 40%-75% of what is produced in a month. "For the time being, it is extremely quiet. No one has tried to jump on these barrels," one trader said, adding refiners were trying to reshuffle their needs. "Some refiners could be opportunistic about buying distressed cargoes," another trader said. Equity holders, who will take June-loading cargoes they could not sell into their own systems, have struggled to deliver additional stems into their systems in July. Akpo and Agbami, Nigeria's best grades in terms of sulfur and gravity, have fallen to a seventh-month low as large quantities of oil from the June and July program remained unsold as traditional buyers sought alternatives. Akpo and Agbami were both last assessed at a 65 cents/b discount to Dated Brent, their lowest since November 13 when they hit the same level, S&P Global Platts data showed. Marketing barrels has been more difficult due to wide Brent-WTI spreads giving oil coming from west of the Atlantic Ocean a price advantage over Brent-related ones.

BP Sees No Sign Of Oil Supply Shortfall Due To Underinvestment - UK supermajor BP doesn’t expect global oil supply shortages in the coming years because of reduced investment, Brian Gilvary, BP’s Group Chief Financial Officer, said on Thursday.“We’re not seeing under-investment coming through yet,” Gilvary said at the FT Energy Transition Strategies summit in London, as quoted by Reuters.“If we start seeing a drop off in production in the Lower 48 [U.S. shale] that might be a cause of concern,” Gilvary said at the summit.  Earlier this year, Saudi Aramco’s president and chief executive Amin Nasser said that the industry would need to invest more in exploration, after record-low discoveries last year. Oil firms will have to meet not only growing energy demand but will have to offset with new discoveries a large natural decline in mature oil fields, Aramco’s top executive said in Houston in March.According to Nasser, the industry—which has already lost US$1 trillion in investments during the downturn—needs more than US$20 trillion over the next 25 years to meet rising demand for oil and gas. More recently, higher oil prices and lowered development and project costs have led to cautious optimism and measured risk-taking within the industry that is set to see an uptick in global oil investment this year, energy consultants Wood Mackenzie say. While much of the investment increase is happening in U.S. onshore—with shale companies lifting 2018 budgets by 15-20 percent in response to higher prices—conventional oil project investments around the world are also coming back, especially in top offshore areas where project economics are competitive with U.S. tight oil, says Simon Flowers, Wood Mackenzie’s Chairman and Chief Analyst.

Russia led the world for oil and gas discoveries in Q3 2017 - -- A total of 30 oil and gas discoveries were made in the third quarter of 2017. Of these, 18 are conventional oil, one is heavy oil, one is unconventional gas, and the remaining 10 are conventional gas, according to GlobalData, a data and analytics company. Among countries, Russia leads with eight discoveries, followed by Norway and Australia with five and three discoveries respectively. Pakistan and Senegal had two discoveries in third-quarter 2017.In Russia, all eight discoveries yielded conventional oil, with two located in the West Siberian basin and the rest in the Volga-Ural basin.  In Norway, among five discoveries, four finds yielded conventional gas from the Barents Sea basin and Norwegian Sea basin, while the remaining one yielded conventional oil from the Barents Sea basin.In Australia, among three discoveries, two discoveries yielded conventional oil, one from offshore terrain and the other from shallow water terrain, and the remaining one yielded conventional gas from onshore terrain.Among operators, Rosneft Oil Company leads among operators with seven discoveries, followed by Statoil ASA with five discoveries, and Oil and Natural Gas Corporation Limited (ONGC) and Cairn Energy Plc with two discoveries each. The remaining operators had one discovery each in third-quarter 2017.

Interview: Would Qatar like to see an OPEC exit strategy? -  Ahead of OPEC's most important meeting in years on June 22, Qatar's energy minister Mohammed Al-Sada answers questions from the S&P Global Platts team on what to expect in Vienna and the state of the world LNG market.Al-Sada: "The 'Declaration of Cooperation' Agreement between OPEC and allied non-OPEC countries effective from January 1, 2017, has been very successful in balancing the market by reducing the overhang of a staggering 340 million barrels above the OECD five-year average commercial stock levels of 2.81 billion barrels. With a committed production adjustment over the 500 days till mid-May this year, the stock overhang has been brought down to almost zero. Currently both the 'fundamentals' and 'geopolitics' are very robust and are having a strong influence on the market. These factors have dramatically changed the market. Whether production cuts should be prolonged, or re-negotiated, in the context of market fundamental and changing geopolitics would be reviewed by OPEC and allied non-OPEC countries during the forthcoming meetings on 22-23 June in Vienna. They will surely arrive at an appropriate decision to the benefit of both suppliers and consumers." : "The production adjustment has been a thoughtful and agreed step to rebalance the market. It has worked well and there is certainly a good opportunity to extend and enhance the cooperation with the countries who have contributed to the stabilization of the market in the best interest of all and the world economy at large. Global spending peaked at $900 billion in 2014 but the crash in oil prices thereafter reduced the investment by half in 2017. It is estimated that the industry would only be spending $510 billion in 2018. It would be safe to say that except for shale plays in the US, there is still a general hesitation in committing resources for oil exploration and development.There is a need to stimulate investments to ensure adequate oil supplies are available to meet the growing demand and offset declines in some parts of the world."

Geopolitical Tensions Reach Boiling Point Ahead Of OPEC Meeting -- The upcoming OPEC meeting on June 22 is shaping up to be a contentious one, after news broke that the U.S. government asked Saudi Arabia to increase oil production before Washington pulled out of the Iran nuclear deal. Earlier last week, news surfaced that the U.S. government asked Saudi Arabia to boost output to relieve pressure on prices. But Reuters followed up with a report on June 7, adding more context to that story. According to Reuters, a high level Trump administration official called Saudi Arabia a day before Trump was set to announce the U.S. withdrawal from the Iran nuclear deal, asking for more oil supply to cover for disruptions from Iran. The last time the U.S. government pressured OPEC into adding supply, it was also over Iran. The Obama administration wanted the cartel to offset disrupted Iranian production, after an international coalition put stringent sanctions on Iran in 2012. Roughly 1 million barrels per day were knocked offline. While the Trump administration’s request might irk OPEC members, with Iran obviously the most aggrieved, the apparent willingness of Saudi Arabia to comply with Washington’s request has ignited furor from within the group.“It’s crazy and astonishing to see instruction coming from Washington to Saudi to act and replace a shortfall of Iran’s export due to their Illegal sanction on Iran and Venezuela,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said in comments to Reuters. He said that OPEC would not simply comply with Washington’s requests.“No one in OPEC will act against two of its founder members,” he said, referring to Iran and Venezuela. “The U.S. tried it last time against Iran, but oil prices got to $140 a barrel.”“OPEC will not accept such a humiliation. How arrogant and ignorant one could be (to) underestimate the history of 60 years’ cooperation among competitors,” he said. Venezuela wrote to OPEC members, asking them to denounce U.S. sanctions, a request similar to the one Iran made recently. “I kindly request solidarity and support from our fellow members,” Venezuelan oil minister Manuel Quevedo wrote. The group should discuss “the constraining effects of unilateral sanctions imposed by the United States of America, which represent an extraordinary aggression, financially and economically, for our national oil industry’s operations and the stability of the market.”The comments suggest that a good portion of the cartel is lining up against any move to increase production. It could set the stage for a heated meeting in Vienna in two weeks’ time. “It might be one of the worst OPEC meetings since 2011," Eugen Weinberg of Commerzbank told CNBC.

Is Russia Bailing On The OPEC Deal? For the first week of June, Russia, the world's largest oil producer, exceeded the amount it agreed to produce as part of the January 2017, OPEC/non-OPEC supply cut deal.  Russia produced some 11.1 million barrels per day (bpd), far exceeding production limits outlined in the deal, Interfax news agency said on Saturday, citing a source familiar with the matter.  As part of the oil production cut, Russia agreed to trim its production by 300,000 bpd from 11.247 million bpd. The output cut deal called for its members to remove some 1.8 million bpd of oil from global markets.That deal was orchestrated to stop the bloodletting in global oil markets at the time due to a ramp up in U.S. shale production and Saudi Arabia's late 2014 strategy of trying to drive U.S. shale producers out of business by opening the production flood gates and sending prices to multi-year lows.However, the Saudi’s plan backfired. Global oil prices tumbled from more than $100 per barrel in mid-2014 to under $30 per barrel by the start of January 2016, throwing global markets into a historic supply overhang, and causing financial chaos for the Saudis who had to start issuing international bonds to offset record budget deficits - a development that is still ongoing as the Kingdom shores up its finances from that low oil price period. Now that OECD oil inventory levels have reached the OPEC/non-OPEC members’ goal of five-year averages, there is talk and speculation among not only media but oil producing countries asking if it’s time to ramp up production. Also, geopolitical factors are coming into play as renewed U.S. sanctions against Iran will remove as many as 500,000 bpd from global markets, perhaps more according to other forecasts. In addition, OPEC member Venezuela's oil production is coming apart at the seams, also removing more barrels from the market.

Feature: North Korea peace deal could reshape Russian gas export priorities - With US President Donald Trump and North Korean leader Kim Jong-un set to meet at a historic summit in Singapore Tuesday, global power brokers such as Russia are eyeing the prospect of an end to the nuclear stand-off on the Korean peninsula and a "new era" in relations with North Korea. Russia believes a potential North Korea peace deal could help to strengthen multilateral energy cooperation in North Asia, with the possible revival of a project to build a gas pipeline through the Korean peninsula underpinning new partnerships in the region. Russian President Vladimir Putin last week said that he continues to support peace talks and the development of new economic projects with North Korea. Putin said the focus lies on infrastructure projects, primarily a gas pipeline, adding that other energy infrastructure are possible with regional players. "There are many opportunities for joint, trilateral and quadrilateral cooperation, we just need to move in this direction," Putin said in an interview with China Media Group. In a sign that Russia is preparing for greater cooperation, Putin has for the first time invited Kim Jong-Un to the Eastern Economic Forum in September. Russia's flagship economic showcase for Asian investors, it has become something of a launch pad for new cooperation between Russia and Asian investors. Analysts see significant potential in integrating North Korea into the regional energy network for Russia, though it could lead to changes in Russia's energy project prioritizes. 

Global crude oil demand growth is now hostage to China, India: Russell (Reuters) - Discussion in the crude oil market is degenerating into a single “will they or won’t they” focus on whether the Organization of the Petroleum Exporting Countries (OPEC) will ease their output restrictions next week. While the meeting in Vienna on June 22 will undoubtedly heavily influence the direction of short-term crude prices, the market’s focus solely on supply could be viewed as somewhat myopic. Demand is probably the more important driver of the oil price over the longer term, and the simple truth is that the global market is effectively now hostage to just two countries. China and India have so far this year accounted for about 69 percent of the expected growth in crude oil demand, meaning that what happens in those two behemoths is likely of far more importance to the crude market than what may or may not happen in Vienna. The International Energy Agency forecast last month that global crude oil demand would rise by 1.4 million barrels per day (bpd) in 2018, down from an earlier estimate of 1.5 million bpd. For the first five months of the year China’s crude oil imports were 9.21 million bpd, according to customs data, a rise of 690,000 bpd on the same period in 2017. India’s crude imports were 4.57 million bpd in the January-May period, up 272,000 bpd from the same period last year, according to vessel and port data and industry sources. Together these two countries, the world’s biggest and third-largest crude importers, have brought in 962,000 bpd more in the first five months of 2018 than in same period last year. If this pace of growth was maintained for the whole year, it would mean that China and India would account for the lion’s share of the IEA’s forecast for the increase in global demand. 

Oil prices stall as hedge funds take profits: Kemp (Reuters) - Investors continue to reduce their bullish position in crude oil futures and options, after a blistering rally over the last year, but now the profit-taking has spread to refined fuels such as gasoline and heating oil. Hedge funds and other money managers cut their net long position in the six most important futures and options contracts linked to petroleum prices by 72 million barrels in the week to June 5, according to data from regulators and exchanges. Funds cut their net long positions in Brent (-14 million barrels), NYMEX and ICE WTI (-19 million barrels), U.S. gasoline (-17 million), U.S. heating oil (-12 million) and European gasoil (-10 million). Portfolio managers have trimmed their combined net long in petroleum to 1.113 billion barrels, down from a recent high of 1.411 billion on April 17 and a record 1.484 billion on Jan. 23. Heavy liquidation has seen the combined position cut by 298 million barrels over the last seven weeks, with most of the reduction coming from crude, where net length has been reduced by 302 million barrels. But in the two most recent weeks the liquidation has spread to gasoline, heating oil and gasoil, reflecting broader doubts about the sustainability of the rally ( ). Oil consumption growth has been strong and the combination of OPEC output restraint and involuntary production losses from Venezuela and other countries has pushed the market into deficit this year. However, with benchmark crude prices up by almost 70 percent over the last 12 months, and now apparently stalling, many fund managers appear to have decided now is a good time to realise some profits. Most of the reduction in net length has come from the liquidation of long positions (-232 million barrels) rather than the creation of fresh short positions (+66 million barrels) confirming profit-taking is the main motive.

Crude Oil Prices Settle Higher as Iraq Warns Against Lifting Output Curbs – WTI crude oil prices settled higher Monday as Iraq's oil minister warned producers against easing limits on production curbs offsetting reports of an uptick in Russian and Saudi output. On the New York Mercantile Exchange crude futures for July delivery rose 36 cents to settle at $66.10 a barrel, while on London's Intercontinental Exchange, Brent added 2 cents to trade at $76.48 barrel. Iraq's oil minister, Jabar al-Luaibi, warned producers Monday against pumping more oil, claiming oil prices still needed support. That helped oil prices bounce from weakness earlier in the session following reports Russia and Saudi Arabia had increased output. Russian oil production reportedly rose by 150,000 barrels per day in the first week of June to 11.1 million barrels by day. That was above the country’s quota agreed in OPEC-led production agreement. The 1.8 million barrel a day production-cut agreement, first agreed in November 2016, between OPEC and non-OPEC members has rid the market of excess crude supplies, underpinning a move higher in oil prices. At OPEC's next meeting due June 22, the OPEC-led deal is expected to come under review. Saudi Arabia, meanwhile, increased production by more than 100,000 barrels a day in recent weeks, the WSJ reported Friday. That saw Saudi output inched higher to about 10 million barrels a day. Reports of rising Russian and Saudi output emerges amid signs of an ongoing ramp up in U.S. output, raising fears of a slowdown in the rebalancing of oil markets. The number of oil rigs operating in the US increased by 1 to 862, its highest level since March 13, 2015, according to data from energy services firm Baker Hughes. The positive start to week for crude prices comes just days after data showed traders continued to slash their bets on further upside in oil prices.

Oil Markets Unmoved By North Korea Summit | - The markets shrugged at the historic meeting between President Trump and North Korean dictator Kim Jong Un. Both sides hailed the summit as a breakthrough, with a pledge towards denuclearization, but as expected, there was a lack of even the most basic details on how they might get there. Oil was flat at the start of Tuesday.  Opposition to an increase in the OPEC/non-OPEC production limits continues to grow, with Iraq coming out against such a move. OPEC’s second largest producer said that the production cuts have not yet achieved the intended objective of balancing the oil market. “Producers from within and outside OPEC have not yet reached the goals set,” Iraq’s oil minister Jabbar al-Luaibi said in a statement. Iraq “rejects unilateral decisions made by some producers which do not consult with the rest.” He went on to add: “We shouldn’t exaggerate the need of the oil market for more oil at the present time, and which could cause great damage to global markets.” The statement of opposition comes after Iran and Venezuela also called upon the group to keep the limits in place. The open resistance from a growing number of OPEC members to what seems to be a likely outcome (a softening of the production curbs) is setting the stage for a contentious meeting.  Despite opposition from some OPEC members, the two most important producers, Saudi Arabia and Russia, are already signaling their intent to raise output. Saudi Arabia also added production last month, which, marking a significant change in strategy. OPEC’s secondary sources said Saudi Arabia increased production by 85,000 bpd in May while the Saudis themselves said production rose by 161,000 bpd. Russia also increased output at the beginning of June from 10.95 million barrels per day to 11.09 mb/d. The data suggests the two producers are laying the groundwork for higher output.  Venezuela told OPEC that it increased production in May by 28,000 bpd, but those communications tend to lack credibility. OPEC’s secondary sources say that Venezuelan output actually fell by 42,000 bpd, putting overall output at a new low of 1.392 mb/d, or roughly 750,000 bpd below 2016 levels.

WTI/RBOB Slide On Russia Oil-Cut Rollbacks, Surprise Inventory Builds -- After last week's biggest inventory build since 2008, headlines confirming Russia is seeking a roll-back of oil-cuts saw selling pressure ahead of the API data which confirmed last week's surprise builds in crude, gasoline, and distillates.Bloomberg reports that Russia plans to propose that OPEC and its allies be allowed to return production to October 2016 levels, rolling back most but not all of their output cuts within three months, according to a person familiar with Russian thinking.  The nations would proportionally share out a 1.8 million barrel-a-day increase to their output limit starting as soon as July, the person said, asking not to be identified because the information isn’t public. The actual boost in supply to the market would be less than that because some states, notably Venezuela, Angola and Mexico, aren’t able to increase, the person said.Additionally, next year, the U.S. government doesn’t see worldwide or U.S. crude production as high as it once did. The Energy Information Administration decreased its 2019 forecast for global production to 102.21 million barrels a day, with most of the downward revision from OPEC.“Overall, where we’re at, is continuing to call into question just what the ultimate outcome will be of the OPEC meeting,” said John Kilduff, a partner at Again Capita LLC.“The opposition that you’re seeing from several OPEC members has given the market some pause about continuing to sell off here.”API

  • Crude +833k (-1.25mm exp)
  • Cushing -730k (-900k exp)
  • Gasoline +2.33mm
  • Distillates +2.1mm

EIA-reported builds in Crude, gasoline, and distillates last week shocked markets, and this week confirmed that surprise in API data...OPEC decisions remain on everyone's mind but inventory data is spoiling the short-term fun and games.“Our best guess is currently that there will be no formal decision to change the production target, but a rather a type of agreement or understanding that compliance will be relaxed,” said Johannes Benigni, chairman of JBC Energy Group in Singapore.The surprise build combined with Russia sent prices modestly lower...

Oil mixed as OPEC cites uncertain market outlook for 2018 (Reuters) - Oil prices were mixed on Tuesday, with U.S. crude settling higher before falling in post-settlement trading, and Brent slipping as investors prepared for a key meeting of the OPEC producer group next week. Brent crude futures LCOc1 fell 58 cents to settle at $75.88 a barrel, while U.S. West Texas Intermediate crude futures CLc1 climbed 26 cents to $66.36. In post-settlement trading, however, WTI turned negative while Brent extended losses after data from the American Petroleum Institute showed a surprise build of 833,000 barrels in U.S. crude stockpiles. Analysts had expected a decline of 2.7 million barrels. [API/S] A stronger dollar .DXY and euro weakness EUR= was putting some pressure on Brent prices, said Phillip Streible, senior market strategist at RJO Futures. A strong dollar makes greenback-denominated oil more expensive for holders of other currencies. “I was looking for an up day (for WTI) - in just a few weeks it had fallen from around $73 (a barrel) to $65, ... and even for the window of seasonal decline, that’s a big move to go uncorrected,” said Walter Zimmerman, chief technical analyst at ICAP-TA. The Organization of the Petroleum Exporting Countries released its monthly report on Tuesday, saying a high degree of uncertainty was hanging over the global oil market. [nL8N1TE33E] OPEC and other producing countries including Russia have cut oil output by 1.8 million barrels per day (bpd) since January 2017 in an effort to boost the market. OPEC holds its next meeting on June 22-23, and is expected to decide on future supply policy. With U.S. sanctions threatening to cut Iranian exports and the potential for more declines in Venezuelan production, Saudi Arabia and Russia have indicated they would be willing to make up for any supply shortfall. U.S. production, meanwhile, is expected to rise by less than previously expected, to 11.76 million barrels per day next year, the U.S. Energy Information Administration said. 

Saudi Oil Production Jumps In June Despite Drop In Oil Demand: OPEC - It will probably not come as a surprise that at a time when both Trump, and Saudi Arabia, are pressing OPEC to reverse the 1.5 year long OPEC agreement and pump more oil so US gasoline prices dont soar in the summer months, that according to the just released monthly report from the cartel, total OPEC production rose by 35.4kb/d to 31.869mmb/d mostly thanks to Saudi output rising by 85.5kb/d (according to secondary) sources to 9.987mmb/d and up a whopping 161.4kb/d as per direct communication, and back over 10 million barrels. Joining Saudi Arabia in producing more oil in June were Algeria & Iraq, while production again declined in Venezuela, with Libya and Nigeria also seeing a decline in output.Commenting on the state of the market, OPEC noted that 2018 global oil demand growth forecast unchanged; and is forecast to increase by around 1.65mln bpd to average 98.85mln bpd, with total oil consumption projected to surpass 100mln bpd during Q4 2018.However, OPEC did warn that its outlook for H2 2018 warrants close monitoring of the factors impacting both world oil demand and non-OPEC supply that will shape the outlook of the oil market going forward; the tacit warning here is that oil prices may be so high to pressure oil demand."Looking at various sources, considerable uncertainty as to world oil demand and non-OPEC supply prevails,” said report read. "This outlook for the second half of 2018 warrants close monitoring."Indeed, according to the report, Saudi April oil demand saw its biggest drop on record, falling across all product categories, with most of the weakness in the heavy part of the barrel, OPEC reported. Demand was down more than 5% y/y in 1st 4 months of 2018, with April falling y/y by 420k b/d, or 17%. “April was extremely sluggish, with the highest drop ever recorded” the monthly report cautioned:

Trump Slams OPEC Again, Demands Lower Prices: "Oil Prices Are Too High, OPEC Is At It Again" - Nearly two months after Trump drew a line in the sand on oil prices, when on April 20 he lashed out at OPEC, tweeting that "Oil prices are artificially Very High! No good and will not be accepted!"which promptly set a ceiling on crude and prompted Saudi Arabia to scramble to boost production...Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!— Donald J. Trump (@realDonaldTrump) April 20, 2018... moments ago Trump doubled down on his oil- price targeting, and in a lengthy tweetstorm that touched on everything from Marc Sanford's loss, to the strength of the economy, to the just concluded North Korean summit, his relationship with Kim Jong Un and the cancellation of war games with South Korea, even the announcement of the world cup host nation  (US, Mexico and Canada), Trump once again lashed out at OPEC, tweeting that "Oil prices are too high, OPEC is at it again. Not good!"Oil prices are too high, OPEC is at it again. Not good!— Donald J. Trump (@realDonaldTrump) June 13, 2018Translation: Trump realizes that the middle-class is spending increasingly more on gasoline, taking away from disposable income, and hopes that Saudi Arabia will pump more to offset the loss of Venezuela and Iran oil (which would not be impaired if Trump hadn't killed the Iran deal), in line with what we described in "Rising Gas Prices Threaten To Wipe Out Trump's Tax Cut Benefits". This time, the market reaction to Trump's angry tweet was far muted, with oil barely moving - so far - after it slumped following yesterday's API report, even if it recovered most of the losses.

WTI/RBOB Soar After Huge Surprise Crude Draw (Despite Production Surge) -- Despite Russia production-cut roll-back headlines, WTI/RBOB prices are unchanged from the huge, bearish surprise API-reported inventory surge. However, for the 2nd week in a row, DOE data was entirely opposite and showed a big crude and gasoline draw. Markets ignored the 100k b/d surge in production...Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that a potential agreement by OPEC to increase oil output when it meets later in June is curtailing the crude rally from earlier this year, while prices in earshot of $80 a barrel weigh on demand and threaten economic growth.Bloomberg reports that OPEC and its partners will meet next week and debate whether to restore output halted last year. Saudi Arabia and Russia have said it’s time to reverse the cuts and appear to have begun reviving supplies, but face opposition from Iran, Iraq and Venezuela.“There is no need for a change in the level of production,” said Iran’s OPEC governor, Hossein Kazempour Ardebili, who serves as one of the country’s representatives to the group. “Any increase should be limited to the production allocation in the agreement, which is valid to the end of 2018.”Oil’s recent rally to a three-year peak above $80 a barrel in London has prompted warnings that prices could hurt economic growth. Yet Kazempour insisted that OPEC will resist pressure to raise production. “The Trump administration is trying to intervene in the affairs of a sovereign organization,” he said. Such attempts have failed in the past and “they will also fail” this time. DOE:

  • Crude -4.143mm (-1.25mm exp) - biggest draw since March
  • Cushing -687k (-900k exp)
  • Gasoline -2.271mm (+1mm exp)
  • Distillates -2.101mm

After a very bearish API report, and an extremely bearish DOE report last week, DOE data surprised across the board with the biggest crude draw in 3 months and a surprise gasoline draw. This is the 4th weekly decline in Cushing stocks in a row...

EIA says US weekly gasoline demand finds new all-time high -- US gasoline demand -- measured as product supplied -- hit a new all-time weekly high in the week ended June 8, Energy Information Administration data showed Wednesday. Product supplied of gasoline was reported at 9.879 million b/d in the first full week of June, the highest that figure has ever been in data going as far back as 1991. The previous all-time high occurred earlier this year, when product supplied was reported at 9.857 million b/d for the week ended April 13. Amid robust demand, US gasoline stocks for the week were reported 2.27 million barrels down on the week at 236.763 million barrels, which is about 2.3% below their level in the year-ago week. Those stocks fell despite uptick in US gasoline imports, which the EIA says rose from 777,000 b/d in the week ended June 1 to 824,000 b/d in the week ended June 8. Aside from strong demand, higher US gasoline imports likely did not lead to an increase in fuel stocks because gasoline exports rose 69,000 b/d to reach 607,000 b/d. The EIA data show this is the highest volume of exports seen in the first full week of June going as far back as 2010. Interestingly, US demand reached an all-time high despite prices being above historic norms. On Tuesday, S&P Global Platts assessed CBOB in Houston, which is perhaps the most liquid gasoline cash market in the US, at July NYMEX RBOB futures minus 14.60 cents/gal, or $1.9439/gal. This is more than 40% above the assessment value from the year-ago date. This data lines up with a blog post from AAA, an auto-club, posted on Wednesday which said that motorists are now spending more on fuel at the pump relative to last summer.

Crude Oil Prices Settle Higher on Massive Draw in U.S. Crude Supplies – WTI crude oil prices settled higher on Wednesday as data showed a massive draw in U.S. crude supplies despite an ongoing expansion in output. On the New York Mercantile Exchange crude futures for July delivery rose 28 cents to settle at $66.64 a barrel, while on London's Intercontinental Exchange, Brent gained 75 cents to trade at $76.62 a barrel. Inventories of U.S. crude fell by 4.143 million barrels for the week ended June 8, well above expectations for a draw of 1.440 million barrels, according to data from the Energy Information Administration (EIA). The unexpected rise in crude supplies emerged as imports fell, while the widening spread between Brent and WTI crude prices encouraged U.S. exporters to ramp up exports. Crude imports fell 247,000 barrels per day (bpd) last week to 8.1 million barrels per day (bpd), while exports rose 300,000 bpd. A 3% uptick in refinery activity, saw product inventories such as gasoline and distillate fall sharply, underpinning the size of the draw in crude supplies. Gasoline inventories – one of the products that crude is refined into – fell by 2.271 million barrels, confounding expectations for an increase of 0.443 million barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – unexpectedly fell by 2.101 million barrels, topping expectations for a build of 0.200 million barrels. The unexpected draw in gasoline inventories was supported by rise in U.S. gasoline demand to an estimated 9.88 million bpd –a record high. U.S. oil output, meanwhile, continued its expansion rising 0.1m bpd to a record 10.9 million bpd, according to preliminary EIA data, strengthening the United States' position as the second largest oil producer behind Russia. The uptick in US output arrives at a time when the world's other two largest producers – Russia and Saudi Arabia – raised output, stoking investor fears major oil producers would continue to expand output to plug falling supplies from Venezuela and Iran.

Higher oil prices set to moderate consumption growth: Kemp (Reuters) - Growth in global oil consumption has accelerated significantly since prices slumped in 2014 – highlighting the critical role demand plays in balancing the market. Lower oil prices stimulated OECD consumption between 2015 and 2017 and played a big role in eliminating the global oil market surplus during the rebalancing phase of the cycle. With oil prices up 70 percent over the last 12 months, however, higher prices are set to moderate OECD consumption and thereby global demand growth in 2018/19. Economists often observe that the price-elasticity of oil demand is low, meaning a small change in prices does not have much impact on the amount consumed in the short term. But low impact does not mean no impact. In the case of a large and sustained change, such as occurred in 2014/15, consumption has proved significantly flexible and plays a key role in rebalancing the market. According to the latest estimates from BP, global consumption increased by almost 1.7 million barrels per day (bpd) in 2017 (“Statistical Review of World Energy”, BP, 2018). Consumption has risen by an average of 1.7 million bpd in the last three years since oil prices slumped (2015-2017) compared with an average of just 1.1 million bpd in the three previous years (2012-2014). Real crude oil prices averaged $51 per barrel between 2015 and 2017, down from $112 between 2012 and 2014, according to BP.

Oil shortage or surplus? Floating storage swamps Europe (Reuters) - OPEC is considering whether or not to raise its oil production to prevent the global market from becoming too squeezed, but there is one part of the world that is telling a very different story about the balance between supply and demand. The boom in U.S. shale shipments has outstripped OPEC’s production cuts and pushed millions of barrels into European waters, where more crude is being stored on ships than at any time in the last 18 months. And it’s not just the volume of oil aboard ships. At a monthly average in May of 12.9 million barrels, or 26 percent of total global floating storage, Europe had more oil in floating storage than the Asia-Pacific region at 9.7 million, according to data from oil analytics firm Vortexa. In March-April, Europe’s share was 10 percent versus 40 percent in Asia-Pacific. Vortexa estimates the monthly average share of oil in floating storage located in European – including the Mediterranean – in May outstripped volumes floating in Asia-Pacific for the first time since at least the beginning of 2015. Buyers in China, India and Indonesia have taken growing amounts of U.S. crude rather than their usual cargoes of Nigerian, Angolan or Middle East fare, some of which have unusually ended up in Europe. Consultants Kpler estimate there are some 17 million barrels of oil on ships in northwest Europe, the most since at least early 2016 and Nigerian in particular is extremely unusual. “It’s quite rare to have Nigerian crude floating in the North Sea. It’s only happened in a total of two weeks in 2018 and 4 weeks in 2017,” Kpler economic analyst Reid I’Anson said. U.S. exports are running at around 2.5 million barrels a day, having more than doubled since January, despite a lack of pipeline and port capacity to get crude to the international markets that has forced down differentials for domestic grades. This has inflated the premium that Brent-linked crudes command over their U.S. rivals, which has yawned out to nearly $11 a barrel this month, from closer to $5 a month ago, as well as boosting the cost versus Middle East grades. The North Sea tends to see builds in floating storage between April and June most years, as refineries gradually exit maintenance mode. 

Russia And Saudi Arabia Will Save The Day If OPEC Deal Falls Apart - Even if the current OPEC/NOPEC oil production cut deal goes to pieces, Saudi Arabia and Russia will be willing to go it alone, the two largest oil producers in the agreement said on Thursday ahead of the much-talked-about OPEC meeting later this month, suggesting that some kind of market-managing efforts may remain in place, even if Iran and Iraq begin to sour on the collaboration. The comments came after Khalid al-Falih and Alexander Novak met in Moscow, and were rubber stamped by Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, who also met on Thursday. The agreement between the two countries was lacking in specifics, saying that they would develop a “comprehensive bilateral agreement” on energy cooperation, according to S&P Global Platts. Both countries increased their May oil production in a show of force that served to calm the oil market somewhat as fears grow over potential supply gaps stemming from looming US sanctions on Iran and realized supply gaps from Venezuela. In a similar market-calming statement made earlier on Thursday, Khalid al-Falih said that it was “inevitable” that OPEC and its partners would agree next week to gradually roll back the oil production cuts that were forged in November 2016 and implemented—at least partially—in January 2017.

OPEC will squeeze oil buffer to historic lows with an output hike (Reuters) - The oil industry will face the biggest squeeze on its spare production capacity in more than three decades if OPEC and its allies agree next week to hike crude output, leaving the world more at risk of a price spike from any supply disruption. Spare capacity is the extra production oil producing states can bring onstream and sustain at short notice, providing global markets with a cushion in the event of natural disaster, conflict or any other cause of an unplanned supply outage. That buffer could shrink from more than 3 percent of global demand now to about 2 percent, its lowest since at least 1984, if the Organization of the Petroleum Exporting Countries, Russia and other producers decide to increase output when they meet on June 22-23, U.S. bank Jefferies said. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel said, adding global demand was 100 million bpd. Some analysts say spare capacity could even fall below 2 percent, after years of low oil prices drove down investment in new production across the industry. Saudi Arabia, OPEC’s de facto leader which has indicated its support for hiking output at next week’s meeting in Vienna, has said it is alert to the potential squeeze on the market. “We are concerned about tight spare capacity nowadays,” Saudi Energy Minister Khalid al-Falih told Reuters last month, although he also said the industry was in “better shape” than in 2016 when oil prices plunged below $30 a barrel. OPEC and its allies have been curbing supply since January 2017 to boost oil prices and cut bloated global inventories. The price of crude has since surged, climbing above $80 a barrel last month, while inventories have also fallen. But falling inventories, which have now dropped back to around their five-year average in industrialized nations, adds to the conundrum facing OPEC. “Today we no longer have an inventory cushion or a large spare capacity,” Claudio Descalzi, chief executive of Italy’s Eni (ENI.MI), said in January. “In this context, any geopolitical event can create a price spike.” 

Oil market's shock absorbers becoming dangerously depleted (Reuters) - Sanctions on Iran and the continued decline in output from Venezuela will leave the oil market very vulnerable to any further production or consumption surprises next year.Output and demand in the global market are each currently running at almost 100 million barrels per day (bpd).To ensure a steady flow of oil from the wellhead to consumers, the industry relies on a series of shock absorbers to handle any interruption in supplies or unexpected strength in demand.Both commercial inventories and OPEC spare capacity have become dangerously eroded over the last 12 months, leaving the oil market much more vulnerable in 2019.If all the other shock absorbers become exhausted, oil prices will have to rise to the point where consumption growth begins to slow.The oil market's first line of defence comes from changes in the volume of commercial inventories held by producers, traders and refiners.OECD commercial stocks currently stand at 2.8 billion barrels, composed of crude (1.1 billion barrels), other liquids (300 million barrels) and refined products (1.4 billion barrels).Additional stocks are held in non-OECD countries, as well as on tankers and in pipelines, either in transit from oilfields to refineries and on to final customers, or as floating storage.The vast majority of stocks are held for operational reasons to ensure the uninterrupted flow of oil from wellhead to final customers.Only a small percentage, generally less than 15 percent, can be considered discretionary and available to act as a shock absorber.OECD crude and product stocks are already 27 million barrels below the five-year average, according to the International Energy Agency (“Oil Market Report”, IEA, June 2018).The five-year average was inflated by the glut of oil between 2015 and 2017, so it m ay not be representative of the normal level of inventories.

Global Oil Supplies Down To 58 Days, Four Hours, And Forty-Eight Minutes -- IEA -- June 14, 2018 --If folks are confused by all the statements coming out of Saudi Arabia, this may be the reason. Reuters wonders if OPEC is moving the goalpost for its oil market scoreline.I have never really believed whatever OPEC says but lately the flip-flops have seemed even more outrageous. First, there's too much oil; then, there's not enough oil; then, there's enough oil now but there won't be enough oil next year; and now, not only is there not enough oil now, there won't be enough oil next year, and US shale oil won't be able to make up the difference.Four months ago, there was this article from Reuters: surge in global oil supply may overtake demand in 2018 (IEA).Today, crude oil demand in 2019 will grow another 1.4 million bopd after growing a similar 1.4 million bopd this year (2018). So, we go back to the data. First, it's nearly impossible to find OECD crude oil inventories. I think it's around 2 billion bbls. This was, March, 2018: At 2.865 billion barrels, OECD stocks were 206 million barrels lower than in January 2017, but 50 million barrels above the latest five-year average, OPEC said. But ycharts says the number is 4.4 billion bbls. Regardless, what it is, no one knows how much is really needed. In the US, we have better data, but folks interpret it differently. At 435 million bbls in reserves, analysts suggest that's below the average median/mean/average for the past five years. And yet, it certainly appears that historically, the US has done just fine with 350 million bbls in reserves. [My benchmark remains: 350 million bbls in reserves.] So, let's look at what I think is the best metric: the number of days of crude oil supply. For the US, my benchmark is 21 days. Anything more than 21 days is a "glut." We haven't seen 21 days or less since 2014.

Crude futures mixed on split among OPEC members, US stocks draw; ICE Brent down to $76.43/b, NYMEX WTI up at $66.80/b - Crude oil prices were mixed in European trading Thursday morning as the market searched for signals on how OPEC will resolve rising divisions over the future of the production cut agreement, and digested a surprise drop in US crude stocks. At 1030 GMT, the August ICE Brent crude futures contract was down 31 cents/b from Wednesday's settle, at $76.43/b, while the NYMEX July sweet light crude contract was up 16 cents at $66.80/b. The US dollar index was down 0.27%. On Thursday morning, mixed comments from OPEC members cast further uncertainty over whether OPEC would maintain current production cuts or increase output over the course of the year, ahead of the June 22 OPEC meeting in Vienna. On Thursday, Saudi energy minister Khalid al-Falih told reporters in Moscow that an agreement between OPEC and non-OPEC partners to increase output and loosen quotas was "inevitable." "I think it will be a reasonable, moderate agreement. It's not going to be anything outlandish. We will be easing our ceilings back," the minister said. That sentiment is backed by Russia, which has also communicated that it hopes to increase output following next week's meeting. But Iranian minister Hossein Kazempour Ardebili said Thursday that Iran, Iraq and Venezuela are aligned in maintaining the current OPEC deal, and said that current prices are acceptable to consumers and producers.

Crude Oil Prices Settle Higher as Saudi Says Output Hike Will Be Reasonable – WTI crude oil prices settled higher as traders mulled comments from Saudi's oil minister ahead of the Organization of the Petroleum Exporting Countries meeting next week. On the New York Mercantile Exchange crude futures for July delivery gained 25 cents to settle at $66.89 a barrel, while on London's Intercontinental Exchange, Brent fell 1.08% to trade at $75.92 a barrel. Ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting next week, Saudi Arabian Oil Minister Al Falih reportedly said "it's inevitable" that OPEC and its allies will agree to boost oil production next week, according to a report from Bloomberg. Al Falih insisted, however, that the uptick in output would be reasonable and won't be anything "outlandish." Traders remained concerned rising output would slow the rebalancing in oil markets as the production-cut agreement has helped rid the market of excess crude supplies. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018 and is expected to come under review at the oil-cartel's next meeting on June 22. The uptick in oil prices comes a day after the Energy Information Administration revealed U.S. supplies fell more than expected but output rose to a record. Inventories of U.S. crude fell by 4.143 million barrels for the week ended June 8, well above expectations for a draw of 1.440 million barrels, according to data from the Energy Information Administration. U.S. oil output, meanwhile, continued its expansion rising 0.1m bpd to a record 10.9 million bpd, according to preliminary EIA data, strengthening the United States' positions as the second largest oil producer behind Russia. 

OPEC May crude oil output slides to 13-month low of 31.90 mil b/d: Platts survey - As OPEC prepares to meet in Vienna to decide whether to loosen the taps, its crude production in May slid for the fourth straight month to 31.90 million b/d, the lowest in over a year, according to the latest S&P Global Platts survey of industry officials, analysts and shipping data. The 14-country bloc produced 32.00 million b/d in April, a 140,000 b/d drop from March, according to the survey. The April figure is about 730,000 b/d below OPEC's notional ceiling of about 32.73 million b/d, when every country's quota under its production cut agreement is added up. Outages due to the troubles in Nigeria and Venezuela's oil industries more than offset higher output from Saudi Arabia, Iraq and Algeria, the survey found, as May production fell 100,000 b/d from the previous month. OPEC output was last lower in April 2017 at 31.85 million b/d, the last month before West African producer Equatorial Guinea became its newest member. The 14-country bloc's next meeting is June 22, when ministers will gather in the Austrian capital amid speculation that Saudi Arabia may push for more flexibility on production quotas in anticipation of sustained declines in Venezuela and the impact of US sanctions on Iran. Recent price rises have also drawn the ire of the US, a key Saudi ally. OPEC is committed, along with 10 non-OPEC producers including Russia, to a 1.8 million b/d cut agreement that is scheduled to run through the end of 2018. The May figure is about 830,000 b/d below OPEC's notional ceiling of about 32.73 million b/d, when every member's quota under the deal is added up.

Oil Prices Crash On Supply Fears - Oil prices bounced around over the past few days as the markets await OPEC’s decision in a week’s time. While the meeting is shaping up to be a contentious one, the hype also demonstrates OPEC’s clout years after the group’s obituary was written. “With unplanned outages escalating, geopolitical risks rising, and U.S. shale production facing infrastructure bottlenecks, Saudi Arabia is once again back in the driver's seat exerting significant influence over the oil market in 2018,” Helima Croft, the global head of commodity strategy at RBC Capital Markets, said Thursday. “All eyes are on what course of action it will call for at the June 22 OPEC meeting in Vienna.” The IEA said in its latest Oil Market Report that robust U.S. shale growth will underpin 2.0 million barrels per day (mb/d) of non-OPEC supply growth this year, plus 1.7 mb/d of non-OPEC output gains in 2019. That should more than meet demand growth…in theory, at least. The agency warned that significant losses in Venezuela and Iran could leave a supply gap. “Even if the Iran-Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the IEA said. “It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile.”  Libya’s two largest oil export terminals suffered disruptions this week due to clashes between rival groups. The outages at the Es Sider and Ras Lanuf terminals disrupted some 240,000 bpd of supply, Libya’s National Oil Corp. said on Thursday. The two facilities account for 40 percent of Libya’s oil exports. If the losses are sustained for any lengthy period of time, it will put more pressure on the OPEC+ group to increase output at its meeting on June 22. Any increase in the volume of output from OPEC and Russia will necessarily cut into spare capacity levels, which analysts say could drop to the lowest level in decades. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel told Reuters, assuming around 1 mb/d increase in output. Periods of low spare capacity have historically been associated with times of high and volatile prices.

Rig Count Falters Amid Oil Price Correction - Baker Hughes reported a dip in the number of active oil and gas rigs in the United States today. Oil and gas rigs decreased by 3 rigs, according to the report, with the number of oil rigs increasing by 1, and the number of gas rigs decreasing by 4.The oil and gas rig count now stands at 1,059—up 126 from this time last year. Canada, for its part, gained 27 oil rigs for the week—after last week’s gain of 13 oil and gas rigs. Despite weeks of significant gains, Canada’s oil and gas rig count is still down by 20 year over year.  Oil benchmarks experienced a huge slide on Friday as Russia and Saudi Arabia proclaimed their willingness to increase output ahead of the June 22 OPEC/NOPEC meeting in Vienna, even if the oil production cut deal were to fall apart. The loose commitment by two of the largest signees to the production cut deal was enough to drag down prices that were earlier being pulled upwards by Venezuela’s freefalling oil production that some think will fall below 1 million barrels per day, and continuing reports that Iran may face multiple obstacles on the road to exporting its oil in the wake of renewed sanctions levied by the United States.  At 12:07pm EDT, the WTI benchmark was trading down a massive 3.36% (-$2.25) to $64.64, with Brent down 3.48% (-$2.64) to $73.30. Both benchmarks are down week on week as well as on the day. US oil production continues putting downward pressure on oil prices, and for the week ending June 08, production reached 10.900 million bpd—just a hair shy of the 11 million bpd production that many had forecast for the year.

Crude Oil Prices Settle 2.7% Lower on Growing Fears of OPEC Output Hike – WTI crude oil prices settled lower as data pointing to an ongoing expansion in U.S. output and fears that Saudi Arabia and Russia were set to hike production weighed on sentiment. On the New York Mercantile Exchange crude futures for July delivery fell 2.74% to settle at $65.06 a barrel, while on London's Intercontinental Exchange, Brent fell 3.41% to trade at $73.35 a barrel. The number of oil rigs operating in the US increased for a fourth-straight week, rising by 1 to 863, according to data from energy services firm Baker Hughes, pointing to signs of an expansion in U.S. output. The continued uptick in drilling activity comes as the Energy Information Administration said Wednesday U.S. oil output rose to a record 10.9 million barrels. Crude oil prices had started the session on the back foot after Russia Energy Minister Alexander Novak said Thursday after talks with Saudi Energy Minister Khalid al-Falih that both nations agreed to gradually increase production. Saudi Arabian Oil Minister Al Falih had previously attempted to temper investor fears of a sharp rise in production, insisting earlier this week the uptick in output would be reasonable and won't be anything "outlandish." Traders fear that an uptick in global output would slow the rebalancing in oil markets as the production-cut agreement has proved effective in slashing the glut in global crude supplies. In November 2016, OPEC and other producers, including Russia agreed to cut output by 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. The OPEC-led deal was renewed last year through 2018 and is expected to come under review at the oil-cartel's next meeting on June 22. 

Global oil benchmark ends at 6-week low on expectations for OPEC output hike -  Oil futures dropped sharply Friday, ending the week lower, with global benchmark Brent crude settling at a more-than-six-week low on expectations OPEC and its allies will agree next week to boost output. August Brent crude, the global benchmark, declined by $2.50, or 3.3%, to $73.44 a barrel on ICE Futures Europe. That’s the lowest settlement since May 2, and they suffered a loss of roughly 4% for the week, according to FactSet data. July West Texas Intermediate crude, the U.S. benchmark, traded on the New York Mercantile Exchange, lost $1.83, or 2.7%, to settle at $65.06 a barrel, pulling back after a four-session climb. It saw its lowest finish since June 6 and lost about 1% for the week. Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, is considering an output boost of 500,000 to 1 million barrels a day, while Russia is weighing a rise of as much as 1.5 million barrels a day, said commodity analysts led by Eugen Weinberg at Commerzbank, in a note. Major oil producers meet June 22 in Vienna. The problem, however, is that several OPEC members, including Iran and Venezuela, are resisting output boosts that are intended to offset their own production falls, he said. News reports said the U.S. requested a 1-million-barrel-a-day output increase and tweets by President Donald Trump slamming OPEC for high oil prices could prove to be “additional stumbling blocks” and could lead to a production increase on the smaller side, he added. Indeed, the “vast majority” of OPEC producers are arguing against relaxing the production curbs agreed by OPEC and major non-OPEC producers, said Helima Croft, head of commodity strategy at RBC Capital Markets, in a note. Most OPEC producers “are effectively tapped out,” she said, noting that while Saudi Arabia is in a much better position than most other sovereign producers, its own ambitious Vision 2030 economic plan could be put in danger by a sharp drop in prices.

United States, Saudi Arabia and Russia Find Agreement on Oil Policy - — It is unusual for the United States, Saudi Arabia and Russia to see eye-to-eye, much less try to achieve common energy policy goals, even indirectly.But that is what seems to be happening, and it is taking the edge off the yearlong rise in oil and gasoline prices. Even if those countries have their own reasons for welcoming the surge in production, it is also reducing the influence of the Organization of the Petroleum Exporting Countries, which will meet in Vienna next week to discuss production cuts put in place in early 2017.The cheerleader, if not the ringmaster, in this effort is President Trump, who took to Twitter on Wednesday to criticize OPEC for high crude prices. “Oil prices are too high, OPEC is at it again,” he wrote in his second such statement since April. “Not good.” Whatever happens at the OPEC meeting, two of the biggest players in the global oil market — Saudi Arabia and Russia — appear to have already calculated that it is in their immediate interest to crank up production, effectively sidelining the Saudis’ fellow cartel members.Between them, the two countries have already each added more than 100,000 barrels a day to global oil supplies. Mr. Trump wants even more crude sloshing around the market to tamp down energy prices ahead of the congressional elections in November, and it looks like he may well get it. It is perfectly normal for Republican and Democratic administrations to try to nudge oil prices down, but rarely — if ever — has the effort been so blunt and public. For decades, whenever presidents faced rising gasoline prices, American officials privately called Saudi Arabia seeking help in getting OPEC to boost production — something that the Trump administration has done, as well. But Mr. Trump appears unsatisfied with limiting his overtures to private diplomacy. He is publicly targeting OPEC even though oil prices have stabilized since his criticism in April, and regular gasoline prices have slid by roughly a nickel a gallon since Memorial Day. A barrel of oil in the United States now costs about $67 a barrel, down nearly $4 over the past month, although that is still about 45 percent higher than at this time last year.

Gloves back on, OPEC and U.S. shale producers to deepen ties in Vienna (Reuters) - Only a few years ago, shale CEOs and the Organization of the Petroleum Exporting Countries were in open conflict. Now, they realize they’re in the same boat and need to row in tandem to keep global crude supply and demand in balance, according to interviews with analysts, executives and investors. The recent rise in crude prices - up more than 40 percent in the past year - has lifted profits for producers across the globe, but also threatens to erode demand for fossil fuels at a time when electrification is becoming commonplace. “We’re getting to a point where a continued rise in the oil price is going to cause major problems for the global economy,” said Amy Meyers Jaffe, director of the program on energy security and climate change at the Council on Foreign Relations. “There are bigger issues at hand besides output that OPEC and shale producers care about.” OPEC and U.S. representatives have met at least twice this year, with a third high-profile meeting set for Vienna next week. Finding the optimal balance of crude supply and demand will be the hot topic. Harold Hamm, the billionaire founder of U.S. shale pioneer Continental Resources, is due to address OPEC ministers, along with fellow shale executives Hess Corp CEO John Hess and Pioneer Natural Resource Co Executive Chairman Scott Sheffield. Hamm and Hess did not respond to requests for comment ahead of the meeting. Sheffield declined to comment. “I wouldn’t take dialogue and discussion as any kind of collaboration. We’re all talking about what does world demand look like for oil,” said U.S. Senator Heidi Heitkamp, a North Dakota Democrat who successfully pushed to lift the U.S. oil export ban in 2015. Lifting that ban ushered in a sea change in global energy, sending nearly 2 million barrels of U.S. crude to India, China and other markets historically dominated by OPEC and forcing the group and its American rivals to be more conciliatory. Hamm, who called OPEC a “toothless tiger” in 2014, has begun encouraging fellow shale companies to focus more on profitability and less on profligate production. Last month, Hamm addressed a Saudi Aramco board meeting in Houston. 

OPEC producers, Russia can quickly boost crude output by 1.5 million b/d: IEA - Middle East OPEC producers and Russia can quickly boost crude production by around 1.5 million b/d to make up for Venezuela's increasing output loss as well as the potential decline in Iranian oil output when US sanctions are implemented, a senior International Energy Agency official said Thursday. Keisuke Sadamori, IEA director for energy markets and security, said at an event in Tokyo: "A quick output boost could be expected mainly from OPEC member countries in the Middle East." "These countries, which have intentionally cut production, have a capacity to boost around 1.2 million b/d in a relatively short time," he said, adding Russia could boost output by around 300,000 b/d. OPEC will meet June 22 in Vienna to decide on the future of its production agreement with 10 non-OPEC countries, led by Russia. Asked about his outlook for the OPEC meeting, Sadamori said: "Under the current market conditions, a certain action is objectively needed to be taken to stabilize the [oil] market." The IEA now expects Venezuela's oil output could fall to 800,000 b/d or even lower next year, from 1.36 million b/d in May and following a 1 million b/d fall over the past two years. Sadamori said the agency also expected to see a "negative impact" on Iranian oil production from the US decision in May to reinstate sanctions. "[The US sanctions] will basically be based on the same clauses in the National Defense Authorization Act for the 2012-15 sanctions," Sadamori said, adding it remained unclear about how exactly the US sanctions will be implemented. International buyers of Iranian oil have until November 4 to wind down contracts before the US re-imposes sanctions on the oil, energy, shipping and insurance sectors. The US has said it will also consider allowing countries to continue importing Iranian crude oil, as long as they demonstrate they are significantly reducing those volumes every 180 days. 

Ritz-Carlton Crackdown Still Haunts the New Saudi Arabia -- The Ritz-Carlton Hotel in Riyadh, where hundreds of rich and once-powerful Saudis were detained in what the government called an anti-corruption campaign, has been a hotel again for four months. Its legacy as a jail, though, runs deep in the new Saudi Arabia. Billionaires, royals and bureaucrats remain locked up, including Prince Turki bin Abdullah and former Economy Minister Adel Fakeih, a key architect of the kingdom’s transformation plan, according to associates. Some are now in the Al-Ha’er prison, a maximum-security facility south of the capital where many Islamic militants are incarcerated. Those released had to promise to pay huge settlements, while some were banned from travel or required to wear ankle bracelets to monitor their whereabouts, according to their associates. The fate of those still being held is unknown, including the former head of the Saudi Arabian General Investment Authority, Amr Al-Dabbagh, and Ethiopian-born Saudi billionaire Mohammed Al Amoudi. The arrests have created a climate of fear, obscuring the daily reports of change that Crown Prince Mohammed bin Salman is ushering in as a young reformer for a new era. Cinemas are open, genders mix more freely and women will be allowed to drive starting this month, but there’s an increasingly authoritarian side to his leadership. The enthusiasm that existed when he unveiled his sweeping changes to Saudi society two years ago in “Vision 2030” has been slowly replaced with wariness about staying on-message, according to conversations with more than a dozen businessmen, government officials, activists and diplomats, all of whom asked not to be named for fear of retribution.Some Saudis put phones in separate rooms or in plastic containers, worried their microphones are being remotely accessed. Most are reluctant to talk politics in public. A Saudi businessman recently asked a guest in his own sitting room to lower his voice as he discussed the kingdom’s anti-corruption campaign with friends.

Three killed in Saudi Arabia following Houthi missile attack - Three people have been killed in southern Saudi Arabia, after a suspected Houthi missile fired from Yemenhit the town of Jizan late Saturday, Riyadh has said. Saudi-led anti-Houthi coalition Spokesperson Colonel Turki al-Maliki said a "projectile" was "launched deliberately to target civilians" on Saturday, according to Saudi Press Agency, which initially reported two casualtiesHe warned that the Saudi-led coalition - which is waging an air war in Yemen - will retaliate in time. "The Joint Forces Command of the coalition will strike with an iron fist all those who threaten the safety and security of Saudi nationals, residents and critical capabilities" he said. Houthi rebels in Yemen have ramped up missile attacks on Saudi Arabia in recent weeks and months. On Tuesday, Riyadh's air defence systems intercepted a Houthi missile fired from Yemen at the Saudi city of Yanbu, north of Mecca and Jeddah. Other missiles have been intercepted by air defences this month.  The Houthis launched their most audacious ballistic attack yet when the Yemeni rebels fired a series of missiles at the Saudi capital in March. Other attacks on Riyadh have taken place since, the most recent being in May. Saudi and UAE-backed Yemeni government forces have surrounded the key port of Hodieda in recent weeks, putting pressure on the Houthi defenders.The UN and aid agencies have pleaded with the Saudi-led force against an attack on Hodeida, warning that it could lead to mass civilian casualties and starvation. Saudi Arabia, the UAE and other Arab joined the Yemen war in March 2015, to help support the Yemeni government which had fled the capital Sanaa in 2014. At least 10,000 people have been killed, the vast majority civilians from Saudi-led coalition air raids.

Anglo-American Media’s Complicity in Yemen’s Genocide -- We’re living through a massive artificial famine, right now. In NW Yemen, home of the Yemeni Shia who’ve fought off a Saudi-financed invasion, the “coalition” of invaders has settled on a slower, more effective strategy: artificial famine and blockade. This is how you kill off a troublesome population, not with bombs and guns alone. Hunger and disease are much better mass killers than firearms and bombs.NW Yemen has been blockaded for years now. And the Saudi strategy is working well. Yemen has had up to a  million cases of cholera, an illness unheard of in countries with modern antibiotics. Untreated cholera is fatal in about half of all cases (versus 1% when normal treatment is available). Since medical supplies are being blockaded (with the help of the US Navy), and few journalists have made much effort to find out what has been going on in the blockaded areas, we may be dealing with an unreported death toll of half a million people, most of them children.Yemen is a perfect target for artificial famine and blockade, because it never had enough farmland to feed its people. Before the Saudi invasion, Yemen imported almost 90% of its food supplies. When the Saudis imposed their blockade, cutting off all food imports to Hodeidah, the one Red-Sea port serving NW Yemen, those imports stopped. There has never been any alternative route for food supplies to Yemen. Even before the war, road traffic between Saudi and Yemenwas all but shut down. (Which is why, in a year spent a few miles from the Yemen border, I went up to the border many times, looked over it, but never gave a thought to crossing it. It would never have been allowed.)So NW Yemen is closed off very nicely, from the Saudi view. Which is also the view of the US, UK, UAE, Israel, Kuwait, and the oil companies — basically, anyone who matters in this world. Shia Yemenis are dying at a very satisfactory rate, children first (because children are always the first to die in long sieges like this). The next step for the Saudi-led “coalition” will be taking Hodeidah, the Shia provinces’ one source of food and medical aid. That operation is well underway as I write.

UN, Red Cross Evacuate Staff From Yemen Port City Ahead Of "Imminent" US-Saudi Coalition Assault - The New York Times reports that the United Nations is pulling its staff from the besieged Yemeni port city of Al Hudaydah as a massive assault on the country's only major humanitarian lifeline appears imminent. UN staff have played a key role in delivering foreign aid through what is now one of the besieged country's only humanitarian access points to the outside world, through which 80% of all humanitarian aid flows. The NYT details that the UN evacuation comes after "member countries were told that an attack by forces led by the United Arab Emirates was imminent, according to two diplomats briefed on the matter." Houthi and other allied Yemeni tribal forces have held the port city of 600,000 for the last two years after ousting the Saudi backed government in Sanaa three years ago. The Saudi-US military coalition currently besieging the country through airstrikes and sea blockade claims Al Hudaydah is a key arms smuggling point through which Iran supplies the Shia Houthis, including sophisticated ballistic missiles which have hit locations inside Saudi Arabia within the past year. Iran has denied that it is a party to the war which has claimed many tens of thousands of casualties — both through direct fighting and through starvation and disease. While acknowledging the US to be a major part of the coalition preparing for the attack on Al Hudaydah, the NYT has still managed to paint the US-Saudi-Emirati forces as benevolent-minded saviors bent on rescuing Yemeni civilians. While first noting that "Yemen is already classified as the world’s worst humanitarian disaster" with "more than 75 percent of the population... dependent on food aid" and as "millions are on the brink of starvation" the NYT report absurdly emphasizes that only the Americans can stave off disaster: "Diplomats in the region say they believe that only more pressure from Washington will stop the planned assault." Thus while the Pentagon has long been at the forefront of the war on Yemen which has caused the deaths of thousands of children, according to one leaked UN report from last summer, the NYT presents the US role as, in our words, 'reluctant humanitarian aggressors' of some sort.

Arab states launch biggest assault of Yemen war with attack on main port (Reuters) - A Saudi-led alliance of Arab states launched an attack on Yemen’s main port city on Wednesday, the largest battle of the war, aiming to bring the ruling Houthi movement to its knees at the risk of worsening the world’s biggest humanitarian crisis. Arab warplanes and warships pounded Houthi fortifications to support ground operations by foreign and Yemeni troops massed south of the port of Hodeidah in operation “Golden Victory”. Ground battles raged near Hodeidah airport and al-Durayhmi, a rural area 10 km (6 miles) south of the city, media controlled by the Arab states and their Yemeni allies reported. The assault marks the first time the Arab states have tried to capture such a heavily-defended major city since joining the war three years ago against the Iran-aligned Houthis, who control the capital Sanaa and most of the populated areas. The port is the main route for food to reach most Yemenis, 8.4 million of whom are already on the verge of famine. The Houthis deployed military vehicles and troops in the city center and near the port, as warplanes struck the coast to the south, a resident speaking on condition of anonymity told Reuters. People fled by routes to the north and west. CARE International, one of the few aid agencies still there, said 30 air strikes hit the city within half an hour. “Some civilians are entrapped, others forced from their homes. We thought it could not get any worse, but unfortunately we were wrong,” said CARE’s acting country director, Jolien Veldwijk. Saudi-owned Al Arabiya TV quoted witnesses describing “concentrated and intense” bombing near the port itself. “Under international humanitarian law, parties to the conflict have to do everything possible to protect civilians and ensure they have access to the assistance they need to survive,” said Lise Grande, U.N. humanitarian coordinator for Yemen. 

Saudi-led ground troops launch assault on Yemen port city of Hodeida, a key moment in three-year war | South China Morning Post: A Saudi-led coalition backing Yemen’s exiled government began an assault Wednesday morning on Yemen’s port city of Hodeida, a crucial battle in the three-year-old conflict that aid agencies warned could push the Arab world’s poorest country into further chaos. Iranian-aligned Shiite rebels known as Houthis and their allies for years have held the Red Sea port, crucial to food supplies in a nation on the brink of famine after years of war. The battle for Hodeida, if the Houthis don’t withdraw, also may mark the first major street-to-street urban fighting for the Saudi-led coalition, which can be deadly for both combatants and civilians alike. Before dawn Wednesday, convoys of vehicles appeared to be heading toward the rebel-held city, according to videos posted on social media. The sound of heavy, sustained gunfire clearly could be heard in the background. Saudi-owned satellite news channels and later state media announced the battle had begun, citing military sources. Houthi media did not immediately report the attack. Yemen’s exiled government “has exhausted all peaceful and political means to remove the Houthi militia from the port of Hodeida,” it said in a statement. “Liberation of the port of Hodeida is a milestone in our struggle to regain Yemen from the militias.” Forces loyal to Yemen’s exiled government and irregular fighters led by Emirati troops had neared Hodeida in recent days. The port is some 150km southwest of Sanaa, Yemen’s capital held by the Houthis since they swept into the city in September 2014. The Saudi-led coalition entered the war in March 2015 and has received logistical support from the US. 

Yemen – The Starvation Siege Has Begun -Last night the Saudi coalition launched its attack on the city of Hodeidah in Yemen. Hodeidah is the only Yemeni harbor on the Red Sea coast that can take large vessels. It is ruled by the Houthi who in 2014 took over the capital Sanaa and disposed of the Saudi installed Hadi government. 90% of the food for the 18 million people living in Houthi controlled areas comes through Hodeidah.  Saudi-owned satellite news channels and later state media announced the battle had begun, citing military sources. They also reported coalition airstrikes and shelling by naval ships. The initial battle plan appeared to involve a pincer movement. Some 2,000 troops who crossed the Red Sea from an Emirati naval base in the African nation of Eritrea landed west of the city with plans to seize Hodeida’s port, Yemeni security officials said.Emirati forces with Yemeni troops moved in from the south near Hodeida’s airport, while others sought to cut off Houthi supply lines to the east, the officials said. The port is now classified as a zone of active military conflict. Prolonged fighting may well destroy the port infrastructure. Even if the Saudi coalition forces take and reopen it they will continue to block food supplies for the central highlands of Yemen. They want to starve the Houthis into submission.

"Civilians Trapped": Major Assault On Yemen Port Begins; Saudi Ship Attacked -- The biggest and potentially most catastrophic battle in terms of civilian casualties has begun in the three-year war between the Saudi coalition and Iranian-aligned Houthi rebels. The assault began early Wednesday after days of the United Nations warning against the operation which also involves the UAE and United States as leading the campaign on the Houthi held port city of Al Hudaydah.  Reuters reports the following breaking updates:

  • "concentrated and intense" bombing near the port itself.
  • 30 air strikes hit the city within half an hour.
  • Houthis say they hit a coalition barge
  • Port is main route to feed 8.4 million on verge of famine
  • "Some civilians are entrapped, others forced from their homes."
  • Arab warplanes and warships pounded Houthi fortifications to support ground operations by foreign and Yemeni troops massed south of the port of Hodeidah in operation "Golden Victory".
  • Ground battles raged near Hodeidah airport and al-Durayhmi, a rural area 10 km (6 miles) south of the city

Though Saudi and coalition authorities have long imposed a media blackout on Yemen which has resulted in little on the ground footage of the war, some early footage of the ground assault has emerged on pro-Saudi social media:عاجل | فيديو مباشر: بإسناد القوات المسلحة الإماراتية القوات المشتركة تقترب من مطار الحديدة #الحديدة_تتحرر— الحديدة مباشر (@HdeidahMubasher) June 13, 2018  Early footage of Saudi-UAE coalition troops mustering outside of the contested port city:

Yemen war: Fighting rages over vital port of Hudaydah - BBC -- Fierce fighting has been reported after pro-government forces in Yemen, backed by a Saudi-led coalition, launched an offensive on the rebel-held city of Hudaydah, a key port for aid supplies.Thirty Houthi rebels and nine members of pro-government forces are said to have been killed.Coalition forces are now within two kilometres of the city's airport, the Emirati envoy to the UN says.The UN Security Council restated its fears about the fate of civilians.The emergency meeting on Thursday, called by the UK, saw members agree the port must be kept open to prevent a further worsening of Yemen's humanitarian crisis. About eight million people are at risk of starvation in the war-torn country and the coastal city is where most aid arrives for people in rebel-held areas.  However, there was not enough support on the council for Sweden's motion to demand an immediate halt to the offensive on Hudaydah. Vassily Nebenzia, Russia's UN ambassador and president of the council in June, said the body urged "all sides to uphold their obligations under international humanitarian law".

The siege of Hodeidah, Washington’s war crime in Yemen -- The siege of Yemen’s Red Sea port of Hodeidah launched by Saudi and United Arab Emirates-led forces at dawn on Wednesday could cost the lives of some quarter of a million people in the crowded city itself, according to a UN estimate, while threatening to kill millions more across the country through hunger and disease. Inflicting mass suffering upon civilians is the main purpose of the attack on Hodeidah, which is the principal lifeline for food, fuel and medicine for at least 70 percent of the population in a country that depends on imports for up to 90 percent of its food. The aim is to starve the impoverished Yemeni people into submission.   Last year alone, some 50,000 Yemeni children starved to death—roughly 1,000 every week—according to the aid group, Save the Children. One million Yemenis are infected with cholera, an epidemic that has claimed the lives of nearly 2,500 people. As part of its preparations for the Hodeidah offensive, Saudi warplanes bombed a cholera clinic run by Doctors without Borders.This total war against an entire population, of the likes carried out by Hitler’s Third Reich three-quarters of a century ago, would be impossible without the uninterrupted support—military and political—of US imperialism since its outset.The US, together with its main NATO allies the UK and France, has supplied the planes, warships, bombs, missiles and shells used to devastate Yemen and slaughter its people. In his eight years in office, President Barack Obama presided over some $115 billion in arms sales to the monarchical dictatorship in Riyadh. The Trump administration, which has sought to forge an anti-Iran axis with Saudi Arabia, the other reactionary Gulf oil sheikhdoms and Israel, has touted arms deals with Riyadh that potentially would amount to $110 billion. The Pentagon has given direct and indispensable aid to the Saudi-led onslaught, providing midair refueling for the planes that bomb Yemeni civilians, staffing a joint command center in Riyadh with US intelligence and logistics officers and reinforcing the Saudi-UAE blockade of the country with American warships. Recently, US Green Berets have been deployed with Saudi ground forces to assist in their anti-Yemen operations. Under the banner of the “war on terror”, the Pentagon is waging its own air war in Yemen, conducting at least 130 air and drone strikes in 2017, quadruple the number in 2016. The Trump administration gave the go-ahead for the current siege of Hodeidah in the form of a statement from US Secretary of State Mike Pompeo announcing that he had spoken with the rulers of the UAE and “made clear our desire to address their security concerns.” Pentagon officials have reported that US officers are helping to select targets in the port city.

Libya "Before And After" Photos Go Viral -A Libyan man who took photos of himself posing at various spots across Beghazi in 2000 has revisited the same locations 18 years later to photograph life under the new "NATO liberated" Libya. The "before and after" pics showing the utter devastation of post-Gaddafi Libya have gone viral, garnering 50,000 retweets after they were posted to an account that features historical images of Libya under Gaddafi’s rule between 1969 and 2011. It appears people do still care about Libya even if the political elites in Paris, London, and Washington who destroyed the country have moved on. Though we should recall that British foreign secretary Boris Johnson was caught on tape in a private meeting last year saying Libya was ripe for UK investment, but only after Libyans "clear the dead bodies away."   We previously detailed in Libya's Slave Auctions And African Genocide: What Hillary Knew how Libya went from being a stable, modernizing secular state to a hellhole of roving jihadist militias, warring rival governments, and open-air slave auctions of captured migrants. Yet what the viral photos confirm is that Libya was once a place of sprawling hotels, wide and clean city streets, functioning infrastructure, and lively neighborhoods. But these very places are now bullet-ridden ruins rotting amidst the political backdrop of the 'Mad Max' style chaos unleashed immediately after US-NATO's bombing the country into regime change. 

Iraqi ballot box storage site catches fire, drawing calls for an election re-run -- A fire ripped through Iraq's biggest ballot warehouse on Sunday ahead of a vote recount prompted by allegations of fraud during legislative elections that saw a surprise victory for a populist cleric. A senior security official, speaking to AFP on condition of anonymity, said the fire broke out in a warehouse located in Al-Russafa, one of the largest voting districts in eastern Baghdad. Firefighters brought the blaze under control several hours after it started, and the extent of the damage caused to ballot boxes was still unclear. Around 60 percent of Baghdad's two million eligible voters had cast their ballots in the May election in Al-Russafa district. A column of black smoke billowed from the warehouse, normally used to store foodstuff, and could be seen across the capital. Warehouse staff ran out of the building carrying blue and white plastic ballot boxes to safety as firefighters backed by around a dozen trucks struggled to put out the fire, an AFP reporter said. Late on Sunday, Iraqi Prime Minister Haider al-Abadi said that the burning of a storage was part of a plot to harm Iraq's democratic process, the first government indication the incident was deliberate. "Burning election warehouses ... is a plot to harm the nation and its democracy. We will take all necessary measures and strike with an iron fist all who undermine the security of the nation and its citizens," Abadi said in a statement.

US-Backed Kurds Agree To "Unconditional Talks" With Syrian Government After Pentagon-Turkey Deal - We've long predicted that the US-backed Syrian Kurdish forces currently holding a vast chunk of land in Syria's northeast with the help of American coalition air power will naturally drift toward striking a deal with Assad, as the two sides have throughout the war exercised some degree of quiet cooperation against ISIS, foreign jihadists, and Turkish expansionism. In a huge weekend development which has gone largely unnoticed by mainstream media, the political wing of the US-trained and supported Syrian Democratic Forces (SDF) announced it is open to entering into unprecedented direct negotiations with the Assad government over the future of the country. The Syrian Democratic Council, or SDC, is the political arm of the powerful alliance of mostly Kurdish and Arab fighters that make up the SDF, and on Sunday declared willingness to enter into "unconditional talks" with the Syrian government. The London based international Arabic newspaper Asharq Al-Awsat reports the following: In a statement on Sunday, the SDC said it was committed to resolving Syria's deadly conflict through dialogue, and would not "hesitate to agree to unconditional talks". "It is positive to see comments about a summit for Syrians, to pave the way to start a new page," it said.Leading SDC member Hekmat Habib told AFP that both the council and the SDF "are serious about opening the door to dialogue" with the regime."With the SDF's control of 30 percent of Syria, and the regime's control of swathes of the country, these are the only two forces who can sit at the negotiating table and formulate a solution to the Syrian crisis," he said.

Israel is about to destroy this Palestinian village. Will Britain step in? - Israel is intent on destroying the homes of the 173 Palestinians who live in the small shepherding community of Khan al-Ahmar, along with the school that serves 150 children from the area. Last month, Israel’s high court of justice removed the last obstacle to this barbaric act of demolishing an entire community in order to forcibly transfer its residents and take over their land. Israel has announced that the land from which these Palestinians will be evicted will serve to expand the nearby settlement of Kfar Adumim. The story of Khan al-Ahmar exemplifies Israel’s policy of expelling dozens of Palestinian communities from areas it plans to formally annex. To keep international criticism to a minimum, Israel usually tries to evict residents slowly by creating unbearable living conditions that force them to leave their homes, allegedly of their own free will. To that end, the authorities refuse to connect these communities to running water and power grids, do not authorise construction of homes or other structures and restrict their pastureland. Now, emboldened by Donald Trump’s overt disdain for human rights – or basic human decency for that matter – and bolstered by the Israeli idea that the European Union is too weak to act decisively, the authorities have stepped up their efforts and issued demolition orders for all the structures in Khan al-Ahmar. Justice Noam Sohlberg, who wrote the ruling that rejected the petition against the execution of these orders, noted the “undisputed” premise that “construction in the Khan al-Ahmar compound, both the school and the dwellings, is unlawful”. He went on to argue that the court should not interfere in the state’s “law enforcement” actions.

Iran, spurned by US, angrily watches Trump-North Korea talks  — For Iran, the so-called "Axis of Evil" has boiled down to a party of one, as President Donald Trump prepares for direct talks with North Korea. For those in Tehran, whether hard-liners, reformists or people simply trying to get by in Iran's worsening economy, it's head-spinning, especially after seeing Trump pull America out of the nuclear deal with world powers.  It wasn't supposed to be like this. Excited crowds flooded the streets after the 2015 nuclear deal that Iran struck with world powers, including the U.S. under President Barack Obama. The deal saw Iran agree to limit uranium enrichment in its nuclear program, which the West feared could be used to build a nuclear weapon. For Iran, which long has maintained its atomic program was for peaceful purposes, the deal took the shackles of sanctions off its economy and opened up its oil sales abroad.  Then came Trump, who campaigned pledging to tear up the nuclear deal. Once elected, he included Iran in his travel bans, blocking Iranians from traveling to the U.S., home to a large Iranian community.  Then on May 8, Trump followed through on his threat and pulled America out of the nuclear agreement, dooming billions of dollars of business deals, including Boeing sales. But at the same time, Trump had traded his criticism of Kim Jong Un, a leader he once derided as "Little Rocket Man" on Twitter, for hopes of a one-on-one meeting.

Iranians Rage At Nike After World Cup Team Forced To Switch Shoes -- It's not merely that the Iranian national team for the 2018 World Cup will no longer have access to Nike shoes or equipment, it's that their current shoes are actually being taken away from them. The announcement set Iranian social media ablaze with anger over the weekend, with many Iranians declaring they would never again buy Nike products: “The sanctions mean that, as a U.S. company, we cannot provide shoes to players in the Iran national team at this time,” Nike told NBC News in a statement.  Soon after initial breaking reports of the decision last week, Iranian-American Middle East analyst Holly Dagres noted, "In the wake of Nike's decision to not provide cleats to Iran's national football team, Iranians are pushing a boycott of the US brand using #BoycottNike."Nike will provide 60% of World Cup players with their shoes as official sponsors when they take the field on June 14 in St. Petersburg, Russia, but says it will confirm to US law citing new U.S. Treasury-enforced sanctions on Iran, and impending White House plans for more. Violators can face punishment of up to $1 million and 20 years in prison, and American banks assisting in business transactions can also be "subject to civil penalties of up to the greater of $250,000 or twice the transaction value," according to the US Department of the Treasury Iran sanctions page.Now, no Iranian players are allowed to wear Nike shoes or gear after the last minute decision — items which the company had previously provided; however, less than a week away from Iran's first game with Morocco on Friday players are being forced to switch.

Is Putin really ready to “ditch” Iran? - The topic of Russian actions in Syria still continues to fascinate and create a great deal of polemics.  This makes senses – the issue is exceedingly important on many levels, including pragmatic and moral ones, and today I want to stick strictly to the pragmatic level and set aside, just for a while, moral/ethical/spiritual considerations.  Furthermore, I will also pretend, for argument’s sake, that the Kremlin is acting in unison, that there are no Atlantic Integrationists in the Russian government, no 5th column in the Kremlin and that there is no Zionist lobby exerting a great deal of influence in Russia.  I will deal with these issues in the future as there is no doubt in my mind that time and events will prove how unfounded and politically-motivated these denials are in reality. But for the purpose of this analysis, we can pretend that all is well in the Kremlin and assume that Russia is fully sovereign and freely protecting her national interests. So what do we know about what is going on in Syria? I submit that it is obvious that Russia and Israel have made some kind of deal.  That there is an understanding of some kind is admitted by both sides, but there is also clearly more happening here which is not spelled out in full.  The Israelis, as always, are bragging about their total victory and posting articles like this one: “In Syria, Putin and Netanyahu Were on the Same Side All Along” with the subheading reading “Putin is ready to ditch Iran to keep Israel happy and save Assad’s victory“.  Really?

China, Iran agree to strengthen strategic cooperation despite US pressure - China and Iran have agreed to strengthen strategic cooperation during Iranian President Hassan Rouhani's visit to China, possibly paving the way for steady crude flows between the two countries. The meeting with China's president Xi Jinping took place on Sunday on the sidelines of the Shanghai Cooperation Organization summit in the eastern coastal city of Qingdao, and comes at a time when Iran faces reimposition of sanctions by the US, which could impact its crude oil exports. China is the largest buyer of Iranian crude and did not reduce crude imports from Iran even at the height of the previous sanctions against Tehran in 2012. In the first quarter of 2018, China's imports of Iranian crude rose 17.3% year on year to 658,000 b/d, making Iran its sixth-biggest supplier. Xi and Rouhani agreed on Sunday to enhance bilateral pragmatic cooperation and pursue comprehensive strategic partnership, according to China's state-owned Xinhua news agency. Xi also called on the two countries to deepen political relations to enhance strategic mutual trust, increase exchanges at all levels, and continue to support each other on issues of major concern involving their respective core interests, according to Xinhua news agency. The latest agreement is expected to further advance bilateral comprehensive strategic partnership established during Xi's state visit to Iran in 2016. Xinhua quoted Xi as saying that the Iran nuclear deal should continue to be implemented earnestly as it acts to stabilize the peace and stability in the Middle East as well as for the international non-proliferation regime.  '