Sunday, August 28, 2016

total supplies of everything oil jump 6.6 million barrels to another new record as rig count drops

oil prices bounced around his week and ended somewhat lower, as news of increasing international oil production and the building domestic product glut dampened speculative buying on the unlikely prospect of an OPEC-Russian production freeze...the 7 day price rally that helped push prices up over 22% from their lows in the first three weeks of August ended on Monday, as forced short squeeze buying came to an end amid news of increased Chinese, Iraqi and Nigerian exports, sending the expiring September WTI oil contract down 3% to close at $47.05 a barrel, while the new October oil contract fell $1.70, or 3.5% to close at $47.41 a barrel...oil production freeze talk returned to the fore on Tuesday, on reports that Iran was 'sending positive signals' that it may support an OPEC attempt to support prices as October oil, now the widely quoted front month contract, closed up 69 cents at $48.10 a barrel, despite a report from the American Petroleum Institute that crude oil stockpiles had increased by nearly 4.5 million barrels, the biggest buildup in 4 months...oil prices were then slammed on Wednesday and closed down $1.33 at $46.77 a barrel after the EIA reported increased inventories across the entire oil and oil products complex, even though their 2.5 million barrel build of crude was 2 million less than the API had telegraphed less than 24 hours earlier...oil prices then returned to the plus column on Thursday, rising 56 cents to $47.33 a barrel, on positive economic reports and further cooperative statements from Iran’s oil minister...oil rose again on Friday after an Iranian TV report that Yemeni forces had fired ballistic missiles at Saudi oil facilities and held on to most of those gains to close the week 1.8% lower at $47.64 a barrel, after Baker Hughes reported the U.S. oil rig count was unchanged for the week....

The Latest Oil Stats from the EIA

as mentioned, the oil data for the week ending August 19th from the US Energy Information Administration showed increases in inventories of oil and of all major refined products, exacerbated by oil imports that were near a 4 year high, even as refineries returned to operating at a seasonable level...however, this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance was again a large positive, at +523,000 barrels per day, which meant that 523,000 more barrels of oil per day showed up in our final consumption and inventory figures this week than were accounted for by our production or import figures, meaning one or several of this week's metrics were off by that amount, so we have to again take this week's data with a large grain of salt...that's now the 9th week in a row that we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment is now up to a positive 93,000 barrels per day, a reversal of the negative adjustment we saw through the first 6 months of this year, when much of what we had appeared to have produced or imported wasn't showing up in the final consumption or inventory figures... 

at any rate, the EIA reported that our imports of crude oil rose by an average of 449,000 barrels per day to an average of 8,738,000 barrels per day during the week ending August 19th, which was the second most oil we've imported in any week since October 19th of 2012....this week's imports were more than 1.44 million barrels per day, or 21.7%, more than the 7,199,000 barrels of oil per day we imported during the week ending August 21st a year ago, and the 4 week average of our oil imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) rose to an average of 8.5 million barrels per day, 13.3% higher than the same four-week period last year... 

at the same time, our field production of crude oil fell by 49,000 barrels per day to an average of 8,548,000 barrels per day during the week ending August 19th, as a 6,000 barrel per day increase in Alaskan oil production was offset by a 55,000 barrel per day drop in production from the lower 48 states...that left the week's oil production down by 8.5% from the 9,337,000 barrels we produced during the week ending August 21st of 2015, and 11.1% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...our oil production for the week ending August 21st is now 671,000 barrels per day lower than we what were producing at the beginning of this year...  

meanwhile, crude oil used by US refineries dropped by an average of 186,000 barrels per day to an average of 16,679,000 barrels of crude per day during the week ending August 19th, as the US refinery utilization rate fell to 92.5% for that week, down from 93.5% of capacity the prior week, and down from the refinery utilization rate of 94.5% logged during the week ending August 21st last year...the drop in refining was entirely due to a 244,000 barrel per day drop in oil used on the Gulf Coast, where refineries were slowed by flooding in Louisiana and a refinery fire in Texas....product bound east cost crude oil refining actually rose by 60,000 barrels per day, though their capacity utilization only rose 85.5%, in contrast to a 94.4% capacity utilization rate of a year ago, when a glut of products was not a problem...nationally, the amount of crude oil refined this week was 21,000 barrels more than the 16,658,000 barrels of crude per day US refineries used during the week ending August 21st last year, and 1.6% more than the equivalent week in 2014... 

the 186,000 barrel per day drop in crude oil being refined in turn led to a 155,000 barrels per day drop in our refineries’ production of gasoline, which fell to 10,035,000 barrels per day during the week ending August 19th...still, that was 2.6% higher than our gasoline output of 9,782,000 barrels per day during the week ending August 21st last year, and 9.6% higher than the gasoline production of the equivalent week of 2014....at the same time, refinery output of distillate fuels (diesel fuel and heat oil) was also down, falling by 90,000 barrels per day to 4,849,000 barrels per day during the week ending August 19th....that left our distillates output 1.4% less than the 4,906,000 barrels per day that was being produced during the same week last year, and 1.3% less than the distillates production of the equivalent week of 2014... 

even with production of both gasoline and distillates down however, supplies of both left over at the end of the week were higher than last week, as were supplies of all other major refined products...our gasoline inventories rose by 36,000 barrels to 232,695,000 barrels as of August 19th, as our gasoline imports rose by 191,000 barrels per day to 801,000 barrels per day...that left this week's gasoline inventories 8.5% higher than the 214,434,000 barrels of gasoline that we had stored on August 21st last year, and also 9.6% higher than the 212,314,000 barrels of gasoline we had stored on August 22nd of 2014...similarly, our distillate fuel inventories rose by 122,000 barrels to 153,257,000 barrels by August 19th, which left our distillate inventories 2.3% above the distillate inventories of 149,836,000 barrels of August 21st last year, and 24.8% above the distillate inventories of 122,794,000 barrels of August 22nd, 2014...  

inventories of all other major products rose as well....our stockpiles of propane/propylene rose by 2,391,000 barrels to 96,135,000 barrels last week, which meant they were 0.4% above the then record high of 95,724,000 set during the week of August 21st last year, and 28.7% higher than the propane/propylene inventories of the same week in 2014...inventories of NGPL (Natural Gas Plant Liquids) and LRG (Liquefied Refinery Gases) other than propane/propylene rose by 2,628,000 barrels to 148,086,000 barrels as of August 19th, 17.2% higher than the 126,335,000 barrels we had stored as of August 21st last year, and 15.6% higher than the equivalent week in 2014...inventories of kerosene type jet fuel rose by 102,000 barrels to 41,751,000 barrels as of August 19th, not up much from our jet fuel stockpiles of 41,694,000 barrels on August 21st last year, but 20.3% higher than our 34,719,000 barrels of jet fuel supplies we had stored on August 22nd of 2014...and stockpiles of residual fuel oils rose by 1,443,000 barrels to 40,493,000 barrels as of August 19th, 1.9% higher than the 39,719,000 barrels we had stored a year earlier, and 11.7% higher than the 36,248,000 barrels of residual fuel oils we had stored on August 22nd 2014...

lastly, with the big jump in imports and the refinery slowdown, our inventories of crude oil that has yet to be refined into any of the above products also rose, increasing by 2,501,000 barrels to 523,594,000 barrels as of August 19th, the 4th oil inventory increase in 5 weeks...thus we ended up with 16.2% more crude oil in storage than the 450,761,000 barrels we had stored as of the same weekend a year earlier, and 45.3% more crude oil than the 360,475,000 barrels we had stored on August 22nd of 2014...

tying it all together, the chart below, from Zero Hedge, shows the aggregate of all oil and oil products we had in storage for every week since the beginning of 1990; it's a compact version of the interactive graph that accompanies the EIA's Weekly U.S. Ending Stocks of Crude Oil and Petroleum Products page...as of August 19th, our total stockpiles of oil and oil products set a new record at 1,400,176,000 barrels, the 23rd new record high set in 2016, and 6,613,000 barrels more than the record set for this metric last week...we've now set new records for total supplies 8 weeks in a row, adding a total of 28.3 million barrels of oil and oil products to what we already have stored over that 8 week stretch....you might also note from that chart that our 1.4 billion barrels of total supply is now more than 30% higher than the 2010 to 2014 average, and 40% higher than the 1 billion barrel average of the decade before that...

August 24 2016 total EIA inventory for week ending August 19

This Week's Rig Counts

US drilling activity fell for only the 2nd time in the past 13 weeks during the week ending August 26th, following the prior string of 39 weeks where the rig count had not risen at all...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rigs to 489 rigs as of Friday, which was also down from the 877 rigs that were deployed as of the August 28th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil was unchanged this week at 406, but was still down from the 675 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 2 rigs to 81 rigs this week, which ties the previous all time low for natural gas rigs set 3 weeks earlier on August 5th -- prior to this year, there is no record of less than 150 natural gas rigs deployed in the US in any week...gas rigs were also down from the 202 natural gas rigs that were drilling on August 28th year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas on August 29th, 2008...there were also two rigs drilling this week that were classified as miscellaneous, unchanged from last week but up from the same week a year ago, when there were no miscellaneous rigs deployed....  

one of the platforms that had been drilling offshore of Louisiana in the Gulf of Mexico was shut down this week, leaving 17 still active in the Gulf of Mexico and offshore nationally at week end, down from 29 rigs drilling in the Gulf and a total of 30 rigs offshore nationally a year ago...however, there was also another rig set up to drill through an inland lake in southern Louisiana, which brought the inland waters rig count up to 4 rigs, which was the same as a year earlier...

the number of working horizontal drilling rigs fell by 3 rigs this week after rising by 7 rigs last week, which left the count of active horizontal rigs at 379 rigs, which was still down from the 672 horizontal rigs that were in use on August 28th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the vertical rig count dropped by 2 rigs to 62 rigs this week, which was down from the 125 vertical rigs that were drilling in the US during the same week last year...meanwhile, the directional drilling rig count rose by 3 rigs to 48 rigs, which was still down from the 80 directional rigs that were deployed during the same week last year...     

the details on this week's changes in drilling activity by state and shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes which shows those changes...the first table below shows weekly and annual rig count changes for the major producing states, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of August 26th, the second column shows the change in the number of working rigs between August 19th and August 26th, the third column shows the August 19th rig count, the 4th column shows the change in the number of rigs running this Friday from the equivalent Friday in August a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this week's case was August 28th of 2015:    

August 26 2016 rig count summary

once again, the Permian basin of western Texas shows the only significant increase in the rig count this week, as has typically been the case during the 13 weeks that oil drilling has generally been on the increase...on the other hand, there were two rigs removed from the Denver-Julesburg-Niobrara chalk of the Rockies front range, the first pullback of that magnitude in that basin since February; the rig count there had previously climbed from 12 to 18 over the prior three months...also note the removal of a single rig from the Utica of Ohio, where 13 rigs remain active, down from 20 rigs a year ago...also, not shown on the state table above was the decrease from 3 rigs to 2 rigs in Alabama, which brings them back to the same level of drilling activity as they saw a year ago, and the increase from 3 rigs to 4 rigs in Mississippi, which is also an increase from the 3 rigs working in Mississippi as of August 28th a year ago…

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Patterson says fracking regulation bill is dead for 2016 - The Star Beacon — A state bill that would have introduced a host of regulations to the fracking industry is dead for 2016, and lawmakers will have to go back to the drawing board in 2017.  The Ashtabula County League of Women Voters met Tuesday to discuss the state of the hydraulic fracturing industry in the county. The league invited Vanessa Pesec, head of the Network for Oil and Gas Accountability and Protection, to speak.  During the session, State Rep. John Patterson, D-Jefferson, confirmed a bill designed to balance the economic boons and environmental concerns that come with fracking won't go any further in this General Assembly, with only five session days left after the Nov. 8 election. Patterson introduced House Bill 422 last year alongside fellow Democrats 63rd District Rep. Sean O'Brien and 64th District Rep. Mike O'Brien. Since then it's had only one hearing, he said. Patterson urged league members at Tuesday's meeting to review the bill on their own — it's viewable online at www.legislature.ohio.gov — and "see what holes are in it" before it's reintroduced during the next General Assembly in January.  About 1.3 million barrels of toxic fracking wastewater, or brine — that's more than 56 million gallons — were dumped in Ashtabula County injection wells last year. In 2014, the county took in 1.1 million barrels, and remains one of the top 10 Ohio counties with the most brine dumping. Across the state, about 1.3 billion gallons of waste were dumped last year. About half of that waste came from outside the state, according to Pesec's research. Projections show the state could end up taking in more than 120 billion gallons per year. "How high is that going to go?" she said.

Ohio Residents Clash With State and County Government in Fight to Ban Fracking via the Ballot  - For years, local Ohioans have been told by courts and elected officials that they have no control over fracking — “it is a matter of state law.”  However, groups of determined residents are refusing to accept this argument, taking steps to establish local democratic control over what they see as vital societal questions of health, safety, and planetary survival. But not without resistance from their own governments.  In recent years, Ohio has seen fracking-induced earthquakes, contaminated waterways, and new proposals for natural gas pipelines and compressor stations, all amidst the accelerating march of climate change. Together, these events have brought the fight against fracking to a fever pitch for the Buckeye State.    Fed up, residents have taken to the local ballot initiative process — by which citizens write, petition for, and vote on legislation — to propose “Community Bill of Rights” ordinances to ban fracking, injection wells, and associated infrastructure for natural gas production and transportation. Their efforst are part of a growing nationwide Community Rights movement. This summer, citizens of Medina, Portage, Athens, and Meigs counties collected signatures for county-wide ballot initiatives that would establish new county charters and enshrine rights to local democratic control over fossil fuel development. All four gathered enough signatures to get on their respective November ballots. Normally, that would be enough. But not in Ohio, where Secretary of State and gubernatorial hopeful Jon Husted has done everything he can to stymie the movement’s use of direct democracy.  It is a rematch from last year, which ended in the Ohio Supreme Court pulling three county-wide initiatives — in Medina, Fulton, and Athens counties — from their ballots, just weeks before the November 2015 elections.  The court battle came after Husted claimed “unfettered authority” to determine the legality of local initiatives, before they go to a vote. Though his power grab was struck down by the court, Husted won the case on a technicality, and no votes were cast. The court ruled that the county initiatives failed to define a new “form of government,” a requirement for new county charters, which all the initiatives proposed.

Supreme Court asked to order county charters to be placed on ballot --  A lawsuit is asking the Ohio Supreme Court to order Secretary of State Jon Husted and the Athens County Board of Elections to place a county charter proposal on the November ballot. The court case, filed Friday, also seeks ballot placement for proposed charters in Meigs County and Portage County. Elections boards in all three counties declared petitions seeking to put the charters on the ballot to be invalid, although it was undisputed that the petitions contained enough valid signatures. Charter supporters filed protests which took the charter petitions before Husted, who last week denied the protests and ruled the charters should not be on the ballots in the three counties. In the Supreme Court filing, the charter proponents argue that Husted and the elections boards improperly delved into the content of the charters when deciding they should not be on the ballot. "Such inquiry or inquiries violated the constitutional prohibition against allowing ballot proposals to be placed on the ballot according to the acceptability of their content to elections officials," the court action argues. Husted disqualified the ballot proposals on grounds that the charters did not fully provide for all the duties that county officeholders are required by law to perform. He called it a "foundational prerequisite" in the Ohio Constitution. The charter proponents argue that providing all the duties is not necessary in order to get the charters on the ballot, and that the charters — which would leave current elected offices in place — contain sufficient description of the form of government that would exist under the charters.

Pipeline firm touts study that shows economic growth - Toledo Blade -- Kinder Morgan’s proposed $500 million Utopia East pipeline is “emblematic of what’s happening here in northwest Ohio with the changing energy landscape across America and — really — the world,” Allen Fore, the company’s vice president of public affairs, told about 200 people attending a Rotary Club of Toledo luncheon Monday.  Moments later, he gave the audience a sneak peek at results of an economic-impact study being released today that claims Ohio’s economy will reap $237.3 million in benefits over the project’s first five years. That study, generated at Kinder Morgan’s request by Kent State University researchers Shawn Rohlin and Nadia Greenhalgh-Stanley, asserts the pipeline will generate or support $144.9 million in new jobs, income, and local spending; $87.5 million in Ohio residents’ earnings, and $4.9 million in tax revenues.The project is expected to create 2,132 new and indirect jobs, about 900 of which would be in construction in 2017, although only five jobs will be permanent. About 215 miles of pipeline would be laid in Ohio, connecting to existing pipeline. According to the study, the project will spur increased spending during construction, spending by out-of-state workers, spending by permanent workers, and reduced manufacturing costs for Ohio firms in the plastics industry. About half the workers are expected to come from out of state, according to the report.

NOVA's plan to boost its Marcellus / Utica ethane use in Sarnia -- NOVA Chemicals’ 1.8-billion-pound/year ethylene plant in Sarnia, ON already is one of the largest consumers of Marcellus/Utica-sourced ethane, and plans are in the works to significantly increase the steam cracker’s ethane consumption.  In 2018, NOVA will complete a project that will enable the cracker to be fed 100% ethane; the petrochemical company also is mulling a cracker expansion –– again with ethane as the feedstock –– and a new polyethylene plant next door. All these plans are driven in large part by the availability of low-cost ethane piped from the U.S. Northeast.  From the beginning of the hydrocarbon era in North America, Sarnia has played an outsized role in crude oil, refining and petrochemicals, in large part due to that essential truth of real estate: location, location, location.  First, it was its local oil resource. As we said in Part 1 of this series, an 1858 oil well in nearby Oil Springs, ON, is said to have been the first on the continent. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were railroads and pipelines); that infrastructure made Sarnia a refining/petchem center, a position that continues to this day, decades after most oil production in southwestern Ontario dried up.  Earlier, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market.  Then, we turned to Sarnia’s increasingly important natural gas liquids (NGLs) sector –– the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates the propane/butane mix into purity products, the NGL storage facilities, and the big NOVA ethylene plant that “cracks” ethane, propane and butane into petrochemical products, with the star of the show being ethylene –– a critically important petchem building block.

Gulf Coast’s first ethane shipment soon to leave for Europe --The first ethane shipment out of Enterprise Products Partners’ (EPP) new export terminal in Morgan’s Point, Texas, is preparing to set sail for Norway. As of Thursday morning, the JS INEOS Intrepid was docked at the terminal, preparing to take on its ethane cargo. The terminal, located on the Houston Ship Channel, is the second to open in the United States, and has an export capacity of up to 200,000 barrels of liquefied ethane per day, of which about 90% is contracted. The United States’ first ethane export terminal, at Marcus Hook, Pennsylvania, has been shipping ethane cargoes since March of this year. Ethane can either be extracted along with other natural gas plant liquids (NGPL) and sold separately, or left in the processed gas and sold as part of the natural gas stream. Recent rapid growth in natural gas production from resources rich in NGPL has yielded higher quantities of ethane than the U.S. market can absorb, leading to growing amounts of ethane left in the processed gas stream. Increased ethane exports could slow or reverse this trend. Natural gas produced in the Marcellus and Utica formations, located primarily in Pennsylvania and Ohio, respectively, tends to be rich in ethane. The Marcus Hook terminal sources all of its ethane from these formations. Some of this Appalachian ethane likely will be delivered to Morgan’s Point via EPP’s Appalachia-to-Texas Express (ATEX) pipeline, which moves ethane from gas fractionation plants in the Marcellus and Utica to the company’s storage complex in Mont Belvieu, Texas.

Losses Adding Up For Exxon, Chevron — In 2014, Ohio and West Virginia saw an average of about 65 rigs running to extract natural gas and oil from the Marcellus and Utica shales, with a majority of those located in the Upper Ohio Valley. After two years of tumbling prices, there are now only 21 rigs running in the two states, with only 7 of those in West Virginia. The profits of two global energy giants, Exxon Mobil and Chevron, seem to correlate with the significant drop in drilling activity throughout the region during the last two years. From April through June 2014, Exxon and Chevron earned a combined $14.5 billion worth of profits. During the same period this year, however, that total profit fell to just $200 million, with Chevron actually posting a $1.5 billion loss during the quarter. San Ramon, Calif.-based Chevron maintains operations in Marshall County. Via its XTO Energy subsidiary, Irving, Texas-based Exxon features active wells in Belmont and Monroe counties. “The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world,” Chevron Chairman and CEO John Watson said. In the second quarter of 2014, Chevron earned $5.7 billion. At that time, a barrel of oil was worth about $103 on the New York Mercantile Exchange, with a 1,000 cubic-foot unit of natural gas (Mcf) then valued around $4.79. However, in 2016 second quarter, the NYMEX price for oil was about $48.46 and an Mcf of natural gas was only about $2. These lower prices contributed to Chevron actually losing $1.5 billion from April through June.  Exxon, meanwhile, did earn $1.7 billion during the three-month period this year, but this seems paltry compared to the $8.8 billion it collected from April through June 2014.

Fracking chemicals exposure may harm fertility in female mice | EurekAlert! Science News: Prenatal exposure to chemicals used in hydraulic fracturing, or fracking, may threaten fertility in female mice, according to a new study published in the Endocrine Society's journal Endocrinology. The study was the first to find a link between chemical exposure and adverse reproductive and developmental outcomes in female mice. Scientists exposed the mice to 23 chemicals commonly used in fracking, as well as oil and gas development, to study their effects on key hormones. Researchers have previously found that these chemicals are endocrine-disrupting chemicals (EDCs) that mimic or block the body's hormones--the chemical messengers that regulate respiration, reproduction, metabolism, growth and other biological functions. More than 1,300 studies have found links between EDCs and serious health conditions such as infertility, diabetes, obesity, hormone-related cancers and neurological disorders, according to the Endocrine Society's 2015 Scientific Statement. "The evidence indicates that developmental exposure to fracking and drilling chemicals may pose a threat to fertility in animals and potentially people," said the study's senior author, Susan C. Nagel, PhD, of the University of Missouri in Columbia, MO. "Negative outcomes were observed even in mice exposed to the lowest dose of chemicals, which was lower than the concentrations found in groundwater at some locations with past oil and gas wastewater spills."

Living Near a Fracking Site Is Tied to Migraines, Fatigue - The New York Times: Living near a natural gas hydraulic fracturing site is associated with increased rates of sinus problems, migraines and fatigue, according to new research.Scientists had 7,785 randomly selected participants in a large Pennsylvania health system fill out health questionnaires. About a quarter met criteria for one or more of three disorders: chronic rhinosinusitis, migraine headaches and severe fatigue.The study, in Environmental Health Perspectives, ranked participants according to how closely they lived to fracking sites and larger wells. Compared with those in the bottom one-quarter by this measure, those in the top one-quarter were 49 percent more likely to have sinusitis and migraines, 88 percent more likely to have sinusitis and fatigue, 95 percent more likely to have migraines and fatigue, and 84 percent more likely to have all three symptoms.The senior author, Dr. Brian S. Schwartz, environmental epidemiologist at the Johns Hopkins Bloomberg School of Public Health, acknowledged that there may be variables the researchers did not account for, and that this was an observational study that does not prove cause and effect. But, he said, “there have now been seven or eight studies with different designs and in different populations, and while none is perfect, there is now a growing body of evidence that this industry is associated with impacts on health that are biologically plausible.

US Western Gulf of Mexico sale could focus on parcels near Mexico border: experts - Wednesday's US Western Gulf of Mexico Lease Sale will likely be a modest event in light of the industry downturn, even though it will feature more than twice the number as last year of long off-the-market blocks. But some tracts that span the maritime border with Mexico could be hotly contested, experts say, as that country prepares for its first deepwater auction in December that will include companies other than state-owned Pemex. Given lingering low oil prices and minimal E&P capital budgets, this year's annual auction is likely to roughly match the $22.7 million in high bids captured a year ago, Bureau of Ocean Energy Management's Gulf regional director Mike Celata said. "We think it could be comparable to last year's sale," Celata said in an interview. "There are a lot of opportunities available to [companies with] some remaining cash and exploration budget available to them."Last year, 33 bids were placed on the same number of blocks. Just five companies participated in last year's Western auction, the smallest such sale since area-wide leasing began in 1983. Western sales, offering blocks offshore Texas, are traditionally the smaller of two yearly offshore US Gulf auctions. Central-area sales, featuring acreage offshore Louisiana, are held in March.

Climate activists want fossil-fuel lease auction canceled in La. — The historic flooding that has left at least 13 people dead and damaged some 40,000 homes in southwestern and central Louisiana this week was caused by record heavy rain, with as much as 31 inches falling in some places over the course of several days.While scientists are cautious about saying climate change is the cause of any single weather event, they point out that five other states — among them South Carolina, Texas and West Virginia — have experienced deadly flooding in the last 15 months. They also note that the Louisiana flood is the eighth event in that period in which rainfall in a given area of the U.S. has matched or exceeded what scientists predict will occur only once every 500 years.These unusually heavy rainfall events are exactly what scientists have predicted would happen with greater frequency in a warming climate. Last month was the Earth’s warmest on record, and this year is also expected to break temperature records. Given the connection between the Louisiana floods and climate change, environmental activists are calling on the Obama administration to cancel the fossil-fuel lease auction scheduled to take place in New Orleans next week, where it plans to put up for bid 23.8 million acres — an area nearly the size of Virginia — in the Western Gulf of Mexico. “This auction would enable the fossil fuel industry to do more of the very thing that is intensifying these floods in the first place,” Gulf Coast environmental activist Cherri Foytlin wrote in a message posted this week by the climate action group 350.org inviting supporters to sign a petition calling on the administration to call off the auction. “Allowing next week’s fossil fuel auction to move forward is rubbing salt in the wounds of a region already in a state of emergency.”

Few bids received in protested Gulf of Mexico drilling lease sale | NOLA.com: The federal government says three companies are bidding on acreage in the Gulf of Mexico off Texas — and they've made a total of 24 bids on 24 tracts out of more than 4,000 offered. That's even fewer than last year's sale, which was the smallest ever for the western Gulf. Last year, five companies made $22.7 million in high bids — also one per tract, on 33 tracts. The statistics were released in advance of Wednesday's (Aug. 24) sale, which is the first to be broadcast live on the internet. At earlier sales, an official from the Bureau of Ocean Energy Management read bids to oil company representatives and others in a Superdome ballroom in New Orleans. A bureau spokeswoman says protests in March and April played a part in the change, but the agency also wants to broaden the audience by opening it to people anywhere. The three companies bidding are BP Exploration and Production Inc., BHP Billiton Petroleum Inc., and Exxon Mobil Corp. BP bid on 13 tracts, BHP on nine tracts and Exxon Mobil bid on two. When the bids were actually opened Tuesday at BOEM's offices in Elmwood, about a dozen protestors attempted to access the meeting. One was allowed to deliver a petition with 184,000 electronic signatures opposing the lease sale. Four others were arrested when they refused to leave the building until getting a response from President Obama. Opponents contend continued drilling in the Gulf of Mexico and elsewhere will serve to extend consumers' dependency on fossil fuel and worsen climate conditions.

The Latest: Dismal oil tract sale results due to low prices -- The federal government’s first livestreamed oil lease sale suffered from a video glitch, as well as extremely low interest. Only three companies bid for a tiny fraction of the leases available in the Gulf of Mexico, and no bid was competitive. Bureau of Ocean Energy Management director Abigail Ross Hopper read the first two bids and was about to read another when she said “We will pause for a moment.” Several minutes then went by while the screen displayed messages such as “memory full” and “all scenes — now deleting.” The bureau got bids for just 24 of nearly 4,400 tracts offered, totaling just over $18 million. That’s even fewer than last year, when 33 tracts attracted bids. And just like last year, there was only one offer per tract. The bureau had sought to broaden its audience by livestreaming its lease sales. Officials say they don’t know how many people watched. Bids were offered by only three major corporations — BP Exploration and Production Inc., BHP Billiton Petroleum Inc., and Exxon Mobil Corp.A federal official says low oil prices are the reason few companies were interested in bidding in the latest oil lease sale for the Gulf of Mexico. The regional director for the Bureau of Ocean Energy Management, Michael Celata (sel-AH-tuh), says the $18 million sale was below last year’s record low in total money offered, number of bids and number of companies participating. Last year, the same area off the Texas coast attracted 33 bids from five companies for a total of $22.7 million. None of the bids was competitive, either this year or last.

Update On The GOM Lease This Past Week -- As posted yesterday, the GOM western area lease in Louisiana was a bust. From Rigzone today: BHP Billiton Petroleum was the high bidder in the last federal Gulf of Mexico oil and gas lease sale of the Obama Administration, offering $9.9 million on 12 tracts in the Western Planning Area program in place between 2012 and 2017.  BP Exploration & Production Inc. followed BHP with more than $6 million in bids on 10 blocks. Exxon Mobil Corp. was the third company to participate in the August 24, 2016, sale and bid almost $2 million on two tracts.  Deepwater assets drew 40 percent more bids than other depths. In all, 24 bids were offered on 4,399 blocks for a total raise of $18,067,020.

EPA To Texas Fracking Regulators: Your Slip Is Showing! - The Intertubes are buzzing with news that the US Environmental Protection Agency has smacked down Texas regulators for failing to publicly acknowledge that fracking and other fossil-related activities have been linked to a spate of earthquakes, particularly in northern parts of the state. According to our friends over at The Texas Tribune, the move seems calculated toward pressuring the state to take action. Speaking of The Texas Tribune, let’s hear it for Trib reporter Jim Malewitz, who unearthed a link to a 1951 U.S. Geological Survey report prepared with the Department of the Interior titled, “Earthquake Hazard Associated with Deep Well Injection — a Report to the U.S. Environmental Protection Agency.” That may be a bit puzzling for those of you familiar with EPA history, since the agency as we know it today wasn’t formed until 1970, but here’s the cover shot: If you have an explanation, drop us a note in the comment thread. Meanwhile we’re going with printer’s error, as it seems that the document posted online was re-printed as recently as 1990: Here’s the money quote from page 11:Within the United States, injection of fluid into deep wells has triggered documented earthquakes in Colorado, Texas, New York, New Mexico, Nebraska, and Ohio and possibly in Oklahoma, Louisiana, and Mississippi. Oh, snap!The 1951 report also indicates that scientists have had a pretty clear understanding about that linkage for decades: Investigations of these cases have led to some understanding of the probable physical mechanism of the triggering and of the criteria for predicting whether future earthquakes will be triggered, based on the local state of stress in the Earth’s crust, the injection pressure, and the physical and the hydrological properties of the rocks into which the fluid is being injected. Meh, scientists — what do they know, anyways.

Groups challenge federal oil, gas leasing on climate grounds  (AP) — Two environmental groups say in a lawsuit the federal government needs to consider the potential effects of climate change before allowing oil and gas drilling on public land. The federal lawsuit filed Thursday in Washington, D.C., challenges almost 400 oil and gas leases the U.S. Bureau of Land Management recently has issued in Wyoming, Utah and Colorado. The groups WildEarth Guardians and Physicians for Social Responsibility say almost 10 percent of U.S. greenhouse gas emissions trace back to publicly owned oil and gas reserves. BLM spokeswoman Cindy Wertz declined to comment, citing agency policy not to comment on pending litigation. Several groups have joined in a movement to end fossil-fuel extraction on public lands. The U.S. Chamber of Commerce says doing so would wipe out thousands of jobs.

New Energy Institute Report Holds Politicians Accountable for Calls to Ban Energy Production on Federal Lands and Waters -- U.S. Chamber of Commerce - The first report in the the Energy Institute’s Energy Accountability Series finds that proposals from Hillary Clinton and other politicians to ban oil, gas, and coal production on federal lands and waters would cost America hundreds of thousands of jobs and billions in revenue. The Energy Accountability Series takes a substantive look at what would happen if energy proposals from candidates and interest groups were actually adopted. Over the past year, a growing number of politicians and interest groups—and the Democratic Party itself—have called for an end to oil, natural gas and coal extraction from federal lands and offshore waters.  That concept is the basis of the “Keep it in the Ground Act,” a House bill with over 20 cosponsors. If these policies were to be enacted, the Energy Institute’s new report found that it will cost the U.S. $11.3 billion in annual royalties lost, 380,000 jobs, and $70 billion in annual GDP. 25% of America’s oil, natural gas and coal production would be halted.“American voters deserve to understand the real-world impacts of the proposals that candidates and their allies make,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy. “In an effort to appeal to the ‘keep it in the ground’ movement, a number of prominent politicians have proposed ending energy production on federal lands, onshore and off. Their proposals will have a direct, harmful effect on the American economy, and in particular decimate several states that rely heavily on revenues from federal land production. Given the implications, these policy proposals should not be taken lightly.”

Oil billionaire: Trump didn't 'understand' simple fracking question - Donald Trump has promised to "unleash" America's oil industry, but he recently sounded confused about the raging debate at the heart of the matter. Harold Hamm, the billionaire oil man and one of Trump's biggest cheerleaders, even said that Trump doesn't "understand" the issue. The confusion stems from an interview by a Colorado television station last month. The GOP presidential candidate told 9NEWS he could support local attempts to ban fracking -- the controversial technology that has fueled America's oil and gas boom.  "Well, I'm in favor of fracking, but I think that voters should have a big say in it," Trump said in the interview. "If a municipality or state wants to ban fracking, I can understand it."  Even though Republicans often support the power of states to regulate themselves, those comments raised eyebrows. That's because supporting local fracking bans would undercut Trump's promise to ramp up America's already-robust oil production. Trump has previously slammed President Obama's energy policies, alleging the Democrat has "tried to destroy this renaissance" despite presiding over the biggest oil boom in U.S. history.

Top Energy Adviser Says Donald Trump Is Solidly Behind Fracking - WSJ — Donald Trump’s top energy adviser on Tuesday sought to play down the GOP presidential candidate’s recent comments that he could support local efforts to ban hydraulic fracturing. Oil man Harold Hamm said in an interview that Mr. Trump didn't fully understand a recent question about whether he supported local bans on hydraulic fracturing, or fracking, and that the Republican nominee was a strong supporter of the industry. “Donald Trump did not understand that concept at the time in my opinion,” said Mr. Hamm, the chief executive of Continental Resources Inc., in an interview on the sidelines of the Colorado Oil and Gas Association’s annual conference.“He does now,” Mr. Hamm added.   Mr. Trump said in a July interview with a Colorado television station that he could support local efforts to ban fracking. Energy companies have used the extraction technology—which involves pumping large amounts of water and chemicals into rock formations—prolifically over the last decade to unlock vast reserves of oil and natural gas. But it has riled environmentalists, who worry it could contaminate water supplies  “Well, I’m in favor of fracking, but I think that voters should have a big say in it,” Mr. Trump said to 9NEWS in Colorado. “If a municipality or state wants to ban fracking, I can understand it.” Mr. Hamm said he hasn't spoken to Mr. Trump about the comments, but emphasized that he is confident the GOP nominee doesn’t support local bans on fracking. A request for comment to the Trump campaign wasn’t immediately returned Tuesday.

High-Price Ethanol Credits Add to Refiners’ Woes - — The oil-refining business has always been a tough way to make money.Stiff competition, heavy regulation and high operating costs make for some of the lowest profit margins in the petroleum industry. And in the last year, profits have been even harder to come by because of the global fuel glut that has translated into bargain-basement prices for the gasoline and diesel that refiners produce.But lately, the game has been tougher still for people like Jack Lipinski, chief executive of CVR Energy, an independent operator of two refineries in Oklahoma and Kansas. The problem involves a soaring cost that is outside of his control.This year, on top of everything else, CVR Energy will have to spend as much as $235 million on credits for renewable fuels. That is nearly double what the company spent last year on the credits, and it exceeds the company’s total labor, maintenance and energy costs.Mr. Lipinski blames the federal program that requires CVR to buy the credits, but he also suspects a role by unknown market speculators who may be driving up the costs of the credits. “It’s a black pool of speculation that could cause bankruptcies in our sector.” The Environmental Protection Agency, which administers the credits, discounts charges of widespread abuse. And the issue may be only a short-term problem, as it was in 2013, when a speculative bubble drove the price of the credits to unsustainable heights before bursting.

Two More New Crude Oil Pipelines from Hubs to Refineries - There is a story behind every new crude oil pipeline built to supply a decades-old refinery. After all, the refinery surely had a well-established crude-delivery system in place –– why change horses now, especially with refinery margins under so much pressure? Typically, the answer is that, well, times have changed. Or, more specifically, the Shale Revolution has up-ended traditional crude sourcing, forced refinery owners to rethink their crude slates, and opened up opportunities to access new, lower-cost oil. Today, we continue our look at these new pipeline connections, their rationales, and their effects on other pipelines, barge deliveries and crude-by-rail. In Part 1 of our series, we noted that new pipelines to increase crude oil takeaway capacity from major producing areas to oil storage and distribution hubs like Houston, TX and Cushing, OK seem to garner most of the media’s attention. Just outside the spotlight’s glare, though, midstream companies are building several “demand-pull” pipelines to move crude to refineries more efficiently, and to give refineries easier, cheaper access to new, desirable supplies. We noted that U.S. refineries –– and most of the crude oil delivery infrastructure that supplies them –– were built many decades before the Shale Revolution enabled vast quantities of oil (and natural gas and natural gas liquids) to be freed from the shale and/or tight sands of the Permian, the Eagle Ford, the Bakken and other big-name plays. Rapid production growth from these new plays forced a major rethinking –– and re-plumbing –– of the nation’s crude-delivery infrastructure; slashed oil imports (especially lighter crudes); and led a number of U.S. refiners to revamp their oil-processing facilities to allow the use of more domestically sourced crude.

The Costs and Challenges of Building Crude Oil Pipelines  --  Eight years into the Shale Revolution –– and two years into a crude oil price slump that put the brakes on production growth –– midstream companies continue to develop new pipelines to move crude to market. As always, the aims of these investments in new takeaway capacity may include reducing or eliminating delivery constraints, shrinking the price differentials that hurt producers in takeaway-constrained areas, or giving producers access to new markets or refineries access to new sources of supply. Whatever the economic rationale for developing new pipeline capacity, midstreamers and potential crude oil shippers need to examine–– early on –– the likely capital cost of possible projects, if only to help them determine which projects are worth pursuing, and which aren’t. Today, we begin a series on how midstream companies and potential shippers evaluate (and continually reassess) the rationale for new crude pipeline capacity in today’s topsy-turvy markets.  As we said in our “But I Would Pipe 500 Miles” series on natural gas pipeline economics, three fundamentals drive the local price of any energy commodity: supply and demand, of course, but also transportation capacity. In the U.S. crude oil market –– as in the gas market –– that critical third factor is the extensive inter/intrastate pipeline network that connects supply basins (sellers) to demand centers (buyers). The availability (or lack) of pipeline capacity drives prices and price relationships by determining how supply connects to demand. By getting enough capacity in place, midstream companies and the customers who pay for that capacity can ensure supply reliability, increase optionality and market liquidity, relieve bottlenecks and enable both supply and demand to grow. New pipeline development is driven by either need or opportunity, and more often than not, a combination of the two. The key question that pipeline developers and their customers (the shippers) have to consider before committing to build new capacity is whether it will “pay” to flow crude on the pipeline once it’s built—not just the first year or the first three, but for years if not decades to come.

Judge denies Iowa landowners' request to halt pipeline work (AP) — A district court judge on Monday denied a request by Iowa landowners to immediately halt construction of a $3.8 billion oil pipeline on 15 parcels of their land, saying they must first talk to state regulators. A state law written in 1998 says the Iowa Utilities Board must consider such a request before the court can weigh in, District Court Judge Jeffrey Farrell said in his order. The landowners have sued, saying the board does not have the authority to give Texas oil company Dakota Access the right to forcefully condemn private farmland under eminent domain. The landowners want to stop Dakota Access, a subsidiary of Dallas-based Energy Transfer Partners, from digging trenches on their land until the courts can determine whether the board’s application of eminent domain is legal. The planned 1,168-mile pipeline would cut through Iowa, Illinois, North Dakota and South Dakota. “It’s disappointing, but not really unexpected,” landowner Richard Lamb said of the judge’s decision. Crops have been cut down on Lamb’s land near Boone in central Iowa to make way for the pipeline. The next step is grading, which is expected to begin in week or two, and trenching after that. The company argued in court on Friday that if the board or the court grants the landowners’ motion to stop work it would be required to move construction crews and equipment around the 15 parcels at a cost of more than $500,000 for each move.

Judge moves pipeline protest hearing, says sides should meet (AP) — A federal judge has postponed a hearing on whether a preliminary injunction should be issued to prevent protesters in North Dakota from interfering with construction of an oil pipeline. U.S. District Judge Daniel Hovland moved the hearing scheduled on Thursday to Sept. 8. The judge also extended a restraining order against the protesters until the hearing. The judge says in his order filed Monday that the two sides are “strongly encouraged to meet and confer in good faith” to try and resolve the dispute out of court. More than two dozen protesters have been arrested in the last month for interfering with the construction of the $3.8 billion Dakota Access Pipeline meant to carry North Dakota crude to Illinois. Developers have agreed to halt construction until court matters are resolved.

Protesters settle into camp life --  An upside down flag hangs in the center of a new community larger than most small towns in North Dakota. It’s a protest camp near the Cannonball River at the border of the Standing Rock Indian Reservation. The flag is a symbol of distress, that the area had been taken over by an enemy. But the atmosphere Thursday afternoon at the Seven Councils or Overflow Camp, where hundreds are staying in Morton County, hardly feels urgent. Rather, it's joyful and cooperative. The setup is an extension of the Camp of Sacred Stones, located on the reservation at the confluence of the Cannonball and Missouri rivers, where people have been protesting an oil pipeline since April. During the past week, the once-small effort has grown to an estimated 1,500 to 2,000 people. On Wednesday, after days of protests, work at the Dakota Access Pipeline site just north of the camp was put on hold until Aug. 24, when a hearing will be held on the tribe's lawsuit against the Army Corps of Engineers over its approval of the pipeline crossing under the Missouri River. Most people at the camp, who rallied at the work site, insisted the demonstrations were peaceful, but law enforcement has said officers received information about weapons. The Morton County Sheriff's Department said in a statement Friday no weapons were seen. Many at the camp saw the previous days’ efforts as a small victory. Often repeated was a gladness that the tribes were working together. The group at the camp is predominantly native, but many white people are there, too. There are kids, adults and grandparents. Many are camped in tents and teepees set up between awkwardly parked school buses, which bring people in each day from nearby reservations. Some people show up with food, water, tents. Others bring just enough gas for the drive down.

State pulls relief resources from swelling Dakota Access Pipeline protest camp -- North Dakota’s homeland security director ordered the removal of state-owned trailers and water tanks from the Dakota Access Pipeline protest campsite Monday, citing mounting reports of unlawful activity -- the latest involving lasers -- and the risk of damage. “Based on the scenario down there, we don’t believe that equipment is secure,” Homeland Security Division Director Greg Wilz said. As tribal members from across the nation streamed into the campsite, swelling its population to between 500 to 4,000 people depending on estimates, the loss of their main drinking water supply came as a blow and sent local officials scrambling to find an alternative water source. “I feel like I just got shot down,” said Johnelle Leingang, executive secretary to Standing Rock Sioux Tribe Chairman Dave Archambault II and the tribe’s emergency response coordinator. “It’s very hurtful.” A black heavy-duty pickup backed up to the water tanks and pulled them away just before noon as the beating sun drove temperatures into the 80s. Two air-conditioned trailers and a command center vehicle – delivered with the water tanks a week ago by the North Dakota Department of Health at the tribe’s request – also were hauled away from the campsite, which overlooks the confluence of the Missouri and Cannonball rivers just south of where the oil pipeline would cross the Missouri. “People are getting overheated now already,” Leingang said shortly before 4 p.m., as the temperature hovered around 90.

Judge to rule on tribe's oil pipeline request by Sept. 9 (AP) — A ruling in the request by the Standing Rock Sioux Tribe to stop a four-state oil pipeline under construction near their reservation will come by Sept. 9, a federal judge said Wednesday. The tribe is challenging the Army Corps of Engineers’ decision to grant permits for Dallas-based Energy Transfer Partners’ $3.8 billion Dakota Access pipeline, which crosses through four states, including near the reservation that straddles the North Dakota-South Dakota border. U.S. District Judge James Boasberg listened to arguments and said he’d rule next month. Also Wednesday, Dakota Access was told by the Iowa Utilities Board to stay away from the properties of 15 Iowa landowners until Monday to give board time to review legal issues involving a lawsuit. The $3.8 billion pipeline, which will run 1,172 miles through Iowa, Illinois, North Dakota and South Dakota, has generated legal challenges and protests, most aggressively in North Dakota and Iowa. Growing protests and increased tension over the pipeline that will cross the Missouri River near the Standing Rock Sioux reservation has led to more than two dozen arrests, including tribal chairman Dave Archambault II. He said he would continue to call for calm at the protest site. “I’m asking that we proceed with prayer and with peace,” Archambault said. “Tribes from across the nation have united and I would hope Dakota Access does not continue with construction with the destruction of land before (the judge’s ruling).” The tribe’s lawsuit, filed last month on behalf of the tribe by environmental group Earthjustice, said the project violates several federal laws, including the National Historic Preservation Act. The tribe also argues the project will harm water supplies and disturb ancient sacred sites outside of the 2.3-million acre reservation. The pipeline’s owners agreed last week to halt construction near the reservation until Wednesday’s hearing, but it’s unclear whether that construction is still on hold.  

FBI called over 2 laser beam cases at pipeline protest site - (AP) — Authorities in southern North Dakota say the FBI has been contacted after a laser beam was aimed twice at an aircraft doing surveillance of an ongoing oil pipeline protest. The Morton County Sheriff’s Office on Monday said a pilot reported a laser beam entering the cockpit and leaving him temporarily blind Wednesday. Then, on Sunday, the pilot was able to look away in time to avoid the laser. Morton County Sheriff’s Office spokeswoman Donnell Preskey says the North Dakota Highway Patrol was flying the state plane. Directing a laser at an airplane is a federal offense.

Occupying the Prairie: Tensions Rise as Tribes Move to Block a Pipeline - — Horseback riders, their faces streaked in yellow and black paint, led the procession out of their tepee-dotted camp. Two hundred people followed, making their daily walk a mile up a rural highway to a patch of prairie grass and excavated dirt that has become a new kind of battlefield, between a pipeline and American Indians who say it will threaten water supplies and sacred lands.The Texas-based company building the Dakota Access pipeline, Energy Transfer Partners, calls the project a major step toward the United States’ weaning itself off foreign oil. The company says the nearly 1,170-mile buried pipeline will infuse millions of dollars into local economies and is safer than trucks and train cars that can topple and spill and crash and burn.But the people who stood at the gates of a construction site where crews had been building an access road toward the pipeline viewed the project as a wounding intrusion onto lands where generations of their ancestors hunted bison, gathered water and were born and buried, long before treaties and fences stamped a different order onto the Plains.People have been gathering since April, but as hundreds more poured in over the past two weeks, confrontations began rising among protesters, sheriff’s officers and construction workers with the pipeline company. Local officials are struggling to handle hundreds of demonstrators filling the roads to protest and camp out in once-empty grassland about an hour south of Bismarck, the state capital.More than 20 people have been arrested on charges including disorderly conduct and trespassing onto the construction site. The pipeline company says it was forced to shut down construction this month after protesters threatened its workers and threw bottles and rocks at contractors’ vehicles.

Pipeline drama deja vu - It’s Hollywood and green groups vs. the oil industry and construction unions today in a brewing battle over the Dakota Access pipeline, a 1,172-mile conduit from North Dakota’s oil-rich shale fields to Illinois. The Standing Rock Sioux are challenging Army Corps of Engineers permits issued for the pipeline that tribe members say violate the Clean Water Act, the National Environmental Policy Act, and the National Historic Preservation Act. Ahead of an afternoon hearing in D.C. District Court, actress-activists Susan Sarandon and Shailene Woodley will appear alongside environmental groups in support of the Sioux’s cause. If you’re thinking that the battle lines sound like Keystone XL, you’d be right. Protesters aligned with the Sioux have temporarily shut down construction by camping out on reservation land in North Dakota near where the pipeline would cross the Missouri River. Meanwhile, the leaders of the Laborers International Union of North America, the Teamsters and other unions that pushed for the jobs Keystone would have created wrote to North Dakota Gov. Jack Dalrymple on Tuesday urging the Republican to “utilize the power of your office to keep our workers safe” even as the pipeline work site is “illegally occupied.”  Dakota Access' majority sponsor, Energy Transfer Partners, also filed suit in North Dakota federal court to force an end to the protest. Other companies with a stake in the $3.7 billion project are Marathon, Sunoco, Phillips 66 and Canadian pipeline giant Enbridge.

Corps says pipeline still needs water-crossing easement - bismarcktribune.com: — While hundreds are settling in for the long haul at an encampment to protest the Dakota Access Pipeline, the U.S. Army Corps of Engineers confirmed Thursday that the pipeline developer, Energy Transfer Partners, does not yet have a written easement to build the pipeline on corps property. Corps spokesman Larry Janis said the easement is still under review, though the agency did issue Section 408 permission in late July that allows the easement to be written. “They can’t build the project by accessing corps property from west to east across Lake Oahe,” Janis said of any current construction. That could partly explain the company’s decision Aug. 18 to voluntarily stop construction at its work site just north of the Standing Rock Sioux Reservation near the Missouri River-Lake Oahe, where an active protest led to 28 arrests. The company has since received a federal court restraining order to prevent all arrestees — including tribal chairman Dave Archambault — and any “Jane and John Doe” from being at the work site and places such violations in federal, not district court. The stopped work also stopped active protest, and protesters have since held prayer circles and other gatherings in the camp area about 1 mile south. The realization that the company still does not have an actual easement surfaced Wednesday in a federal district court in Washington, D.C., where the Sioux tribe’s request for an injunction to stop the pipeline pending its suit against the corps was heard. The court judge said he wants more time to study whether the corps failed to follow the National Historic Preservation Act and other federal laws in its environmental review of the project. The judge said he will rule on the injunction Sept. 9. “Everybody thought they had it (easement),” said attorney Carolyn Raffensperger, executive director of the Science and Environmental Health Network. “This is really important information.”

Why There's A Media Blackout On The Native American Oil Pipeline Blockade - As the Lakota Sioux continue their peaceful blockade of the $3.8 billion Dakota Access Pipeline, the story’s absence from the national media narrative is palpable. Considering the corporate media’s chronic quest for controversial stories on government versus public standoffs, you’d think this situation would garner the typical media frenzy invoked during a right-wing militia occupation of a federal building, for example, or a tense standoff between the Black Lives Matter movement and police. But it’s not. As of late, the media has faced criticism for its selective coverage of certain events — like, say, focusing on single terror attacks in Western Europe that garner thousands of headlines while basically ignoring similar or worse attacks that occur on a constant basis in Muslim-majority countries. But the confrontation unfolding in North Dakota, in particular, is strikingly similar to the recent standoff at the Malheur Wildlife Refuge in Oregon, which involved a right-wing militia advocating land rights against the federal government. The militia was led by the controversial Bundy family, which previously drew sensationalized coverage during a similar standoff in Nevada in 2014. So why were these stories covered extensively while the other — also centered around land rights — has been mostly ignored? The first point is actually very simple: Native Americans standing up for themselves is not polarizing. In an age of institutionalized media divisiveness and hyper-partisanship, the story of Native Americans in North Dakota fighting for land and water rights just doesn’t fit the script of deep, societal divides plaguing the nation’s law and order, nor does it fit in with the left-right paradigm. The second and more obvious reason why mainstream outlets have not focused on the situation in North Dakota is money — oil money, to be exact. The corporate media in the United States is deeply in bed with oil interests. From fracking advertisements on MSNBC to individuals on Big Oil’s payroll literally working for Fox News and the Wall Street Journal, the ties cannot be understated. Why would mainstream media publicize a standoff that could potentially kill an oil pipeline when their own financial interests would be negatively affected? The answer is they wouldn’t.

Creative Bookkeeping -- DUCs -- CLR is, I think, doing something interesting. Obviously all the operators are doing this but CLR puts it right there out in front of you. Some may think it's creative financing. I think its simply "creative." I'm looking at this from the viewpoint of the shareholders (including the directors of the companies). This has to do with DUCs. Regardless of how the company is doing -- good, bad, or indifferent -- a company with DUCs has already sunk money into those wells. If those wells were drilled a few months ago, they are history. The capital required to drill those wells was factored into an earlier financial quarter. So, those DUCs are simply sitting there. What it cost to drill those wells is now history, part of a previous quarter, and perhaps part of an earlier fiscal year. So, CLR starts "from scratch." Instead of suggesting these wells cost $6.2 million, CLR simply states that these wells have an "incremental" cost of $3.6 million (or whatever it costs to frack/complete the well). It's not quite "accurate," but with creative financing, one can almost say CLR is going to "bring in" scores of Bakken wells with EURs of 900,000 boe (mostly oil) for about $3 million / well. That may be why CLR is up more than 160% in the past year, or whatever it is.

Some Shale Drillers Return to Oil Patch - WSJ -  As the price of U.S. crude marches back toward $50-a-barrel territory, several big shale drillers are tiptoeing back into the oil patch, and that is making some energy experts nervous. Devon Energy , Pioneer Natural Resources and other prolific shale producers are telling investors that this fall they will pour more money into drilling new wells. The burst of activity shows the resilience of American energy companies that managed to survive oil’s plunge from over $100 a barrel in June 2014 to less than $30 earlier this year. But the burgeoning ramp-up threatens to cut the recent rally to $50 off at its knees. Investors are scared there is little room in the market for all the new crude that is about to be unleashed by companies restarting their operations in Texas and Oklahoma. Federal data shows companies are already pumping more from each well, getting an additional 15 percent to 30 percent from new wells in some of the biggest shale fields.  “This higher activity level may be premature, in my view, and probably keeps a cap on how high oil prices can go.” This summer the U.S. oil price has whipsawed from more than $50 a barrel in June to below $40 earlier this month. In the past two weeks it has risen more than 20%, to a recent $48.22 a barrel.   Oil storage tanks around the country are already brimming with more than 521 million barrels of crude, a 14% increase over last year, according to federal data. But as the price rises, producers can’t seem to resist pumping more despite the glut. Many have cut costs so deeply that they can turn a profit when oil trades around $50. That’s why a contingent of investors and analysts now see that price as a ceiling for the market. When oil popped above $50 a barrel for a few days in June, money managers began betting that prices would collapse. That group had just 53,377 bearish positions in the U.S. oil market on May 31, a one-year low, CFTC data show. In the following two months, the number of bearish positions ballooned to 220,000, a record high in a decade of data.

Been Down So Long - U.S. E&P Upstream Capex Bottoms, Signs of Growth Emerge -- In their second quarter 2016 earnings announcements, North American exploration and production companies (E&Ps) announced relatively minor changes to the steep reductions in 2016 capital budgets they unveiled around the first of the year. Total 2016 “finding and development” spending for 46 leading U.S. producers was an estimated $41.0 billion, down 51% and 70% from investment in 2015 and 2014, respectively, and slightly lower than the $41.9 billion forecast for 2016 spending in year-end 2015 announcements. The second-quarter reports over the past few weeks also confirmed the initial guidance of a 4% production decline in 2016 after 7% and 6% increases in 2014 and 2015. However, as we discuss today, a look behind the headline numbers indicates that cuts in capital expenditures (capex) look to have bottomed out, and that the industry may be poised for a turnaround in drilling activity later this year into 2017.

NYMEX September gas settle at $2.796/MMBtu, up 3.5 cents - The NYMEX September natural gas futures contract settled at $2.796/MMBtu, up 3.5 cents, further extending this week's rally as prices rose on bullish weather forecasts and expectations for another below-average weekly build to gas storage stocks. Wednesday's increase marked the third consecutive positive settlement and the eighth out of nine trading days that the contract settled higher. "Coming into this week it looked as though the weather forecast changed to put some heat back in the country for the last two weeks of August. The market has taken that as a sign we could see a correction ... . Looks as if maybe the rush to shoulder season seems to have taken a back seat to tighter fundamentals," said Tradition Energy senior analyst Gene McGillian. Since falling to $2.551/MMBtu August 11, the prompt contract has rallied 24.5 cents. The September contract is set to expire next Monday.

Future U.S. tight oil and shale gas production depends on resources, technology, markets - Today in Energy - U.S. (EIA) --Based on projections in the U.S. Energy Information Administration's Annual Energy Outlook 2016 (AEO2016), U.S. tight oil production is expected to reach 7.08 million barrels per day (b/d), and shale gas production is expected to reach 79 billion cubic feet per day (Bcf/d) in 2040. These values reflect Reference case projections, while several side cases with different assumptions of oil prices, technological advances, and resource availability have different levels of tight oil and shale gas production.  U.S. production of tight oil and shale gas has increased significantly from 2010 to 2015, driven by technological improvements that have reduced drilling costs and improved drilling efficiency in major shale plays, such as the Bakken, Marcellus, and Eagle Ford.  Production from tight oil in 2015 was 4.89 million barrels per day, or 52% of total U.S. crude oil production. From 2015 to 2017, tight oil production is projected to decrease by 700,000 barrels per day in the Reference case, mainly attributed to low oil prices and the resulting cuts in investment. However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques. The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well.  As oil prices recover, oil production from tight formations is expected to increase. By 2019, Bakken oil production is projected to reach 1.3 million b/d, surpassing the Eagle Ford to become the largest tight oil-producing formation in the United States. The Bakken, which spans 37,000 square miles in North Dakota and Montana, has a technically recoverable resource of 23 billion barrels of tight oil that can be produced based on current technology, industry practice, and geologic knowledge. Bakken production is projected to reach 2.3 million barrels per day by 2040, almost a third of the projected U.S. total tight oil production.

$110b of debt from global oil companies to be due in 5 years - Already reeling under massive decline in oil prices, about $110 billion (Dh403.7 billion) of debt taken by the overseas oilfield services and drilling companies is due for payment in the next five years. The junk bonds make up 65 per cent of the total, Moody’s Investor Services said in a report.Junk bonds are securities that are not invest rated. The default rate on corporate junk bonds can early surprise 20 per cent and historically has risen as high as 69 per cent.In 2018, about $21 billion of debt will mature, which is almost three times the total maturity rate in 2017. The debt burden continues to edge higher into 2021, when nearly $29 billion of issuance and revolvers is scheduled to come due.This could mean problems for the bond issuers if financial conditions worsen. Many of the larger companies may refinance or roll-over their bonds until business conditions improve, but the smaller companies would have to pay out of their current cash on hand, said Morris Borenstein, Moody’s Assistant Vice-President in a statement. Currently as earnings continue to decline, old field services companies are not only facing challenges to service their debt (in the case of coupon payments) but may also see their refinancing options become “severely” limited or even eliminated, according to the report.And this is making fund managers edgy on these bonds. S&P Global Ratings in May said it expects corporate defaults to keep rising, dominated by energy companies. Between the start of 2015 and March 2016, the energy sector accounted for half of all corporate debt defaults in the United States.

Debt At The Big 4 Oil Companies Hits A Record $184 Billion -- So what do you do when the commodity you harvest and sell suddenly collapses by 50-60% and slashes your operating profit?  If you said, raise a whole bunch of debt and continue spending on new capital projects to drill for even more supply in a collapsing market then you might be an oil CEO.  The Wall Street Journal this morning pointed out that raising debt to cover cash burn is exactly what the largest oil companies in the world are doing.  In fact, the 4 largest oil companies have doubled their net debt positions since 2014 when the oil selloff started.  Frankly, we're a little skeptical that raising debt to add supply to an already over-supplied market is the right idea.  That said, certain investors and CEOs, whose bonuses are tied to production in many cases, disagree. “They are just not spending enough to boost production,” said Jonathan Waghorn, co-portfolio manager in London at Guinness Atkinson Asset Management Inc. who helps oversee more than $400 million across a range of energy funds, including shares in Exxon, BP, Chevron and Shell. But as Michael Hulme of Carmignac Commodities Fund noted, “eventually something will give"..."these companies won’t be able to maintain the current dividends at $50 to $60 oil—it’s unsustainable”  Well given that, per the chart below, the largest 4 oil companies are burning nearly $80BN per year we would tend to agree with Hulme.

Is ExxonMobil Actually Only Worth A Fraction Of What It Says? -  The investigation by a handful of attorneys general into ExxonMobil has much more to do with the oil major misleading investors than it does about covering up climate science. The legal headache stems from several news reports that ExxonMobil buried decades of internal climate science in order to protect its interests. That has environmental groups crying foul, blaming the oil company for decades of policy inaction to stop the growth of greenhouse gas emissions. That also was a key reason that New York attorney general Eric Schneiderman, along with several other AGs from different states, opened up an investigation into the company. But as The New York Times recently noted, Schneiderman emphasizes that the probe is focused on securities fraud, which hinges on recent statements that Exxon has given to shareholders and securities regulators, not on the company’s alleged cover up of climate science decades ago. Schneiderman’s argument is straightforward: forthcoming policies to address climate change will severely limit Exxon’s ability to produce all of the oil and gas in its possession. Nobody knows this better than Exxon, Schneiderman alleges, since the company has been at the forefront of climate research since at least the 1970s. If Exxon cannot produce all of its oil reserves because they become either legally off limits or so regulated and/or taxed that they are uneconomical to produce, then the company itself is actually worth a lot less than shareholders think. And if Exxon knows this, then they are committing securities fraud, Schneiderman says. “If, collectively, the fossil fuel companies are overstating their assets by trillions of dollars, that’s a big deal,” Schneiderman said, according to the NYT.

Low oil prices, costly wildfire push Alberta's deficit to nearly $11-billion - The Globe and Mail: Alberta is facing the longest recession in its recorded history and the province’s Finance Minister is warning that the provincial government won’t be able to create enough jobs to employ the thousands of Albertans currently out of work. Facing the twin shocks of low energy prices and the costly Fort McMurray fire, Alberta’s economy is in free fall and the province’s two-year old recession is getting worse, according to the first-quarter financial update released Tuesday. Announcing that Alberta’s deficit is now expected to grow to nearly $11-billion this year, Alberta Finance Minister Joe Ceci said the once debt-free province will be $32-billion in debt by the end of the current fiscal year. “That is a place Alberta hasn’t been,” he said. With the government deep in red ink, the jobs plan put forward by Premier Rachel Notley’s NDP government will create and sustain 10,000 jobs over the next year, according to the Finance Minister. “The billions of dollars that have been taken out of the economy as a result of the reduced investment by the oil sector is a tragedy for this province, but it’s not something we can repair,” said Mr. Ceci, who was visibly frustrated. “The government is not able to shore up the job losses that have happened in private industry.”

Mexico's Round 2.2 auction features 12 blocks, gas potential: minister - A total of 12 onshore oil and natural gas blocks will be on offer in the second auction of Round Two of Mexico's energy reform, the energy ministry announced Tuesday. The blocks include 39 fields that have already been explored. In all cases, licenses will be on offer. A total of nine of the blocks lie in the Burgos Basin, across the US border from Texas, and the nation's main source of non-associated gas. Production of gas from Burgos has fallen below 1 Bcf/d in recent months. The remaining three blocks comprise two in the Chiapas Fold Belt, and one in the southeastern basins in the states of Tabasco and Campeche. All three have potential for both oil and natural gas.Speaking at a press conference, Pedro Joaquin Coldwell, the energy secretary, said that the main objective of Round 2.2 is to "extract both wet and dry gas so as to produce more ethane, propane and butane in order to benefit the petrochemical industry." Mexican gas demand has averaged just over 8 Bcf/d over the past three months, peaking at 8.05 Bcf/d in June, according to Platts Analytics' Bentek Energy data. This represents a year-on-year build of 330 MMcf/d or 4%. A substantial proportion of that demand is now being satisfied by a growing network of pipelines linking the US to Mexico.

Chile eyes more US LNG after expansion of Panama Canal - Since the US start commercial exports of liquefied natural gas in February, 92 Bcf of LNG, loaded on 26 vessels, have been exported to 10 different countries. Of the 26 vessels, Chile has received seven, making it the largest recipient of US LNG. Chile's first five vessels from Sabine Pass traveled around the southern tip of South America through the Strait of Magellan. These voyages lasted an average 23 days and Platts Analytics estimates that shipping costs were around 93 cents/MMBtu.Since the newly expanded Panama Canal reopened in June, Chile has taken advantage of the shorter route to save time and money. On August 11, Chile's Quintero regasification terminal received a Sabine-laden vessel, the Maran Gas Delphi, in a voyage that took just 13 days. Another Sabine-laden vessel, the Sestao Knutsen, arrived at Chile's Mejillones terminal in 12 days. Platts Analytics estimates freight route costs from the US Gulf Coast through the Panama Canal are 56 cents/MMBtu.

U.S. LNG for China Arrives via Panama Canal - WSJ - The first shipment of liquefied natural gas from the lower 48 U.S. states to China arrived this week, thanks to the recently expanded Panama Canal’s easing access to the robust Asian market for U.S. gas exporters.  The shipment was chartered by Royal Dutch Shell PLC, the company. The cargo, from the Sabine Pass export facility in the U.S. Gulf of Mexico, was delivered to the Yantian Port on Monday in southern China and was purchased by China National Offshore Oil Corp. as part of a long-term contract.  U.S. LNG, which is usually transported on large ships that can’t fit in the older Panama Canal locks, hasn’t been able to compete in Asia. The new locks, which opened in June and can accommodate larger ships, mark a significant moment for U.S. exporters.  The new locks can reduce the travel time from the U.S. to North Asia for ships that couldn’t fit in the old locks by about one third—to 20 days—and cut transportation costs by about 30 cents to $1 per million British thermal units.

Egypt plans to end fuel subsidies within three years: sources - Egypt plans to end fuel subsidies within three years and is aiming to increase fuel prices to 65 percent of their actual cost during the 2016/17 fiscal year, two government sources told Reuters on Tuesday. Struggling to revive its economy after an uprising in 2011 shook investor confidence and drove tourists and foreign investors away, Egypt has been trying to cut spending on subsidies because they eat into its state budget. Egypt has reached a staff level agreement with the International Monetary Fund (IMF) for a $12 billion three-year loan program which is subject to final approval by the IMF executive committee. Disbursement is linked to progress on a variety of reforms including cuts in subsidies, the introduction of value-added tax (VAT) and a shift to a more flexible exchange rate regime. "What was agreed lately with the IMF delegation in Egypt is cancelling fuel subsidies within three years," one of the officials, who declined to be named, told Reuters. A spokesman from the Petroleum Ministry said that "no decisions have been issued on that matter." Gasoline in the 92-octane category is sold at 58 percent of its cost in Egypt while the 80-octane category is sold at 57 percent of its cost and for diesel it's about 53 percent.

The Israeli public says NO to fracking: In September 2014 an Israeli government planning committee delivered a remarkable decision: it rejected a pilot project for non-conventional oil exploration in the country's Adulam region located between Tel Aviv and Jerusalem, a pastoral rural area rich in biblical archeology with a strong eco-tourism sector.The company that had submitted the request, Israel Energy Initiatives (IEI), had planned to use an untested technology called "In Situ Thermal Recovery" to produce oil by heating shale rock to temperatures as high as 950 degrees Fahrenheit. This releases organic matter known as kerogen, a compound that eventually transforms organic matter into oil and gas. The committee's decision was a major victory for Israel's environmentalists, and a fatal blow for the IEI. IEI had argued that the since the project would operate underground, it would leave a minimal ecological footprint, and water resources would not be endangered because of an impermeable rock layer protecting them. However, the committee remained unconvinced, and its final decision determined that the technology posed a critical environmental risk. The real winners here were the local activists whose health, environment and communities had come under direct threat by the proposed IEI project. Their media-savvy campaign presence has compared the conflict to the biblical confrontation between David and Goliath; the project location was in the same area where the diminutive David emerged victorious over the giant Goliath.

Nigerian oil militants declare ceasefire, ready to negotiate (AP) — Nigeria’s leading oil militants have declared a conditional ceasefire in attacks that are losing the West African nation a million barrels of oil a day. The Niger Delta Avengers also say they are willing to negotiate a peace deal. A statement posted on the group’s website and dated Saturday says they will continue an undeclared “cessation of hostilities” on condition that security forces stop harassing civilians, and that international mediators are involved. A military campaign in the oil-producing Niger Delta has killed unknown scores of militants, soldiers and police. The announcement follows a call Friday by community elders for all militants to join a dialogue for peace. President Muhammadu Buhari’s government already is in talks with other militants. But it is the attacks by the Niger Delta Avengers that have cut production by 40 percent this year and caused Nigeria to lose its place to Angola as Africa’s biggest oil producer. The attacks on facilities of U.S.-based ExxonMobil and Chevron, Italy’s Agip and the Dutch-British Shell resumed this year after the government stopped paying stipends to 30,000 militants under a 2009 amnesty that ended years of unrest in the Niger Delta. Some militant leaders were given multimillion-dollar contracts to protect the oil installations they once attacked. Buhari’s government earlier this month resumed the amnesty payments, though the Avengers have charged that some of the funds have been stolen over the years by militant leaders.

Oil Rally At Risk After Niger Delta Advisors Announce Ceasefire - Three months ago, we introduced readers to the Niger Delta Avengers (the NDA): a mysterious Nigerian militant group, which appeared out of nowhere, and which as we said at the time, "held the price of oil in its their hands", as a result of its relentless - and successful - attempts to sabotage Nigerian oil production.  Back in May, the NDA was cited by Goldman as one of the key reasons for the ongoing supply disruptions that had led the bank to push up its short-term crude oil price forecast (even as it cut its long-term one).  This is what Goldman said at the time: The inflection phase of the oil market continues to deliver its share of surprises,with low prices driving disruptions in Nigeria, higher output in Iran and better demand. With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected and we are pulling forward our price forecast, with 2Q/2H16 WTI now $45/bbl and $50/bbl. The recent roll-over in production is the result of somewhat offsetting cross currents. And while some of the disruptions will stop such as maintenance, fires and strikes, some are likely systemic, for example in Nigeria, and we now expect production there will remain curtailed for the remainder of the year. Net, this leaves us expecting a sharp decline in 2Q output. Furthermore, the NDA's constant unwillingness to engage the government in any discussion on a compromise suggested to some that the NDA may be merely a (well-funded) front for some offshore entity, either corporate or sovereign, which was provoking unrest inside Nigeria in hopes of keeping domestic supply low thanks to disruptions and thus, the price of oil high. That, however, changed dramatically overnight, when the Niger Delta Avengers announced on their website, that it would cease “hostilities in the Niger Delta against all interest of the multinational oil corporations,” to support talks with govt to end conflicts adding that it promises "to fight more for the Niger Delta, if this opportunity fails."

Nigeria downbeat on oil prices, adopts $42.50/b in 2017 budget - Nigeria, whose production is currently hovering close to 30-year lows, is downbeat on oil prices, with the government adopting a $42.50/b price for next year's notional budget. The government approved an oil price benchmark of $42.50/b at a production assumption of 2.2 million b/d for the purposes of revenue calculation in its 2017 budget, according to local media reports. The budget contained in the medium term expenditure framework covering the period 2017-19, was approved by the cabinet at a meeting chaired by President Muhammadu Buhari on Wednesday, state television quoted budget minister Udo Udoma saying."Government is being very conservative in terms of the reference price of crude oil, even though we are expecting it to go higher than this, but we are keeping to an extremely conservative price scenario," Udoma said. This compares with its 2016 budget, which has a price benchmark of $38/b at a 2.2 million b/d output figure. But the Nigerian government has struggled to implement the 2016 budget after oil output has slumped by more than 40% this year due to renewed militancy in the main oil producing Niger Delta region. Nigeria, which until a few months ago was Africa's largest oil producer, has seen its output fall to around 1.4-1.6 million b/d this month after climbing back up to 1.9 million b/d in end June from around 2.2 million b/d earlier in the year following a series of attacks on installations by the militants. The government is retaining this year's oil production estimate of 2.2 million b/d for 2017, according to the minister, on hopes that the security challenges that cut Nigeria's output down to around 1.5 million b/d would "soon be resolved."

The Definitive Answer To Whether The Oil Market Has Rebalanced -  There has been much debate in this oil industry regarding this subject with a lot of poor analysis, no analysis at all, opinions, raw speculation, pure conjecture and every investment bank in the world talking their book on this subject. So we thought we would settle this question once and for all so that everybody is one the same page. We analyzed the Oil Market to determine this question definitively by checking the actual data. The only valid way of determining this matter in a rational and constructive manner. We drew down 18.9 Million of Oil Stocks during summer driving season in 2016. We drew down 28.6 Million of Oil Stocks during summer driving season in 2015. We drew down more oil in 2015 versus 2016 for the same strong season of the market, and we are sitting with an extra 65 Million more barrels of oil in storage year over year with less of a drawdown this year during the Summer Driving Season. Therefore: Oil Market Not Rebalanced. We drew down 7.9 Million of Gasoline Stocks during summer driving season in 2016. We drew down 13.9 Million of Gasoline Stocks during summer driving season in 2015. We drew down more gasoline in 2015 versus 2016 for the same strong season of the market, and we are sitting with an extra 20 Million more barrels of gasoline in storage year over year with less of a drawdown this year during the Summer Driving Season. Therefore: Gasoline Market Not Rebalanced. We drew down 2.2 Million of Distillate Stocks during summer driving season in 2016. We built 20.1 Million of Distillate Stocks during summer driving season in 2015. Conclusion: We built more Distillate Stocks in 2015 versus 2016. However, we are sitting with 5 Million more barrels of Distillates year over year. Furthermore, we were coming from such lower levels of Distillates last year there was more room to fill up storage facilities, and like Cushing this year once Oil Capacity reaches limits the Oil gets moved to the Gulf Coast. Well similarly for Distillates once inventories reach this level of overall capacity, refiners no longer want to produce extra supplies, so they have found other alternative products to process excess oil into product for available storage capacity. Therefore: Distillate Market Not Rebalanced. We built 20.6 Million of Propane Stocks for this time period in 2016. We built 25.4 Million of Propane Stocks for this time period in 2015. Conclusion: We built more Propane Stocks in 2015 versus 2016. However, we basically have the same levels of overall stocks (Which are at Record Historical Levels) as this time last year. The big takeaway is that over the last two years a lot of oil has been processed into this category for the sole purpose of doing something with the existing oil glut. Therefore: The Propane and Propylene Market Not Rebalanced. We built 24.1 Million Barrels of Oil and Petroleum Products during summer driving season in 2016. We built 35.7 Million Barrels of Oil and Petroleum Products during summer driving season in 2015. We built 11.5 Million more Total Crude Oil & Petro Stocks in 2015 versus 2016. However, we still added another 24 Million to total overall stocks this year during the Summer Drawing and Driving Season. Moreover, we are sitting at 1,393,563 versus 1,280,261 for last year, for the highest ever Recorded Reading of this Metric by a large margin. Therefore: Oil & Petroleum Products Market Not Rebalanced.

OPEC Ignites Biggest Short Squeeze In History: Hedge Funds Cut Oil Shorts By Most On Record -- Ever since the February crash, when oil tumbled to 13 years lows, and when OPEC started releasing tactical headlines at key inflection points about an imminent oil production freeze (which not only never arrived but has since seen Saudi Arabia's output grow to record levels) which we first suggested were meant to trigger a short squeeze among headline scanning HFT algos, our suggestion was - as is often the case - dismissed as yet another conspiracy theory. Six months later, this conspiracy theory is now a widely accepted fact, and as Bloomberg reports tonight, "well-timed" OPEC talk of a potential deal to freeze output, has "forced bears" into a historic squeeze and helped push oil close to $50 a barrel, prompting West Texas Intermediate from a bull to a bear market in less than three weeks. "This is all courtesy of some very well-timed comments from the Saudi oil minister," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "They’ve been successful over the last year in jawboning the market, and this is the latest example." And while one can debate whether OPEC's "headline" leaks are timed to coincide with near-record short positions on WTI, one thing is certain: the past week saw the biggest crude oil short squeeze on record as money managers cut bets on falling prices by the most ever. According to Bloomberg, Hedge funds trimmed their short position in WTI by 56,907 futures and options during the week ended Aug. 16, the most in data going back to 2006. And, as one would expect following yet another record short squeeze similar to the one experienced earlier in the year, WTI futures rose 8.9% to $46.58 a barrel in the report week and closed at $48.52 a barrel on Aug. 19. WTI is up more than 20 percent from its Aug. 2 low, meeting the common definition of a bull market.

The Shorts Have All Been Squeezed Out of the September Oil Contract (Video) - The Reason for the large move in the Oil Market over the last 7 trading days, has to do with the record level of shorts that had to cover before the September Futures contract expired. This had nothing to do with the fundamentals of the oil market. With the record level of Oil production by the Saudis in July and August a freeze at these levels is absolutely meaningless and bearish for the oil market rebalancing anytime soon.

'Well-Timed' OPEC Talk Forces Oil Bears Into Record Reversal  |  Rigzone-- OPEC has done it again. Talk of a potential deal to freeze output helped push oil close to $50 a barrel and prompted money managers to cut bets on falling prices by the most ever. West Texas Intermediate, the U.S. benchmark, went from a bear to a bull market in less than three weeks. OPEC is on course to agree to a production freeze because its biggest members are pumping flat-out, said Chakib Khelil, the group’s former president. Saudi Energy Minister Khalid Al-Falih said that the talks may lead to action to stabilize the market. "This is all courtesy of some very well-timed comments from the Saudi oil minister," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "They’ve been successful over the last year in jawboning the market, and this is the latest example." Hedge funds trimmed their short position in WTI by 56,907 futures and options during the week ended Aug. 16, the most in data going back to 2006, according to the Commodity Futures Trading Commission. Futures rose 8.9 percent to $46.58 a barrel in the report week and closed at $48.52 a barrel on Aug. 19. WTI is up more than 20 percent from its Aug. 2 low, meeting the common definition of a bull market. "This was a very short market so we were bound to get some covering," said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania. "You probably won’t hear a lot from OPEC with prices up here, but if we get down to where we were a few weeks ago we can expect to hear more."

Peak Oil Review - Aug 22 2016 - Oil prices climbed another $3 a barrel last week as traders continued to hope that not only will OPEC and Russia agree to a production freeze next month, but that it will eventually result in the elimination of global oversupply and reduce global stockpiles to a normal level. The week closes with New York futures at $48.52 and London at $50.88. Most analysts doubt that a freeze agreement can be reached as Iran and Iraq have hopes of substantially increasing their oil production in the next couple of years. Most of the other OPEC members are pumping as fast as they can and have little prospect of substantial production increases in the next few years. Libya and Nigeria currently are pumping way below capacity due to political problems and are unlikely to agree to a freeze that does not allow them to return to their previous highest production level. Last spring when OPEC could not agree on a freeze, the cartel was pumping some 33 million b/d. It is now pumping about 34 million b/d. Some analysts have noted that should the Nigerian and Libyan situations be settled, world oil production could increase by another million b/d in the near future. While oil prices back in the vicinity of $50 a barrel have been enough to entice many rigs back into production in the US, it is still well below the levels need to attract the major oil companies back into expensive projects, most of which would be deepwater these days. A few companies still in reasonable financial shape have increased drilling, but most of the surge in the US rig count has been based on hopes of much higher prices, using other people’s money. Most still believe that overproduction will fade in the second half of this year and that prices will gradually climb to average in the mid-$50s next year and the mid-$60s in 2018. There are several factors that could upset this calculation such as a revival of US shale oil production, an increase in US interest rates, or weaker-than-expected Chinese demand.

Saudi Arabia isn't flooding oil market ahead of freeze talks: Kemp | Reuters: Saudi Arabia's oil production hit a record in July, according to published statistics, and is likely to hit another in August, according to industry sources. Some analysts have interpreted the increases as an aggressive demonstration of the kingdom's ability to ramp up output ahead of an informal meeting of oil ministers in Algeria next month. In this view, Saudi Arabia is increasing output as a warning to rivals that if there is no agreement on a production freeze it has the means to continue raising its output and intensify the pain for all oil exporters ("Saudi signals it may hit new output record ahead of freeze talks", Reuters, Aug. 17). Saudi Arabia may have resorted to volume warfare in the past to encourage agreement on output and punish non-compliance ("OPEC and other commodity cartels", Alhajji and Huettner, 2000). But a closer look at the kingdom's recent production, consumption and export statistics paints a more nuanced picture. At least this time around, there is no evidence that Saudi Arabia is raising production to intensify the pressure on its rivals to reach a production freezing agreement.Saudi oil production typically increases during the summer months to meet extra direct consumption of crude in the kingdom's power plants. In the past decade, Saudi oil production has been on average almost 400,000 barrels per day higher in July than January (tmsnrt.rs/2bz0A6P). The production swing from January to July has been very variable, ranging from a reduction of 325,000 bpd to an increase of more than 1 million bpd. But production has tended to increase seasonally by between 150,000 bpd and 650,000 bpd, according to the Joint Organisations Data Initiative (JODI).

Goldman Calls It For Oil: "OPEC Freeze Insufficient To Support Prices; The Price Rally Should Stall" -- Exactly 24 hours ago, we explained why - in our view - the oil rally was over, and gave four key reasons: i) after the biggest documented short squeeze in history, all the "weak hands" had been blown out and any incremental covering from here on out would be far more difficult; ii) an oil OPEC freeze will have no impact coming at a time when production by many cartel members is at all time highs, iii) the Niger Delta Avengers have agreed to a ceasefire meaning up to 300kbpd in Nigerian oil production would hit market shortly, and iv) the fundamentals suggest far more supply in the future, notably out of the US shale sector much of which has reorganized with cleaner balance sheets, which in the absence of rising demand (in fact demand out of China is falling) means lower price. Moments ago, Goldman energy analyst Damien Courvalin released a note titled "More worried about a thaw than a freeze", in which he effectively confirmed everything we said yesterday, when the sellside strategist said that the "three remaining large sources of oil supply disruptions – Nigeria, Iraq and Libya – have all shown signs of increasing output since last Wednesday", warning that "each country has the potential to move the global oil market back into surplus given our modest 230 kb/d expected deficit in 2H16" and "as a result, we reiterate our view that the oil price and fundamental recovery remains fragile." But worst of all, if only for the headline scanning algos, and Venezuela's increasingly more desperate oil minister Eulogio Del Pino, Goldman now thinks that "while discussions of an OPEC freeze and a weakening dollar have been catalysts for the sharp reversal in oil prices this month, we believe neither will be sufficient to support prices much further. In our view, thawing relationships between parties in conflict in areas of disrupted production would be more relevant to the oil rebalancing than an OPEC freeze which would leave production at record highs and could prove counter productive if it supported prices further and incentivized activity elsewhere." As for fundamentals, "supply continues to feature the cross currents of rising low-cost supply, declining high-cost production, and new project ramp up. In fact, marginally more bearish data recently than we had assumed suggests in our view that the recent price rally should stall."

Oil futures snaps 7-session win streak -  Oil futures settled with a drop of 3% on Monday as investors cashed in on a seven-session streak of gains, pressured by expectations of higher global crude production. Bets that major oil producers will agree to stabilize oil output at a meeting late next month fed a rally last week, but expectations for an agreement have faded and the market is eyeing the potential for higher production from Iraq and Nigeria. September West Texas Intermediate crude CLU6 slid $1.47, or 3%, to settle at $47.05 a barrel on the New York Mercantile Exchange. That was the largest one-day dollar and percentage decline since Aug. 1. The contract expired at Monday’s settlement, with October CLV6, which ended at $47.41 a barrel, down $1.70, or 3.5%, now the front-month contract. “The slowed covering of short positions relative to the torrid pace in recent weeks as the prospect of a Saudi-Iran agreement to freeze production grows increasingly unlikely, in conjunction with the potential of increased exports from Iraq and Nigeria are certainly weighing on prices,”

Oil down 3 percent as rally snaps on rising crude, China fuel exports | Reuters: Oil settled down more than 3 percent on Monday, retreating from last week's two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. China's July diesel and gasoline exports soared 181.8 percent and 145.2 percent, respectively, from the same month last year, putting pressure on refined product margins. In the United States, BP's 413,500 barrel per day refinery in Whiting, Indiana, returned to normal production for the first time since late July, adding to refined products supply. On the crude oil front, U.S. drillers added 10 oil rigs in the week to Aug. 19, the eighth straight week of rig additions, as crude rebounded toward the $50-a-barrel mark that makes drilling viable. Elsewhere, Iraq plans this week to increase exports of Kirkuk crude by 150,000 bpd from its northern fields while Nigerian rebels who regularly attacked oil facilities in the country earlier this year said they were ready for a ceasefire. Brent crude settled down $1.72, or 3.4 percent, at $49.16 a barrel. It hit a two-month high of $51.22 on Friday. U.S. West Texas Intermediate (WTI) crude's front-month contract, September CLU6, closed down $1.47, or 3 percent, at $47.05 before expiring. It hit a six-week high of $48.75 on Friday. WTI's more active second month position, October CLV6, closed down $1.70, or 3.6 percent, at $47.41 a barrel.

Iran signals more willingness for OPEC action to boost oil price: (Reuters) - Iran is sending positive signals that it may support joint action to prop up the oil market, sources in OPEC and the oil industry said, potentially aiding efforts to revive a global deal on freezing production levels at talks next month. OPEC's third-largest producer has been boosting output after the lifting of Western sanctions in January. Tehran refused to join a previous attempt this year by OPEC plus non-members such as Russia to stabilise production, and talks collapsed in April. Though Iran has not yet decided whether to join a new effort, Tehran appears to be more willing to reach an understanding with other oil producers, the sources said. Venezuelan Oil Minister Eulogio Del Pino last week toured oil-producing countries including Saudi Arabia and Iran to rally support for a deal. Despite rising this year, oil at around $49 a barrel is less than half its level of mid-2014. "Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others," said a source familiar with Iranian thinking after del Pino's visit to Tehran. "In general, Iran prefers more actions from the OPEC side rather than just freezing at the maximum production level of all members. If this freezing issue helps prices to improve, Iran by positive words of support, will help."

Oil up on Iran talk; stockpile build cited by API surprises | Reuters: Oil prices rose on Tuesday after Reuters reported Iran was sending positive signals that it may support joint OPEC action to prop up the market, before the market pared gains on trade data showing a surprise build in U.S. crude stocks. Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, refused to join a previous attempt this year by the group and non-OPEC members led by Russia to stabilize production. But sources in OPEC and the oil industry told Reuters that Tehran appeared more willing to support such talks scheduled next month in Algeria. "Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others," said a source familiar with Iranian thinking after a visit by Venezuelan Oil Minister Eulogio Del Pino to Tehran as part of a tour to convince OPEC of a production freeze. Brent crude settled up 80 cents, or 1.6 percent, at $49.96 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 69 cents, or 1.5 percent, to close at $48.10. Tehran has been boosting its oil output since the lifting of Western sanctions in January. News of its potential support for a production freeze helped halt an abrupt slump in crude prices that began on Monday, after a 20-percent rally in the past two weeks. Still, Brent and WTIpared gains in post-settlement trade after the American Petroleum Institute (API) reported that U.S. crude inventories rose by 4.5 million barrels last week, a surprising build versus analyst expectations' for a draw of 500,000 barrels. The U.S. government will issue official inventory data on Wednesday.

WTI Slides After Biggest Inventory Build In 4 Months - Amid the volatility of crude prices, inventory levels, and headline hockey; API printed a surprisingly large 4.464mm crude build (against expectations of a 850k draw). Having spiked early in the day on Iran rumors (and failed to fall on denials), WTI knee jerked lower after the API data showed the biggest crude build in over 4 months (and a bigger than expected build at Cushing). API

  • Crude +4.464mm (-850k exp)
  • Cushing +417k (+200k exp)
  • Gasoline -2.2mm (-1.7mm exp)
  • Distillates -834k

Biggest build in crude in over 4 months... (4th weekly draw in gasoline)

No End in Sight for East Coast Gasoline Glut - Higher gasoline imports to the U.S. East Coast and weaker demand in the region have combined to bloat gasoline inventories, raising the question, what would it take to bring the market into balance? East Coast refinery output is down from this time last summer in response to somewhat lower crack spreads, but not enough to make a dent. Part of the problem is that while gasoline demand turned anemic in the Maine-to-Florida region, it is even weaker in many overseas markets. Also, the skill of East Coast blenders in dealing with a wide variety of supplies has always made the region an attractive destination for international product flows. Today, we continue our look at petroleum product cargo flows, and what they are telling us about the health of the market. In Part 1 of this series, we discussed the fact that while global demand for crude oil has been growing 3% to 4% annually, growth in oil refining –– turning crude into products –– has been on a steeper climb. It comes down to this: Refiners, tempted by cheap crude and healthy processing margins, have been turning out more product, and refiners, traders, marketers and others have been squirreling away those barrels. The long run of high refinery output now is coming back to haunt the industry, both in the U.S. and overseas. Our focus last time was on middle distillates (heating oil/diesel and jet fuel). We found that a combination of favorable refining margins, a relatively mild 2015-16 winter and other factors have left U.S. inventories of middle distillates at or near record highs so far in 2016. This time, we focus on gasoline. U.S. inventories are at historically high levels for this time of year, the high-demand season for gasoline is about to end on Labor Day, and refiners have to consider how long to idle their plants during maintenance season. The U.S. East Coast is the main connection to the world gasoline market, and a bellwether for the health of refining in its own right. We will therefore dedicate a large part of this post to the outlook for that part of the country.

Crude Slammed After Inventory Builds Across Entire Oil/Product Complex --Following API's reported biggest crude build in 4 months overnight, which weighed on oil prices, DOE exasperated the pain by signaling builds across the entire complex. Crude's build of 2.5m barrels (biggest in 3 months) was less than API but more than the expected 850k draw but Cushing saw a big build and gasoline and distillates both saw builds despite expectations of big draws. As a reminder, US Crude production surged by the most since May 2015 the prior week but fell modestly in the last week. Crude tumbled back to $47 on the print.  DOE:

  • Crude  +2.5mm (-850k exp)
  • Cushing  +375k (+200k exp)
  • Gasoline +36k  (-1.7mm exp)
  • Distillates +122k

DOE reports biggest build in 3 months and builds cross the entire complex... This is the first time since Feb 2016 that all 4 major segments have seen a build in the same week.

Crude futures weaken after EIA data shows inventories growing - Crude futures fell Wednesday after US Energy Information Administration data showed a larger-than-expected build in crude stocks, and refined products inventories saw slight increases. NYMEX October crude settled $1.33 lower at $46.77/b. ICE October Brent settled 91 cents lower at $49.05/b. NYMEX September ULSD settled 55 points lower at $1.4963/gal. NYMEX September RBOB settled 1.08 cents higher at $1.5096/gal. Crude stocks increased 2.501 million barrels to 523.594 million barrels in the week that ended August 19, EIA said.It was the fourth crude build over the last five reporting periods, and was far greater than the 200,000-barrel increase analysts were looking for. The main factor driving stocks higher was imports, which jumped 449,000 b/d to 8.642 million b/d. That was 9.39% above the year-to-date average of 7.9 million b/d. Gulf Coast crude runs dropped 244,000 b/d to 8.712 million b/d, leading inventories higher. Severe flooding in the region, which knocked out refineries in Texas and Louisiana, was likely responsible for the downturn. The same outages were expected to deliver a draw in gasoline stocks of 1.6 million barrels, but instead EIA reported that inventories increased 36,000 barrels to 232.695 million barrels.

U.S. Oil-Rig Count Unchanged in the Latest Week - WSJ: The number of rigs drilling for oil in the U.S. were unchanged in the past week at 406, ending a recent trend of increases, according to oil-field services company Baker Hughes Inc. BHI -1.53 % The U.S. oil-rig count is typically viewed as a proxy for activity in the sector. After peaking at 1,609 in October 2014, low oil prices put downward pressure on production and the rig count fell sharply. The oil-rig count had risen for eight weeks in a row before the past week, and the count is up roughly 28% in the past three months. The nation’s gas-rig count fell by two in the past week, to 81. The U.S. offshore-rig count fell by one rig from last week to 17, which is 13 fewer than a year ago. The rig count comes as Brent crude traded near flat on Friday. Federal Reserve Chairwoman Janet Yellen’s remarks, which left the door open for a sooner-than-later interest-rate increase, erased earlier gains.

U.S. oil rig count unchanged at 406; Baker Hughes: Oil prices were modestly higher on Friday in a volatile session, as traders reacted to comments from Fed Chair Janet Yellen and reports of missile activity in Saudi Arabia. The market was taking its cues from the movement in the dollar, which has been choppy following Yellen's remarks. At one point, crude benchmarks were up as much as 2 percent before drifting lower. Brent futures for October were up 0.44 percent at $49.89 a barrel. U.S. crude was at $47.60 per barrel, up 27 cents, or 0.55 percent. The U.S. crude oil rig count was at 406, Baker Hughes said on Friday. That compares to 675 a year ago. The market was primed to react to Yellen's speech in Jackson Hole, Wyoming, as her remarks initially caused a big rally in the dollar, which caused oil to slip. Later, the dollar pared those gains, with the dollar index at one point down as much as 0.5 percent. It was lately up 0.3 percent. Oil prices touched the day's highs after reports of Yemeni missiles hitting Saudi Arabia's oil facilities, traders said. Saudi state TV reported that a projectile fired from Yemen hit a power relay facility in Najran, in the southern part of Saudi Arabia.

BHI: Another Permian rise not enough to prevent US rig count decline - Oil & Gas Journal: The US drilling rig count decreased during the week ended Aug. 26 for just the second time in 13 weeks, data from Baker Hughes Inc. indicate. However, the tally of oil-directed units was flat and the Permian basin continued its hot streak with a 3-unit increase. Down 2 units to 489, the overall US count is still 85 units above its total on May 27, just before the recent drilling rebound began. The Permian has added 62 units during that time (OGJ Online, Aug. 19, 2016). After jumping 152,000 b/d last week, US crude oil production during the week ended Aug. 19 decreased 49,000 b/d to 8.548 million b/d, down 789,000 b/d year-over-year, the US Energy Information Administration reported this week. The Lower 48 declined 55,000 b/d while Alaska added 6,000 b/d. EIA foresees more declines from US tight oil into next year. In the reference case of its Annual Energy Outlook 2016 published this month, US tight oil output is projected to drop 700,000 b/d between 2015-17 primarily due to low oil prices and resulting investment cuts. “However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques,” EIA said. “The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well.” Continuing the trend of firms flocking to West Texas’s resilient production hub, meanwhile, PDC Energy Inc. bought its way into the Delaware basin this week, agreeing to take 57,000 net acres for $1.5 billion (OGJ Online, Aug. 24, 2016). The Denver-based firm plans to add 2 rigs to the basin and spud 9 horizontal wells by yearend. Also reported on Aug. 26, Blackstone Energy Partners LP, an affiliate of multinational private equity firm Blackstone Group LP, said it’s investing in two units respectively focused on the Midland and Delaware basins (OGJ Online, Aug. 26, 2016).

OilPrice Intelligence Report: Oil Under Pressure As Saudi Arabia Downplays OPEC Deal: Oil prices faced some downward pressure at the end of this week as Saudi Arabia seemed to downplay the chances of an OPEC deal in Algeria (see below). But oil prices moved back up during midday trading on Friday as reports surfaced that Yemeni missiles hit Saudi oil facilities. Meanwhile, Fed Chair Janet Yellen said that the U.S. Federal Reserve’s case to raise interest rates “has strengthened in recent months,” a sign that rate hikes could resume in the relatively near future. Ultimately the markets do not expect an increase in September, but the chances of a December hike are more likely. The dollar fell slightly following the news, providing a small boost for oil.  In an interview with Reuters, Saudi Arabia’s oil minister Khalid al-Falih said that he did not think that intervention in the oil market was necessary, raising questions about the viability of a deal in Algeria next month between OPEC and Russia. He also said that no “discussions of substance” have been conducted yet. The comments throw cold water on the chances of a freeze deal, but they come just after Iran said that it would attend. Oil analysts are now at odds over the chances of a successful outcome. The WSJ reports that China’s oil production likely peaked last year at 4.3 million barrels per day and is already in decline, perhaps permanently. China gets most of its oil from aging and depleting oilfields. The collapse of oil prices has made many of them unprofitable, and several of China’s state-owned companies have abandoned the least attractive fields.  The result will be a higher dependence on imports in the years to come.  The Only Chart Needed To Understand The Global Oil Market - Sure, there's tanker-carry-trades, positioning extremes, jawboning, marginal supply interruptions (and increases), and slowing (or rising) growth expectations... But taking a step back for a moment, what do you think this means for 'price'... US oil inventories (crude plus refined product) soars above 1.4 Billion barrels for the first time ever... 40% above the 25-year 'norm' average

Saudi government to sell $5 billion worth of bonds - Khaleej Times: The Saudi Arabian government is raising up to 20 billion riyals ($5.3 billion) from banks in this month's sale of domestic bonds, financial website Maaal reported on Tuesday. The government began the regular monthly sales in mid-2015 to help cover a budget deficit caused by low oil prices. Since then, it has sold 156.6 billion riyals of bonds, of which 70.5 billion has come in the first half of this year, Maaal said. The government has informed banks of August's allocations, Maaal quoted unnamed sources as saying, without specifying how large they were. There are signs that Saudi banks are becoming less willing or able to buy government bonds as persistently low oil prices reduce the amount of spare cash they have available for such purchases. Saudi banks' holdings of government bonds increased by just 3.1 billion riyals month on month in June, a slower rise than in previous months, central bank figures show. Bankers say that because the bond offers are shrouded in secrecy, it is impossible to be sure how much debt the government is selling. Total issue Maaal quoted sources as predicting issues in 2016 would total 100 billion riyals. In this month's sale, the government offered five-year bonds at 64 basis points over US Treasuries, seven-year bonds at 77 bps over and 10-year bonds at 91 bps over, Maaal said. That is within the pricing ranges offered in last month's sale.

Investors Panic-Buy Saudi Default Protection Ahead Of Big Debt Deal -- Amid expectations that The Kingdom will sell bonds as early as next month, investors are panic-buying protection against default on Saudi Arabia. The last few weeks have seen a surge in CDS notional outstanding to its highest on record even as Saudi risk has stabilized after quadrupling in the last year.  Saudi CDS notionals are soaring as potential buyers of Saudi's future debt issuance load up on protection to 'free' up balance sheet room to cover the issue.  Rather notably, bets of Riyal devaluation in the FX forward market have slid notably recently... at exactly the time as investors are loading up on credit protection... a proxy for devaluation fears...  It would appear every effort is being made to put some lipstick on this pig before the debt issuance (and don't forget that it was a Saudi statement that spraked the biggest short-squeeze in history in crude), but under the covers, the big boys are scrambling for hedges.

Japan to look at possibility of raising Saudi Arabia's Okinawa crude storage capacity - Japan will examine the potential for increasing Saudi Arabia's crude oil storage capacity in Okinawa, when it starts detailed discussions with officials from the kingdom in September, Japanese government sources told S&P Global Platts Wednesday. In the event Saudi Arabia's leased storage capacity of 1 million kiloliters, or 6.29 million barrels, at Okinawa, in Japan's southwest, is actually increased, it could further help cement its already strong crude marketing outlet in Asia. The possible development over a crude storage deal came as Saudi Arabian Deputy Crown Prince Mohammed bin Salman is scheduled to visit Japan over August 31 to September 3, when memorandums of understanding of bilateral cooperation are expected to be signed. The Japanese government sources said that Tokyo is now working to finalize details on possible MOUs, which include cooperation in areas such as energy, and confirmed that the crude storage framework, known as the joint crude storage by producing countries, is among potential items to be included. The Saudi Gazette reported Wednesday that the kingdom's discussions with Japan for an MOU on cooperating in the energy sector were approved by the Cabinet. The deputy crown prince is visiting Tokyo en route to China to attend the G20 meeting, and it comes after a Cabinet session this week delegated several ministers to discuss with the Chinese side an MOU to cooperate in the energy sector and an initial cooperation memorandum on crude storage, according to the Saudi Gazette.

Fuel Subsidy Regime Falls Like Dominoes Across Middle East - Two weeks ago, news broke that the International Monetary Fund had reached a “tentative” agreement with Egyptian officials regarding a $12 billion loan that the Washington-based pool would pay out over the next three years. The IMF’s Egypt mission chief, Chris Jarvis, said, “Egypt is a strong country with great potential but it has some problems that need to be fixed urgently.” One of those problems, it turns out, is the country’s fuel subsidies. Reuters reported on Tuesday that Egyptians will pay 65 percent of the actual cost of fuel at pumps during the 2016-17 fiscal year, and by the time the IMF distributes the last portions of its massive loan in 2020, the fuel subsidies will be completely dismantled. To be clear, the fuel subsidy cuts do not represent a new political position in Egypt. In October 2014, Acting President Adly Mansour released a five-year economic development plan that would be valid through the 2018-2019 fiscal year. The strategy – or Strat-EGY, as the government put it – scheduled fuel and electricity price reforms for the 2015-2016 fiscal year, but current President Abdel Fattah el-Sisi did not follow through on the proposed measures. Now, as cash flows from neighboring Gulf States – which had kept Egypt’s ailing economy afloat– start to run dry, the republic has reached out to the IMF for financial buoyancy.

Dubai crude structure flips back to contango as Asian demand dissipates -The benchmark Dubai crude market structure has flipped back to contango this week as Asian demand dissipated after most refineries were heard to have covered their requirements for October. Platts Tuesday assessed the spread between first and second month Dubai crude swaps at a contango of 14 cents/b and between the second and third month Dubai crude swaps at a contango of 1 cent/b. Both spreads flipped to backwardation on Tuesday last week, for the first time since May 31, 2016 and July 10, 2015 respectively, amid an expected uptick in demand as refineries in China and elsewhere in Asia returned from seasonal maintenance. But the anticipated strength of this demand did not fully materialise, leaving sellers of October-loading cargoes to lower their selling ideas this week. During Tuesday's Platts Market on Close assessment process, seven October-loading cargoes, comprising three Upper Zakum, two Das Blend, a Qatar Marine and a Murban cargo, were seen offered by oil major BP, South Korea's SK Energy, France's Total and Western trading house Vitol.

Iran Oil Production Stalls Ahead of OPEC Talks–Energy Journal -- The Wall Street Journal’s Benoit Faucon reports that Iran’s revival as a crude-oil exporter appears to have stalled, seven months after Western sanctions over its nuclear program were lifted, casting uncertainty over the country’s willingness to cooperate with other producers on limiting output.  Iran’s production has taken on heightened significance in recent weeks as the Organization of the Petroleum Exporting Countries gets ready for talks next month on oil output. Iran has previously refused to consider joining fellow OPEC members in action to lift crude prices by curbing output until its exports and production reach pre-sanctions levels.  But the country’s ability to reach pre-sanctions levels above four million barrels a day are now in question. Iran has been pumping 3.85 million barrels a day this month, the country’s oil minister Bijan Zanganeh said Saturday, little changed from above 3.8 million barrels a day he cited in June. That is up from less than three million barrels a day from before sanctions were lifted in January but short of the country’s stated goals.

Report: Iran detains Greek national for smuggled oil  (AP) — An Iranian state-run daily is reporting that authorities in Tehran have detained a Greek national they accuse of embezzling money from smuggled oil and selling three oil tankers for $100 million. The report on Thursday in the IRAN newspaper suggests the Greek national was involved in smuggling Iranian crude oil while economic sanctions were imposed over the country’s contested nuclear program. Those sanctions under then-President Mahmoud Ahmadinejad greatly restricted where Iranian oil could be sold in the global market. The newspaper said the unnamed Greek national was detained three weeks after arriving at Tehran’s Imam Khomeini International Airport due to a “special trick” by investigators. It did not elaborate, though it said the Greek had controlled eight Iranian oil tankers and five have since been brought back to Iran.

US Destroyer Fired Warning Shots At Iranian Fast-Attack Ship -- Yesterday, we reported that four Iranian ships carried out a "high speed intercept" of a US destroyer, the USS Nitze, in the Strait of Hormuz, an incident that the official dubbed "unsafe and unprofessional", cited by Reuters. The four vessels belonging to the Islamic Revolutionary Guard Corps "harassed" a U.S. destroyer on Tuesday by carrying out a "high speed intercept" in the vicinity of the Strait of Hormuz, a U.S. Defense official said on Wednesday. Moments ago, CNN reported that in a separate incident, A US Navy ship fired three warning shots after an Iranian fast-attack craft approached and circled two U.S. Navy ships and a Kuwaiti vessel in the northern Gulf on Wednesday.  It said the U.S. ship fired the shots into the water after the Iranian ship did not leave after a brief radio conversation, according to U.S. officials. The United States on Wednesday had reported another incident in which it said Iranian vessels harassed a U.S. warship near the Strait of Hormuz on Tuesday. CNN also provided more details on yesterday's incident, report that according to a US official two of the Iranian vessels slowed and turned away only after coming within 300 yards of the US guided-missile destroyer "as it transited international waters near the Strait of Hormuz, and only after the destroyer had sent multiple visual and audio warnings."

U.S. paid $1.3 billion to Iran two days after cash delivery: The Obama administration said Wednesday it paid $1.3 billion in interest to Iran in January to resolve a decades-old dispute over an undelivered military sale, two days after allowing $400 million in cash to fly to Tehran. State Department spokeswoman Elizabeth Trudeau says the U.S. couldn’t say more about the Jan. 19 payments because of diplomatic sensitivities. They involved 13 separate payments of $99,999,999.99 and final payment of about $10 million. There was no explanation for the Treasury Department keeping the individual transactions under $100 million. The money settles a dispute over a $400 million payment made in the 1970s by the U.S.-backed shah’s government for military equipment. The equipment was never delivered because of the 1979 Islamic Revolution that overthrew the shah and ended diplomatic relations between the U.S. and Iran. On Jan. 17, the administration paid Iran the account’s $400 million principal in pallets of euros, Swiss francs and other foreign currency, raising questions about the unusual payment. The $1.3 billion covers what Iran and the U.S. agreed would be the interest on the $400 million over the decades.

Iran Sets Condition Under Which It Would Join OPEC Oil Production Freeze -- In the past two weeks, Iran has rejoined the OPEC production freeze headline and jawboning fray, by making bold statements that it would be willing to work with OPEC on the recurring plan other members, mostly Venezuela, have proposed to push prices higher, namely freeze oil production (at a level which is an all time high output for OPEC's largest member, Saudi Arabia, beyond which it can't produce even if it wanted). So earlier today, Iran's oil minister Bijan Zanganeh made the most explicit statement on the topic, when he laid out the conditions under which Iran would be willing to "help other oil producers stabilize the world market."  It was a simple condition: Iran will cooperate as long as it is excluded from the freeze, or as Reuters put it, Iran will cooperate "so long as fellow OPEC members recognize its right to regain lost market share, the country' oil minister said on Friday." In other words, Iran will endorse an OPEC supply freeze as long as it can keep pumping more. Iran, OPEC's third-largest producer, boosted output after Western sanctions were lifted in January, and had refused to join OPEC and some non-members in an accord earlier this year to freeze production levels. "Iran will cooperate with OPEC to help the oil market recover, but expects others to respect its rights to regain its lost share of the market," Bijan Namdar Zanganeh was quoted as saying by the oil ministry's news agency SHANA.

Oil Spikes On Iran Report Saudi Aramco Facilities Hit By Yemen Missiles -- While oil is spiking thanks to the dollar's kneejerk reaction lower following Yellen's (not really) hawkish speech, another reason for the move higher appears to be an unconfirmed report by Iran's PressTV that Yemeni forces have fired ballistic missiles at the facilities belonging to the Saudi state oil giant Aramco in the kingdom’s southwest. From the report: Yemeni forces have fired ballistic missiles at the facilities belonging to the Saudi state oil giant Aramco in the kingdom’s southwest. The retaliatory attack took place on Friday, hitting targets in Saudi Arabia’s Jizan region and causing considerable damage to the Aramco facilities there, Yemen’s al-Masirah television reported. Saudi military has been pounding Yemen since March last year to undermine Yemen’s Houthi Ansarullah movement and to restore power to the former president, Abd Rabbuh Mansur Hadi, a staunch ally of Riyadh. Nearly 10,000 people, most of them civilians, have been killed in Riyadh’s military aggression which lacks any international mandate. HIstorically, the accuracy of PressTV reports has been spotty at best, so waiting for confirmation may be prudent, although as of this moment algos are buying first and not even bothering to ask questions.

No ISIS There – Are U.S. Troops In Hasakah “Advising” Kurds To Attack The Syrian Army? - Yesterday a fight broke out between Syrian Arab Army troops and local Kurdish forces in the predominately Kurdish city of Hasakah in north-eastern Syria. Hasakah, with some 200,000 inhabitants, has held a SAA garrison for years. There is some enmity between the Kurds and the soldiers but the situation is generally peaceful.  There have been earlier fights but these were local rivalries between Syrian auxiliary National Defense Forces from local Arab (Christian) minorities and some gangs who form a Kurdish internal security force under the label Asayish. Such fights usually ended after a day or two when grown-ups on both sides resolved the conflict over this or that checkpoint or access route. The Islamic State (grey on the map) once threatened Hasakah but that danger is now far away. Yesterday another fight broke out, but got serious. The Syrian air force was called in to defend against direct attacks on the SAA garrison and minority quarters Syrian government warplanes bombed Kurdish-held areas of the northeastern city of Hasaka on Thursday for the first time in the five-year-old civil war, the Syrian Kurdish YPG militia and a monitoring group said.  The cause of this week's flare-up was unclear. The reason that fighting started might have to do with U.S. troops who, for whatever reason, seem to be in Hasakah. The U.S. military now laments that these troops came under Syrian air force fire:

Kurds versus Syrian army battle intensifies, complicating multi-fronted war | Reuters: Fighting between the Syrian army and Kurdish forces intensified late on Friday and into Saturday, creating the risk of yet another front opening in the multi-sided civil war. The two sides have mostly avoided confrontation during the five-year conflict, with the government focusing its efforts against Sunni Arab rebels in the west, and the Kurds mainly fighting Islamic State in northern Syria. In an indication of their reluctance to escalate further, pro-government media said on Saturday they had held preliminary peace talks. After the fighting broke out this week, government warplanes bombed Kurdish-held areas of Hasaka, one of two cities in the largely Kurdish-held northeast where the government has maintained enclaves. Fighting there could complicate the battle against Islamic State because of the Kurds' pivotal role in the U.S.-backed Syrian Democratic Forces' (SDF) fight against the group. On Friday, warplanes from the U.S.-led coalition flew what the Pentagon called protective patrols around Hasaka to prevent Syrian jets from targeting U.S. special forces, who are operating on the ground with the SDF, the first sorties of their kind in the war. Ground fighting intensified late on Friday when Kurdish YPG fighters battled Syrian forces, whose air force flew sorties over the city, Kurds and monitors said. "The clashes continue in areas inside the city today. There were military operations,"

Kurds to launch an assault to kick the Syrian army out of its last stronghold in Northeastern Syria- (Reuters) - The Kurdish YPG militia launched a major assault on Monday to seize the last government-controlled parts of the northeastern Syrian city of Hasaka after calling on pro-government militias to surrender, Kurdish forces and residents said. They said Kurdish forces began the offensive after midnight to take the southeastern district of Nashwa, close to where a security compound is located near the governor's office close to the heart of the city. The powerful YPG militia had earlier captured Ghwairan, the only major Arab neighborhood still in government hands. The fighting this week in Hasaka, which is divided into zones of Kurdish and Syrian government control, marks the most violent confrontation between the Kurdish YPG militia and Damascus in more than five years of civil war. The Syrian army deployed warplanes against the main armed Kurdish group for the first time during the war last week, prompting a U.S.-led coalition to scramble aircraft to protect American special operations ground forces.

Turkey makes first major foray into Syria with assault on IS (AP) — Turkey on Wednesday launched its first major ground assault into Syria since the country's civil war began, sending in tanks and special forces backed by U.S. airstrikes to help Syrian rebels retake a border town from Islamic State militants. The surprise incursion to capture the town of Jarablus was a dramatic escalation of Turkey's role in Syria's war. But its objective went beyond fighting extremists. Turkey is also aiming to contain expansion by Syria's Kurds, who are also backed by the United States and have used the fight against IS and the chaos of the civil war to seize nearly the entire stretch of the border with Turkey in northern Syria. That raises the potential for explosive frictions between two American allies. U.S. Vice President Joe Biden flew into Ankara hours after the offensive, and he backed Turkey with a stern warning to the Kurds to stay east of the Euphrates River, which crosses from Turkey into Syria at Jarablus. Kurdish forces "must move back across the Euphrates River. They cannot, will not, under any circumstance get American support if they do not keep that commitment," he said. The Turkish assault, launched in retaliation after a string of militant bombings in Turkey, adds yet another powerhouse force on the ground in an already complicated war.

Syria regime, Kurds blast Turkish incursion - Syria condemned Wednesday's Turkish incursion into an Islamic State group-held border area as a "flagrant violation" of its sovereignty as Kurdish authorities said the action amounted to a "declaration of war". The foreign ministry in Damascus said it "condemns the crossing of the Turkey-Syria border by Turkish tanks and armoured vehicles towards the Jarabulus area with air cover from the US-led coalition and considers it a flagrant violation of Syrian sovereignty". The Syrian opposition in exile, however, welcomed the intervention. The operation -- named "Euphrates Shield" -- began around 4:00 am (0100 GMT) with Turkish artillery pounding dozens of targets of the Islamic State (IS) jihadist group around Jarabulus, the Turkish prime minister's office said. Turkish tanks and special forces accompanied by pro-Ankara Syrian rebels then rolled across the border in an unprecedented operation to drive IS out of Jarabulus, from which it has fired rockets into Turkey. "Syria demands the end of this aggression," the foreign ministry said. "Any party conducting a battle against terrorism on Syrian soil must do so in coordination with the Syrian government and the Syrian army who have been fighting this war for five years. "Chasing out IS and replacing them with terrorist groups backed by Turkey is not fighting terrorism."

Russia warned that US will fight back after attack near American forces in Syria | Daily Mail Online: A top US commander has warned Russia that the United States 'will defend itself if threatened' after warplanes attacked near American forces operating in Syria.Lt. Gen. Stephen Townsend, based in Baghdad, vowed to defend US special operations forces in northern Syria if they come under another attack.'We've informed the Russians where we're at,' he told CNN. '(They) tell us they've informed the Syrians, and I'd just say that we will defend ourselves if we feel threatened.' The warning follows what defense officials described as an 'unusual' incident Thursday when President Bashar al-Assad's regime deployed warplanes to attack an area near where US special operations forces were operating.US forces are currently in the area to support Kurdish forces in the fight against terrorist group ISIS.

The Islamic State and Body Parts -- While the fight against ISIS/ISIL rarely appears on the front pages or headline stories of the mainstream except in cases where there appears to be a link between ISIS/ISIL and a terrorist attack, an interesting fatwa or legal Islamic declaration has been released by the ISIL Committee of Research and Fatwas.   Fatwa Number 68, dated January 31, 2015 and found during a December 2015 raid in eastern Syria answers the age-old question: "Is it permissible to take the captured apostate's body organs and give them to Muslims who are in need of them?" The Islamic scholars that answered this question did so stating that Muslim hospitals are overwhelmed with diseases that are both "incurable by doctors and harsh on patients" and stated that Allah Almighty knows best what is right and what is wrong.  The scholars go on to point out that verse 5:32 of the Quran states the following: "Because of that, We decreed upon the Children of Israel that whoever kills a soul unless for a soul or for corruption [done] in the land – it is as if he had slain mankind entirely. And whoever saves one – it is as if he had saved mankind entirely.  And our messengers had certainly come to them with clear proofs. Then indeed many of them, [even] after that, throughout the land, were transgressors." (my bold) From this verse, ISIS' Islamic scholars claim that "saving a Muslim from death or deterioration is an Islamic legal duty that should be performed with every legitimate way or financial means.".  As well, they claim that jurists of two Islamic schools allowed Muslim warriors to actually consume the flesh of infidels and apostate Muslims when it is necessary to save their own lives. In addition, ISIS' scholars claim that it is even more appropriate to transplant organs from the apostate to the Muslim to save the life of the Muslim since it has been ruled that the apostate's life and organs are not protected by Islamic law.

After 10 Years, US B-52H Resumes Operations in Afghanistan - The United States has resumed operations of its B-52H Stratofortress strategic bomber in Afghanistan for the first time in ten years.  The strategic bomber recently flew several operations, dropping 27 munitions in various counterterrorism operations in Afghanistan. The reintroduction of the bomber may highlight the United States’ expanding role in Afghanistan and the increasing instability in the country.   “We got the B-52 back in the fight in Afghanistan and Iraq,” Staff General David L. Goldfein announced.”We have the B-52 contributing to a significant ground effort and employing weapons in close proximity of friendly troops who are under attack [and] who are preparing the battlefield in new ways.”   Goldfein indicated that the U.S. Air Force’s B-52H detachment at the Al Udeid Air Base has conducted roughly 325 strikes, dropping nearly 1,300 bombs in Operation Inherent Resolve in Iraq and Syria.  The B-52H brings valuable capabilities to the fight in Afghanistan and its reintroduction on the battlefield may highlight the rising instability in Afghanistan. Capable of carrying 70,000 pounds (roughly 32,000 kilograms) worth of munitions, the aircraft can hold an array of bombs, to include 20 long-range JASSM-ERs, 80 Small Diameter Bombs, 24 MALD-Js, AGM-142 Raptor missiles, 51 500 lb bombs, 30 1,000 lb bombs, 12 joint stand-off weapons (JSOW), 12 joint direct-attack munitions (JDAM), and 16 wind-corrected munitions dispenser (WCMD).  On top of its impressive payload capability, which offers much flexibility to ground commanders, the B-52H provides another added bonus especially specific to the mountainous terrain in Afghanistan. Equipped with modern and secure radios that include beyond-line-of-sight data nodes, the B-52H is capable of acting as a network node such as the Battlefield Airborne Communications Node (BACN), which would act as a relay station feeding information to ground and air assets over the country.

Pentagon Admits "Lapses In Accountability" Led To Loss Of Hundreds Of Thousands Of US Guns In Afghanistan And Iraq -- Back in April 2016, the New York Times published an article highlighting a number of Facebook pages in the Middle East being used to sell U.S. military equipment. A terrorist hoping to buy an antiaircraft weapon in recent years needed to look no further than Facebook, which has been hosting sprawling online arms bazaars, offering weapons ranging from handguns and grenades to heavy machine guns and guided missiles. The Facebook posts suggest evidence of large-scale efforts to sell military weapons coveted by terrorists and militants. The weapons include many distributed by the United States to security forces and their proxies in the Middle East. These online bazaars, which violate Facebook’s recent ban on the private sales of weapons, have been appearing in regions where the Islamic State has its strongest presence. Many of the Facebook pages have subsequently been shut down, as selling stolen U.S. military equipment to terrorist organizations technically violates Facebook's user policies.  But the remnants remain...like the Facebook post below showing a row of kids shooting increasingly lower caliber weapons culminating with a young man shooting a sling-shot...adorable!   

In Response to Indiscriminate Saudi Bombing, MSF Evacuates Northern Yemen - Things are getting even worse for the civilian population of Yemen as Doctors Without Borders (MSF) announces that it is pulling its staff and medical personnel out of northern Yemen following the latest bombing of one of their hospitals there earlier this week: Doctors Without Borders announced on Thursday that it’s withdrawing from northern Yemen due to what the international aid group called “indiscriminate bombings and unreliable reassurances” from the Saudi-led coalition that’s fighting Shiite rebels in the country. The group, known by its French acronym MSF, said an attack on a hospital it supported in the area on Monday had killed 19 people and wounded 24 — a higher death toll after some of the wounded had died. Earlier, 11 were reported killed.  “The airstrike on Abs Hospital was the fourth and the deadliest attack on an MSF-supported medical facility during this war, while there have been numerous attacks on other health facilities all over Yemen,” the Geneva-based group said in a statement. This is another devastating blow to the people living in northern Yemen. Not only have the Saudis and their allies grossly and repeatedly violated international law with their bombing of civilian targets for well over a year, but they have struck so many hospitals that they are now forcing a major aid group out of the area. That deprives injured and sick Yemenis of essential medical care that is made all the more necessary by the frequent indiscriminate bombing of civilian areas by the coalition, and it further cuts off this part of Yemen from an outside world that was already mostly ignoring its plight.

Saudis bomb Sanaa during “Million-Person march”  - The Houthi Ansarullah Movement that controls most of north and west Yemen staged what was by all accounts an enormous demonstration in the capital of Sanaa on Saturday. It may have been the single largest demonstration in the country’s history. While it was unlikely actually to have involved a million people, it did probably tens of thousands, and it showed how strong grassroots support for the Houthis is in the north. The massive demonstration in Sab`in Park in downtown Sanaa was intended to send a signal to Saudi Arabia and its coalition that the Houthis are enormously popular in the north and that the General People’s Congress, the parliament of Yemen in its present form, shares in that popularity. If so, Saudi Arabia did not get that message. Its fighter-bombers targeted downtown Sanaa in the midst of the demonstration, which arguably was a war crime (you aren’t allowed to endanger large numbers of civilians in war if you don’t have to). The Saudis are at war with rebel supporters of the Houthis, whom Saudi Arabian inaccurately depicts as a cat’s paw of Iran.  The Houthis are a fundamentalist movement growing out of the moderate Zaidi branch of Shiite Islam in north Yemen. They were one of the groups that supported the Yemeni revolution of 2011-2012, which deposed ‘president for life’ Ali Abdullah Saleh. But during the transition to elected governments, the Houthis derailed the country’s move to democracy by making a coup and gradually dismissing civilian high governing officials.

Acceptable Losses - Andrew Cockburn -  Harper's - Just a few short years ago, Yemen was judged to be among the poorest countries in the world, ranking 154th out of the 187 nations on the U.N.’s Human Development Index. One in every five Yemenis went hungry. Almost one in three was unemployed. Every year, 40,000 children died before their fifth birthday, and experts predicted the country would soon run out of water. Such was the dire condition of the country before Saudi Arabia unleashed a bombing campaign in March 2015, which has destroyed warehouses, factories, power plants, ports, hospitals, water tanks, gas stations, and bridges, along with miscellaneous targets ranging from donkey carts to wedding parties to archaeological monuments. Thousands of civilians — no one knows how many — have been killed or wounded. Along with the bombing, the Saudis have enforced a blockade, cutting off supplies of food, fuel, and medicine. A year and a half into the war, the health system has largely broken down, and much of the country is on the brink of starvation. This rain of destruction was made possible by the material and moral support of the United States, which supplied most of the bombers, bombs, and missiles required for the aerial onslaught. (Admittedly, the United Kingdom, France, and other NATO arms exporters eagerly did their bit.) U.S. Navy ships aided the blockade. But no one that I talked to in Washington suggested that the war was in any way necessary to our national security. The best answer I got came from Ted Lieu, a Democratic congressman from California who has been one of the few public officials to speak out about the devastation we were enabling far away. “Honestly,” he told me, “I think it’s because Saudi Arabia asked.”

Ex-president Saleh offers 'all Yemen's facilities' to Russia | al-bab.com: In a TV interview today, Yemen's ex-president, Ali Abdullah Saleh, appeared to invite Russian military intervention in the country's conflict. He talked of reactivating old Yemeni agreements with the Soviet Union and offfered "all the facilities" of Yemen's bases, ports and airports to Russia. Saleh seemed to be advocating something similar to what happened in Syria, where Russia and Iran joined the conflict on the Assad regime's side under the guise of fighting terrorism. A video of the interview is here, with a transcript in Arabic here.. Saleh, who was ousted from the presidency in 2012, is allied to the Houthis who currently control the Yemeni capital and large parts of the country, especially in the north. For more than a year Saudi-led forces, who back Saleh's exiled successor, Abd-Rabbu Mansour Hadi, have been bombing Houthi-controlled areas of Yemen. Meanwhile the Houthis, who have some Iranian backing, have attacked Saudi territory in the border area. Talks in Kuwait aimed at ending the war recently collapsed. Separately from the Houthi-Saleh-Hadi conflict there are frequent attacks in Yemen by Islamist militants. In the Russian TV interview, Saleh described Russia as "the closest kin to us", adding that it has "a positive attitude" in the UN Security Council.

Yemen Offers Russia Use Of Its Airports And Ports In "Fight Against Terrorism" - While Obama was golfing in the midst of another Louisiana natural disaster, and is set to end his vacation so he can do what is truly important, support Hillary Clinton in the presidential race, Putin has been busy making new friends: first he did the seemingly impossible, having rekindled relations with Turkey to the point where Ankara itself is warning it may quit NATO to seek "military cooperation" with Russia, followed quickly by strengthening relations with Iran to the point where Russia is now using an Iranian airbase to strike ISIS, much to the angry dismay of the US and the United Nations, the latest stunning pivot toward Russia comes from yet another civil war-torn nation, Yemen, whose former president, Abdullah Saleh, said its newly-formed governing council could work with Russia to "fight terrorism" by allowing Moscow use of the war-torn country's military bases. What makes the announcement even more striking is that Ali Abdullah Saleh, Yemen's ex-president who was toppled by mass protests in 2011 as part of the Arab Spring launched by none other than the US when it "intervened" in Libya and Egypt, was a former staunch counter-terrorism ally of the US; it is this former US ally who told state-owned channel Russia 24 that Yemen was ready to grant Moscow access to air and naval bases. "In the fight against terrorism we reach out and offer all facilities. Our airports, our ports... We are ready to provide this to the Russian Federation," Saleh said in an interview in Sanaa.

Erdogan: Suicide bomber in Turkish wedding attack that killed 51 was 12-14 years old - The suicide bomber who attacked a wedding party in the southeastern Turkish city of Gaziantep on Saturday killing 51 people was a child between the ages of 12 and 14, President Tayyip Erdogan said. In comments shown live by broadcaster NTV, Erdogan also confirmed that 51 people had died in the blast, and 69 were wounded. Seventeen of the injured were "heavily" wounded, Erdogan said. Erdogan said it was likely that Islamic State militants carried out the late-night attack, the deadliest bombing this year in Turkey , which faces threats from militants at home and from Syria. Saturday's wedding party was for a member of the pro-Kurdish Peoples' Democratic Party, it said, and the groom was among those injured. The bride was not hurt, one local official said. Celebrations were ending at the traditional henna night party, when guests have decorative paint applied to their hands and feet. Some families had already left when the bomb went off but women and children were among the dead, witnesses said.Blood and burns marked the walls of the narrow lane where the blast hit. Women in white and checkered scarves cried, sitting crosslegged outside the morgue waiting for word on missing relatives. "The celebrations were coming to an end and there was a big explosion among people dancing," said 25-year-old Veli Can. "There was blood and body parts everywhere."

China's Decline in Oil Production Echoes Globally —China’s struggling oil sector has entered a challenging new phase: long-term decline of its domestic production. Oil production in China likely peaked last year at around 4.3 million barrels a day, according to new data and interviews with industry executives. The development has significant implications globally, including the potential for higher crude prices over time as China steps up imports to meet rising demand at home. “The turning point that we’ve been searching for, for years, is happening now,” said Kang Wu, vice chairman for Asia at energy consultancy FGE. As an oil producer, he said, “China is entering long-term stagnation and decline.”   For years, the world’s second-largest economy eked out gains from its aging oil fields as demand surged. But new discoveries haven't been enough to keep production growing, and the crash in commodities prices led the state-owned oil giants to sideline less-productive wells. All this puts pressure on China’s oil giants to step out on the global stage. Today, more than ever, state-controlled PetroChina, China Petroleum & Chemical Corp , and Cnooc compete with international companies such as Exxon Mobil Corp. for resources and customers. At the same time, China will be forced to boost imports. As domestic production falls, additional barrels of oil that China needs to fuel the new cars hitting its streets will come from overseas. That marks a fundamental shift for a country that not long ago saw energy independence as a key part of national security. It also deepens China’s exposure to global hot spots. Among its biggest suppliers today: Saudi Arabia, Russia, Angola and Iraq.

PetroChina's H1 oil, gas output up 1.7% on year to 748 mil barrels - State-owned PetroChina said late Wednesday it produced 748 million barrels of oil equivalent in the first six month of the year, up 1.7% year on year. The company said oil and gas equivalent output in the first six months has exceeded half of the 2016 annual target of 1.45 billion boe, despite growth being slower than the 2.9% seen in the H1 of last year and 2.5% in the same period of 2014. PetroChina, the listed subsidiary of China National Petroleum Corp., early this year actually targeted cutting its oil and gas output by 2.7% on the year in 2016 amid low oil prices. The company's crude oil output in the period stood at 470.6 million barrels, down 1.4% year on year, while natural gas output rose healthily at 7.4% on the year to 1.665 Tcf, it said while announcing its H1 financial results. The company's oil and gas production from domestic operations edged down 0.5% year on year to 640.1 million boe, while production from its overseas assets was jumped by 16.5% to 108.1 million boe. PetroChina processed 483.4 million barrels of crude oil, down 2.5% from the 493.7 million barrels in H1 2015 and around 500 million barrels in the same period of 2014. It produced 43.44 million mt of refined oil products, representing a decrease of 6.5% compared with the same period of 2015 as a result of a 0.2 percentage point decline in the integrated oil products yield to 93.7% as well as 20% year on year increase in the output of downstream petrochemical products.